Brown Dense Generates Interest in Louisiana State Lease Sales

At Louisiana's state lease sale on October 12, 2011, the Department of Natural Resources accepted bids to lease more than 6000 acres of state‑owned land in East Carroll Parish, an area which historically has seen relatively little oil and gas activity.  The bidding on tracts in East Carroll appears to have been prompted by interest in the "Brown Dense," a shale formation that stretches across South Arkansas and North Louisiana, and which is expected to be an oil play.  The Brown Dense is sometimes called the "Lower Smackover" because it is located below the "Smackover," a formation from which companies have produced oil and gas for several decades in Louisiana. 

The winning bids for each of the tracts in East Carroll provided for a bonus of approximately $304 per acre, delay rentals of about $150 per acre, a 20% royalty, and a three‑year primary term.  In addition to the tracts for which bids were accepted at the October lease sale, private interests have nominated tracts of state‑owned water bottoms totaling more than 3000 acres in East Carroll for bid at the upcoming December 14, 2011 state lease sale.

Activity in the Brown Dense is at an early stage.  Southwestern Energy has received a permit for a Brown Dense well in Claiborne Parish, and is expected to begin drilling the well this year.  Southwestern already has begun drilling a Brown Dense well in Columbia County, Arkansas, and has plans to drill as many as ten Brown Dense wells in 2012.  XTO, a subsidiary of ExxonMobil, also has obtained a permit for a well in Claiborne Parish.  In addition, Devon Energy has obtained a permit for a well in Morehouse Parish.

The Oil and Gas Law Brief previously discussed the Brown Dense in posts dated August 31 and September 11, 2011.  The Department of Natural Resources has a page on its website with information regarding state lease sales, which are conducted by DNR's State Mineral and Energy Board.

EPA to Use Toxic Substances Control Act to Require Disclosures Regarding Hydraulic Fracturing Fluids

In response to a petition filed by Earthjustice and several other organizations, the United States Environmental Protection Agency has stated that it will use the Toxic Substances Control Act (TSCA) to draft regulations requiring companies to disclose information regarding "chemical substances and mixtures used in hydraulic fracturing."  Although the EPA has not indicated what information will be subject to disclosure, the agency stated that it will attempt to avoid duplication of "the well-by-well disclosure programs already being implemented in several states," and that it anticipates that its regulations will "focus on providing aggregate pictures of the chemical substances and mixtures used in hydraulic fracturing." 

In a November 23, 2011 letter to Earthjustice, the EPA stated that "the first step" in its development of disclosure regulations will be to "convene a stakeholder process to develop an overall approach that would minimize reporting burdens and costs, take advantage of existing information, and avoid duplication of efforts."  The EPA said that it will facilitate a public comment process by publishing an advance notice of its proposed rulemaking, "identifying key issues for further discussion and analysis."  The EPA did not specify in its letter or its public announcement when it would convene the stakeholder process or publish notice of its proposed rulemaking.

The EPA's decision grants a portion of the relief requested in Earthjustice's petition, but denies other portions of the requested relief.  Earthjustice's petition, dated August 4, 2011, requested that the EPA use 15 U.S.C. § 2607 (section 8 of TSCA) to require chemical manufacturers to report a broad range of information on all substances used in the exploration and production of oil and gas.  The EPA stated, however, that its disclosure regulations will apply only to substances used in hydraulic fracturing, and that the agency was denying Earthjustice's request for regulations relating to other substances used in oil and gas activities.  

EPA previously had denied another request contained in Earthjustice's petition  ─ a request that the EPA use 15 U.S.C. § 2603 (section 4 of TSCA) to require manufacturers to conduct toxicity testing of all "chemical substances and mixtures used in oil and gas exploration or production."  The EPA announced that decision in a letter dated November 2, 2011.  The letter explained that the EPA was rejecting the request for mandatory toxicity testing because Earthjustice's petition had not included information sufficient to support certain factual findings that EPA must make before it is authorized to order toxicity testing.  The statutorily-required factfindings include determinations that there is insufficient existing data regarding the effects that exposure to a substance has on health and the environment, and also that testing is necessary in order to develop such data.

