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Apr 29, 2020

Examining state oil and gas enforcement across the West

For decades, oil and gas development has spread across the American West, driving local economies through boom and bust cycles, fragmenting wildlife habitat, and harming communities with air and water pollution. States play a critical role in protecting public health and the environment by inspecting oil and gas facilities, identifying violations, and, when appropriate, issuing financial penalties. However, the structure and success of oil and gas enforcement programs varies widely from state to state. An examination of Western state oil and gas enforcement finds that while some states have successful programs worth emulating, many have room to improve in order to adequately protect the health and safety of local communities and hold companies accountable. Enforcing environmental and safety regulations is especially critical as the coronavirus pandemic intersects with market forces to send oil prices tumbling. With widespread operations and crashing oil prices, companies are looking to cut costs, and many face the prospect of bankruptcy. With low financial consequences for violations, many companies may see noncompliance as a cheaper option than correctly monitoring their operations or shutting down wells. It is critical that Western states prioritize improving their oil and gas enforcement programs to protect local communities and the environment, and make sure taxpayers aren’t left on the hook for cleanup costs. Read the Report This new analysis by the Center for Western Priorities finds that many Western state oil and gas enforcement programs are at times understaffed, leading to low inspection rates. Few states issue financial penalties that are adequate to ensure oil and gas companies are complying with regulations, with some states issuing no financial penalties at all. In total, Western state oil and gas enforcement programs only collected $5.5 million from 62 fines in 2018, with more than 95 percent of that value assessed in Colorado. Critically, state enforcement programs often lack transparency, leaving the public in the dark. While some states have improved in recent years, decades of studies have shown that most states face chronic problems when enforcing oil and gas regulations. Looking across states, Utah has historically had the worst enforcement, while Wyoming and New Mexico are in the process of improving programs. Colorado, Montana, and Nevada have some of the stronger oil and gas enforcement programs, although they have opportunities to improve.
Going forward, states should:
  • Adopt a goal of inspecting all active wells once a year.
  • Track and publish all inspections, violations, resolutions, and penalties to increase enforcement transparency.
  • Standardize financial penalties in written public policies. These should include the time allowed to come into compliance and violation follow-up procedures.
  • Ensure state oil and gas enforcement agencies have the authority to directly assess financial penalties.
  • Increase financial penalties and their issuance such that the cost of noncompliance is greater than that of compliance.
To accomplish the above goals, states should better fund oil and gas enforcement programs where necessary and fully utilize budgets where applicable. For decades the oil and gas industry has had an outsized presence in the Western United States. Not only has this region experienced the boom and bust economy that comes with the industry, but also the threats to human and environmental health. State oil and gas enforcement programs play a critical role in ensuring that balanced, responsible development takes place. However, deficiencies in state oil and gas enforcement programs are widespread across the West. It is up to governors, legislatures, and oil and gas regulators to fix these shortcomings, hold extraction companies accountable, and protect local communities, lands, waters, and wildlife.