24 March 2015

Sidley Shale Gas and Hydraulic Fracturing Report

Vol. 4. No. 12

Federal

BLM Issues Hydraulic Fracturing Regulations. On March 20, 2015, the Bureau of Land Management (BLM) issued new regulations governing hydraulic fracturing. The new regulations apply only for wells on federal and tribal land, and are expected to affect approximately 3,500 new wells per year. The regulations cover the full range of hydraulic fracturing activities, including well integrity, chemical disclosure and wastewater storage. Among the key provisions is the requirement to disclose hydraulic fracturing chemicals using the FracFocus registry. The provisions also include a state variance process that can be applied when state regulations meet BLM standards and the requirement to store flowback and produced water in above-ground storage tanks. The rule was immediately challenged by the Independent Petroleum Associations of America and the Western Energy Alliance in U.S. District Court in Wyoming. For more information about the rule, see BLM’s Final Hydraulic Fracturing Rule for Federal Land: Five Things You Need to Know.

States

Ohio: Court Overturns Local Ordinance Banning Hydraulic Fracturing. A judge in Cuyahoga County, Ohio recently overturned an ordinance that sought to ban hydraulic fracturing in Broadview Heights, Ohio, holding that the ordinance was preempted by state law. Plaintiffs Bass Energy Co. and Ohio Valley Energy each had state-issued permits to drill in Broadview Heights but were prevented from doing so by the ordinance. The court held that Ohio’s home rule law for municipalities did not authorize them to exercise police powers that conflict with state laws, including the state’s uniformly applicable oil and gas laws. The decision is consistent with a recent Ohio Supreme Court decision that struck down a similar ban on hydraulic fracturing in Munroe Falls, Ohio.

Michigan Approves New Chemical Disclosure Regulations. The Michigan Department of Environmental Quality has issued revised regulations governing the disclosure of chemicals used in high-volume hydraulic fracturing. The rule, which became effective on March 11, 2015, requires companies to disclose in their permit application the chemicals they intend to use in hydraulic fracturing. Disclosures must be made using the FracFocus registry, as now required for drilling on federal lands. The rule also expands the requirements to provide advance notice of hydraulic fracturing activities, as well as adding new requirements for water quality sampling in the vicinity of the drill site.

Pennsylvania: Third Circuit Affirms Dismissal of Chemical Disclosure Lawsuit. On March 16, 2015, the U.S. Court of Appeals for the Third Circuit affirmed a district court decision dismissing a lawsuit challenging the legality of a Pennsylvania law that prohibits physicians from sharing proprietary information about hydraulic fracturing chemicals obtained during treatment of a patient. The law requires physicians to sign a confidentiality agreement before obtaining any proprietary information. The physician alleged that the prohibition violated his First Amendment rights and was inconsistent with his ethical obligations to share such information with other physicians to advance medical science. The Third Circuit agreed with the district court that the physician lacked standing under federal law, because he failed to allege that he had ever been in a situation where he sought, and was unable to obtain, the information that he now wished to make available to the public.

International

Mexico Issues Guidelines for Hydraulic Fracturing. Mexico’s Environmental Ministry has issued non-binding recommendations for regulating hydraulic fracturing. The guidelines focus primarily on drinking water protection and include recommendations to use 90 percent recycled water for hydraulic fracturing and to adopt monitoring procedures to protect drinking water aquifers. Other recommendations address air quality, soil quality, biodiversity and seismic activity. Binding regulations related to hydraulic fracturing would be issued by newly formed Security, Energy and Environmental Agency (ASEA), which began operations on March 1, 2015. While there are currently no hydraulic fracturing operations in Mexico, the country plans to hold an auction later this year that would allow for development of shale plays in Northern Mexico.

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

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