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Friday, July 06, 2012

Will the Left ever lose its naively technocratic romance with policy centralization?

The question is inspired by Jody Freeman's New York Times op-ed this morning calling for a national law to regulate "hydrofracking" -- that is, extraction of natural gas from rock formations by hydraulically fracturing the rocks with high-pressure blasting of the formations with liquid. The underlying conceit of Professor Freeman's op-ed is that regulatory disuniformity ("patchwork") is somehow ipso facto a symptom of some problem justifying federal intervention: If some states ban hydrofracking while others sit on their hands and let extractors blast away, then there must necessarily be simultaneously over- and under-regulation for which a single uniform federal approach would be a good solution. Professor Freeman, of course, would leave a role for the states under the proposed national law: She wants a system of "cooperative federalism" under which "[t]he federal government sets baseline standards, which states can exceed but not fall below," standards that "would be based on best practices for disclosure, drilling location, well construction and wastewater treatment."

But Freeman never explains why the feds ought to intrude when the effects of hydrofracking seem to be confined within a single state. Why not let each state chart its own course, with some state legislatures exhibiting environmental paranoia, some economic greed, and some, indifferent delegation of the issue to counties and towns? Hydrofracking affects groundwater (through underground leakage) and infrastructure (through vibrations). But no one seems to allege that there is an underground interstate aquifer through which runoff would flow across state lines. (Riverkeeper's map, for instance, shows that the potential damage within a single state, but I cannot find an account of pervasive interstate groundwater migration). Moreover, no single state enjoys a monopoly on "fracked" gas: The Marcellus Shale formation sprawls across New York, Pennsylvania, Ohio, and Virginia. One state's allegedly paranoid over-regulation can be curbed by other states' enthusiastic welcoming of miners and their attendant jobs, taxes, and fees. Since states seem to internalize the costs and benefits of "'fracking," why is this not a perfect case for a regime of pure federalism rather than the "cooperative" variety?

Freeman has no answer to this question. She vaguely hints that "pollution risks go[ing] beyond state borders" and that "natural gas extraction is a national priority." She never specifies, however, the particular spillover implicated by hydrofracking or how such a leak might justify a comprehensive national law. Nor does she explain why local and state greed for the lucre of taxes, mineral leases, and jobs will not adequately fuel subnational pursuit of the national interest in natural gas extraction. Given that subnational governments and their mineral-leasing constituents have apparently good incentives to balance those financial benefits against the costs of 'fracking (aesthetic, health, psychic, etc.), the "patchwork" of which Freeman complains is actually a good thing.

So why does Professor Freeman embrace some national "framework" law? Below the jump, I will suggest that the itch to nationalize is driven by technocratic idealism about the One Right System and corresponding irritation at regulatory diversity that is driven by politics rather than expertise. The problem with this belief in "best practices" is that it underestimates the importance of politics for regulation and the effects of governmental scale on politics.


1. First, consider how Professor Freeman's focus on "best practices" reflects a professorial impatience with politics. She revealingly complains that "the uneven approach" is bad for industry, because some states or localities might impose "outright bans on drilling." To which one wants to respond: "So what?" If voters really fear 'fracking so much, then why should they not get their ban? The notion that drilling companies cannot hold their own in subnational politics seems ludicrous; the notion that local voters do not have countervailing incentives to lease their land to the highest bidder and reap taxes and fees is demonstrably false. The implicit reason for Professor Freeman's fear of bans must be that such a ban is irrational, given the actual risks of well-regulated 'fracking. But, again, so what? Voters might have be hyper-risk averse or distrustful of expert judgment: If they bear the costs of their exquisite environmental sensitivity, then why should we bar them from expressing their values and tastes through subnational politics? The truth is that one's view of "best practices" will vary depending on one's ideology: Riverkeeper's members will have a very different notion of acceptable environmental risks than, say, Randy Barnett. The notion that there is some objective metric by which such ideological differences can be resolved is sheerest fantasy worthy of Frederick Winslow Taylor. Of course, one group should not be permitted to under-regulate and thereby impose their libertarian tastes on their neighbors. But Professor Freeman nowhere explains how such spillover concerns are implicated by 'fracking or why a very narrow federal law addressing border areas between states would not suffice to solve such a problem. Absent such a spillover, however, why not let fifty fracking schemes bloom?

2. Freeman's apparent distrust of politics is matched by her bewildering optimism about the federal regulatory process. Again, the details of her op-ed are revealing: She complains about the risks of subnational governments' banning 'fracking "outright," but then she calls for "baseline standards, which states can exceed but not fall below." Taken literally, such baselines would not solve the problem of what she complains: Why cannot states "exceed" baseline standards with an outright ban? But one cannot take such rhetoric literally without ignoring the political reality that any "baseline" will include some sort of preemption of subnational regulation. How else would any repeal of the 2005 exemption for fracturing ever get passed a closely divided Congress?

