Sidley Shale Gas and Hydraulic Fracturing Report

Vol. 4. No. 17

Topics discussed in this week’s Report include:

  • USGS Proposes Annual Assessment of Seismic Risk.
  • House Democrats Revisit Bill to Prevent Hydraulic Fracturing on Federal Land.
  • Oklahoma Links Increased Seismicity to Injection of Produced Water From Oil and Gas Production Wells.
  • Texas Cities to Request Well Closures Following Earthquake Studies.
  • Colorado Supreme Court Rejects Lone Pine Case Management Orders.
  • North Dakota Permitted to Join Wyoming Case Against BLM’s New Oil and Gas Development Rules.

(more…)

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Sidley Shale Gas and Hydraulic Fracturing Report

Vol. 4. No. 16

Federal

Environmental Group Challenges Federal Wastewater Permits. The Public Employees for Environmental Responsibility (PEER) filed a petition with Environmental Protection Agency’s (EPA) Environmental Appeals Board challenging five federal National Pollutant Discharge Elimination System (NPDES) permits allowing three oil and gas companies to dispose of wastewater in surface streams. The permits were issued by EPA for hydraulically fractured drilling operations in Wyoming in and around the Wind River Indian Reservation. According to PEER, surface water disposal of liquid drilling wastes is prohibited in areas of Wyoming where the state has jurisdiction, and EPA failed to provide information to the public demonstrating that surface water disposal is safe. The petition further alleges the permits are invalid because the chemicals used in the discharged wastewater were not disclosed to the public (the chemicals are protected as trade secrets), depriving the public of the ability to comment on the potential impacts of the discharges on receiving waters.

States

Maryland Bill Would Allow Hydraulic Fracturing by 2017. Maryland’s General Assembly passed H.B. 449, which would require the Maryland Department of Environment (MDE) to issue permitting regulations that would become effective in 2017. Hydraulic fracturing has been subject to a de facto moratorium in Maryland since 2011. The bill does not specify what the MDE regulations should require from drilling companies. Governor Larry Hogan (R) is still reviewing the bill and has not commented on whether he will sign it. MDE has already proposed hydraulic fracturing regulations that would require drillers to collect two years of baseline environmental monitoring data before applying for a permit and impose several other requirements that industry officials submit are unnecessarily costly. The rules were proposed by MDE during the administration of former Gov. Martin O’Malley (D), and the new Governor has not indicated whether he intends to proceed to finalize those rules.

International

Dutch Court Slows Gas Production After Seismic Activity. The Administrative Jurisdiction Division of the Council of State limited gas production from the Loppersum area of the Groningen natural gas field after the Dutch Ministry of Economic Affairs claimed that 196 earthquakes were linked to hydraulic fracturing in the field. Some of the quakes damaged nearby homes. The judge agreed that there was enough of a link to limit production but declined to grant the petitioners’ request for a complete ban on production. Instead, the judge ordered the gas field operator, Nederlandse Aardolie Maatschappij, to limit gas production from the Loppersum area to a small volume unless production from other areas becomes impossible. The Groningen produced 61 percent of the Netherlands’ natural gas in 2014.

Litigation

Appeals Court: Range Resources Must Disclose Chemical Information. A Pennsylvania superior court panel denied an interlocutory appeal by Range Resources seeking to reverse a lower court order to produce proprietary information on chemicals used at the company’s Marcellus Shale hydraulic fracturing operations. Landowners adjacent to the Range Resources’ Yeager Drill site alleged personal injuries and property damage from the operations and sought discovery on the chemicals supplied by third-party contractors. The lower court had ordered Range Resources to gather details about the chemicals from its contractors and produce the information to the plaintiffs. Range appealed the order, arguing that the chemicals’ identities and properties were proprietary and should be protected. The court panel upheld the order, finding only the chemical manufacturers had the right to seek protection for the information, and that Range Resources did not have a sufficient interest in keeping the information secret.

Business

Rail Shipments of Oil Taper off. Thousands of crude oil tank cars have been sidelined as several factors reduce the shipment of Bakken crude oil by rail. According to the Surface Transportation Board, crude shipments have dropped by about 8,000 cars per week in April, compared to the prior year, and down seven percent since March 2015. The reduction is due in part to reduced production, as output has decreased slightly due to lower crude oil prices. Increased pipeline capacity has also cut into railway transportation. Industry analysts at Ernst & Young reported that new Department of Transportation safety standards for crude oil tank cars, to be published next month, are expected to increase shipping costs and erode further the advantages of shipping crude by rail.

