Hydraulic Fracturing: Regulation by State vs. Federal Government?

Hydraulic Fracturing: Regulation by State vs. Federal Government?

By Somin Lee, Staff Contributor

Last June, EPA released a draft report of the five-year study of hydraulic fracturing’s effect on drinking water. Hydraulic fracturing, commonly called “fracking,” involves pumping liquids under high pressure into a well to fracture rock and extract the gas that escapes.[1] The draft report concluded that “hydraulic fracturing activities have not led to widespread, systematic impacts to drinking water resources in the United States.”[2] This conclusion attracted much controversy from both the scientific and political community. Upon investigation, Marketplace and American Public Media recently found that the controversial conclusion in the EPA’s draft report was a last minute change from the earlier drafts that had highlighted over two dozen cases in which fracking contaminated drinking water in some places as well as hundreds of other spills.[3]

In the upcoming weeks, the EPA will finalize the draft of the 2015 report.[4] This finding comes to light as President-elect Trump prepares for his term in office. He holds a friendly stance towards fracking and the oil and gas industry and has promised to “lift the restrictions on American energy and allow this wealth [to] pour into our communities.[5] Despite his support for hydraulic fracking, Trump holds the position that voters should decide at the state and local level whether to ban or permit fracking.[6] In 2015, thirty one states considered 187 bills relating to fracking regulations.[7] Some states including Vermont and New York banned fracking, and Maryland enacted a moratorium,[8] while municipalities in over twenty states have prohibited fracking via ordinances.[9] In contrast, states like Oklahoma and Texas prohibited local regulation of fracking.[10] This raises an interesting tension of who should regulate fracking: the state and local government or the federal government?

Currently, fracking is exempt from many federal environmental laws including the Safe Drinking Water Act (“SDWA”), the Resource Conversation and Recovery Act, and Energy Planning and Right to Know Act.[11] Notably, when Congress passed the Energy Policy Act, it amended the SDWA in 2005 to exclude fracking from the definition of ‘underground injection,’ thereby exempting it from SDWA’s Underground Injection Control (“UIC”) program.[12] This exemption is commonly known as the “Halliburton loophole,”[13] and it effectively strips EPA of its regulatory power over fracking and water pollution from the fracking process.

Despite EPA’s restricted authority with regards to the SDWA, during the last few years EPA has shifted its attitude to control shale gas activities through other means. First, Congress is contemplating repealing the SDWA amendment and setting up a “one-stop-shop” for application and issuance of federal permits.[14] Under the Clean Water Act (“CWA”), EPA has been trying to increase limitations guidelines to manage discharge of waste water and update chloride water quality standards.[15] Moreover, that EPA issued a final rule in 2014 to regulate emissions from fracking operations to reduce methane emissions further demonstrate EPA is taking action to bring fracking within the purview of the federal government regulation.[16]

Many critics of the Halliburton loophole disallowing federal oversight of fracking activities support implementation of comprehensive national standards to “ensure safe drilling and hydraulic fracturing.”[17] Some point to the current rules that differ state-by-state which add to administrative inefficiencies. For instance, proponents of federalization of fracking regulation argue that “it is inefficient and unfair to subject manufacturers to fifty different sets of standards, one for each state instead.”[18]  Furthermore, others believe that the states do not have the adequate means to regulate the risks of fracking.[19] There could be benefits if the federal government did, in fact, institute a uniform regulatory standard for fracking and preempt state and local regulation. Both the regulatory scheme and production volume could increase in efficiency, thereby alleviating the fear that “we won’t achieve the full promise of fracking if environmental impacts and public reaction cause land to be pulled out of production.[20]

On the other hand, proponents of state and local-level regulation believe otherwise. They argue that because the costs and risks as well as benefits of fracking befall primarily on the municipals and states, the states are better equipped to regulate fracking.[21] As fracking is a matter of local concern, where the gains in added jobs and tax revenue and the risks of pollution and rapid industrial growth are felt by the local community, states are seen to be in a more favorable position to regulate fracking.[22] Moreover, although there are concerns that the state-level regulations would lag behind the industry standards, many of the states with active shale gas activity are “coming up with regulatory systems that fit local conditions…to match the local geography.”[23]

Despite the existing legal framework for the federal government to regulate fracking[24] and the inconvenient consequences of having potentially fifty different standards by states, it is likely more expedient to regulate fracking at the state and local level. While each state could be required to meet a floor to safeguard minimum standards for environmental and public health issues related to fracking, states should be given the autotomy to regulate fracking activities as they best see fit because they are in the position to understand the local geographic conditions, their constituent’s needs, and balance the benefits with the costs.

