Walking the Tightrope: Energy Development and the Environment

Explosive development of shale resources has breathed new economic life into communities across the United States, current low gas prices notwithstanding. But how might individual states balance fossil energy-driven economic development with environmental protection? Former Pennsylvania DEP Secretary and coal-town Mayor John Quigley discusses his state’s political juggling of energy and environmental concerns, and the prospects for environmental progress should policymakers roll back fossil fuel regulations.

Full Transcript

Andy Stone: Good day and welcome to the Energy Policy Now podcast from the Kleinman Center for Energy Policy at the University of Pennsylvania. I’m your host Andy Stone. The state of Pennsylvania can be viewed as a microcosm of the larger energy and environmental landscape in the United States. The shale gas boom has turned Pennsylvania into the country’s second ranking producer of natural gas, while the state is number four in coal production. Pennsylvania is also a leading exporter of electricity but being an energy leader has come with environmental trade-offs. Philadelphia, which is home to a major oil refinery, was recently given a grade of F on its smog report card despite recent air quality improvements and Pennsylvania ranks as the third biggest emitter of greenhouse gases in the country, just behind much more populous California and Texas. Where does the balance lie as Pennsylvania, as many states, struggle to balance economic growth provided by the energy industry with environmental protection. Here to provide some insights is today’s guest, John Quigley, senior fellow at the Kleinman Center. John, welcome to the show.

John Quigley: Great to be here.

Stone: John, you’ve occupied the top energy and environmental posts in Pennsylvania, including Secretary of the Pennsylvania Department of Environmental Protection and Secretary of the Department of Conservation and Natural Resources. Earlier in your career, you were the Mayor of the City of Hazleton, a coal town that has never recovered economically from the anthracite coal industry’s decline in the 1950s. Just to get started, could you talk for a moment about the importance of natural resources to some communities in the state?

Quigley: Well, I will say that historically, Pennsylvania’s history actually is punctuated by waves of natural resource extraction. So we had the timbering over the Northern tier, about 2 million acres were literally mowed of trees to fuel the early days of the Industrial Revolution. And when Drake drilled the first oil well in Titusville in 1859 and then of course we had the rise of king coal, soft coal Southwest Pennsylvania, anthracite coal, where I come from in Northeastern Pennsylvania. And now we have a fourth wave in shale gas. So the Pennsylvania’s history has been really characterized by natural resource development. I think the pendulum needs to shift in a slightly different direction. I learned in my days at DCNR for example, that the connection to nature and natural assets is probably just as important now for many communities as it is on the extraction side. Tourism and outdoor recreation is the state’s number two industry. So we have to pay attention to preserving our natural capital even as we exploit the natural resources that we have.

Stone: Looking specifically at the environmental impacts, coal production has declined due to cheap gas and to some extent federal regulation as natural gas has risen, what is the pollution impact been on balance?

Quigley: Well, I think any dispassionate look at the situation would recognize a couple of things. First, cheap shale gas and the switch from coal to gas has significantly reduced carbon emissions and air pollution, burning gas to generate electricity generates about half the CO2 compared to coal. And very little NOx, Sox,  and particulate matter and no lead pollution. So Pennsylvania air from a statewide stand point, I think is substantially cleaner now, thanks to the switch from coal to gas. Now there are certainly some other local air quality issues that the closer you get to the extraction point, to the transmission point it becomes a little bit more problematic. So air quality issues from drilling and transmitting gas have to be better quantified. They have to be better understood.

The state doesn’t have enough data and that’s something that I tried to address in my days at DEP. I actually ordered the largest expansion in Pennsylvania’s history of our air quality monitoring network and that plan was to add 10 particulate pollution monitors in 10 different counties in the shale fields where we’re seeing a lot more compressor stations pop up. So we need to get better data. And there is a fundamental assumption that the closer you get to the activity, the more problematic air quality is. In terms of other pollution, water quality is very murky. And I say that pun intended. There are at least 250 documented cases of groundwater contamination in Pennsylvania from gas drilling and that’s split about evenly between conventional oil and gas drilling and unconventional shale gas drilling. And very frankly, one instance is too many. There has also been water pollution instances from erosion and sedimentation from all the well development and transmission line development, et cetera.

