The New Oil & Gas Governance

Abstract

As technologies change and the scale of human activity grows, so, too, does the law. The surge of oil and gas production in the United States, spurred by hydraulic fracturing in shale formations, has fomented a sea change in oil and gas law, substantially infusing this area with more complex environmental and property principles. While not as momentous as the transformation of tort law in the transition from horse drawn carriages to automobiles, the expansive reshaping of oil and gas law amounts to a legal revolution.

Widespread demands for legal and policy-based solutions to the environmental and social impacts of drilling and fracking have transformed three key areas of the field. First, through lobbying and the courts, concerned residents and environmental groups have reshaped oil and gas conservation law—principles to support maximum fossil fuel production—into environmental conservation law. They have also begun to imbue local governments with more authority over oil and gas development. This is most dramatically demonstrated by sweeping Colorado legislation in 2019, which required a substantial reconfiguration of the state’s oil and gas agency, expanded state environmental regulation of oil and gas development, and gave local governments substantial regulatory authority in the areas. And small landowners with scant resources, as compared to the abundant wealth of the oil and gas industry, have begun to transform the common law of oil and gas. They have forced courts to reconsider long-held assumptions about the right of companies to produce as much oil and gas as possible without paying for the attendant damages. Finally, citizens and environmental groups, through a protracted campaign in the courts, have extended procedural environmental protections and state constitutional environmental rights to the oil and gas realm.

The full extent of this legal revolution remains to be seen, and as this Essay also explores, the transformation of the law—although trending toward more environmental protection—is by no means uniform. Oil and gas law is more state centric than most other fields, and as scholars of federalism would predict, courts and legislatures, facing disparate demands, histories, and political economic forces, have created a spectrum of new policies.

Keywords: oil and gas, legal reform, climate change, environmental regulation, hydraulic fracturing, state regulation, environmental review

JEL Classification: K11, K12, K20, K23, K32, Q30, Q32, Q33, Q34, Q35, Q38, Q39, Q40, Q48, Q50, Q54, Q56, Q58