Policy Analysis pubs.acs.org/est
The Capacity of States to Govern Shale Gas Development Risks Hannah J. Wiseman* Florida State University College of Law, Tallahassee, Florida 32306, United States ABSTRACT: The development of natural gas and oil from unconventional formations in the United States has grown substantially in recent years and has created governance challenges. In light of this recent growth, and increasing attention to global shale gas resources, the successes and failures of governance efforts in this country serve as important lessons for other nations that have their own unconventional petroleum resources and are beginning to move forward with development, thus calling for a more in-depth examination of the laws governing shale gas development and their implementation. Governance includes both the substance of laws and the activities of entities that implement and influence laws, and in the case of oil and gas, states are primarily responsible for risk governance. Nongovernmental actors and industry also work with states to shape and implement regulations and standards. This Policy Analysis introduces the role of various actors in U.S. shale gas governance, explaining why the states are primarily responsible for risk governance, and explores the capacity of states to conduct governance, examining the content of their laws and the strength of their regulatory entities. The Analysis concludes that states are, to a degree, addressing the changing risks of development. Gaps remain in the substance of regulations, however, and many states appear to lack adequate support or policies for training industry in compliance matters, monitoring activity at sites, prioritizing certain types of regulatory violations that pose the highest risks, enforcing laws, and ensuring that the public is aware of inspections and enforcement and can therefore monitor state activity.
I. INTRODUCTION Governance issues often rise to the forefront of public dialogue when something changes: innovators develop a new technology or industrial activity expands into a new region, thus calling attention to the status quo governance approach. The recent growth of the U.S. oil and gas industry represents one of these changes. Domestic energy companies have long drilled and hydraulically fractured for oil and gas, but they are now drilling and fracturing new formations and using modified development techniques on a very large scale.1−3 This paper focuses on the upstream side of oil and gas developmentthe extraction of oil and gas. The term governance, as used here, encompasses all institutions associated with shale gas development including governmental incentives, guidance and mandates, and private standards. It also encompasses the entities that form, interpret, and implement policies.4,5 Due to several major exemptions of oil and gas development activity from federal environmental statutes, including an exemption of nondiesel hydraulic fracturing from the Safe Drinking Water Act,6 and of oil and gas exploration and production wastes from the hazardous waste portion of the Resource Conservation and Recovery Act,7 the United States relies largely on state governments to control the risks of oil and gas development. States implement certain federal regulations at well sites, write and administer their own regulations, and work with industry actors and stakeholders to enforce state laws.8 They also participate in regional compacts that govern water quality and water use,9,10 and they determine the extent to which local governments may govern oil and gas development, if at all.8 This paper therefore focuses on the states’ governance of unconventional oil and gas extraction and suggests that there are positive developments, but also © 2014 American Chemical Society
important gaps, in current state governance of unconventional oil and gas development. An additional challenge connects directly to these governance gaps and makes it difficult to assess them: although some organizations collect and report regulatory data,11 there is no publicly available, comprehensive database of state regulations organized by each stage of well development to which they apply. This makes it difficult to identify regulatory gaps. More importantly, even with knowledge of gaps, some regulatory entities may lack the political will to adequately govern and to fill gaps through modified regulation and compliance activities. These limitations may result from public choice dynamics and the threat of “capture” by industry stakeholders,12 and many of the risks of development are not fully known, thus requiring regulation in the face of uncertainty. The paper concludes by suggesting specific strategies to locate and address governance gaps and to ensure that updated policies are implemented, including the formation of a national database that tracks regulations and standards with the help of state inputs, better training of industrial actors that move rapidly from state to state, more consistent and uniform enforcement objectives and recording of enforcement actions, uniform baseline testing and monitoring requirements, bonding mechanisms that continue to fund staffing of well sites after the closure of wells, and requirements that operators maintain a Special Issue: Understanding the Risks of Unconventional Shale Gas Development Received: Revised: Accepted: Published: 8376
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new surface casing and specific types of cement material and cementing methods36,37 all waste must be removed from well sites every 30 days.36,37
groundwater impacts from improper casing of wells and disposal of wastes
8377
drying, filling in of pits after drilling and fracturing91 well plugging 92 and bonding93
drilling and gas safety standards for use of ladders, welding equipment, hoisting equipment, etc.63 fire protection63
prohibition on building over abandoned wells36,37 casing must be cut to a minimum depth.36,37
fire prevention practices34−37 industry provision of worker compensation benefits up to state compensation limits36,37
improper plugging and inadequate removal of wastes, restoration of site
human safety
Occupational Safety and Health Administration Standards and Objectives19
New Source Performance Standards Subpart OOOO: Limits on volatile organic compound emissions from flowback, storage vessels, other equipment; limits on sulfur dioxide from gas processing plants18 limits on certain air toxics from glycol dehydration units, leak detection and repair18
