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Regulation of the oil and gas industry is nothing new. State and federal agencies have had their regulatory fingers in petroleum virtually since the first barrel of oil was extracted. The Obama administration, however, has taken the art of regulatory oversight to new levels never witnessed before. Here are just a few examples:
- U.S. Fish and Wildlife Service designates the Lesser Prairie Chicken as “threatened.”
- EPA has implemented a multi-year study of hydraulic fracturing.
- New air regulations have been established for drilling and production techniques.
- The Bureau of Land Management has new rules regarding drilling on federal lands.
- National Climate Assessment and Development Advisory Committee proclaims climate change is here, and it is bad for human life.
- EPA redefines “pollutants” under the Clean Air Act to include CO2.
- EPA has redefined “waters of the United States,” which makes for some big changes in current regulations. Congressman Lamar Smith (Rep. – Texas), chairman of the House Science Committee, said “EPA’s rule is so vague that it does little more than extend an open invitation to trial lawyers and government drones.”
Some 13 federal agencies track oil and gas operations, and that doesn’t count more than 100 regulations enacted by the Texas Railroad Commission and the Texas Commission on Environmental Quality. The E&P industry is just one of many economic sectors being touched by federal regulators. Last year, federal officials issued 26,417 pages of rules in the Federal Register, a new record, according to the Competitive Enterprise Institute (CEI).
CEI does an annual review and oversight of federal regulations, and 2013 had 3,659 final rules and 2,594 proposed rules. Of course, no one can read, much less comprehend, all of these new requirements. So, industry has to hire consultants, lawyers and other experts to read, decipher and educate those who are regulated about the new “do’s” and “don’ts.” CEI estimates that it cost Americans $1.863 trillion in 2013 to comply with federal regulations, which is more than Canada’s gross domestic product. The $1.8-trillion price tag is an extra cost of business in the U.S., which makes firms less competitive than businesses in other countries.
The Rules Committee in the U.S. House held a July 16 hearing, regarding a legal action filed by the House against President Obama, because of overreach by the Executive branch. One witness, Professor of Public Interest Law at The George Washington University Law School, Jonathan Turley, a nationally recognized legal scholar, highlighted the importance of this House action. “Today’s hearing is a historic step to address the growing crisis in our constitutional system,” said Turley. “After years of eroding legislative authority, the decision of this body to take a stand and seek judicial review, is a welcome change … [W]e remain a nation of laws, and we have a court system designed to resolve such controversies. That is precisely where this authorization would take us, and it is where these questions should be answered.”
Professor Turley said that the federal bureaucracy has grown so much, that he believes that it has become the fourth branch of government, in addition to the three constitutional branches. Federal government growth has not been limited to agencies; Congress has played a significant role, too. ObamaCare and Dodd-Frank are just two examples. In Dodd-Frank’s 2,600 pages, businesses are still finding new requirements, years after passage.
For example, Mercatus Center scholars Hester Peirce and James Broughel explain, in their recent book on Dodd-Frank, that the law’s “miscellaneous provisions” in Title XV offer “a clear example of how a statute invoked as the answer to the financial crisis is, in reality, an odd conglomeration of responses to issues, many of which had nothing to do with the financial crisis.” Section 1502, championed by celebrities, such as Ashley Judd and Ben Affleck, requires publicly traded firms to disclose their use of five “conflict minerals”—including gold, tin and tungsten—sourced from war-torn regions of the Congo. Similarly irrelevant is Section 1504, added at the behest of activist rock star Bono. Aiming to combat “dirty money” usage by U.S. energy companies, it requires firms developing oil, gas or minerals to disclose payments they make to foreign governments, to further their activities.
Peirce and Broughel pointed out that fighting corruption and violence in the Congo is laudable, but pursuing foreign policy objectives through a financial bill is the wrong approach. The entity charged with enforcing these provisions is the Securities and Exchange Commission (SEC)—an agency that no one would describe as well-schooled in foreign policy nuances. Further, the required disclosures will be made in the same annual reports, where companies disclose financial information to investors. This mission creep imposed on the SEC could impair its efforts to protect U.S. investors from fraud. As Peirce and Broughel warn, “Title XV not only fails to address any issues that arose during the crisis, but it also distracts the SEC from undertaking reforms designed to prevent future crises.”
The swarm of government regulations impacts virtually every aspect of American life. It has become so intrusive, that the Board of Directors of the Texas Alliance of Energy Producers passed a resolution calling for “Regulatory Détente,” in hopes that policymakers will step back and take a fresh look at the consequences—both intended and unintended—of their rules. 
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