Comprehensive Study of Impacts of Shale Development Released

Posted on June 28, 2017 by Kinnan Golemon

A report, Environmental and Community Impacts of Shale Development in Texas was released by The Academy of Medicine, Engineering and Science of Texas (TAMEST) to the public on June 19, 2017 (1). TAMEST is a nonprofit and brain trust for Texas composed of Texas-based members of the National Academics of Sciences, Engineering and Medicines and the state’s Nobel Laureates.  This entity was the original idea of my law school classmate and friend, Honorable Senator Kay Bailey Hutchinson, in 2004. The recently released report is the product of the TAMEST Board decision in 2015 to organize a task force charged with writing a report to “collect the best science available and summarize what we do and do not know” about environmental and community impacts that are posed by new technologies for the extraction of hydrocarbons from shale and other tight rock formations.

Texas, although oil had already been produced at various locations within its boundaries, became a dominant entity in oil and gas production on January 10, 1901, when the Lucas Gusher at the Spindletop salt dome in Jefferson County, roared to the surface: soon producing 100,000 barrels of oil per day, more than all U.S. wells combined (2). Oil and Gas production for the next 100 years was driven by “conventional” vertical well technology seeking resources from porous formations. However, commencing in the late 1980s and through the 1990s, a company founded by an affable, brilliant, tenacious and innovative son of immigrant Greek parents, George Mitchell, undertook an extended effort to access organic resources trapped in shale and very tight rock formations. After many years of limited or no success, Mitchell Energy, by century end, had demonstrated that certain hydraulic fracturing strategies [i.e. well completion techniques similar to those used since the late 1940s] (3) could be deployed in organic rich formations to produce natural gas economically.

Mitchell Energy’s acquisition by Devon Energy in 2002 resulted in another known technology, horizontal well drilling, being deployed along with hydraulic fracturing to produce the basic technological template that is utilized for shale development of oil and gas throughout the U.S., and currently being deployed elsewhere in the world today (4). The production from shale has also resulted in the largest transformation of the U.S. petrochemical industry in a generation, with $185 billion in new U.S. petrochemical projects either under construction or in planning (5).

Those interested in current and future energy policy, as well as the economic, social and environmental impacts associated with modern-day fossil fuel extraction and production, will find this authoritative, comprehensive and well-written report, see http://www.tamest.org, to be far more enlightening than one gains from other current information sources.

Interestingly, a portion of the funding for the report was provided by the Cynthia and George Mitchell Foundation, a mission-driven grantmaking foundation that seeks innovative sustainable solutions for human and environmental problems that was established prior to his death (6).

 

  1. The Academy of Medicine, Engineering and Science of Texas, 2017, Environmental and Community Impacts of Shale Development in Texas. Austin, TX: The Academy of Medicine, Engineering and Science of Texas. Doi: 10.25238/TAMEST stf.6.2017
  2. www.history.com/topics/spindletop
  3. Society of Professional Engineers (SPE) CD ROM https://www.store.com/spe.org/Legend of-Hydraulic Fracturing-P.433.aspx
  4. https://assets.kpmg.com/content/dam/kpmg/pdf/2014/03/shale-development-global-update-v2.pdf
  5. Christopher M. Mathews. “Shale Boom’s Impact in One Word: Plastics”. Wall Street Journal, June 26, 2017, A1.
  6. http://cgmf.org/p/founders.html

RULES ARE (APPARENTLY) MADE TO BE FRACKED . . .

Posted on March 23, 2017 by William Session

The news flies fast and heavy from Washington almost daily on the fate of every manner of environmental program, rule or regulation. An exciting time to be an environmental lawyer. The latest entrant into the “what’s next” sweepstakes came from the Tenth Circuit just a few days ago.

The Court of Appeals sent a pointed inquiry to the newcomers at the Department of Justice about the future of the federal government’s (recent) historic efforts to curb hydraulic fracturing:

Given the recent change of Administration and the related personnel changes in the Department of Justice and the Department of Interior, the Court is concerned that the briefing filed by the Federal Appellants in these cases may no longer reflect the position of the Federal Appellants. By statement filed electronically on or before March 15, 2017, the Federal Appellants are asked to confirm whether their position on the issues presented remain the same, or have now changed.

The DOJ’s response will very likely determine the fate of the Obama era Bureau of Land Management hydraulic-fracturing rule. That rule required drilling operators to follow “ . . . widely-accepted” best practices for preventing environmental or resource harm. 

In State of Wyoming et.al v. State of Utah et. al, that rule was set aside and its enforcement enjoined by a Wyoming district court in 2016. The district court set aside the rule, holding that the federal government had no authority to set the standards that federal lessees had to follow when extracting oil and gas from federally owned resources through hydraulic fracturing. The DOJ appealed and the Tenth Circuit subsequently instructed the district court to vacate its preliminary-injunction order.

The DOJ spearheaded the appeal of that ruling, asserting that the district court disregarded a central tenet of administrative law by substituting its own judgment for the government’s about the purview of the BLM’s regulatory reach. The DOJ argued that courts “must defer under Chevron to an agency’s interpretation of a statutory ambiguity that concerns the scope of the agency’s statutory authority.”

So the obvious question of the day is, will the new administration drop the appeal? The newly appointed Interior Secretary Ryan Zinke has stated publicly he supports fracking. With daily pronouncements from the White House about the surfeit of regulations strangling the economic engines of the country, it’s a good bet that the rule has seen its best and last days.

Perhaps more intriguing, should the appeal go forward, will be the somewhat conservative Tenth Circuit’s take on the now “institutional” Chevron deference embedded in countless appellate decisions over the last thirty-four years. As recently posted by ACOEL Fellow Chris Schraff, the views of Tenth Circuit veteran and Supreme Court nominee Judge Neil Gorsuch on the Chevron question could prove central to the concerns of some about the future of the administrative state,. 

For those who might not be familiar with Judge Gorsuch’s perspectives on the subject, review again his concurring opinion in Gutierrez-Brizuela v. Lynch. His concurring opinion in that case begins:

There’s an elephant in the room with us today. We have studiously attempted to work our way around it and even left it unremarked. But the fact is Chevron and Brand X permit executive bureaucracies to swallow huge amounts of core judicial and legislative power and concentrate federal power in a way that seems more than a little difficult to square with the Constitution of the framers’ design. Maybe the time has come to face the behemoth. . . .

And continues in clearly provocative terms:

Whatever the agency may be doing under Chevron, the problem remains that courts are not fulfilling their duty to interpret the law and declare invalid agency actions inconsistent with those interpretations in the cases and controversies that come before them. A duty expressly assigned to them by the APA and one often likely compelled by the Constitution itself. That’s a problem for the judiciary. And it is a problem for the people whose liberties may now be impaired not by an independent decisionmaker seeking to declare the law’s meaning as fairly as possible — the decisionmaker promised to them by law — but by an avowedly politicized administrative agent seeking to pursue whatever policy whim may rule the day. . .

So, what do we in the environmental business expect the position of the federal government to be going forward? Is federal environment protectionism on its way out of the door? Will the EPA be judicially branded a “politicized administrative agent” by courts across the land and denied deference even if the Chevron doctrine survives? Will the courts and the public allow the progress on cleaner air, water and earth we have all witnessed—and even helped bring about over the last fifty years—to be . . . fracked?

