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Natural Gas Policy Path: Built to Boom

  • Andrew R. Kear (a1)

Abstract:

Using federalism as a guide, this research explores the conflicted, complementary and unique natural gas policy paths of the U.S. federal government, Wyoming and Colorado and analyzes how policies facilitate and respond to booms. Federal policymaking has consistently focused on gas ownership, leasing, interstate dispute resolution and fiscal mechanisms to stimulate and manage development. At the state level, policies are designed to enable exploration and production while protecting fuel mineral rights, minimizing waste and generating revenue. During the most recent gas boom, driven in part by technological advances like fracking, policies are being tested from local to national levels. Colorado demonstrates that states can balance economic benefits with environmental and social costs of gas booms, thus providing an example for other gas producing states. Whether states serve as stewards or laggards is a function of federalism and choice, but the direction of federal and state natural gas policy remains a long-term play.

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NOTES

1. Jack Healy, “Heavyweight Response to Local Fracking Bans,” New York Times, 14 January 2015, A11.

2. Bruce Finley, “Colorado Supreme Court Rules State Law Trumps Local Bans on Fracking,” Denver Post, published 2 May 2016, updated 23 June 2016, at http://www.denverpost.com/2016/05/02/colorado-supreme-court-rules-state-law-trumps-local-bans-on-fracking/.

3. Davis, Sandra K. and Kear, Andrew R., “U.S. West: The Next Energy Nexus,” California Journal of Politics and Policy 6, no. 1 (2014): 127–51; Gary Bryner, “Coalbed Methane Development in the Intermountain West: Primer,” University of Colorado School of Law, Natural Resources Law Center (Boulder, 2002).

4. Amanda C., Leiter, “Fracking as a Federalism Case Study,” University of Colorado Law Review, 85 U. Colo. L. Rev 1123 (2014).

5. Charles, Davis and Katherine, Hoffer, “Federalizing Energy? Agenda Change and the Politics of Fracking,” Policy Sciences 45 (2012): 221–41; Barbara Warner and Jennifer Shapiro, “Fractured, Fragmented Federalism: A Study in Fracking Regulatory Policy,” Publius: The Journal of Federalism 43, no. 3 (2013): 474–96; Alex Ritchie, “Local Fracking Bans: Policy and Preemption in New Mexico,” Natural Resources Journal 54 (2014): 255–317.

6. For example, in 2012 the U.S. Environmental Protection Agency (EPA) promulgated rules addressing volatile organic compound emissions from wells, processing plants, and throughout production. The EPA extended its regulation of methane under the new source performance standards (NSPS) for new wells and throughout the value chain, with the future goal of applying the methane standards to existing infrastructure.

7. Patricia McGee Crotty, “The New Federalism Game: Primacy Implementation of Environmental Policy,” Publius: The Journal of Federalism 17 (1987): 53–67; James P. Lester and Anne Bowman, “Implementing Environmental Policy in a Federal system: A test of the Sabatier-Mazmanian Model,” Polity 21 (1989): 731–53; David M. Welborn, “Conjoint Federalism and Environmental Regulation in the United States,” Publius: The Journal of Federalism 18 (1988): 27–43.

8. Warner and Shapiro, “Fractured, Fragmented Federalism: A Study in Fracking Regulatory Policy”; The “Halliburton Loophole” refers to Vice President Dick Cheney’s (former CEO of Halliburton) role in pushing Congress to exempt fracking from the Clean Water Act, the Safe Drinking Water Act (SDWA), the Resource Conservation and Recovery Act (RCRA), the Emergency Planning and Community Right to Know Act, and the Hazardous Materials Transportation Act.

9. Carol Hardy Vincent, Laura A. Hanson, and Jerome P. Bjelopera, “Federal Land Ownership: Overview and Data,” Congressional Research Service Report R42346 (29 December 2014).

