British Parliament issues report on hydraulic fracturing

The Energy and Climate Change Committee of the United Kingdom's House of Commons issued a report on hydraulic fracturing.  The report provides an interesting, foreign perspective on an issues that have become the subject of heated debate here in the United States.  The report includes a thorough discussion of several issues relating to hydraulic fracturing, as well as numerous specific recommendations and conclusions.  One of the Committee's conclusions is that hydraulic fracturing should be allowed to proceed in Britain:

On balance, we feel that there should not be a moratorium on the use of hydraulic fracturing in the exploitation of the UK's hydrocarbon resources, including unconventional resources such as shale gas."

The Committee analyzed both the benefits of hydraulic fracturing and the environmental concerns that have been raised.  The Committtee's report identified economic gains and decreased dependence on foreign sources of energy as being two of the benefits.  The Committee concluded that UK shale gas resources "could be considerable," though "it is unlikely that shale gas will be a 'game changer' in the UK to the same extent it has been in the U.S."  An interesting part of the report was a statement that Britain may have greater shale resources offshore than under land.

The report noted that hydraulic fracturing also has a potential environmental benefit because the process often is used to facilitate the production of natural gas, the cleanest burning of all fossil fuels ("shale gas" is simply a term for natural gas produced from shale).  The Committee stated:  "Shale gas could lead to a switch from coal to gas for electricity generation, thereby cutting carbon emissions, particularly projected emissions from developing countries." 

The report acknowledged that a countervailing concern raised by some environmentalists is that there are fugitive emissions (small leaks) of gas during the production and transport of shale gas.  Fugitive emissions are a concern because the main component of natural gas is methane, and methane (like carbon dioxide) is a greenhouse gas.  The report concluded, however, that fugitive emissions can be minimized through proper regulations.  The report also noted another concern -- that production of large quantities of shale gas might distract from efforts to develop renewable sources of energy.

But the main environmental concern that people express is a fear that hydraulic fracturing might harm the quality of underground sources of drinking water.  On this issue, the UK report reached conclusions similar to those stated previously in this blog.  The report noted that most shale formations are thousands of feet below drinking water aquifers, and that the fractures created by hydraulic fracturing are much shorter in length.  That leaves two other potential mechanisms for contamination to occur.  One would be for hydraulically-induced fractures to link with natural faults or fractures, leading to a pathway between the formation being fractured and a drinking water aquifer.  But most analysts in the United States think this is very unlikely, and the Committee seemed to agree. 

The general consensus is that, if contamination were to occur, it likely would be as a result of the other potential mechanism for contamination -- a well construction failure.  Most oil and gas wells, including both those that are hydraulically fractured and those that are not, are drilled to formations that are located deeper beneath the surface than drinking water aquifers are.  Oil or gas wells pass through the drinking water aquifer, and casing and cementing of the well are used to seal the drinking water aquifer from deeper formations.  Such casing and cementing has been done on millions of wells.  The UK report stated:

There is no evidence that the hydraulic fracturing process poses any risk to underground water aquifers provided that the well-casing is intact before the process commences.  Rather the risks of water contamination are due to issues of well integrity, and are no different than concerns encountered during the extraction of oil or gas from conventional reservoirs."

For that reason, the report concluded that care should be given to well construction standards and inspection.  The report expressed a belief that Britain's existing regulations for well construction are adequate.

Another issue of occasional concern in the United States is water supply.  Typically, a few million gallons of water are used in fracturing an oil or gas well drilled into a shale formation.  That amount is fairly modest compared to some other industrial and agricultural uses.  Nevertheless, this amount of water use can put a strain on supplies in areas that already are facing water shortages.  The UK report stated that water supply generally should not be a problem if fracturing is performed in Britain, but that fracturing "could challenge resources in regions already experiencing water stress."

The report also weighed-in on the issue of whether regulations should require that the composition of fracturing water be disclosed.  That has been a hot issue in the United States.  The UK report endorsed some reporting, but it is not clear whether the report meant to support the disclosure of the specific chemical compounds used.  The report said that well operators should report the volume of fracturing water used, as well as the "type" of chemicals used, and the concentrations.  In the debate within the United States about disclosure requirements, when people refer to the "type" of additive they often are referring to the functional category of an additive -- that is, whether the additive is a biocide, corrosion inhibitor, friction reducer, etc. -- rather than the identity of the specific chemical compound.  It is not immediately clear whether this is what the report meant, or whether it was advocating that specific chemical compounds be identified.

In addition, the report discussed the possibility of spills of fracturing fluid, and such localized effects as noise and traffic that can result from increased drilling activity, and how those concerns can be addressed.

