Clearing the Air on HF Laws in Texas
**This op-ed originally appeared on Forbes.com**
Texas became the first state in the union to require well-by-well disclosure of all ingredients of fracturing fluids being used anywhere in the state when Governor Rick Perry signed into law House Bill 3328, the Texas Hydraulic Fracturing Fluid Disclosure bill, in June, 2011. As Chairman of the Texas Railroad Commission, the nation’s premier energy oversight agency, I made sure that the prompt enactment of rulemaking to implement the statute supported our very important dual mission of ensuring responsible production of Texas’s bountiful energy resources, protecting the environment, and ensuring the safety of Texans.
Like every other law governing fluid disclosure, the Texas law contains a provision that allows contractors to protect chemical ingredients or compounds that qualify as proprietary information. It does so using a process governed by the State Attorney General’s office that has been a feature of Texas law for decades, and it contains a process for concerned parties to file challenges if they believe the process is being abused.
This provision of Texas law that assigns oversight of proprietary information to the Attorney General has proven to be fair and effective over time. That is why the sponsors of HB 3328 decided to use it as the procedure for the hydraulic fracturing disclosure law.
Recently, a media outlet with a track record of aggressively protecting its own proprietary information published an article that called into question how some contractors have chosen to use this provision since the law became effective in February of this year. The article contained numerous quotes from well-known anti-energy development activists and politicians with long track records opposing responsible development of our nation’s bountiful oil and natural gas reserves.
Substantively, though, perhaps the story’s biggest failure is that it fails to report on the fact that a process for appealing company decisions on disclosure actually exists assuming a spill occurs, and the need for disclosure becomes immediate. Unfortunately, the article is chock full of hyperbole and frightful accusations, but precious little evidence that any wrongdoing has actually taken place, or that protecting proprietary information is dangerous for the public.
Texans, including those working in the oil and gas industry, want this law to be effective, and everyone wants service providers to comply with not just the letter of the law, but its spirit as well. An overwhelming majority of oil and natural gas producers supported this law and the subsequent rulemaking at the Railroad Commission. These companies want to make sure that their fellow Texans can be confident that energy produced in Texas – and all the states for that matter – is produced responsibly. They and their families live here, too.
Opponents of the oil and gas industry can’t have this argument both ways. After all, they support passage of a federal FRAC Act but what you seldom hear from supporters of that federal act is that it, too, contains a provision to allow providers of fracturing services to protect trade secrets. Protection of trade secrets is as American as apple pie. Here’s why.
Service providers spend millions of dollars each year on research and development designed to optimize the effectiveness of the fluids they use. Much of that R&D investment is geared toward finding ways to reduce or even eliminate the need for the use of chemicals, and companies like those negatively mentioned in the article in question have made enormous strides in that direction over the last few years. As we all know, no company – regardless of industry – will invest millions of dollars in research into any cutting edge technology if a competing company can uncover the blueprints and license it as their own.
So the supporters of the federal FRAC Act understand what the sponsors of HB 3328, Governor Perry, I and my two fellow Railroad Commissioners, who are directly elected by the people of Texas, understood at the time: If we don’t allow these service providers to protect legitimate trade secrets, the value of their R&D efforts will be dramatically diminished, and that’s not good for anyone who supports technological progress.
If service providers in Texas are abusing the disclosure law’s trade secret provision, then there is a longstanding, very workable process in place for challenging them on it. I would suggest that, rather than running to the media to complain, opponents of the oil and gas industry should encourage qualified parties to take advantage of that provision and participate in the process in good faith.
That would be a change in behavior we would all welcome, and certainly one that would truly be in the spirit of public transparency.
Elizabeth Ames Jones served on the Texas Railroad Commission from 2005-2012.