Science of the Total Environment 476–477 (2014) 359–367

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Science of the Total Environment journal homepage: www.elsevier.com/locate/scitotenv

Unfinished business in the regulation of shale gas production in the United States Terence J. Centner ⁎, Laura Kathryn O'Connell Department of Agricultural and Applied Economics, The University of Georgia, Athens, GA 30602, USA

H I G H L I G H T S • • • • •

Negative externalities from shale gas production affect property owners and others living nearby. Governments have a range of regulatory options for addressing risks and harms. Governmental agencies often lack information for effective enforcement of regulations. The non-disclosure of fracturing fluids adversely affects emergency responders. Regulators can become more supportive of public health through greater oversight of extraction.

a r t i c l e

i n f o

Article history: Received 29 November 2013 Received in revised form 24 December 2013 Accepted 24 December 2013 Available online xxxx Keywords: Shale gas Environmental quality Government regulation Public health Energy

a b s t r a c t With increased drilling for natural gas, toxic chemicals used to fracture wells have been introduced into the environment accompanied by allegations of injuries. This article evaluates laws and regulations governing shale gas production to disclose ideas for offering further protection to people and the environment. The aim of the study is to offer state governments ideas for addressing contractual obligations of drilling operators, discerning health risks, disclosing toxic chemicals, and reporting sufficient information to detect problems and enforce regulations. The discussion suggests opportunities for state regulators to become more supportive of public health through greater oversight of shale gas extraction. © 2014 Elsevier B.V. All rights reserved.

1. Introduction North America's embracement of jobs and domestic energy production from its shale gas plays has been controversial. Over the years, the petroleum industry convinced Congress that several laws addressing environmental concerns were inimical to the development of domestic petroleum preserves and were not needed to oversee petroleum extraction. Through legislative and regulatory exceptions, the industry was granted special dispensation from requirements of the Clean Air Act of 1970, Clean Water Act of 1972, Safe Drinking Water Act of 1974, Resource Conservation and Recovery Act of 1976, Comprehensive Environmental Response, Compensation and Liability Act of 1980, and the Emergency Planning and Community Right-toKnow Act of 1986. With the commencement of drilling more than 11,000 new wells a year (US EPA, 2012a) and the use of hydraulic

⁎ Corresponding author at: 313 Conner Hall, The University of Georgia, Athens, GA 30602, USA. 0048-9697/$ – see front matter © 2014 Elsevier B.V. All rights reserved. http://dx.doi.org/10.1016/j.scitotenv.2013.12.112

fracturing (fracking), people are worried that the exceptions are allowing their air and water resources to become contaminated and cause health problems. The federal government has laws and regulations that address releases of some contaminants into water and air, but otherwise offers scant protection against many of the risks of injuries that accompany shale gas production. There are no comprehensive federal provisions addressing items such as water testing prior to well drilling, controls over drilling, inspections of hydraulic fracturing, disclosure of toxics used in fracturing, wastewater storage, and releases of many gasses (US GAO, 2012b). This means that federal law does not preclude the imposition of pollutants and associated damages from shale gas production on property owners, neighbors, and others (Corman, 2012; Goldman, 2012; McKay et al., 2011; Obold, 2012; Wiseman, 2012a). In the absence of sufficient federal safeguards, the protection of the public and the environment has fallen to state governments (e.g., Arkansas Code Annotated, 2012; Colorado Code of Regulations, 2012; Pennsylvania Administrative Code, 2013; Texas Administrative Code, 2012c). As might be expected, individual states have addressed risks