The report contains two volumes.  The first contains the narrative report, plus a transcript of questions and answers from hearings.  The second contains written materials presented by various individuals and organizations, including environmental groups, trade groups, and companies.

EPA Selects Locations for Seven Hydraulic Fracturing Case Studies

EPA has announced locations for seven case studies regarding the potential impacts of hydraulic fracturing on underground sources of drinking water.  The locations include two sites where hydraulic fracturing has not yet started, but is planned for the near future.  These two "forward‑looking" or "prospective" sites are located in:

  • DeSoto Parish, Louisiana (Haynesville Shale)
  • Washington County, Pennsylvania (Marcellus Shale).

Five of the locations are "retrospective" study sites, where hydraulic fracturing already has occurred.  These sites include:

  • Killdeer and Dunn Counties, North Dakota (Bakken Shale)
  • Wise and Denton Counties, Texas (Barnett Shale)
  • Bradford and Susquehanna Counties, Pennsylvania (Marcellus Shale)
  • Washington County, Pennsylvania (Marcellus Shale)
  • Los Animas County, Colorado (Raton Basin, coalbed)

At the "forward‑looking" sites, the EPA will take samples and evaluate conditions through the entire life cycle of the well, beginning before the wellpad is constructed and drilling begins.  Groundwater samples from the area around each site will be analyzed for several substances, and samples of flowback water also will be analyzed.  The operator of the well at the Haynesville Shale site in DeSoto Parish, Louisiana will be Chesapeake, and work is expected to begin by this Fall.  The operator of the well at the "forward‑looking" Marcellus Shale site in Washington County, Pennsylvania will be Range Resources, and work likely will begin this Fall or sometime later.

EPA anticipates starting work at one or more of the "retrospective" sites within about four months.  For the "retrospective" study sites, the EPA has not yet defined the specific wells that will be included in the study, and therefore has not named the operators.  Samples also will be collected in the vicinity of the retrospective study sites and analyzed for various types of compounds.

The seven case study locations have different characteristics.  The Bakken Shale in North Dakota is a shale from which oil is produced.  The Raton Basin in Colorado is a site where coalbed methane has been produced.  The other five sites are locations where natural gas has been produced or will be produced from the Barnett, Haynesville, and Marcellus Shales.

The site studies are part of the EPA's previously‑announced study of the possible effects of hydraulic fracturing on underground sources of drinking water.  A preliminary report is expected in 2012, and a more detailed report in 2014.

The locations for the site studies were chosen from amongst dozens of locations suggested by various stakeholders, including public officials and the public, based on criteria in the EPA's study plan that was published in February 2012.  The EPA stated yesterday:

These criteria included proximity of population and drinking water supplies to activities, concerns about impaired water quality (retrospective only) and health and environmental impacts (retrospective only), and knowledge gaps that could be filled by the case study.  Sites were prioritized based on geographic and geologic diversity, population at risk, site status (planned, active or completed), unique geological or hydrology features, characteristics of water resources, and land use."

The EPA announced the seven sites in a statement released yesterday, and made additional information available in late afternoon, during conference calls with various stakeholders.  The EPA's study is important because it will influence public opinion on the subject of hydraulic fracturing, which has become controversial, with supporters and opponents of fracturing portraying the process in very different terms.  The EPA's study also likely will influence the views of public officials and regulators.

Supreme Court decides climate change case

Today, the United States Supreme Court issued its decision in a highly-watched climate change case,  American Electric Power Co., Inc. v. Connecticut, holding that the Clean Air Act and EPA actions authorized by the Act preempt any federal common law claims. 

In this case, a group of eight States and New York City brought suit against the Tennessee Valley Authority and four privately-owned power companies in the United States District Court for the Southern District of New York.  A group of three nonprofit land trusts brought a separate action against the same defendants in the same court.

The plaintiffs primarily based their suits on federal common law nuisance claims.  Common law claims are claims that are not based on a statute, but instead are based on general legal principles recognized by courts.  The plaintiffs asserted state law tort claims as an alternative legal theory.  The governmental plaintiffs alleged that that the defendants are emitting greenhouse gases that will contribute to climate change and thereby put public lands, infrastructure, and health at risk.  The land trusts alleged that the defendants are contributing to climate change that will destroy habitats for animals and rare plant species on lands that the trusts own and conserve.  The plaintiffs in both actions sought court orders requiring the defendants to limit carbon dioxide emissions to particular levels that would be reduced by specified amounts each year.

The district court dismissed both cases, holding that the cases raise issues that are exclusively within the province of the legislative and executive branches of government.  The Second Circuit Court of Appeals reversed the district court, holding that the plaintiffs asserted claims that may be brought and decided in court. 

