20 May 2014

Sidley Shale and Hydraulic Fracturing Report

Volume 3, No. 20

Federal

NGOs petition EPA to regulate oil and gas wells under the Clean Air Act. In a petition filed May 13 with the U.S. Environmental Protection Agency (EPA), several NGOs requested that EPA establish an area source category under the Clean Air Act for oil and gas wells and their associated equipment. The petition additionally requests that EPA issue regulations limiting hazardous air pollutant emissions. EPA is already examining the impact of methane releases from the oil and gas industry in connection with President Obama’s Climate Action Plan.

FERC rejects push for review of LNG export project’s environmental impacts. The Federal Energy Regulatory Commission’s (FERC) final environmental impact statement (EIS) for Sempra’s proposed Cameron liquefied natural gas (LNG) facility and natural gas pipeline expansion in Louisiana was published on May 7, 2014 in the Federal Register. EPA and several environmental groups had called for a broad review of the project’s potential environmental impacts, including an examination of the potential impact of increased demand for natural gas and the quantification of lifecycle greenhouse gas (GHG) emissions. FERC rejected these requests in its final EIS, concluding that the environmental impact of the proposed project would not be negative if proper steps are taken. The FERC’s environmental assessment of the project has been ongoing since 2012, and the review appears to be the first in a series of EIS reviews for LNG projects.

GAO reports deficiencies in BLM inspections of oil and gas wells. A report issued by the U.S. Government Accountability Office (GAO) concluded that the U.S. Department of Interior’s Bureau of Land Management (BLM) was unable to inspect over half of the high-priority wells drilled between 2009 and 2012, is missing data on nearly 1,800 wells, and failed to review or monitor inspection activities in its field and state offices. The GAO identified numerous reasons for BLM shortcomings including a lack of sufficient funding and staffing, continued reliance on outdated guidance and limited coordination with state regulators. In a comment letter, the BLM agreed with GAO’s conclusions and reported it was taking steps to increase oversight, including the development of revised rules for hydraulic fracturing on public lands which BLM expects to issue this year.

States

Colorado: County urges BLM to prevent drilling on contested leases in national forest. The Garfield County Commission in northwest Colorado asked BLM to not approve a set of contested leases in the Thompson Divide portion of the White River National Forest. BLM is evaluating approximately sixty leases in the area of the national park as part of an environmental impact statement. While BLM conducts the EIS, the contested leases are on hold. The Commission seeks special consideration for the Thompson Divide leases in the EIS analysis due to the nature of the surrounding land. Other local governments are expected to support Garfield County’s request, including, Pitkin County, the city of Glenwood Springs and the city of Carbondale. Colorado Senator Michael Bennet continues to sponsor a bill, S. 651, that would honor existing leases in the Thompson Divide but would make the remainder of the area ineligible for oil and gas leasing.

New Jersey: State Senate votes to ban treatment of hydraulic fracturing wastes. The New Jersey Senate approved a measure to bar the treatment or disposal of hydraulic fracturing waste in New Jersey. New Jersey has no shale plays, but Pennsylvania companies have transported hydraulic fracturing wastes to New Jersey landfills. If passed, the legislation would prohibit the treatment, discharge, disposal and storage of wastes from hydraulic fracturing within New Jersey state borders. New Jersey Governor Chris Christie previously vetoed two legislative attempts to regulate hydraulic fracturing—in 2011, Gov. Christie conditionally vetoed a bill to ban hydraulic fracturing and in 2012, he vetoed an earlier version of the waste legislation. Identical legislation remains pending in the New Jersey Assembly.

Ohio: State House passes hydraulic fracturing tax legislation. The Ohio House of Representatives voted to pass legislation that would impose a 2.5 percent severance tax on horizontal oil and gas hydraulic fracturing within the state. The tax revenue would be allocated to various projects, including state regulatory efforts, a well-plugging program, geological mapping services and local governments. Supported by the Ohio Oil and Gas Association, the bill now moves to the Ohio Senate for debate and a likely vote.

Utah: BLM releases master leasing plan maps detailing restrictions on oil and gas exploration. BLM recently unveiled maps that show areas around Moab, Utah where drilling would be prohibited as part of the bureau’s master leasing plan (MLP). The MLP will close certain areas to development and set aside roughly half of the area for no-surface disturbance. Industry officials have criticized the MLPs as an unnecessary and inefficient layer of planning that will prevent oil and gas exploration. If finalized, the Moab MLP will direct oil and gas and potash leasing on approximately 800,000 acres of federal land.

Wyoming: Commission rejects tighter rules for setbacks and natural gas flaring. The Wyoming Oil and Gas Conservation Commission voted to reject a landowners group’s petition calling for stricter regulation of natural gas flaring and more stringent setback requirements – the required minimum distance between drilling operations and homes. The Commission found the petition was unnecessary given that the state is in the process of reviewing its setback and flaring requirements.

Transportation

Industry officials consider processing Bakken crude oil before rail-transport. Following number of trail derailments involving crude oil from North Dakota’s Bakken Shale, industry representatives are considering processing Bakken crude to remove natural gas liquids from the oil prior to transportation on rail cars. Eliminating natural gas liquids before shipment could reduce crude volatility but may cost billions of dollars to install and operate. At this time, it is unclear whether regulators will implement a processing plan, however the U.S. Department of Transportation reported that it is considering all available options for improving rail safety.

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

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