REGULATION

Few states submitting oil and gas rules for review

No one wants to go under the microscope.

That's the predicament faced by a team of regulators, industry officials and environmental advocates who offer comprehensive reviews of state oil and gas oversight programs and make recommendations for improvement.

With oil and gas rules facing widespread scrutiny from the public and environmentalists calling on states -- or the federal government -- to tighten oversight, the State Review of Oil & Natural Gas Environmental Regulations (STRONGER) has had trouble lately finding any takers.

"Nobody's volunteering," Don Garvin said at a recent STRONGER board meeting in Arlington, Va. Garvin is legislative coordinator for the West Virginia Environmental Council and part of the multi-stakeholder group that leads the state review organization.

STRONGER was started in 1999 to pick up on state reviews begun by U.S. EPA and the Interstate Oil and Gas Compact Commission in 1988. The group -- which has grants from EPA and the Department of Energy and receives "no-strings-attached funding" from the American Petroleum Institute -- wants state regulators to view its voluntary evaluations as a chance to go through rules with a fine-toothed comb and identify strengths and weaknesses.

Many state agencies are feeling pressure from environmentalists and the public to bolster oil and gas requirements as the industry swells with the dawn of the shale drilling era. But instead of welcoming review, many agency heads seem leery. Whether reluctant states are bound by limited resources or are looking to limit fuel for critics of already-scrutinized oversight programs is an open question.

STRONGER's last full review of a state oil and gas regulatory program was in 2007 in Tennessee. It also reviewed North Carolina's Department of Environment and Natural Resources this year as the state prepares to allow shale drilling, but North Carolina does not yet have any oil and gas production.

In recent years, the review group has stuck with more targeted reviews. Since 2010, STRONGER has evaluated hydraulic fracturing regulations in Colorado, Arkansas, Oklahoma, Louisiana, Ohio and Pennsylvania. But it's unclear which states will come next or whether checked-off states' evolving regulations merit further review.

Barriers to review

During the group's board meeting late last month, members rattled off a list of prospective states, a matching list of hurdles and just a few leads.

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"We've never been successful to get them to submit to review," board member Wilma Subra lamented to the board last week, referring to Mississippi, which has seen a revitalization of its oil industry in the Tuscaloosa Marine Shale. Subra is a Louisiana-based environmental scientist.

Of Kansas, Tom Stewart -- acting chairman of the STRONGER board and head of the Ohio Oil and Gas Association -- said industry groups had expressed interest but regulators had not yet bitten.

Texas? Maybe, but the state is working through rulemaking initiatives that it will likely want to complete before undergoing review.

Better prospects may be states like Indiana or Illinois -- smaller players in the oil and gas game, which has been newly defined by booming shale plays and advanced drilling technology like hydraulic fracturing and horizontal drilling that allows operators to access previously inaccessible oil and gas.

Illinois was last reviewed in 1996, Indiana in 2005. But those reviews predate piqued interest in the New Albany Shale, a source of oil reserves. Indiana Division of Oil and Gas Director Hershel McDivett said Thursday that he was open to the review process.

But he wasn't quite ready to jump on board, as the division is still molding its rules and following suggestions from the initial STRONGER review. This summer, Indiana updated rules for fracking, requiring drillers to report fluid volume, additives and injection pressure.

"STRONGER was very helpful in guiding us and making some changes where we had the ability to. I wouldn't rule out that possibility of asking for a follow-up review," McDivett said, but he added that further review was not a priority right now.

Ed Cross, president of the Kansas Independent Oil & Gas Association, said his member companies in the Sunflower State were also supportive of the STRONGER process.

"We think that's a good group to go and give an unbiased review of state regulations," he said. "We support that, and we always encourage that."

But regulators there have not expressed interest, a response Cross attributed to stretched agency resources. "They tell us that they're real busy, and they are," he said.

Regulators in Texas shared that sentiment. The state was last reviewed by STRONGER in 2003. In an email, a spokeswoman for the Texas oil and gas agency, the Railroad Commission, wrote that staff members are open to further review but are strapped for time as they work through rulemaking initiatives and a sunset review of the commission by the Texas Legislature.

"Staff have discussed a follow-up review with the STRONGER board and do contemplate a follow-up review at some time in the future," spokeswoman Ramona Nye wrote. "However, preparation for the reviews is time-consuming, and staff time has been dominated recently with overseeing the high level of oil and gas activity in Texas."

Texas Railroad Commission chief geologist Leslie Savage is a nonvoting member of the STRONGER board.

The Ohio Division of Natural Resources, where rules are evolving quickly to keep up with the booming Utica Shale, said it was not considering another review because it was busy implementing changes prompted in part by the state's last STRONGER review of fracking rules in early 2011, including 110 new requirements and standards for well construction. Ohio underwent a full review in 1995, carried out by IOGCC, and a follow-up by STRONGER in 2005.

Oil and gas officials from North Dakota and Oklahoma did not respond by deadline to inquiries about STRONGER reviews.

'Critical elements'

STRONGER's purpose becomes a little less clear when states do not participate, observers said. Board member Bruce Baizel, a Colorado-based attorney for the environmental group Earthworks, said STRONGER's review process cannot be effective if state agency heads are not willing to submit their programs for review.

"It's still an open question whether STRONGER and their core mission will really be adding much value in the foreseeable future" unless states sign on, he said, adding that he continues to serve on the board because he firmly believes the process is valuable.

Broad industry groups agree. John Krohn, spokesman for Energy in Depth, sang STRONGER's praises when asked about the group's reviews of regulations in Pennsylvania and Ohio.

"It provides a level of authenticity and certainty that is important for stakeholders," he said, referring to STRONGER's inclusion of a diverse set of technical professionals, regulators, industry representatives and environmentalists.

"Those are all critical elements," he said, "especially as the conversation has developed into what it is now."

A blue-ribbon panel organized by the Bipartisan Policy Center's Energy Project recommended in a report earlier this year that more states should volunteer for STRONGER review and that states should undergo more frequent reviews (Greenwire, Jan. 19).

As Indiana's McDivett put it, though, "some states are comfortable with where they're at, and others may feel as though they wouldn't benefit from an outside review."

But if more do not volunteer for review, Baizel said, they are asking EPA to revisit its determination that the states can handle regulation of fracking and other oil and gas matters. And that's the last thing most state and industry officials want.

"They open the door for critics to go back to Congress and say, 'The states have shown they can't regulate,'" Baizel said.

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