Studies

Association of State Regulators Report Drilling Waste Regulations Differ Across States. The Association of State and Territorial Solid Waste Management Officials (ASTSWMO) released a survey of 40 state drilling waste management requirements, finding differing approaches. Increased oil and gas production due to hydraulic fracturing have generally caused states to examine new requirements for disposal or the beneficial reuse of drill cuttings, produced water, drilling fluids and sediments. Thirteen states approve of certain wastes being beneficially used as landfill cover, road base, in concrete manufacturing and for de-icing while others have barred re-use. The survey also found that, in many states, multiple agencies have jurisdiction over drilling wastes while some states have interpreted some or all oil and gas production wastes to be exempt from solid waste disposal requirements. Overall, states differed significantly on how they require various wastes to be disposed of, with options including burying the wastes at the well site, deep well injection, land application and disposal at a Subtitle D landfill.

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Sidley Shale Gas and Hydraulic Fracturing Report

Vol. 4. No. 15

Federal

EPA Proposes Effluent Limitations Guidelines and Standards for Oil and Gas Extraction. On April 7, the Environmental Protection Agency (EPA) proposed effluent limitations guidelines for oil and gas extraction that would require pre-treatment of wastewater from hydraulic fracturing operations before discharge into a publicly owned treatment works (POTW). In the supporting preamble, EPA states it has found that pre-treatment is necessary because such wastewater contains materials that are not commonly found in wastewater treated by POTWs, and thus could disrupt POTW operations or pass through the treatment system without being addressed before the final effluent is discharged into the environment. Chemicals of concern for POTWs include salts, organic and inorganic chemicals, metals and naturally occurring radioactive materials. According to EPA, there are not currently any oil and gas extraction facilities that discharge wastewater to POTWs, meaning that, if finalized, the proposed rule will not result in significant changes to current industry practices.

International

Canada: Northwest Territories Proposes Hydraulic Fracturing Regulations. The Northwest Territories recently proposed hydraulic fracturing regulations that go beyond those required by federal Canadian requirements. Specific provisions include a risk assessment, environmental protection plan, a spill contingency plan, fluid transportation and disposal plans, and a plan for monitoring seismic events. Public disclosure of hydraulic fracturing chemicals is not required, so a company’s willingness to disclose such information would be considered during evaluation of permit applications on a case-by-case basis. While there are no active hydraulic fracturing activities in the Northwest Territories, several companies have made proposals to drill in the Canol shale, which may hold as much as three billion barrels of oil.

Studies

EIA Study Identifies Opportunities to Increase Processing of Shale Oil. In response to rising production of domestic shale oil, the Energy Information Administration (EIA) has identified several opportunities to increase processing at U.S. refineries. Unlike crude oil, there are no restrictions on the export of refined petroleum products. Since 2011, production of domestic light crude oil has increased from 5.6 million to 8.7 million barrels per day, and is expected to increase to 9.5 barrels per day by 2016. Among the low-cost options for increasing processing of domestic crude at U.S. refineries identified by EIA are displacement of imported crude oil, increased refinery capacity utilization, and investments to reduce bottlenecking through installation of equipment to remove restrictions on throughput. However, to keep up with increased production, EIA concluded that expansion projects would eventually be needed.

Study Reports Correlation Between Natural Gas Development and Radon Levels in Pennsylvania. A recent study conducted by the Johns Hopkins Bloomberg School of Public Health reported a correlation between natural gas development and indoor radon levels in Pennsylvania. The study analyzed approximately two million indoor radon tests conducted across Pennsylvania between 1987 and 2013. However, the authors of the study cautioned that they were unable to conclude that oil and gas development was causing increased radon levels. The authors also explained that the study did not take into account potential confounding variables, such as home construction, remediation efforts or the use of gas for heating. Further, in contrast to the Johns Hopkins study, a January 2015 study commissioned by the Pennsylvania Department of Environmental Protection, found that there was little potential for additional radon exposure beyond background levels due to increased natural gas extraction.

If you have any questions regarding this Report, please contact us.

