Shale gas renaissance makes governments examine regulatory roles

The rapid growth of unconventional natural gas development and production is forcing governments worldwide to examine not just how to regulate the business, but also to consider which levels of government can do the best job in specific instances, participants at an Aug. 15-16 conference hosted by the National Research Council agreed.

That process is raising new intergovernmental questions that could make federal, state, and local officials reconsider whether existing enforcement responsibilities are still effective for nonoil and gas industries, some participants suggested.

In the US, “the governors, state agencies, legislators, and commissions clearly dictate the relationship, and local governments have to try and work with it,” said Charles Davis, a Colorado State University political science professor.

“Most state oil and gas commissions were established to provide for the orderly development of resources,” he continued during his Aug. 15 presentation at the National Academies of Science in Washington. “Some have been updated since the 1990s. But it’s necessary to look beyond legal definitions to other relationships.”

Some local governments, meanwhile, had to react quickly when wells began to be horizontally drilled and shale formations hydraulically fractured. The first unconventional gas well in Fort Worth was drilled in 2000, when Texas only regulated a well’s distance from residences, recalled Sarah Fullenwider, who works in the city attorney’s office, wrote its first fracing ordinance in 2001, and chaired gas drilling task forces that year and in 2006.

Now, the city regulates hundreds, she noted. “Drilling started north of the city. When it moved downtown, the industry discovered it couldn’t just move in,” Fullenwider said. “It tried to get a bill passed in the legislature to have statewide regulations, but couldn’t because legislators wanted the counties and cities to keep some control.”

State vs. local

The extent to which a state controls local authorities’ powers is only one aspect of domestic shale gas development regulation, according to Charles Lowry, a political science professor at Washington University in St. Louis. Gas’s prominence in a state’s economy matters. So does political partisanship, he observed.

“Unlike the usual perceptions of the two major parties, Republicans tend to prefer centralized state control when it comes to regulating natural gas development, while Democrats want control decentralized to county and local governments,” Lowry said.

Local opposition tends to be stronger in states where oil and gas production is not prominent, he continued. Rural places in the West tend to be more agricultural than in the East, where affluent urban dwellers increasingly have summer homes, other speakers indicated. These part-time residents can join full-time landowners over concerns that shale gas development might crowd other businesses out or disturb previously tranquil spots, they said.

“Almost every revision we’ve made to our ordinances occurred when industry went in and did not pay attention to residents’ concerns,” said Fullenwider. “Without naming names, there were differences in the ways companies approached this. The ones which were more successful were frank about what they were going to do and what they thought might happen, and then tried to work with residents on handling impacts. The ones which came in and said they held subsurface leases and were going ahead with drilling did not do as well.”

Residents’ attitudes toward potential shale energy development can vary from county to county within a single state. Davis said that in Colorado, people on the state’s Western Slope are familiar with acquainted with mining, oil and gas, and other industrial activities. Development of the Nio Brara shale oil play, however, is occurring along the Front Range from Fort Collins to Colorado Springs in places unfamiliar with such activity, he said.

Local inspectors

Davis said Colorado Gov. John Hickenlooper (D) has tried to assuage residents’ concerns that their fears were being overlooked by state officials. The governor worked with the Colorado Oil and Gas Conservation Commission to appoint locally designated inspectors to supplement state oversight of oil and gas activities. “These LDIs get training from COGCC to learn what to look for at the drill site so they can report it to the commission, but they do not have authority to issue citations,” Davis said.

Such supplemental oversight by local residents is increasingly essential, maintained Hannah Wiseman, an assistant law professor at Florida State University whose research has examined environmental quality and its impact on communities. “Where it doesn’t exist yet, it’s imperative that citizens who don’t have access to the sites know what state inspectors are finding,” she said. “Many of those inspectors already have to post their reports on a state website with full public access, but more needs to be done.”

To improve coordination between layers of government officials, local officials facing an enforcement problem they can handle should be get help from their counterparts at the state level, she said. State agencies similarly should recognize there will be instances when the US Environmental Protection Agency and other federal entities have better resources, particularly when interstate impacts are involved, Wiseman suggested.

“Mandatory insurance is essential,” she added. “That’s not the same as bonding. There will be some contamination that will need to be cleaned up, and [the federal Comprehensive Environmental Response, Compensation, and Liability Act] will not cover this. Maryland and some other states are requiring mandatory liability insurance for producers, which will make the insurer monitor the company because it doesn’t want to pay out a claim.