Endangered Species Act89 and listing of the diamond darter as endangered60 failed attempted enforcements of bird deaths in pits under Migratory Bird Treaty Act90
limited requests that operators use existing disturbed areas88
habitat fragmentation and wildlife impacts
implementation of New Source Performance Standards Subpart OOOOcontrolling volatile organic compounds and sulfur dioxide emissions from natural gas wells and associated facilities18 in Colorado, more stringent emissions limitations than federal standards28
study only87
moratorium on disposal well use in areas of Arkansas85 Ohio: monitoring required; injection must end if certain pressure exceeded86
induced seismicity from disposal wells
mufflers, exhaust mufflers, or exhaust muffler box required “to prevent the escape of obnoxious gases, fumes or ignited carbon or soot”36,37
study only84
water withdrawal permit; minimize aquatic life impacts83 some portions of Marcellus: water withdrawal permit from regional compact commission (group of states); operators must ensure minimum streamflow maintained32
water quantity
air pollution
draft EPA casing guidelinesfracturing with diesel fuel81 underground injection control well regulation in states without primacy31 planned EPA regulation of brine and flowback from shale wells sent to wastewater treatment plants82
casing79 and cementing 80 underground injection control well regulation for disposal of oil and gas wastes in states with primacy (federal Safe Drinking Water Act regulation delegated to states)31
spill prevention, control, and countermeasure plans76 Illinois and Maryland: environmental pollution liability coverage77,78 (also applies to groundwater impacts, disposal)
spill prevention and control for sites with aboveground aggregated oil storage capacity of more than 1,320 U.S. gallons of oil78
regulation of pit and impoundment construction74 and maintenance75
closed loop mud systems for drilling and reworking36,37 blowout prevention required36,37 prohibition of surface discharge of hydrocarbon substances or refuse36,37 environmental pollution liability coverage34,36,37 (also applies to) groundwater impacts, disposal)
surface and groundwater impacts from spills, leaking pits, well blowouts, improper disposal
federal federal stormwater permitting for sites with contaminated runoff72,73
state or regional some best management practices in addition to federal requirements71
local
design criteria and construction standards manual38
impact
erosion and sedimentation from well sites
Table 1. Examples of Institutions That Regulate Selected Impacts of Shale Gas Development
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river.32,33 Other states experiencing high rates of shale gas development, on the other hand, such as Arkansas, Louisiana, and Texas, lack regional governance mechanisms that apply directly to fracturing activities. Local governments, such as cities, towns, townships, and boroughs, also substantially influence oil and gas development activity in certain statesparticularly in states like New Mexico34,35 and Texas.36−38 The state-local relationship in oil and gas governance is currently one of the most uncertain oil and gas governance areas, with many states attempting to preempt local regulation, and court cases in this area addressing the extent to which states may preempt local governance are ongoing.39 Finally, private actors participate in governance in a variety of ways. Due to a previous EPA directive,7 the State Review of Oil and Natural Gas Environmental Regulations (STRONGER) enlists a group of public and private entities to write guidelines for effective state regulation of oil and gas development and to review state oil and gas regulatory programs for voluntary compliance with these guidelines.40−42 Nonprofit groups such as the Environmental Defense Fund also work with industry to suggest improved oil and gas practices with which certain operators voluntarily comply, as evidenced by the consensus performance standards written by the Center for Sustainable Shale Gas Development.43 B. The Substance of Regulations. The substance of the regulations and standards implemented by the public and private entities introduced above is best understood by the stage of unconventional well development to which regulations apply and the impacts caused by these stages of development. To develop an unconventional oil or gas well, a well operator must construct a relatively flat “pad” on which trucks, engines, rigs, trailers, and waste storage units sit. The operator excavates and grades a several-acre pad and constructs an access road to the site.44 This can cause soil erosion and sedimentation, which can enter surface water bodies.45−47 The construction of well sites also fragments habitats and can kill or harm species, including endangered and threatened species.45,48 Many additional stages of well development also impact water quality. When operators drill and hydraulically fracture a well, the well can leak methane, drilling muds, and fluids, and hydraulic fracturing fluids into underground resources if not properly cased and cemented.49−52 The wastes that come out of the well and are stored on site in a pit or tank also can pollute surface water resources, or groundwater resources if they percolate down from the surface.53,54 Soil and rocks in the form of drill cuttings come to the surface, and these often contain naturally occurring radioactive materials (NORM).44 Drilling also produces used drilling muds and other wastes, which are stored in surface pits or tanks; these pits and tanks can leak if improperly constructed and maintained, and leaks can contaminate surface and groundwater resources depending on their location and how quickly they are cleaned up.8 After well drilling, operators hydraulically fracture a well by injecting several million gallons of water, mixed with chemicals, down the well; the flowback water that comes back up out of the well after fracturing contains NORM and salts in addition to the chemicals added.55 Flowback, too, is stored in surface pits or tanks and can leak, polluting water.8 Finally, the salty produced water that comes out of the well over its lifetime also often contains NORM and salts,56 and, like other wastes, is temporarily stored on the surface prior to disposal.
minimum level of insurance to so that contamination is cleaned up and damages are covered.