Sidley Shale Gas and Hydraulic Fracturing Report

Vol. 4. No. 14

Federal

EPA Report Finds Majority of Wells Keep Fracking Fluid Chemicals Secret. The U.S. Environmental Protection Agency (EPA) recently analyzed disclosure of fracking fluid chemicals between 2011 and 2013 on FracFocus, the website managed by the Ground Water Protection Council and Interstate Oil and Gas Compact Commission. EPA found that the majority of hydraulic fracturing fluid is plain water, with operators using a considerable range of different ingredients as additives and proppants. EPA reports that hydrochloric acid, methanol, ethylene glycol, guar gum and naphthalene are among those ingredients that are most frequently used. According to the report, operators asserted business confidentiality claims over approximately 11 percent of the chemical ingredients and that an estimated 70 percent of the wells EPA examined used at least one ingredient in the fluid that was confidential. EPA has announced it intends to use the information it gathered to assess the toxicity associated with drilling operations.

States

New Mexico County Repeals Anti-Fracking Ordinance. Commissioners in Mora County, New Mexico unanimously repealed a 2013 anti-fracking ordinance. The ordinance was originally styled as a community bill of rights, but banned fracking and drilling throughout the rural county, sparking numerous lawsuits from corporations and landowners. In January, a federal judge struck down the ordinance, finding it unconstitutional and contrary to New Mexico state law. Following the decision, the county is facing possibly paying both its own and industry’s legal fees, which could result in the county facing municipal bankruptcy.

North Dakota Seeks to Sue BLM Over Hydraulic Fracturing Regulations. Attorney General Wayne Stenhjem filed a motion to intervene in Wyoming’s lawsuit filed in the U.S. District Court for the District of Wyoming following publication of the Bureau of Land Management’s (BLM) federal regulations governing hydraulic fracturing on federal lands. Wyoming’s lawsuit alleges that the BLM rule-making process relied on an improper cost analysis. North Dakota similarly asserts that the cost/benefit analysis for BLM’s final rule did not take into consideration that many states, including North Dakota, already have similar requirements and make the federal rules duplicative. More than one-third of North Dakota’s oil and gas production comes from federal land located within the Bakken Shale, including land in the Fort Berthold Indian Reservation and surrounding Theodore Roosevelt National Park.

States Increase Wastewater Injection Well Requirements Following Increased Seismic Activity. Officials with Oklahoma Corporation Commission’s Oil and Gas Conservation Division (OCC) are requiring wastewater disposal wells that inject wastewater into the Arbuckle geologic formation to prove that the injections do not go below the formation. In 2014, Oklahoma experienced 585 earthquakes with a magnitude of 3.0 or higher, exceeding the cumulative total for the past 35 years. The OCC sent letters to 92 companies that hold permits informing them that they have until April 18, 2015 to demonstrate that the injections are not released below the Arbuckle. Operators who fail to meet this demonstration will be required to reduce disposal by 50 percent, a directive that OCC estimates will apply to over one-third of the 900 Arbuckle wells in Oklahoma. Neighboring Kansas also took steps this week to restrict oil and gas activities, following 127 earthquakes in 2014 and 50 this year. Like Oklahoma, Kansas will require companies to show they are not drilling deeper than the Arbuckle formation; additionally, Kansas wells will have injection quantity pressure restrictions.

Litigation

New York Court Refuses to Extend Oil and Gas Leases. On March 31, the New York Court of Appeals held that New York’s ban on fracking did not trigger the force majeure clauses of leases originally signed in 2001. Lease-holders had argued that the leases should be extended without penalty due to the ongoing moratorium on drilling in the state. The highest court in New York found that because drilling and production had never occurred on the leased land, the companies were not entitled to invoke force majeure to extend the leases and that therefore the leases expired at the end of their terms.

Studies

Three Methane Studies Focus on Drilling Impacts. Several studies published in the last week examined whether oil and gas operations were contributing to methane in the environment. Scientists from Pennsylvania State University, the University of Utah and the U.S. Geological Survey published a report outlining a technique to monitor methane in streams that could be used to identify contamination from natural gas production wells. The analysis showed that methane contained in the stream could not have come from biologic sources because it was thermogenic methane, a type that comes from shale formations. The scientists cautioned, however, that without sampling data taken prior to drilling operations, there is no way to determine conclusively that the methane in the stream came from nearby wells. Another study published in Environmental Science & Technology examined over 11,000 water samples collected from Chesapeake Energy Corp. in northeastern Pennsylvania and found that there was no “statistically significant relationship between dissolved methane concentrations in groundwater from domestic water wells and proximity to pre-existing oil or gas wells,” contradicting earlier studies. A third study, also published in Environmental Science & Technology, found that since 1992, new technology and regulations have reduced methane emissions from natural gas operations; resulting in emissions between 36 and 70 percent lower than EPA estimates.

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