02 February 2015

Sidley Shale Gas and Hydraulic Fracturing Report

Vol. 4. No. 5

Federal

Senate Rejects Amendment to Allow Direct U.S. EPA Regulation of Hydraulic Fracturing Under Safe Drinking Water Act. In a 35-63 vote, senators rejected a measure that would have repealed a provision of a 2005 energy bill exempting oil and gas drilling from the underground injection control requirements in the Safe Drinking Water Act (SDWA). Senator Kristen Gillibrand (D-N.Y.) proposed the measure as an amendment to legislation to approve the Keystone XL pipeline. Rejection of the measure means that U.S. EPA still may not use the SDWA to require a federal permit for most injection activities associated with hydraulic fracturing. EPA has asserted the right to regulate injection when the fracturing fluids contain diesel fuels. Versions of the same legislation were proposed previously but ultimately did not reach a vote on the floor.

Federal Legislation Introduced to Compensate New York Landowners. In response to the decision by the administration of New York Governor Andrew Cuomo (D) to ban hydraulic fracturing in the state, Rep. Tom Reed (R-NY) introduced a bill, the “Defense of Property Rights Act,” H.R. 510, that would provide compensation to landowners who would have otherwise economically gained from fracking within the state. Rep. Reed argues that the state is depriving landowners of their property value by prohibiting the lease and sale of mineral rights to developers.

States

Texas Railroad Commission to Increase Community Outreach Rather Than Require Additional Well Inspections in Urban Areas. Following a decision in December to increase inspections at urban drilling sites in response to a growing number of local bans and protests, the Texas Railroad Commission has determined instead to increase community outreach rather than increase individual well inspections in urban areas. The Commission stated it has no evidence that there are higher noncompliance issues in urban areas, and instead that the community needs to better understand the role of the Commission in regulating oil and gas development and the associated potential for effects on communities, such as increased traffic and noise. The Commission decided it would be a more effective use of its resources to focus on improving the coordination between the local districts and communities.

International

British Parliament Members Call for Hydraulic Fracturing Ban. Members of the United Kingdom’s Environmental Audit Committee are calling for a ban on hydraulic fracturing, citing an uncertain effect on the environment. Additionally, lawmakers are concerned that oil and gas development from hydraulic fracturing could impact the country’s carbon emissions targets. Prime Minister David Cameron has publicly supported shale development as a means to grow the economy and move away from reliance on imported oil. The Department of Energy and Climate Change similarly disagree with the Parliament committee, reasoning that shale drilling for natural gas would result in cleaner energy than energy produced from coal. Shale development continues to move forward in the United Kingdom, but government officials did agree to prohibit development in specific high risk areas, including national parks and special interest sites.

Scotland Stops Hydraulic Fracturing Operations. The Scottish Energy Minister recently announced plans for further study of the environmental and health implications of hydraulic fracturing, delaying planned drilling operations within the country. The additional studies will include public consultations, a public health impact assessment and a review and possible revisions of guidance and environmental regulations. The moratorium will cover all planning consents for unconventional oil and gas developments, including hydraulic fracturing.

Business

Oil Prices May Impact Sand Suppliers. Sand suppliers in western and central Wisconsin, where commercial quality sand is frequently sold as a proppant for use in hydraulic fracturing fluid due to its size, shape and durability, anticipate a downturn in demand for their product. However, officials in several counties report that production has not slowed yet and new mines continue to be developed. Some industry experts believe the downturn could actually provide an economic benefit to proppant suppliers, as drillers look for ways to maximize well efficiency—use of additional sand could potentially increase production rates.

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

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