II. THE STRUCTURE AND CONTENT OF OIL AND GAS GOVERNANCE The growth and perfection of a technique called hydraulic fracturing, combined with updated horizontal drilling technologies, has dramatically expanded U.S. oil and gas production from unconventional formations13those that require relatively expensive and advanced production techniques.14 An array of actors govern these activities, as described in this part. A. Government and Private Actors. At the federal level, the Environmental Protection Agency is the most active institution in oil and gas governance, setting standards for the disposal of wastes through underground injection control wells,15 prohibiting the disposal of brine into surface waters east of the 98th meridian16 and requiring treatment of brine west of the 98th meridian,17 and controlling certain air pollution from well sites and associated infrastructure,18 among other requirements. Other federal agencies, such as the Occupational Safety and Health Administration,19 also regulate certain aspects of drilling and fracturing, as summarized in Table 1 above. As introduced above, states are the most active regulators of oil and gas development due to several large federal exemptions and historic allocations of authority to the states. Outside of certain basins that are regionally regulated, states determine the sources from which operators may withdraw water for fracturing and the quantity of water that may be used20in some cases allowing unpermitted withdrawals,21 and in others implementing relatively rigorous permitting requirements.22,23 States are also responsible for ensuring that wells are adequately lined with steel tubing called casing, which is cemented into the well and prevents oil, gas, brine, or fracturing fluids from escaping underground.24 Further, they regulate the handling of most oil and gas wastes, even most hazardous ones.7 States also often regulate setbacks of wells or well sites from protected resources (if setbacks are required, which in some states they are not),25−27 certain air pollution emitted from oil and gas sites,31 and the restoration of sites,29,30 among other requirements.8 Even when a federal standard applies to oil and gas, states often implement this standard. For example, the injection of oil and gas wastes underground is regulated under the federal Safe Drinking Water Act (SDWA), but approximately 31 states have received EPA authority to issue permits for these wells.31 This combination of direct state authority and implementation authority under “cooperative federalist” regimes of federal delegation to states causes the states to shoulder the bulk of responsibility for shale gas governance risks and, as discussed below, they are not, at current capacity, fully equipped or motivated to adequately take on this task. In addition to having extensive authority to implement many federal statutes that apply to unconventional oil and gas development, states participate in regional governance, as indicated in Table 1 under “water quantity”. In the Marcellus Region, where extensive shale gas development is currently occurring, Maryland, New Jersey, New York, Pennsylvania, and Delaware have formed regional governance compacts, which the federal Congress has approved.9,10 These commissions govern activities such as the withdrawal of water for fracturing and, under draft regulations that were not approved, one commission proposed to regulate the construction and operation of oil and gas well sites within the watershed of a 8378
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regulations that require, for example, reporting of pollutant emissions or chemicals used. Although procedural regulations can encourage enhanced substantive performance of operators70 and support monitoring of compliance with substantive standards, they are omitted due to space limitations. Finally, the federal regulations described are those that apply on both nonfederal and federal lands. The table does not include regulations that apply exclusively to oil and gas development on federal lands. Although Table 1 might give the impression of comprehensive regulation of oil and gas development, especially by the states, regulation varies substantially among states, as briefly introduced above with respect to pit liners. The examples of variation are too numerous to document here, but a few examples paint an initial picture. From the regulatory survey conducted for this paper, it appears that Texas does not require that well sites be set back a minimum distance from water resourcesonly requiring setbacks from buildings94whereas West Virginia, for example, requires that wells be set back 100 feet from streams,95 and Colorado has a complex buffer system for wells near public water supplies.96 Pennsylvania presumes that water contamination within a certain distance of the well site and within a certain time of drilling was caused by oil and gas operations,97 whereas many states have no direct provisions for assigning liability for underground water contamination or requiring water replacement by operators.98 In addition to variation in regulatory substance, states’ capacity to implement the regulations on their books differs substantially, as discussed below.
