Sector News

Hydraulic fracturing has been a hugely controversial subject in many countries and has increasingly become the focus of legislation in the US.

The state of Colorado has seen the most recent push for new restrictions – activists have obtained over 200,000 signatures to introduce two new initiatives on Colorado’s November 8th ballot. If passed, these initiatives would impose the toughest regulations on the hydraulic fracturing industry to date – increasing local control and dramatically limiting where fracking can take place. Initiative 75 would provide local governments with the authority to regulate oil and gas development in a manner that supersedes statewide regulations, whilst initiative 78 would prohibit fracking within 2,500 feet of houses, parks, schools, playgrounds, and clean water sources.

Colorado accounts for a significant proportion of U.S. hydrocarbon reserves – more than ten percent of the nation’s largest natural gas fields. Amongst US states, Colorado ranks 7th in both natural gas and crude oil production. Upstream activity in the state relies heavily upon fracking, the proposed legislation, coupled with the slow oil price recovery would likely severely hinder hydrocarbon extraction in Colorado.

Strict limitations on fracking activity will also have severe consequences for the state budget. Pro-fracking groups argue that passing these initiatives in Colorado may cost the state 140,000 jobs and up to $217 billion in economic activity over the next 15 years. The implications of passing such a bill would likely reach much further than just the state of Colorado. With precedent set, increased regulation may be seen in other states. Greater regulation, combined with reduced activity as a result of the oil price downturn, could severely impact the future of the drilling sector in the US.

Both presidential candidates may also play a significant role in the future of fracking. Trump has stated that while he is in favour of fracking, he supports Colorado’s right to ban the activity as an issue of states’ rights. Clinton broadly supported fracking as Secretary of State – however, she has pledged support for increased investment in renewable energy and outlined a series of fracking ‘conditions’. With volatility shaking the industry, the United States presidential election could be decisive in deciding the industry’s direction.

By Jacob Halevy

Source: Oil Voice