“Several insurance companies have indicated they’re not willing to insure this liability,” Wiseman said. “I think we need to consider better and clearer and scientific information about risks of telling every state it must have mandatory insurance before requiring insurance companies to participate. Just as CERCLA and Superfund shifted the toxic substances cleanup burden to anyone who was associated with a property, we need to properly place similar burdens resulting from shale oil and gas development and manage risk.”

Europe’s challenges

European attitudes toward shale gas development also vary widely, but the European Union has the authority to make policies, said Elizabeth Bomberg, a senior lecturer on politics and international relations at the University of Edinburgh’s School of Social and Political Science. She said it is using four general principles: erring on the side of environmental caution to encourage officials to assess policy risks; trying to increase transparency; creating more consultation not just between governments and the industry, but also between governments and residents who will be affected; and promoting environmental sustainability.

“If you bring the idea of sustainability into the discussion, it might be a more effective way to address opposition in states and localities,” Bomberg said. “When you’re talking about shale development in populated and other vulnerable places, it’s important to convince people that decisions are being made with a goal of long-term sustainability. Frankly, the EU is farther ahead in rhetoric than in action on sustainability.”

Regulations need to be both strong and flexible, she maintained. “Standards are important. Learning from the policies which are developed for shale gas activity could be applied elsewhere,” Bomberg said. “In the EU, it’s been proposed that the firms contribute to monitoring of their activity. They would not hire the monitor itself, but contribute to a pool from which monitors would be paid. If we focus on monitoring implementation, we also can address the government integrity gap.”

“I believe the government could play a bigger role in sharing and collecting data,” said Kate Konschnik, policy director at Harvard Law School’s Environmental Law and Policy Program. “Right now, it’s trying to pull together basic information from universities about shale gas resource formation. It should not just be technical, but also governance data, including best practices not only from the oil and gas but also other industries.”

After calling for better consultation between federal and state governments, she acknowledged that the US Bureau of Land Management held numerous meetings with stakeholders as it developed its proposed hydraulic fracturing regulations.  “I believe that a more public forum where states educate the federal government about their needs and experience would have been worthwhile,” Konschnik said. “Finally, I’d like to see more enforcement training coming not from the oil and gas industry, but from environmental experts. That’s not happening yet.”

Contact Nick Snow at nicks@pennwell.com.

Related Articles

Shell cuts $15 billion in spending for 2015-17

01/30/2015 Royal Dutch Shell PLC has curtailed more than $15 billion in potential spending over the next 3 years, but is not “not overreacting to current low ...

Victoria extends drilling, fracing ban

01/30/2015 The new Victorian Labor government of premier Daniel Andrews has extended the coal seam gas (CSG) exploration and hydraulic fracturing ban in the s...

Chevron’s $35 billion capital budget down 13% from last year

01/30/2015 Chevron Corp. will allocate $35 billion in its capital and exploratory investment program for 2015, including $4 billion of planned expenditures by...

US Senate passes bill approving Keystone XL pipeline project

01/30/2015 The US Senate has passed a bill approving construction of the proposed Keystone XL crude oil pipeline by a 62-36 vote after 3 weeks of debate. Nine...

Oxy cuts capital budget by a third

01/30/2015 In the midst of falling oil prices, Occidental Petroleum Corp., Houston, expects to reduce its total capital spending for 2015 to $5.8 billion from...

MARKET WATCH: NYMEX natural gas prices drop after storage report

01/30/2015 US natural gas closed at its lowest price in more than 2 years on the New York market Jan. 29 following the government’s weekly gas storage report,...

Pennsylvania governor reinstates state forest drilling moratorium

01/29/2015 Pennsylvania Gov. Tom Wolf (D) signed an executive order fully reinstating a 2010 moratorium on new oil and gas leases in state forests and parks. ...

PwC: Low oil prices might drive surge in restructuring in 2015

01/29/2015 Mergers and acquisitions (M&A) in the oil and gas industry hit 10-year highs in terms of deal value and volume in 2014, according to a report f...

DOE could meet 45-day LNG export decision deadline, Senate panel told

01/29/2015 The US Department of Energy would have no trouble meeting a 45-day deadline to reach a national interest determination for proposed LNG export faci...
White Papers

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by
Available Webcasts

On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected