28 April 2014

Sidley Shale and Hydraulic Fracturing Report

Volume 3, No. 17

States

Act 13 opponents argue the Pennsylvania PUC should end its review of municipal laws related to oil and gas development. Although the Pennsylvania Supreme Court struck down Act 13, the state’s law setting uniform rules for oil and gas development, the commonwealth’s Public Utility Commission (PUC) is still required by that law to review local zoning ordinances. If those ordinances conflict with Act 13’s requirements, the PUC will withhold some or all of the impact fee revenue paid out to local governments. Even though the review provision was not directly challenged, the Commonwealth Court must now determine which portions of Act 13 survived the Pennsylvania Supreme Court’s decision. Opponents of Act 13 argued in briefing last week that the PUC review provision must be invalidated, arguing that the reviews constitute a backdoor method to enforce an unconstitutional law. The PUC has not conducted reviews of local ordinances since August 2012 due to the ongoing Act 13 litigation.

Minnesota Governor rejects petition to impose moratorium on frac sand mining. Minnesota Governor Mark Dayton declared he lacks the power to impose a moratorium on frac sand mining. Mining opponents presented the Governor with a moratorium petition during an Earth Day rally. The Land Stewardship Project claimed the state’s Critical Areas Act allows the Governor to order the Minnesota Environmental Quality Board to impose a two-year moratorium on mining without legislation, asserting further mining threatens ecologically sensitive areas in southeastern Minnesota. Minnesota state agencies are now developing new regulations for frac sand mining, including new air quality and mine reclamation standards. Frac sand is used as a proppant in hydraulic fracturing fluid.

Markets

Baker Hughes will disclose chemicals in hydraulic fracturing fluid. Well services company Baker Hughes declared that it will begin disclosing the chemicals it uses in hydraulic fracturing fluid, declining to rely upon trade secret rights that may otherwise be available to protect against disclosure. It is the first well services company to take this step and is consistent with a recent Department of Energy advisory board recommendation that chemicals in fracturing fluids not receive protection under federal regulations. Baker Hughes has concluded that it could disclose the identity of the chemicals without compromising how it creates its proprietary blends of fluids. This position differs from most of its competitors, who have defended their right to protect the composition of fracturing fluids as confidential trade secrets. A Department of Energy spokesman supported the decision, stating that it would help build public trust in hydraulic fracturing.

International

Canada bars 5,000 crude tank cars. Canada’s Ministry of Transport is pulling approximately 5,000 DOT-111 crude oil tank cars out of circulation, citing the lack of continuous reinforcement on their bottom shells. Railroads have 30 days to phase out the cars. The order also required companies to phase out 65,000 other DOT-111 tanker cars within three years unless they are retrofitted with additional reinforcements, imposed new emergency response plan requirements and imposed lower speed limits for trains carrying hazardous materials.

Mexico’s Eagle Ford Shale up for bid next year. Mexico’s National Hydrocarbons Commission announced that its portion of the Eagle Ford Shale formation that is located just over the U.S. border, will be one of the first assets up for bidding next year when the country begins allowing the entry of foreign companies to develop Mexico’s oil and gas. The Commission is working with the state-owned oil company, Pemex, to determine which assets will be opened to bidding by foreign companies. As Mexico’s oil and gas production has declined over the years, the Congress amended the constitution to allow foreign companies with superior technological expertise to partner with Pemex in developing shale plays and offshore oil fields.

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