Trump Greenlights Keystone and Dakota Access Pipelines, but the Battle is Far From Over

Posted on January 26, 2017 by Patrick A. Parenteau

President Trump wasted no time making good on his promise to reverse President Obama’s efforts to reduce greenhouse gas emissions and move U.S. energy policy towards cleaner energy sources.  On January 24 Trump signed two executive memoranda, one inviting TransCanada to resubmit its application to build the 800,000 barrel a day Keystone XL pipeline from the Canadian oil sands to the Gulf Coast; the other directing the Army Corps of Engineers to expedite the review and approval of the Dakota Access Pipeline (DAPL) to carry approximately 500,000 barrels per day of crude oil from the Bakken shale in North Dakota to oil markets in the United States. But a close reading raises some sticky legal and economic issues that will have to be resolved before the oil starts flowing.  [LINKS to Keystone and DAPL Memos]

In announcing the Keystone Memo, Trump said that approval was contingent on TransCanada’s  willingness to “renegotiate some of the terms” – including perhaps a commitment to use US steel and a share in any profits. The problem is that tar sands oil is not only the dirtiest fuel on the planet, it’s also the most expensive to extract. To be profitable oil prices need to be above $80 per barrel; today they sit around $52, and it is unlikely they will rise much higher in the foreseeable future given the competition from shale oil and the fracking boom that is flooding the market in the US. The break-even point for Bakken shale oil is $29 per barrel. Seventeen major oil sands projects were canceled after oil prices crashed in 2014, as companies took major losses. Major investors in the oil sands have begun to leave, including Norway-based Statoil, which pulled out of the oil sands in December 2016. So cutting a deal to the President’s liking may be harder than it looks.

Assuming the deal goes down, the Keystone Memo issues several directives to clear the way for the project. It directs the State Department to make a final decision within 60 days of the date TransCanada re-submits its application, and it further specifies that “to the maximum extent permitted by law” the final supplemental EIS issued in 2014 shall satisfy the requirements of NEPA as well as the consultation requirements of the Endangered Species Act, and “any other provision of law that requires executive department consultation or review.” The Keystone Memo also directs the Corps of Engineers to use Nationwide Permit 12 to summarily authorize the stream crossings needed to complete the project. These fast track measures are sure to be tested in court by the opponents who are not about to let their hard won victory be snatched away without a furious fight—in the courts as well as in the streets. While courts have ruled that the presidential permit itself is not reviewable, there is presumably no bar to challenging the decisions of the Corps and the Department of Interior that are necessary to complete the project.

The DAPL Memo directs the Secretary of the Army and the Chief of the Corps of Engineers to “review and approve in an expedited manner, to the extent permitted by law and as warranted, and with such conditions as are necessary or appropriate, requests for approvals to construct and operate the DAPL, including easements or rights-of-way to cross Federal areas under section 28 of the Mineral Leasing Act.” The Memo also instructs the Secretary to consider whether to rescind the memorandum issued by the Obama administration requiring preparation of an EIS on DAPL’s   request for an easement to cross Lake Oahe, and to deem the previously-issued Environmental Assessment sufficient to satisfy NEPA.

The Standing Rock protest over DAPL has become an historic confrontation that has united an Indigenous land-and-water movement and climate activism to confront a fossil-fuel corporation protected by a militarized police force.  At one point in December thousands of veterans arrived to provide a safe space for the protesters who call themselves “water protectors.” Litigation filed by the Standing Rock Tribe and other tribes challenging the Corps’ issuance of permits under the Clean Water Act and Rivers and Harbors Act is pending in federal district court in the District of Columbia.  Judge Boasberg denied a preliminary injunction but has yet to rule on the merits of the case. At the moment, the court is considering DAPL’s motion for summary judgment to declare that the project already has all of the approvals it needs and the Corps should not be able to reverse its earlier decision that an EIS was not required. Though the Justice Department has vigorously opposed this move, it will be interesting to see whether the Trump administration adopts a different posture. In any event, the Tribe has raised serious questions about whether the Corps properly evaluated threats to its water supply intake and alternative routes that would lessen the risk. One of the allegations invokes environmental justice concerns arguing that the project was re-routed away from Bismarck in response to concerns about threats to its water supply. The Tribe has also raised novel questions about whether granting the easement would violate treaty rights under the 1851 Treaty of Fort Laramie.

At the hearing on DAPL’s motion for summary judgment, Judge Boasberg acknowledged the uncertainty about what the new administration might do but observed that “It’s not my business to guess.” For now the rest of us will have to guess at what the final outcome of this epic confrontation that has galvanized indigenous peoples from all over the world will be.

The Drama of the Massachusetts Power Wars

Posted on September 20, 2016 by Lisa C. Goodheart

Sometimes the most extraordinary things in the world of law and government get served up in the most undramatic way.  If you aren’t paying attention to the back story, and you don’t know the context, you might almost miss the action.  And future generations, seeking to decipher history, might all too easily overlook the most crucial and delicate tipping points.  This fact of life has been emphatically proven by the Pulitzer Prize-winning cultural juggernaut that is the Broadway musical Hamilton, by Lin-Manuel Miranda.  In addition to telling the very personal story of one of our nation’s founding fathers, Hamilton shows, in brilliant style, that even seemingly dry and technical matters such as the origins of our nation’s financial system, and the logic underlying the complex apparatus of modern administrative agencies, are actually fueled by passion, dripping with drama, and world-changing in consequence.  You just need to know whose story to tell, and how to read between the lines.

A recent case in point:  On August 17, 2016, the Massachusetts Supreme Judicial Court issued its decision in Engie Gas & LNG LLC v. Department of Public Utilities (Docket SJC-12051/SJC-12052).  Environmental and energy lawyers readily recognized the decision as an important one, but it’s easy to see how future generations, far from the current action, might miss the excitement here.  The question in Engie was whether the state utility department could approve ratepayer-backed, long-term contracts by electric distribution companies for the purchase and resale of interstate natural gas pipeline transportation capacity. 

To answer that question, the Engie court addressed, among other things, (1) the propriety of the appeal in the absence of a final adjudicatory order; (2) the pertinent standard of review, (3) the canon of statutory construction reddenda singula singulis, a.k.a. the rule of the last antecedent (which might also be merely a grammar rule), (4) whether ambiguity should or could be found in statutory language that neither expressly forbids nor clearly permits the proposed departmental action, (5) the parties’ competing interpretations of the legislative history, (6) the overall statutory framework, (7) the necessity of a “distributive reading” of the terms “gas or electric,” (8) the limitations of the deference to be afforded to an agency’s reasonable interpretation of a statute it is charged with enforcing, where the interpretation represents a significant departure from the agency’s own record of administering the pertinent statute, (9) the importance of ensuring consistency with the fundamental policy embodied in the legislation at issue, and (10) the interpretive pertinence of subsequent, separate legislation. Phew! 

Ultimately, the SJC rejected the utility department’s determination of the scope of its authority, and concluded that the pertinent statute forbade the imposition on electricity ratepayers of the costs of new natural gas supply infrastructure.  Like many judicial opinions concerning complex environmental and energy issues, the Engie decision has a sober logic that makes it seem unsurprising, correct, and even almost easy.  But wait – what just happened here? 

Ladies and gentlemen, we have an affair of honor!  One dueling party and its seconds, the state’s public utility department and electric distribution companies, contend that the policy choice by our state government’s executive branch to expand natural gas pipeline capacity is a sensible way of meeting our very real need for reliable electrical power.  Even as we move toward a more sustainable future of renewable energy, they say, we still depend urgently on new supplies of natural gas, obtained by means of fracking, to provide the essential “bridge” fuel, and we can all get ready for price spikes and power blackouts each winter if we ignore that reality.  It’s an emergency, and our future is at stake!  

