Sanders unveils fracking ban proposal with sweeping prohibitions on pipelines, crackers

US Senator Bernie Sanders, a leading Democratic presidential candidate, has introduced legislation to phase in a nationwide ban on hydraulic fracturing and immediately block all federal permits on "fracked" oil and natural gas infrastructure, including pipelines, ethane crackers and LNG export terminals.

Analysts said Tuesday that the bill appeared intended to highlight the Vermont senator anti-fracking credentials during the primary season, which began Monday with the Iowa caucuses.

"The point of this bill is for Senator Sanders to campaign on fracking," said Kevin Book, managing director with ClearView Energy Partners.

The bill appears unlikely to become law and would be subject to years of legal challenges if it ever did, but its introduction marks perhaps the most extensive legislative proposal to hamper domestic oil and natural gas growth.

Sanders, in a statement, said: "If we are serious about clean air and drinking water, if we are serious about combating climate change, the only safe and sane way to move forward is to ban fracking nationwide."

The introduction before the Iowa caucus helps flesh out specifics of his climate agenda, said Katie Bays of Sandhill Strategy.

Sanders introduced the bill along with Representative Alexandria Ocasio-Cortez, Democrat-New York, a key surrogate for his campaign, as well as Representative Dan Soto, Democrat-Florida, and Senator Jeff Merkley, Democrat-Oregon.

The bill, known as the Ban Fracking Act, would prohibit federal permits for new fracking operations and place a ban on fracking within 2,500 of homes and schools by 2021. The bill calls for an all-out ban on fracking beginning in 2025, shutting down all federally permitted oil and gas wells.

More than 2.86 million b/d of oil and 18.13 Bcf/d of natural gas production took place on federal acreage in fiscal 2019, including on and offshore and Native American lands, according to the US Interior Department's Office of Natural Resources Revenue. That's about 23% of total US oil output and about 18% of total gas production in 2019, according to the US Energy Information Administration.

INFRASTRUCTURE PROHIBITIONS

On top of the phaseout of fracking, the bill would broadly prohibit federal permitting of "fracked oil and natural gas infrastructure," a category encompassing new pipelines, new LNG or oil export terminals, new natural gas storage, new ethane cracker plants and new gas-fired generation. Federal permits of "[o]ther infrastructure intended to extract, transport or burn natural gas or oil," are also barred.

"They seem to be trying to cover the entire value chain to ensure there's a federal nexus," Book with ClearView said.

Lee Fuller, an executive vice president with the Independent Petroleum Association of America, called it a "massive effort to stop not only development of natural gas but its use for both energy and chemical feedstocks."

The bill's broad definition of fracturing could apply to all forms of well stimulation, in both conventional and unconventional formations, he said.

The prohibition would effectively undo aspects of the Natural Gas Act, under which the Federal Energy Regulatory Commission plays a lead role reviewing interstate natural gas pipelines, storage and LNG terminals, with the Department of Energy sanctioning exports or imports. FERC signed off on 16.7 Bcf/d of new gas pipeline capacity in January through November of 2019, and certificated 20.2 Bcf/d of LNG export capacity during the same period.

Reaching beyond the NGA, Gary Kruse of LawIQ contended that the bill as drafted would take control from states for a range of decisions, undo a host of federal statutes and make decisions for agencies involved. For example, the US Fish and Wildlife Service would have to deny an incidental take permit under the Endangered Species Act for a new gas-fired generating plant.

"The chance of this statute ever being sustained on appeal is zero," Kruse said. "There are all sorts of due process issues with pre-determining an outcome without any ability to defend your particular case."

SUPPLY IMPACT

Platts Analytics views a full ban on US oil and gas production as improbable, but believes a number of policies being pushed by Democratic presidential candidates, including federal permitting prohibitions and emissions regulations, would deter 1.6 million b/d of oil and 2.4 Bcf/d of gas growth. Platts Analytics currently forecasts US oil output to grow to 14.3 million b/d by 2024 and gas to reach 100 Bcf/d over the same timeframe, but a Democrat in the White House could cut that to 12.7 million b/d by 2024, roughly 300,000 b/d below where it is now, and natural gas production to about 97.5 Bcf/d.

Any anti-fracking action by a potential Democrat president would likely impact federal lands on the New Mexico side of the Permian's Delaware sub-basin, according to Kayrros, a data analytics firm. Wells in federal leases in the Delaware Basin accounted for about 350,000 b/d of new oil production since the start of 2018, about 14% of US production growth over that time, Kayrros said.