And the impacts on Pennsylvania’s landscape I think are only beginning to unfold. Big impacts to habitats and landscape level drilling and pipeline development is a very significant fragmenting feature. It’s going to fragment habitats. We’ve seen already probably tens of thousands of forest acres cleared in Pennsylvania and over time, at full build out, there have been some estimates that we will see close to 200,000 acres of forest land cleared, essentially permanently, or at least for the next, for as long as the gas is flowing. So that’s a big impact in terms of not only habitats but also water quality because our forests really our filters for drinking water in many portions of Pennsylvania. So the health of the forest long term are something that I think we have to be concerned about.

And then finally, just in terms of public health, there’s a lot of concern. Recently the Pennsylvania Medical Society actually called for a moratorium on shale gas drilling and Pennsylvania until the health risk could be better understood. And that’s a big issue because as more wells are developed, there’ll be more Pennsylvanian’s living in close proximity to those wells. And again, a recent analysis projected that at full buildout in 30 years or so, about 1.8 million Pennsylvanians will live within a mile of a well pad. That’s huge number. That’s over 10% of the state’s population. So there are some big unknowns in terms of public health but overall all of the environmental impacts are things that we need to pay attention to.

Stone: You mentioned a moment ago, the issue of data and data being very important in understanding, I guess the impacts. What type of data are we looking at? Are we talking about here. And can you tell me a little bit more about how that data is used?

Quigley: Well, the data that we have primarily is in terms of emissions and that’s self reported by the industry, for example, methane emissions. The numbers that DEP has at it’s disposal are self-reported by the industry based on engineering calculations and frankly they’re wildly inaccurate. They’re probably off by a factor of 10 and methane, depending on what timeframe you use is either 34 or 84 times more potent as a climate forcing gas than CO2. So it is absolutely essential that we minimize methane emissions and to do that and design really good policies, you need good data. We don’t have that in this instance. There’ve been all kinds of studies done about leakage rates and they vary across the board from 2% to 10%. So we need better data.

In terms of other air pollution, we need local air quality data around the remaining impoundments, around drilling pads, around compressor stations. We certainly took some steps in my tenure to start to gather that data so that we can make sense of it. We need much better monitoring of water quality. Typically, DEP as a regulatory agency finds out about stuff after the fact, after the pollution incidents occurs. We need better data. DEP has developed a world class well integrity monitoring database that over time will tell us how well construction of well pads and the actual wells themselves are holding up over time, whether there’s any degradation. So there’s a lot of data gathering that needs to happen to inform good policy to inform targeted policy interventions that are aimed at specific problems.

Stone: So in an ideal world, what tools do we have to actually cut pollution or emissions from the energy sector in Pennsylvania?

Quigley: There, there are wide variety, actually, and I’ll start with the most important one. And that is that I think the most effective tool to cut pollution comes from the drilling companies themselves. The practices that they use, the technologies and chemicals that they employ. The natural gas industry has an absolutely amazing record of innovation. And they’ve demonstrated that in, for example, in an almost 900% increase in per well productivity over the last six years. They’re incredibly efficient and clever at getting gas, getting every last molecule of gas out of shale. And in addition to that, the actual on the ground trend of environmental violations by the gas industry going down.

So that’s really important for folks to understand. The actual performance is improving with experience and it’s hopeful, but I think the industry can do better and if they would just turn some of their attention to more rapid innovation on the pollution prevention side, I think instances of pollution can be cut very drastically. Other tools from the standpoint of regulation. Obviously, we talked a little bit about data, we need better monitoring, regulation and enforcement are our key tools. Pennsylvania in my time as DEP Secretary substantially strengthened its regulations on shale gas development. But honestly, the industry and most of the general assembly fought us every step of the way for five years. And in fact, the industry has challenged some of the surviving rules in court and a couple of examples of that, rules that protect playgrounds and other public resources have been challenged by the industry.

