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Unconventional Oil and Gas Development

Advances in horizontal drilling and hydraulic fracturing technologies have ushered in an historic oil and natural gas boom in the United States. The legal infrastructure in place to manage drilling and its impacts is insufficient to address the new realities of this production.

The Policy Initiative supports the development of state, local, and federal policies that address what’s different about today’s oil and natural gas production, and a framework for deciding whether, where, and how to produce fossil fuels. We look for governance weaknesses that are made starker by changes in market trends and technology. And we suggest how reporting and disclosure requirements can generate much-needed data to identify and mitigate the risks associated with oil and natural gas development.

As described below, the bulk of our work in this area falls into three interrelated areas: Reporting and Disclosure Requirements, Governing Uncertainty, and Risk-Informed Decision-making.

Reporting and Disclosure Requirements

Reporting and disclosure rules are important tools in a regulator’s toolkit, particularly when managing an emerging activity with poorly understood risks. Done well, reporting requirements can reveal problems and identify risk drivers; agencies and industry can use the collected information to prioritize inspections, and implement training and safety interventions. Disclosure enables the sharing of that information more broadly. But not all reporting is equal. Poorly worded, vague, or overly burdensome rules will not yield positive results. Similarly, when information is not collected in a helpful format, or when regulators don’t have the capacity to review submissions, reporting becomes an empty paper exercise.

EPI has worked to improve reporting and disclosure in several areas:

Hydraulic Fracturing Chemicals: Since 2010, 28 states have begun to require disclosure of the chemicals used in hydraulic fracturing; of those, 23 direct disclosure through FracFocus.org.

  • In 2013, EPI published a white paper pointing out the shortcomings of FracFocus and informed recommendations made by the Secretary of Energy’s Advisory Board for this disclosure platform. EPI then worked with industry, government, and NGO stakeholders to improve the website and learn from the data .
  • EPI offers general tips to states for making chemical use more transparent (the full-size academic article may be found here ).

Spills and Threats to Surface Waters: Spills and accidental releases of waste water, chemicals, and product may seem random. But spills data can reveal patterns that could suggest common-sense interventions.

Baseline Water Quality Testing and Water Monitoring: Water contamination complaints are stymied by a lack of water quality data pre-dating oil and gas development. EPI has presented on the need to collect baseline data and teamed up with the Clinic on a best practices paper for states on addressing water contamination complaints.

Governing Uncertainty

There is a lot we don’t know about unconventional oil and natural gas production. Reporting and disclosure rules can shrink that knowledge gap. EPI provides general guidance and specific policy proposals to decision-makers as they work to make unconventional oil and natural gas production safer. For instance:

Smart Regulation Framework: EPI teamed up with Southwestern Energy’s Mark Boling to propose a CORE framework – characterization of risk, optimization of technology, regulation, and enforcement – for unconventional oil and natural gas development, to address data gaps and regulate uncertain risks.

Model Induced Seismicity Compensation Fund: Some oil and natural gas production and disposal activities have been linked to earthquakes in the central United States. We can’t predict the next earthquake, and current insurance, regulatory, and liability regimes don’t adequately reduce the risk, or compensate harms following a seismic event. EPI has discussed these uncertainties with stakeholders and has proposed a Model Induced Seismicity Compensation Fund for states [forthcoming publication].

Risk-Informed Decision-making

The oil and natural gas sector is a challenging space to regulate. There are many actors, ranging in size and capacity, and millions of pieces of equipment spread over large geographic areas. Regulators have to prioritize rulemaking, compliance assistance, and enforcement. In addition, regulators must calibrate requirements to risk, and account for the uncertainty pervasive in aspects of this industry. EPI works with regulators and other stakeholders to take action to reduce risk. Some of EPI’s projects in this area include:

Aspen Institute: In 2016-2017, EPI is participating in a three-part Aspen Institute Dialogue Series on Shale Production and Governance. With generous support from the Sloan Foundation and the Mitchell Foundation, the inter-sector working group is forging recommendations for regulating in a contentious and uncertain context.

Enhancing Flow Line Regulation: EPI is part of a work group organized by STRONGER (State Review of Oil and Natural Gas Environmental Regulations) to develop guidelines for the regulation of produced water lines. These lines, which move waste water from wells to onsite storage facilities and disposal trucks, accounted for more than 20% of well spills in a recent study. The recommendations should be available by late 2017.

Improving Risk Assessments: EPI offers expert input on state risk assessments and regulations.

Tackling the Methane Challenge: Natural gas emits less than half the carbon dioxide of coal to produce the same amount of electricity. But. when natural gas – or methane – escapes to the atmosphere, it negates the relative climate benefits of replacing coal with natural gas for power. EPI is designing a framework for tackling the methane challenge, to reach the 40-45% reduction goals pledged by Canada, the United States, and Mexico in 2016. [forthcoming publication]