Introduction and Background
Fossil fuel is an ever more contentious topic. Changing technology has revolutionized production, but at what cost to our health and environment? The states must find a way to balance the risks and rewards of oil and gas development in general, and hydraulic fracturing in particular. This blog post will look at bills having to do with producing, transporting, and storing oil and gas. We will start by looking specifically at current bills having to do with hydraulic fracturing, and then we will take a broader look at more general oil and gas bills that have passed over the last five years. I’ll try to highlight some particularly interesting individual bills, and see if we can identify any trends.
I’m going to assume you understand the basics of oil and gas, and understand what hydraulic fracturing is and why treatments suddenly became much bigger a few years ago. If not, please see the introduction to this post for a short and super simplified (but generously linked and illustrated) explanation.
The one reference I do want to share before we get started is this map of where oil and gas wells are producing in the United States (Hawaii has no production).
If you’d like to take a more detailed look at where wells have been drilled and are producing, the USGS has this great interactive map. Knowing how much oil and gas is produced by various states will be relevant when we look at what states have introduced legislation encouraging or discouraging (in various ways) oil and gas development.
Also, to make sure we are all on the same page, here’s what the the impact of shale development, even just over the last few years, actually looks like:
2012 graphic from NPR, 2016 data from EIA. The EIA notes the oil imports are at their lowest point since 1970.
Legislation About Hydraulic Fracturing
Here’s a look at all of the bills in the current (or most recent) sessions dealing with hydraulic fracturing:
You might notice New York stands out as having many times more bills than any other state. To keep that in perspective, here’s a look at how many bills overall are introduced and passed in each state:
So lots of bills are introduced in New York (and Illinois) that don’t necessarily pass. So keep the difference in how states approach legislating in mind when looking over the list of bills in each category.
Generally speaking, here is what the bills are about:
You can review all of the bills here. Most of the water disposal controls and bans (in which I included total fracking bans, bans on certain chemicals, bans on injection, moratoriums, etc) are in New York.
Compare this to a similar count I did in 2013:
Transparency and disclosure – telling the public about what’s in frac fluid mostly, but also sharing more information in general – was a big topic in 2013 and remains a hot topic today. There are relatively fewer bans, though; attention seems to have turned more to water, both where you can get it and what to do with waste water after it’s been used for fracking.
Local Authority
One particularly interesting topic to me is the bills about local authority. Who decides the rules? We have the usual tension between State and Federal control, but also between states and their political subdivisions. There is by no means a consensus around who should get to make the laws controlling hydraulic fracturing in a particular location. Here’s a few items from this year showing the contrast between states around who is in control:
- OH HB522 – local approval required for injection
- TX SB440 / TX SB720 / TX HB40 – cities and counties can’t ban fracking
- MI HB5372 – counties and townships can ban fracking
- Colorado Supreme Court Case – cities can’t ban fracking
- OK SB809 from 2015 – Cities and counties can regulate some things like setback, but can’t prohibit fracking
- ND 2226 from 2015 – How to reach agreement about taxes with the tribes
The gist of the court case overturning two city bans in Colorado, was that
“The Oil and Gas Conservation Act and the Commission’s pervasive rules and regulations … convince us that the state’s interest in the efficient and responsible development of oil and gas resources includes a strong interest in the uniform regulation of fracking”.
I also want to point out a few jurisdiction related bills that passed in previous sessions, UT SCR012 and ND 1216, which both claim state fracking regulations can’t be pre-empted by federal legislation. And finally, last year Texas and Oklahoma both called on Congress to end the ban on exporting crude; they don’t want Federal control over what they do with state resources. I think this battle is going to continue at all levels as individual and local interests vary and even conflict with state and national interests.
