06 April 2015

Sidley Shale Gas and Hydraulic Fracturing Report

Vol. 4. No. 14

Federal

EPA Report Finds Majority of Wells Keep Fracking Fluid Chemicals Secret. The U.S. Environmental Protection Agency (EPA) recently analyzed disclosure of fracking fluid chemicals between 2011 and 2013 on FracFocus, the website managed by the Ground Water Protection Council and Interstate Oil and Gas Compact Commission. EPA found that the majority of hydraulic fracturing fluid is plain water, with operators using a considerable range of different ingredients as additives and proppants. EPA reports that hydrochloric acid, methanol, ethylene glycol, guar gum and naphthalene are among those ingredients that are most frequently used. According to the report, operators asserted business confidentiality claims over approximately 11 percent of the chemical ingredients and that an estimated 70 percent of the wells EPA examined used at least one ingredient in the fluid that was confidential. EPA has announced it intends to use the information it gathered to assess the toxicity associated with drilling operations.

States

New Mexico County Repeals Anti-Fracking Ordinance. Commissioners in Mora County, New Mexico unanimously repealed a 2013 anti-fracking ordinance. The ordinance was originally styled as a community bill of rights, but banned fracking and drilling throughout the rural county, sparking numerous lawsuits from corporations and landowners. In January, a federal judge struck down the ordinance, finding it unconstitutional and contrary to New Mexico state law. Following the decision, the county is facing possibly paying both its own and industry’s legal fees, which could result in the county facing municipal bankruptcy.

North Dakota Seeks to Sue BLM Over Hydraulic Fracturing Regulations. Attorney General Wayne Stenhjem filed a motion to intervene in Wyoming’s lawsuit filed in the U.S. District Court for the District of Wyoming following publication of the Bureau of Land Management’s (BLM) federal regulations governing hydraulic fracturing on federal lands. Wyoming’s lawsuit alleges that the BLM rule-making process relied on an improper cost analysis. North Dakota similarly asserts that the cost/benefit analysis for BLM’s final rule did not take into consideration that many states, including North Dakota, already have similar requirements and make the federal rules duplicative. More than one-third of North Dakota’s oil and gas production comes from federal land located within the Bakken Shale, including land in the Fort Berthold Indian Reservation and surrounding Theodore Roosevelt National Park.

States Increase Wastewater Injection Well Requirements Following Increased Seismic Activity. Officials with Oklahoma Corporation Commission’s Oil and Gas Conservation Division (OCC) are requiring wastewater disposal wells that inject wastewater into the Arbuckle geologic formation to prove that the injections do not go below the formation. In 2014, Oklahoma experienced 585 earthquakes with a magnitude of 3.0 or higher, exceeding the cumulative total for the past 35 years. The OCC sent letters to 92 companies that hold permits informing them that they have until April 18, 2015 to demonstrate that the injections are not released below the Arbuckle. Operators who fail to meet this demonstration will be required to reduce disposal by 50 percent, a directive that OCC estimates will apply to over one-third of the 900 Arbuckle wells in Oklahoma. Neighboring Kansas also took steps this week to restrict oil and gas activities, following 127 earthquakes in 2014 and 50 this year. Like Oklahoma, Kansas will require companies to show they are not drilling deeper than the Arbuckle formation; additionally, Kansas wells will have injection quantity pressure restrictions.

Litigation

New York Court Refuses to Extend Oil and Gas Leases. On March 31, the New York Court of Appeals held that New York’s ban on fracking did not trigger the force majeure clauses of leases originally signed in 2001. Lease-holders had argued that the leases should be extended without penalty due to the ongoing moratorium on drilling in the state. The highest court in New York found that because drilling and production had never occurred on the leased land, the companies were not entitled to invoke force majeure to extend the leases and that therefore the leases expired at the end of their terms.

Studies

Three Methane Studies Focus on Drilling Impacts. Several studies published in the last week examined whether oil and gas operations were contributing to methane in the environment. Scientists from Pennsylvania State University, the University of Utah and the U.S. Geological Survey published a report outlining a technique to monitor methane in streams that could be used to identify contamination from natural gas production wells. The analysis showed that methane contained in the stream could not have come from biologic sources because it was thermogenic methane, a type that comes from shale formations. The scientists cautioned, however, that without sampling data taken prior to drilling operations, there is no way to determine conclusively that the methane in the stream came from nearby wells. Another study published in Environmental Science & Technology examined over 11,000 water samples collected from Chesapeake Energy Corp. in northeastern Pennsylvania and found that there was no “statistically significant relationship between dissolved methane concentrations in groundwater from domestic water wells and proximity to pre-existing oil or gas wells,” contradicting earlier studies. A third study, also published in Environmental Science & Technology, found that since 1992, new technology and regulations have reduced methane emissions from natural gas operations; resulting in emissions between 36 and 70 percent lower than EPA estimates.

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