Regulation Battles: States Square Off Against the Federal Government Over Economic Benefit of Fracking
According to Advanced Resources International (ARI), the United States holds the largest amount of recoverable shale gas reserves in the world. Most experts agree that the most effective way to reach these untapped shale gas reserves is through a method known as hydraulic fracturing, or “fracking”. Fracking, used in nine out of 10 natural gas wells in the U.S., is a process where millions of gallons of water, chemicals, and sand are pumped underground at a very high pressure in order to fracture dense shale rocks that release oil and gas reserves.
Back in 2000, before the fracking boom, shale gas represented only one percent of U.S. natural gas production. With new technological advances and changes in state regulations, shale gas now constitutes about 40 percent of total U.S. natural gas production.
Fracking regulation battles dominate national headlines as oil and gas industry representatives and environmental groups present opposing views on its economic and environmental impact. Some argue that fracking is exceedingly beneficial economically; it creates jobs, increases U.S. energy dominance and independence and boosts local economies. Others contend that environmental factors need to be considered, such as drinking water contamination, water use and climate pollution. This debate has prompted numerous studies that aim to capture the most accurate effects that fracking poses on our economy and our environment.
On the state level, North Dakota is a prime example of the transformative impact that fracking can have on a state’s economy. Last year, North Dakota had the highest payroll-to-population (P2P) rate and the lowest underemployment rate in the country, largely because of the state’s thriving oil and gas industry. Fracking for shale oil on the two mile deep Bakken Shale in Williston, North Dakota, plays a major role in the state’s budding economy. With more than 8,000 producing wells in the state, Steven Landefeld, director of the U.S. Bureau of Economic Analysis (BEA) claims that North Dakota’s economic growth is “bigger than China’s growth rate”.
New York, home to 18,750 square miles of the Marcellus Shale, is currently halting all fracking operations within state boundaries. Starting in the summer of 2008, New York’s Governor David Paterson instituted a fracking moratorium to allow time to gather conclusive scientific evidence on possible health and environmental risks of fracking. Six years later, the state has yet to reach a decision on whether the moratorium should be lifted or made permanent. To prove the economic potential of fracking within the state, the Manhattan Institute for Policy Research published a report in May 2013. The data suggested if the moratorium were lifted, counties on the Marcellus Shale would see income growth rise 15 percent in the next four years. Instead, New York counties sitting above the Marcellus Shale saw an 11 percent decrease in employment over the last decade.
On the other hand, New York’s neighbor, Pennsylvania, experiences persistent employment and income growth in counties with fracking wells covering the Marcellus Shale. Even during the worst period of the Great Recession, in counties with more than 200 wells, per capita income rose 19 percent between 2007 and 2011. New York counties without fracturing wells only saw an eight percent growth in per capita income.
As fracking becomes more prevalent in oil and gas production, federal, state, and local governments are searching for a compromise on who should be responsible for regulating this practice. Other countries across the globe have implemented federal fracking laws, such as France, which banned fracking altogether in 2011.
In the U.S., however, fracking regulations have never been set a federal level. Rather, states determine the guidelines. In an effort to federally regulate fracking, the Interior Department’s Bureau of Land Management (BLM) published a revised rule on May 25, 2013 that would grant the BLM authority to govern hydraulic fracturing on 700 million acres of federally owned land, most of which is in the Western U.S.. The BLM’s proposal sparked a debate between the federal and state governments.
States claim that a new federal law would add duplication to existing state laws, while the federal government suggests that setting minimum standards is necessary as fracking operations quickly expand.
In an effort to contend the proposed federal law, the House Natural Resources Committee proposed legislation on July 31st, 2013 that would block the federal government from regulating the fracking process, allowing states to regulate it in the manner that is most appropriate. The House of Representatives is expected to debate this proposed legislation later this year.
As fracking unlocks enormous energy reserves, the U.S. is tasked with proposing legislation that will allow it to reposition itself as a global leader in the energy market. China holds the second largest amount of recoverable shale gas reserves and is planning a fracking revolution of its own, but experts predict that other countries are not expected to catch up to the U.S. levels of shale gas production for at least ten to 15 years.