By Cynthia Yuan and Shannon Cullen

Background

Not all fossil fuels are equal in the equation for carbon emissions. Natural gas continues to be a source of energy that is deemed “cleaner” than coal, with lower carbon emissions. One type of natural gas extraction is hydraulic fracturing (“fracking”), which has become more prevalent with modern-day technology. Fracking describes the process in which companies extract natural gas embedded in shale, a type of fine-grained sedimentary rock. Drillers inject a mixture of water, sand, and chemicals into the shale formation to create fissures for the gas to come up. Fracking has become so lucrative that companies are going to extreme lengths to protect their interests. Imaginative strategies companies implement now includes filing for copyright protections for fracking documents. However, companies may not be very successful.

Controversy

Fracking has been a controversy among environmental groups and the general public due to a variety of reasons, such as chemicals leeching into the groundwater or earthquakes occurring when active faults are drilled.  However, the main controversy is whether disclosures of certain documents lowers the bar for other companies to enter the fracking industry.

In the case of Kern River Gas Transmission Co. v. Coastal Corp., Kern River sought Commission approval to construct a pipeline from Southwestern Wyoming, through Utah and Nevada, to Southern California. Kern River Gas Transmission Co. v. Coastal Corp., 899 F.2d 1458, 1460 (5th Cir. 1990). During this process, Kern River disclosed topological maps it had prepared at its expense. A competitor then got ahold of these maps. In an unusual move, Kern River registered the maps with the Copyright office and sued for protections under copyright law. The Fifth Circuit held that the maps were not protectable under the Copyright Act. As a result, competitors freely obtained information pertaining to the locations of natural gas as well as the proposed pipeline route.

This ruling has the potential for lowering the bar for companies to enter the industry, since companies would not need to bear the expense of creating its own maps. Critics fear that with the entry lowered, more companies may enter the industry, and as a result, more fracking may occur. More competition will also lower natural gas prices, increasing overall natural gas dependency.

Analysis/Evaluation

Although there is an argument that not protecting fracking maps will result in more companies entering the industry and result in more fracking, the opposite may in fact be true. Allowing the information to be made public may alert the public about shale gas under their properties. Property owners will then be warned and could take measures such as hold out against sales by gas companies or move. Gas companies could then encounter more difficulty and greater cost from homeowner actions. More importantly, the Copyright Act was not intended to serve as an environmental regulatory tool, and in applying the relevant law, courts should decide whether something is copyrightable without speculating about potential market impacts. Companies should also recognize that copyright law is not an avenue for protecting information.

Conclusion

With the technology today, fracking has become so lucrative that companies are resorting to unusual strategies to preserve their wealth. It is important to recognize that controversial cases do not always result in poor environmental decisions. However, in the absence of more sustainable energy options, companies will continue to anger critics on both sides of the environmental debate.

I had a very interesting Monday morning earlier this week, which happened to be in a law firm conference room in Palo Alto.  I gave a presentation introducing the basics of American administrative law to a delegation of senior officials of the Legislative Affairs Office (LAO) of China’s State Council (as well as some officials from provincial legislative affairs offices).   The group of 14 officials are in the US on a study tour, spending this week in the SF Bay area and next week in Washington DC.  In DC, they’ll visit the US Department of Justice and the Interior Department.

When my research assistant Shuyang had researched ongoing activities of the LAO, he came across an interesting administrative reform pilot project, loosely translated as the 3 systems (pillars?) of administrative law enforcement.  These pilot projects, supervised by the LAO, are being implemented in many places in China and are designed to enhance government transparency and to ensure that enforcement occurs consistent with the law.  A February 10, 2017 English language press release  of the State Council  describes the purpose of this pilot project as focused on “information disclosure, full-process recording, and legal review of major law enforcement decisions.”  That appears to mean sharing more information about administrative enforcement processes with the public, better documentation of the enforcement proceedings themselves as well as evidence collection, and ensuring through LAO audits that enforcement processes comport with applicable law.

That is an interesting development, based on what I have seen in my previous lives as head of the US-China Partnership on Environmental Law at Vermont Law School and as EPA Deputy General Counsel.  In many respect, any reform effort that increases transparency of government decision-making, especially administrative enforcement processes, and ensures that enforcement proceedings comport better with the law will be really valuable in moving China closer to the rule of law.