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and problems of shale gas production differently (Spence, 2013). Some focus more on the protection of persons and property while others are more interested in economic development and business interests. For example, Pennsylvania allowed horizontal fracking to start in 2007 whereas neighboring New York issued a moratorium on hydraulic fracking until a study could be conducted on its safety (New York Governor, 2010; Kieman, 2012). Other distinctions among state actions involve the protection of private property interests, sustainability of resources, and the degree of governmental interference. States also decide whether to delegate powers to local governments including cities, villages, towns, and counties. Regulatory evaluations for shale gas production suggest that state governments are engaged in the development and implementation of reporting and permitting requirements for shale gas wells and associated activities (Rahm, 2011; Wiseman, 2012a; Wiseman, 2013). The industry contends that additional regulations will impede economic activity to the detriment of local communities where the wells are located (American Petroleum Institute, 2009). With the economic clout of shale gas production, the petroleum industry has had a major influence on the legislative and regulatory agendas of states that are important natural gas producers (Allen, 2012; Bunch, 2013; Rahm, 2011). Yet alleged injuries and damages to persons and property pose questions of whether governments are doing enough to address the risks accompanying hydraulic fracturing and shale gas extraction activities (Abbott and Bagnell, 2011; Corman, 2012; McKay et al., 2011). Due to the lack of information on chemicals being used and fluids being produced, claimants of health problems caused by toxic chemicals released during shale gas production are unable to learn whether their maladies are related to fracturing. Furthermore, there is a lack of information on low-dose cumulative health effects of contaminants from gas wells (Colborn et al., 2012; Jenner and Lamadrid, 2013; Vandenberg et al., 2012). Given these limitations, claimants have difficulties in establishing whether they were exposed to toxic chemicals in sufficient quantities to cause injuries. American jurisprudence generally is not structured to recognize that causal exposure to toxic chemicals resulting in the aggravation of a health condition or a premature death should be compensated. Science is not exact enough to assign damages for multiple exposure events that contribute to health problems (Vandenberg et al., 2012). While some research shows that adverse health effects from air emissions from gas extraction are more likely to occur to nearby residents (McKenzie et al., 2012), it remains unclear whether particular maladies are related to shale gas extraction. Injured persons are unable to establish that a causal connection exists between released toxic chemicals and health damages so that their lawsuits for damages fail (Corman, 2012; McKay et al., 2011). In the first part of the paper, a review of the state regulatory responses governing various aspects of shale gas production shows an evolution and progression in the regulatory framework overseeing the risks accompanying drilling and fracturing wells (Baizel, 2013; Degenhardt, 2012; Texas Railroad Commission, 2012). An evaluation of regulations considered and enacted by state governments suggests that they have not fully appreciated the public health dangers posed by shale gas production (Goldstein et al., 2012; Lauver, 2012; Roberson, 2012). Current practices and regulations often do not adequately consider long-term and compounding health effects. The second part of this paper addresses four issues confronting US state governments in responding to risks of damages from shale gas production. Several ideas appropriate for providing greater property and health protection may be identified from analyses of notable issues facing governments and their regulatory responses. Governments have responsibilities in protecting the health of their citizens. Society has vested interests in keeping people healthy and in maintaining water, land, and air resources for use by future generations. A legal regime that provides inadequate attention to future risks and

damages may not provide an optional resolution for the damages being imposed by shale gas production. Moreover, the lack of incentives for testing and investing in safer practices, recycling, and adopting procedures that would reduce greenhouse gas emissions is costly (Adair et al., 2012; Jefferies, 2012; US GAO, 2012a). Balancing multiple interests – local and regional economic benefits, property protection, public health, sustainability, and long-term environmental quality – is difficult (Birol, 2012). 2. Regulatory options and limitations Governments have a range of regulatory options for addressing risks and harms. Disclosure-based regulations make information available to the public to reduce risks and damages. Operational requirements provide records that expose lapses that may be related to problems and damages. Outright restrictions are appropriate for prohibiting known activities or releases that markedly detract from public welfare. Economic-based regulations can help encourage the reduction of conduct resulting in negative externalities and provide funding for governmental oversight. Most of the legislative actions to protect the public from damages associated with shale gas production involve the first two categories, although all four categories are represented in state regulations. The least intrusive category of regulatory options is disclosure-based regulations under which information is reported to the government. Disclosure is important in providing the public the location of wells and facilities used to transform extracted liquids and gasses into usable products. For shale gas production, states have enacted reporting requirements providing regulators and the public considerable information that serves to document production practices and activities. Yet the disclosure-based regulations contain exceptions for proprietary information and trade secrets (Adair et al., 2012; Furlow and Hays, 2011; Wiseman, 2011b). The exceptions are being used to preclude the disclosure of toxic chemicals used in hydraulic fracturing (NY DEC, 2011; Soraghan, 2012). For many polluting activities, governments enact further operational requirements concerning monitoring, record-keeping, and selfreporting information. Operational requirements such as the Clean Water Act's permitting system require permittees to secure approval and report information including violations but does not necessarily involve surveillance or inspections by government officials (US Code of Federal Regulations, 2012, tit. 40, § 122.41). Reporting requirements also include submitting information on accidents and releases of pollutants (e.g., US Code, 2012, tit. 42, § 9603). Operational regulations thereby facilitate a record of violations that may form the basis for corrective actions and citations. However, if governments decline to meaningfully address violations, operational requirements may not achieve their objectives. A third category of regulations provides restrictions under which certain conduct is not allowed. Restrictions on hydraulic fracturing include outright prohibitions on the use of certain substances in fracturing, releases of contaminants into waters, and releases of too many contaminants into the air. While federal regulations provide some of these restrictions, states are able to enact further regulations deemed necessary to protect public health and the environment. For example, since the Emergency Planning and Community Right-to-Know Act fails to give the public full access to chemicals on sites, states have responded with their own requirements (Wiseman, 2013). The success of restrictions is connected to governmental enforcement practices. In the absence of inspections and prosecutions of violators, restrictions may fail to protect public health and the environment. Concern has been expressed that states are not adequately enforcing existing regulations governing the extraction of natural gas (Fershee, 2011). Governments may also use economic-based regulations to augment oversight of shale gas production and remediation of contaminated sites. The most common are well permit fees that raise funds for