10. James Everett, Katz, Congress and National Energy Policy (New Brunswick, N.J., 1984); Walter Rosenbaum, “The Bureaucracy of Environmental Policy,” in Environmental Politics and Policy: Theories and Evidence, ed. James Lester (Durham, 1989); David Davis, Energy Politics, 4th ed. (New York, 1993); Marc A. Eisner, Jeff Worsham, and Evan J. Ringquist, Contemporary Regulatory Policy (Boulder, Colo.: 2000).

11. Eisner et al., Contemporary Regulatory Policy; Davis and Kear, “U.S. West: The Next Energy Nexus.”

12. Davis, Energy Politics.

13. Duffy, Robert J., “Political Mobilization, Venue Change, and the Coal Bed Methane Conflict in Montana and Wyoming,” Natural Resources Journal 45, no. 2 (2005): 409–40; Bryner, “Coalbed Methane Development in the Intermountain West: Primer.”

14. The following sources provide a comprehensive historical coverage of federal natural gas policy. David W. Miller, “The Historical Development of the Oil and Gas Laws of the United States,” California Law Review 51, no. 3 (August 1963): 506–34; John G. Clark, Energy and the Federal Government: Fossil Fuel Policies, 1900–1946, (Champaign, 1987); Richard H. K. Vietor, Energy Policy in America since 1945: A Study of Business-Government Relations (Cambridge, 1987).

15. Wilkinson, Charles E., Crossing the Next Meridian: Land, Water, and the Future of the West (Washington, D.C., 1992).

16. Miller, David W., “The Historical Development of the Oil and Gas Laws of the United States,” California Law Review 51, no. 3 (August 1963): 506–34.

17. Christopher McGrory Klyza, “Reform at a Geological Pace: Mining Policy on the Federal Lands (1964–1994),” in Western Public Lands and Environmental Politics, ed. Charles E. Davis (Boulder, 2001); Patricia Nelson Limerick, Claudia Puska, Andrew Hildner, and Eric Skovsted, “What Every Westerner Should Know About Energy,” Report #4 from the Center of the American West, University of Colorado at Boulder, 2003; Marc Humphries, “Oil and Gas Exploration and Development on Public Lands,” Congressional Research Service—CRS Report for Congress RL32315 (2004).

18. Miller, “The Historical Development of the Oil and Gas Laws of the United States.”

19. Ibid.

20. Ibid.; Clark, Energy and the Federal Government: Fossil Fuel Policies, 1900–1946.

21. Mineral Leasing Act, ch. 85, 13–17, 41 Stat. 443 (1920).

22. Humphries, “Oil and Gas Exploration and Development on Public Lands”; relevant statutes include the Coal Lands Act of 1909, 30 U.S.C. 81; the Agricultural Entry Act of 1914, 30 U.S.C. 121–23; and the Stock-Raising Homestead Act of 1916, 43 U.S.C. 291–301.

23. Humphries, “Oil and Gas Exploration and Development on Public Lands”; Limerick et al., “What Every Westerner Should Know About Energy”; Robert E. Forbis Jr., “Drill Baby Drill: An Analysis of How Energy Development Displaced Ranching’s Dominance over the BLM’s Subgovernment Policymaking Environment” (Ph.D. diss., University of Utah, Salt Lake City, 2010); Robert E., Forbis Jr., “The Political History of Hydraulic Fracturing’s Expansion Across the West,” California Journal of Politics and Policy 6, no. 1 (2014): 153–86.

24. Houston G., Williams and George M., Porter, “Practice Before the Wyoming Oil and Gas Conservation Commission,” University of Wyoming College of Law, Land and Water Law Review 10, no. 2 (1975); Mark W. Gifford, “The Law of Oil and Gas in Wyoming: An Overview,” University of Wyoming College of Law, Land and Water Law Review 17, no. 2 (1982).

