07 December 2015

Sidley Shale and Hydraulic Fracturing Report

Vol. 4, No. 48

Topics discussed in this week’s Report include:

  • New York attorney general seeks federal limits on vapor pressure for shipping crude oil by rail.
  • Federal Energy Regulatory Commission (FERC) approves Pennsylvania-to-New Jersey natural gas pipeline.
  • Colorado Supreme Court dismisses governor’s bid to stop attorney general’s environmental litigation.
  • Oklahoma restricts underground injection wells in response to seismic activity.
  • Pennsylvania reaches settlement with Chesapeake Appalachia over well site landslide.
  • South Dakota approves permit for Dakota Access Pipeline.

Federal

New York attorney general seeks federal limits on vapor pressure for shipping crude oil by rail. New York Attorney General Eric Schneiderman recently filed a petition for rulemaking with the Pipeline and Hazardous Materials Safety Administration (PHMSA) requesting that the agency limit the vapor pressure allowed in crude oil shipped by rail to nine pounds per square inch. The petition acknowledges PHMSA’s recent efforts to increase regulation of shipping crude oil by rail but asserts that high vapor pressure has been a contributing factor in several accidents involving rail cars. The petition further argues that stabilization techniques exist to reduce the vapor pressure of crude oil by removing gases such as propane, butane and ethane. PHMSA has not yet responded to the petition.

Federal Energy Regulatory Commission (FERC) approves Pennsylvania-to-New Jersey natural gas pipeline. FERC recently upheld a decision to approve a natural gas pipeline from Pennsylvania to New Jersey. FERC first approved the 40-mile pipeline in 2012, and construction was completed in 2013. However, several environmental organizations challenged the project, alleging that FERC had failed to comply with the National Environmental Policy Act. The D.C. Circuit agreed and held that FERC impermissibly segmented the pipeline project by failing to consider environmental impacts from other pipeline projects in the same area. After completing a supplemental environmental analysis that considered cumulative impacts from other pipeline projects and other issues raised by environmental organizations, FERC again concluded that the project would not result in any significant impacts that required mitigation.

States

Colorado Supreme Court dismisses governor’s bid to stop attorney general’s environmental litigation. The Colorado Supreme Court recently dismissed Governor John Hickenlooper’s attempt to block the state’s attorney general, Cynthia Coffman, from challenging certain federal environmental rules. Hickenlooper, a Democrat, has opposed the decision by Coffman, a Republican, to challenge a number of federal environmental regulations, including the Bureau of Land Management’s hydraulic fracturing regulations and the Environmental Protection Agency’s greenhouse gas rules for power plants and “waters of the United States” rule under the Clean Water Act. Both Hickenlooper and Coffman argue that they are the one representative of Colorado’s interest on legal issues. The court did not reach the merits of Hickenlooper’s claim and instead dismissed the case on jurisdictional grounds, holding that the governor has an “adequate alternative remedy” to resolve his conflict with the attorney general.

Oklahoma restricts underground injection wells in response to seismic activity. In response to recent earthquakes in the Medford and Cherokee areas, the Oklahoma Corporation Commission restricted underground injection wells located near the earthquakes. The Commission ordered seven disposal wells to stop operations and reduced injection volumes for another 66 disposal wells. The order noted that additional steps may be necessary depending on future activity, with 67 disposal wells placed on notice that they may be subject to restrictions. State officials have stressed that their efforts to address seismicity are working, as the average rates of seismic activity are declining.

Pennsylvania reaches settlement with Chesapeake Appalachia over well site landslide. Chesapeake Appalachia LLC recently entered into a consent order and agreement with the Pennsylvania Department of Environmental Protection (DEP) to resolve its potential liability for a 2011 landslide at a well site in which sediment from the slide reached nearby streams. In response to the event, Chesapeake had implemented measures to address the issue and temporarily stabilize the site. DEP reports that under the agreement, Chesapeake Appalachia will pay a civil penalty of $1.4 million and take steps to permanently address the nearby waterways. The agreement calls for the additional work to be completed by September 2016.

South Dakota approves permit for Dakota Access Pipeline. On November 30, the South Dakota Public Utilities Commission voted to approve a permit for the Dakota Access Pipeline. The $3.8 billion pipeline is expected to transport 450,000 barrels of crude oil per day from North Dakota’s Bakken shale formation to Illinois. At present, crude oil from the Bakken shale is typically transported by rail. The approval came with a number of conditions, including the requirement to have an independent third party, whom the Commission must approve, monitor compliance with the permit. The Dakota Access Pipeline still must obtain approval from North Dakota, Iowa and Illinois.

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