Industry is worried that enforcement of new federal and state regulations may restrict the use of hydraulic fracturing to expedite development of oil and gas (O&G) reserves, but the threat may be less than feared since regulatory agencies are currently doing a poor job of enforcing the rules now on the books and will probably fare no better should new requirements be issued.

That’s one conclusion to draw from a recent report from the Government Accountability Office (GAO) on the environmental and public health requirements for unconventional O&G development.  In the O&G sector, the term unconventional generally applies to deposits previously considered inaccessible (e.g., shale, tight sandstone, and coalbed methane formations) because traditional techniques did not yield sufficient amounts for economically viable production.  Advances in horizontal drilling and hydraulic fracturing are rapidly increasing domestic production of onshore O&G unconventional reservoirs.

Regulation of unconventional O&G development is covered by eight federal environmental and public health laws.  Development on federal lands is subject to additional rules.  Also, states impose their own requirements, generally affecting well site selection and preparation, how wells are drilled, and how casings are installed and cemented into place.

Information gaps

The GAO learned that one problem faced by EPA inspectors was the absence of information on groundwater quality before development occurs.  Lacking such baseline data, the impact of development on groundwater cannot be determined.  Inspectors added that even when baseline data are available, it is difficult to link groundwater contamination to a specific activity because of the variability and complexity of geological formations.

Lack of information also hampers the EPA in other areas.  The Agency often does not know which types of activities are occurring at well sites, making it difficult to know which regulations apply and where to inspect for compliance with regulations developed under the Safe Drinking Water Act (SDWA), the Clean Water Act, and the Clean Air Act.   For example, SDWA regulations require that well operators apply for Class II underground injection control (UIC) permits when they conduct hydraulic fracturing with diesel fuel.  But if the EPA does not know that an operator is using diesel, an inspection may prove wholly unjustified.  Similar gaps in information, which hamper enforcement, are found in relation to requirements for oil spill prevention, control, and countermeasure (SPCC) plans and control of hazardous air pollutants.

EPA officials also mentioned that the dispersed nature of the industry across very large geographic regions, the rapid pace of development, and the high cost of travel add to the difficulty of conducting inspections.

State programs

The SDWA is proving to be a particularly challenging statute to enforce, reported EPA officials, because it allows the Agency to authorize state implementation programs that differ from the federal UIC Class II regulatory program.  As a result, EPA’s enforcement actions must be specific to each state’s program, which increases the challenge for EPA inspectors.

The Agency said enforcement could be somewhat simpler if it possessed the authority to inspect compliance with Resource Conservation and Recovery Act (RCRA) hazardous waste regulations.  But RCRA currently excludes exploration and production wastes from the hazardous waste regulations.  The EPA is currently considering a 2010 petition from the Natural Resources Defense Council that the Agency regulates waste associated with O&G exploration and production as hazardous.

            Both federal and state agencies also complained that it has been difficult to hire and retain good inspectors and permit writers.  The GAO found that the most qualified staff often leave for the private sector, where the money is better.  For example, the federal Bureau of Land Management, which oversees development on public land, has reported high turnover rates in key O&G inspection and engineering positions responsible for production verification activities. 

It would not be wise for O&G companies to assume that challenges faced by agencies have completely crippled enforcement.  However, based on the GAO report, neither should there be the expectation that teams of inspectors will be showing up at every site where unconventional development is occurring. 

Click here for GAO’s fracking report.