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States Are Leading The Way On Oil And Gas Regulations

By Bill Whitsitt
Originally published in the Kalispell Daily Interlake

On June 16, the Daily Inter Lake ran two articles by the Associated Press regarding oil and gas well inspections. The front page headline read: “State oil, gas wells often uninspected.” A teaser promoted another story this way: “Regulators way behind in North Dakota oil fields.” What those headlines failed to convey was that both stories dealt exclusively with failings of the federal government’s Bureau of Land Management, not the state regulators who are the real oil and gas regulators.

The shale energy or “resource play” revolution being led by larger independent exploration and production companies in the United States is unlocking oil and gas that just a few years ago could not be economically produced. Technology improvements, led by the marriage of two practices long used separately — hydraulic fracturing and horizontal drilling — coupled with continuing efficiency gains, are rapidly moving us ever closer to true energy independence. At the same time, abundant oil and gas are lowering energy costs to all consumers. Cost trends are sparking a manufacturing revival, including among the plastics, fertilizer and other sectors that rely on competitively priced petrochemical feedstock. But the revolution is taking place, by and large, on and under private and state lands, not those managed by the federal government.

There are multiple reasons for the differences in activity levels and results — these include permitting delays, if not outright bans, on federal lands that are supposed to be available for multiple use. This of course is bad for the country, and the economies of states and counties with large federal landholdings that could be providing more sharing of oil and gas bonus, rent and royalty payments. However, perhaps in a perverse way, it may be a good thing for the environment since states have been regulating the oil and gas industry for many decades. Their rules are often followed on federal lands as well as state and private ones since operators don’t change good practices needlessly when crossing jurisdictions.

The Associated Press articles were both undoubtedly a result of AP’s work after the Government Accountability Office published an update report last month on deficiencies in the federal BLM oil and gas program. While many of the findings came as no surprise to industry and other stakeholders, they may indeed have been a surprise to some others. The GAO recognized the state oil and gas regulatory roles, including enforcement of federal air and water statutes. And it recognized that states take action to continually improve their ability to keep up with technology-driven developments.

A key result is that the environment, health and safety record of the shale energy revolution is solid. Can more be done to make oil and gas regulation even more effective? Of course. But not by the federal BLM that is continuing to pursue new rules on top of those that already led to, as the GAO noted, duplication of state enforcement on the one hand and gaps on the other. The BLM should refocus on true state partnerships, allowing enforcement of state rules on all lands within states’ borders with exceptions in rare cases. States are leading the way on oil and gas regulation. That should be the headline.

Bill Whitsitt is a Liberty Foundation board member and retired energy executive. He is currently a visiting professor at the University of Montana and executive-in-residence at its Bureau of Business and Economic Research. He lives in Bigfork, Montana.

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