Stone: They can’t drill too close to a playground?

Quigley: Exactly. Exactly. And they don’t want those limitations. Another example is that we required in this last regulatory package that before you drill a shale gas well, you attempt to locate all of the abandoned wells. Now in Pennsylvania when that first wave of oil and gas development, that has left us with an estimated 200,000 abandoned wells. And if you happen to drill into one of those wells, that is a pathway for pollution, that is a huge risk to groundwater, to folk’s private water wells. And so we put in place a regulation that required drillers to find those wells within a certain radius before the drill. And they’re fighting that. That defies logic. It defies common sense. It’s in the interest of the industry to minimize its liability. And yet the industry is fighting that provision in court as well. So some of it frankly doesn’t make any sense.

And then the last tool that I’ll mentioned is enforcement. DEP does not have enough resources in terms of systems. We still send out inspectors with carbonless forms. I say we, I’m defaulting to the old way, but DEP still sends out inspectors with carbonless forms instead of iPads. So, very inefficient. I started as Secretary, a modernization effort to change that and I’m hoping that will prevail. But the agency needs more resources, more staff, to adequately monitor and inspect the industry. The average well should be inspected about six times in the course of its productive life. And DEP is not inspecting it even three times on average. So there’s more work to be done and as issues are identified when violations occur, they need to be addressed through enforcement action but the agency simply lacks the resources to actually get at all of the problems that are in fact occurring.

Stone: Recently, Pennsylvania Governor Tom Wolf signed legislation that allowed new shale gas drilling regulations developed by the DEP to go forward. At the last minute, however, companion regulations for conventional oil and gas drilling were dropped. In addition, Commonwealth Court stayed the imposition of some of the shale gas regulations. These rules were the result of five years of negotiations and it seemed that they were a lock. What happened at the last minute?

Quigley: All right. Well, the simple answer is politics. A majority of the general assembly was, as I mentioned, deposed to tighter regulations on drilling and a lot of them believed the old canard that we can either have economic development or environmental protection, but not both. And they labored under the misapprehension that any regulation was harming economic development. And that’s honestly, that’s a crock. In fact, the new rules very consciously and intentionally embraced the best practices by the best operators in the industry. And the regulations wanted to make them the standard and that was really on a theory that if the best companies can take environmentally protective measures, then all companies should. And that’s essentially all that the new regulations were requiring.

And then DEP estimated that the cost of that regulatory package, in which the agency relied on data given to DEP by the industry, was that these new regulations would add less than 1% of the cost, 1% to the cost of drilling a well. So really the, the additional cost was minimal. But the industry as a whole fought that hard. They exaggerated the costs and the impacts wildly and they eventually chose to take the matter to court. But once the regs were adopted, the General Assembly was threatening to stop the entire package by legislation. And the Governor made a deal to stop the conventional regulations that were also worked on for five years in exchange for dropping legislative opposition to the shale gas rates. And that’s really what the law did that the Governor signed.

But as I mentioned, the industry has challenged some of the surviving regs in court. And in November of 2016, Commonwealth Court issued a stay on the imposition of the regs, the provisions that were challenged. And again, there are things like protecting playgrounds, protecting a species of concern, requirements that drillers find abandoned wells before the drill their own. Just some common sense stuff. But the industry is fighting those provisions and in my estimation we’re likely to see some renewed efforts by the General Assembly in the next session to further water the regs down there. There was a bill proposed last year that would have, by legislation, acerbated a number of these protections in the new regulatory package. I think we’ll probably see some more of that. So long and the short it is that we put, the DEP put in place a regulatory package that contains substantial additional protections for public health in the environment. Some of those protections now are not enforced and that introduced, every single day, additional risk to public health, to public safety, to the environment that isn’t warranted.

Stone: Just a point of clarification here at the national federal level, you’ve got two bodies that that really regulate a lot of what’s going on environmentally with the energy industry. You’ve got the Department of Energy (DOE) and you’ve got the EPA. Just want to clarify in Pennsylvania specifically, is it all the DEP or are there other agencies that are involved with this as well?

