25 October 2016

Sidley Shale and Hydraulic Fracturing Report

Vol. 5, No. 43

Topics discussed in this week’s Report include:

  • EPA issued final control techniques guidelines for existing oil and gas operations
  • U.S. Court of Appeals stayed challenge to tribal oil and gas rule
  • BLM scheduled online lease sales
  • Trade group challenged new Pennsylvania hydraulic fracturing rules
  • Boulder County proposed new drilling restrictions
  • Study: Naturally occurring brines need reuse strategies

Federal

EPA issues final control techniques guidelines.  The U.S. Environmental Protection Agency (EPA) finalized new control techniques guidelines for existing oil and gas operations. The guidelines recommend reasonably available control technology (RACT) that states may impose to reduce leaks of volatile organic compounds (VOCs) from storage tanks, compressors, controllers and other equipment. Under the Clean Air Act, areas that exceed their legally mandated ozone limits must require certain sources to implement RACT to reduce VOC emissions which contribute to ground-level ozone. EPA estimates that the guidelines will impose $390 million in capital costs and an additional $100 million in annual costs, after considering offsets for the sale of recovered natural gas that would otherwise be lost. Industry groups opposed the guidelines, arguing that the costs of putting new controls on existing equipment were unjustified and would disproportionately harm smaller, independent producers. They further asked EPA to delay finalizing the guidelines until EPA reviews data it is seeking under an Information Collection Request issued to the oil and gas industry. Environmental groups praised the guidelines, including EPA’s decision not to exempt low-producing wells (less than 15 barrels of oil per day). The guidelines will apply in 28 areas classified as being in non-attainment status for the 2008 ozone ambient air quality standards and in 11 Northeastern states within the Ozone Transport Region. These states — which include California, Colorado, Pennsylvania and Texas — will have two years to revise their state implementation plans to include RACT determinations. States must either follow the guidelines or show that alternative methods or controls will achieve similar reductions.

Court stays challenge to tribal oil and gas rule. The U.S. Court of Appeals for the District of Columbia Circuit stayed a trade association’s challenge to EPA’s final minor source New Source Review rule for oil and natural gas production equipment and natural gas processing operations on Indian lands. The two-sentence order held the case in abeyance while EPA reconsiders aspects of the rule. In issuing the rule, EPA claimed that new regulations were needed due to rapid oil and gas development on Tribal lands and it created a federal implementation plan requiring registration for new and modified minor sources instead of permit applications. An industry trade association challenged the rule while also filing a petition for reconsideration with EPA, asserting that the rule’s procedures for establishing synthetic minor sources and screening procedures for compliance with the Endangered Species Act and National Historic Preservation Act were arbitrary and capricious, and that the final rule should extend to newly designated nonattainment areas. EPA agreed to reconsider aspects of the rule that industry asserts will delay oil and gas projects on Indian lands. The parties will file motions to govern further proceedings by December 13.

BLM schedules online lease sales. The U.S. Bureau of Land Management (BLM) rescheduled four oil and gas lease sales for December, changing them to online auctions. BLM explained that online auctions modernize the lease sale process and increase efficiency and competition. A Greenpeace spokesman objected, claiming that BLM made the change to deprive the group and others in the “Keep it in the Ground” movement from protesting lease sales. Industry groups praised the change to an online format, stating that protestors will no longer be able to disrupt lease sales. BLM was forced to postpone prior lease sales for fear of disruption by protestors. The December lease sales will cover parcels in Colorado, Kentucky, Mississippi, Montana and Utah.

States

Trade group challenges new Pennsylvania hydraulic fracturing rules. The Marcellus Shale Coalition (MSC) filed suit to block new Pennsylvania regulations governing hydraulic fracturing. The regulations, called the Chapter 78(a) Rules, went into effect earlier this month after five years of development. MSC is challenging seven provisions on various grounds. It argues that some of the rule’s requirements, such as an expanded list of persons who must be notified and allowed to comment on well permits, draws its authority from Act 13, an oil and gas law previously struck down by the Pennsylvania Supreme Court. Other provisions, according to MSC, are too vague to provide fair notice of what companies must do to comply, are not based in any statutory authority, or conflict with other statutory laws, rules and guidance documents. The complaint also alleges that the new regulations could add up to $2 million to the cost of each well while adding no environmental protections. MSC is seeking an injunction staying the Chapter 78(a) Rules until its appeal can be resolved.

Boulder County proposes new drilling restrictions. Boulder County, Colorado, is proposing to let its existing moratorium on hydraulic fracturing expire while it implements new drilling regulations. Industry groups oppose the proposal, arguing these local regulations are unlawful under the Colorado Supreme Court’s ruling earlier this year finding that the state has exclusive authority over oil and gas regulations. They argue that the county’s proposed rules are inconsistent with, or more stringent than, Colorado state requirements with respect to land use impact reviews for new wells, mitigation measures, water quality standards and air emission requirements. Environmental groups urged the county to extend the moratorium or institute a permanent ban, even though the state Supreme Court had ruled that such bans are illegal. In lieu of a ban, the groups seek baseline air, water and soil sampling and to require every company to submit audited financial statements prior to well development. The Boulder County Planning Commission will meet to consider the proposed rules on Nov. 17, the day before the current moratorium expires.

Studies

Study: Naturally occurring brines need reuse strategies. A Duke University study of hydraulically fractured wells identified the flow back of naturally occurring brines in produced water as a significant environmental challenge. According to the study, hydraulically fractured wells continue to draw up between 500,000 and 3.8 million gallons of produced water during their first five to 10 years of production. The study estimates that only four to eight percent is hydraulic fracturing fluid, with most of the remainder being natural brines. While hydraulic fracturing fluid can be easily treated and recycled, the brines can contain chlorides, metals and naturally occurring radioactive materials, making treatment and reuse more difficult. The Duke study asserts that the potential environmental impacts of a brine release to waterbodies and the sheer volume that must be stored require further study on options for treatment and reuse.

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