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governmental oversight (Gradijan, 2012; Pennsylvania Consolidated Statutes, 2012; Wiseman, 2012a). A state may increase its well fees to provide monies for hiring additional inspectors and conducting additional enforcement actions (Wiseman, 2012a). Other fees may be collected for testing for toxic substances (Gradijan, 2012) and for remediation activities abating sources of contamination (Pennsylvania Consolidated Statues, 2012). States may also enact a severance tax on the extraction of natural gas (Pless, 2012). In hastening to develop domestic natural gas, many states have opted to forgo economic-based regulations that would be beneficial for responding to negative externalities and providing for a more sustainable future (Anonymous, 2012; Fershee, 2011; Hatzenbuhler and Centner, 2012). 3. Issues on the agenda An evaluation of alleged health and environmental problems that accompany shale gas production activities discloses four issues involving situations that are not adequately addressed by some state governments. By highlighting these issues, the industry, regulators, and governments can direct efforts toward ideas for addressing potential and unresolved damages accompanying shale gas production. 3.1. Damages to owners of leased property The initial issue involves offering protection to the owners of properties on which mineral rights are leased for gas production. Leases are written by drilling companies and lessors may not read all the provisions that address potential problems including contamination. In areas where the rule of capture applies, a lessor may be anxious to sign a lease because whoever has the first operating well can extract gas even though it flows from beneath neighboring properties (Fish, 2011–2012). Additional concerns about damages exist for property owners who do not own the mineral rights for gas under their properties. For split estates where the holder of the mineral estate has the dominant estate, activities for drilling may take precedence over the rights of the surface owner's estate (Diaz, 2013). For these surface owners, gas can be extracted from beneath their properties pursuant to leases between drilling companies and owners of the mineral rights without full consideration of the property owners' interests (Smith, 2008). The contractual lease agreements may not adequately address responsibilities concerning contaminants and land degradation. In some cases, this may mean that areas of an owner's land are not suited for use at the end of well development (see Table 1). Owners of properties that have been contaminated may find that their lands are undesirable and worth less (Powers, 2011; Roberson, 2012). Moreover, if there are damages, a state may have a one- or two-year statute of limitation that limits the ability of surface owners to sue for damages (Louisiana Statutes Annotated, 2013; Marin v. Exxon Mobile Corporation, 2010). In some cases, injured landowners will wait too long to bring actions and lose their ability to collect damages. Without a contractual provision to the contrary, a drilling company may use as much of the surface area of a leased parcel as reasonably necessary to extract gas (Allen and Duncan, 2011; Maxwell, 2009). Individual property owners may have no say on where the well pad and roads for access of trucks and drilling equipment are located. This means that property owners whose lands have been leased for gas exploration may absorb damages to growing crops, timber, and fencing where a well pad is located (Abbott and Bagnell, 2011; Anderson, 2013). Depending on the well, between 360 and 1100 truckloads of water may be needed in fracturing (Peduzzi and Harding, 2013). During the first year of production at a well, approximately 44 truckloads of wastewater may need to be removed (NY DEC, 2011). Soil compaction, dust, erosion, and other problems often occur on properties under shale gas leases (US GAO, 2012b). Another activity accompanying drilling is the use of storage tanks or impoundments for the temporary storage of wastewater produced at a

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well (Aminto and Olson, 2012; Murphy, 2007). Concerns exist about contamination by toxic substances injected in a well that exit as flowback fluids after hydraulic fracturing (US EPA, 2011). Concerns also exist about produced water that accompanies gas production that contains contaminants from the ground. States have rules on procedures used for the storage of wastewater, but faulty equipment, errors, and spills sometimes can result in accidental releases of pollutants. The pollutants may remain in the soil after drilling is finished. Drillers may also bury drill cuttings and mud on site that denigrate future uses of properties (US GAO, 2012b; Walsh, 2010). Property owners should be concerned about responsibilities for the restoration of surfaces and cleanup of contaminated properties after the well has been drilled. Industry-written leases generally do not require that the drilling company restores surface conditions (Allen and Duncan, 2011). Unless a specific provision in the lease or a state regulation provides otherwise, the drilling company may leave sump holes, mud pits, tanks, tank supports, and obsolete equipment on the site (Allen and Duncan, 2011). States are recognizing these problems and some have enacted regulations governing the restoration of property disturbed by well-drilling activities. Drillers in Ohio have a duty to restore land surfaces (Ohio Revised Code Annotated, 2013). Pennsylvania has specific provisions applying to waste disposal pits with specifications on liners and revegetation (Pennsylvania Administrative Code, 2013).