Quigley: Well, it depends on how you define the scope of the industry. Certainly things like pipelines are regulated by the Federal Energy Regulatory Commission (FERC), the pipeline health and safety agency, FIMSA, and to some extent the Pennsylvania Public Utility Commission. But in terms of the environment, it’s a two tiered system. Basically, the United States Environmental Protection Agency (EPA) establishes a floor for regulation and that’s based on federal law, the Clean Air Act, the Clean Water Act and so on. And states then in theory, build additional protections, additional regulations on top of that federal floor. And that is designed to reflect state law and the unique geography that unique geology of any particular state.

And it varies widely and now doesn’t always work that way, but I think Pennsylvania’s case, our shale gas regulations are either the strongest or among the very strongest in the country, but they’re still not where they need to be. We still race to catch up to a rapidly evolving industry. An agency like the DEP is under resourced and it’s hard for them to keep pace and it’s new issues are identified, they have to be addressed. So it’s an idea that I borrow from industry and that is continuous improvement. We have to continue to look at upgrading our regulatory environment, respond to the data, respond to the facts on the ground, identify issues, and address them in a targeted focused way. But again, keep in mind that these newest regulations only added about 1% to the cost of drilling a well and I submit to you that strong well-crafted regulations are not economically burdensome.

And then again, to address the, the whole issue of economic development. You know, DEP’s job is to protect public health and the environment. Economic development isn’t their mission. We have a Department of Community Economic Development that does that and frankly economic shouldn’t be the regulator’s job. A regulator’s job is to protect public health and the environment. But in practice, DEP makes, in my judgment, heroic efforts to work with the regulated community to achieve compliance. It very consciously designed its regulations with costs to the regulated community in mind. So for DEP it’s a balancing act and I think the agency strikes that balance very well in its work. I don’t think reasonable regulations impede economic growth. In fact, overall, I would argue that they’re essential to sustainable economic growth. And it really doesn’t do any good for a community to have an industrial activity permitted. And if that activity goes on the pollute local air and water and harm the health of local citizens, so those costs would be borne by people, men, women, children, communities and society. So smart environmental regulation is really common sense.

Stone: You’ve been in the trenches with all of these issues for quite some time as the head of the DEP. And before that. Is there an anecdote or a story that you might tell that kind of really illustrates the challenge of balancing the environment and development?

Quigley: That’s a loaded question. Let me put it this way. I talked about balance. Balance is what DEP does every day but folks in the regulatory community and folks in the environmental community see it differently. And in my time at DEP, I was viewed by a lot of folks as a tree hugger and by others as a pipeline hugger. I was physically threatened by a climate change denier at a public hearing and I had seven pipeline protestors who called me a whole bunch of different interesting names and called my integrity into question while seven folks were arrested at another public meeting that I chaired. So the way I look at it, if you do your job honestly and effectively and fairly as DEP Secretary, nobody’s happy with you. And being DEP Secretary is not for the faint of heart. I knew the job was dangerous when I took it. I knew that that we would encounter these kinds of hyperbolic situations where it’s all to be extreme and nothing in the middle, but I tried to do my job at DEP transparently and with integrity.

Stone: Today’s guest is former Pennsylvania DEP Secretary John Quigley. We’re talking about the challenge of balancing economic development brought by the energy industry with environmental protection. Donald Trump has indicated that he is skeptical about climate change. What actions do you see a Republican administration taking on energy development, regulation and climate, and most notably in relation to the Clean Power Plan? And how might that play out here at the state level in Pennsylvania?

Quigley: Well, the President Elect wants to pull us out of the Paris Climate Deal. That will slow, if not eliminate, momentum for global action. That’s a huge concern. It’s not hard to imagine China and India deciding they don’t need to push nearly as hard on clean energy if the United States doesn’t care. But those nations have their own very serious air pollution problems that I think they’re going to have to deal with. So we’ll have to wait and see what the international response may be. But the U.S. withdrawing from a leadership role is extremely troubling.