Why would a Democrat and liberal like Freeman invite such federal preemption of "over-regulating" states just to obtain "baseline" federal regulations in libertarian states? Here's where I think that Freeman is a naive romantic: She actually believes that, if the feds establish some baseline, then it will actually be enforced, because "the federal government could step in if states abdicated their responsibility."

Really? The experience with our other schemes of "cooperative federalism" leave some room for doubt here. When the EPA tried to force California to adopt a transportation implementation plan in the 1970s, Jerry Brown flatly refused. Of course, EPA lacked the resources to substitute its own personnel for California's. Likewise, 47 states implement section 402 of the Clean Water Act, but, to my knowledge, not a single one has ever been ousted for under-regulation. The states' perfect record might reflect their assiduous regulation, or it might reflect EPA's limited resources. In short, the notion that the feds can easily parachute in their people to enforce federal standards in place of slacker states strikes me as naive. The EPA's enforcement resources are dependent on Congress' generosity, which has been waning of late. And it is a familiar tactic for Congress to allow agencies to announce grandiose federal baselines while simultaneously allocating enforcement resources penuriously.

3. Underlying this optimism about cooperative federalism is an indifference to the effects of governmental scale on politics. Environmentalists tend to have a rationally inexplicable prejudice that the feds are more responsive to environmental concerns than subnational governments. Sometimes this prejudice is grounded in vague allusions to the alleged "race to the bottom," sometimes in empirically unfounded ideas that industry "captures" subnational government more readily than national government. But Ricky Revesz has thoroughly exploded the notion that subnational governments "race to the bottom" when environmental costs and benefits are internalized. Likewise, environmental groups are frequently chapter-based groups like Sierra Club whose political power rests on thousands of mobilized homeowners suspicious of everything from cell 'phone towers to 'fracking operations. Elevating an issue to the obscurities of EPA rule-making strengthens groups that can hire lawyers more easily than they can mobilize neighbors -- that is to say, nationalization would logically be more beneficial to industrial groups than environmental groups. Again, as Ricky Revesz has noted,There does not seem to be a shred of evidence that subnational governments are more prone to industrial "capture" than the feds.

In sum, despite the evidence to the contrary, the Left still seems to think that a comprehensive federal statute implemented by states will be a good way to manage environmental risks. Maybe they are right -- but it would be nice if their arguments said a bit more about the externalities that subnational governments fail to address or the political costs of nationalizing an issue when such externalities are absent.

Posted by Rick Hills on July 6, 2012 at 11:26 AM | Permalink

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Rick, I think we may at this point have ample and thus sufficient reason not to trust any Republican officeholders to avail themselves of any information the EPA may gather and make publicly available. Why? Well, consider (several sources):

In the summer of last year, “the Republicans in charge of the House of Representatives launched an unprecedented attack on the U.S.’s environmental protections. GOP Representatives added rider after rider to the 2012 spending bill for the Environmental Protection Agency and the Interior Department, tacking on amendments that would essentially prevent those agencies — charged with protecting America's air, water and wildlife — from doing their jobs.”

“Republicans are going after the EPA. It’s a ‘job-killer.’America’s high unemployment rate is not the fault of the worldwide recession or the housing bubble or Wall Street hubris or two unfunded wars on top of George W Bush’s silly tax cuts for the rich, it’s those damned DC bunny-huggers. Representative Mike Simpson of Idaho insists, ‘overregulation from EPA is at the heart of our stalled economy;’ his colleague, Rep Louie Gohmert of Texas, says, ‘Let EPA go the way of the dinosaurs that became fossil fuels.’ Michele Bachmann advocates abolishing the EPA as soon as God puts the Tea Party in charge. She blames it for a host of anti-free market evils, from what she sees as an attempt to outlaw incandescent light bulbs (she countered with the ‘Lightbulb Freedom of Choice Act of 2011’) to the ‘hoax’ that is global climate change. Take no notice of what elitist scientists say, Bachmann knows better, assuring us that ‘CO2 is a natural byproduct of Nature.’”

“Republicans have spent lots of time and effort targeting the ‘job-killing EPA’ for a landslide of regulations that they say hurt businesses and the American economy with dubious returns on health.”

“The oil and gas industry, the mining industry and the electric utility industry are all big-money sectors to watch, including several newly formed PACs. As of Oct. 31, the Center for Responsive Politics, which tracks FEC filings, showed more than $11.6 million in spending from the oil and gas industries, with 12 percent going to Democrats and 88 percent to Republicans. But that number is likely to rise exponentially when the campaign gets under way.”

