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This Month's News & Analysis

Volume 45, Issue 8 — August 2015


The Shale Oil and Gas Revolution, Hydraulic Fracturing, and Water Contamination: A Regulatory Strategy

by Thomas W. Merrill and David M. Schizer

This Article considers how to regulate the risk of water contamination from fracturing. The task entails a careful balance of competing considerations. The shale boom offers enormous benefits and should be encouraged. At the same time, we need regulation to ensure that it is safe, since water is a vitally important resource. In addition, the public must believe that shale drilling is safe. Otherwise, the shale revolution could be vulnerable to regulatory overkill, as media stories about flaming water faucets, brown well water, and sickly farm animals prompt widespread public apprehension about water contamination. In order to realize the potential benefits of fracturing, we need regulation that is carefully calibrated to minimize the real risks, without deterring socially valuable drilling. This challenge is all the more difficult because fracturing can potentially contaminate water in several ways. Some are well understood from decades of conventional oil and gas production and can be controlled with best practices regulations. Others are highly speculative, may or may not present real risks, and currently have no known solutions. As a result, regulatory responses should be dynamic, generating additional information about potential risks and stimulating innovations to reduce these risks.

A Market Approach to Regulating the Energy Revolution: Assurance Bonds, Insurance, and the Certain and Uncertain Risks of Hydraulic Fracturing

by David A. Dana and Hannah J. Wiseman

In the industrial revolution of the nineteenth century, the United States was transformed from a largely agrarian nation of farmers to a major center of manufacturing. With industrialization came new risks to public welfare and, ultimately, changes in law to address those. The United States is now undergoing another revolution, an energy revolution that has the potential to transform the United States from a net energy importer into the next Saudi Arabia. Like the industrial revolution, this energy revolution entails new risks and, by necessity, will produce new legal responses to those risks. It has fomented one of the greatest environmental regulatory challenges of our time, and calls for an effective solution that must be rapidly implemented. This Article addresses a set of important legal responses that so far have received scant attention from academic commentators and lawmakers—market-based requirements for enhanced bonding and, more importantly, environmental liability insurance for wells.

The Military-Environmental Complex

by Sarah E. Light

Two competing theories vie for dominance regarding the relationship between the U.S. military and the natural environment. On the one hand, because legal rules permit the military to disregard environmental laws when they conflict with the military’s national security mission, one might be left with the impression that the military’s mission conflicts inexorably with environmental protection. Yet, the military is currently engaged in an extensive undertaking to improve its sustainable energy use by reducing demand for fossil fuels and developing renewable energy sources. The military is undertaking such actions not only in response to congressional directives and presidential executive orders, but also voluntarily in response to its operational and national security needs. In some cases, the military is leveraging private financing rather than taxpayer funds to drive innovation. Such cooperation among the military, private financiers, and technology firms has the potential to transform for the better not only our nation’s energy profile, but also the militaryindustrial complex. This new Military-Environmental Complex should become a factor in the debate over regulatory instruments to combat climate change. At the same time, however, these relationships warrant some caution to prevent rent-seeking.

Taking Public Access to the Law Seriously: The Problem of Private Control Over the Availability of Federal Standards

by Nina A. Mendelson

In the 1930s, Harvard professor Erwin Griswold famously complained about the enormous numbers of New Deal regulations that were obscurely published on individual sheets or in “separate paper pamphlets.” Finding these binding federal rules was difficult, leading to “chaos” and an “intolerable” situation. Congress responded, requiring that agencies publish all rules in the Federal Register and in the Code of Federal Regulations (CFR). Currently, recent federal public laws, the entire U.S. Code, the Federal Register, and the CFR are all freely available online as well as in governmental depository libraries. But with respect to thousands of federal regulations, the clock has been turned back—and worse. To save resources and build on private expertise, federal agencies have incorporated privately drafted standards into numerous federal regulations, but only by “reference.” These standards range widely. The CFR presently contains nearly 9,500 “incorporations by reference” of standards, often referred to as “IBR” rules. Many IBR rules incorporate privately drafted standards from so-called “standards development organizations” or “SDOs.” Agency use of IBR rules is likely to grow. Since the 1990s, both executive branch and congressional policies have officially encouraged agency use of privately drafted standards.

