15 November 2016

Sidley Shale and Hydraulic Fracturing Report

Vol. 5, No. 46

Topics discussed in this week’s Report include:

  • Changes in federal oil and gas policy likely in Trump administration.
  • Southern Ute Tribe assumed authority over hydraulic fracturing in tribal lands.
  • Oklahoma Corporation Commission responded to earthquake near Cushing.
  • Pennsylvania judge issued preliminary injunction enjoining certain of the state’s revised hydraulic fracturing regulations.
  • Wyoming report concluded that hydraulic fracturing likely did not cause contamination in Pavillion.

Federal

Changes in federal oil and gas policy likely in Trump administration. The nature of the changes are still unknown, but it is highly likely that the new administration of President-elect Donald Trump will be making changes in the way the federal government regulates oil and gas upstream, midstream and downstream operations, including any regulation of the use of hydraulic fracturing. During the campaign, Trump vowed to boost the nation’s oil, natural gas and coal production by rolling back regulations and increasing development on federal lands.

Southern Ute Tribe assumes authority over hydraulic fracturing in tribal lands. In a settlement agreement with the Bureau of Land Management (BLM), the Southern Ute Tribe will assume primary regulatory authority over the use of hydraulic fracturing on tribal lands in Colorado. The tribe asserted that BLM had violated tribal sovereignty by including tribal lands along with federal lands under BLM’s 2015 rule regulating the use of hydraulic fracturing. Under the settlement agreement, the parties invoked a variance provision in BLM’s regulations that allows a state or tribe to apply its own regulations in lieu of BLM’s regulations if they are more stringent than the federal requirements. The settlement agreement did not resolve the underlying legal question of BLM’s authority to regulate oil and gas activity on tribal lands.

States

Oklahoma Corporation Commission responds to earthquake near Cushing. On Nov. 6, a magnitude 5.0 earthquake occurred near Cushing, Oklahoma, prompting a response from the Oklahoma Corporation Commission and the oil and gas industry. The earthquake caused power outages and some structural damage but did not affect nearby oil and gas infrastructure. Cushing is the delivery point for West Texas Intermediate crude oil and is a central hub for both oil and natural gas transport. The town stores 60 million barrels of crude oil. In response to the earthquake, pipeline companies immediately shut down operations as a precautionary measure but resumed operations within 24 hours. Gov. Mary Fallin (R) declared a state of emergency in Payne County in response to the earthquake, authorizing state agencies to make emergency purchase and paving the way for a potential request for federal aid. In immediate response to the earthquake, the Oklahoma Corporation Commission addressed a number of wastewater disposal wells in the Arbuckle formation, ordering seven wells to be shut in, 16 wells to reduce injection volume by 75 percent and limiting the injection volume for another 31 wells. The Oklahoma Corporation Commission stated that this was an initial response and that a broader plan to address wastewater disposal near Cushing would be developed over the coming weeks.

Pennsylvania: Judge issues preliminary injunction enjoining certain of the state’s revised hydraulic fracturing regulations. On Nov. 8, a judge in Pennsylvania’s Commonwealth Court issued a preliminary injunction blocking implementation of several provisions of the Department of Environmental Protection’s (DEP) revised hydraulic fracturing regulations until a lawsuit challenging those provisions is resolved. Opponents challenging the regulations allege that they exceed DEP’s authority and are impermissibly vague. The enjoined provisions require (1) notification when a well could affect publicly accessible areas including playgrounds and schools, (2) drillers to identify and monitor all previously drilled wells in the area, regardless of ownership or control, (3) upgrades to freshwater impoundments constructed in accordance with prior DEP regulations, and (4) remediation of drilling sites to standards that allegedly exceed Pennsylvania’s Clean Streams Law.

Wyoming: Report concludes that hydraulic fracturing likely did not cause contamination in Pavillion. On Nov. 10, the Wyoming Department of Environmental Quality issued a final report concluding that hydraulic fracturing likely did not contaminate wells located near Pavillion, Wyoming. While noting that there was some seepage from existing gas wells and natural upward migration of chemicals in the area, the report concluded that chemicals associated with hydraulic fracturing activities were unlikely to have migrated up to the shallow groundwater where the wells are located. The potential sources of contamination noted in the report included agricultural chemical application and residential and commercial chemical use. The report concludes a multiyear investigation that began with a 2011 report by the U.S. Environmental Protection Agency (EPA) that linked well contamination to hydraulic fracturing. EPA later abandoned work on its own study and turned the matter over the state.

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

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