States best qualified to regulate oil, gas, House panel told

US states are the most qualified to regulate oil and gas development within their boundaries because they’re well acquainted with unique geological and environmental conditions there, officials from three state governments told the US House Natural Resources Committee. But a fourth witness said federal and state regulators may have different management goals that are dictated by law.

US Rep. Doc Hastings (R-Wash.), the committee’s chairman, said the committee and some of its subcommittees have held at least five hearings in the last 2 years about problems when new federal oil and gas requirements are imposed on top of existing state regulations. “There is a simple solution to prevent duplication: Don’t duplicate the states,” he declared. “The ‘one size fits all’ regulatory structure being pursued by the Obama administration is a waste of time and energy.”

The three state officials agreed. “While day-to-day interactions with local branches of these federal land management agencies are friendly and, for the most part, productive, national policies are beyond the control of local administrators,” Utah Lt. Gov. Gregory S. Bell (R) said. “From Utah’s perspective, increasingly national political considerations are unduly influencing land use decisions that are more effectively addressed locally.”

Bell continued, “Utah believes that those closest to, and whose lives are most directly impacted by, public lands are better situated to make decisions regarding the use and enjoyment of those public lands. In our experience, when land and energy policies are determined within the political jockeying in Washington, DC, the outcomes for local communities are almost invariably negative.”

The most recent example is the US Department of the Interior’s decision to apply sequestration cuts to mineral lease royalty payments, Bell told the committee. “This move subverts the common understanding of what royalties are—dedicated revenues collected by the federal government in trust for us, but certainly not federal spending,” he said.

Certainty matters

Texas can charge more for a lease over a shorter timeframe than the federal government because it completes permit application reviews and reaches other regulatory decisions more quickly than the federal government, Texas General Land Office Commissioner Jerry Patterson said. “Producers are willing to pay more because our terms and timeframes are certain,” he explained.

The numbers speak for themselves, he told the committee. “On state trust lands, as well as private lands, permits can be secured more quickly and the process is less cumbersome than dealing with the federal government,” Patterson said. “In all categories, the states lead the way in leasing, permitting, drilling and—most important—the production of oil and gas. This administration should look to the states and follow their lead if we are to become energy independent.”

Richard J. Simmers, chief of the Division of Oil and Gas Resources Management for the Ohio Department of Natural Resources, said, “Energy development of all types—but particularly oil and gas—can be risky and dangerous. This industry needs to be regulated, and states are the most qualified to it.

Simmers added, “People who believe federal regulations are uniform and consistent, and state regulations are a patchwork of inconsistency don’t understand how oil and gas regulation works. The states are doing it properly. We’re just doing it differently.”

States also may have different resource management goals than the federal government, suggested Brad Powell, senior policy director at Trout Unlimited, a sports and recreation association. “An important distinction is that federal lands are managed for multiple uses, while state and private lands often are not,” he said. “State lands often are managed for maximum revenue under constitutional mandates requiring the managing agency to maximize revenues from commodities.”

Powell said federal agencies don’t always meet their multiple use goals, but added that protests against issued leases have dropped significantly since US Interior Sec. Ken Salazar announced major reforms during President Barack Obama’s first term, “and from sportsmen’s organizations to a trickle.”

Contact Nick Snow at nicks@pennwell.com.

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