Federalism

The Battle for Energy Independence

Technological breakthroughs in hydraulic fracturing (commonly known as fracking) continue to unlock vast oil resources, revitalizing industries and unleashing economic growth across the nation. A competitive regulatory climate characterized by federalism is largely responsible for the proliferation of fracking and the rise of America’s energy renaissance. With more proven oil reserves than Russia and Saudi Arabia, U.S. states are embracing fracking with smart regulations designed to protect the environment while minimizing unnecessary red tape. Yet, despite strong evidence states are successfully regulating fracking with little oversight from Washington, federal regulators appear very eager to get more involved.

In the face of heavy opposition from Congress and the states, the Obama Administration recently directed the Bureau of Land Management to issue a slew of new rules, potentially costing unconventional oil and gas producers an additional $100,000 in compliance costs per well. According to Erik Milito of the American Petroleum Institute, ambiguous new rules create uncertainty, stifling needed investments in shale resources. “It’s all about an industry that just simply wants to have certainty and predictability in the regulatory regime so that you can have the confidence to invest… And we’re seeing that torn down in many respects,” Milito said.

Michael McKee, county commissioner in Utah’s Uintah County, testified that “the proposed [BLM] rule would add a redundant, burdensome and costly layer on federal approval for routine oil and gas operations on federal public lands, and threatens to usurp state authority in a field already well-managed by state regulators.”

In response to a legal challenge filed by the Western Energy Alliance and the Independent Petroleum Association of America, a federal court rejected the new BLM regulations, citing the 2005 Energy Policy Act, which provided that states retain exclusive authority to regulate fracking on federal land falling within their geographic areas of jurisdiction. But the ruling hasn’t dampened the administration’s quest to impose federal regulations on fracking. “We believe that we have a strong argument to make about the important role that the federal government can play in ensuring that hydraulic fracturing that’s done on public land doesn’t threaten the drinking water of the people who live in the area,” said White House Press Secretary Josh Earnest, adding that the administration will appeal the ruling.

While critics of fracking appear convinced of the necessity for more federal regulations on the activity, there is little evidence to suggest that greater federal oversight is warranted. The single biggest question in this debate hinges on whether the authority to regulate fracking is best wielded by state governments with local knowledge, or federal bureaucrats far removed from the localities directly impacted by their rulemaking.

Fracking policies made at the state level allow for a diverse range of regulatory models tailored to the specific environmental, economic and social needs of each state. Instead of a one-size-fits-all approach to fracking regulation, federalism allows states to learn from each other and address valid environmental or health concerns without hindering growth. A recent study by Dartmouth College found that “within 100 miles of new production, one million dollars generates $243,000 in wages, $117,000 in royalties, and 2.49 jobs.” The study also found that “over a third of the fracking revenue stays within the regional economy,” and that “new oil and gas extraction led to an increase in aggregate US employment of 725,000 and a 0.5 percent decrease in the unemployment rate during the Great Recession.”

The ongoing tug of war between Washington and the states is a battle for America’s energy future and the role of state governments in shaping energy policy. For the sake of federalism and America’s continued energy renaissance, states would do well to vigorously defend their longstanding right to regulate fracking activity.


In Depth: Federalism

Genuine accountability to hardworking taxpayers results when state and local legislators work with members of the community to determine a plan of action that is right for each individual state, city or town. Real solutions to America’s challenges can be found in the states – America’s fifty laboratories of democracy …

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