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Regulating Oil and Gas

The regulation of oil and gas operations in the United States is commonly a mix of laws from federal, state and local governments, each working to protect the resources, reduce waste of the resources, and also ensure the public’s health and safety. Which specific laws apply depends greatly on the land ownership in a given region, but the authority to regulate oil and gas stems from the executive branches of the government.

When the federal, state or local government owns the land, the government generally owns the rights to the oil and gas and works to manage these rights in a way that will benefit the public as a whole. However, much of the land in the United States is still privately owned. However, this private ownership does not strip the land completely of oversight and the regulation of oil and gas is primarily achieved at the state level.

Federal Regulation

Federal regulations are implemented primarily to focus on the environment: federal involvement commonly includes the protection of water and air quality, and worker safety. Development on federal lands is regulated by the U.S. Federal Government, including production from the Gulf of Mexico. The Department of the Interior regulates the extraction of oil and gas from federal lands and the Bureau of Land Management (BLM) regulates the development of federal onshore properties.

Federal regulations are also used to protect Native American lands. The BLM, working in conjunction with the Bureau of Indian Affairs (BIA), has jurisdiction over most development for these lands. For development in National Parks, regulation is undertaken by the National Park Service.

Most federal regulation stems from the National Environmental Policy Act (1970). However, the Environmental Protection Agency (EPA) has expressed its authority through The Clean Water Act (1972) and the Clean Air Act (1963). These are just two examples of federal regulation overlapping into oil and gas development. Because of their broad applicability, many states use federal regulations to form state level regulations in this area.

State Regulation

The United States has 33 oil and gas producing states. State regulation is generally extended to state lands and privates lands. States are commonly charged with not only ensuring that the resources of the state are developed in a safe manner, but they must also ensure the public is safe and the environment is protected. Traditionally, state regulation has focused on the prevention of waste but as development has increased, environmental regulations are also emerging as commonplace in the industry.

In 1935, the Interstate Oil and Gas Compact Commission (IOGCC) formed to develop standards and regulations associated with oil and gas development and production which a majority of states would be able to agree upon. This action formally recognized the state’s role in oil and gas regulation. Today, the IOGCC is comprised of 31 member states, 7 associate states, and 10 international affiliates. The Commission includes state governors and state appointed delegates, as well as numerous members of state level agencies, industry attorneys, and regulatory officials. While the IOGCC works to find common ground among the states, the reality is that regulation of oil and gas can be complex and fluctuates based on jurisdiction.

Today, states will generally regulate oil and gas to not only prevent waste, but to also protect adjacent landowners and address health and safety issues. States also regulate utilities, seismic activity, hydraulic fracturing, and many other activities. State regulation is normally enforced through permitting processes and other regulatory rules and inspections. States also regulate pipelines and natural gas gathering lines and many states have begun to enact renewable energy standards and regulations.

Regulation at the state level comes from the need for comprehensive energy policies and the recognition that most states are better suited to manage their energy resources internally. State regulations are commonly enforced through state agencies, like the Oklahoma Corporation Commission or Railroad Commission of Texas.

Local Regulation

Local regulation of oil and gas is more commonly found when development is taking place in or near a certain municipality. Local governments work under the same guidelines as the state but can fine tune their regulations to fit their specific demographic needs. Generally, local government regulation is not permitted unless there is a need for control over when and where development is to occur.

Local regulations have increased as horizontal drilling has increased. Ideally, horizontal drilling helps operators reach oil and gas resources located beneath cities or towns without having to place a rig in the middle of the town square. However, in certain areas, the best drilling location may be inside city or town limits and local regulations may be triggered.

Many times, local oil and gas regulations are enacted as a response to local zoning laws with concern for noise, pollution, or other hazards impacting residential or business areas caused by proximate drilling. Local regulations can include setback spacing for drill sites located near houses or other buildings, requirements for specific paint colors to be used, screening of the site and restoration and/or reclamation once drilling is completed, and many more.

Thus, because of the unique nature of developing oil and gas inside municipal or city limits, many times, local regulations require that oil and gas operations not only work with the landowners, but also the municipality through permits and notice processes. Regulations at the local level can vary a great deal but public safety is commonly the top priority.

Regulatory Collisions

Many times, regulation between the federal, state and local level can cause confusion as to what power is bestowed where. The federal government and states have not adopted energy policies with a one size fits all approach and have instead, regulated based on various needs and public policy concerns.

Because of the complex nature of oil and gas ownership and multiple avenues for development, allowing states to regulate within their borders is the most logical solution. However, states may enact stricter regulations than those set by federal standards, but local regulations are generally not allowed to trump state regulation in the same area. Location of drilling will greatly determine what regulations are in place and processes must be followed for that specific area of land.

If you are dealing with regulatory concerns, it is critical to understand how each level of the government can impact your development. If you have questions or need assistance with regulatory guidance, please contact our office.

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