Like other stages of well development, improper disposal of oil and gas wastes can cause surface and groundwater pollution. Solid wastes are typically disposed of in state-regulated centralized landfills, and liquid wastes are sent to underground injection control (UIC) wells or through wastewater treatment plants.8 All of these disposal methods can contaminate water resources if conducted improperly.57 UIC wells also have induced earthquakes in several parts of the United States.58,59 The hydraulic fracturing of wells impacts water quantity as well. In addition to potential long-term impacts, when operators withdraw millions of gallons of water from one water body within a short time period, this can cause water levels to drop and can endanger aquatic life.60 Beyond water and seismicity impacts, several stages of oil and gas development emit air pollution, including trucks, drilling, and fracturing rig motors, and other well site equipment; processing units on site such as machines that separate water from oil or gas; compressor units to send gas through pipelines; and storage tanks and flowback water, which emit volatile organic compounds.18,44 Oil and gas wells, distribution lines, and pipelines also emit methane, a greenhouse gas with high global warming potential.61,62 A variety of safety concerns also arise at the well site: workers can be injured by fires and explosions at the site, by pipes being hoisted in the air, and chemical spills, among other incidents.63 And finally, the environmental and safety impacts of well sites extend beyond the life of the well. Once production stops, wells that are improperly plugged can leak methane and serve as conduits for other pollutants,49 and sites with pits that are not fully emptied of waste substances and filled in can continue to cause soil and water contamination. Table 1 describes the role of various institutions in governing these impacts of well development, showing that often, states hold the bulk of responsibility. Note that many of the regulations listed in Table 1 (with an indication that states regulate pit construction and operation, for example) vary substantially among jurisdictions. For the construction of surface pits that contain oil and gas wastes, for example, states like Colorado and Pennsylvania require a synthetic liner with a maximum allowed hydraulic conductivity,64,65 whereas Louisiana allows an earthen liner if the liner stays below this same maximum hydraulic conductivity,66 and North Dakota requires only that the lined pit be “sufficiently impermeable to provide adequate temporary containment of the oil, water, or fluids in the pit”.67 When Table 1 indicates that states regulate pit construction, casing, or other activities, this does not indicate that all states regulate that activity, or regulate it uniformly. Further, for each impact regulated by one or several states, the footnote in the table provides only one example of a state regulation, unless otherwise indicated. Note also that in some states, the state does not allow local governments to regulate oil and gas operations.68,69 The primary examples of local regulation in Table 1 are from Texas and New Mexico, where local regulation is allowed.34−38 For each impact regulated by one or several local governments, an example from one local government is typically provided. A blank space in the table indicates that the author has not located regulation specific to the jurisdiction indicated. Due to the voluminous nature and diversity of regulations, however, it is possible that a regulation exists that the author has not yet identified. The table provides examples of substantive regulationsthose that require certain technologies or practices to prevent pollutionrather than procedural
III. GAPS AND STRENGTHS IN THE SUBSTANCE, FORMATION, AND IMPLEMENTATION OF POLICIES Governing entities must operate effectively and competently for governance to work: agency staff must know the risks and technologies to write good regulations; update regulations to address changing risks; inform industry actors of policies and new rules to encourage compliance with these rules; and look for violations of rules and, where violations are identified, enforce them. Industry actors that have agreed to voluntary standards, in turn, must conduct auditing and take other measures to ensure that those standards are achieved. Because states are at the center of unconventional oil and gas governance, this part examines the states’ capacity to perform these roles, and how the federal government has in some cases augmented this capacity. For each area explored, this part also briefly suggests how governance needs to improve. A. Improving Understanding of Risks. To improve the substance of regulations and ensure that regulations adequately control risks, governing entities and stakeholders that influence these entities must understand the technologies and practices involved in the oil and gas industry and the resulting risks. Some states have begun to enhance their understanding of technologies and associated environmental risks. The State of New York has embarked upon the largest risk assessment todate, preparing a voluminous environmental impact statement.44 Some states have also helped to identify potential risks by requiring or incentivizing baseline testing of environmental resources prior to development and, in limited cases, monitoring water quality during well development and conducting post-development surveys.99 This data, in addition to being required in only a few states, is not uniform, and it sometimes does not include information on substances that 8379
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8380
individual performance well bond per well for plugging and other site activities
$10,000 for wells less than 3000 feet in total measured depth; $20,000 for wells greater than or equal to 3000 feet123
$50,000; lesser amount for wells less than $2000 ft. if approved by state oil and gas agency124
for operators drilling up to 50 wells with total bore length less than 6000 ft., $4,000 per well; for up to 50 wells greater than 6000 ft $10,000 per well125
secondary containment for the capacity of the container plus 10%121
no specific requirements located
leak detection possibly required in sensitive areas120
secondary containment under drilling/fracturing pits and tanks and/or leak detection
$2.00 per foot times “total aggregate depth of all wells”126
leak detection system if pit not inspected annually122
no specific requirements located
impoundments must be more than 100 feet from streams, wetlands, other water bodies.119
pits may not be “in or hazardously near” bodies of water and may not block natural drainages118
no drilling or pits w/in 0−300 ft. of water supply, pitless drilling within 300−500 ft., pitless drilling or containment 500−2640 ft.96
pit location constraints
steel casing hydrostatically pressure tested to maximum pressure to which it will be subjected117
“new pipe with an internal pressure rating that is at least 20% greater than the anticipated maximum pressure” to which it will be subjected, or used casing with other conditions116
