20 January 2015

Sidley Shale Gas and Hydraulic Fracturing Report

Vol. 4. No. 3


White House Announced Plan To Reduce Methane Emissions from Oil and Gas Sector. On January 14, 2015 the White House announced broad plans to reduce methane emissions over the next decade by 40 to 45 percent from 2012 levels. While few details were provided, the plan will involve new regulations by a number of federal agencies. The Environmental Protection Agency (EPA) will issue New Source Performance Standards under Section 111 of the Clean Air Act for new and modified wells this summer and will finalize them in 2016. EPA’s regulations may target completion of hydraulically fractured oil wells, pneumatic pumps and methane leaks from well sites and compressor stations. There are no immediate plans to regulate existing wells under Section 111, but EPA will also develop new control technique guidelines for state to reduce emissions of volatile organize compounds (VOCs) in areas designated non-attainment for ozone. The Bureau of Land Management will also issue new methane emission standards for oil and gas wells located on public lands. In addition, the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration will develop new safety standards for natural gas pipelines that are expected to reduce methane emissions from the midstream sector. Finally, the Department of Energy (DOE) will issue energy efficiency standards for natural gas and air compressors. The new regulations will be proposed later this year and are expected to be finalized in 2016.


California: Draft Environmental Impact Report Concludes that Hydraulic Fracturing can be Conducted Safely. On January 14, 2015, the California Department of Conservation’s Division of Oil, Gas and Geothermal Resources (DOGGR) issued a draft Environmental Impact Report (EIR) regarding hydraulic fracturing, concluding that hydraulic fracturing can be conducted safely as long as appropriate mitigation measures are used. The EIR evaluated potential impacts on a range of issues including air and water quality, public safety, wildlife habitat, climate change, seismicity, cultural impacts, noise and vibration impacts and visual impacts. The EIR was required by California’s legislature in S.B. 4, which also directed DOGGR to issue rules for hydraulic fracturing which were finalized last year. Environmental groups criticized the timing of the EIR, arguing that it should have been completed before DOGGR’s regulations were issued. Over the past decade, hydraulic fracturing has been used widely in oil production in California. Written comments on the draft EIR must be submitted by March 16, 2015.

North Dakota Proposes Disposal Plan for Radioactive Drilling Waste. The North Dakota Department of Environmental Health (DEH) recently proposed new regulations regarding the disposal of radioactive drilling waste. The proposal would increased the limit on radium-containing drilling waste that can be deposited in “special waste” landfills from 5 picocuries per gram (pCi/g) to 50 pCi/g. Special waste landfills are similar to municipal solid waste landfills, but contain an additional composite liner. Industry representatives supported the proposal, asserting that it would provide clarity for drillers and ensure that radioactive wastes are disposed of properly. The proposed rule may also serve as a precedent for other states that are currently considering new regulations for such waste materials.

Wyoming Considering Expanded Setbacks for Oil and Gas Wells. The Wyoming Oil and Gas Conservation Commission recently announced a new proposal to amend the state’s oil and gas regulations. Under the proposal, setbacks between oil and gas wells and occupied structures including houses, schools and hospitals would be increased from 350 feet to 500 feet. The proposal would also require pre-drilling notice to owners of all occupied structures within 1000 feet of the well site. A public hearing on the proposal has been scheduled for March 9.


Report by Think Tank Questions Manufacturing Benefits from Shale Development. A recent report by the Information Technology and Innovation Foundation (ITIF) questions whether shale development will have an effect across all manufacturing sectors. The study agrees that shale development and lower gas prices have benefited certain manufacturing sectors such as the petrochemical industry and steel and aluminum sectors that service the drilling industry. However, these researchers claim that other sectors have not experienced similar benefits. Instead, the study asserts that energy prices have little impact on manufacturing when compared to other expenses such as shipping costs. The study concludes that recent gains in other manufacturing sectors are cyclical improvements related to the recovery from the recent recession and are not indicative of longer-term trends for U.S. manufacturing.

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