As for the disclosure regulations that EPA has agreed to draft, it is unclear exactly what information will need to be disclosed.  Earthjustice's petition asked that chemical manufacturers be required to supply EPA with "various records," including the chemical and trade names of all substances manufactured for use in hydraulic fracturing, along with other information regarding each substance, including the amount produced; all existing data concerning the effects of exposure on health and the environment; copies of all health and environmental studies "known to" the manufacturers; and information regarding all adverse health or environmental effects that the manufacturers know have been "alleged to have been caused" by the substance.

Earthjustice, along with approximately  120 other organizations, submitted the August 4 petition pursuant to 15 U.S.C. § 2620 (section 21 of TSCA), which allows citizens to petition the EPA to draft TSCA regulations. 

Earthjustice is a San Francisco based organization whose website states that the organization was founded in 1971 as the Sierra Club Legal Defense Fund, but that the group later changed its name to reflect that it is independent of the Sierra Club, and that it provides legal representation to "hundreds" of clients in addition to the Sierra Club. 

Oil & Gas Lease Sale for Land in Wayne National Forest Delayed

The U.S. Forest Service announced on November 15 that it is postponing plans to conduct an oil and gas lease sale for approximately 3300 acres of land in the Wayne National Forest in southeastern Ohio. The sale, which was scheduled to take place by auction on December 7, 2011 (the news release regarding the postponement erroneously refers to the originally scheduled date as being December 7, 2012), had been announced on September 7, 2011.  The land at issue is located in Athens, Gallia, and Perry counties.

The delay is expected to last at least six months.  Wayne National Forest Supervisor Anne Carey stated that the purpose of the delay is to allow a study of the effects hydraulic fracturing and shale development might have on the surface.  The Wayne National Forest is managed under a plan developed in 2006, and Ms. Carey stated that oil and gas development techniques have changed since then.  She stated: "Conditions have changed since the 2006 Forest Plan was developed.  The technology used in the Utica & Marcellus Shale formations need to be studied to see if potential effects to the surface are different than those identified in the Forest Plan."

Some people have criticized the delay, noting that it will cost jobs.  Sources have estimated that development of shale resoures in Ohio could generate more than 200,000 jobs within three years (see press release of the Ohio Oil & Gas Education Program), though that figure includes the effect of development in all areas of the state.  The Forest Service estimates that the number of potential jobs affected by the delay in the Wayne National Forest lease sale will only be a small fraction of that number. 

The total size of Wayne National Forest is approximately 241,000 acres. 

Secretary of Energy Advisory Board Issues Second Report on Shale Gas Production

The Secretary of Energy Advisory Board on shale gas production issued its second "ninety day" report, dated November 18, 2011.  The group's first report, dated August 18, 2011, stated that shale gas production is important to the economy and our nation's energy security, but that several changes to regulations and procedures should be made to address environmental issues.  The first report made recommendations relating to reducing emissions, requiring disclosure of fracturing water composition, improving well construction standards, and prohibiting the use of diesel in fracturing fluid (see August 29, 2011 Oil & Gas Law Brief).  

The second report does not contain much in the way of new recommendations or conclusions.  Instead, it primarily discusses implementation of the recommendations contained in the first report.  For example, the second report expresses the Advisory Board's disappointment that there has not been more progress toward implementing the Board's prior recommendations, but the second report also acknowledges that progress has been made and that it has been a relatively short time since the release of the first report.  For each of the Advisory Board's prior recommendations, the second report also discusses which entity or entities would have to take action in order to implement the recommendation — the federal government, state governments, or some other organization.

In some reports, the Advisory Board is referenced as "SEAB."

Hydraulic Fracturing and Gasland: Separating Fact from Fiction

The movie Gasland portrays hydraulic fracturing as a cause of water well contamination, while industry supporters assert that there has never been a documented case of hydraulic fracturing causing contamination of groundwater.  So what are the facts?

