08 March 2016

Sidley Shale and Hydraulic Fracturing Report

Vol. 5, No. 10

Topics discussed in this week’s Report include:

  • Court dismisses challenge to new federal crude-by-rail regulations.
  • Environmental group’s suit targets gas pipeline approval process.
  • West Virginia votes down bill to allow pipeline companies on private lands.
  • Utica shale development has no impact on groundwater.
  • Environmental group asserts low natural gas prices will incentivize industrial growth that will increase U.S. greenhouse gas emissions.

Federal

Court dismisses challenge to new federal crude-by-rail regulations. A federal court dismissed a suit by several environmental groups challenging U.S. Department of Transportation (DOT) safety regulations for railroads hauling crude oil. According to the groups, DOT’s regulations do not require companies to retire older tank cars fast enough. Since the groups filed their challenge, President Obama signed the Fixing America’s Surface Transportation Act (the FAST Act), which reauthorizes federal funding for transportation. While focused mostly on federal funding of state and local transportation programs, the FAST Act contains several provisions that address crude-by-rail. Specifically, it phases out tank cars that do not meet the more stringent DOT-117 design and performance specifications, requires “thermal blanket” insulation to better contain fires in case of an accident and increases reporting to state emergency response officials. The court held that these FAST Act provisions mooted the groups’ challenge to the DOT regulations.

Environmental group’s suit targets gas pipeline approval process. In a lawsuit filed in the District of Columbia, the Delaware Riverkeeper Network (DRN) alleges that the process used by the Federal Energy Regulatory Commission (FERC) to approve natural gas pipelines violates due process because of a “structural bias.” According to DRN, because FERC’s gas pipeline program is “funded by the private companies that it is tasked with regulating,” the program violates a constitutional right to a neutral regulator and has turned FERC into a “corrupt” and “rogue” agency. DRN alleges that the ability to assess fees against the companies it regulates is the real reason FERC has approved every pipeline project since 1986. The complaint asks the district court to declare FERC’s funding structure unconstitutional as well as FERC’s powers to assert eminent domain and preempt state and local laws. The suit is an expansion of DRN’s opposition to a proposed gas pipeline that would run from Pennsylvania to New Jersey while cutting through the Delaware River watershed.

States

West Virginia votes down bill to allow pipeline companies on private lands. SB 596 would have allowed pipeline surveyors to enter private lands without the owners’ consent, overturning an August 2015 Circuit Court decision, but a bipartisan majority of the West Virginia Senate voted it down. The court had rejected a pipeline company’s claim that eminent domain laws could force property owners to accept surveying on their property, holding that there is no “public use” justification for pipelines that ship natural gas out of state. While many opposed putting more eminent domain powers in the hands of private companies, some senators who were initially supportive of the bill said they changed their mind when the company declined to appeal the court decision and was relying on the legislature to change the outcome of a lawsuit.

Studies

Utica shale development has no impact on groundwater. University of Cincinnati researchers have completed a three-year study on hydraulic fracturing in Carroll County, Ohio, concluding that there was no discernible effect on area groundwater. The study measured methane in drinking water wells in five counties from 2012 to 2015, a time during which 400 new gas wells were drilled. Although methane was found in some drinking water wells, the highest concentrations were more than five kilometers from active gas production wells, and testing showed the methane likely came from coal deposits. The study was sponsored by groups opposed to hydraulic fracturing that were hoping to find support for banning the practice. Reportedly, the groups were disappointed by the study’s results and are not planning on publishing them. State Representative Andy Thompson (R), whose district includes Carroll County, has demanded that the researchers publicize their data, as they received public funding from the Ohio Board of Regents.

Environmental group asserts low natural gas prices will incentivize industrial growth that will increase U.S. greenhouse gas emissions. The Environmental Integrity Project (EIP), a Washington, D.C.-based environmental group, released a report asserting that natural gas is not a cleaner energy source because low natural gas prices are encouraging the construction of new petrochemical plants in the U.S. EIP examined 44 petrochemical plants that were either permitted or proposed in 2015, estimating that the new production would emit up to 86 million tons of greenhouse gases, equivalent to emissions from as many as 19 new coal-fired power plants. Critics of the report noted that lower natural gas prices have led chemical production to shift back to the United States, where plants are more efficient and emit fewer greenhouse gases than plants operated overseas.

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