The other dueling party and its seconds, who include the Massachusetts Attorney General and a coalition of environmentalists, land conservationists, and consumer and taxpayer advocates, insist that we don’t need any new natural gas infrastructure at all.  And if we don’t push much faster and harder for a larger-scale shift to more environmentally sustainable ways to support our energy consumption, they say, we are fiddling while Rome burns. It’s an emergency, and our future is at stake!

Grappling with the fine points of utility infrastructure regulation and financing may make some people’s eyes glaze over.  To which I say, are you kidding?  I can’t think of another moment when our courts were faced with environmental and energy law disputes more laden with tension and drama.  This is the high-stakes, heroic, dueling-on-the-ledge stuff on which our future history depends.  It could practically be a Broadway musical.

HEY, JUDGE SKAVDAHL - DON’T THE INTERESTS OF THE UNITED STATES INCLUDE PROTECTING GROUNDWATER ON ITS OWN LAND?

Posted on July 6, 2016 by Karl Coplan

The Mined Lands Act directs the Bureau of Land Management to issue regulations governing mining on public lands for, inter alia, “the protection of the interests of the United States, . . . and for the safeguarding of the public welfare.” More recently, the Federal Lands Policy Management Act specifically directs the BLM to take environmental issues into account in promulgating regulations governing the use of federal lands, that is, to manage federal lands in a way,

That will protect the quality of scientific, scenic, historical, ecological, environmental, air and atmospheric, water resource, and archeological values,

Last year, acting under these statutory authorities, the BLM issued regulations governing fracking on federal lands, which required federal lessees to disclose chemicals in their fracking fluids and to take measures to prevent well leakage.  This week, the Federal District Court for the District of Wyoming struck down these regulations as exceeding BLM’s authority to regulate mining on public lands. The Court purported to find this result under the Chevron step I analysis, i.e., finding specific congressional intent that the Bureau of Land Management does not have authority to protect groundwater on public lands.  Despite the broad statutory authorities cited above, the Court found that the Energy Policy Act of 2005, which specifically exempted fracking from EPA regulation under the Safe Drinking Water Act, evidenced Congressional intent that no federal agency has jurisdiction to regulate fracking activities, even on federal lands.

This ruling ignores the obvious difference between EPA regulation to protect groundwater generally under the Safe Drinking Water Act and actions by the BLM to protect the United States’ own properties that are subject to federal leases.  FLPMA specifically directs BLM to take measures to protect ecological interests in managing federal lands, and it seems inappropriate for a federal court to second guess BLM’s balance between resource extraction and groundwater protection.  The United States in general has very broad authority to regulate activities on its own land, and Congress’ decision to exempt fracking on private lands from EPA regulation can’t possibly be read as specific Congressional intent to preclude BLM from protecting groundwater on lands owned by the United States. On another level, this decision reflects a concerning trend towards judicial activism tearing down the Obama administration’s invocation of statutory authorities to advance environmental protection in the face of a hostile Congress – witness the Supreme Court’s stay of EPA’s Clean Power Plan, and the Sixth Circuit’s stay of the Clean Water Rule.              

Environmental law got its start when courts, like the Second Circuit in Scenic Hudson Preservation Conference v. Federal Power Commission, read broad statutory grants of regulatory authority to include environmental protection.  This decision by the District of Wyoming departs from that tradition.  The BLM plans to appeal.

Fracking Ban Banned

Posted on June 24, 2015 by Jeff Civins

The State of Texas took swift action to block a municipality seeking to limit fracking.  In response to a 59 to 41% vote of its citizens, in November 2014, the City of Denton adopted an ordinance banning the well completion activity of hydraulic fracturing or fracking, which involves the high pressure injection of water, with proppants and small amounts of chemicals, into tight formations thousands of feet below surface to create and prop open fractures that facilitate the flow of oil and gas. 

Hours after the ordinance’s adoption, the Texas General Land Office and Texas Oil & Gas Association filed suit in Denton County district court, seeking to declare the ban invalid.  They argued that the ordinance intruded on powers granted by the legislature to the Railroad Commission of Texas and the Texas Commission on Environmental Quality and thus was preempted by state law.  On May 18, 2015, before the court could rule on the law suit, Texas Governor Greg Abbott signed into law House Bill 40, which removes the authority of Denton and all other Texas municipalities to regulate not only fracking, but also all other oil and gas operations.  On June 17, 2015, in recognition of House Bill 40, Denton’s City Council voted to amend its ordinance by repealing it in its entirety.  

In seeking to reconcile the interests of those concerned with state government intruding on local rule with the interests of mineral owners and their lessees concerned with intrusive governmental restrictions on the use of their property, House Bill 40’s approach arguably was solomonesque.  In just 3 pages, the bill allowed cities, under certain circumstances, to regulate above ground activities related to oil and gas operations, but barred them from regulating oil and gas operations per se, reserving that regulation to the state. 

House Bill 40 declares that oil and gas activities are subject to the exclusive jurisdiction of the state, but clarifies that municipalities may adopt an ordinance that regulates above ground activities related to oil and gas operations, including ordinances governing fire and emergency response, traffic, lights, or noise, or imposing reasonable setback requirements.  The statute requires, however, that such an ordinance be “commercially reasonable,” not effectively prohibit an “oil and gas operation” conducted by a reasonably prudent operator, and not otherwise be preempted by state or federal law.  The statute defines the quoted terms.  It also creates a presumption that an ordinance is considered prima facie to be commercially reasonable if it has been in effect for 5-years and has allowed oil and gas operations to continue during that period.  

The stated concerns of the Denton ordinance generally related not to fracking, but rather to the above ground impacts of the oil and gas activities it facilitated, that is, things like traffic, lights, noise, and safety concerns.  The Denton ordinance did express concern with the potential for contamination of drinking water aquifers, but studies, including EPA’s recently released draft assessment on fracking, generally have shown that concern to be related more to oil and gas activities generally than to the subsurface migration of contaminants associated with fracking per se.  

Even in fossil energy friendly Texas, fracking can be controversial.  The new state statute allows municipalities to address above ground effects related to oil and gas operations, subject to certain limits to be more fully fleshed out, but reserves to the state the power to regulate oil and gas operations per se.  This approach preserves local authority over things that arguably mattered most to the citizens of Denton, while preserving regulation of oil and gas development by the agencies that have historically regulated them.

USEPA Finds No Systemic Contamination of Drinking Water from Hydraulic Fracturing

Posted on June 23, 2015 by Chester Babst

On June 4, 2015, the U.S. Environmental Protection Agency released a draft “Assessment of the Potential Impacts of Hydraulic Fracturing for Oil and Gas on Drinking Water Resources,” which finds no evidence that hydraulic fracturing activities have led to widespread, systemic impacts on drinking water supplies.  According to the draft assessment, between 2000 and 2013, there were an estimated 9.4 million people living within one mile of a well that was hydraulically fractured.  The draft assessment supports the assertion that state agencies, as the primary regulator of oil and gas development in the United States, are effectively governing hydraulic fracturing activities by the industry.  

Initially announced by USEPA in March 2010, the study has a broad scope.  USEPA reviewed each stage of the “hydraulic fracturing water cycle” – including water acquisition, chemical mixing, well injection, flowback and produced water recapture, and wastewater treatment and disposal – to assess for any widespread, systemic impacts on the quality or quantity of drinking water resources.  The agency also used an expanded definition of drinking water resources that includes currently undrinkable saline aquifers that might be desalinated for consumptive use in the future.  

