Continuous Improvement: A Regulators Guide to Constant Change

By Matt Lepore and Michael Teague

Sustainable energy development requires a balancing of environmental, social, and economic interests, each of which is in constant flux.  State oil and gas regulators frequently find themselves on the “hot seat” at the intersection of these competing interests, and an effective regulatory regime can help bring balance.  To keep pace with changing conditions, however, regulators and regulations must strive for continuous regulatory improvement.

In June, the Colorado Oil and Gas Conservation Commission (COGCC) adopted new, “nation‑leading” wellbore integrity rules.  Environmentalists, industry representatives, and agency staff collaborated to develop the rules.  At the core of their process was a set of recommendations from a peer assessment conducted by the State Oil and Gas Regulatory Exchange, known simply as “the Exchange.”  The Exchange’s expert-driven, impartial peer assessment was Colorado’s road map to continuous improvement.

The Need for Change.  The development of shale resources over the past 15 years is marked by an intensity and scale that is much different from traditional oil and gas production.  The development also often occurs close to communities and population centers.  While there have been tremendous benefits to developing these resources, there are real impacts that must be addressed in part through a strong regulatory program at the state level committed to continuous improvement.

  • In the US, the states are and will continue to be the primary regulators of oil and gas development.  This comes with the challenges and the benefits of broad regional economic and political differences between the states.  This results in very different approaches to regulating similar operations.
  • Geologic and other characteristics of oil and gas basins vary greatly.  This leads to different development practices in different oil and gas plays.  The industry is intensely innovative, particularly in the deployment of new technologies.  These innovations often drive the need for state-specific regulatory changes.
  • The public relies on the state regulators to ensure development occurs responsibly and avoids or minimizes impacts to communities and the environment.

The Exchange.  The Exchange’s mission is “to assist states’ efforts to continuously improve their oil and gas regulatory programs.”  The Exchange convenes workshops, studies, and peer consultations and assessments that bring together state regulators from around the country, as well as our Canadian colleagues, to share their experience and expertise.  Exchange workshops may cover topics that are technical, regulatory, legal, administrative, or a combination of those areas.  A great example was the workshop last year on the evolving drone inspection technology.  Studies produce reports for the state regulators use such as the recent studies on induced seismicity and underground gas storage.  A peer assessment is a formal process intended to produce a report that the agency can share with state leaders.   The Exchange was created through a collaboration between the Ground Water Protection Council (GWPC) and the Interstate Oil and Gas Compact Commission (IOGCC) out of the recognition that oil and gas regulations must continuously evolve in response to technological innovations, changing social dynamics, and variable economic conditions.  The GWPC is a national nonprofit organization whose members are state water and oil and gas regulatory agencies.  The IOGCC is a multi-state governmental agency whose members are the oil and gas producing states.  The two organizations have a long history of working together, including developing FracFocus.   More information about the Exchange can be found here

How the Exchange’s Peer Assessments Work. States use peer assessments to seek a gap analysis of their own regulations; information about how other states regulate similar issues; or recommendations for writing new regulations in pursuit of continuous regulatory improvement.  A peer assessment begins with a written request from a member state to the Exchange. The requesting state determines the scope in discussion with the Exchange.  Based on the scope, the Exchange assembles a team tailor-made for each project, usually comprised of senior level state oil and gas regulators and technical subject matter experts from around the country supported by GWPC or IOGCC staff.

Some Recent Exchange Peer Assessments. In 2016, Idaho was experiencing an uptick in development activity and, along with it, increased scrutiny from the public, lawmakers, the regulated community, and the media.  The Idaho Department of Land (the state’s primary oil and gas regulator) requested an Exchange peer assessment of its statutory authority and implementing regulations to help it evaluate how best to update its existing rules to meet changing expectations.

The Exchange’s Peer Assessment team was comprised of senior oil and gas regulators from four states that included petroleum and mechanical engineers, a state geologist, an attorney, an underground injection control well specialist, and a communications specialist.  At the Idaho Department of Land’s request, the Exchange team evaluated and responded to eight specific regulatory, legal, or administrative issues of concern.  The team flagged ten additional issues for the Department’s consideration as it contemplated regulatory updates.  Examples and insights from other states were provided for each of these issues. To close out the peer assessment, team members presented the final Peer Assessment Report to the Idaho Oil and Gas Conservation Commission and the Idaho Joint Senate Resources & Environment and House Resources & Conservation Committees.  The Idaho Peer Assessment Report can be found here.

As noted, Colorado’s new best‑in‑class wellbore integrity rules sprang from an Exchange peer assessment that included oil and gas and environmental regulators from three states. At Colorado’s request, the Environmental Defense Fund (EDF) served as a third-party advisor to the team.  The assessment provided technically sophisticated recommendations from an unbiased panel of experts on more than 70 aspects of wellbore integrity. In its response to the peer assessment, the COGCC wrote:

The benefit of the [Exchange] review is that the assessment is a collaborative review from other states’ regulatory oil and gas agencies (Texas, Pennsylvania, and Ohio) . . . . These other states with the guidance from the GWPC/IOGCC have provided a balanced review.  Many of these states have recently reviewed their well integrity and construction rules.

The Colorado Well Integrity Peer Assessment can be found here.

The peer assessment recommendations provided the foundation upon which operators, EDF, and the COGCC built a set of regulations that garnered universal praise from stakeholders and unanimous, enthusiastic approval from the Commissioners.  When the Exchange released the recommendations, Adamantine Energy facilitated initial meetings between EDF and industry leaders who quickly found common ground in the science‑driven, leading‑edge recommendations.  They collaborated to develop an agreed-upon set of proposed rules, which they presented to the COGCC.  An expanded stakeholder process followed and produced the final rules adopted last June, which responded to all the peer assessment’s recommendations.

New regulatory issues will continue to arise – venting and flaring of associated gas and produced water management come immediately to mind — and familiar issues, like wellbore integrity, will continue to evolve as technology marches steadily forward.  This reality underpins the need for state oil and gas regulators to engage in continuous regulatory improvement.  The Exchange’s peer assessment offers an unparalleled opportunity for every state oil and gas regulatory agency to level-up its regulatory program.    

Matt Lepore served as the Director of the Colorado Oil and Gas Conservation Commission from 2012 to 2018.  He is currently the principal at Insight Energy Law LLC. Michael Teague served as the Oklahoma Secretary of Energy and Environment from 2013 to 2019.  He is currently the principal at Brass Compass LLC. In their state roles, they were part of the founding of The Exchange. Please send us your feedback or questions at matt.lepore@insightenergylaw.com or michael@brasscompassconsulting.com.

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