The People of America's Oil and Natural Gas Indusry

The States and the Right Regulatory Approach

Mark Green

Mark Green
Posted July 12, 2016

The sound approach to energy regulation in the U.S. – one that provides appropriate oversight to oil and natural gas development without unnecessarily impeding progress – continues to be a major theme at the U.S. Energy Information Administration’s (EIA) annual conference in Washington.

Tesoro President and CEO Gregory J. Goff raised the point with his Day 1 keynote speech, calling for transparency, fairness and accountability in federal regulation:

“Consumers, companies and the economy all benefit when government policies are well-reasoned and balanced. America is blessed with an abundance of affordable, reliable energy. It must not be squandered. Allowing the forces of the free market to operate will continue to benefit society. Government should be a facilitating partner in this positive economic force, not a roadblock to it.”

On Day 2, Kinder Morgan President and CEO Steve Kean echoed the idea, warning that prescriptive regulation could have “massive unintended consequences.”  Kean refers to energy development that’s empowering individual American households and the economy as a whole. The increased development and use of clean-burning natural gas is the main reason the United States is leading the world in reducing energy-associated carbon emissions. Energy development and construction of needed infrastructure are critically important for continuing these trend lines. Kean said infrastructure permitting needs to improve:

“We’ve become an energy producing power house, and to take full advantage of that we need to get better about permitting. The implications of not going forward with that are big. …  Energy becomes more expensive and less available.”

More Kean:

“When it comes to fighting global warming, we need more natural gas, not less. In the power sector we are back to 1993 levels on [greenhouse gas emissions]. We’ve increased our generation by 25 percent while keeping that emissions level flat.”

The key issue remains regulation. State energy regulators from Texas and Ohio speaking at EIA’s conference asserted that state agencies are best able to effectively oversee oil and natural gas operations. Lori Wrotenbery, director of the oil and gas division of the Texas Railroad Commission:

“Every state needs to adopt regulations appropriate to its particular circumstances, and that’s something that we feel strongly about and convey on a regular basis to the public at large and to folks working at the national level.”

Texas has more than 320,000 active oil and natural gas wells, Wrotenbery said. According to EIA, the state produced more than 3.4 million barrels of oil per day in 2015 and about 20 billion cubic feet per day of natural gas in 2014. The state has almost a century of experience regulating oil and gas production, Wrotenbery said.

Scott Kell, assistant chief of the Ohio Department of Natural Resources’ oil and gas division, said his state produced 22 million barrels of oil in 2015, more than 85 percent of which came from shale areas, as well as more than 905 billion cubic feet of natural gas. The state has increased its regulatory staff with the increase in shale energy development. Ohio’s is a regulatory operation that’s responsive in its work to facilitate safe and responsible energy development. Kell:

“Over the next couple of years we will continue to be developing additional rules that were required by statute enacted over the last six years. Our efforts will continue to be toward maximizing the protection of public health and safety while we continue to [oversee] orderly oil and gas development in Ohio.”

Ohio’s regulatory framework is designed for continuous improvement, Kell said, required by law to undergo a review process every five years. Permitting rules include set timeframes for responding to applications:

“We have very efficient turnaround times built into our regulatory requirements.”

Kell, too, said states are in the best position to be the primary regulators of energy operations within their borders:

There’s a “strong commitment to improve their regulatory framework within the states in a firm belief that the states are the best placed [to regulate]. States have very different geologies. The permitting requirements that we have for our well pads might be totally unnecessary in most areas of Texas and Oklahoma and so on. There’s no reason why they should be inserted federally or on a national scale. The states are in the best place – we are the most agile, best understanding demographics, local geology and water resources – all of those things that are necessary to draft regulations that fit the area that we have authority over.”

A sound regulatory approach to energy is foundational to continuing and growing America’s energy revolution. Regulation should foster safe development without needlessly hindering it. Unfortunately, the Obama administration is engaged in a regulatory push that could put at risk energy production (see this post on a recent flawed initiative aimed at natural gas transmission and gathering pipelines). Thus, a good deal of the discussion at EIA’s conference.

The states already are effectively and efficiently overseeing safe and responsible energy development – oversight that’s tailored to address their unique conditions and needs and oversight that works with existing federal regulation on air and water safety. Regulatory primacy should continue to reside with them.

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.