Federalism at Work: States Lead on Hydraulic Fracturing Regulation

It is not by the consolidation, or concentration of powers, but by their distribution, that good government is effected. Were not this great country already divided into states, that division must be made, that each might do for itself what concerns itself directly, and what it can do so much better than a distant authority.

-Thomas Jefferson

The Ground Water Protection Council (GWPC), a national association of state agencies, recently released a new study that examined what states are doing to effectively regulate hydraulic fracturing in light of its rapid increase in use.  The study found “…state oil and natural gas regulatory agencies have been diligent in addressing the technological, legal and practical changes that have occurred in oil and gas E&P [exploration and production] over the past four years.” Effective state regulation of hydraulic fracturing is a modern example of our great federalist system at work.

Scope and Background

The GWPC study was a collaborative effort between the various stakeholders in government, environmental protection groups, and affected industry groups.

This version of the study is an update on a similar 2009 study. The purpose of the update was to identify if state regulations have kept pace with the rapid increase in the use of hydraulic fracturing due to technological increases in horizontal drilling. By and large the authors of the study were confident that new regulations have been effective in mitigating risk.

Specifically, it identified the different approaches that 27states are taking throughout the hydraulic fracturing process to ensure safety, emerging issues, regulatory coordination, and data management. In addition to this analysis, the study made recommendations about emerging issues that states should pay attention to regarding hydraulic fracturing.

States Effective because of Federalist Principles

According to the report states are better able to regulate hydraulic fracturing because state agencies have the most applicable knowledge. The authors of the study concluded, “…on most issues the greatest experience, knowledge, and information necessary effectively rests with state regulatory agencies.” This is because governments must be aware of the various local geological features that surround sites to know how to best guard against potential environmental harm caused by hydraulic fracturing. GWPC stresses, “…the variability between state programs is a natural outgrowth of the unique characteristics of each state. There is no ‘national’ geology, geography, topography, or hydrology. State programs protect water resources best because they address the unique conditions that exist locally.”

The report goes further and says not only would national requirements be less effective, they could also be disastrous in certain situations where a beneficial requirement in one case could lead to environmental destruction in another. For example, the authors wrote, “…it might seem like a good idea to require that surface casing be set a minimum distance below the deepest underground source of drinking water. While that might work in most cases, in some places over-pressured and contaminated zones are located below, but in close proximity to, the deepest underground source of drinking water. In such a case, the mere drilling of the hole into a deeper zone could result in the contamination, rather than the protection of underground sources of drinking water.” Many of the regulations surrounding hydraulic fracturing require local specificity that a federal one-size-fits-all approach cannot provide.

In addition to the benefits of local knowledge there is also increased accountability when regulators are closer or part of the group of people they are seeking to protect. This is because they are the same people who ultimately have to live with the consequences contaminated water- and therefore have greater incentive to get the regulation right.

Finally, competition among states to drive economic growth in a safe environment makes it less likely that states will place overly onerous regulations on industry. When multiple states are finding out what works, what doesn’t work, and how they can improve their processes from other states’ experiences as well as their own, overall effectiveness of regulation increases rapidly. This is very different that when a federal agency proposes a rule because there is limited flexibility to change the rule once promulgated without going through a long and expensive process.

Regulatory Trends

States have been updating and increasing the regulations they impose on the oil and gas industry throughout the entire process of hydraulic fracturing due to the rapid increase in its use since 2010. The regulatory process has been updated from increasing permit requirements before hydraulic fracturing activity even occurs, to ensuring proper treatment and handling of waste and closing of wells once finished.

Regulation of Hydraulic Fracturing Should be left to States

Finally, given their examination of regulations, the authors of the report concluded, “…there is no reason to believe that overlaying additional federal controls on the regulatory process would lead to better, safer, or more environmentally protective development of oil and gas.”

Continuing the successful state regulation of hydraulic fracturing is a great example of our federal system at work. By using local knowledge and involving those most interested in outcomes to perform the regulation, we are keeping groundwater clean while reaping the immense benefits from the hydraulic fracturing revolution. It is up to the U.S.  to ensure that it continues to work  successfully by keeping hydraulic fracturing regulations in the hands of the states.