3.2. Inadequate protection for neighbors The drilling of a gas well affects neighbors, communities, and persons and properties downstream and downwind from releases of contaminants. While federal and state regulations restrict the releases of some contaminants that may harm people, others are permitted (US GAO, 2012b). Federal provisions with penalties for water pollution are generally effective in encouraging drilling operators to refrain from knowingly placing pollutants in federal waters. Yet spilled, leaked, or released fluids sometimes flow to a surface water body or infiltrate the ground (Roberson, 2012). Federal and state regulations on air pollution are less exacting than water regulations and some health officials believe that they are inadequate in protecting the health of persons downwind from gas wells (Weinhold, 2012; Wiseman and Gradijan, 2012). Various activities and equipment at shale gas well sites release emissions into the air (Table 2) including nitrogen oxides, particulate matter, sulfur dioxide, and carbon monoxide (US GAO, 2012b). With the presence of sunlight, the nitrogen oxides may react with volatile organic carbons to create tropospheric ozone (US EPA, 2007). For humans, such ozone can increase airway inflammation and lead to other adverse health effects (Jerrett et al., 2009). Sites also emit hydrogen sulfide, methane, and hazardous air pollutants that may contain benzine, toluene, ethyl benzene, xylene, and hexane (US EPA, 2013a). Governments and industry are seeking procedures, equipment, and technology to reduce amounts of gasses released that pose dangers to people and contribute to climate change, including reductions of emissions from gas wells (Bott, 2007; McFarland and Sarker, 2012; Miller et al., 2013). New rules adopted in 2012 by EPA apply to emissions of volatile organic compounds for natural gas wells requiring green completions to reduce releases of gaseous pollutants (US EPA, 2012b). The rules adopt the first federal standards for air emissions from production wells through a New Source Performance Standard for emissions of volatile organic compounds (VOCs) from a range of sources including gas wells, centrifugal compressors, reciprocating compressors, pneumatic controllers, and storage vessels (US EPA, 2012b). By requiring equipment to capture gasses that reach the surface during a well completion, operators can reduce emissions of both VOCs and methane. In September 2013, the federal government issued new source performance standards for the oil and natural gas sector that require installation and

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Table 1 Potential disturbances to property owners due to shale gas drilling⁎. Operation

Activities

Potential problems

Access road and well pad construction

Clearing, grading, and impoundments; construction, placement of road materials such as geotextile and gravel Transport, assembly and setup; repositioning on site of large rig and ancillary equipment Drilling, running and cementing production casing; truck trips for delivery of equipment and cement Rig down and removal or repositioning of drilling equipment; truck trips for delivery of temporary tanks, water, sand, additives, and other fracturing equipment; fluid pumping and use of wireline equipment; computerized monitoring Rig down and removal or repositioning of fracturing equipment; controlled fluid flow into treating equipment, tanks, lined pits, impoundments or pipelines; truck trips to remove fluid if not stored on site Pumping and excavation to empty and reclaim reserve pits; truck trips to transfer waste to disposal facility and remove temporary water storage tanks; well flaring and monitoring; truck trips to empty wastewater tanks

Interference with greater area than necessary; dust; erosion and siltation problems; damages to fencing for cattle Heavy traffic causing soil compaction; dust; damages to timber or crops Leaking casings; blowouts; spills; releases of contaminants

Preparation for horizontal drilling Horizontal drilling Hydraulic fracturing

Flowback and treatment

Waste disposal and well cleanup

Casing failure due to pressure; soil compaction; spills; releases of contaminants

Spills; leakages from tanks and impoundments; traffic

Releases of contaminants; spills; incomplete cleanup of site

⁎ Information from NY DEC, New York Department of Environmental Conservation (2011).