Although the draft assessment acknowledged that hydraulic fracturing could potentially contaminate drinking water resources, USEPA found that the actual occurrences of such impacts were “small compared to the number of hydraulically fractured wells.”  The risks related to hydraulic fracturing activities identified in the draft assessment included:  water withdrawal in times of low availability; spills of fracturing fluids and produced water; fracturing directly into underground drinking water resources; below ground migration of liquids and gases; and inadequate treatment and discharge of wastewater.  

The draft assessment noted that the primary means of disposing of wastewater from hydraulic fracturing activities conducted in the United States is underground injection wells.  However, one notable exception to this finding is in the Marcellus shale play, where USEPA found that most wastewater is reused by industry.  The high percentage of reuse and recycling of wastewater in the Marcellus shale play is a practice that industry has long asserted is a valuable means of reducing the amount of freshwater needed for well development activities.

USEPA is expected to publish a final assessment after the completion of a notice and comment period, which is currently open and concludes on August 28, 2015, and a review of the draft assessment by the Science Advisory Board Hydraulic Fracturing Research Advisory Panel.  The Panel has scheduled a public meeting to conduct a review of the draft assessment from October 28 to October 30, 2015, and teleconferences to discuss the draft assessment on September 30, October 1, and October 19, 2015.

OKLAHOMA SURPASSES CALIFORNIA IN EARTHQUAKES

Posted on May 1, 2015 by Mark Walker

Oklahoma has quietly earned the dubious distinction of earthquake capital of the Lower 48, having surpassed California last year.  In 2014, Oklahoma had 585 earthquakes of magnitude 3.0 or higher compared to California’s 180.  The cause of this dramatic rise in seismic activity, and whether it is induced by human activity, particularly by oil and gas operations, has been the subject of much discussion and scientific study.

When I last blogged about this subject (June 2014) the U.S. Geological Survey (USGS) and the Oklahoma Geological Survey (OGS) had just issued a joint warning of the increased risk of a M5.5 or greater earthquake in central Oklahoma, stating that the science suggests that a “likely contributing factor” to the increase in earthquakes is injection of oilfield wastewater into deep geologic formations.  Despite several sensational articles implying that industry has exercised undue influence over the OGS and its scientific conclusions, on April 21, 2015, the OGS issued a statement in which it reiterated the view that “the primary suspected source of triggered seismicity is…from the injection/disposal of water associated with oil and gas production…the OGS considers it very likely that the majority of recent earthquakes…are triggered by the injection of produced water in disposal wells . . . .”

On April 23, 2015, the USGS released a new report which again noted the connection between earthquakes and certain deep disposal wells, but concluded that, “induced seismicity does not occur near every disposal well, so it is important that we continue to study and learn more about how these earthquakes are generated…These changes may be related to oil and gas exploration activity but they also may depend on physical processes, which are poorly understood…many questions remain”.

As the science develops, the Oklahoma Corporation Commission (OCC), which regulates oil and gas wastewater disposal wells in Oklahoma under the SDWA Underground Injection Control program, has taken an aggressive approach.  The OCC has identified “areas of interest”, which are areas within 10 kilometers of any earthquake swarm.  Eight areas of interest encompassing approximately 112 square miles have been identified.  On March 12, 2015, the OCC sent letters to operators who dispose of oilfield wastewater into the deep Arbuckle formation within these areas of interest directing that they provide information from which it can be determined whether such disposal is in communication with the underlying crystalline basement rock.  If it is, the OCC is requiring that disposal into the Arbuckle be discontinued.  Failure to produce the information results in immediate curtailment of disposal by 50%.

With the downturn in crude oil prices, most companies have dramatically cut back on drilling and completing new wells.  This downturn itself may provide a scientific opportunity to see if reduced oilfield activity produces fewer earthquakes in Oklahoma.

To Frack or Not to Frack – Who Should Answer the Question?

Posted on January 27, 2015 by Catherine R. McCabe

On December 17, 2014, New York State’s Department of Environmental Conservation (DEC) announced that high volume hydraulic fracturing to recover natural gas (a/k/a “fracking”) will be banned on a state-wide basis.  Is this good law, good science, good policy (or politics)?  Perhaps the most important question is who should decide – states or local governments?  

The DEC’s decision to ban fracking is based on the recommendation of the state’s Department of Health (DOH), which just completed a two-year study of the state of the science on the environmental and public health risks posed by fracking. DEC requested this study after it received over 13,000 public comments on its 2009 draft programmatic environmental impact statement (EIS) for a proposed fracking permit program in New York State.

The DOH study concluded that the cumulative body of scientific information demonstrates that there are “significant uncertainties” about the environmental and public health risks of fracking --- including air pollution, drinking water contamination, surface water contamination, earthquakes, and community impacts such as increased vehicle traffic, noise and odor problems.  The DOH concluded that “it would be reckless to proceed in New York until more authoritative research is done.” 

In accepting DOH’s recommendation, DEC noted that its own review had identified dozens of potentially significant adverse impacts from fracking, and concluded that “the risks substantially outweigh any potential economic benefits” from fracking.  The Commissioner of DEC directed staff to complete the final programmatic EIS for fracking early this year, after which the fracking ban will be put into place.  (No fracking has been permitted in New York State in the interim.)

The DEC decision follows a June 2014 ruling by the New York’s highest court affirming local governments’ authority under the state’s constitution and statutes to use zoning laws to ban fracking in their jurisdictions.

There are good policy reasons for leaving the decision of whether to allow fracking up to local communities.  After all, they bear most of the environmental and potential public health risks that fracking poses. Local communities may be in the best position to decide whether those risks, or even perceived risks, are worth the economic benefits that fracking development can bring to local economies.  The Town of Dryden and Cooperstown cases make it clear that citizens and neighbors do not always agree on the right outcome for their communities.

But many of the local controversies seem to be based, at least in part, on citizens’ differing perceptions of the nature and level of risk that fracking poses to their environment and health.  Surely, the scientists in the state departments of health and environmental conservation are in a better position to evaluate that risk than local governments or individual citizens.  By making this science-based decision on behalf of all its citizens (whether you agree with it or not), New York State should be given credit for stepping up to perform one of the most basic responsibilities of state government – protecting the public health.   

Ozone, Oil and the Uintah Basin

Posted on November 6, 2014 by James Holtkamp

Ozone is the quintessential ambient pollutant.  It is the result of complicated chemical reactions involving NOx and VOCs, sunlight, humidity and temperature.  It is primarily an urban pollutant, because that is where most of the NOx and VOCs are emitted, but it is also a regional challenge particularly in the eastern U.S. 

The Uintah Basin of eastern Utah is the quintessential Western U.S. Empty Quarter.  It is sparsely populated and windswept, and is a high-altitude desert.  It is home to the Ute Indian Tribe, and the greater part of the Basin is Indian Country for purposes of environmental regulation, meaning EPA – not the State of Utah – has regulatory authority.  The Basin is home to extensive reserves of oil, gas, oil shale and oil sands.

If the Basin is a dry, windy environment, then why have ambient ozone levels spiked dramatically in the Basin the last few years, during the winter, no less?  It turns out that ozone is not only created during hot muggy summer days, but when VOCs build up during winter inversions with a lot of sun and snow.  Periodic winter high pressure systems trap the VOCs and the ozone appears.  EPA has classified the Basin as “unclassifiable” for ozone and has denied an administrative petition to classify the area as nonattainment.  That denial is currently under review at the D.C. Circuit.

