21 July 2014

Sidley Shale and Hydraulic Fracturing Report

Volume 3, No. 29

Federal

EPA proposes revisions to NSPS for oil and gas development. The Environmental Protection Agency (EPA) recently released proposed revisions to the new source performance standards (NSPS) for oil and gas development, including hydraulic fracturing. The proposed revisions are in response to several petitions for reconsideration of a prior rulemaking and, according to EPA, are intended to clarify requirements for well completions, vapor recovery controls from storage vessels and leak detection requirements for processing plants. In addition, EPA is proposing to eliminate the affirmative defense from civil penalties for violations of the emissions standards caused by equipment malfunction. EPA will accept comments on the proposed changes until September 2, 2014 and has stated it intends to issue a final set of revisions by the end of this year.

States

New York: Court dismisses lawsuits challenging delay in state’s assessment of hydraulic fracturing. On July 14, 2014 a New York trial court dismissed two cases seeking to compel the New York Department of Environmental Conservation (DEC) to issue a revised general environmental impact statement addressing high-volume hydraulic fracturing. The ongoing DEC study, which has been underway since 2008, acts as a de facto ban on high-volume hydraulic fracturing within the state. The court determined that the plaintiffs, who include both landowners and oil and gas developers, lacked standing to challenge the delay in completing the DEC study because they claimed that the DEC’s delay caused them economic rather than environmental harm.

North Carolina proposes oil and gas exploration regulations. On July 15, 2014, the North Carolina Mining and Energy Commission released proposed regulations for oil and exploration activities including hydraulic fracturing. The proposed regulations address permitting, safety, location, waste storage, water usage and chemical disclosure requirements. Once finalized, the regulations will end a statewide ban on the use of hydraulic fracturing by empowering the commission to issue oil and gas development permits. The Commission is accepting comments on the proposed regulations until September 15, 2014 and is required by state law to issue final regulations by January 1, 2015.

Pennsylvania: Commonwealth Court rules on additional provisions of Act 13 on remand in Robinson Township. In response to the Pennsylvania Supreme Court’s 2013 decision declaring that Act 13’s preemption of local zoning for oil and gas development was unconstitutional, the Commonwealth Court eliminated a number of related provisions on the same grounds. Specifically, the court found that provisions that authorized the state Public Utility Commission (PUC) to review the validity of local zoning ordinances and that permitted the state to withhold oil and gas impact fees based on local zoning ordinances were also unconstitutional. At the same time, the court upheld a number of unrelated provisions in Act 13, including the notification requirements in the event of a drilling-related spill, the provision prohibiting doctors from disclosing information regarding hydraulic fracturing fluids obtained for emergency treatments, and provisions permitting the use of eminent domain by companies that transport, sell or store natural gas.

Markets

ACC: Shale development spurring growth in chemical industry. A recent study by the American Chemistry Council (ACC) found that shale development in the United States is leading to significant new investments in the chemical industry. Overall, the study found that 188 projects, representing $117 billion in capital investments, have been designed to take advantage of domestic shale gas production. This represents a yearly increase of 91 projects and more than $45 billion. As a result of shale gas development, the United States is now the leading global producer of natural gas liquids such as ethane, propane and butane that serve as feedstocks for chemical manufacturing.

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