19 August 2014

Sidley Shale and Hydraulic Fracturing Report

Volume 3, No. 33

Federal

USFWS seeks information related to potential Endangered Species Act listing for greater sage grouse. On August 11, the United States Fish and Wildlife Service (USFWS) announced a formal status review that will seek information related to a possible Endangered Species Act (ESA) listing for the greater sage grouse. The Agency is seeking information from state and federal agencies, tribes, industry representatives and environmental groups. Listing the bird could materially impact oil and gas development across the west, including in Montana, Wyoming and elsewhere. States have sought to avert a listing, in part, by developing conservation plans to protect the species. An industry representative stated that, as part of oil and gas development projects, companies have committed to 773 conservation measures that will protect more than 68,000 square miles of habitat for the greater sage grouse. The USFWS is under a court order to make a final ESA listing decision by September 30, 2015.

NGO claims operators use “diesel fuel” in hydraulic fracturing wells without requisite permit. The Environmental Integrity Project (EIP) asserted that more than 350 wells have used “diesel fuel” as an ingredient in hydraulic fracturing fluids since 2010 without obtaining a permit under the federal Safe Drinking Water Act (SDWA). By federal law, injecting hydraulic fracturing fluids does not require an SDWA permit, unless the fluid contains “diesel fuels.” The SDWA and implementing regulations do not define “diesel fuel,” but EPA issued interpretive guidance on the term that it finalized earlier this year. EIP also claims that chemical disclosure reports submitted to FracFocus were revised in a number of cases to remove references to diesel fuel. Hydraulic fracturing operators took issue with the report, noting that EIP used an unduly broad definition of diesel fuel and that revisions to the FracFocus reports were made in response to revised data provided by suppliers. FracFocus also defended its reporting program, which continues to perform its intended function of providing data to citizens regarding the chemicals used in injection fluids at a specific well site.

States

New Jersey Governor vetoes ban on disposal of hydraulic fracturing waste. On August 8, 2014 Gov. Christie vetoed a bill that would have prohibited the treatment of disposal of hydraulic fracturing waste in new Jersey. The bill, S. 1041, had broad bipartisan support and was similar to another bill that Gov. Christie vetoed in 2012. In each case, Gov. Christie asserted that the bill would violate the dormant Commerce Clause of the United States Constitution. Hydraulic fracturing does not currently occur in New Jersey and, as a result, only out-of-state hydraulic fracturing operators would be affected by such a ban. The legislature has not yet determined whether it will seek to override Gov. Christie’s veto.

North Dakota considering regulations to require reduced volatility of Bakken crude oil before transport. The North Dakota Industrial Commission has announced plans to consider regulations to reduce the volatility of Bakken crude oil. While studies of Bakken crude oil have reached different conclusions regarding its volatility compared to other crudes, a study conducted for the Industrial Commission has recommended steps to reduce the volatility of Bakken crude oil before it is transported. The process would involve heating the crude oil to reduce flammable gases and then letting it stand in tanks before shipment. The Industrial Commission intends to hold a hearing on this issue in September.

Texas Railroad Commission proposes seismicity regulations. On August 12, the Texas Railroad Commission released proposed rules to regulate the seismicity allegedly associated with the underground disposal of hydraulic fracturing waste water. The Commission declined to recognize a causal link between wastewater disposal and seismic activity, but proposed to require that permit applicants must evaluate the area’s seismic history as part of the permitting process. In addition, the Commission would be given authority to shut down an injection well that is linked to seismic activity. In response to previous calls to shut down injection wells located near seismic activity, the Commission had previously stated it lacked the authority to do so. The proposal will be published later this month and will then be subject to a 30-day comment period.

Virginia announces special permit review process for hydraulic fracturing in Coastal Plain. On August 13, Virginia Gov. McAuliffe announced a special review process for hydraulic fracturing permit applications in the Coastal Plain. Under the revised permitting process, the Department of Mines, Minerals and Energy (DMME) and the Department of Environmental Quality (DEQ) will have joint review authority over permitting decisions. Before any permits are issued, however, the two agencies must complete a review of the potential cumulative impacts of hydraulic fracturing in the Coastal Plain. In addition to its standard role in reviewing DMME environmental assessments, DEQ may also conduct its own independent environmental assessments—an action that could effectively freeze the DMME permitting process.

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

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