The United Supreme Court agreed to hear the case.  Eight of the nine justices participated in the case.  The eight participating justices unanimously agreed that the Clean Air Act preempts any federal common law claims.  The court explained that, "The test for whether congressional legislation excludes the declaration of federal common law is simply whether the statute 'speak[s] directly to [the] question at issue.'"  Here, the Clean Air Act speaks directly to the issue of pollutants, and the Court previously has held that greenhouse gases qualify as "pollutants" for purposes of the Clean Air Act.  The Court further noted that the EPA already has enacted some greenhouse gas regulations and is in the process of developing additional regulations. 

The plaintiffs had noted that it was possible that numerous cases would be brought against "thousands or hundreds or tens" of other defendants who are emitting greenhouse gases.  The Court stated that regulation of such emissions is best left to an agency that can call on experts, propose rules, collect comments and hold public hearings regarding the proposed rules, and develop a set of consistent regulations.  The Court explained that such a regulatory process would be superior to dozens of different judges setting unique emissions standards for particular defendants in a multitude of individual cases.

The issue of whether the plaintiffs' state law tort claims are viable was not before the Court, so the Court did not decide that issue.  The Court remanded the case for the parties to litigate whether the plaintiffs' state law tort claims are viable. 

The Court's opinion was written by Justice Ginsburg, who wrote for six justices, including herself.  Justice Alito wrote an opinion in which Justice Thomas joined, concurring in the judgment and largely agreeing with the majority.  Justice Sotomayor did not participate.  She was on the three-judge panel from the Second Circuit that heard the case, though she was elevated to the Supreme Court before the Second Circuit issued its decision.  The fact that she previously had heard the case probably is the reason that she did not take part in the Supreme Court decision.

Although none of the defendants in this litigation were oil and gas companies, the litigation has implications for the oil and gas industry because some of its members have been defendants in other climate change litigation, and because such companies may be defendants in such litigation in the future. 

Michigan issues new hydraulic fracturing regulations

On May 25, 2011, Michigan's Department of Environmental Quality announced new regulations relating to "high volume" hydraulic fracturing.  The regulations will require oil and gas operators to report to DEQ the source they plan to use for water, and will require monitoring of the level in any wells within 1320 feet of an operator's proposed large volume withdrawal.  The regulations also will require operators to provide Michigan DEQ with Material Safety Data Sheets for the substances used in their fracturing.  Those MSDSs will be made available to the public.  In addition, operators will be required to provide Michigan DEQ with records relating to injection pressures, volumes of fracturing fluid, and volumes of flowback.

The new regulations define "high volume" fracturing as fracturing that uses more than 100,000 gallons of hydraulic fracturing fluid.  Michigan DEQ issued information explaining that oil and gas operators have used hydraulic fracturing in Michigan since the 1960s to produce natural gas from the Antrim Shale in the northern portion of the Michigan's Lower Peninsula.  Those wells are shallow, and typically operators only use about 50,000 gallons of water in the fracturing process.  This compares to typical water use of 4 to 5 million gallons per well in several deeper shales being hydraulically fractured in other parts of the country.  Michigan has implemented its new fracking laws in anticipation that oil and gas operators may begin drilling in Michigan to the Utica Shale, a deeper formation, and that operators would use much larger volumes of water in fracturing Utica wells than in fracturing Antrim wells.

Michigan DEQ officials have indicated that they do not believe the fracturing of underground formations itself is an issue to be concerned about, and that the important issues relate to well construction, water sourcing, and flowback disposal. 

EPA to provide webinar regarding permits for use of diesel in hydraulic fracturing

The EPA is in the process of developing guidance for the permitting of hydraulic fracturing using diesel fuel.    The EPA will hold an "Informational Public Webinar" regarding such guidance on June 15, 2011 from 2 pm to 5 pm Eastern Daylight Time (1 to 4 pm Central;  noon to 3 p.m. Mountain;  11 a.m. to 2 p.m. Pacific).  The webinar is free and open to the public, but preregistration is required, and EPA is requesting that people preregister at least 3 days in advance. 

The EPA also has posted on its website a couple of slide-presentation-type PDFs containing relevant information.  One has basic information on underground injection control.  The other document explains, among other things, that EPA's plan for developing guidance for permitting for fracking using diesel has the following timeline.  EPA will hold stakeholder meetings in the Spring, produce draft guidance by Summer, accept public comments in the Fall, and then develop final guidance.

What is this all about?

Part C of the Safe Drinking Water Act concerns protection of underground sources of drinking water.  It includes provisions for the regulation of underground injections, but the Act's definition of "underground injection" expressly excludes hydraulic fracturing operations in which diesel fuel is not part of the fracking fluid.  This has the effect of exempting hydraulic fracturing from regulation under the SDWA, provided that the fracking fluid does not contain diesel. 

