Regulatory Fracture Plugging: Managing Risks to Water from Shale Development

24 Pages Posted: 6 Sep 2018 Last revised: 10 Sep 2018

See all articles by Caroline Cecot

Caroline Cecot

George Mason University - Antonin Scalia Law School, Faculty

Date Written: March 9, 2018

Abstract

Debates about the desirability of widespread shale development have highlighted outstanding uncertainty about its health, safety, and environmental impacts—most prominently, its water-contamination risks—and the ability of current institutions to deal with these impacts. States, the primary regulators of oil and gas extraction, face pressure from the energy industry, local communities, and, in some cases, the federal government to strike the right balance between energy production and the health and safety of individuals and the environment—an elusive balance given the ongoing risk uncertainty. This dynamic is not especially unique to fracking, or even oil and gas extraction; instead, this dynamic, characterized by tradeoffs between environmental protection and economic development under risk uncertainty, is a common theme of environmental risk regulation. Regulators at every level of government weigh and evaluate potential interventions against this background. This Article contributes to a symposium held at Texas A&M School of Law that explores the advantages and disadvantages of various government interventions in the environmental context in an effort to identify ideal risk-management tools under various circumstances. It argues that the most important considerations for identifying risk-management tools in the environmental context are risks, incentives, and cost-benefit analysis. These cornerstone principles provide a useful framework for environmental policy in general, especially in situations that involve heterogeneous and uncertain risks. By paying attention to risk, incentives, and cost-benefit analysis, government regulators are more likely to promote optimal levels of environmental quality and avoid unintended, or even perverse, consequences. To demonstrate the usefulness of these concepts concretely, this Article applies them to the fracking context, focusing on the most prominent risks from widespread shale development, risks to water from shale gas extraction. It identifies risk-management gaps in tort litigation, insurance markets, and regulation schemes and suggests potential solutions.

Keywords: shale development, fracking, risk management

JEL Classification: K00, K13, K32

Suggested Citation

Cecot, Caroline, Regulatory Fracture Plugging: Managing Risks to Water from Shale Development (March 9, 2018). Forthcoming, Texas A&M Law Review; George Mason Legal Studies Research Paper No. LS 18-26. Available at SSRN: https://ssrn.com/abstract=3232944

Caroline Cecot (Contact Author)

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States

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