So where is this aberrant ozone coming from?  Although oil and gas has been produced in the Basin for decades, the fracking boom has swept into Eastern Utah with a vengeance, and the number of wells and associated facilities has mushroomed.  Utah DEQ, EPA Region 8, the counties, the Tribe, NGOs and the operators are jointly working on strategies to mitigate the problem, including newly promulgated state rules requiring retrofit of existing wells with equipment to reduce VOCs.  These efforts are complicated, however, by the jurisdictional differences over air issues as between Utah DEQ and EPA and the results are sometimes a bit clumsy.  But all of the stakeholders see the need to address the ozone issue proactively, and the end result will hopefully be a model for addressing similar issues in North Dakota, western Wyoming and Western Colorado.

Texas Railroad Commission finalizes proposal to require seismic surveys

Posted on November 4, 2014 by Jeff Civins

Over 30 earthquakes jolted the area in and around the City of Azle, Texas —20 miles north of Fort Worth—last November through January. In response to citizen concerns, the Texas House Committee on Energy Resources created a Subcommittee on Seismic Activity to investigate whether there was a link between earthquakes and increased oil and gas production and disposal wells.  On August 12, the Railroad Commission of Texas, with support from both  the Texas oil and gas industry and environmental groups, proposed rules that would require companies to do a seismic survey before obtaining permits for new oil and gas disposal wells—so-called Class II injection wells.  On October 28, 2014, the Railroad Commission unanimously voted to finalize that proposal.

Presently, the state has more than 3600 active commercial injection wells used for the disposal of oil and gas wastes. The rules require applicants for new oil and gas disposal wells to provide additional information, including logs, geologic cross-sections, and structure maps for injection well in an area where conditions exist that may increase the risk that fluids will not be confined to the injection interval. Those conditions include, among other things, complex geology, proximity of the base rock to the injection interval, transmissive faults, and a history of seismic events in the area as demonstrated by information available from the USGS. The rules also clarify that the Railroad Commission may modify, suspend, or terminate a permit if fluids are not confined to the injection interval, that is, if it poses a risk of seismic activity. The effect of these rules will be not only to regulate oil and gas disposal activities to address potential seismic effects, but also to generate data that may be useful in determining whether and to what extent to further regulate those activities.  The rules also may serve as a model for other states concerned about the seismic effects of oil and gas waste disposal.

Texas Railroad Commission on track to address quakes

Posted on August 28, 2014 by Jeff Civins

Over 30 earthquakes jolted the area in and around the City of Azle, Texas —20 miles north of Fort Worth—last November through January.  In response to citizen concerns, the Texas House Committee on Energy Resources created a Subcommittee on Seismic Activity, to investigate whether there was a link between earthquakes and increased oil and gas production and disposal wells.  In addition, the Railroad Commission of Texas—the agency with jurisdiction over oil and gas activities in Texas--hired a state seismologist and, on August 12, approved a draft of proposed rules that would require companies to do a seismic survey before obtaining permits for new oil and gas disposal wells—so-called Class II injection wells.  Representatives of both the Texas oil and gas industry and environmental groups are supportive of this proposal.

Texas, in particular, has been part of the tremendous increase in oil and gas exploration and production activity nationwide through hydraulic fracturing and horizontal drilling.  Although “fracking” per se does not appear to result in quakes, there is a concern that related disposal well injection might.  The Railroad Commission proposal is intended to address this concern.  Some have suggested the Texas proposal could be a model for other states.

The proposal would require applicants for oil and gas injection wells used for disposal to provide additional information, including logs, geologic cross-sections, and structure maps for injection well in an area where conditions exist that may increase the risk that fluids will not be confined to the injection interval.  Those conditions include, among other things, complex geology, proximity of the base rock to the injection interval, transmissive faults, and a history of seismic events in the area as demonstrated by information available from the USGS.  The proposal also would clarify that the Commission may modify, suspend, or terminate a permit if fluids are not confined to the injection interval, that is, if it poses a risk of seismic activity.  Presumably, the effect of the proposal, if promulgated, will be not only to regulate oil and gas disposal activities to address potential seismic effects, but also to generate data that may be useful in determining whether and to what extent further regulation is needed.

Oklahoma Rattled by Earthquake Warning

Posted on June 23, 2014 by Mark Walker

            On May 2, 2014, the U.S. Geological Survey and the Oklahoma Geological Survey issued a Joint Statement advising residents that the rate of earthquakes in Oklahoma had increased by 50% in the last seven months  - “significantly increasing the chance for a damaging magnitude 5.5 or greater quake in central Oklahoma.”  This is the first such advisory for a state east of the Rockies.

            The Joint Statement was accompanied by the following graph which illustrates the dramatic rise in Oklahoma earthquake activity:

            What accounts for this increase?  The USGS’s statistical analysis indicated that the increase did “not seem to be due to typical random fluctuations in natural seismicity rates.”  Instead, the “analysis suggests that a likely contributing factor to the increase in earthquakes is triggering by waste water injected into deep geologic formations.” 

            In November, 2013, the Groundwater Protection Council issued a White Paper summarizing its special session on “Assessing & Managing Risk of Induced Seismicity by Underground Injection.”  The paper notes that there are approximately 150,000 UIC Class II permitted injection wells in the U.S., about half of which are disposal wells that inject into non-producing formations.  Yet the number or felt earthquakes suspected to be associated with waste water disposal is very small (the White Paper focused on 8 examples), meaning induced seismicity from waste water disposal is “quite rare.”  The concern seems to be focused around deep well injection into non-sedimentary basement rock or disposal in close proximity to critically stressed faults.

            Earlier this year 14 Arkansas families filed lawsuits against two energy companies alleging that waste water disposal caused earthquake “swarms” in Arkansas in 2010 and 2011 which injured the plaintiffs’ property.  Those swarms resulted in the plugging of several disposal wells and the imposition of a regulatory moratorium on new Class II disposal wells near the Guy-Greenbrier Fault.

            The Oklahoma Geological Survey has developed a draft set of best practices for siting injection wells which seek to avoid placement of injection wells near known faults and injection into deep basement rock.  The Oklahoma Corporation Commission is supporting research and the expansion of the network of Oklahoma seismic monitoring stations, and is following a stoplight approach to permitting new disposal wells which evaluates risk on a site-by-site basis.

 

P.S.      While writing this I experienced two earthquakes (4.3 and 2.7 magnitude) at my home in Edmond, Oklahoma, within a one hour span.  There have been seventeen earthquakes in Edmond within the past 8 days.

Jurisprudential Fracture Chiropracture: Pennsylvania Justices Make a Salutary Adjustment of Erroneous Precedent

Posted on January 28, 2014 by Deborah Goldberg

On December 19, 2013, in Robinson Township v. Pennsylvania, a three-justice plurality of the Pennsylvania Supreme Court revived the previously moribund Environmental Rights Amendment of the Pennsylvania Constitution, which provides: 

The people have a right to clean air, pure water, and to the preservation of the natural, scenic, historic and esthetic values of the environment.  Pennsylvania’s public natural resources are the common property of all the people, including generations to come.  As trustee of these resources, the Commonwealth shall conserve and maintain them for the benefit of all the people.

Pa. Const. art. 1, § 27.  According to the plurality, lower courts interpreting the provision had been disregarding the constitutional text in favor of a judge-made rule under which the Environmental Rights Amendment offered protection only through implementing legislation.  The plurality noted that when “prior decisional law has obscured the manifest intent of a constitutional provision . . . [,] adjustment of precedent is . . . salutary.”  Slip op. at 64.