operation of air pollution control technologies for additional facilities (US EPA, 2013b). Two studies released in 2013 show considerable greenhouse gasses being released during gas extraction, but the employment of recovery systems can reduce emissions (Allen et al., 2013; US EPA, 2013c). Other studies suggest that natural gas pipeline and distribution systems also release significant quantities of methane and other gasses (Karion et al., 2013; Pieschl et al., 2013). It remains unclear whether the federal rules are sufficient with respect to releases of air pollutants from tank ruptures, piping failures, equipment or surface impoundment failures, overfills, vandalism, accidents (including vehicle collisions), ground fires, drilling, and production equipment defects (NY DEC, 2011). Reports suggest that existing governmental controls are inadequate in protecting the interests of neighbors (Steinzor et al., 2012). With the development of additional regulatory options and limitations by governments, further protection has been accorded to persons near wells. However, mishaps, accidents, leaks, and other problems mean that it may be expected that some contaminants will be placed in the air. For these situations, recovery of damages may require that injured persons bring an action in tort (including causes of action in trespass, negligence, and nuisance) against drilling firms (Gradijan, 2012; Wiseman, 2011a). Under American jurisprudence, drilling operators incur no liability under tort law until injured persons establish liability for damages by a preponderance of the evidence. While most of the claims for damages to neighbors are anecdotal, the problem is not that there are no damages but rather that injured neighbors cannot establish proof that their injuries came from a drilling operation (Corman, 2012). Proof of a relationship between specific injuries and emissions from a particular well is extremely difficult and expensive (Henkels, 2009). The plaintiff must prove that the defendant's release of contaminants was a substantial factor in causing the alleged harm. Individual plaintiffs do not have the resources to successfully carry their lawsuits to trial and secure awards of damages. This leads some to believe that shale gas producers are not paying for the damages they cause (Johnson and Boersma, 2013). Rather, damages may be placed on neighbors who are not compensated. When a polluter places damages on neighbors, the true costs of production are not employed to choose the level of production. This may result in more than a socially desired level of pollution. The failure to internalize costs also leads to the underinvestment in pollution–reduction technology. 3.3. Secrecy of chemicals used One of the most controversial issues relating to shale gas production is the secrecy of toxic chemicals used for fracturing wells. Congress has

adopted the Emergency Planning and Community Right-to-Know Act under which persons have the right to know about hazardous chemicals used in their communities (US Code, 2012, tit. 42, § 11023). Local governments are required to prepare emergency response plans that identify facilities with hazardous substances (US Code, 2012, tit. 42, § 11003). Material data sheets are made available to the public so that they can have information on toxics (US Code, 2012, tit. 42, § 11044). However, the EPA has declined to require petroleum producers to report under this act. Due to the absence of Standard Industrial Classification Code 13 from required toxic releases that need to be reported, the oil and gas industry is able to decline to disclose the chemicals used at a well (Cahoy et al., 2013; Gerken, 2013; US Code, 2012, § 11023). The issue is whether nondisclosure for dangerous chemicals used in fracturing wells is consistent with American jurisprudence of transparent information on hazards in one's community. The absence of an exacting federal disclosure requirement has made it possible for drilling operators to use hazardous chemicals in close proximity to people and communities without identifying chemicals that pose dangers. It is estimated that companies are keeping at least one chemical secret in 65% of fracturing disclosures (Soraghan, 2012). The lack of sufficient information on chemicals poses risks and problems to emergency responders and people exposed to toxic substances (Centner, 2013). Well blowouts and releases of fracturing fluids may result in accidental exposures to substances that affect the brain and nervous system, immune and cardiovascular systems, and the endocrine system (Colborn et al., 2011). Concerns about secrecy of hazardous substances led the federal Bureau of Land Management to propose a new federal rule in 2012 that would require the disclosure of chemicals used in fracturing wells on public lands. Well operators would be obligated to disclose the chemicals used “after the fracturing operation is completed” (US Department of the Interior, 2012). However, the rule has been sent back to the agency for further consideration (D'Angelo, 2013). Many states have responded to the federal disclosure exception with state regulations on reporting chemicals used in fracturing (Murrill and Vann, 2012; Wiseman, 2011b). The state requirements include the disclosure of chemicals used in fracturing on registry forms including the identification of all chemical constituents and associated Chemical Abstracts Service Numbers (Wiseman and Gradijan, 2012). However, two exceptions accompany the state regulations. First, under some state regulations, disclosure is not required until after a well is fractured (e.g., Oklahoma Administrative Code, 2012; Texas Administrative Code, 2012, Section 3.29). Since most of the risks of injuries arise during the drilling and fracturing of a well, the information is not readily available to emergency responders or affected persons.

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Table 2 Sources of air pollutants around natural gas wells including volatile organic compounds (VOCs) and hazardous air pollutants (HAPs). Activities and equipment

Description

Potential emissions⁎

Drilling Storage tanks, pits, and impoundments Pneumatic controllers Dehydrators Flaring

Casing and cementing new wells, fracturing Hold flowback and produced waters Provide compressed air Removing water that is entrained in the natural gas stream Used for safety reasons or if no local market exists

On-road diesel engines Off-road diesel engines

Vehicles transporting materials to and from well sites Compressors and engines used to drill and fracture the well

Methane, VOCs, HAPs, hydrogen sulfide Methane, VOCs, HAPs Methane, VOCs, HAPs Methane, VOCs, HAPs Nitrogen oxides, carbon monoxide, particulate matter, carbon dioxide, sulfur dioxide Nitrogen oxides, particulate matter, carbon monoxide, HAPs Nitrogen oxides, particulate matter, carbon monoxide, HAPs

⁎ US Government Accountability Office, (2012a).