25. Interstate Oil and Gas Compact Commission, “Making a Difference: A Historical Look at the IOGCC” (2006).

26. Miller, “The Historical Development of the Oil and Gas Laws of the United States.”

27. Ibid.

28. Clark, John G., Energy and the Federal Government: Fossil Fuel Policies, 1900–1946 (Chicago, 1987), 33.

29. Davis, , Energy Politics, 132.

30. Richard H. K., Vietor, Energy Policy in America Since 1945 (New York, 1987).

31. Ibid., 139. The monopolistic companies that controlled a majority of interstate gas transmission included Columbia Gas and Electric, Standard Oil, Cities Service, and Electric Bond and Share.

32. Ibid.; Vietor, , Energy Policy in America Since 1945.

33. Vietor provides a thorough accounting of the contentious history of the FPC with respect to commission membership, price setting, control over production and pipeline companies, and the extensive litigation surrounding their jurisdictional and rate-setting decisions.

34. Ibid.

35. Stephen, Breyer and Paul W., MacAvoy, “The Natural Gas Shortage and the Regulation of Natural Gas Producers,” Harvard Law Review 86, no. 6 (1973): 941–87; Lucas W. Davis and Lutz Kilian, “The Allocative Cost of Price Ceilings in the U.S. Residential Market for Natural Gas,” Journal of Political Economy 119, no. 2 (2011): 212–41.

36. Davis, Energy Politics; Zhongmin Wang and Alan Krupnick, “A Retrospective Review of Shale Gas Development in the United States—What Led to the Boom?” Resources for the Future Discussion Paper 13–12 (Washington, D.C., April 2013).

37. National Research Council (NRC), “Energy Research at DOE: Was It Worth It? Energy Efficiency and Fossil Energy Research, 1978–2000” (Washington, D.C., 2001).

38. U.S. Energy Information Administration, “Drilling Sideways: A Review of Horizontal Well Technology and Its Domestic Application,” Natural Gas Monthly (April 1993), DOE-EIA-TR0565.

39. Ibid.

40. National Research Council, “Energy Research at DOE”; Wang and Krupnick, “A Retrospective Review of Shale Gas Development in the United States,” 8–10.

41. David J. Hayes, “Hearing to Review Current U.S. Energy Trends and Recent Changes in Energy Markets, Day 2 Before the Senate Committee on Energy and Natural Resources” (3 April 2001).

42. Davis, and Kear, , “U.S. West: The Next Energy Nexus”.

43. U.S Department of Interior, “Scientific Inventory of Onshore Federal Lands’ Oil and Gas Resources and the Extent and Nature of Restrictions or Impediments to Their Development, 2006.”

44. Oil and Gas: Hydraulic Fracturing on Federal and Indian Lands, 80 Fed. Reg. 16,128 (26 March 2015).

45. U.S. EPA, “Assessment of the Potential Impacts of Hydraulic Fracturing for Oil and Natural Gas on Drinking Water Resources,” External Review Draft (2015), available at http://cfpub.epa.gov/ncea/hfstudy/recordsiplay.cfm?deid-244651. In March 2016, environmental groups like the Natural Resources Defense Council petitioned the EPA to revisit these exemptions and engage in new rulemaking. Additionally, environmental groups have sued the EPA to reconsider its 1988 determination that oil and gas waste is not hazardous and thus exempt from RCRA regulations.

46. Natural gas, comprised mostly of methane (CH4), is a naturally occurring fossil fuel that is developed and used for a variety of purposes, ranging from electricity generation to home heating to manufacturing.

47. U.S. Department of Interior, “Scientific Inventory of Onshore Federal Lands’ Oil and Gas Resources,” 228; John B. Curtis and Maeve A. Boland, “Challenges in Providing Technical Information for Societal Use: Examples from the Gas Resource Assessment Community,” Technology in Society 28 (2006): 505–16.

48. Bryner, “Coalbed Methane Development in the Intermountain West: Primer”; Wang and Krupnick, “A Retrospective Review of Shale Gas Development in the United States,” 8–10.