 Gasland showed individuals lighting their faucets on fire, explained that the individuals' water wells were contaminated with methane (the principal component in natural gas), and suggested that hydraulic fracturing had caused the contamination.  The water wells probably did contain methane, but determining the cause of the contamination requires some investigation.  And to understand those investigations, it helps to understand a little about the ways methane can be formed.

 Methane is a flammable gas that is formed in one of two ways.  First, it can be produced by bacteria during the decomposition of organic matter.  This is the process that creates the methane found in landfills, swamps (called swamp gas), and in the intestines of cattle and other animals.  Methane produced in these biological processes is called "biogenic" methane.  When biogenic methane is formed underground, it generally is formed at fairly shallow levels ─ not more than a few hundred feet underground.  It has been well documented for years that a high proportion of water wells in some parts of the country contain significant amounts of biogenic methane.

 The second way methane can be formed is through the thermal decomposition of organic matter under high temperatures and pressures.  Methane created by this thermal process is called "thermogenic" methane.  Thermogenic methane is created when organic matter is buried deep underground by the accumulation of more and more sediment under the right circumstances.  Over thousands of years, the combination of high temperatures and pressures caused by the organic material being buried deep underground can lead to the formation of thermogenic methane.

Biogenic methane and thermogenic methane molecules are chemically the same, but scientists can tell the difference between the two types of methane by a couple of means of "chemical fingerprinting."  The first is isotopic analysis of the carbon atoms found in methane.  All carbon atoms have the same chemical properties, but a small fraction of carbon atoms have a different number of neutrons in the atomic nucleus than do most carbon atoms.  Because the fraction of carbon atoms that have the "odd" number of neutrons is different for thermogenic and biogenic methane, scientists can tell the difference between the two types of methane by using isotopic analysis. 

Also, the process that creates thermogenic methane also generally leads to small amounts of other hydrocarbons, such as ethane, propone, and butane.  The process that creates biogenic methane creates very little ethane, and no propane or butane.  Thus, scientists sometimes can "fingerprint" methane as being thermogenic or biogenic based on the presence or absence of other hydrocarbons.

 The methane recovered in natural gas drilling is thermogenic, not biogenic.  Thus, the presence of biogenic methane in a water well generally would not be caused by natural gas drilling, whereas the presence of thermogenic methane might be caused by drilling activity (though in some places, thermogenic natural gas naturally seeps to the earth's surface, so that the presence of thermogenic methane in a water well is not sufficient by itself to prove that oil and gas activity is the cause).

 Gasland discussed three water wells located in Colorado, and also discussed two additional places in Colorado where gas was seeping to the surface in the West Divide Creek area.  The Colorado Oil & Gas Conservation Commission, the arm of state government that regulates the oil and gas industry, investigated the contamination and has posted a report of its findings on its website.  Through testing, the Commission conclusively established that three of the five locations (two of the water wells and one of the seeps) contained biogenic methane that was unrelated to oil and gas activity.

Of the remaining two locations, the water well contained both biogenic and thermogenic methane, while the seep contained thermogenic methane.  That left the question of what caused thermogenic methane to contaminate the water well and the seep.  The Commission concluded that oil and gas activity was the cause, but that the contamination had not been caused by hydraulic fracturing.  Rather, the problem had been caused by improper well construction (the casing and cementing of the natural gas wells).

This result is consistent with statements previously made in the Oil & Gas Law Brief that standards for casing and cementing wells is an issue that should be discussed, but that hydraulic fracturing rarely, if ever, is a problem.  Further, the Colorado result is consistent with investigations of water well contamination in other places.  Those investigations repeatedly conclude either that oil and gas activity was not the cause of the contamination, or that oil and gas activity was the cause, but that the specific activity that led to the problem was a well construction problem, not hydraulic fracturing.  Lisa Jackson of the EPA and other officials in the Obama administration have stated that they are unaware of any documented cases of groundwater being contaminated by hydraulic fracturing.  Numerous other government agencies have reached similar conclusions. 

