U.S. states vary widely on how they are regulating the booming business of producing natural gas from shale formations, according to a study released this summer by the Washington environmental think tank Resources for the Future (RFF). “As the shale gas boom has taken off,” says RFF, “states have updated their regulations, each with varying requirements. This dynamic regulatory environment has been challenging for industry, environmental groups, researchers, the federal government, and other experts to understand.”

The new RFF report, “The State of State Shale Gas Regulation,” compares 25 “regulatory elements” related to shale gas and hydraulic fracturing—such things as well spacing, fluid storage, and the like, across 31 states, identifying, for the first time, “differences and similarities among states.” RFF analyst Nathan Richardson at a briefing said that a lot of the regulations the researchers identified “aren’t specific to shale gas,” as states have traditionally regulated oil and gas operations inside their borders.

The RFF report does not identify which state has the “best” regulatory regime for fracking and shale gas production. Richardson said that his team “only analyzed what some current regulations require, not their costs and benefits or how they are enforced. We also did not rank the overall quality or effectiveness of each state’s regulations.”

A key finding from RFF’s work is “a high degree of heterogeneity among states.” Regulatory tools include “command-and-control,” case-by-case permitting, and performance standards, and how states mix and match these tools varies greatly. “We statistically tracked 20 of the 25 regulatory elements,” notes RFF. “The other 5 elements … cannot be cleanly compared in the report. We found that states regulate anywhere from all 20 elements (West Virginia and, under its proposed regulatory package, New York) to only 10 elements (California and Virginia).”

Command-and-control “is the most frequent tool used by the states,” said RFF, “covering more than 80 percent of the regulatory elements. Case-by-case permitting accounts for 14 percent and performance standards account for about 1 percent of the elements.”

Are the wide differences among the states a bad thing? Not necessarily, said Richardson at the briefing. States differ widely in areas such as geology, geography, politics, and law. “We don’t know why states do things the way they do,” he said. The strongest threat seems to be the number of wells in the state. The report notes, “The five states with the most gas wells (Texas, Oklahoma, Ohio, Pennsylvania, and West Virginia) regulate at least 16 elements, more than the national average of 15.6.

Regulatory transparency is a problem that Richardson highlighted. “Though regulations are publicly available,” says RFF, “they are often difficult to find and interpret, even for experts. Moreover, states’ use of case-by-case permitting makes it challenging for researchers and the public to determine what is regulated and required.” Economists—and RFF is heavily populated with economists—generally prefer performance standards to either command-and-control or case-by-case permitting.

The RFF state-of-the-states report is part of a larger effort to examine the controversial and increasingly important shale gas technology. Earlier this year, RFF released a report that surveyed a broad group of experts and stakeholders to discern where they saw environmental threats from fracking for shale gas. The experts were remarkably in agreement on what environmental risks they saw as important (surface water) and those they believe are not important (groundwater).

The aim was to find some theme in the welter of opinions about fracking among experts in industry, government, academia, and environmental groups. Despite the swirl of competing claims, always asserted with great postures of authority, says RFF, “The potential environmental risks related to shale gas development are not well understood.”

As the RFF report observes, the current policy landscape is “dominated by strong and contradictory opinions. Shale gas detractors have been blamed for performing biased, inaccurate, and misleading studies. When the U.S. Environmental Protection Agency has moved to regulate or even study risks, critics have accused the agency of wanting to shut down the industry. And attempts by the Bureau of Land Management to write new regulations for drilling on federal land are derided as being so onerous and bureaucratic as to stymie all such development. Meanwhile, environmental groups eye academic supporters of shale gas development with suspicion and claim that they and some state regulators are captured by industry.”

How to make sense out of the competing assertions and arguments? RFF asked its experts to choose from among 264 possible risk pathways involved in shale gas development, ranging from site development to well abandonment. The list included burdens to the environment and to local communities, including such elements as road congestion in rural areas as a result of well development. RFF asked the experts to identify their high-priority risks, by which RFF says it meant “those for which they believe government regulation and/or voluntary industry practices are currently inadequate to protect the public or the environment.”

The results were eye-opening. “We found a remarkable overlap for the most frequently cited risks by experts from different perspectives,” said Krupnick, who did the work with co-authors Sheila Olmstead and Hal Gordon. “In fact, if we look at the 20 most frequently cited risks, 12 are common to all the groups.” Perhaps most interesting, of the 12 consensus risks, only two are unique to fracking, while 10 relate to common practices in all natural gas and oil development, such as construction of roads, well pads, and pipelines, and the potential for leaks in well casing and cementing.

Of the two risks unique to fracking, both related to surface water, not to groundwater, a frequent target of anti-fracking advocates, including some of the more spectacular scenes in anti-fracking movies such as Gasland and Gasland II. “The results stand in sharp contrast to the rhetoric of much of the public debate,” says the RFF report.

Of the 12 consensus risk pathways:

  • Seven involve potential surface water threats;
  • Two involve air quality issues;
  • Two involve groundwater risks;
  • One related to habitat disruption.

The RFF survey is part of a $1.2 million multi-year study of the environmental risks of shale gas development and ways to manage them funded by the Alfred P. Sloan Foundation.

—Kennedy Maize is MANAGING POWER’s executive editor