01 June 2016

Sidley Shale and Hydraulic Fracturing Report

Vol. 5, No. 22

Topics discussed in this week’s Report include:

  • The Agency for Toxic Substances and Disease Registry issued a report on Dimock study.
  • The U.S. Federal government approved hydraulic fracturing in the Pacific.
  • The secretary of the Pennsylvania Department of Environmental Protection resigned over email controversy.
  • A UK county approved hydraulic fracturing.
  • Chesapeake Energy and Total E&P agreed to a settlement of disputed royalty claims.
  • Pennsylvania announced a new survey to study methane emissions from abandoned wells.

Federal

ATSDR issues report on Dimock study. The U.S. Environmental Protection Agency (EPA) previously found that water from residential wells in Dimock, Pennsylvania, was safe to drink, but the Agency for Toxic Substances and Disease Registry (ATSDR) issued a report disputing EPA’s findings. According to ATSDR, the 2012 data show dissolved methane and metals at levels that present a “health and safety concern” and it urges homeowners to take measures to reduce risk. The Dimock wells sparked a controversy when residents claimed that hydraulic fracturing by Cabot Oil & Gas Corp. was the source of the methane. The movie Gasland featured the controversy and led the Pennsylvania Department of Environmental Protection (PADEP) to shut down Cabot’s operations in the town for more than two years. After its review, EPA concluded the water from the wells was safe and found no evidence of hydraulic fracturing fluids in the well water. However, two Dimock families pursued claims in court and recently won a $4.2 million jury verdict against Cabot. Cabot has argued that the methane is naturally occurring, not from hydraulic fracturing, and the company’s request to overturn the verdict is pending. ATSDR’s report does not evaluate the potential source of the methane.

Federal government approves hydraulic fracturing in the Pacific. The Bureau of Ocean Energy Management (BOEM) and Bureau of Safety and Environmental Enforcement (BSEE) finalized an environmental assessment for hydraulic fracturing in the Pacific Ocean, concluding that the practice would not have a significant impact on the environment. BOEM and BSEE had imposed a moratorium on permitting for hydraulic fracturing in the Pacific Ocean until they could complete their environmental review under the National Environmental Policy Act. That moratorium is now set to be lifted, although it is anticipated that environmental groups will challenge their finding in court.

States

Pennsylvania environmental regulator out over email controversy. John Quigley has resigned as secretary of the PADEP. Although he gave no official reason, his resignation coincided with the circulation of a leaked April 2016 email to environmental groups that castigated them, using colorful language for insufficiently supporting the Commonwealth’s new Chapter 78 gas drilling regulations. As previously reported here, certain members of the General Assembly are looking to repeal the regulations, which have also been challenged in court. The email insulted the members who are pursuing repeal and characterized legislative committee hearings on the subject as “Russian show trials.” It remains to be seen what the full fallout may be from this incident, as there have been calls for an investigation. Patrick McDonnell, PADEP’s director of policy, is serving as acting secretary.

International

UK county approves hydraulic fracturing. Third Energy will be the first company in the United Kingdom to develop shale gas with hydraulic fracturing since the country rescinded its ban on the practice in 2012. By a vote of 7 to 4, the North Yorkshire County Council authorized the company to begin drilling in an area called Ryedale, near the village of Kirby Misperton. The vote followed two days of hearings where protestors lamented the potential for noise, industrial traffic, water contamination and earthquakes from the operations. The council noted that out of 4,420 comments on the proposal, only 36 were in favor, but a council spokesman said that national policy favors shale gas development. Environmental groups said this vote could be the first of thousands more authorizing hydraulic fracturing and resolved to reverse the decision, citing the need to avoid industrializing the Yorkshire countryside and to stop global warming. The British Chambers of Commerce released a statement calling the vote a “much-needed victory for pragmatism.”

Litigation

Chesapeake and Total settle royalty litigation. Chesapeake Energy and Total E&P USA agreed to a global settlement of disputed royalty claims by approximately 13,000 mineral rights owners. The plaintiffs alleged that the companies underpaid royalties owed on Barnett Shale leases. Under the settlement, if approved by the court, Chesapeake will pay $29.4 million up front and another $10 million three years after approval. Total will pay $13.1 million at the time of the settlement. Plaintiffs will receive payments based on individualized assessments of their claims. The settlement resulted from two Texas Supreme Court decisions in the litigation governing the amount of money the companies could deduct from royalty payments to cover costs and mediation between the parties with a former judge. At least two other lawsuits making similar allegations remain against Chesapeake, filed by the Tarrant County College District and the Tarrant County Commissioners.

Studies

Pennsylvania studying methane emissions from abandoned wells. PADEP and a group of researchers from several universities are undertaking a new survey of abandoned gas wells within the state. PADEP suspects that there are between 300,000 and 500,000 abandoned wells across the state, but there is no exact count and many locations are unknown. The research group is trying to learn about methane from these wells. Due to the uncertainty, EPA does not include estimates of methane emissions from abandoned wells in its greenhouse gas inventory, but the researchers believe these emissions are cumulatively significant. The survey will examine 208 known oil and gas wells abandoned before state plugging regulations were adopted to gauge methane emissions and identify any data trends. Depending on the results, PADEP may be able to identify higher emitting wells which could be prioritized for plugging with limited state funds. The survey is due to be completed this fall.

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