Further, in the past, neither the EPA nor the States (with the exception of Alabama) have attempted to apply SDWA regulations to fracking operations that use diesel, even though those operations are not exempted from such regulations by the language of the SDWA statute.  But last year, that changed.  The EPA posted a statement on its website, stating that service companies that perform fracturing using diesel must first obtain a SDWA permit for an underground injection.  Two industry groups have brought suit, challenging the EPA's statement.  The industry groups argue that the EPA is imposing a new requirement and therefore effectively is imposing a new rule, but is doing so without going though the normal rule-making process required by the Administrative Procedures Act.  More detail about this litigation is contained in my March 7, 2011 post.

Further, because the EPA and most States have never previously regulated fracking under the SDWA, there is uncertainty about what would be required in the permitting process.  The EPA has stated it will provide guidance for such permitting.


Montana considers mandatory disclosure of frack water composition

Montana's Board of Oil and Gas Conservation will hold a public meeting on June 15, 2011 to consider the adoption of proposed regulations that would require operators to disclose the chemical composition of hydraulic fracturing fluids for each well fractured in Montana.  The proposed rules would allow operators to refrain from disclosing the identity of any chemicals that are trade secrets.  If, however, authorities need to know the identity of the chemicals in order to respond to a spill or release, or if health professionals need that information for diagnosis or treatment of a person exposed to the chemical, disclosure would be required.

If Montana adopts the proposed regulations, it will be following a growing trend toward the general disclosure of fracking water composition, while protecting trade secrets.  This blog has previously reported on: Wyoming and Arkansas enacting regulations last year that require complete disclosure of fracturing water composition to regulators, and provide for making all the disclosed information public, except information that qualifies for trade secret protection; Texas enacting a law last month that will lead to regulations requiring the oil and gas industry to publicly disclose fracturing water composition, except for the identity of chemicals that qualify as trade secrets; the Department of Interior considering implementing a mandatory disclosure requirement for wells fractured on federal land; and two groups of state regulators recently launching a website, FracFocus, where many operators are voluntarily disclosing fracturing water composition on a well-by-well basis.

Texas enacts frack fluid disclosure requirement

Texas has enacted legislation requiring its Railroad Commission (the regulatory authority that regulates the oil and gas industry in Texas) to develop regulations for the mandatory disclosure of the composition of water used in hydraulic fracturing on a well-by-well basis.  The new law, which is reported to be the product of negotiations involving the oil and gas industry, environmental groups, and legislators, directs that this information be posted on the internet.  Companies can request that any particular chemical be exempted from disclosure if the identity of the chemical is a trade secret.  The initial decision whether to grant an exemption will be made by the Railroad Commission, but a decision by the Railroad Commission to grant an exemption can be appealed by the landowner on whose property the well is drilled, by an adjacent landowner, or a state agency other than the Railroad Commission.

The legislation gives the Railroad Commission until July 1, 2013 to finalize regulations, but Commission members have stated that they will begin the process of developing regulations soon, and one Commissioner has said he will push to finalize regulations a year early, by July 1, 2012. 

Texas' mandatory disclosure program is significant because Texas has drilling in several shale plays -- the Barnett, the Eagle Ford, the Permian Basin, and the Haynesville (the Haynesville Shale is mostly in Louisiana, but extends into East Texas).  Further, Texas has far more ongoing drilling than any other state.  The most recent rig count by Baker Hughes shows that 843 oil and gas drilling rigs are operating in Texas.  This is nearly half of the total of 1854 rigs operating in the entire United States, and is far more than the number operating in any of the three states with the next largest totals (170 are operating in Oklahoma; 166 are operating in Louisiana; and 161 are operating in North Dakota).

When Texas' regulations are put in place, the state will join Wyoming and Arkansas in requiring disclosure.  Both Wyoming and Arkansas enacted regulations last year that require disclosure of chemicals used in fracking water on a well-by-well basis.  Wyoming and Arkansas require disclosure of all chemicals to regulators, and provide that such information generally will be made available to the public.  But the regulations in both states allow companies to request that particular chemicals whose identities constitute trade secrets be exempt from disclosure to the public.  The Wyoming and Arkansas regulations were discussed in my blog post dated March 14, 2011.

In addition to mandatory disclosure programs, two groups of state regulators -- the Ground Water Protection Council and the Interstate Oil and Gas Compact Commission -- have organized FracFocus, a website where several companies are voluntarily posting the composition of fracking water on a well-by-well basis.  Visitors to the website can search for wells near where they live (or in any other location), or by other criteria, such as well operator.  The website also contains other information on hydraulic fracturing.  FracFocus and certain company-specific voluntary disclosure initiatives were discussed in my blog post dated April 18, 2011.