28 June 2017

Sidley Shale and Hydraulic Fracturing Report

Vol. 6, No. 26

Topics discussed in this week’s Report include:

  • EPA Inspector General to review methane emission estimates from the oil and gas sector.
  • Texas: Researchers concluded road damage among most significant effects of hydraulic fracturing.
  • Pennsylvania: Supreme Court limited state spending of oil and gas proceeds.
  • Pennsylvania Supreme Court affirmed decision requiring evaluation of environmental effects of proposed oil and gas wells.

Federal

EPA Inspector General to review methane emission estimates from the oil and gas sector. On June 21, the U.S. Environmental Protection Agency (EPA) Inspector General issued a memorandum announcing plans to evaluate EPA’s estimates for methane emission from the oil and natural gas sector. Specifically, the Inspector General intends to evaluate EPA’s reliance on 2013 and 2014 studies of methane emissions conducted by the Environmental Defense Fund and University of Texas – Austin, which concluded that methane emissions from hydraulically fractured wells could be reduced by 99 percent. EPA relied on the studies to support new source performance standards for methane emissions from the oil and natural gas sector under Section 111 of the Clean Air Act. EPA is now reconsidering those regulations.

States

Texas: Researchers conclude road damage among most significant effects of hydraulic fracturing. A yearlong study conducted by the Academy of Medicine, Engineering, and Science of Texas concluded that road damage is among the most significant effects of shale oil and gas development in Texas. The academy evaluated the oil and gas industry’s impact in a wide variety of areas, including road damage and traffic fatalities, seismic activity, air quality, water quality, habitat fragmentation and wealth distribution. The report shows that wells require between 988 and 1,708 loaded truck trips over their life cycles and concluded that truck traffic causes between $1.5 billion and $2 billion per year in road damage along with $1.5 billion to $3.5 billion in equipment damage and downtime to the industry. In addition, the academy found that traffic fatalities involving trucks and commercial vehicles in the Permian Basin between 2010 and 2013 doubled in comparison to the prior four-year period. The researchers called for additional funding to support road infrastructure.

Pennsylvania: Supreme Court limits state spending of oil and gas proceeds. In a landmark case, the Pennsylvania Supreme Court issued a ruling holding that the Pennsylvania Constitution limits the state’s spending of certain proceeds from oil and gas development. The Court found that the state’s environmental rights amendment creates a public trust for the protection and maintenance of environmental resources and prohibits the diversion of proceeds tied to the public trust to the state’s general fund. The court found that “The Commonwealth (including the Governor and General Assembly) may not approach our public natural resources as a proprietor, and instead must at all times fulfill its role as trustee.” In doing so, the court rejected a previously applied balancing test that had been used to permit the expenditure of oil and gas proceeds to promote a broader suite of societal benefits. The court remanded the case to allow lower courts to determine which rents and proceeds from oil and gas development fall within the scope of the public trust.

Pennsylvania Supreme Court affirms decision requiring evaluation of environmental effects of proposed oil and gas wells. In a one-page opinion, the Pennsylvania Supreme Court upheld a provision of Act 13 requiring applicants for new oil and gas wells to evaluate the wells’ impact on sensitive areas, including public lands, parks and waters. The decision was based on the briefs alone, without oral argument. Rejecting arguments by the oil and gas industry, the lower court had found that the provisions requiring evaluation of environmental effects could be severed from other portions of Act 13 that the Pennsylvania Supreme Court had struck down in 2013.

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