07 June 2016

Shale and Hydraulic Fracturing

Vol. 5, No. 23

Topics discussed in this week’s Report include:

  • California proposed a rule to govern methane emissions from the oil and gas sector.
  • A Pennsylvania court dismissed a suit against environmental groups regarding hydraulic fracturing.
  • A new study indicated that the cost of reducing methane emissions is higher than previously reported.
  • A new study asserted that state governments should do more to ensure that well owners plug retired oil and gas wells.
  • British Columbia’s Oil and Gas Commission released guidance requiring seismic monitoring in certain hydraulic fracturing permits.

States

California: State proposes rule to govern methane emissions from oil and gas sector. The California Air Resources Board (CARB) proposed a rule designed to reduce methane emissions from both new and existing upstream oil and gas facilities and some downstream oil and gas facilities. Among other provisions, CARB is proposing quarterly leak detection on oil and gas facilities, with requirements to fix identified leaks depending on their scope. The frequency of inspections would decrease to annual inspections if no leaks are detected for five consecutive quarters. CARB would permit sources to use a variety of leak detection methods, including Environmental Protection Agency Method 21. The proposed rule also would address venting in a variety of ways, such as by generally requiring “no bleed” pneumatic devices and pumps. Finally, the proposed rule would require vapor collection systems on certain types of oil and water separators, storage tanks and well stimulation circulation tanks. CARB stated that it intends to propose new regulations designed to address methane emissions from oil and gas pipelines in a second joint rulemaking underway with the California Public Utilities Commission.

Pennsylvania: Court dismisses plaintiffs’ suit against environmental NGOs and residents who challenged a township for allowing hydraulic fracturing. A Pennsylvania county common pleas court dismissed a case that 13 property owners had brought against the Delaware Riverkeeper Network, the Clean Air Council and several Middlesex Township homeowners. The plaintiffs had argued that the defendant environmental groups and residents’ case against the Township, which challenged an ordinance authorizing a drilling permit and the use of hydraulic fracturing on the plaintiffs’ land, violated the landowners’ rights under contracts they had signed with various energy companies. The court held that the defendants had the right to petition the government by bringing their separate challenge. The court had dismissed the case in fall 2015 but allowed the plaintiffs to amend their complaint.

Studies

New study indicates that cost of reducing oil and gas industry methane emissions is higher than previously reported. Our Nation’s Energy (ONE) Future Coalition released a study it commissioned showing that the cost of reducing methane emissions from the oil and gas industry will be more than anticipated. The study showed that, excluding the distribution sector, it would cost industry $296 million annually to reduce 88.3 billion cubic feet of methane annually, which translates to about $3.35 per thousand cubic feet of reduced methane. However, the study found that costs varied, depending on the segment of the industry. A study commissioned by environmental non-governmental organizations (NGOs) had previously asserted that it would cost $0.66 per thousand cubic feet of methane oil and gas companies eliminated. ICF International conducted both studies. ONE Future Coalition is composed of natural gas companies that have committed to voluntarily reduce methane emissions.

Study suggests that state governments should do more to ensure that well owners plug oil and gas wells after production ceases. Resources for the Future released a study that asserted that states are not doing enough to reduce the frequency of taxpayer-funded cleanups of oil and gas wells after production ends. The study noted that just under three million inactive wells exist nationwide, some of which are fully plugged but others of which are abandoned or awaiting potential future production. The study concluded that Pennsylvania had the most strict requirements for inactive wells and that Kansas, Louisiana and New York had the weakest regulations for those wells. The study recommended that states begin using surface damage agreements in addition to bonding requirements.

International

British Columbia to require seismic monitoring in certain hydraulic fracturing permits. British Columbia’s Oil and Gas Commission released guidance stating that permits for new hydraulic fracturing operations in parts of the province will require seismic monitoring. The guidance stated that permittees will be required to conduct seismic monitoring during hydraulic fracturing and submit a follow-up report to the commission within 30 days after hydraulic fracturing is completed. In designated areas where the monitoring requirements will apply, the commission is planning to require at least one seismic monitor per common drilling pad location, which must be located within at least three kilometers of the drilling pad.

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