The realigned jurisprudence, under the plurality’s interpretation, now recognizes a directly enforceable right to clean air, pure water, and to the preservation of the natural, scenic, historic and esthetic values of the environment, which limits state power; common ownership of public natural resources, meaning all resources that “implicate the public interest” (air, water, wild flora and fauna) but are outside the scope of purely private property; and a trustee relationship, under which both state and local government must manage those resources for the benefit of “all the people,” including future generations.  The trust provision may be enforced by “citizen beneficiaries. . . in accordance with established principles of judicial review,” id. at 85, as well as by municipalities on behalf of their citizens. 

Relying exclusively on the trust provision, the plurality ruled that provisions of a state law that purported to preempt local environmental regulation of oil and gas operations and that required localities to authorize drilling in all zoning districts violated the Environmental Rights Amendment.  A concurring opinion by one justice, based on substantive due process, resulted in a 4-2 decision invalidating those provisions.  The decision thus transforms a state ceiling on environmental regulation of the oil and gas industry into a floor.  

In more than 70 pages addressed to the Equal Rights Amendment, the plurality dropped tantalizing hints about the further potential reach of its analysis.  The opinion suggests that government actions imposing “much heavier environmental and habitability burdens” on some properties and communities than on others—i.e., causing environmental injustice—violates the trustee’s obligation to manage the trust corpus for the benefit of “all the people.”  Under the plurality’s interpretation, moreover, respect for the rights of future generations requires that the state’s power to promote prosperity “be exercised in a manner that promotes sustainable property use and economic development.”  Id. at 79.  Whether Pennsylvania’s judiciary is ready for the new jurisprudence of environmental rights contemplated by the plurality remains to be seen.  A motion for reconsideration is pending before the Supreme Court.

Strange Bedfellows: Environmental Defense Fund Collaborating with Energy Companies!

Posted on October 31, 2013 by LeAnne Burnett

Just like claims of fire from garden hoses and water contamination from hydraulic fracturing (“frack”) fluids, engineering estimates of the magnitude of methane emissions from natural gas production have varied widely, leading natural gas production opponents to face-off with energy companies.  Fortunately concrete steps are now being taken to bring science to bear to help narrow the gap between the two sides.  These steps come in the form of a joint project that actually measures methane emissions.  Imagine! Cooperation, collaboration, and ditching polarizing polemics to find out what is really going on! 

The first of 16 planned studies directly measured methane emissions at natural gas production sites in the United States.  The Proceedings of the National Academy of Sciences has recently published the first results.  These studies represent an organized effort among the Environmental Defense Fund, nine participating energy companies (Anadarko Petroleum Corporation; BG Group plc; Chevron; Encana Oil & Gas (USA) Inc.; Pioneer Natural Resources Company; SWEPI LP (Shell); Southwestern Energy; Talisman Energy USA; and XTO Energy, a subsidiary of ExxonMobil), an independent Scientific Advisory Panel and a study team from University of Texas, Cockrell School of Engineering.  Dr. David Allen of the University of Texas at Austin led the study effort.  Previous greenhouse gas emission analyses have been based on either engineering estimates or measurements made 100 meters to a kilometer downwind of the well site.  The studied methane emissions are associated with 190 sites where unconventional natural gas production, specifically fracking, is used. 

Uncommon features of this study are first and foremost the unique and perhaps anomalous partnership between the Environmental Defense Fund and energy companies, particularly given the adversarial relationship that has historically characterized the relationship between the environmental community and the energy industry.   Second, the energy companies provided the study team direct access to 190 natural gas production sites so measurements could be taken directly at the source.  Third, for several source categories, such as well completion operations, these data are the first reported direct, on-site methane emission measurements.  The full data set, along with significant additional information, is now available online.

As an idea of one metric, the Environmental Protection Agency (“EPA”) current national inventory estimates well completion emission reductions at roughly one-half of potential emissions.  This new study shows net or measured emissions for the total of 27 completions were 98% less than potential emissions.  The large difference between the net emissions measured by the study and the net emissions estimated in the national inventory is due to several factors, including that emerging regulatory requirements and improved operating practices meant 67% of the wells sent methane to sales or control devices.  For those wells with methane capture or control, 99% of the potential emissions were captured or controlled.  And the wells with uncontrolled venting of methane had much lower than average potential to emit (0.55% of the average potential to emit in the national inventory).

Pragmatic environmentalists should welcome the studies as an aid to balanced decisions about energy choices facing the United States.  Both gas boom critics and advocates now have rigorous scientific analysis to work with when considering regulation.  Armed with knowledge rather than speculation, what a novel way to approach policy and regulation!

Shoot First -- Ask Questions Later

Posted on September 26, 2013 by Mark Walker

“Shoot first, ask questions later” is how Congressman Chris Stewart described EPA’s efforts to link groundwater contamination to hydraulic fracturing.  Stewart is the Chair of the Environmental Subcommittee of the House Committee on Science, Space and Technology, chairing the July 24 hearing on “Lessons Learned:  EPA’s Investigations of Hydraulic Fracturing.”  Specifically at issue was the EPA’s investigation in Pavillion, Wyoming.

In December, 2011, the EPA issued a “draft” report which concluded that hydraulic fracturing in the Pavillion, Wyoming gas field had caused pollution of the deep drinking water aquifer.  The draft report was based upon sample results from two EPA monitor wells and was issued without peer review or stakeholder input.

There were serious flaws with EPA’s work.  For starters, EPA failed to complete the monitor wells according to its own guidelines.  Annular sealants were not properly installed, allowing cement to impact the water quality.  A landowner’s complaint that EPA had an anti-freeze leak during drilling operations was not disclosed in the draft report.  EPA exposed the wellbores to painted low-carbon steel casing and welding materials, which are known to contain various organic and metal compounds, yet the report inaccurately stated that stainless steel casing had been used.  Moreover, several of the constituents which the EPA attributed to hydraulic fracturing fluids (e.g. glycols, 2-butoxyethanol and phenols) are known to be associated with the high pH cement that the EPA used to complete the wells.  The bottom line is that the EPA’s own operations introduced the contaminants that it blamed on hydraulic fracturing fluids.

Subsequent testing by the USGS was unable to verify the EPA’s results.  The USGS was unable to find some of the compounds that EPA claimed were present, and other constituents were found at significantly lower levels.  The USGS was unable to sample one of the two wells due to improper well construction.

The EPA has now walked away from its flawed study, turning the entire investigation over to the State of Wyoming.  The EPA has stated that the draft report will not be peer reviewed or finalized, and that the results will not be used in its national hydraulic fracturing study.  Nevertheless, the EPA’s handling of Pavillion has cast doubt over the EPA’s national investigation of hydraulic fracturing intended to develop regulatory policy for unconventional reserves, causing Chairman Stewart to conclude, “given EPA’s rush to judgment in Wyoming…we should question whether the Agency’s ongoing study is a genuine, fact-finding, scientific exercise, or a witch-hunt to find a pretext to regulate.”

DOE Conditionally Approves Second Natural Gas Export License

Posted on May 30, 2013 by Deborah Jennings

On Friday, May 17, the Department of Energy (DOE) announced it had conditionally authorized Freeport LNG Expansion, L.P. and FLNG Liquefaction, LLC (collectively Freeport) to export domestically produced liquefied natural gas (LNG) to countries that do not have a Free Trade Agreement (FTA) with the United States from the Freeport LNG Terminal on Quintana Island, Texas.  This marks only the second time that the DOE has granted a natural gas export license to non-FTA countries, and only the first after DOE ceased action on all applications pending a study of the economic impacts of LNG exports.  The Freeport approval marks a noticeable, but likely incremental shift in US policy towards increased export of natural gas to non-FTA nations, opening up new markets for the boom in domestic natural gas production.

