Tuesday, September 18, 2012

Federalism in Fracking: Updates on the Regulatory Experiment

Legal scholars have finally begun to take on the pressing federalism questions raised by the expansion of shale gas development, including hydraulic fracturing -- also described as fracing, fracking, hydrofracking, or whatever else you'd like to call it. (I usually refer to the whole process as tight sands and shale gas development, since it appears that many of the risks arise not from the process of fracking itself but from other stages, such as disposal of drilling and fracturing wastes.  But fracking is so much easier--and perhaps more fun--to say.)

In a thorough and interesting article forthcoming in the University of Pennsylvania Law Review, Professor David Spence explores fracking federalism issues through traditional justifications for federal regulation, such as externalities that cross state boundaries, races to the bottom, and national interest in the issue.  He concludes that federal regulation should be limited to the areas in which fracking has interstate effects or involves national interests, such as greenhouse gas emissions and disposal of fracking wastewaters through treatment plants into rivers.  Professor Spence believes that many of the effects are local, suggesting that the areas for proper federal involvement are somewhat narrow.  In a New York Times op-ed, Professor Jody Freeman proposes a more comprehensive, cooperative federalist regime involving a floor of federal requirements. 

I'm glad that the scholarly conversation about the best level(s) of governance for shale gas development has begun in earnest, and I hope that it will expand.  In the meantime, the grand regulatory experiment continues to play out at the state, local, and sublocal levels, while the EPA continues to study fracking and occasionally get involved.  It wouldn't be fair to suggest that this is an organized experiment--indeed, these efforts might best be described as hasty and sometimes haphazard responses to a rapidly expanding practice.  States do engage in some comparison of their regulations through the Interstate Oil and Gas Compact Commission.  But the IOGCC sometimes appears to focus more on building a high fortress around state authority, and I worry that this distracts from its efforts to encourage states to compare and improve their oil and gas regulations.  In addition to the first link on its Hydraulic Fracturing page--"States' Rights"--the IOGCC's page includes links such as "States Challenge Attempted Federal Power Grab in Hydraulic Fracturing Issue," and a full-paragraph reference to a much-criticized 2004 EPA report that concluded that fracking for coalbed methane posed few risks and that further study was unnecessary. (The EPA has since commenced a new study of fracking in shales.) 

The State Review of Oil & Natural Gas Environmental Regulations (STRONGER) also inspires some important state coordination.  STRONGER, formed by the EPA and the IOGCC in 1988, emerged after the EPA decided to not regulate oil and gas exploration and production wastes under Subtitle C of the Resource Conservation and Recovery Act.  The organization suggests waste management guidelines  that states should follow and conducts voluntary reviews of state oil and gas regulatory programs, including hydraulic fracturing regulation. 

STRONGER and the Ground Water Protection Council--a nonprofit association of state regulators--also have worked together to form the Risk Based Data Management System, which tracks some "oil, gas, injection well, and source water protection activities."  That system provides a link to FracFocus, which discloses chemicals used at certain hydraulically fractured wells.  Like the IOGCC, however, the GWPC focuses some of its efforts on supporting state-level authority over hydraulic fracturing.  In 2000, it issued a resolution supporting a congressional clarification to exclude hydraulic fracturing from the definition of underground injection under the Safe Drinking Water Act.  Congress granted the GWPC's wish in the Energy Policy Act of 2005.

As states coordinate (a bit) and in some cases resist federal regulation, they have begun to make regulatory changes of their own.  In December 2011, West Virginia passed a relatively comprehensive revision of its oil and gas laws to address shale gas development risks.  Pennsylvania, which has updated its shale gas regulations several times, most recently passed Act 13 (HB 1950) in February 2012.  This Act strengthens many state environmental regulations for fractured (unconventional) wells, but it also raises new federalism issues by expanding state preemption of local control.  In addition to reaffirming the state's existing, general preemption of local oil and gas regulation, the Act provides that any local ordinance regulating oil and gas activity must "authorize oil and gas operations, other than activities at impoundment areas, compressor stations and processing plants, as a permitted use in all zoning districts," with exceptions for residential areas.  It also requires municipalities to "authorize natural gas compressor stations as a permitted use in agricultural and industrial zoning districts and as a conditional use in all other zoning districts" if the compressor stations meet certain standards.

Some concessions to municipalities accompany this broad preemption of municipal regulation in Pennsylvania.  Act 13 allows them to charge an unconventional gas well fee and strengthens certain state-level environmental protections, for example.  Several municipalities objected to this expansion of state authority, though, and they sued the state.  In July, the Pennsylvania Commonwealth Court in Robinson Township v. Pennsylvania (2012 WL 3030277) struck down many of the preemption provisions, including those requiring that states authorize oil and gas operations in most zones and compressor stations in industrial and agricultural zones. Specifically, the court found that these provisions violated substantive due process by forcing municipalities to "to violate their comprehensive plans for growth and development." Governor Corbett has appealed to the state supreme court. Despite the ruling of the commonwealth court, the state's public utility commission is continuing to review local ordinances to determine whether they comply with Act 13.  

As Pennsylvania attempts to preempt local action, courts in New York have allowed the towns of Dryden and Middlefield to ban oil and gas development and fracturing through their zoning ordinance, despite general state language superseding local laws relating to the regulation of oil and gas. At the sublocal level, a New York court allowed a property owners' association to prohibit gas development by enforcing a restrictive covenant that banned "commercial uses" in the community.  See Weiden Lake Property Owners Association v. Klansky, 32 Misc.3d 1234(A), Sullivan County, NY, 2011.  Colorado is seeking a middle ground; its Regulatory Task Force on Cooperative Strategies Regarding State and Local Regulation of Oil and Gas Development issued recommendations in April.

As scholars exchange ideas, states, municipalities, and private governments will continue to spar over the proper location and content of regulatory authority.  Hopefully the experiment will lead to something better; there's progress, but much room for improvement remains. 

-Hannah Wiseman

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