Texas
new or reconditioned pipe “previously tested to one thousand pounds per square inch”115
Pennsylvania
no requirement or incentive identified
production casing “adequately pressure tested” for anticipated conditions114
North Dakota no requirement or incentive identified incentivized within 2500 feet of well113
casing − new, used, or no specification
Colorado
maximum of four samples within 2,640 feet of well99
baseline testing of groundwater
well development activity
Table 2. Examples of Regulatory Gaps
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could potentenially enter water due to hydraulic fracturing.100 Colorado, for example, requires baseline testing for toluene and ethylbenzene,99 whereas it appears that Ohio does not.101 Other states have no baseline testing requirements or incentives. The federal government has assisted the states in identifying technologies and risks in several ways, but in a limited fashion. Certain local U.S. Geological Survey offices, in collaboration with states, are compiling baseline groundwater data and conducting some sampling.102,103 The Environmental Protection Agency is completing a limited study of the potential impacts of hydraulic fracturingfocusing only on water quality and quantity impacts84and a Department of Energy subcommittee has identified some risks and suggested ways to improve regulation.104 Although regulatory entities have begun to identify the risks and assess pre- and post-development conditions, much progress remains to be made. The Government Accountability Office recently assessed the scientific literature on risks of fracturing and concluded that many risks are not yet quantifiable.105 The limitations of the scientific studies likely result from numerous factors, including a lack of adequate funding and incentives for scientific research, industry actors’ hesitancy to share data with scientists, and in a some cases, a lack of baseline and post-development data. Furthermore, many of the questions about the science are hidden, literally, underground: it is difficult to tell whether a casing failure, an old, improperly plugged well, and/or naturally occurring methane caused methane contamination near a well, for example. Isotopic analyses can help: matching the gas found leaking from the annulus in a well (the space between the casing and the wellbore, or between two casing strings) with the gas found in water or soil is a useful tool, but sometimes this gas cannot be fully tested.106 The use of tracer technologies, in which the fracturing fluid injected contains substances that remain in the fluid and allow for later identification if the fluid migrates, offers some promise but has been limited so far.106 In another promising data collection effort in the Marcellus region, a university-led project called the ShaleNetwork “is creating a central and accessible repository for geochemistry and hydrology data collected by watershed groups, government agencies, industry stakeholders, and universities” and is identifying data from the existing literature, state violations that noted spills on land and “into water resources”, and other sources.107 For scientists, policymakers, and stakeholders to be able to fully assess the risks of fracturing nationwide and thus to better understand governance gaps, they will need more raw data from around the country. This data should demonstrate the amount of pollution in the air, water, and soil prior to, during, and after oil and gas development activity. Michigan appears to be one of the few states that requires continuous monitoring of certain pollutants near well sites, mandating as least one “groundwater monitoring unit” close to and downgradient from catchment basins and other secondary containment areas for hydrocarbons and brines (salty produced waters from the well).108 The baseline data and other information on pollutant releases that a handful of states already require will be difficult to compare and assess if it is reported in different units, or if it reports the results of testing for different types of pollutants in different states. If the states or the federal government are to enable a broad assessment of risks, the states need to harmonize their testing and reporting requirementsagreeing on the
types of pollutants to be tested for, the units in which they will be tested, and the types of laboratories from which testing results will be accepted. To support cross-comparison of data, operators or states that conducted testing at and around well sites, following uniform standards, could then input results into a centralized water quality databaseperhaps managed and audited by the federal government with the assistance of states, industry actors, and nonprofit groups. B. Filling Regulatory Gaps. In addition to better identifying and understanding shale gas development risks, regulatory gaps must be addressed. Many states wrote their oil and gas regulations at a time when well numbers were lower and when slickwater fracturing had not been fully developed, and these regulations implicitly or explicitly assumed a certain level of risk associated with those well numbers.109 But rising well numbers and densities can pose larger cumulative risks more spills of drilling and fracturing substances and leaking wastes from surface pits, for example.8 Many state regulations have not been updated to reflect potentially larger risks, but some governments are beginning to modify regulations or write new ones. Beyond mandating chemical disclosure, some of the common regulatory changes at the state level have required testing of wells before fracturing to ensure that they can withstand the pressure of fracturing, as well as blowout prevention so that pressure buildups during drilling and fracturing do not cause an uncontrolled release of substances from the well, which can last for hours or days.110−112 Some states have also implemented broader revisions to their oil and gas codes, requiring elements like baseline testing prior to drilling; larger setbacks between well sites and natural resources; and assurances that water withdrawals will not damage aquatic life.8 Finally, many local governments are adding or changing rules, with places like Fort Worth and Arlington, Texas and Santa Fe County, New Mexico implementing relatively broad environmental protection and insurance requirements.34−37 Despite these improvements, states have not adequately updated their policies to address changing risks: state regulations vary substantiallyand not always due to differences in climate and geology. Some also fail to account for the cumulative and interactive effects of higher well densities. Limited examples of gaps are documented in Table 2, which provides examples of states that have implemented requirements for particular stages of shale gas development, others that have not implemented these requirements, and still others that appear to have implemented weaker versions of requirements. Table 2 is not intended to suggest, however, that one “best” regulation has been identified for each stage of development, and that this regulation should be implemented in every area. Best management practices or regulations have not yet been comprehensively identified for shale gas development, and these practices will, in some cases, vary by region. Table 2 provides only a small sample of variation in state regulations, and to fill regulatory gaps, it is important to have a comprehensive understanding of how state regulations vary and why. Yet, as introduced above, although nonprofit groups like the Ground Water Protection Council and coalitions of states working through the Interstate Oil and Gas Compact Comission provide oil and gas regulatory data, there are no databases that comprehensively identify and compare all state regulations for each stage of development and organize the regulations in a way that allows for quick comparision across states127−130. To address this deficiency, states working 8381