The second and more serious concern is that nearly all of the state disclosure requirements contain an exception for proprietary information and trade secrets (Table 3). These exceptions are leading many drilling firms to keep the identities of some chemicals used in fracturing secret (Soraghan, 2012). Some feel that additional reporting of toxic substances used by the oil and gas industry is not a high priority because some reporting exists under current state legislation. Another concern is that reporting from the hundreds of thousands of oil and gas sites would overwhelm the existing regulators and make it difficult to extract meaningful data from the massive amount of information submitted. Although fracturing fluids may be patented and the information publicly available (Cahoy et al., 2013), firms often forgo patents for trade secret protection. Trade secrets cover a broader range of information (Almeling, 2012). Moreover, patents are expensive, involve monitoring and maintenance fees, and can involve expensive litigation (Almeling, 2012). Most drilling companies prefer trade secret protection over patents (Almeling, 2012), and fracturing fluids are claimed as trade secrets so that the chemicals are not disclosed under a state's reporting regulations. A voluntary chemical disclosure registry, FracFocus, makes considerable information available to persons wanting to know more about the chemicals used at wells (FracFocus, 2013). While FracFocus is used by some states for reporting information, there is no review of submissions, states may not receive the forms, and operators have sole discretion in determining whether information qualifies for trade secret protection (Konschnik et al., 2013). Thus, some believe that FracFocus

Table 3 Disclosure of chemicals and protection for proprietary information and trade secrets. State

Exception for trade secrets or proprietary information

Percentage secret⁎

Arkansas California Colorado Illinois Indiana Louisiana Michigan Mississippi Montana Nebraska New Mexico

Trade secret protection If adopted, trade secret protection Trade secret protection If adopted, trade secret protection None but under consideration Trade secret protection Trade secret protection Trade secret protection Trade secret protection If adopted, trade secret protection Proprietary information and trade secret protection Trade secret protection Trade secret protection Must report but allows trade secret protection Trade secret protection Trade secret protection Trade secret protection Trade secret protection None listed Confidential information Trade secret protection for one year Trade secret protection

76 80 50 No data No data 51 100 100 73 No data 84

New York North Carolina North Dakota Ohio Oklahoma Pennsylvania Texas Utah Virginia West Virginia Wyoming

⁎ At least one chemical is kept secret. Soraghan (2012).

No data No data 68 77 61 38 73 94 No data 9 73

is not doing enough to encourage oversight of risks associated with hydraulic fracturing. In the absence of information on chemicals used at a well, persons exposed to unknown toxic chemicals cannot receive timely medical attention to ameliorate damages (Weinberger et al., 2012). Nearby residents, emergency response personnel, and medical professionals may be unable to take timely responses to releases of toxic substances (Centner, 2013). Moreover, nondisclosure may preclude long-term benefits such as encouraging the development of more environmentallyfriendly fracturing fluids (Roberson, 2012), allowing individuals to make choices on risks (Wiseman, 2011b), and encouraging the reuse of produced waters (Amadun et al., 2009; Garber, 2011; Jenkins, 2012). 3.4. Deficiencies with reporting and nonenforcement A fourth issue concerning governmental oversight of shale gas production involves the adequacy of the reporting requirements and enforcement mechanisms. Is sufficient information being made available so that persons suffering health problems, medical professionals, and governmental officials charged with oversight can discern appropriate courses of action? With respect to reporting, the limitations posed by the nondisclosure of fracturing chemicals have already been noted. In the absence of public information on chemicals used at a well, people will not know whether they were exposed to a toxin that can lead to a health problem. Individuals exposed to a toxic substance may lack sufficient information on what is causing their health problems. The lack of information may result in delays in obtaining medical assistance. However, there are some reporting requirements other than chemical identities that may also be important. Additional information might be beneficial in avoiding future health injuries. For example, required water and air testing prior to drilling a well could provide information for determining whether shale gas production has caused changes of air and quality (Ohio Administrative Code, 2013). Pennsylvania adopted a provision regarding a presumption for the pollution of a water supply within a given number of feet of a well but offers well operators a defense (Pennsylvania Consolidated Statutes, 2012, § 3218). If an independent certified laboratory conducts a predrilling or prealteration survey and follows the law, this information may be used to refute the presumption of pollution. Additional information on concentrations of toxic substances might encourage the implementation of equipment and technology to enhance safety and reduce releases of substances containing toxic chemicals (Adair et al., 2012). The lack of information also includes situations where states decline to develop meaningful databases of reported problems and spills. Texas maintains a database of all petroleum spills that fails to identify those related to fracturing (US EPA, 2012c). A similar situation exists in Wyoming (US EPA, 2012c). This absence of differentiation between hydraulically fractured and other wells meant that the federal study of potential impacts of hydraulic fracturing on water quality could not use the data of these states (US EPA, 2012c). Additional disclosure requirements could help agencies in monitoring sites (Wiseman, 2012b). Since installing, casing, cementing, and fracturing wells seem to be related to a high number of problems,