The President Elect has also talked about bringing back coal mining by repealing federal air pollution regulations, wants to scrap the Clean Power Plan but very frankly, that’s not going to bring coal back, including here in Pennsylvania, because of cheap natural gas. Cheap gas is out competing coal and that equation is not going to change and especially so when you consider that the President Elect also wants to expand drilling by opening up federal lands and waters currently off limits from drilling. He wants to stop additional regulations on fracking, eliminating procedural hurdles to pipeline projects. So all of that is going to maintain gas’ dominance over coal from just a purely economic standpoint. The President Elect also wants to repeal all federal spending on clean energy research, including tax breaks for wind, solar, or electric vehicles. Now again, you watch the press and there are kind of mixed signals at this point, but just based on what he said during the campaign, this is the, at least the potential of what we’re looking at.

That is certainly going further slow investment in job creation in Pennsylvania. Pennsylvania now lags the nation when it comes to solar development, which is actually adding jobs much faster than the general economy. There are right now more folks working in the solar industry than all coal miners in the country. Not so in Pennsylvania, but even a neighboring state like Ohio has double the amount of solar workers than Pennsylvania does. It doesn’t make any sense. So we are going to continue to lag under a pro-coal, anti-climate, public policy. And I think it’s going to bleed down into Pennsylvania. Just in October of 2016, the Pennsylvania Senate passed a resolution calling for the identification of any state law or regulation that is more stringent than federal law, essentially to develop a hit list, an effort to roll them back and make them less protective. So, the General Assembly appears to be falling right in line there. They have been opposed to the state developing its own Clean Power Plan. And now we have this hit list of environmental rollback that they have endorsed. So I think Pennsylvania General Assembly has been in the vanguard of the very same troubling movement that we now see taking up residence in Washington. All of those actions are going to harm Pennsylvanians ,they’re going to harm, in large measure, not only every citizen of this country, but the world.

Stone: Why specifically is Pennsylvania lagged and solar development?

Quigley: A number of reasons and I’ll put it in some historical context. When I first came to Harrisburg in 2003, I went to work for a statewide environmental organization called PennFuture. And my job was to get the state’s Alternative Energy Portfolio Standard Law enacted that was a law that would require a certain percentage of Pennsylvania’s electricity to come from renewable resources. And we got it done and the law was passed in 2004. But any legislation to that nature inevitably involves some compromise. And one of the big weaknesses when it comes to solar is that we have what are called open borders in Pennsylvania. So a solar project outside of Pennsylvania can actually qualify as compliance for Pennsylvania’s energy standard. It doesn’t make a lot of sense.

The net impact of that is a lot of solar investment happening in other states is qualifying in Pennsylvania and we’re losing out. In addition to the regulations that the Public Utility Commission had promulgated and recently updated, still aren’t very friendly to solar. So the official rules of the game are not solar friendly. The law is not solar friendly and as a result, we lag the country in solar development. It’s a huge economic opportunity to say nothing of clean air and a better climate to deploying additional solar. Again, it’s one of the fastest growing industries in the country and indeed the world, but not in Pennsylvania. So there’s some real public policy opportunities to change that. And I’m a little bit skeptical, in fact, more than a little skeptical that Pennsylvania will take advantage of the opportunity.

Stone: Before we finish up, I wanted to ask you about one other topic that you have quite a lot of experience with based on your background is as Mayor of Hazelton. That is the decline of the coal industry and what may be done to help those communities that are suffering from that. Just want to get your thoughts on that.

Quigley: We are in the midst of an energy transition and whether or not the next administration, the Trump Administration, tries to distort the market and somehow slow down this transition, which is I think all that they’re going to do. Because at the end of the day, markets rule and economics rule, I don’t think they’ll be able to repeal the laws of economics. We’re in an energy transition. And so the real question is how can we for Pennsylvania have a just transition? And there’s, I think there’s all kinds of opportunities.