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each industry actor search through voluminous state and local regulations, it would be more efficient, and likely more effective, for governments to communicate their regulations to industry in a concise, comprehensive, and quickly understandable manner. This is not to say that an agency can easily summarize a code that is several hundreds of pages long. But states need to highlight the key requirements in their code and explain recent changes to it in order to encourage industry compliance with rules. To some extent, states are beginning to do this. The Railroad Commission of Texas provides a compliance checklist for operators, which briefly describes all of the permits that they must receive; the rules that they must follow for drilling, constructing, and plugging wells; required waste handling and spill prevention procedures; and hyperlinks to the relevant rules at each stage.133 The agency also provides links to the permit applications and other forms that operators must fill out and submit to the agency, and contact names and phone numbers for various division offices. Kentucky and Pennsylvania similarly publish online an oil and gas operators’ manual comprehensively describing rules that must be followed and forms that must be submitted.134,135 Other states provide guidance about certain aspects of their regulations: West Virginia details how oil and gas operators must control soil erosion from well sites, for example.136 Although some states have taken steps to inform oil and gas operators of their rules, it appears that some operators are still unaware of regulatory variations. In Pennsylvania, for example, the Susquehanna River Basin Commission issued several stiff penalties to an operator from Oklahoma who withdrew surface water for fracturing in excess of the withdrawal amounts allowed by the permit.137 Large, broadly publicized penalties can, in, lieu of training, alert industry actors to state and regional rules. A final means of better training industry actors to follow environmental and safety standards would be the development of an industry-led oil and gas operations training organization, similar to the nuclear industry’s Institute for Nuclear Power Operations (“INPO”).138,139 Through this organization, industry actors would agree upon safety practices to be followed to avoid incidents like spills of drilling and fracturing substances, leaking pits, and well blowouts. Industry would recruit the most talented engineers and site managers to train new employees, and the organization would potentially be certified by a government agency. An “INPO for the oil and gas industry” could greatly benefit both the public and industry reducing the incidents that can be efficiently avoided at well sites through better training and more careful well operations. Even when industry actors are informed of rules, including recently changed rules, they sometimes do not follow them. This can occur for a variety of reasons. In some cases, violations of rules result from human error and mistakes, or even circumstances beyond industry’s control: vandals occasionally open waste tanks at oil and gas sites, for example, if the sites are not properly fenced in or otherwise secured.140 In other cases, industry actors might decide that polluting and paying a resulting fine is more efficient than complying with regulations. Careful monitoring of industry behavior and follow-through on enforcement, with larger fines for incidents with serious environmental or human health risks, is therefore required. 2. Improving Monitoring of Rule Violations. For states to determine whether the oil and gas industry has complied with rules, several forms of monitoring are necessary in addition to monitoring the quality of the environment before, during, and after drilling. States need information about air pollution, spills
together or with the federal government should create and maintain such a database and audit it for accuracy. Academic and nonprofit organizations could also support this effort and contribute regulatory data. While identifying regulatory gaps and their causes, states should also begin to implement regulations that address the cumulative and interactive harms of drilling and fracturing. These rules should set certain thresholds for environmental impacts. States should consider requiring a minimum stream flow in surface waters, for example, as the Susquehanna River Basin Commission has done. If simultaneous withdrawals for hydraulic fracturing would cause stream flow to drop below this level, withdrawals would have to temporarily cease.32 In some cases, improving state regulations will not be enough; federal or regional regulation will be required when impacts cross state lines or are discovered to be larger than expected. Regional waste management compacts might be needed, for example, in areas where operators send large quantities of waste across state lines. Similarly, if road impacts and other problems are experienced on a regional level, a collaboration of local governments or of statesworking through a compact, with the approval of Congressmight best address these impacts. Finally, because contamination already has occurred at well sites and will continue to occur at the tens of thousands of sites still being developed, improved bonding and insurance schemes will be required: governments must have a mechanism for paying for site cleanup in the future. Few states currently have environmental liability insurance requirements, and bonding mandates differ substantially.122−126 Bond money or other funding, such as fees, should be required in amounts that will ensure adequate well plugging and site restoration, and also should be made available for continued inspections of sites during production and after the plugging of the well. When state agencies no longer receive permit fees from new wells being drilledfees that help fund needed compliance investigationsinspection of abandoned sites is still necessary. C. Enhancing Enforcement. In addition to improving the substance of regulations, states must better enforce these regulations and alert industry actors to rules. This requires better publicization of rules, monitoring for violations using technologies and human inspections, the prioritization of certain enforcement, and careful design of penalties in order to deter future violations and ensure remediation of harm caused. 