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The Surprising Thrills of Trade Secret Law

07/18/2011

Last week I started another internship in the Capitol to tide me over until I start as a Senate Fellow in October – I’m working in freshman Democratic Assemblymember Bob Wiecowski’s office. It’s been a surprisingly awesome experience so far. While I loved working in Republican Assemblymember Nathan Fletcher’s office last summer (some of the nicest people I’ve ever met), I didn’t feel like I got to work in any sort of substantive policy. Their office was largely consumed with the passage of Chelsea’s law, a measure increasing punishment for sex offenders, and by the time I got to the office the bill had been through a dozen rounds of amendments and committee reshuffling, leaving me little to do policy-wise as a lowly intern.

Even though I’ve only been in Assemblymember Wiecowski’s office for a week, I’ve already dived headlong into the legislative process. The Assemblymember is authoring AB 591, which will reform the way that oil and gas producers and government regulators interact over hydraulic fracturing treatments, a process commonly known as “fracking.” Fracking is a method of extracting additional oil and natural gas from a well whereby fluid is injected into a rock layer, fracturing it and thus making it easier to access the natural resources within it. Formerly a relatively unregulated process, fracking has become a serious environmental issue as it has become apparent that the chemicals used in the fracking process can sometimes seep into groundwater or emerge on the surface. Dramatic footage from fracking-heavy states such as Arkansas show civilians literally lighting their tap water on fire. Scary stuff.

Essentially, the bill I’m working on would require the owner or operator of a well in which a hydraulic fracturing treatment is taking place to submit a list of the chemical constituents in the “fracking fluid,” their volumes and % concentrations to DOGGR, the agency in California responsible for this sort of regulation. It sounds like a relatively simple bill, but there are lots of small complexities I’ve encountered that have made this project really fun to work on.

I mean, environmental regulation is not high on my list of “exciting things to think about.” I think it’s incredibly important, but I’ve usually been more motivated and passionate about education and medical policy. What makes this particular bill interesting is the way that the desires of environmental groups and the industry do not necessarily clash directly, but get tangled up in how the regulatory policy affects economic competitiveness.

Competitive advantage in the oil and natural gas industries is all about time, being able to extract the most resources out of an area as quickly and efficiently as possible. To this end, trade secret law helps to protect innovation and thus competitive advantage – if a company discovers that their particular fracking fluid and its associated processes works 10% faster than their competitors’, there is a legitimate capitalist interest to protect. Existing law already protects “exploratory” well sites wherein fuel companies test new materials and procedures for up to four years, rewarding innovation and enforcing fair competition.

Some of the provisions in our bill would ostensibly mess with those competitive protections. Disclosing the chemical compounds within the “fracking fluid,” for example, might be giving away a company’s secret recipe for free, as it were. Thus a compromise between environmental groups and the industry becomes necessary – how do you protect consumers and innocent bystanders from potentially deletrious effects of fracking while also not hindering an important industry trying to emerge from a recession? The solution to this problem is deceptively simple: require the company to disclose the chemical information, but by request, that information can be kept confidential within the regulatory agency. Thus the industry gets to keep its competitive edge, but in case of an emergency, the regulatory agency is still equipped to response to any accidental “release” quickly and appropriately.

This conflict was really interesting to examine from a policy point of view because it was completely divorced from the Manichean paradigms of evil corporations and persecuted goodly citizens that tend to pervade progressive thought about the conservation of natural resources and the protection of consumers. Here was a situation in which a group of companies actually has a legitimate competitive interest not necessarily against regulation itself, but the manner in which the information gained from that regulation was being used. It wasn’t about oppressive government fettering the market, but about the way good intentions could have unintentionally harmful consequences. Especially looking at the ridiculous peacockery of Republican Congressmembers over the debt limit negotiations, it was refreshing to see government working through practical difficulties divorced from larger ideological battles.

I fear that I may be well on the path to becoming an (even nerdier) policy wonk. At any rate, the other really exciting part of this internship so far has been the assumption of responsibility – I have presented at a Sierra Club meeting, done background research for bill recommendations, and just today, actually written language into the fracking bill itself. So awesome.

I’m a little sad I’m only going to be working in this office for a month or so, but the surprising alacrity I’ve found myself working with here makes me impatient for October to arrive. This fellowship is going to be fantastic. I can’t wait.

-AC

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