Regulatory Non-Enforcement by Design: Earthworks Shows How the Game is Played

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Earthworks Oil and Gas Accountability Project published a scathing 124-page report this week, โ€œBreaking All the Rules:ย the Crisis in Oil & Gas Regulatory Enforcement.โ€

The content of the report is exactly as itย sounds.

That is, state-level regulatory agencies and officials often aren’t doing the jobs taxpayers currently pay them to do and aren’t enforcing regulations on active oil and gas wells even when required to under the law.

This is both out of neglect and also because they’re vastly understaffed and underfunded, meaning they literally don’t have the time and/or resources to do properย inspections.

And on those rare instances when regulatory agencies and the regulators that work for themย do enforce regulations on active oil and gas wells, Earthworks demonstrated thatย the penalties for breaking the rules are currently so weak that it’s merely been deemed a tiny โ€œcost of doing businessโ€ by the oil and gasย industry.

It’s certainly not a report to read for the optimists of the world. The Executive Summary sums things up nicely:

The U.S. faces a crisis in the enforcement of rules governing the oil and gas industry. The shale gas and shale oil boom has brought an expansion of oil and gas activity unseen in many parts the country since the 19th century. Unfortunately, as this report shows, states are dangerously unprepared to oversee current levels of extraction, let alone increased drilling activity from the shaleย boom.

(Snip)

Based on their own data, every state we studied fails to adequately enforce regulations on theย books.

Miniscule Enforcementย Levels

One of the most shocking findings of the study is the fact that 51-91% of the active wells studied in the six states (Colorado, New Mexico, New York, Ohio, Pennsylvania, Texas) have operated with zero inspections to date since the beginning of the ongoing shale oil and gas boomย in about 2008.ย 

Translation: over half of all wells go uninspected each year in these six states and hundreds of thousands of active oil and gas wells across the country are neverย inspected.

2010 in Pennsylvania and Ohio – home of the Marcellus Shale and Utica Shale basins respectively – featured some 91% of wells going uninspected. This amounts to more than 82,000 wells in PA and over 58,000 in OH. Texas’ 2010 stats aren’t much better. Home of the Barnett and Eagle Ford Shale basins, the state saw 53% of wells go uninspected, a total of 139,000ย wells.ย 

While the shale oil and gas boom is here to stay in the U.S. for the forseeable future, enforcement of regulatory mechanisms has gone out the door, explainsย Earthworks:

Despite the shale oil and gas boom, enforcement actions have not kept pace. The numbers of enforcement actions and total dollar amount in penalties have either remained fairly constant or have dropped in all six states over the past fewย years.

These figures are but the tip of the iceberg. There were 84 oil and gas well inspectors in all of Pennsylvania, 15 in Colorado and 97 in Texas at the end of 2011. This equtes to 885 wells per inspector (258 inspections per inspector), 3,122 wells per inspector (816 inspections per inspector)ย and 2,696 wells per inspector (1,184 inspections per inspector)ย respectively on an annualย basis.ย 

All the while, the report explains, funding continues to be slashed from the PA Department of Environmental Protection’s coffers, to the tune of 36% budget cuts between 2008-2011 and more than 60% over the pastย decade.

โ€œI was surprised at how uniformly inadequate things were,โ€ Bruce Baizel, a staff attorney with Earthworksย told theย Huffington Post. โ€œIf you compare this to building a house โ€“ you have to have multiple inspections during the home-building process. Why is that not the case here, with oil and gas drilling? It shouldย be.โ€

โ€œThe Cost of Doingย Businessโ€

As we explained in analyzing Bloomberg Markets Magazine‘s November 2011 cover story about theย โ€Koch Brothers Secret Sins,โ€ the โ€œhavesโ€ almost always come out ahead in the U.S. legal system. That’s not our analysis, but the age-old analysis of one of the founders of the study of sociology of law, University of Wisconsin Law School professor Marc Galanter, author of the seminal paperย โ€Why the ‘Haves’ Come Out Ahead: Speculations on the Limits of Legal Change.โ€

As we wrote, the Bloombergย โ€œarticle is highly applicable not only to the Koch Brothers, but to all corporate criminals of their ilk.โ€ We proceeded to write,ย 

Galanter’s thesis, which he presented in his meticulously researched 60-page essay, is now common knowledge โ€“ in the American legal system, the โ€œhaves,โ€ or the โ€œRepeat Players,โ€ as he puts it, nearly always come out ahead. The converse, the โ€œone-shotters,โ€ as he calls them, nearly alwaysย lose.

(Snip)

Why do the โ€œRepeat Playersโ€ never really lose? Because they have attorneys who are constantly working the legal system, fighting big-money lawsuits, and developing the techniques necessary to โ€œcome out ahead,โ€ including the ability to gain rapport with judges andย juries.