49. U.S. Energy Information Administration, Natural Gas Data, available at http://www.eia.doe.gov/aer/natgas.html (2015).

50. Ibid.

51. Ibid.; Curtis and Boland, “Challenges in Providing Technical Information for Societal Use.”

52. Ibid.

53. Rita C. Meyer, “A Wyoming Financial Perspective: A Report to the Citizens of Wyoming for Fiscal Year 2009,” Prepared by the Office of the State Auditor, Rita C. Meyer, Wyoming State Auditor (Cheyenne, 2009).

54. Booz, Allen, and Hamilton, “Wyoming Oil and Gas Economic Contribution Study,” prepared for the Wyoming Heritage Foundation, Casper (August 2008).

55. Department of Administration and Information, Economic Analysis Division, State of Wyoming, “Macro Report—Review of Wyoming’s Economy: Economic Update as of June 30, 2015,” available at http://eadiv.state.wy.us/Publications/Publications.html; Petroleum Association of Wyoming, “Wyoming Oil and Gas Facts and Figures, 2014 ed. (2015), available at http://www.pawyo.org/facts-figuers.pdf.

56. Colorado Geological Survey, “Colorado Mineral and Energy Industry Activities,” 2006. Colorado Geological Survey, Information Series 75” (Denver, 2006); Colorado Geological Survey, “Colorado Mineral and Energy Industry Activities Information Series 77” (Denver, 2007); Richard Wobbekind and Brian Lewandowski, “Oil and Gas Industry Economic and Fiscal Contributions in Colorado by County, 2014,” Business Research Division, Leeds School of Business, University of Colorado, Boulder (December 2015).

57. Ibid.

58. IOGCC website, available at http://iogcc.publishpath.com/history.

59. Bryner, , “Coalbed Methane Development in the Intermountain West.

60. Gifford, , “The Law of Oil and Gas in Wyoming,” 415.

61. Wyoming Comp. Statute §§ 557–1101 to 1107 (1945).

62. Houston G., Williams and George M., Porter, “Practice Before the Wyoming Oil and Gas Conservation Commission.

63. Ibid., 364.

64. See Act of Apr. 13, 1915, ch. 126, § 29, 1915 Colo. Sess. Laws 374 (prohibiting the escape of oil or gas into the air). See Act of Apr. 1, 1927, ch. 138, 1927 Colo. Sess. Laws, 525–27.

65. Thomas A., Mitchell, “The Future of Oil and Gas Conservation Jurisprudence: Past as Prologue,” Washburn Law Journal 49, no. 2 (Winter 2010); Andrew R. Kear, “Unconventional Politics of Unconventional Gas: Environmental Reframing and Policy Change” (Ph.D diss., Colorado State University, 2011).

66. Former Colorado Oil and Gas Association director and thirty-year oil and gas attorney, Ken Wonstolen (personal interview 30 October 2009) provides a general overview of Colorado’s natural gas politics. Wonstolen states, “In the early 90s as natural gas activity ramped up, particularly in Weld County, we ran into the first real round of push-back against the industry. We even called it the Weld County Wars back in those days. It was a whole different set of protagonists. It was really the agriculture and farming community versus the industry. There were good reasons on the agricultural side, because companies were pushing so fast to get these wells spudded in the ground so they would qualify for the tax credits. They were not paying attention to the back end. They were not getting their last sites cleaned up; pits were staying open too long; sites weren’t being reclaimed; they were rushing the process; they weren’t doing a good job of protecting agricultural soils. Naturally we ran into a buzz saw, followed by rounds of litigation and several attempts to amend the oil and gas act in the early 1990s. We were very, very close to adopting one of the first surface owner compensation bills in the U.S. in 1992. It went down to the last minute and the agricultural community pulled the plug.”

67. Ken Wonstolen (personal interview, 30 October 2009); Colorado Oil and Gas Conservation Commission, “1995–96 Major Rulemaking Overview,” available at http://cogcc.state.co.us/documents/reg/Rules/Older/ogrulemake.html.