Public Utility and the Low-Carbon Future

by William Boyd

Substantial reductions in global power sector emissions will be needed by midcentury to avoid significant disruption of the climate system. Achieving these reductions will require greatly increased levels of financing, technological innovation, and policy reform. In the United States, the scale and complexity of the overall challenge have raised important questions regarding prevailing regulatory and business models, with much scrutiny directed at the traditional practice of public utility regulation. Recognizing the many valid criticisms leveled against public utility regulation and the important questions raised about the viability of traditional utility business models, particularly in the face of substantial growth in distributed energy resources, this Article argues that a revitalized and expanded notion of public utility has a critical role to play in efforts to decarbonize the power sector in the United States.

Mapping, Modeling, and the Fragmentation of Environmental Law

by Dave Owen

Over the past four decades, increased data availability, new software systems, and exponentially greater computing power have combined to turn spatial analysis—that is, quantitative analysis of data coded to specific geographic coordinates—into the coin of the environmental realm. Thousands of analysts in dozens of fields now spend their days gathering and crunching spatial data. Their efforts serve a wide variety of purposes and are leading to new ways of conceptualizing ecological systems and environmental change. The emergence of spatial analysis merits revisiting environmental law’s traditional debates about integrative, holistic decisionmaking. This Article argues for bridging the divide between spatial analysis and environmental law by exploring some of spatial analysis’s implications for environmental law. Using land use as a central example, it explains how spatial analysis can change which environmental problems we find cognitively tractable, what tools we use to address those problems, and to whom we allocate authority to respond.

Prosecutorial Discretion and Environmental Crime

by David M. Uhlmann

The environmental laws create a complex regulatory system affecting a wide range of economic activity in the United States. Given the wide range of potential environmental violations, it might have been preferable for Congress to specify which environmental violations could result in criminal prosecution. Instead, Congress made only limited distinctions between acts that could result in criminal, civil, or administrative enforcement. If the same violation often could give rise to criminal, civil, or administrative enforcement—and if mental state requirements only preclude criminal enforcement for a small subset of violations—what determines which environmental violations result in criminal prosecution? The answer is the exercise of prosecutorial discretion, which exists in all areas of the criminal law, but assumes a particularly critical role in environmental cases because so much conduct falls within the criminal provisions of the environmental laws.


The Critical Role of Voluntary Standards and Certification in the Hydraulic Fracturing Framework

by Susan Packard LeGros

The shifting economic, regulatory, political, and operational landscape of shale gas development requires regulatory approaches that are timely, flexible, and adaptive. Voluntary standards, particularly those that incorporate diverse perspectives, are a path toward responsible and constructive leadership that can inform and support development of a reasoned regulatory and legal structure.

Comment on The Shale Oil and Gas Revolution, Hydraulic Fracturing, and Water Contamination

by Peter D. Robertson

In their article The Shale Oil and Gas Revolution, Hydraulic Fracturing, and Water Contamination, Professor Merrill and Dean Schizer have made a very thoughtful proposal that has genuine merit and deserves equally thoughtful consideration by states across the country. I have a series of what are essentially random reactions, thoughts, and suggestions, but they all flow from a fundamental position that their suggestions are an excellent model for states to consider as they adopt new or update old regulatory and liability regimes.

Options for Regulating the Environmental Impacts of Hydraulic Fracturing

by Leslie Carothers

The ELI-Vanderbilt Law School Environmental Law and Policy Annual Review identifies outstanding academic work in the field of environmental law. The reviewers selected two excellent articles on the challenges of hydraulic fracturing (fracking for short) to the regulatory system for presentation and discussion at the 2015 program on Capitol Hill: David A. Dana and Hannah J. Wiseman, A Market Approach to Regulating the Energy Revolution: Assurance Bonds, Insurance, and the Certain and Uncertain Risks of Hydraulic Fracturing, and Thomas W. Merrill and David M. Schizer, The Shale Oil and Gas Revolution, Hydraulic Fracturing, and Water Contamination. Both articles address many of the common issues raised about the strengths and weaknesses of the current and potential alternative regulatory approaches, while emphasizing different but not mutually exclusive solutions. This comment will focus primarily on the approaches to setting regulatory standards and securing compliance by the key actors in the cycle of production and site restoration. It concludes with a comment on the problem of cumulative impacts of fracking on landscapes, an issue receiving less attention in the articles, and the importance of maintaining local land use authorities to contend with those impacts.

