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Fracking Regulation: Let the States Lead

Lynn Helms, director of North Dakota’s Department of Mineral Resources, reports that the number of oil-focused rigs in the state has dropped to its lowest point since July 2011. Helms mentions a handful of reasons, but let’s focus on one: uncertainty over where the federal government might go in regulating hydraulic fracturing. Interesting. And yes, the Bureau of Land Management (BLM) announced proposed new fracking rules just last week. More from Reuters:

“Helms, voicing concerns publicly for the first time over slowing growth in the Bakken shale prospect, cited the lower rig count, rapidly rising costs, and uncertainties over regulations on the ‘fracking,’ or hydraulic fracturing, drilling technique. … Uncertainties over the federal government’s bid to regulate fracking centrally are affecting investment decisions in North Dakota, Helms said.”

Certainly, the trend in the country’s No. 2 oil-producing state (674,000 barrels per day in July, see Mark J. Perry’s chart below) is important as debate continues over the regulation of hydraulic fracturing – whether the states or federal government should have primary oversight – and as the effect of duplicative, unnecessary regulation on energy development gets clearer.

From official public comments to BLM’s proposals we see key stakeholders are concerned that the new U.S. energy revolution from shale – oil and natural gas – could be stalled by new regulatory layers on top of effective state rules. Indeed, BLM is one of 10 federal agencies known to be considering fracking regulation. Part of what Helms detects in his state is the palpable chilling effect of regulatory obstacles to energy investment and development.

It doesn’t have to be that way. The states have done a good job regulating hydraulic fracturing, as EPA Administrator Lisa Jackson has said. There’s no need to duplicate the work they’ve done or to try to impose a one-size-fits-all regulatory strait jacket on development. Wyoming Gov. Matt Mead in a recent op-ed for The Washington Times:

“Wyoming time and again has proved it can promote development, support its economy and protect the environment. From hydraulic-fracturing rules to air-quality strategies, Wyoming leads in developing solutions that work for people and the future, without compromise on clean air, wildlife, land or water. Those of us who call Wyoming home only want to make the state better. …  We balance energy development and environmental protection — and we regulate accordingly, getting the balance right.”

Mead noted that Wyoming’s fracking regulatory regime served as a blueprint for the feds:

“BLM’s proposed rules are based on those Wyoming drafted, adopted and has followed since 2010. Those proposed federal rules add unnecessary and often repetitive requirements, which add cost and delay projects. They would pile on federal rules over existing, effective state rules, with negative consequences. Those consequences include inconsistency and uncertainty for operators and drillers, which could result — albeit unintentionally — in harm, not benefit.”

Mead echoes Jackson’s assessment – that the states are willing and best suited to regulate hydraulic fracturing:

“Well-run state permitting and regulatory programs achieve results. They help industry create jobs and maintain environmental standards. Wyoming has a record of success in environmental stewardship, natural-resource development and job generation. We are accountable every day for decisions made and actions taken. We take responsibility. We want to leave a legacy for future generations that is ever better. Our state is simply in the best position to get results.”

The Heritage Foundation’s Nicolas Loris agrees:

“One of the reasons why hydraulic fracturing has been so successful in promoting oil and gas development, while maintaining a strong environmental record, is the state regulatory regime. States in which fracturing takes place each have comprehensive regulation that ensures that oil and gas companies operate safely and in an environmentally sensible manner, and administer fines and implement punitive measures to correct any wrongdoing.”

Federal legislation offered by Sen. John Hoeven of North Dakota would help ensure this state primacy – by giving them the first shot at responding to potential environmental problems while requiring a federal agency to consult with state, tribal and local agencies before drafting new oil and gas regulations. The proposal would require federal agencies to identify effects of new regulation on energy supply, reliability, price and employment. It’s a good proposal that would help clear regulatory uncertainty, which affects energy investment. API President and CEO Jack Gerard:

“Shale energy development has been a game-changer for economic growth, job creation and government revenue.  Hydraulic fracturing has been used safely for more than 60 years, and the states are well-equipped to ensure that record continues.  The Empower States Act recognizes states are getting the job done when it comes to robust regulation of hydraulic fracturing.”

That recognition is critical to keeping safe, responsible development of energy from shale growing – creating jobs, producing revenue for governments and making our energy future more secure.

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