19 April 2016

Sidley Shale and Hydraulic Fracturing Report

Vol. 5, No. 16

Topics discussed in this week’s Report include:

  • Government: Producers lack standing to allege unreasonable permitting delays.
  • BLM reports 7,500 drilling permits unused.
  • Pennsylvania legislators move to stop new oil and gas regulations.
  • Pennsylvania intends to use general public interest requirements to increase disposal well scrutiny.
  • NETL claims new fracture data could improve production.
  • Researchers believe injection wells plausible cause of 2012 Texas earthquake.

Federal

Government: Producers lack standing to allege unreasonable permitting delays. The Bureau of Indian Affairs (BIA) moved to dismiss a lawsuit brought by the Osage Producers Association, an oil and gas trade association, alleging that BIA has unreasonably delayed acting on applications to drill on the Osage Indian Reservation. The Osage Producers Association, representing approximately 160 companies, filed suit in August 2015 alleging that delays caused by BIA’s unauthorized imposition of additional reviews and requirements for drilling permits amount to constructive denials. According to BIA, with few exceptions, the complaint failed to identify a final agency action that could be challenged and, in the few instances it did, there is no alleged connection between the actions and the alleged harms to the plaintiff’s members. Instead, BIA argued that the Osage Producers Association was unlawfully seeking a “programmatic review of the entire oil and gas permitting program in Osage County.”

BLM reports 7,500 drilling permits unused. The U.S. Bureau of Land Management (BLM) reported that the oil and gas industry has not used approximately 7,500 issued drilling permits. The agency attributed the unused permits, 6,100 for federal lands and 1,400 for tribal lands, to its increased speed in processing permit applications and the sharp drop in oil and gas prices. BLM reported approving more than 4,200 new drilling permits in fiscal year 2015, a 10 percent increase over the prior fiscal year. It also touted increases in oil and gas production on federal and tribal lands during fiscal years 2014 and 2015, along with increased revenues. At the same time, however, the number of acres leased for oil and gas development was down by almost 25 percent in fiscal year 2015 when compared with 2014, and industry bid on only 15 percent of the acreage offered at lease auctions. Of those acres bid on, administrative protests of lease sales increased from prior years, with almost half of them now contested by environmental groups.

States

Pennsylvania legislators move to stop new oil and gas regulations. The Pennsylvania House and Senate Environmental Resource Committees wrote the state’s Independent Regulatory Review Commission (IRRC) asking it to deny approval of new regulations for surface operations at oil and gas wells. The Pennsylvania Department of Environmental Protection (DEP) issued and the Environmental Quality Board approved the new rules, which restrict the use of impoundments to store drilling wastes, impose new waste reporting requirements, make drillers notify different public agencies if drilling sites are near various public resources and identify active or abandoned wells within 1,000 feet of the vertical and horizontal wellbore. The two legislative committees, however, believe the new regulations ignore a 2014 law requiring DEP to create separate rules for conventional wells and shale gas wells and failed to consider the rules’ impact on small businesses, especially those drilling conventional wells. An industry group filed suit challenging the rules on that basis, as reported in our March 29 Hydraulic Fracturing Report. The IRRC will vote on the regulations on April 21.

Pennsylvania intends to use general public interest requirements to increase disposal well scrutiny. Pennsylvania DEP officials announced that the agency intends to use long-dormant state rules to increase DEP’s scrutiny of underground injection wells that dispose of oil and gas wastewater. Presently, the U.S. Environmental Protection Agency (EPA) is the permitting authority of disposal wells in the state under the federal Safe Drinking Water Act’s underground injection control program. However, the state’s Chapter 91 rules also restrict disposal of wastes into “underground horizons” unless the applicant can demonstrate that disposal will not harm the public interest, and DEP has indicated that it plans to use that authority to subject disposal well applications to a level of review beyond that required by EPA. According to DEP officials, the additional scrutiny would include seismic monitoring as well as reviews of structural integrity and area fault lines. Industry groups have responded that EPA already requires that type of review and that DEP is promulgating new rules without a proper rulemaking process. They also expressed concern about how DEP would apply this new policy to pending permit applications. Pennsylvania has relatively few wastewater injection wells; only eight are active, but seven more are in the permitting stage.

Studies

NETL claims new fracture data could improve production. The U.S. Department of Energy’s National Energy Technology Laboratory (NETL) revealed that it was processing new data that could allow companies to hydraulically fracture horizontal wells more efficiently to greatly increase oil and gas yield from shale plays. Working with industry groups, NETL is analyzing core samples of hydraulically fractured shale formations. It believes that by working with actual samples instead of the computer simulations currently used by industry, it will be able to better understand how hydraulic fracturing aligns with natural fissures and cracks in the shale. Greater alignment would allow producers to drive deeper into a shale formation, boosting production volumes while using less water and proppant. NETL believes that this could make hydraulic fracturing profitable even when crude oil prices are relatively low.

Researchers believe injection wells plausible cause of 2012 Texas earthquake. University of Texas researchers published a paper in Journal of Geophysical Research: Solid Earth claiming that a 2012 4.8 magnitude earthquake in East Texas was “plausibly” triggered by the underground injection of oil and gas wastewater. Using models simulating the potential impacts of wastewater injection on deep faults, researchers concluded that the mechanics existed for the quake to be caused by wastewater disposal wells. Texas experiences frequent but low-level seismic activity, rarely enough for people to notice without instruments, but the U.S. Geological Survey characterizes it as being at risk for manmade earthquakes. The Texas legislature recently appropriated $4.5 million for TexNet, the state’s seismic monitoring network.

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

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