Bond What You Know and Insure What You Don’t: A Comment on A Market Approach to Regulating the Energy Revolution

by W. Blaine Early III

It is a privilege to comment on the extensive and thoughtprovoking work of Professors Dana and Wiseman. I approach this from the perspective of my practice in the environmental regulation of natural resources industries, including coal and hard rock mining and oil and gas extraction, and the role that surety bonds and other forms of financial assurance play in those industries. Professors Dana and Wiseman describe categories of relatively certain risks in the short or medium term versus those risks that are uncertain and have a long tail. This comment focuses on how surety bonds can address the relatively certain risks of these natural resources industries within the framework of command-and-control regulation, while insurance is better suited for the more uncertain risks.

Reflections on A Market Approach to Regulating the Energy Revolution

by Tom FitzGerald

As a practitioner who has represented low-income individuals and community groups pro bono on environmental and energy development issues for over three decades, I appreciate the contribution of Professors Dana and Wiseman to the literature concerning the regulation of those particular risks and effects of the use of hydraulic fracturing and horizontal drilling to develop shale gas and oil from formations once considered inaccessible. I agree with the authors that, if engaged, the surety and insurance industry could become valuable partners in assisting in the mitigation of risks associated with hydrofractured horizontal well production. But there are three main difficulties I see in the proposal to use insurance and surety mechanisms as a tool for mitigating risks.

No Such Thing as a Green War or a Bad Peace

by Sharone E. Burke

While U.S. military operations in the 21st century have largely been spared the nefarious results of “eclipses of the sun,” the central point of Thucydides’ account of a war that happened more than 2,000 years ago still holds: war is a calamity. War consumes money and natural resources and it destroys lives and land. There is nothing environmentally friendly about combat. That core truth is largely absent from Sarah Light’s otherwise thoughtful article, The Military-Environmental Complex.

Remarks on The Military-Environmental Complex

by Amanda Simpson

The U.S. Army Office of Energy Initiatives is the central management office for large scale renewable energy projects leveraging third-party financing to bring energy resiliency to our Army installations. I would like to thank Professor Light for including the efforts of what is now the Office of Energy Initiatives in her paper. It was the success of the original task force that brought about the transition to an enduring office last year. The United States Army has long recognized that if we are to be successful in our primary national defense mission, we have an obligation to ensure that our Soldiers today—and the Soldiers of the future—have the land, water, and air resources they need to train; a healthy environment in which to live; and the support of the local communities of the American people.

A Multidimensional Problem

by Emily S. Bremer

In Taking Public Access to the Law Seriously: The Problem of Private Control Over the Availability of Federal Standards, Professor Nina Mendelson has done a great service, offering a strong and comprehensive argument for “why law needs to be public.” This comment and the Administrative Conference’s recommendation also agree that the policy goal should be to make incorporated materials freely available online. Where we part ways is with respect to the solution. Focusing exclusively on the public access dimension of the incorporation by reference conundrum, Professor Mendelson concludes that any solution relying on collaboration with private standards developers “should be out of bounds.” But the problem has several other dimensions—interests, both public and private, that must be considered if one is to design a policy that is workable and avoids unintended, negative consequences. Viewed from this perspective, public-private collaboration emerges as the policy prescription with the greatest promise. And there is substantial evidence that it is already working.

Comments on Taking Public Access to the Law Seriously

by Lois Schiffer

Professor Mendelson’s article is extremely important. Although I have worked on federal regulations and environmental law for over 40 years, until I read Professor Mendelson’s article I had not focused on this critical issue. The idea that the government has a body of law that the public cannot access for free is quite startling from the perspective of the enforceability of federal rules, government transparency, and public access to material that may bind the public. It also raises serious questions about basic due process and fairness.

In the Courts

D.C. Circuit denies pre-final review of Clean Power Plan.

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In the Agencies

EPA and Army Corps finalize CWA jurisdictional rule.

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In the Congress

TSCA Modernization Act passes the House.

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In the States

New York proposes amendments to state right-to-know act.

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