State and Federal Regulation of Hydraulic Fracturing: A Comparative Analysis

Abstract

Abstract While hydraulic fracturing is a well-developed technology that has been used for more than 40 years, its wide-spread use for coal-bed natural gas and shale gas development has raised questions about the appropriate regulatory approach to ensure that groundwater resources are protected. In response to recent public concerns about hydraulic fracturing, Congress introduced the Fracturing Responsibility and Awareness of Chemicals Act (FRAC Act). The FRAC Act would amend the Safe Drinking Water Act (SDWA) to regulate hydraulic fracturing under the same laws and regulations that are used for the Underground Injection Control (UIC) program. Proponents of the FRAC Act assert that federal regulation is necessary to ensure protection of groundwater resources. Opponents argue that federal regulation creates a one-size-fits-all approach that is inefficient and protects poorly. In addition, they argue that states are best suited to regulate hydraulic fracturing given their ability to tailor regulatory requirements to local conditions. This paper will provide an overview of state regulation of hydraulic fracturing including some of the various approaches taken, different levels of regulatory detail, and recently adopted changes as well as changes that have been proposed, but not yet adopted. The paper will also examine how hydraulic fracturing would likely be regulated under the SDWA and discuss the pros and cons of federal regulation of hydraulic fracturing from the stand point of both regulatory burden to the industry and the potential for improved environmental protection. Introduction Hydraulic fracturing is a critical component of shale gas development and has led to the current success of the active shale gas plays in North America. However, it is often the subject of significant controversy surrounding the large volumes of water used and concerns about the protection of groundwater and surface water resources (Arthur, Coughlin, and Bohm 2010). Hydraulic fracturing is not a new technology. Records indicate that it was first developed in 1903, but the first commercial application occurred in 1948. Since 1998, the United States has seen an increase in horizontal drilling and hydraulic fracturing as a result of the advancement of the Barnett Shale development in Texas. With the increase in hydraulic fracturing operations came an increase in environmental groups expressing concerns over groundwater and surface water contamination, water sourcing, and community impacts such as increased truck traffic and noise (See Figure 1). The negative public perception surrounding shale gas and hydraulic fracturing has stemmed from a lack of technical awareness of how shale gas extraction occurs. Environmental Non-governmental Organizations (ENGOs) have questioned the effectiveness of the existing regulations for hydraulic fracturing and such questions have led the public to believe that it is a generally unregulated activity. ENGOs have called for increased federal regulation of hydraulic fracturing to ensure protection of groundwater resources, even though it is regulated by nearly every state oil and gas agency where development occurs. Regulatory Issues In 2005, the Energy Policy Act clarified the definition of underground injection under the Safe Drinking Water Act (SDWA). Opponents of hydraulic fracturing have misinterpreted this clarification, insisting that hydraulic fracturing was previously regulated but is now exempt, and have designated it the "Halliburton Loophole.?? This is in fact not the case. The 2005 Energy Policy Act did not change previous law or regulations by providing an exemption for hydraulic fracturing under the SDWA. In fact, hydraulic fracturing was never regulated by the SDWA. The clarification amended SDWA's Underground Injection Control (UIC) definition to exclude "the underground injection of fluids or propping agents (other than diesel fuels) pursuant to hydraulic fracturing operations related to oil, gas, or geothermal production activities?? (U.S. Congress 2005). The U.S. Environmental Protection Agency (EPA) had not previously regulated the process of hydraulic fracturing for oil and gas wells under the SDWA's UIC program (EID 2009).