Other Hydraulic Fracturing Bills of Interest
Besides the local authority bills, there are a few other bills worth highlighting from this year. First, a series of bills Michigan. Bill MI HB5366 says they intend to repeal their moratorium on high volume hydraulic fracturing if the legislature can agree on how to: assess the impact of water withdrawal (MI HB5373), require operators to disclose what is in their frac fluid (MI HB5367), increase public participation and control (MI HB5371 and MI HB5372), and require certain setbacks (MI HB5369). The reason I picked out this collection of bills in particular is that the first bill lays out what the Michigan legislature sees as the challenges from fracking to health and the environment, and then they suggest a series of solutions with individual bills tackling one issue at a time. This allows each issue to be individually focused on and debated. Regardless of the merits of the individual bills, I find this framework a sensible way to proceed.
Second, TX HB4021, encouraging operators (via tax incentive) to find alternative sources of water instead of fresh water to use for fracking, namely “brackish groundwater, desalinated, recycled, municipal treated water or any other technologies that may be developed as alternative to fresh water.” Although the bill died in committee, it was an interesting approach. As concerns mount over the volume of fresh water being used in hydraulic fracturing I believe more states will be looking at both carrots and sticks to cope.
And finally, I want to highlight the contrast between NJ A2625, AZ HB2407, SD HB1197, HI SB1197 proposing total bans or moratoriums, from states with little or no current oil and gas production, and various statements of strong support of the oil industry from CO HJR1020, TX HR1145, OK SB1485 from states with more significant oil and gas production. Also, from TX HB40 this year we get
“The legislature finds that the laws and policy of this state have fostered successful development of oil and gas resources in concert with the growth of healthy and economically vibrant communities for over 100 years. The legislature acknowledges this cooperative progress and that mutual benefit is derived from the statutes already in effect, which provide effective and environmentally sound regulation of oil and gas operations that is so comprehensive and pervasive that the regulation occupies the field, while facilitating the overriding policy objective of this state of fully and effectively exploiting oil and gas resources while protecting the environment and the public’s health and safety. The legislature recognizes that in order to continue this prosperity and the efficient management of a key industry in this state, it is in the interest of this state to explicitly confirm the authority to regulate oil and gas operations in this state. The legislature intends that this Act expressly preempt the regulation of oil and gas operations by municipalities and other political subdivisions”
which I think we can also consider unambiguous support for the oil industry. The contrast in tone between non-oil producing states and states with a significant economic stake is not surprising perhaps, but notable.
Passed Oil and Gas Bills in the Last Five Years
Now let’s turn our attention more broadly, and look at all relevant bills that mention oil and gas wells, enhanced oil recovery, pipelines, gas storage, or liquefied natural gas. For this set of bills we are not focused on hydraulic fracturing. To make the number of bills we are looking at manageable, we will be looking at only bills that passed.
Here is an map of the distribution of relevant oil and gas related bills passed in the last five years (and full list here):
You’ll notice a distinct difference looking at passed bills vs bills that had been introduced on a hot topic (hydraulic fracturing). The oil producing states tend to be the states passing the most bills on these more nitty gritty topics.
Here’s a breakdown of the count of bills in each of the topics I’ve chosen to include:
You can see the full list here. (If you have other topics you’re interested in feel free to contact me or register for your own free account to search for anything you like.)
Notable bills
In the list of bills I’ve marked several as “interesting” because they were interesting to me for various reasons. To highlight the contrast between states and how they are dealing with their own circumstances, I chose 4 bills to look at in more detail. Two are generally favorable to the oil industry, and two generally unfavorable to the oil industry. All are clearly are striving for the public good.
PA SB875 – Providing for the use of treated mine water for oil and gas development. Like the Texas bill in the previous section offering tax breaks for using alternate sources of water, this Pennsylvania bill looks to help reduce the use of fresh water for hydraulic fracturing by making it easier to use mine water (by reducing liability for the mine for providing it). Opportunity well spotted, PA!
OK SB1122 – Requiring agencies to encourage industrial use of water produced in oil and natural gas operations. There’s no specifics in the bill, just the statement that the agencies will cooperate to find ways to use produced water. Produced water is not waste water from hydraulic fracturing, but rather water produced along with oil in the normal operation of a well. There can be quite a lot of it, so if it can be used to replace fresh water for another industry, that could be a big overall win on the water front. This bill just passed in April 2016, so it’s worth keeping an eye on the Corporation Commission to see what ideas are ultimately developed.