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inspections during and after these operations are more critical than inspections at other times. More inspections are especially needed to oversee wastewaters generated at wells, highlighted by a $20 million fine of a company for leaking wastewater in Pennsylvania (Magill, 2013). The use of pits for wastewater is especially risky, and accidents with wastewater contamination suggest that more inspections are needed (Kiparsky and Hein, 2013). Furthermore, additional disclosure could allow the public to monitor agencies as well as drilling operators (Wiseman, 2011b). Governments depend on voluntary reports of activities, releases, and lapses resulting in violations for their enforcement of laws and regulations. Under self-reporting regulations, states may not have very accurate accounts of how many violations are occurring. A survey of the shale gas industry in four states funded by the Energy Institute of the University of Texas disclosed considerable procedural violations concerning the nonsubmission of data to the regulatory agency (Wiseman, 2012b). This suggests that governmental regulators simply do not have full information on compliance with existing regulations. Because of nonreported information, governments may not be able to accurately account for problems and damages related to shale gas production. An important reason for collecting data on infractions is to discern whether activities at gas wells might be altered, restricted, or monitored to reduce spills, mishaps, and accidental releases of pollutants. The analysis of the Energy Institute's survey data suggested that a considerable number of violations related to accidents and spills could have been prevented (Wiseman, 2012b). It was noted that pouring substances into tanks with leaks in them, allowing valves to freeze, and failing to maintain adequate dikes for pits may result in accidental releases (Wiseman, 2012b). Turning to the issue of enforcement, some governments are placed in an uncomfortable position of having laws and regulations to protect people but an inadequate infrastructure for the enforcement of the requirements (Anonymous, 2012). This involves two aspects. First, given budgetary limitations, governments may not have enough inspectors and personnel to effectively respond to alleged and known violations (Adair et al., 2012; Anonymous, 2012). An evaluation of Pennsylvania's inspection program in 2011 reported that 86% of active wells were not inspected (Steinzor et al., 2012). Another study concluded that over one-half of oil and gas wells in the US are not inspected each year to determine whether they are in compliance with applicable regulations (Sumi, 2012). Given increases in the numbers of wells being drilled, a state's regulatory agency may not have sufficient staff to oversee a program. In a study on unconventional oil and gas development by the US Government Accountability Office (2012b), it was found that some state agencies could not employ sufficient employees for their oversight programs. Thus, in the absence of increased funding for enforcement agencies, the added wells and activities mean that violators are less likely to be cited, fined, or prosecuted. Pennsylvania has adopted a fee schedule to provide monies for oversight of gas wells. Firms drilling wells need to apply for a well permit and pay a permit fee with monies deposited into a state treasury Marcellus Legacy Fund (Pennsylvania Consolidated Statutes, 2012, § 3211). Counties may adopt ordinances and impose a fee on unconventional gas wells (Pennsylvania Consolidated Statutes, 2012, § 2302). State funds are divided into six categories to be used for remediation and reclamation efforts, environmental stewardship, highway bridges, water and sewer projects, natural areas and community projects, and projects related to chemical substances and the cleanup of hazardous sites (Pennsylvania Consolidated Statutes, 2012, § 2315). Yet Pennsylvania has not proceeded with a severance tax on produced gas as has occurred in many other states (Pless, 2012). Other states collected more than $11 billion in 2010 to use for offsetting costs associated with resource extraction (Pless, 2012). Second, what types of enforcement actions against violators are being pursued by state enforcement agencies? The Energy Institute's