 And I recently attended a major conference where a representative of the Natural Resources Defense Council stated that he advocates several reforms relating to the oil and gas industry (including mandatory disclosure of hydraulic fracturing fluid composition, spill prevention, and more attention to well construction standards), but that he does not think the threat of groundwater contamination by the hydraulic fracturing process itself is an issue.

 In short, many knowledgeable people assert that all the energy that is being poured into the debate over hydraulic fracturing would be better spent on other safety issues.  

Shipments of Oil by Rail Increasing Rapidly, Driven by Surge in Production from Bakken Shale in North Dakota

Within the U.S., about two-thirds of crude oil is transported by pipeline, but the Energy Information Administration reports that shipments by rail are increasing rapidly.  The volume of crude oil and refined petroleum shipped by rail increased by 9.1% during the first ten months of 2011, compared to the same period in 2010.  Shipments of crude oil have also increased as a fraction of total rail shipments.  The number of railcars transporting oil increased from 2% of all railcars in 2008, to 3% in 2009, 7% in 2010, and 11% so far in 2011.

The biggest reason for this is the surge in production of crude oil from North Dakota.  Driven by drilling in the Bakken Shale, North Dakota's rate of oil production has increased by more than a third this year, from 343,000 barrels per day in January to 464,000 barrels per day in September.  This rate of production already exceeds the capacity of the pipelines serving North Dakota, and is expected to continue increasing.  North Dakota now has more active drilling rigs than any states other than Texas and Oklahoma, and it has been predicted that North Dakota will pass California to become the fourth largest producer of oil in the U.S. next year.

Early Results of Study Indicate No Direct Link Between Hydraulic Fracturing and Groundwater Contamination

An interdisciplinary team from the University of Texas has announced that early results from its study of hydraulic fracturing show no direct link between hydraulic fracturing and groundwater contamination.  The team stated that, in some instances, other aspects of oil and gas activity might have led to contamination, but that hydraulic fracturing itself does not appear to have been the cause.

The team's leader, Dr. Charles "Chip" Groat stated: 

From what we've seen so far, many of the problems appear to be related to other aspects of drilling operations, such as poor casing or cement jobs, rather than to hydraulic fracturing per se." 

The team's preliminary results also indicate that spills of wastewater, sometimes are an issue: 

Many allegations of groundwater contamination appear to be related to above‑ground spills or other mishandling of wastewater produced from shale gas drilling, rather than from hydraulic fracturing itself."

These preliminary conclusions that spills and poor casing and cementing sometimes can be a problems, but that hydraulic fracturing itself rarely is, are consistent with views previously stated in the Oil & Gas Law Brief.  On April 24, 2011 and April 25, 2011, the Oil & Gas Law Brief carried a two‑part series ─ "Hydraulic Fracturing:  What safety issues should we be discussing?" ─ in which the author stated that regulations relating to spills, casing, and cementing are generally sound, but are the issues we should be discussing, rather than hydraulic fracturing itself.

The University of Texas study was announced on May 9, 2011 (see Oil & Gas Law Brief, May 10, 2011).  The leader of the interdisciplinary study team is Chip Groat, head of the U.S. Geological Society under Presidents Clinton and George W. Bush.  Groat stated:  "Our goal is to inject science into what has become an emotional debate and provide policymakers a foundation to develop sound rules and regulations."  The group's final report is expected early next year.

TransCanada Announces it Will Change Route of Proposed Keystone XL Pipeline to Avoid Nebraska Sand Hills Region

TransCanada announced yesterday that it will seek an alternative routing for the proposed Keystone XL Pipeline in order to avoid the Sand Hills region of Nebraska.  TransCanada seeks to build the pipeline to transport petroleum from the oil sands of Alberta to refineries on the Texas Gulf Coast.  The route previously proposed by TransCanada would have passed through the Sand Hills area, which contains a large number of wetlands.  That routing drew opposition, and the United States Department of State announced last week that it was delaying a decision on whether to approve the pipeline in order to consider alternative routes (the pipeline needs State Department approval because it crosses the border with Canada).  TransCanada stated that it will work with the Nebraska Department of Environmental Quality to determine a new route.