The same rules apply to Chesapeake Energy, a shale gas industry behemoth. In 2009, Chesapeake Energy had 123 violations in Texas and Pennsylvania, according to the Earthworks study. The following year, it received the largest oil and gas-related fine in Pennsylvaniaย history.

Common sense would say this fine served as a deterrent for Chesapeake.ย Not so fast: โ€œthe next year the companyย’โ€™s compliance record actually got worse ย–โ€“ in 2011 Chesapeake had 161 violations,โ€ wroteย Earthworks.

In CO, TX and PA, the oil and gas industry paid civil penalties of $13.1 million between 2009-2011. Enforcement violations run at $500-$1,000/day, $1,000-$10,000/day and $75,000 and $5,000/day in these states, respectively. That’s all a drop in the bucket for the oil and gas industry, given that BP, Chevron, ConocoPhillips, ExxonMobil, and Royal Dutch Shellย scored profits ofย $137 billion in 2011. The same companiesย made more than $1 trillion in profits from 2001-2011.

When push comes to shove, Earthworksย says fines are simply too low when oil and gas companies break the rules and โ€œdo not deter companies from violating rules, but instead are viewed as the cost of doingย business.โ€

Baizel told Huffington Post, โ€œYou’ll only get the industry’s attention if you hurt their pocketbook, and that anything less is really just the cost of doing business toย them.โ€

The American Legislative Exchange Council and How the Game isย Played

Looking at things from the commanding heights perspective of the oil and gas industry, it’s hard not to get cynical about how the game isย played.ย 

As we have covered on DeSmog, the American Legislative Exchange Council (ALEC) and one of the โ€œOther ALECs,โ€ the Council of State Governments (CSG), have moved to gut EPA greenhouse gas emissions regulations for a two-year time window, calling them a โ€œregulatory trainwreck.โ€ Theย model resolution has been introduced in an astounding 34 states, passing in 13, as of Juneย 2011.

ALEC has also proposed and passed a model bill that erodes local democracy in the sphere of zoning rights, which passed in Pennsylvania, almost passed in Texas and failed to pass inย Colorado.ย 

Passage of this resolution and model bill in statehouses means the very statehouses covered in the Earthworks reportย are left on their own to regulate at the well-head level and at the greenhouse gas emissionsย level.

The cherry on top here is the piece of legislation mandating fracking chemical fluid disclosure at the state level, which also came into existence via an ALEC and CSG model billย written by and for ExxonMobil. It’s laden with the very loopholes one would expect from a bill written by Exxon, rendering โ€œdisclosureโ€ meaningless. That bill has passed in Texas, Colorado and Pennsylvania, as well, all states covered in the Earthworks study.

Despite overwhelming evidence completely to the contrary, the Obama Administration – whose Department of Energy created the chemical fluid disclosure standards that are found within this model bill – told Plattsย โ€œEnergy Week TVโ€ on Sept. 16 that โ€œthe states are doing a good jobโ€ with overseeing natural gas drilling.

This claim doesn’t pass the โ€œlaugh test,โ€ given that โ€œtwo out of every three times oil and gas companies have publicly disclosed the chemicals in their hydraulic fracturing fluid, they’ve left something out,โ€ as recently reported byย EnergyWire.

This set of circumstances can best be described as a trifurcated approach for the oil and gas industry: strip federal regulations, attack local democracy, andย underfund, understaff, and underenforce state regulatory agencies and their respective regulations, so as to make themย toothless.ย 

โ€œI left my home in Dish, TX because gas development threatened my family’s health,โ€ said Calvin Tillman, former mayor of Dish and featured interviewee in the documentary film โ€œGaslandโ€ in a press release on the Earthworksย report. โ€œThis report shows that rules and regs aren’t worth the paper they’re written on if they’re notย enforced.โ€

But perhaps it’s more sinister than that: the rules and regs written by and for the oil and gas industry are worth the paper written on preciselyย because they’re not enforced. Just ask the oil and gas companies that fund ALECย andย friends.

Sharon Wilson, author of the well-read blogย Texas Sharonย andย Earthworks’ย Gulf Regional Organizer toldย DeSmogBlogย that she chocks it up to not only a crisis in regulatory enforcement, but something far more grave: a crisis in democracy as we knowย it.ย 

โ€œThere should be no new drilling until our government fixes the problem and the public can trust the well-being of families and communities in America will come before industry’s bottom line,โ€ sheย said.

Image Credit: Shutterstock |ย Bruceย Rolff

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Steve Horn is the owner of the consultancy Horn Communications & Research Services, which provides public relations, content writing, and investigative research work products to a wide range of nonprofit and for-profit clients across the world. He is an investigative reporter on the climate beat for over a decade and former Research Fellow for DeSmog.

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