13 September 2016

Sidley Shale and Hydraulic Fracturing Report

Vol. 5, No. 37

Topics discussed in this week’s Report include:

  • Federal agencies block construction of Dakota Access pipeline pending further agency review, despite federal court order authorizing work to proceed.
  • Federal court holds that BLM violated NEPA in allowing hydraulic fracturing on federal lands in California.
  • EPA and state regulators adjust restrictions on wastewater disposal wells in Oklahoma in response to earthquake.
  • Projections for U.S. oil production overall improve, while oil and gas production in Ohio trend in opposite directions.

Federal

Federal agencies block construction of Dakota Access pipeline pending further agency review, despite federal court order authorizing work to proceed. The U.S. Department of Justice, U.S. Army and U.S. Department of the Interior (Agencies) issued a joint statement late last week that they would not permit construction of the portion of the Dakota Access pipeline slated to be built on federal land underneath and near Lake Oahe in North Dakota while the U.S. Army Corps of Engineers determines whether to revisit its decisions favoring construction. The Agencies also urged Dakota Access to temporarily halt construction within 20 miles of Lake Oahe. The Agencies’ announcement came shortly after a federal district court in Washington, D.C. held that it would not grant the Standing Rock Sioux tribe’s request for a preliminary injunction halting construction of the pipeline. Among other claims, the Standing Rock Sioux have alleged the Army Corps had not met its duty to consult with the tribe over potential damage to sacred tribal sites under the National Historic Preservation Act. Two possible burial sites of Sioux leader Sitting Bull are located along Lake Oahe. The Agencies’ decision is a victory for the tribe, which has vigorously opposed the pipeline. The Dakota Access pipeline would extend approximately 1,200 miles and would move crude oil from the Bakken Shale in North Dakota to existing pipelines in Illinois.

Federal court holds that BLM violated NEPA in allowing hydraulic fracturing on federal lands in California. The U.S. District Court for the Central District of California granted summary judgment to the two plaintiffs, the Center for Biological Diversity and Los Padres ForestWatch, in a lawsuit against the U.S. Bureau of Land Management (BLM) over the agency’s decision to permit oil drilling on over a million acres of federal lands and mineral estates in central California, including via hydraulic fracturing. The court held that the BLM violated the National Environmental Policy Act (NEPA) when it issued a resource management plan for the lands because while the BLM had issued an environmental impact statement (EIS) under NEPA for the project, the EIS failed to sufficiently consider possible risks associated with hydraulic fracturing. Thus, the court ordered the BLM to prepare a supplemental EIS addressing the possible “environmental consequences” of hydraulic fracturing. The BLM had argued that the plaintiffs could challenge the use of hydraulic fracturing later on, when the lands are actually being leased.

EPA and state regulators adjust restrictions on wastewater disposal wells in Oklahoma in response to earthquake. In addition to the Oklahoma Corporation Commission’s decision to shut down wastewater disposal wells following the August 28 earthquake near Pawnee, previously covered in this publication, the U.S. Environmental Protection Agency (EPA) initially ordered 17 wastewater disposal wells in Osage County to cease operations. The EPA, and not the Commission, has primary jurisdiction under the Safe Drinking Water Act over these wells, which are located on the lands of the Osage Nation near the epicenter of the earthquake. On September 12, both federal and state regulators adjusted their approach, announcing that certain disposal wells would be allowed to reopen at reduced injection volumes. Regulators are examining the data from the quake, which they suggested was due to a previously unidentified east-west fault line.

Studies 

Projections for U.S. oil production overall improve, while oil and gas production in Ohio trend in opposite directions. The U.S. Energy Information Administration recently increased its projections for domestic crude oil production, raising its forecast for 2016 production from 8.73 million barrels per day to 8.77 million barrels per day and its forecast for 2017 production from 8.31 million barrels per day to 8.51 million barrels per day. At the same time, the Ohio Department of Natural Resources has released data showing that oil production in Ohio from the Utica Shale is down 20 percent from year-ago levels, dropping from 6 million barrels in the second quarter of 2015 to 4.8 million barrels in the second quarter of this year. Over that same period, however, gas production in Ohio from the Utica Shale has increased by 51 percent.

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