68. Kear, “Unconventional Politics of Unconventional Gas.”

69. Jeri Clausing, “Change in Air for Drillers—More Diverse State Oversight Panel Proposed—Industry on Edge, Ritter Officials Want to Add Environmental, Health and Landowner Voices to the Industry-Dominated Board,” Denver Post, 1 February 2007.

70. Personal interview (21 March 2009), rancher and surface owner in southwestern Colorado.

71. Oil and Gas Accountability Project (OGAP) attorney Bruce Baisel (personal interview 24 March 2009) asserts that his organization and the San Juan Citizens Alliance (SJCA) were instrumental in providing the substantive content of the Landowner Protection Act. The first bill contained even greater surface-owner protections but was scaled back to more closely reflect the 1997 Gerrity v. Magness Colorado Supreme Court decision of mutual accommodation.

72. Sean Patrick, Farrell, “Plan to Drill on Colorado Plateau Meets Resistance,” New York Times, 30 October 2009.

74. Noelle Straube, Oil and Gas: Controversial Roan Plateau Lease Sales Yield a Record $114M [In Land Letter, daily publication online], Energy and Environment Publishing, 21 August 2008, available at: http://www.eenews.net/Landletter/2008/08/21/archive/.

75. U.S. DOI, “Roan Plateau Timeline.”

76. Ibid.

77. Finley, “Colorado Supreme Court Rules State Law Trumps Local Bans on Fracking.”

78. The hydraulic fracturing chemical disclosure rules and amendments applied to 2 CCR 404-1, 100 Series Definitions, 200 Series General Rules, 300 Series Drilling Development, Production and Abandonment Rules and 500 Series Practice and Procedure Rules.

79. Katharine Collins, “Open for Business: Wyoming Throws Away Its Water to Get out the Gas,” High Country News, 25 September 2000.

80. Ibid.

81. Ibid.

82. Ibid.; Paul Krza, “Wyoming at a Crossroads,” High Country News, 17 February 2003.

83. In the case of Montana v. Wyoming (129 S. Ct. 480 [2008] and 131 S. Ct. 1765 [2011]), Montana claimed that CBM groundwater withdrawals in Wyoming deplete surface waters belonging to junior downstream (Montana) users under the Yellowstone River Compact. The U.S. Supreme Court appointed Special Master Professor Barton H. Thompson in 2008 to preside, but as of 2016, Thompson and the court have yet to rule on whether Wyoming violated the compact by allowing CBM water withdrawals.

84. This 2005 Split Estate Act, signed into law by Governor Freudenthal, contained significant modifications from the previous legislative session drafts. This surface-owner protection act established requirements prior to commencing oil and gas operations on split-estates, which included: 30-day notice; good-faith negotiation, and surface use agreements or financial assurance; and compensation to surface owners for damages due to oil/gas operations. Although this act does provide a longer notice of operations (30 days) to the surface owner, if the mineral estate owner cannot get surface-owner consent or execute a surface-use agreement, the mineral owner can execute a surety bond or “other guaranty” to the WOGCC. Rather than use a regulatory remedy such as mediation or adjudication, the act directed aggrieved surface estate owners to seek compensation for damages in the district courts.

85. Powder River Basin Resource Council et al. v. Wyoming Oil and Gas Conservation Commission, “Stipulated Settlement Agreement,” Docket No. 94650-C, Hon. Judge Catherine E. Wilking, 7th Judicial District Court of the State of Wyoming, in and for the County of Natrona, 14 January 2015.

86. Mark Watson (WOGCC supervisor), “Wyoming Oil and Gas Conservation New Rules,” Energy and Natural Resources Law (19 July 2016), available at https://www.wyomingbar.org/wp-content/uploads/7-19-2016_ENR_Webinar.pdf.

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Journal of Policy History
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