1. Alerting Operators and Service Companies to Oil and Gas Regulations. The oil and gas industry is a highly mobile one: energy companies transport their rigs to numerous states to extract oil and gas, and rigs sometimes move quickly from state to state. When the price of gas is too low and the price of oil is higher, for example, companies might move from Pennsylvania’s Marcellus to the Bakken Shale. The speed of the transition from state to state is somewhat limited by the availability of mineral rightsa company must obtain ownership of the minerals, typically through oil and gas leases, before drilling and fracturing.131,132 But transitions can still, and often do, occur quite quickly. Further, the operators responsible for well development typically contract out much of the work to fracturing service companies, which travel rapidly from site to site. When industries are primarily regulated by state entities and move among sites, an important regulatory challenge emerges: these industries must quickly familiarize themselves with new regulatory regimes and comply with them. Rather than having 8382
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caused by violations because administrative orders often require oil and gas operators to conduct specific cleanup and remediation. Enforcement also can, if it has sufficiently high penalties, deter future regulatory violations. This section uses Colorado and Pennsylvaniatwo states with relatively high levels of drilling and fracturingas examples of the procedures that enforcement programs follow and the priorities established for enforcement. In Colorado, a potential enforcement case is initiated when a staff member of the Colorado Oil and Gas Conservation Commission issues a notice of alleged violation (NOAV).142 The state indicates that “[m]ost NOAVs are resolved satisfactorily without further enforcement action”, meaning that the operator corrects the alleged deficiency or shows that there was no violation. If the NOAV is not resolved in this relatively informal manner, “COGCC staff generally makes an offer to settle the matter with an Administrative Order by Consent”, (AOC), which “may contain further requirements for corrective action and may include fines”.142 Finally, if the operator does not settle the matter through an AOC, the case goes to a full hearing before the Oil and Gas Conservation Commission, called an “Order Finding Violation (OFV) hearing”, at which fines are assessed.138 The Commission in 2008 doubled most fine amounts and increased the base fine amount for violations that cause “significant, avoidable loss to wildlife or wildlife resources”.143 In addition to these regulatory changes, Governor John Hickenlooper recently issued an executive order providing that Administrative Orders by Consent should not be available for certain types or series of violations; that statutory maximums should be provided “as necessary to protect public health, safety, welfare, and environment”; and that minimum violations should be established for “especially egregious violations”, among other directives.144 The agency also must post all violations on the web, thus giving the public access to information about enforcement.144 Like Colorado, Pennsylvania guides and prioritizes certain enforcement actions in oil and gas. Pennsylvania’s oil and gas enforcement policy provides: “An enforcement action is to be taken for each identified violation. No violation is to be ignored”.145 Like Colorado, the state agency also prioritizes certain types of enforcement, recognizing the “limited resources available for enforcement activities”.145 The highest priority violations are those that “result in an actual release of gas or pollutants that endanger human life or public health or safety”.145 Pennsylvania has further aimed to better coordinate regulatory activity, announcing that the DEP “works closely with the State Police to conduct unannounced . . . operations to strenuously enforce waste and highway safety laws for trucks hauling wastewater from drilling sites”.146 As in Colorado, once a Notice of Violation is issued in Pennsylvania, operators may enter into informal negotiations with the DEP, which do not count as enforcement, and settlements with plans for corrective action are memorialized in a Consent Assessment of Civil Penalty or Consent Order and Agreement.145 Also similar to Colorado, cases may move to a formal enforcement stage, although Pennsylvania identifies only limited circumstances that trigger formal enforcement. The Department issues an Administrative Order when a violation causes “imminent danger to health or safety”, is causing or “can be expected to cause, pollution or environmental damage”, or an operator has not complied with “a previously cited violation”.145 The Order “directs the operator to take specific
of substances onto soil on or near the site, and the extent to which these spills migrated, if at all. The possibilities for monitoring industry actors’ compliance with rules range from very detailed monitoring to looser systems involving periodic checks. At the most stringent monitoring level states could, and sometimes do (outside of the oil and gas industry), continuously monitor industry using technology rather than human inspections. Power plants have continuous emissions monitoring systems, for example. Although oil and gas drilling and fracturing activities are more temporary, an air emissions monitor installed downwind of an oil or gas site could take measurements of the concentration of various air pollutants in the air during site construction, drilling, and fracturing, for example, and send these to a centralized agency database. Groundwater monitoring units also could be installed at or near sites, as Michigan requires.108 Indeed, in a costless world, technology could monitor, record, and report nearly every potential problem at an oil or gas site: cameras could show wildlife injuries or deaths when birds flew into waste pits or wildlife breached fences around pits. Seismic equipment deployed near disposal wells could detect potential induced earthquake activity, and monitors placed at various points could pick up indications of soil erosion. Opportunities for technological monitoring at well sites, although cost-constrained, should be more seriously considered by local governments, states, and the federal government. 