The DOE rejected opponents’ arguments that the project would be inconsistent with the public interest.  Among other reasons, the DOE found that the proposed exports are likely to yield net economic benefits to the US, would enhance energy security for the US and its allies, and were unlikely to affect adversely domestic gas availability, prices or volatility. Accordingly, DOE conditionally granted Freeport’s Application, subject to satisfactory completion of an environmental review pursuant to the National Environmental Policy Act (NEPA) by the Federal Energy Regulatory Commission (FERC) and DOE.  FERC will serve as the lead NEPA review agency. DOE will subsequently reconsider the conditional order in light of the NEPA analysis led by FERC and include the results in any final opinion and order.

Environmental issues will now take center stage as interested stakeholders seek to influence the government’s conclusions in the NEPA review.  In support of its application, Freeport extolled the following environmental benefits of the project:

•    Natural gas, the cleanest burning fossil fuel, would replace coal-fired power resulting in substantial reductions in greenhouse gas and traditional air pollutants. 
•    Compared to the average coal-fired plant, natural gas fired plants emit half as much carbon dioxide (CO2), less than a third of the nitrogen oxides, and one percent of the sulfur oxides. 
•    Natural gas, if used as a transportation fuel, also produces approximately 25 to 30 percent less CO2 than gasoline or diesel when used in vehicles, and is not a significant contributor to acid rain or smog formation.

Opponents of the project, however, are less convinced of its environmental benefits.  These include the Sierra Club, the Delaware Riverkeeper Network (consisting of 80 organizations), NRDC, among others.  Specifically, they assert that LNG exports will increase demand for natural gas, thereby increasing negative environmental and economic consequences associated with fracking, the process used for shale gas production.  They argue that the DOE’s two-part study of the economic impacts of LNG exports, upon which DOE relied in conditionally granting Freeport’s application, failed to consider the cost of the environmental externalities that would follow such exports, which include:

•    Environmental costs associated with producing more shale gas to support LNG exports;
•    Opportunity costs associated with the construction of natural gas production, transport, and export facilities, as opposed to investing in renewable or sustainable energy infrastructure;
•    Costs and implications associated with eminent domain necessary to build new pipelines to transport natural gas; and
•    Potential for switching from natural gas-fired electric generation to coal-fired generation, if higher domestic prices cause domestic electric generation to favor coal-fired generation at the margins.

Sierra Club and other organizations have previously challenged the adequacy of FERC’s and DOE’s NEPA determinations in other LNG export applications.  In the first LNG export license approval for Sabine Pass Liquefaction, LLC (DOE Docket. No. 10-111-LNG), Sierra Club, as an intervener in the FERC proceeding, challenged the adequacy of FERC’s NEPA compliance, and the lawfulness of the FERC’s determination to authorize the Project facilities. The FERC addressed these concerns and found that if a series of 55 enumerated conditions were met, the Project would not constitute a major Federal action significantly affecting the quality of the human environment. 

After FERC authorized the Liquefaction project, Sierra Club filed a motion to intervene out of time before DOE , again challenging FERC’s NEPA determinations.  DOE rejected Sierra Club’s motion, and granted the final order approving the LNG export on August 7, 2012.  Sierra Club subsequently sought a rehearing on the final order which was also rejected by the DOE in a January 25, 2013 order

Similarly, earlier this month, Sierra Club and other environmental organizations objected to the proposed Dominion Cove Point LNG export terminal in Maryland, arguing the project would harm the Chesapeake Bay’s economy and ecology, increase air pollution, and hasten fracking and drilling in neighboring states.  On May 3, 2013, the coalition filed public comments and a timely motion to intervene in the proceedings calling on FERC to conduct a thorough environmental review, or prepare an EIS, of the project.  The proposed terminal will be the only LNG export facility in the east coast, providing foreign markets with access to natural gas from the Marcellus Shale.

Energy Resources Exports: Good for America? Good for the Environment?

Posted on May 10, 2013 by Sheila Slocum Hollis

Proposals to export liquefied natural gas (“LNG”) produced in large part from shale gas recovered by hydraulic fracturing techniques or “fracing” continue the public debate about the desirability of exports of other energy resources.  This political, regulatory, environmental and trade debate engages powerful politicians, lobbyists, environmental groups, trade associations, developers, producers, state regulatory authorities, consultants, academics, and landowners, and a broad spectrum of the press and public. 

On its face, the notion of substantial exports of LNG to both countries with which the U.S. has free trade agreements (FTA) in place and those it does not, seems highly attractive.  Such exports would improve the balance of trade deficits, create new jobs associated with the production; and produce tax revenue.  And, from the broad environmental perspective, LNG exports would lower greenhouse gas emissions (GHG) in countries with heavy reliance now and in the future on coal or oil for electric generation, or in countries with need for replacement of nuclear facilities.

Query then, what are the factors that engender the impassioned debate on energy resource export policy?  Key are:  (1) fears of massive development of “frac” gas, freighted with concern over impacts on water, air, and use.  Analogous to the Keystone XL battle, another concern is development of the unconventional gas for the benefit of foreign interests, particularly those without an FTA in place with the U.S. (export to those countries with FTA agreements with the U.S. is deemed by law to be in the public interest).  (2) A second issue in contention on LNG is the impact on domestic energy prices if significant LNG exports limit availability of natural gas for domestic industrial and other uses.  (This issue harkens back to the energy crises of the 1970s when natural gas availability was tight and energy prices sky high.) 

So, although not explicitly an environmental-based objection, such opponents of LNG exports  find friendly bedfellows with the environmental objectors and the commercial interests concerned about their ability to rely upon and benefit from increased gas supply.  Industrial interests argue that stopping exports to non-FTA countries, particularly the insatiable Asian markets, will result in an industrial renaissance with jobs and development growing significantly.  And, some opponents of LNG exports to non-FTA countries ironically, (to this blogger at least) express little regard for overall environmental benefit to potential importing countries and thus the globe.  Rather, the impact on the United States from development of unconventionally sourced gas supply has been their focus point.  Yet, LNG is only part of the energy export debate.

Further complicating this analysis is the parallel potential increase in the export of U.S. coal to energy hungry nations, particularly in Asia.  As noted above, there is a broader questioning on the entire topic of U.S. energy resources exports: LNG, oil or refined products and coal.  In addition to the Keystone XL pipeline standoff, many environmentally oriented players (e.g., the Sierra Club) and political leaders have expressed reservations about the export of U.S. coal for two primary reasons – the impact on the U.S. of new infrastructure for storage, transportation and increased mining activities, and the increase in GHG emissions worldwide as a result of heavier coal-fired electric generation.  And in the past months, several proposed coal export projects have been scrapped. This energy export issue makes for a complicated stew of federal, local and regional politics.  What makes the entire public war of words (and the behind the scenes maneuvering) so fascinating is the question of who or what decides where and with what restrictions U.S. energy resources are to be marketed to the world – the federal agencies, the state and local governmental entities, or the market?  The next few months may provide guidance on LNG and perhaps the Keystone XL pipeline, however, the national and international implications of these decisions are so important that it is unlikely that peace will settle on these matters for decades.

Hydraulic Fracturing Fluid Balancing Act: Disclosure Versus Protection of Trade Secrets

Posted on March 7, 2013 by Linda Bullen

One of the many controversies surrounding hydraulic fracturing involves the protection of trade secrets in an evolving regulatory environment hungry for more information about every aspect of operations.  Regulators, litigants and the public press for disclosure of the composition of hydraulic fracturing fluids while manufacturers and operators resist full disclosure to protect proprietary formulas believed to be valuable secrets.  
 