I remember I convened a listening session, DEP did 14 listening sessions around the state on what Clean Power Plan compliance would look like. And it was essentially a conversation with Pennsylvanian’s about their energy future. And I convened one a little over a year ago in Green County in the heart of soft coal country. And I heard from miners and their families wanting to know what their future looked like. And not only is coal mining the mainstay of the economy in Southwest Pennsylvania and some of these communities, especially Green County, it’s a way of life. It’s part of the culture, it’s intergenerational, it’s handed down from father to son, it’s part of their life. And you have to respect that. So the question becomes from a public policy standpoint, what do we do for the folks in Green County? What do we do for all the displaced miners who are going to be displaced? The employment trends in mining are plummeting. And it’s not going to change. So we have to have a just transition.

And there’s a couple of good examples of what we can do. There was a study done recently that suggested that every worker in the coal industry could be retrained to work in the solar industry, very cost effectively and end up with jobs that were at least as well paying as they have now. That’s something at least is very provocative and merits a lot more study and action if that the results of that study hold up. So we have to invest in job retraining, we have to invest in coal communities and change their economic prospects. And a good example of that is a project that I signed off on as DEP Secretary and it was actually the agency broke ground on it in June of 2016 and that is in a tiny community of Ehrenfeld in Southwest Pennsylvania. A population 200, where thanks to an investment of a $30 million investment of federal funding that’s enabling several projects like this, in that community, they’re going to extinguish a smoldering coal fire that has been burning for years. They’re going to remove 60 or 70 million tons of coal refuse that the drainage of which has been, has killed a tributary, the little Connemara River. And they’re going to create trails and recreational opportunities and land for industrial and economic development. They’re going to reclaim that site and essentially give the tiny community of Ehrenfeld the new lease on life, address some serious environmental degradation, and create additional recreation and economic development opportunities in the community.

So I think that model of land reclamation and the real kicker on that project is it put 48 laid off miners back to work for three years. So there’s a huge opportunity in Pennsylvania that has quarter million acres of abandoned mine lands, 5,000 miles of streams that can support aquatic life because of acid mine drainage. There’s an immense opportunity to turn displaced coal workers into reclaimers of our natural resources. It’s the same skill set, it’s operating heavy machinery, it’s doing smart things with natural resources. And to put that workforce into that kind of productive use for the long term and build the state’s economic and recreational environmental potential. That’s a no brainer. So why is public policy as part of a adjust transition is going to invest in land reclamation? We’ll see if it happens.

Stone: How’s that funded?

Quigley: It was actually, in this instance, it was a $30 million special appropriation out of federal abandoned mine land funding that comes from a taxation on coal extraction. So it was kind of a onetime, there is legislation proposed in Washington, The Reclaim Act that would essentially establish this as a permanent program with ongoing funding. Pennsylvania stands to gain hundreds of millions of dollars that we could put to this kind of a just transition. Legislation hasn’t been passed yet and amazingly enough, not all of Pennsylvania’s delegation in Washington signed up for that for whatever reason, but that’s the kind of very forward-looking policy proposal that we need to ensure that in Pennsylvania we have a just energy transition.

Stone: What’s next on the agenda for you?

Quigley: Well, it’s, I will say that it is a privilege to be a Senior Fellow here at the Kleinman Center. I hope to use my time at the university to provoke some thought on sustainability issues on regulatory policy and practice, maybe come up with a few other windmills to tilt at, hopefully. It’s such an immensely stimulating and exciting environment here at Penn and I think the Kleinman Center can have real impact, not only nationally, but internationally. And I hope I can contribute to that.

Stone: John, thanks for being on the show.

Quigley: Thank you.

Stone: Our guest today has been John Quigley, senior fellow at the Kleinman Center and former Secretary of the Pennsylvania Department of Environmental Protection. And thanks to our listeners for tuning into Energy Policy Now from the Kleinman Center. If today’s episode helped you to better understand one part of the complex world of energy policy, please recommend Energy Policy Now with a five star rating and keep up to date on the latest news, research, and events from the Kleinman Center by visiting our website, www.kleinmanenergy.upenn.edu.