“Republican proposals today are unprecedented in their sheer scope and ambition. They do not simply block this or that rule (though just about every proposed EPA rule has been voted down by the House at one point or another). Instead, they reshape the basic operations and independence of executive branch agencies.”

For a nice summary, see here: http://www.washingtonmonthly.com/magazine/january_february_2012/features/the_environment034476.php

Mind you here is a case where the Party appears clearly out of touch with the majority of its own base.

Posted by: Patrick S. O'Donnell | Jul 7, 2012 8:30:12 AM

DKM writes: "states are highly resource constrained, and are usually considered a joke in terms of their abilities to assess complex technical questions."

I'd agree 100% that there are scale economies in the provision of information justifying the federal government's providing such information. That's why we need all of those current federal bureaus, administrations, academies, and institutes that create and promulgate information and standards -- e.g., the National Institutes of Health, the National Oceanic & Atmospheric Administration, the National Center for Educational Statistics, and the like. If the feds tested water, required industry to submit data, promulgated model codes and standards, and offered other sorts of helpful advice and staff time to state agencies, that's all to the good.

But Professor Freeman was not calling for such a purely informational scheme: She was expressly calling for a federal law modeled on the Surface Mining Conservation and Reclamation Act, a 1970s environmental statute that was, in turn, modeled after OSHA. On this mode, the states cannot regulate a subject matter at all unless they do so according to an implementation plan that they submit in advance to the feds. The SMCRA has a preemption clause and, although she equivocates a bit in the op-ed, Freeman would likewise include a preemption measure.

I remain unclear as to why such preemption is necessary to exploit the superior informational capacities of the feds. Why not let the EPA require industry to report water quality, emissions, vibrations, etc? Why not have EPA make this information available to states, counties, and townships -- not just on a website but in usable, crunchable form, with staff on hand at a hotline to explain and make recommendations?

And then why not let New York's counties, towns, and state do what they want with that information?

Posted by: Rick Hills | Jul 7, 2012 4:49:30 AM

Arguably, Professor Freeman does identify a mechanism by which underregulation in one jurisdiction may impose negative externalities on other jurisdictions: she writes that “mistakes by a few bad apples” in under-regulated areas “could lead to overregulation or even outright bans on drilling” elsewhere. Although she does not fully flesh out the argument (perhaps due to the space constraints of the op-ed format), it seems to go something like this:

-- If some jurisdictions underregulate fracking, then we may see safety/environmental disasters in the lax jurisdictions.

-- Given that regulatory failures at the local level will generate national/international media coverage, then one or a handful of isolated incidents could trigger a cascade effect, cf. Kuran & Sunstein (1999), that leads to popular demands for drastically increased regulation elsewhere.

-- The post-disaster political climate may make it impossible for elected officials to resist popular demands for increased regulation, to the point that regulation rises well above the socially optimal level.

-- Thus, underregulation in one place may ultimately lead to overregulation everywhere (or, if not everywhere, at least elsewhere).

Perhaps I’m misreading Professor Freeman’s op-ed. If I’m not, then it seems as though she’s suggesting that national regulation of fracking may be justified on the basis of negative political externalities--rather than negative economic externalities or negative ecological externalities. Moreover, the underregulation-begets-overregulation argument would seem to imply that national regulation is justified whenever local regulatory failures might catalyze overreaction (which, given cognitive biases and national/international media markets, would seem to be a generally applicable condition). I’m tempted to reject the underregulation-begets-overregulation argument because (1) it implies deep distrust of democratic processes (indeed, the logic of the argument relies on voter irrationality) and (2) it has virtually no limiting principle. But given empirical evidence of voter irrationality, (1) is not a terribly compelling objection, and (2) is simply what Professor Freeman seems to be saying: that, as Professor Hills puts it, regulatory disuniformity is ipso facto a symptom of a problem justifying federal intervention.

Posted by: Daniel H. | Jul 6, 2012 8:19:39 PM

Agree with Patrick. I don't think it's those seeking a federal solution to problems that are "naive" here. Those of us who have actually worked in government know very well that states are highly resource constrained, and are usually considered a joke in terms of their abilities to assess complex technical questions.

