Business law is filled with a wide range of regulation and regulatory issues, and one of the main areas of business law for my research is energy law.  Regulation impacts energy businesses at many levels. Energy companies have to deal land use regulations, air and water quality regulations, work place regulations, and (often) securities regulations.  

On the land use and permitting side of things, oil and gas law has long been considered primarily a state issue, making such regulations relatively local (i.e., not federal).  In recent years, with the increased use of high-volume hydraulic fracturing, many local governments have decided to restrict the process in their localities, splitting from state regulatory regimes that would allow the process. Interesting cases related to fracking bans from New York, Colorado, and Pennsylvania provide good examples of this process. 

Texas Professor David B. Spence’s article about local hydraulic fracturing bans: The Political Economy of Local Vetoes, 93 Texas L. Rev. 351 (2015), discusses the debate about whether local governments should be ale to overrule the state law on oil and gas operations.  Here’s the abstract:

As the controversy over fracking continues to sweep the nation, many local communities have enacted ordinances banning the practice, creating conflicts between these ordinances and statewide regulation schemes. This has given rise to state–local preemption challenges within state courts. In this Article, Professor Spence analyzes these conflicts, focusing on the best way to distribute the costs and benefits of fracking and how courts have attempted to address these distributional concerns. He begins by describing the conflicts between state law and local ordinances and the court decisions that have resolved these preemption issues. He next discusses how future takings claims would affect the distribution of the costs and benefits of fracking.

I think Prof. Spence is right on a lot of the issues, though I have come to believe that, at least for most oil and gas issues, as long as state-level regulation is the primary regulation in the sector, whether localities have the ability to ban hydraulic fracturing in their jurisdictions is irrelevant.  That is, I see oil and gas as a state-level issue, and if state’s have or wish to grant counties or municipalities local control, then great.  If the state chooses to maintain control, that’s fine, too.  

My main concern is that legislators and regulators, and courts who review their decisions, seek sufficient information to balance the costs and benefits of oil and gas operations.  This is not an outcome driven analysis. That is, decision makers can, in my view, properly assess the costs and benefits of the hydraulic fracturing process and have different outcomes (such as one court upholding a ban and another striking a ban).  But one must gather information and assess the broader range of issues raised by oil and gas operations, which are not that different from many other industrial operations, as I have argued previously, here.

I’ll close with a shameless plug for my response to Prof. Spence’s article, which appears in Texas Law Review See Also, along with responses from two outstanding scholars: Alexandra Klass  (Fracking and the Public Trust Doctrine: A Response to Spence) and Hannah Wiseman  (Governing Fracking from the Ground Up).  I highly recommend these three pieces, and if you want more, you can check out mine.  

Here’s my abstract for How Local is Local?: A Response to Professor David B. Spence’s the Political Economy of Local Vetoes:

Abstract:      

Professor Fershee responds to Professor David B. Spence’s article about local hydraulic fracturing bans: The Political Economy of Local Vetoes, 93 Texas L. Rev. 351 (2015). Professor Spence notes that the shale oil and gas debate provides an example of “an age-old political problem that the law is called upon to solve: the conflict between an intensely held minority viewpoint and a less intense, contrary view held by the majority.” In resolving such conflicts, Spence suggests that courts should resolve such “conflicts in ways that encourage states and local governments to regulate in ways that weigh both the costs and the benefits of shale oil and gas production fairly and fully.” 

This Response suggests the Professor Spence’s test for local control is a sound, but adds another factor contributing to local control. As noted above, another way of considering local control over oil and gas operations is to view local control as state-level control. This Response proceeds under the premise that each state should decide whether it wishes to allow its municipalities to exercise oil and gas related vetoes. In analyzing whether local vetoes are efficient under Professor Spence’s test, this article analyzes recent decisions in New York, Pennsylvania, and Colorado. 

This Response concludes that as long as state-level regulation is the primary basis for oil and gas regulation, Professor Spence’s overarching rule that state and local governments pursue regulations seeking to balance the costs and the benefits of shale oil and gas production “fairly and fully” is a foundation for good regulation. In this sense, local (meaning state or smaller subdivisions) vetoes are critical, but how “local” the vetoes are is less important. The key, then, is ensuring that courts and regulators are actually balancing costs and benefits.