Tuesday, 21 February 2012

Post-script to my last post...

A small postscript to my last post, but interesting enough to be worth it's own post. I was chatting to someone familiar with the regulatory environments in the US the other day, and he raised an interesting point. US legislation is such that, once a drilling lease has been purchased (often at great expense), the operators must drill within 3 years or the lease is returned and made available for sale. What's happened in the US is that many companies have seen the potential of shale gas and bought up huge acreages. However, now they have to put wells in each leasehold to avoid forfeiting the lease. This is putting pressure on them to drill vast numbers of wells in double-quick time, which in turn has an inevitable impact on the quality of the wells, and subsequently for environmental contamination.

This is a classic example of bad legislation leading to an unfavourable results all round: the companies don't want to be drilling as fast as they are, as the resulting gas glut on the market is driving down prices and eating away their profits, while anyone interested in the environment would want companies to be putting proper care and effort into every well, rather than being forced by regulations to drill as fast as they can.

Luckily, as far as I'm aware the UK has a much more sensible regulatory environment in comparison to the US, so this sort of scenario can be avoided.

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