3. Prioritizing Compliance and Providing Uniform Standards for Compliance Reports. Although many states do not require continuous monitoring of all pollutionlikely in part due to the costssome require agencies or industry actors to conduct limited testing and monitoring around particular well sites. And in lieu of or in addition to electronic monitoring or testing and reporting requirements, many states require agency staff to periodically inspect sites. Some, like Colorado, even specify which types of inspections are most important, thus potentially ensuring that the highest-risk activities are monitored. The Colorado Oil and Gas Conservation Commission’s Rules provide: “The commission shall use a risk-based strategy for inspecting oil and gas locations that targets the operational phases that are most likely to experience spills, excess emissions, and other types of violations and that prioritizes more in-depth inspections”.141 Many states lack these types of formal priority-based systems for inspection. Furthermore, the problems noted by inspectors are also reported using different information and metrics depending on which inspector shows up at the sites. States should implement more consistent standards for the types of data inspectors should look for and report at sites, such as the areal extent (in square feet or a similar metric) of any surface spills, the type and volume of substance spilled, the environmental resources that appeared to have been impacted, if any, and a number of other uniform criteria. States also should consider requiring digital photographs to be taken at each site inspection and included within the file for each well. All pictures and inspection and enforcement information should then be posted on the internet for public access, and this information should be searchable. 4. Designing Penalties for Consistent and Optimal Enforcement of Rule Violations. No matter how states detect a violation of a regulationthrough periodic inspections, industry self-reporting, or monitoringtheir governance systems will only be effective if they enforce regulations. Enforcement can lead to needed remediation of damages 8383
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2009, using 87 oil and gas field inspectors who conducted 128,000 inspections, “most fees have not been raised in nine or more years”, thus limiting inspection and enforcement capabilities and the ability to hire more staff.153 6. Requiring Responses to Damages Caused by Rule Violations. In addition to ramping up inspection requirements or funding for inspection staff in limited cases, some states attempt to ensure that damages from violations are remediated. In Colorado, for example, the state may use money in the “oil and gas conservation and environmental response fund” to mitigate conditions that threaten to or do cause environmental damage as well as to “[g]ather background or baseline data on any air, water, soil, or biological resource” that could be impacted by “oil and gas operations”.154 Other states have, in a more limited fashion, added insurance requirements to ensure that operators can cover liability for certain damages.155 Some states are working to address the rise in oil and gas development despite having limited resources to address the rapid growth in activity. Substantial substantive and institutional gaps remain, however, that require close attention if risks are to be adequately controlled.
corrective actions by specific dates to correct [a] violation” or orders the cessation of operations.145 The DEP may also issue civil penalties or require environmental projects in lieu of payment, bond forfeiture orders, and criminal penalties when operators intentionally violate the law and do not take corrective action.145 Finally, the DEP posts on the web “all inspections that resulted in a violation or enforcement action assigned by the Oil and Gas program”.147 As shown by the Colorado and Pennsylvania examples, some states have clear directives for the stages through which enforcement must proceedoften from the informal to a more formal leveland some have implemented or are moving toward implementing enforcement priorities. Some, like Colorado and Pennsylvania, also have made clear that enforcements must be made public, which is important; if “private attorneys general” are to act, they must be informed about which violations or alleged violations the states have and have not pursued. But not all states have such clear policies, and some do not provide easy public access to enforcement information. 5. Funding Enforcement. One of the greatest challenges to state compliance activity arises from resource limitations. Many states appear to lack adequate staffing numbers to inspect well sites when drilling and fracturing occurs, and, in many cases, they lack money to hire more staff. In 2012, for example, Colorado had 27 inspectors for more than 49 000 conventional and unconventional oil and gas wells listed as active; Ohio had 40 inspectors for 55 083 wells, and Texas had 153 inspectors for 279 856 wells.148 States’ efforts to ensure compliance with rules will only be effective if the programs are supported by adequate funding: agencies need well-trained staff on the ground to inspect sites and monitor for and respond to problems, and these staff need resources like monitoring equipment to properly conduct their jobs. States often fund enforcement efforts through fees imposed on operators when they apply for a permit to drill and complete a well, and some states have recently increased these fees.149,150 Some states have also attempted to better assess staffing needs and to ensure that staff will be paid minimum rates (thus, potentially, avoiding some staff migration to more lucrative industry jobs). In West Virginia, for example, the legislature required the Secretary of the Department of Environmental Protection to “[d]etermine the number of supervising oil and gas inspectors”, inspectors, hearing officers, and stenographers needed to carry out new regulatory requirements.151 West Virginia’s legislature attempted to provide for high quality staffing by requiring that staff receive minimum salaries, stating: “Every supervising oil and gas inspector shall be paid not less than $40,000 per year. Every oil and gas inspector shall be paid not less than $35,000 per year”.152 This still might not be enough funding, however, to retain staff, as they are often lured away by more lucrative industry positions. West Virginia also requires minimum qualifications for oil and gas inspectors, including “at least two years actual relevant experience in the oil and gas industry”.152 Although this is an important step toward providing competent staff to implement regulations at well sites, imposing minimum qualifications does not necessarily ensure that these types of staff will in fact be available for hire, or will be hired. Pennsylvania has taken more definitive action. The Department of Environmental Protection indicates that it hired 37 additional oil and gas employees in 2009 and 68 more in 2010.146 In Texas, on the other hand, which spent $15,871,941 on monitoring and inspections in
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AUTHOR INFORMATION
Corresponding Author
*Phone: 850-645-0073; e-mail:
[email protected]. Notes
The authors declare the following competing financial interest(s): The author consults for the Environmental Defense Fund and conducted one consulting project for the General Electric Company. She also has worked with Resources for the Future on shale gas issues.
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REFERENCES
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Environmental Science & Technology
Policy Analysis
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