Obama tightens oil and gas drilling regulations

Obama's EPA requires the oil and gas industry to capture air pollution released during well construction, including during the fracking process. But rules give industry time to comply.

NEW YORK (CNNMoney) -- The Obama administration tightened regulations on the oil and gas industry Wednesday, requiring drillers to capture emissions of certain air pollutants from new wells.

But in a nod to industry concerns that the rules were being enacted too quickly, the Environmental Protection Agency said companies can burn the pollutants at the well head until the start of 2015, when enough equipment is expected to be available to capture the pollution.

The administration said the regulations are part of President Obama's promise to develop the nation's oil and gas resources in a manner that protects the environment and the public health.

"The standards are practice, flexible, affordable and achievable," Gina McCarthy, an assistant administrator for EPA's Office of Air and Radiation, said on a conference call with reporters.

The rule will require all oil and gas companies to capture the volatile organic compounds that are emitted during the final stages of well construction, including during the process of hydraulic fracturing.

That process, known as fracking for short, eases the flow of oil or gas from dense shale rock by injecting water, sand and some chemicals deep into the earth.

Fracking has unlocked an energy boom in the United States, but has also led to concerns about groundwater contamination and earthquakes.

Once the realm of smaller comapnies, big oil firms such as BP (BP), ExxonMobil (XOM, Fortune 500) and Royal Dutch Shell (RDSA) are all in on the shale boom.

The equipment used to capture the pollution largely consists of truck-mounted tanks and hoses that separate the gas from the liquids. Currently, that gas is often just released into the atmosphere.

Volatile organic compounds are responsible for smog formation. Some are known to cause cancer in humans and other animals.

The equipment will also capture methane released during the well construction process. Methane, the prime ingredient in natural gas, is a potent greenhouse gas itself -- 20 times stronger than carbon dioxide.

Some states, notably Colorado and Wyoming, already require the capture of these gases. EPA's ruling makes it a federal standard.

The industry had lobbied to prevent the rule from applying to the hydraulic fracturing process, saying that shale wells generally emit far fewer volatile organic compounds than conventional wells.

Instead, the industry proposed burning the toxic gases and methane from shale wells -- a process known as flaring that is relatively effective in eliminating the pollutants but is not as clean as capturing them.

The industry also wanted an extended timetable to implement the new rules.

EPA's ruling is something of a compromise -- subjecting fracking to the new regulations but giving the industry three years to obtain the equipment and requiring flaring during the interim.

Both industry and environmentalists seemed pleased with the ruling.

"EPA has made some improvements in the rules that allow our companies to continue reducing emissions while producing the oil and natural gas our country needs," Howard Feldman, director of regulatory and scientific affairs at the American Petroleum Institute, said in a statement shortly after the announcement.

"EPA's action today is a breath of fresh air for every man, woman, and child living in the shadow of the gas drilling boom," John Rumpler, senior attorney for Environment America, said in a statement.