Recent technological advancements in hydraulic fracturing have
enabled the oil and gas industry to access shale gas. While it is estimated that
shale gas, a clean source of energy, will account for 20% of the total U.S. gas
supply by 2020, there have been serious concerns about potential adverse
impacts of fracking on the environment and public health. Consequently, a
patchwork of regulations has evolved in the United States to cope with the
competing concerns of environmentalists and the oil and gas industry. After
an overview of the technical aspects of the fracking process and environmental
concerns, this article examines the successes and shortcomings of the statecentric regulatory system and the potential application of America’s regulatory
scheme as a model for entrants into fracking. It reviews federal regulation of
fracking and the comprehensive regulatory systems that vary from state-to-state.
Hydraulic fracturing has transformed the United States’ energy outlook in recent
years. President Obama dubbed the United States the “Saudi Arabia of natural
gas” because “[w]e’ve got a lot of it”.
In fact, the US Department of Energy’s
(DOE) Energy Information Administration (EIA) estimated that the US has over
2,214 trillion cubic feet (tcf) of recoverable shale gas reserves.
By 2020, the EIA
projects that shale gas will comprise over 20 per cent of the total US gas supply.
Thus, the “fracking” process has been touted in the US as the key to a clean energy future and to end dependence on foreign oil.
Hydraulic fracturing is a process
where fracturing fluids — a combination of sand, water and chemical additives —
are pumped into wells under high pressure to generate fractures in underground
Recent technological advancements in hydraulic fracturing have
enabled the oil and gas industry to access “shale gas” — natural gas produced
from hydrocarbon-rich shale formations.
Despite the many potential benefits of fracking, many have raised concerns
about the impact of fracking on underground water resources, public health and
other environmental effects in the locale of these shale gas extraction facilities.
The sudden pervasiveness of fracking, in conjunction with communities and
environmentalists’ concerns, has raised the issue of who regulates fracking. Because
fracking is not regulated under federal law, legal battles ensued between state and
local governments over who has the power to regulate fracking. A patchwork
of regulations evolved in various states across the nation as legislators and
municipalities struggled to cope with the competing concerns of environmentalists
and the oil and gas industry.
A cursory investigation into hydraulic fracturing outside the US leads
to two conclusions: (1) There is more fracking in the US than in most other
countries combined, some of which categorically prohibit it altogether, and (2) United States’ regulation of fracking is more varied (by state) and generally
more comprehensive. What follows is a random sampling of fracking practice and
regulation in other, primarily European, countries and China.
That there are considerable shale natural gas reserves in Europe appears to
be a given. The International Energy Agency estimates that there is sufficient
natural gas locked in shale formations to meet Europe’s needs for at least
half a century.
Given that the European Union (EU) is collectively one of
the world’s largest importers of natural gas, it would appear logical to assume
that Europe as a whole would welcome hydraulic fracturing to capture such
a large reserve of natural gas. Not necessarily so. The region’s shale gas
reserve is largely untapped. The EU is expected to release a unified policy on
fracking to manage a multiplicity of sometimes conflicting laws and permitting
requirements throughout EU countries.
Although the EU refused to enact a
complete moratorium on fracking, in October 2013, it voted to require energy
companies to conduct environmental audits before fracking.
With the unified
EU policy still in the early stages of development, several EU countries are
adopting their own approaches in the interim.
Poland appears to have the largest of such shale gas reserves in western Europe.
While there are indications that the Polish government would like to develop its
own gas supplies both to decrease use of fossil fuels
and to decrease its reliance
on natural gas from Russia,
exploitation is hampered by legal obstacles such as
the generic need for environmental impact assessment together with amendments
to current laws directed specifically at hydraulic fracturing.
trend appears to be toward the regulation of hydraulic fracturing rather than its
France appears to be at the other extreme. Although private industry secured
some fracking permits, in 2011, the French Parliament issued a complete moratorium
on both explorations for shale gas and hydraulic fracturing.
Both appear to be the
result of public concerns over environmental effects of fracking, including water
pollution from toxic chemicals allegedly used in the injection part of the fracking
process, contamination from waste byproduct from fracking, and induced seismic
In October 2013, the French Constitutional Court upheld
the ban as constitutional.
In England, by contrast, the relevant governmental agencies initially gave
hydraulic fracturing “a clean bill of health”, noting that the process was subject
to “robust controls”.
However, in 2011, two earthquakes in hydraulic fracturing
extraction areas resulted in a Parliamentary call for an investigation into “the safety
and environmental impacts of drilling for shale gas”.
A kneejerk reaction initially
hindered the United Kingdom’s exploitation of natural gas resources in 2011, when
a temporary moratorium was issued after unusual seismic activity was recorded in
an area containing the only well-utilizing fracking.
In 2012, the moratorium was
lifted and regulations currently require a review of seismic activity and faults in the
area before the U.K. will issue a license for a fracking operation.
Now the U.K.
seems eager to exploit its natural gas reserves, estimated to contain 1,300 tcf of
gas — enough to provide energy to the U.K. for the next 50 years.
After a 2013
British Geological Survey revealed that there was twice as much shale gas in the
north of England than previously thought, a new shale gas allowance was released
halving the tax due on income from production in order to encourage exploration.
Hydraulic fracturing has become controversial in Germany as well. Germany
is estimated to contain 1.3 trillion cubic meters of recoverable shale gas.
opposition in German cities where fracking was planned has resulted in plans for
popular referenda on moratoria for both test drilling and shale extraction.
Finally, several Baltic countries have responded to the anticipated
commencement of hydraulic fracturing by banning or placing moratoria on the
process. Thus, for example, responding to public protest, Bulgaria has reportedly
banned fracking altogether. Romania has reportedly imposed a moratorium on both
shale exploration and extraction.
China is estimated to have the largest reserve of technically recoverable shale
gas in the world (1,115 tcf) — more than the US and Canada combined.
stifling levels of pollution and being the largest importer of energy worldwide,
there is little doubt that China would benefit from a shale revolution.
this agenda, China’s National Energy Administration released ambitious targets
for shale gas development by 2020 (60–100 billion cubic meters).
China has set vigorous natural gas collection goals, it faces obstacles to fostering a
successful natural gas industry. First, China’s shale formations, in comparison to US
shale formations, are older, deeper (sometimes 4,000 meters deep) and composed
of more compact clay, posing barriers to economic retrieval.
Second, most of
China’s shale is on rough or inaccessible terrain and also happen to be located in
China’s most arid regions that often struggle with water shortages.
has little experience with domestic drilling and does not have the infrastructure
necessary to transport natural gas, such as natural gas pipelines.
Finally, one of the
largest shale formations, the Sichuan basin, also happens to be highly vulnerable
to seismic activity.
Under-regulation of fracking by China also raises concern.
government bodies in China regulate oil and gas, yet there are only 2–3 rules
pertaining to fracking.
In addition, China currently has no rules on groundwater
Also, because China’s air pollution standards do not regulate methane,
there is no legal limit on methane emissions or mechanism to regulate methane
emissions at fracking wells.
This article briefly reviews the hydraulic fracturing process and summarizes
the regulatory regimes applicable or potentially applicable to hydraulic fracturing
in the US and analyzes relevant case law. Section I of this article gives an overview
of shale gas, the technical process of shale gas extraction and the environmental
concerns surrounding fracking operations. Section II summarizes the various
laws that comprise the Federal fracking regulatory framework. Finally, Section III
examines the regulation of fracking by the states and examines how courts across
the US treat fracking regulations at the state and local level.