Colorado Considers Rules for Mandatory Disclosure of Hydraulic Fracturing Water Composition

The Colorado Oil and Gas Conservation Commission has proposed regulations that would require public disclosure of the composition of hydraulic fracturing water.  In particular, the proposed regulations would require operators of each oil or gas well that is fractured in Colorado to disclose to the public the operator's name, the date the well was fractured, and

  • the location of the well, including the county in which it was drilled and also the latitude and longitude of the wellhead 
  • the well's name and registration number 
  • the true vertical depth of the well 
  • the total volume of water or other base fluid used as the fracturing fluid (and, if the base fluid is not water, the identity of the base fluid)   
  • the trade name of each fracturing water additive, as well as the supplier and the intended function of the additive (e.g., biocide, corrosion inhibitor, friction reducer, etc.) 
  • the Chemical Abstracts Service (CAS) number for each additive (CAS numbers are unique identifiers that scientists use to identiy and distinguish each known chemical compound),  and
  • the maximum concentration of each additive.

The operators would have to disclose the information by posting it to FracFocus, a website operated by the Ground Water Protection Council and the Interstate Oil & Gas Compact Commission that has become a central location for the posting on information regarding the hydraulic fracturing of wells in several states.  Visitors to the website can search for wells by county, longitude and latitude, or the name of the operator, as well as by other criteria. 

If a particular additive in the fracturing fluid is a trade secret, the operator would not have to identify it to FracFocus, but the operator would have to identify the chemical family of the additive.  In addition, the the operator would be required: (1) to identify the additive to a health professional who needs the information for purposes of treating or diagnosing a person who has been exposed to the fracturing fluid; and (2) to identify the additive to the Oil & Gas Conservation Commission if it needs the information for purposes of responding to a spill or release.

The Colorado Oil and Gas Commission website has information regarding the proposed regulations, including

The website also includes information on requesting the opportunity to speak at the public hearing, and on submitting written comments, which can be made on-line through November 23, 2011.

A Colorado Oil and Gas Conservation Commission official has stated that the proposed regulations, if approved, could go into effect as early as February 1, 2012.

If Colorado adopts mandatory disclosure rules, it will join several states, including Wyoming, Arkansas, Montana, Louisiana, and West Virginia that have already enacted similar regulations.  In addition, Texas is in the process of enacting such regulations, and New York is considering the idea.

In addition to being available at the Oil and Gas Conservation Commission's website, the proposed regulations appear in the November 10, 2011 edition of the Colorado Register.

Interview: Hydraulic Fracturing Safety and EPA's Hydraulic Fracturing Study Plan

On November 7, 2011, the Oil and Gas Law Brief discussed the EPA's release of the final draft of its hydraulic fracturing study plan, and two days later, LexBlog Network interviewed me regarding the plan.  Attached is a link to a video of that interview.

U.S. State Department Postpones Decision on Keystone XL Pipeline

The United States State Department announced today that it is postponing a decision on whether to grant approval to the proposed Keystone XL pipeline, which would be used to transport oil from the oil sands of Alberta to refineries on the Texas Gulf Coast.  The State Department stated that the purpose of the delay is to allow the Department to consider alternative routes for the pipeline to avoid the Sand Hills region of Nebraska, a region which contains a number of wetland areas.  The Department stated that environmental assessments of alternative routes would not be complete until 2013.  Thus, a decision on the Keystone XL effectively is being postponed until after the next Presidential election.

State Department approval is required for the pipeline because the pipeline would cross the country's border with Canada.  Environmentalists have opposed the pipeline.  Many have raised concerns about potential pipeline leaks, which they assert could affect the Ogallala Aquifer and sensitive wetlands areas.  But much of the opposition is driven by many environmentalists' opposition to the development of oil sands (also known as "tar sands").   

