15 December 2014

Sidley Shale Gas and Hydraulic Fracturing Report

Volume 3, No. 50

Federal

Anticipated endangered species listing limits auction of oil and gas leases – but budget rider that restricts listing adds confusion to process. The anticipated endangered species listing of the wide ranging sage grouse halted a Bureau of Land Management auction of ninety-seven oil and gas leases. Bidding did not begin due to concerns that the bird will soon be included on the endangered species list, as Interior’s Fish and Wildlife Service (FWS) is under court order to make a decision on listing by September 30, 2015. However, a rider to the $1 trillion budget bill recently passed by the Congress, which President Obama is expected to sign, provides that FWS cannot “write or issue” listing rules for four grouse species during FY 2015. The rider only lasts for the coming fiscal year as it is part of an underlying appropriations bill, but given the makeup of the incoming Congress, permanent or further temporary restrictions on any listing may be forthcoming. How this will all shake out will have significant impact on oil and gas operations on land that share the bird’s habitat in many parts of the western United States.

States

Texas regulator exploring urban oil and gas inspections. The Texas Railroad Commission (TRC) announced that the agency will consider increasing inspections of wells in suburban and urban areas. The announcement follows a vote to ban fracking in the Dallas suburb of Denton in November, amid claims that current state regulations are not sufficiently addressing the alleged impact of drilling operations on densely-populated areas of the state. Ban supporters argued that drillers failed to comply with local regulations regarding setbacks and well spacing, while state officials urged voters not to set a precedent for banning oil and gas development in the state. In addition to the drilling boom, a surge in population is contributing to increased complaints in urban areas. To help meet its regulatory responsibilities, TRC is seeking additional resources to handle the growth in oil and gas development. In August, TRC requested a large budget increase that would add additional well inspectors and pipeline inspectors. Press reports indicate that industry representatives generally supported increased urban inspections, believing it will help demonstrate that most drilling companies are already in compliance with all applicable state and local regulations.

Business

NGO and green investor review finds drillers should provide more complete information to investors on potential risks of hydraulic fracturing. On December 11, a coalition of green investment firms and advocacy groups released a report analyzing disclosure rates for water and waste management, emissions and other environmental impacts from oil and gas operations between August 2013 and September 2014. The review, authored by Boston Common Asset Management LLC, Green Century Capital Management Inc. and As You Sow Foundation, found that while some companies have increased disclosures, industry-wide reporting should be expanded. The review assessed five areas of environmental, social and governance-related risks: (1) toxic chemicals; (2) water and waste management; (3) air emissions; (4) community impacts; and (5) management accountability. According to the report, the analysis relied on publicly available information that companies disclose on their websites or in financial statements or other reports linked from their websites.

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