survey of four states showed that enforcement actions are sparse (Wiseman, 2012b). A study of enforcement activities in Colorado showed that inspectors were giving unsatisfactory scores without issuing violations (Sumi, 2012). State budgetary limitations have limited the number of personnel hired by state regulatory agencies including those charged with enforcement (Spence, 2013). In states where the regulatory agency has twin duties of fostering and overseeing energy production, concerns about health and environmental problems may receive minimal attention. 4. Unfinished business Shale gas production has created a large number of business opportunities and brought jobs to many rural communities. While the benefits accompanying the development of shale gas resources are notable, issues of health and environmental problems cannot be dismissed. Governments have responsibilities in protecting people from dangers including toxic substances that are released during shale gas production (de Melo-Martín et al., 2014). An evaluation of the literature on the regulation of activities involved in drilling and fracturing shale gas wells suggests that governments are failing as people and properties are being damaged due to insufficient oversight (Burleson, 2012; Fish, 2011–2012; Garmezy, 2013; Markell, 2011; US GAO, 2012b; Wiseman, 2013). A summary of well inspections in Pennsylvania over a two-year period disclosed roughly two violations per inspection (US Senate Subcommittee on Water and Power, 2011). State legislators, regulators, and the shale gas industry may want to take additional actions to protect the health and property of those affected by gas extraction. States have adopted different approaches to the health issues accompanying shale gas production, especially with respect to risks of water and air pollution. All of the major shale gas producing states have enacted and revised regulations overseeing drilling and fracturing activities to respond to problems adversely affecting others (Wiseman and Gradijan, 2012). Although problems have accompanied shale gas production, state regulatory provisions have prevented major environmental disasters that could have adversely affected millions of people (Fershee, 2011). Concerns about water pollution have been addressed by changes in fracturing chemicals being used, technology, and better-crafted regulatory provisions. The introduction of technology to reuse produced water from wells has enabled drilling operators to reduce wastewaters (Hickenbottom et al., 2013; Rahm and Riha, 2012). Other efforts are concentrating on reductions of dissolved salts and chlorides used in fracturing wells (Guarnone et al., 2012). Turning to air pollution, the adoption of better equipment and employing reduced emission completions are reducing releases of methane (Howarth et al., 2011; US EPA, 2012d; Wang et al., 2011). Furthermore, older pneumatic pumps are being phased out due to their venting of natural gas into the air (McFarland and Sarker, 2012). A few states including New York and North Carolina temporarily declined to approve the use of high-volume hydraulic fracturing in the extraction of shale gas (New York Governor, 2010, 2011; North Carolina Administrative Code, 2013). Yet it is expected that they will eventually approve hydraulic fracturing due to economics (Burns et al., 2012). By delaying development of their shale gas deposits, these states may benefit from the experiences of other states. The state regulatory agencies have had more time to consider and adopt better regulations to protect people and the environment, and the states are in a position to avoid some of the problems experienced in other states involving releases of pollutants. The states also have opportunities to invest in state regulatory enforcement (Eaton, 2013). Advances in technologies, equipment, and increased knowledge about contamination mean that firms are able to eliminate more of the risks that accompany shale gas extraction activities. This suggests several ideas for greater accountability that would be expected to reduce injuries and damages.

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4.1. Initiate additional best management practices Best management practices have been successful in reducing pollution from various land disturbing activities including forestry and agriculture (Budner, 2013; Baumgart-Getz et al., 2012; Rao et al., 2009). States and local governments can adopt best management practices on pollution prevention, public safety, well siting, and fracking fluid selection to reduce externalities accompanying extraction and production activities (Getches-Wilkinson Center for Natural Resources, Energy, and the Environment, 2013; U.S. Fish and Wildlife Service, 2007). 4.2. Earlier disclosure of chemicals used States may want to narrow their trade secret protection provisions. Slight changes to existing provisions could require the disclosure of chemicals used at wells so that persons injured by accidental releases can secure prompt and appropriate medical treatment. Another change could facilitate the exchange of information of chemicals among emergency responders and medical personnel. The Pennsylvania Supreme Court ruled in 2013 that Section 3222.1(b), Pennsylvania Statutes, places medical doctors in an untenable position. They must choose “between violating a Section 3222.1(b) confidentiality agreement and violating [a doctor's] legal and ethical obligations to treat a patient by accepted standards, or not taking a case and refusing a patient medical care” (Robinson Township v. Commonwealth of Pennsylvania, 2013). State restrictions on the disclosure of chemical information to medical providers impede their ability to diagnose and treat patients properly. Such provisions offend governmental obligations to protect public health and well-being. 4.3. Surface lease agreements State or local governments can offer greater protection to surface owners who do not own the mineral rights under their properties. A state legislative provision could require a drilling firm to enter a lease with the surface owner that would delineate particulars on the location of drilling activities. Although there would be no payments to the surface owner, the lessor and lessee could come to agreement on conditions affecting interferences with surface activities. 4.4. Adopt certification requirements Governments might contemplate how certification requirements could be integrated into shale gas extraction activities. Rather than more governmental regulations, private firms could be employed to certify various steps and practices. For example, ISO 29001 Oil and Gas standards defining quality management system requirements could be used to reduce externalities. 4.5. Fees and taxes Although states have adopted some fees and taxes to pay for oversight and damages, these tend to be insufficient. Additional provisions on rates for permits, fees, and production taxes could provide additional funding for monitoring and enforcement activities. Funds could also be used for further remediation of polluted sites and for providing monies for communities' infrastructural needs related to drilling activities. Because pollution prevention and safety controls cost money, drilling operators may forgo actions that minimize risks of pollutant discharges. Unless external pressures of governmental sanctions or public opprobrium are applied, unnecessary health and property damages from extraction activities may be placed on persons near production sites. These ideas document how state governments might do more to reduce risks of problems from shale gas extraction activities. Rather than neighbors and governments assuming costs related to pollution damages from drilling, more costs could be placed on firms causing

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the injuries. Each state legislature can decide whether changes to its regulatory provisions might achieve a better balance between shale gas production and environmental and health costs.

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