Last month, Illinois passed new legislation (SB 1715) strengthening and updating its oil and gas regulations. Governor Pat Quinn and sponsors of the new law claim it will give the state “the strongest, most effective drilling safeguards enacted by any state in the nation” while still allowing the industry to “develop in a responsible manner.”
The new Illinois law came too late to be included in RFF’s recent analysis of state shale gas regulations, which reviewed 25 regulatory elements (20 of which we tracked statistically) across 31 states. But we’ve since updated our database to include the new rules. As we’ve noted, the data doesn’t allow us to rank states according to the cost or environmental effectiveness of their regulations. But we can evaluate a bold claim like that made by Illinois, at least for the regulations in our sample.
The Illinois bill increased the stringency of many existing regulations and added newly regulated elements. For example, new regulations will increase the distance a well pad must be from a building, increase the distance from the well pad that water testing must take place prior to drilling, and increase requirements for cement depth and casing. New regulations include those regarding cement type, setbacks from water sources, and limitations on venting of gas. The severance tax rate is also increased under the new bill—though these rates are tracked in our analysis, we don’t treat them as a form of regulation or count them for stringency purposes.
In the report, we used three measures to examine regulatory behavior across the states. The first and crudest is the number of elements that each state regulates in our sample of 20. Prior to the updated regulations, Illinois regulated 15 of these 20 elements, a level slightly below the national average. After the rulemaking, Illinois now regulates 19 of the 20 elements. (Illinois still lacks freeboard requirements to manage changes in stream water flow from hydraulic fracturing.) The figure below shows how other states in our study compare. Only New York (in its proposed regulations) and West Virginia regulate all 20 of the elements considered in our study. Along with Illinois under its new rules, Colorado, Michigan and Pennsylvania also regulate 19 of the 20 elements.
For many of the elements we analyzed, we can go deeper. Where regulations use quantifiable standards, we can compare stringency across states. We normalized stringency for each element to a standard scale, and used that data to determine an average stringency for each state.
Looking only at each state’s quantifiable regulations, the most stringent state is Montana, at 96 percent, followed by Maryland at 90%—in other words, Montana’s rules, on average, were 96% of the stringency averaged across the most stringent regulations across the states. In this measure, Illinois was at 44 percent before the recent rulemaking, one of the five least-stringent states sampled. Including its new regulations, it is now at 66 percent, putting it into the top 10 most-stringent—but far from Montana’s 96%, and also less than other states with significant shale gas development, like Texas.
This measure isn’t perfect, however. It ignores elements a state doesn’t regulate at all. Montana’s high degree of stringency is only based on 4 elements, for example. When elements a state does not regulate are treated as minimally stringent, the picture changes. Maryland remains one of the most stringent regulators but Montana does not, for example.
Here, Illinois’ claims about the stringency of its new rules seem more plausible. Previously, its rules were in the middle of the stringency pack, at 42%. Under the new rules, Illinois is in a virtual tie with three other states at about 60%, ranking behind only Maryland at 74%. According to EIA data, Maryland’s gas industry remains very small, however.
Our data therefore supports (but does not prove—remember that our sample is limited) a somewhat qualified version of Illinois’ claim about the stringency of its regulations: under its new rules, it does appear to be in a small group of significant gas-producing states with the strongest regulations in the country.
Both our findings about stringency and claims like those made by Illinois should be taken with a grain of salt, however. Enforcement and, ultimately, cost and environmental effectiveness are as much or more important that on-the-books stringency. Having the tightest rules in the country doesn’t matter much if they aren’t effectively enforced, and is bad policy if they don’t address the right risks or are too costly. Making meaningful comparisons between states therefore requires much deeper analysis than we do here and Illinois’ politicians are doing in their press releases trumpeting the new law.
But if states compete to have strong and effective regulations, that’s not a bad thing. The evidence we have broadly supports Illinois’ claims about its new rules. States that want to compete will need to either strengthen their rules or show why their current approach is more effective than a simple look at stringency might suggest.
