01 June 2015

Sidley Shale Gas and Hydraulic Fracturing Report

Vol. 4, No. 22

Topics discussed in this week’s Report include:

  • Administration Plans Further Oil and Gas Rulemakings.
  • Final Sage Grouse Protection Plans Issued.
  • DOE: U.S. Gas Exported From Canada Still Requires U.S. Review.
  • Oklahoma Law Prohibits Local Restrictions on Use of Hydraulic Fracturing.
  • Maryland: Hydraulic Fracturing Permits by October 2017.

Federal

Administration Plans Further Oil and Gas Rulemakings. The Obama Administration released its Spring Unified Agenda, setting out ongoing and future rulemakings for federal agencies. Among them are plans by the Bureau of Land Management (BLM) to issue a proposed rulemaking this summer to address the venting and flaring of gas from oil production wells developed on federal lands. BLM held public meetings in 2014 where it explained that venting and flaring not only releases methane to the environment, but reduces royalties owed to the federal government. BLM also is expected to propose an overhaul of leasing rules that would make it easier for the government to raise royalties and increase rental payments, as well as increase minimum lease bids, civil penalty caps and financial assurance amounts. No projected date for the proposed leasing rules was announced.

Final Sage Grouse Protection Plans Issued. The U.S. Department of Interior issued its final plan to protect sage grouse habitat on federal lands in 10 states, including in Colorado, Utah and Wyoming, where there are significant shale plays. Under the plan, BLM and the U.S. Forest Service will have to amend approximately 100 land-use management plans to incorporate new measures to protect the animal’s habitat which will have a corresponding impact on shale oil and gas development. The plan and its 14 environmental impact statements are subject to a 30-day public protest period, and governors will have 60 days to review for consistency with state and local land use plans. The new restrictions have been criticized by stakeholders on multiple fronts, including state governments, environmental groups, ranching and farming associations and the oil and gas industry. The governors of Colorado and Wyoming, however, praised the plans for taking state conservation measures into account. Both federal and state governments are seeking to conserve sage grouse habitat and boost its population to avoid a listing under the Endangered Species Act (ESA) which would require even more stringent restrictions on development in the area. Environmental groups oppose the conservation measures, arguing that the grouse’s population has already declined enough to warrant an ESA listing.

DOE: U.S. Gas Exported From Canada Still Requires U.S. Review. The U.S. Department of Energy (DOE) announced that companies could not avoid the Office of Fossil Energy’s review process for exporting gas to non-free trade countries by routing U.S. gas to liquefied natural gas export terminals in Canada for further shipment from there. Pieridae Energy had applied to export shale gas routed through New England to Nova Scotia, but the Office of Fossil Energy stated that DOE would only approve gas exports to countries with free trade agreements, finding that the company would have to go through the DOE’s separate gas-export application process. Companies could not sidestep DOE’s regulations that require a public interest review and public comment period for all requests to export U.S. natural gas to non-free trade countries by transferring the gas to Canada for liquefaction and shipment.

States

Oklahoma Law Prohibits Local Restrictions on Use of Hydraulic Fracturing. A week after Texas enacted a law prohibiting municipalities from passing bans or regulating hydraulic fracturing, Oklahoma followed suit with a similar bill. Under the Oklahoma law, municipal government regulation of oil and gas operations is limited to traffic, noise, odors and “reasonable” setbacks from homes. All other regulation, including the disposal of hydraulic fracturing wastewater, is explicitly reserved to the Oklahoma Corporation Commission. Activist groups opposed to hydraulic fracturing declared that the law is unconstitutional and are considering a legal challenge.

Maryland: Hydraulic Fracturing Permits by October 2017. Maryland Governor Larry Hogan (R) opted to allow S.B. 409/ H.B. 449, passed by the state legislature, to take effect without his signature. Under the bills, the Maryland Department of Environment (MDE) must issue final regulations for hydraulic fracturing permitting by October 1, 2016, with those regulations becoming effective one year later. Maryland has had a moratorium on hydraulic fracturing since 2011 while the practice was studied. Based on that study, MDE issued proposed hydraulic fracturing regulations right before former Governor Martin O’Malley (D) left office, but it is expected that Gov. Hogan to implement some changes to the proposal before it becomes final.

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

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