Shale Gas Development: A Smart Regulation Framework

Advances in directional drilling and hydraulic fracturing have sparked a natural gas boom from shale formations in the United States. Regulators face a rapidly changing industry comprised of hundreds of players, operating tens of thousands of wells across 30 states. They are often challenged to respond by budget cuts, a brain drain to industry, regulations designed for conventional gas developments, insufficient information, and deeply polarized debates about hydraulic fracturing and its regulation. As a result, shale gas governance remains a halting patchwork of rules, undermining opportunities to effectively characterize and mitigate development risk. The situation is dynamic, with research and incremental regulatory advances underway. Into this mix, we offer the CO/RE framework-characterization of risk, optimization of mitigation strategies, regulation, and enforcement-to design tailored governance strategies. We then apply CO/RE to three types of shale gas risks, to illustrate its potential utility to regulators.