As explained in the Oil & Gas Law Brief on May 2, 2011, oil sands are a solid-like mix of clay, sand, water, and bitumen (a black, viscous oil).  To commercially develop this energy source, the oil sands are mined, often in a pit mining process.  The solid material can then be transported to a plant where the oil sands are heated by being mixing with hot water.  This separates the bitumen from the sand and clay.  In addition, it makes the bitumen less viscous, in much the same way that heating syrup will make it less viscous so that it flows more easily.  In an alternative method of production, steam is used to heat the oil sands while they still are in the ground. 

Environmentalists object to the mining process and the consumption of the energy required to heat the oil sands.  Also, they raise objections relating to water use.  In the heating process, several barrels of water are needed for every barrel of liquid bitumen that is produced.  After the process is complete, the water contains hydrocarbons and tailings (fine solid materials).  The small solids require a significant time to settle out of the water, which sometimes is held in large settling ponds called tailings ponds.

Supporters of oil sands development note that much of the world's petroleum resources are contained in oil sands.  If society avoids developing those, it is putting a large portion of the world's oil off-limits.  Further, Canada, a friendly neighbor to our immediate north, has large reserves of oil sands.  Many argue that it is better to import oil from Canada than from some of the other countries that export oil.  Moreover, building and maintenance of the pipeline would produce jobs.  In addition, as noted in the Oil & Gas Law Brief on August 26, 2011, the State Department's Environmental Impact Statement (EIS) concluded that the impact of the pipeline would not be severe if it is built along the currently proposed route.  

The Summary of Findings section of the full EIS states that "most resources would not experience significant impacts" from the proposed pipeline.  The same section states that there would be "adverse effects to certain cultural resources along the proposed Project corridor," but that "mitigation measures have been developed ... to address these adverse impacts."  The Summary of Findings also states that there would be adverse effect to the American burying beetle, raising Endangered Species Act issues, but that Keystone has offered to provide money to acquire habitat area for the beetle, and that Keystone and various government agencies have discussed conservation measures that could minimize potential impacts to the American burying beetle.

Finally, some supporters of the pipeline project have noted that developing any source of energy has some environmental impact.  As reported in the Oil & Gas Law Brief on April 4, 2011, some environmentalists even complain about adverse impacts of renewable energy sources such as windmills, hydroelectric generators, and large solar arrays.

A spokesman for Canadian Prime Minister Stephen Harper expressed disappointment with the delay, and stated that he hopes the pipeline eventually will be approved.

 

EPA Announces Release of Final Draft of Hydraulic Fracturing Study Plan

Late last week the United States Environmental Protection Agency announced the release of a final draft of its hydraulic fracturing study plan.  The study, which EPA is performing at the request of Congress, will focus on potential impacts of hydraulic fracturing on drinking water. 

The EPA will collect and analyze samples from seven locations, and perform modeling based on its analyses.  The seven locations include two sites where the EPA will conduct "prospective case studies."  At the "prospective" sites, the EPA will take samples and evaluate conditions through the entire life cycle of a well, starting before the wellpad is constructed and drilling begins, through the drilling and fracturing processes, and afterward, when the well is put into production.  Groundwater samples from the area around each site will be analyzed for several substances, and samples of the flowback water also will be analyzed. 

The locations of the two "prospective" sites are  

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

The operator of the well in DeSoto Parish will be Chesapeake, and the operator at the well in Washington County will be Range Resources. 

The EPA also will conduct five "retrospective case studies" to analyze alleged impacts of hydraulic fracturing on groundwater at five sites where wells already have been drilled and hydraulically fractured.  The five "retrospective" sites are

  • 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 Basis coalbed).

The seven locations have different characteristics, and include a shale formation from which oil is produced (the Bakken Shale location in North Dakota), a site where coalbed methane is produced (the Raton Basin site in Colorado), and five sites where natural gas is produced from shale (the Haynesville, Barnett, and Marcellus Shale locations).

The EPA plans to issue a first report by the end of 2012 and an additional report in 2014.  The EPA also plans to provide quarterly updates on the progress of its study.  The EPA first announced its intent to perform the study in March 2011.  In addition to outlining the EPA's plans for its study, the final draft released last week has background information on drilling and the hydraulic fracturing process.