 

[1] Natural Gas Explained, U.S. Energy Information Administration, http://www.eia.gov/energyexplained/?page=natural_gas_environment (last visited Jan. 12, 2016).

[2] U.S. EPA, Assessment of the Potential Impacts of Hydraulic Fracturing for Oil and Gas on Drinking Water Resources, Executive Summary, June 2015, EPA/600/R-15/047a, ES-6 DRAFT.

[3] Scott Tong & Tom Scheck, EPA’s late changes to fracking study downplay risk of drinking water pollution, Marketplace (Nov. 30, 2016, 8:00 AM) https://www.marketplace.org/2016/11/29/world/epa-s-late-changes-fracking-study-portray-lower-pollution-risk.

[4] Merrill Matthews, The EPA will likely conclude fracking doesn’t affect drinking water, The Hill (Dec. 7, 2016, 11:50 AM) http://thehill.com/blogs/congress-blog/energy-environment/309194-the-epa-will-likely-conclude-fracking-doesnt-affect.

[5] Noah Bierman, Donald Trump promises to ‘lift the restrictions on American energy’ in appeal to fracking industry, L.A. Times (Sept. 22, 2016, 11:10 AM) http://www.latimes.com/politics/la-fi-trump-fracking-20160922-snap-story.html.

[6] Id., (“I mean there are some areas, maybe, that don’t want to have fracking, and I think if the voters are voting for it that’s up to them.”).

[7] KSE FOCUS, States Take Wait and See Approach on Fracking Regulations, Congress.org/CQ – Roll Call, Inc. (Jul. 9, 2015) http://congress.org/2015/07/09/states-take-wait-and-see-approach-on-fracking-regulation/

[8] Id.

[9] Id.

[10] Id.

[11] Ronald E. Flinn, Hydraulic Fracturing (Fracking) in the U.S.: Issues, Problems, and Opportunities, 6402-4 Oil, Gas & Energy Q. 4.1 (2015).

[12] Id.                                                                                                                  

[13] Halliburton Loophole was named after Halliburton Halliburton, a multinational oil company that invented fracking in 1947. Clarissa Bierstedt, What’s the Fracking Problem?: Hydraulic Fracturing, Silica Sand, and Issues of Regulation, 63 Drake L. Rev. 639, 659 (2015).

[14] States Take Wait and See Approach on Fracking Regulations, supra note 7.

[15] Michael Burger, The (Re)Federalization of Fracking Regulation, 2013 Mich. St. L. Rev. 1483, 1534

[16] See id.

[17] See Kendall Gurule, Halliburton Loophole, Frackwire (Jun. 5, 2013) http://frackwire.com/halliburton-loophole/.

[18] David B. Spence, Federalism Regulatory Lags and the Political Economy of Energy, 161 U. Pa. L. Rev. 431, 464 (Jan. 2013).

[19] E.g., Should the Federal Government Regulate Fracking, Wall St. J. (Apr. 14, 2013, 4:16 PM) http://www.wsj.com/articles/SB10001424127887323495104578314302738867078.

[20] Id.

[21] See Spence, supra note 18, at 507. (The proponents of federal regulation “assumes that federal government actors (Congress or the EPA) can better regulate and balance the costs and benefits of fracking than can state and local government officials whose constituents are directly experiencing most of those costs and benefits.”).

[22] See Should the Federal Government Regulate Fracking, supra note 19.

[23] Id.

[24] The federal government could regulate fracking under the power of the Commerce Clause, SDWA, the Clean Water Act, etc.,

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