However, I have to confess that none of that came up in my discussions with the delegation.  What did come up was a government proposal to add lawyers to each ministry/agency in China.  The parallel that some of the officials seemed to draw to the US are agency general counsels.  (It was only when they mentioned this that I understood the context of their numerous questions about my former role as EPA Deputy General Counsel.)  I have no idea how definitive this proposal is, but it seemed intriguing.  Compared to the US government, the role of lawyers is rather limited in China’s government bureaucracy.  Formally introducing “general counsel” officers into China’s government ministries would certainly focus government decision-maker more explicitly on the legality of their actions and the rule of law.  At the same time though, it was not clear to me how such new legal officers would interact with existing entities in the bureaucracy that already house lawyers, such as the Law and Policy Department within the Ministry of Environmental Protection.   That Department has always had great lawyers.  I guess we’ll  have to stay tuned to future developments.

Here’s a picture of me with  the head of the delegation, Director General Li Mingzheng of the Government Legal Affairs Research Center in the LAO.  The gift in the picture is a stylish silk neck tie.  Undoubtedly, it will seriously enhance my wardrobe.  But even with out that gracious gift, the discussion with the delegation members itself was well worth my time that morning.

Recently, The American Bar Association’s Civil Rights and Social Justice Section, together with the Environmental Law Institute, published the Report “Environmental Protection in the Trump Era.”  The report is a thoughtful analysis of the major changes in the EPA that have occurred since President Trump took office in January 2017 and is well worth a read. In our view, the following three issues described by the report should present the greatest concerns for the American public:

“Two-For-One” Executive Order (or Executive Order 13771)

This order imposes two requirements: First, it mandates that for every new regulation adopted, two existing regulation have to be repealed (“two-for-one requirement”). Secondly, it establishes the “cost offset requirement”, insists that the cost imposed by new regulations must be compensated by the elimination of the existing two.

As costs are the only consideration, the order therefore discourages new beneficial regulations. Moreover, finding regulation for repeal will be difficult, because in existing regulations cost have often been internalized into efficient processes. So there is little, if any, cost saving available from the repeal of a regulation. However, the president’s intention by issuing this order appears to be to ease “over-regulation” and boost the expansion of small businesses.

Withdrawal of Funding for Regulation and Enforcement

Under The Trump Administration, the actions taken by the EPA so far indicate further that many of the rules issued during the previous administration will be frozen, reviewed, and amended. The goal appears to be to cut costs of regulation and enforcement. This effort comes with great concern for long term effects since it has been reported that the contemporary EPA’s cost-benefit analyses underestimate unforeseeable impacts on ecosystem services.

Regulations in jeopardy include: The Clean Power Plan, Waters of the United States rule, and EPA standards on methane, ozone, and toxic discharge limits. Additional costs will also be cut by decreasing enforcement measures; there will be limitations on requirements that demand polluters to pay for environmental depletion, fewer actions initiated by the EPA, smaller penalties, and caps placed on attorney’s fees. This is reflected in Trump’s FY 2018 Budget. It requests a 31% reduction in overall EPA funding; the gradual reduction in EPA responsibilities shows the agency’s preparation for this cutback.

Potential Problems of Future Regulations

The new Administration seems to be putting roadblocks in the EPA’s way, such as constraining agencies’ use of scientific data. If any of the pending bills in Congress are enacted, they would add structural constraints to the federal agencies’ ability to regulate. The Trump Administration and Congress have not given an opinion on how the states will be allowed to fill in the gaps in federal protections. Further, the Trump Administration’s actions dealing with air, water, and soil pollution have implications for vulnerable communities.

Key takeaway

When reflecting on the Report it appears to us that the Trump administration’s attempts to simplify the system are actually making it more complicated. The new EPA applies an incomplete cost benefit analysis, which is a source of controversy in the practice of environmental law. Additionally, the Administration’s goal is to help small businesses thrive, but how this is to be achieved is unclear. There is little question that businesses would likely be able to operate more profitably if there were fewer regulations. But with no market-based incentives to be environmentally friendly in the first place, fewer regulations would only result in inadequate protections for public health and the environment.

Furthermore, it appears that people in the lower socioeconomic strata will be the most adversely affected by EPA constraints. Trump’s EPA has minimized reliance on scientific data for standard promulgation in order to achieve procedural brevity. However, with less data to rely on, formulating pollutant discharge limitations will likely take even more time. In conclusion, the administration should look at new ways to handle the problems effectively (e.g., incentivizing advanced clean technology) rather than simply cutting entire programs.

Arielle Canepa, Haley Costamagna, and Josiane Weder