red tape natural gas

Hydraulic Fracturing technologies combined with horizontal drilling techniques have generated access to an unprecedented volume of natural gas throughout the US.  In many of these locations, energy exploration is an entirely new industry and state legislators, regulators and governors are examining ways in which they can harvest the enormous bounty of fuel, while still protecting the environment and the public from the potentially negative impacts of exploration. 

Similarly, states that have a history of exploration are adapting their regulations to respond to growing concerns around the use of hydraulic fracturing or “fracking”.

Former Colorado Governor Bill Ritter is seen as one of the first architects of this new regulatory regime.  In 2007, he reformed the Colorado Oil and Gas Conservation Commission, expanding membership, stakeholder involvement and removed a statutory requirement that industry make up a majority of the seats on the regulatory commission.  Following that restructuring, the commission went about developing rules to increase transparency and oversight as well as respond to pubic concerns relating to oil and gas exploration.

Recently, those rules were further amended to increase set back requirements and put in place baseline water measurements for effective quantification of the impacts of drilling on water quality. 

Advanced Energy Economy has launched a new Energy Policy Podcast, which presents critical policy components for advanced energy legislation in states around the country.  The first of the twice/month podcasts interviews Governor Ritter in a discussion around natural gas regulations and policy development.

When he left office, Governor Ritter started the Center for the New Energy Economy at Colorado State University.  He is frequently invited to participate in strategic discussions, deliver testimony and consult to states as they consider establishing responsible oil and gas exploration guidelines and regulations.

In the interview with Governor Ritter, he articulated a few key components states should consider when developing a regulatory structure:

A Social License to Operate

  • Work with local community to mitigate the nuisance activity that can be a part of the industrial process
  • Setback rules
  • Disclosure requirements for fracturing fluids

Methane capture, fugitive methane and the emissions from traffic and rigs

  • Industry needs to be at the table to jointly develop rules
  • Establish limits on fugitive methane emissions

Water

  • Ability to recycle water helps if there’s a shortage of water
  • What do you do with the waste water?
  • States with deep well injection need to address potential seismic activity

Monitoring

  • Baseline monitoring to determine what is naturally occurring and what can be attributed to drilling activity
  • Real-time monitoring can bring additional parties to the table and relieve concerns around green washing of results
  • Transparency of monitoring results is essential

Jurisdiction Issues

  • Comprehensive drilling plan requirement – demonstrate that the drilling activity can coexist with local community
  • Require input by the local community
  • State may retain jurisdiction, but require a finding that the plan is addressing local concerns
  • Contractual obligations to mitigate impacts

Taxation and Fees

  • Severance Taxes to address local impacts
  • Activity can pay for mitigation of impacts

Creating Regulatory Commissions

  • Broad stakeholder participation on commission
  • Representation of state interests – natural resources, division of wildlife, state EPA, etc…
  • Local Government Representatives
  • Give directions to the new commission to establish rules through a public process that is nimble enough to revise when necessary.

Enforcement

  • Rules are only as good as their level of enforcement
  • Fees can be used through permit process to hire inspectors
  • Strict set of rules that are clear, predictable and understandable by industry

The full podcast can be heard at www.policypodcast.com - or listeners can subscribe to the twice/month podcast at the iTunes store.  The website also contains links to relevant legislation, studies and rules that states can consider when building a responsible regulatory regime.

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