Disclosing Influence: Hydraulic fracturing, interest groups, and state policy processes in the United States

Abstract

This paper examines copy-and-paste regulating in hydraulic fracturing (HF) fluid disclosure regulation across US states. Using text analysis, cluster analysis and document coding, we compare HF regulations of twenty-nine states and two “model bills” drafted by the conservative American Legislative Exchange Council (ALEC) and the Environmental Defense Fund (EDF, an environmental NGO). In contrast to recent studies that have documented ALEC’s widespread influence across policy domains, we find limited evidence of ALEC influence in HF fluid disclosure regulations. Instead, elements of the EDF bill are more prevalent across state regulations. Yet, text similarity scores between states are higher than similarity scores between states and the EDF bill. In particular, Colorado and to a lesser extent Pennsylvania functioned as leader states for other states to follow. This indicates that state-to-state communication was a more influential channel of policy diffusion than interest group model bills in this instance. Future research should better examine processes of information sharing amongst state oil and gas regulators as regulatory text is but one channel of policy diffusion. The cluster analysis also reveals that contiguous states, often within the same shale basins, frequently have different regulations. This finding calls for a reconsideration of the current state-led environmental regulatory framework for HF, which has resulted in a patchwork of regulations across the US. Finally, through the use of novel text analysis tools, this paper adds methodological diversity to the study of policy diffusion within energy policy.

Introduction

Since the 1980s, US energy regulatory policy has been increasingly devolved to states [1]. A frequent justification for devolution is the claim that state legislatures are more likely to devise regulatory policies that best fit the needs and interests of their constituents. Social scientists and the broader public have turned their attention to the processes of developing state regulation; however, questions have been raised about the independence of legislators, and about how regulators balance competing stakeholder interests.

One such process that has drawn scrutiny is the prevalence of “copy-and-paste” legislating, whereby state legislators introduce “model bills” drafted by interest groups into legislative processes, or copy regulatory text from other states [2], [3], [4]. Although both conservative and liberal interest groups draft model bills, much interest has focused on the influence of the American Legislative Exchange Council (ALEC), a conservative-leaning interest group that is one of the most prolific drafters of model bills [2]. In Hertel-Fernandez’s [4] study evaluating the influence of ALEC model bills across US states, he found over 10,000 instances of copy-and-paste legislating where all or part of an ALEC model bill was included in legislation that was introduced or enacted.¹ Further, he found that such copy-and-paste legislating was widespread across US states and steadily increasing over time. As a lobbying organization, ALEC has been active in state debates over energy policy, opposing renewable energy and energy efficiency policies, including Renewable Portfolio Standard legislation, in multiple states [5], [6].

Given the scale and broad scope of their responsibilities, state legislators and regulators are pressed for time and attention [7]. As such, it is not necessarily surprising that they would rely on model bills and other states’ legislation and regulation when developing their own. In their analysis of ownership structures in the oil and gas sector, Jones Luong and Weinthal [8] found that model contracts helped to reduce information asymmetries in negotiations between companies and governments. Model bills can also help reduce the transaction costs involved in researching and writing new regulations.

States’ resource constraints are especially challenging when they are grappling with regulating new technologies. As Centner [9] summarizes from research on unconventional oil and gas resources, in cases of uncertainty about risks, governments may allow development to take place before they have enacted the relevant regulatory institutions. Drawing on the experience of other governmental bodies along with non-state groups enables states to increase their legislative productivity, standardize legislation where appropriate, and engage in policy diffusion across regions.² These phenomena have been crucial in areas where states lack regulatory experience, including in managing oil and gas revenues through trust funds [11]. However, given the technical knowledge associated with energy regulation [12] as well as the historic influence of lobbying groups in such regulatory processes [13], [14], policy convergence in energy regulation through channels such as copy-and-paste legislating may be disproportionately weighted to the interests of select special interests.

In light of the prevalence of, and concerns over, copy-and-paste legislating, this paper presents an analysis of the impact of model bills on state hydraulic fracturing (HF) fluid disclosure laws. ³This topic is one of the most controversial aspects of HF governance [18], [19] as well as a central concern of HF-related community groups [20].⁴ While many environmental, economic, and social aspects of HF have been studied [21], [22], [23], the role of copy-and-pasting within HF governance has never before been systematically examined.

Previous research in the US has revealed that the oil and gas industry aligns with states in favor of subnational HF regulation and against federal involvement [24]. However, when the industry is governed at the state level, it is unclear to what extent industry preferences are considered by policy makers. This paper seeks to fill that gap by examining the influence of model bills on state HF fluid disclosure regulation. Using text analysis tools, we evaluate whether states have relied more on regulations from other states or from model bills. We analyze fluid disclosure regulations in states that updated or enacted new fluid disclosure regulations between 2010 and 2017 (n = 29 states). We compare the state regulations to each other as well as to two model bills, one drafted by ALEC and a second written by an environmental NGO, the Environmental Defense Fund (EDF). To the best of our knowledge, this is the first study using text analysis to examine policy diffusion within energy policy.

We situate our study within the literature on policy diffusion [25], [26], [27], [28], [29], [30], which broadly aims to examine the processes through which states develop, pass, and enact regulation. A nascent literature within policy diffusion research has used data analytic methods to evaluate processes of policy diffusion [7], [31]. We further position our work within the emerging literature on public and private authority in HF governance [i.e., [18], [32], [33]. Specifically, we compare two models published by organizations with distinct agendas in order to examine the influence of model bills on the diffusion of energy policy.

Given the increasing role of copy-and-paste legislating as well as growing concern over corporate influence in US policy-making, we anticipated that the ALEC model bill would have had a disproportionate influence on HF disclosure regulations. However, our analysis indicates that the EDF model regulation had more impact on shaping outcomes. This result is all the more significant given that the EDF model bill was released in 2014, after 19 of the 29 states had already enacted HF disclosure regulations.⁵ Importantly, we find that states relied more heavily on “peer leader” states, particularly Colorado and Pennsylvania, than on either the ALEC or EDF model bills to govern fluid disclosures. In contrast to claims that states functioned as “regulatory islands” in the context of HF environmental regulation [34], we find that states relied most heavily on each other to design HF fluid disclosure regulations aimed at protecting ground water resources and human health. We discuss processes of information exchange amongst state regulators to help contextualize our findings and to provide insights for future environmental regulatory efforts within the oil and gas sector.

In Section 2, we review the literature on HF governance, industry influence over regulatory processes, and policy diffusion. In Section 3, we provide an overview of processes via which states develop legislation, and explain why states adopt model bills. In Section 4, we describe our methods. We present our results in Section 5, which examines the extent to which state regulations resemble model bills or regulations of other states. Section 6 concludes with a discussion on the methodological, empirical, and theoretical significance of the results.