Study Analyzes O&G Disclosure Policies

Contributed by Senior Student Research Fellow Grace Kovalan

When it comes to unconventional oil and gas production, transparency is key. As an operator, member of the public, or regulator, you want to ensure safety and security, whether it be for yourself or for the greater good. Because of the potential environmental and public health hazards, the use of information disclosure requirements is ever so imperative.

While multiple studies have been conducted to examine state-level disclosure rules, Jonathan Fisk and A.J. Good, authors of the article Information Booms and Busts: Examining Oil and Gas Disclosure Policies Across the States, have compiled these various studies into an evaluation of three types of disclosure: pre-drilling notification, chemical disclosure during operations, and trade secret exemptions.

States have been transitioning from more traditional forms of environmental control to these information disclosure policies, regulations, and programs in recent years. There is, however, still a disconnection amongst states in regards to standards and regulations due to differences in policies state-to-state. While each state is unique, policymakers are increasingly requiring firms to provide information about their operations to both the public and regulators.

Disclosure agreements allow for more transparency between firms and the public. This is essential to keep businesses ethical, but also to ensure safety. When dealing with unconventional gas and oil production, it is important to do so, which is why stricter information disclosure standards are being implemented.

By measuring association and exact logistic regression, we are able to focus on the three areas of disclosure previously mentioned. Five hypotheses were formed and tested for each of these areas. These targeted the number of elected Democrats, liberal ideology, the percentage of revenue collected from oil and gas, socio-demographic profiles, the number of wells, and the environmental hazards. The compilation of studies found a correlation between the political, demographic, economic, and environmental factors, and the pre-drilling, chemical, and trade secret disclosure.

While relationships were defined and the data was compared to the hypotheses, two results came unexpectedly. There was no significant relationship between political variables and any of the three stringent disclosure types. Secondly, factors differed substantially between more stringent forms of pre-drilling notification and chemical disclosure. This proves hypothesis one incorrect, as there was no observed relationship between the presence of elected democrats or liberal ideology adopting stricter standards and any of the three areas of disclosure.

Other hypotheses were supported by the analysis of this study. States that collect small percentages of their revenue from oil and gas were associated with stricter disclosure standards and supported by more stringent chemical disclosure. States with higher socio-demographic adopting stricter standards are supported by pre-drilling notification, in terms of education and state GDP. States with greater numbers of oil and gas wells adopting stricter standards are supported by chemical disclosure and partially supported by trade secret exemptions. And finally, states with greater numbers of environmental hazards adopt stricter standards and are partially supported by trade secret exemptions.

There is a significant relationship between pre-drilling notification, chemical disclosure, and trade secret exemptions and some of the studied hypotheses. The authors call for adopting stricter standards in order to best disclose information about unconventional oil and gas drilling to not only firms and regulators, but also the public.