In a pre-rulemaking decision draft of hydraulic fracturing regulations released on December 18, 2012, California addressed the tension between protecting trade secrets and the public's right to obtain information under California's Public Records Act ("Act").   Under the draft regulations, operators are not required to disclose the chemical composition of hydraulic fracturing fluid prior to drilling.  After fracking, operators must disclose the chemicals in their fracturing fluid by chemical family and by percent of the fluid.  Disclosure of precise chemicals and formulas is not required.  Operators must also provide contact information for the person or entity that possesses the information withheld as a trade secret.
 
The California draft regulations reflect a national trend.  Alaska, however, bucks this trend with draft regulations released in December which require full disclosure of each fluid additive type by chemical name, CAS registry number and concentration.  The issue is far from resolved and we can certainly expect more regulation and litigation.

FRACKING FRACAS IN A LOCAL LABYRINTH

Posted on February 19, 2013 by David Buente

Oil and gas development has traditionally been regulated by the states, and the majority of the states with viable shale reserves have adopted laws or regulations that directly address hydraulic fracturing.  However, several local governments have responded to concerns over potential health and environmental impacts by banning hydraulic fracturing within their jurisdictions.  To date, local bans have been enacted in Colorado, Maryland, New Jersey, New York, North Carolina, Ohio, Pennsylvania, and West Virginia.  In several cases these local bans have been challenged as being preempted by comprehensive state regulation of oil and gas development.  While there is very little appellate case law addressing the legality of local bans, two preemption cases are currently on appeal in New York.  Norse Energy Corp. USA v. Town of Dryden, No. 2012-1015 (N.Y. App. Div.); Cooperstown Holstein Corp. v. Town of Middlefield, No. 2012-1010 (N.Y. App. Div.).  In each case, the local trial court upheld a local ban on hydraulic fracturing, finding that preemption language in the state’s Oil, Gas, and Solution Mining Law (“OGSML”) did not apply to local land use regulations. 

Appellant natural gas developers rely primarily on the OGSML’s preemption provision, arguing that its broad language was intended to preempt all local ordinances and regulations related to oil and gas development unless they are directed toward local roads or real property taxes.  They also emphasize the broad scope of DEC’s oil and gas regulations which go beyond regulating how oil and gas development is conducted and also address spacing requirements and other limitations on where oil and gas development can occur.  Thus, they assert that any local ordinance that limits where hydraulic fracturing can occur is superseded by the OGSML.  The natural gas developers also argue that under implied preemption principles and New York’s constitutional limits on home rule authority, local governments cannot prohibit hydraulic fracturing because such regulations are in direct conflict with the OGSML’s provisions that dictate where oil and gas development can occur.  Finally, the natural gas developers argue that the trial court’s reliance on supersedure provisions from other statutes was misplaced due to key differences in the language of the supersedure provisions as well as the relatively broader scope of DEC’s regulatory authority under the OGSML.   

In contrast, the towns of Dryden and Middlefield assert that local prohibitions on hydraulic fracturing can be harmonized with the OGSML and its preemption provision.  They argue that the local bans on hydraulic fracturing were not enacted for the purpose of regulating natural gas development, but instead are part of comprehensive land use plans designed to protect the public health, safety, and general welfare of the local community.  Because the purpose of the prohibitions are not to “regulate” natural gas development, the towns contend that the prohibitions are not subject to the OGSML’s preemption provision.  Instead, they argue that such local bans can be harmonized with the OGSML by limiting the OGSML’s well spacing and setback provisions to those areas where oil and gas development is otherwise permitted.  Further, the towns argue that the trial court properly relied on earlier cases interpreting the supersedure provisions of the Mined Lands Reclamation Law (“MLRL”).  The towns assert that the supersedure provisions in the MLRL and OGSML are substantially similar and, therefore, should be given similar effect.  Thus, the towns assert that the prior cases that upheld local ordinances banning mining practices that were subject to regulation under the MLRL are binding precedent here. 

Oral argument has been scheduled for March 21, 2013 and a final decision is not expected for several months, at the earliest.  However, these cases will be closely watched in other jurisdictions where local bans on hydraulic fracturing have been enacted and where additional litigation is expected.  Given the diversity among state laws addressing both home rule authority and oil and gas development, the legality of local bans on hydraulic fracturing is likely to remain a hotly debated issue for several years to come, particularly as oil and gas development using hydraulic fracturing continues to expand to new shale reserves around the country.

EVOLVING CONCERNS OVER THE PRODIGIOUS VOLUMES OF WATER USED IN HYDRAULIC FRACTURING

Posted on October 31, 2012 by Michael Hardy

When hydraulic fracturing “exploded” in Pennsylvania and Ohio to unlock the huge reservoirs of natural gas buried thousands of feet below surface in the deep shale formations, the initial environmental concerns focused on the potential for contamination of drinking water supplies from the “fracking” fluids and methane, and from the induced seismicity from the disposal of the waste brines into the underground injection wells.

While those concerns remain, new issues have surfaced.  In Ohio’s Utica shale play, the deep wells typically consume 5,000,000 or more million gallons of water for the hydraulic fracturing and well completion.  Beginning in June, a number of political subdivisions and water districts saw the energy industry’s needs for water as a wonderful business opportunity.  For example, the Muskingum Watershed Conservancy District, whose eighteen counties cover 20 percent of Ohio, reportedly contracted with one exploration and production company to sell millions of gallons of water from one of its reservoirs in eastern Ohio.  The City of Steubenville signed a five year contract to supply as much as 700,000 gallons a day from a reservoir that holds water from the Ohio River.  Newspaper reports at the time mentioned monthly payments to Steubenville on the order of $120,000.  The Buckeye Water District enjoyed a seven-month windfall of $24,000 per month for sales of water to a large drilling firm. Even the Ohio Department of Natural Resources weighed possible plans to grant drilling companies access to state-held reservoirs, lakes and streams.

But the public announcement of these water supply contracts produced significant public backlash.  The reaction to the plans of the Muskingum Watershed Conservancy District, for example, prompted a reversal of the sales, and lead to a moratorium pending completion of an independent water availability study by the U.S. Geological Survey and an updating of the District’s water supply plan with input from the new study.  Low stream flows in the Susquehanna River watershed in Pennsylvania lead the Susquehanna River Basin Commission to suspend 57 approved water withdrawals by gas drillers and other industrial users.

Perhaps in response to the public outcry over the potential impact on water resources, the Ohio General Assembly passed wide-ranging legislation to deal with the growth of shale gas exploration in Ohio.  One of the features of that bill requires drillers to disclose their water source and the likely volume of water for well completion.

The link to that legislation is here: 
http://www.legislature.state.oh.us/bills.cfm?ID=129_SB_315

In another piece of legislation, the Ohio General Assembly adopted a measure to regulate the withdrawal of water from the Lake Erie watershed, effectively precluding the use of Lake Erie watershed waters for hydraulic fracturing in the counties where the drilling is occuring because they are outside the watershed.

The legislation on the use of Lake Erie water can be found at this link:
http://www.legislature.state.oh.us/bills.cfm?ID=129_HB_473

Even with these safeguards, groups like the National Wildlife Federation urge the adoption of even stronger rules on the use of water for hydraulic fracturing.  With the projected exponential growth of shale gas drilling, there will be continuing efforts to regulate the use of water, and the encouragement for water recycle and reuse, for hydraulic fracturing.