Posted by: DKM | Jul 6, 2012 6:16:12 PM

Rick,

I wish I had the time to address the capital flight effects on the bargaining situation in more detail so as to account for its role with regard to incentives and so forth in a way that shows the variability of preferences and the fact that preferences of bargaining parties are not fixed or stable. Instead, I simply want to point out that I’m skeptical about the characterization of the Left’s “naively technocratic romance with policy centralization,” even as a generalization that admits of exceptions, at least with regard to the environmental (or more narrowly, ecological) Left I’ve been acquainted with since the 1970s, and thus I would not infer that Freeman’s position is emblematic or representative (especially given her former position/role with the White House) of the green Left as a whole, whatever the plausibility or persuasiveness of her argument. The environmental Left is somewhat of a motley, including as it does those of anarchist (e.g., social ecologists after Murray Bookchin) and bioregional sensitivity, some “deep ecologists,” for instance, as well as those in the “environmental justice” movement who believe, in Kristin Shrader-Frechette’s words, that “increased federalized or centralized authority over environmental and technological projects...can be a mixed blessing.” As one example, she cites the federal government preventing states from strengthening current federal radiation standards for nuclear plants within their borders. Shrader-Frechette proceeds to enumerate the reasons those who favor local control have proffered for challenging federal decision-making. The environmental justice movement tends not to pin its hopes on government (centralized or not), industry, or academia to sufficiently protect public and environmental interests. See Shrader-Frechette’s work generally, but especially, Environmental Justice: Creating Equality, Reclaiming Democracy (2002).

With regard to fracking itself, Bill McKibben noted in The New York Review of Books (March 8, 2012), “overmatched [state] regulators who can’t even keep an accurate count of the number of wells are having a hard time coping with waste products—especially since the political power of the industry just keeps growing.” Corporate political spending (keeping in mind the ‘staggeringly deep pockets of the fossil fuel industry’) once more rears its ugly head: “Pennsylvania inaugurated a new governor last year, Republican Tom Corbett, who had taken more gas industry contributions than all his competitors combined. Not only did he quickly reopen state land to new drilling, he claimed regulation of the industry had been too aggressive. ‘I will direct the state’s Department of Environmental Protection to serve as a partner with Pennsylvania business, communities and local governments.’”


Posted by: Patrick S. O'Donnell | Jul 6, 2012 5:03:57 PM

As I noted above, Patrick, I think that Revesz has thoroughly discredited the notion that the threat of capital flight leads states to under-regulate absent the production of pollution that crosses state lines. This is especially true of state regulation of immobile resources like natural gas deposits. If a mineral extractor decides to invest in one state rather than another because the former regulates the investment more heavily than the latter, this choice should not induce the former to relax their own regulation unless they value jobs and taxes more than avoidance of local pollution. But, if they DO value jobs and taxes more than pollution avoidance, then they SHOULD relax their regulations, because such regulations are too strict, by their own standards.

Maybe Professor Freeman has a slam-dunk response to Revesz's argument, but that response was not apparent in the op-ed.

Posted by: Rick Hills | Jul 6, 2012 4:11:36 PM

Leaving matters up to the states would seem to give the industry an inordinate power to rely on capital flight and strike(s) to extort what they want from individual states, threatening to take their operations to another state (or states) with a more congenial (for them) regulatory environment, analogous to what transnational corporations do on a globals scale with nation-states. Do we want to entrust state and local government officials with highly constrained bargaining scenarios of this sort? Would not regulatory uniformity rule this out?

Posted by: Patrick S. O'Donnell | Jul 6, 2012 3:57:56 PM

Yes, absolutely: Seismic effects, river pollution from 'fracking runoff crossing state lines, and a myriad of other possible spillovers could justify a federal law tailored to these effects. My complaint is not that 'fracking has no interstate effects -- what do I know about 'fracking's effects, after all? -- but rather that Professor Freeman does not bother identifying such effects with any precision or defending her proposed law in terms of such effects.

Instead, Professor Freeman seems to think that regulatory disuniformity on any important issue is ipso facto a sign of a problem. This view is, I think, rooted in a technocratic notion that there is one right answer to regulatory questions rather than just a variety of different political positions, each of which should prevail where it is favored by those affected by the political decision.

Posted by: Rick Hills | Jul 6, 2012 3:38:40 PM

Agree with most of this analysis, but would add the one factor that actually mitigates in favor of federal regulation: there is tentative evidence tying hydrofracking to increased seismic activity, and, as we know, earthquakes do not respect state boundaries. If more evidence comes out strengthening the link between hydrofracking and earthquakes, federal regulation would be highly appropriate, as the citizens of one state could easily fall victim to earthquakes caused at least in part by fracking across the state line. (Of course, even then I suspect it will stay regulated at the state level, as I suspect Republicans in Congress will deny all such evidence until an earthquake destroys a major city not in California, in much the same way that it has become official party doctrine to deny all evidence of global warming).

Posted by: Charles Paul Hoffman | Jul 6, 2012 12:52:20 PM

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