June 10, 2013

Is fracking regulation a federal issue?

From: Scientific American

By David Wogan

A couple of items about fracking regulations worth keeping track of. First, the Associated Press reports that the comment period is being extended by 60-days for a new rule that will regulate hydraulic fracturing on public lands. The 171-page rule would require companies who drill for oil and natural gas using hydraulic fracturing to disclose chemicals used in the process.

And second, the question of who should regulate hydraulic fracturing: the federal government through a set of baseline standards, or individual states. The Wall Street Journal offers two competing arguments for whether the federal government should regulate hydraulic fracturing. Arguing in favor of federal standards is Jody Freeman, professor of law at Harvard University and formerly counselor for energy and climate change at the White House. Arguing in favor of state regulation is David Spence, professor of law at The University of Texas at Austin. Please read the full arguments here.

Here is Freeman’s main point:

At scale, fracking requires vast amounts of water, which can reduce regional supplies. And industrializing the countryside not only disturbs locals, it can harm habitat and wildlife.

States aren’t fully up to the task of regulating these risks. And the problems inevitably cross state borders, making them a national issue.

A study by Resources for the Future, an independent research organization, showed that state standards for well integrity, wastewater management, disclosure of the content of fracking fluid and other aspects of drilling vary considerably, and some states lag far behind others. The same study reported that state enforcement capacity is generally lacking, and even states experienced with oil and gas are struggling to keep up with the pace of drilling.

And David Spence with the counterpoint:

In general, the federal government should regulate when the important impacts of the regulated activity cross state lines, when states cannot regulate efficiently or when national interests are at stake. None of these justifications apply to fracking.

Only a few of the risks of shale-gas production—methane leakage, for example—extend beyond state lines. And the Environmental Protection Agency is addressing those interstate risks already, using its existing regulatory authority.

As for the argument that states just can’t handle the job of regulating, it is true that regulation lagged behind the industry’s growth in some states at first. But states are quickly adapting. States are strengthening their shale-gas regulations to tighten well-construction and waste-disposal standards and require disclosure of fracking-fluid ingredients, sometimes bringing industry and environmental groups together in the process.

They’re also coming up with regulatory systems that fit local conditions. Different rules for different states are necessary to match the local geography—for example, drillers may use different drilling specifications or wastewaster-disposal methods, depending upon the location.

Texas is at the center of hydraulic fracturing and recent action by the state’s oil and gas regulatory body, the Texas Railroad Commission, highlights some of the points made above. In May 2013, the Commission updated a “well integrity rule” that tightens standards around drilling and securing wells. Environmentalists, drilling companies, and state regulators appear to have reached an agreement on rules that address some risks with drilling and casing wells and respect the local conditions. You can read the ruling here (PDF).

Kate Galbraith, writing for StateImpact Texas, summarizes the regulatory atmosphere in Texas:

The Texas Oil and Gas Association praised the new rule. “We commend the commission’s efforts because the new rule enhances transparency, reflects advances in technology and is technologically feasible for operators to implement,” Deb Hastings, a vice president of the association, said in a statement.

Environmentalists issued qualified praise for the new rule. “Overall this is a very important rule that sets a higher bar for both traditional and hydro-fracking well drilling and casing,” Cyrus Reed, conservation director of the Sierra Club, said in an email. He said he wished at least one technical aspect of the rule were stronger.

One subtext of the new rule is concern about potential new federal requirements for drillers. Barry Smitherman, the commission chairman, testified before a U.S. Senate committee in Washington on Thursday.  He said that some in Congress were wondering whether federal “baseline” standards for hydraulic fracturing were necessary, and he pushed back.

“State regulators are being proactive in regulating this incredible industry, and no federal baseline is necessary because we are the agency closest to the ground,” Smitherman said on Friday.

Regardless of federal action, Texas is moving full steam ahead.

Disclosure: David Spence is a former professor of mine from UT Austin.

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