HI HCR170 – Hawaii will study the impact of divesting fossil investments from their Employees’ Retirement System’s portfolio. The bill states very strongly that “Hawaii is particularly vulnerable to the effects of global warming” and “fossil fuel usage is often cited by scientists as a primary driver of global warming” as one reason for not investing in oil stocks. They also say “financial experts …. have warned of a looming carbon financial bubble” so they see it as a financially prudent as well as environmentally sound decision.
CA SB380 – Natural gas storage: moratorium. “The supervisor shall continue the prohibition against Southern California Gas Company injecting any natural gas into the Aliso Canyon natural gas storage facility located in the County of Los Angeles until a comprehensive review of the safety of the gas storage wells at the facility is completed…” There’s a lot to this bill, but first, gas storage in brief: the demand for natural gas is cyclical. One main use of natural gas is for heating, so demand for gas peaks in the winter months. But production is steady, so we need to store gas produced in the summer to use in the winter. One way to do that it is to inject produced gas into depleted reservoirs with favorable attributes (location, size, development, rock properties). Then the stored gas can be easily produced and delivered when it’s needed. Unfortunately there was a lengthy catastrophe in on such facility, Aliso Canyon, dating from October 2015 to February 2016, during which an impossible to visualize massive amount of natural gas (97,100 metric tons of methane) was released to the atmosphere. By many measures this leak is a worse environmental disaster than Deepwater Horizon and has had an extreme impact on the local community. So it certainly makes sense that the legislature wants to take quick, dramatic, better safe than sorry action. Unfortunately, it’s not that simple, because this gas provides much of the energy for Los Angeles and is an important part of the local energy infrastructure. This is the fossil fuel debate made acute. Energy to live your daily life vs an inhabitable planet. Unfortunately we need both. How California manages this awful mess and figures out how to move forward may prove a bellwether for energy policy in general.
Oh, and one bill I can’t help but share, just because:
ND 2284 – To designate the use of oil and gas impact grants for hospital treatment of victims of sexual assault. Oil companies are to provide grant money to help out hospitals located in areas where there is oil and gas development. This grant money is earmarked to be used to support rape crisis programs. Because? Because rape victims need help and oil companies have money which can help? I’m not sure. I find it interesting because it seems to me to be both random and helpful.
Here are all of the individual bills I found particularly interesting. Maybe you will to:
Trends
What stands out to me in the collection of passed bills are all the ways states are trying to exercise oversight over the oil industry. The public is demanding more accountability and transparency, particularly around managing water, and states are trying to respond. You can also see this trend in the continuing push for transparency in the hydraulic fracturing bills listed above.
States are also getting pretty creative about how to collect money from the oil industry, and how to deploy those funds. We had the support for sexual assault victims bill above, as an example. Or this Kansas bill, KS SB156, passed last year, directing that “All moneys received as royalties from the states oil and gas leases in Hamilton, Kearny, Finney, Gray and Ford counties … shall be credited to the Arkansas river gaging fund” (which I believe funds gauges to help manage the river). There’s actually a number of bills directing funds to environmental funds of various forms, especially funds aimed at remediation, like ND 1014 from last year. And finally NY A02446 from this year, which “Requires ten percent of oil and gas produced using hydraulic fracturing to be contributed to a state reserve.” (not a sure thing to pass, of course, but …. creative)
The states are also trying to ensure new opportunities for their citizens, like WV SB461 The WV Workforce Innovation and Opportunity Act which states: “The state needs to take all necessary steps to retain, educate and train West Virginians to have the skills necessary to compete for job opportunities resulting from horizontal drilling.”
We all know it isn’t easy to balance risk and reward. Each state faces their own unique opportunities and challenges. Hopefully they are mostly getting it right. At the very least lots of ideas are being tested that are worth keeping an eye on.
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