02 December 2014

Sidley Shale Gas and Hydraulic Fracturing Report

Federal

EPA publishes final amendments to Subpart W regulations and issues proposal to further expand the reporting requirements. The Environmental Protection Agency (EPA) has published final amendments to its Subpart W rules governing reporting of GHG emissions from oil and natural gas production, and natural gas transmission, distribution and storage. Among other changes, EPA is phasing out an alternative calculation method known as best available monitoring methods, thereby requiring operators to install new monitoring equipment during the next year in order to comply with Subpart W. The final Subpart W rule will also require operators to report emissions in metric tons of each GHG separately, including methane, as well a facility’s total GHG emissions in tons of carbon dioxide equivalents. EPA also proposed further amendments to Subpart W that would require reporting of GHG emissions from additional gathering and boosting systems, completions and workovers of oil wells using hydraulic fracturing, and blowdowns (the release of gas from transmission pipelines for the purpose of reducing system pressure or complete depressurization) of natural gas transmission pipelines.

EPA seeks an extension of judicial stay in challenge to hazardous air pollution regulations for oil and gas sector. EPA is asking the D.C. Circuit to extend until January 30, 2015 a stay in a challenge to EPA’s national emission standards for hazardous air pollutants (NESHAP) for the oil and gas sector. EPA previously agreed to reconsider certain aspects of the rule, but is requesting more time to define the scope of a revised rule and how that might affect current litigation. Last month, EPA announced in its 2014 unified agenda of pending regulations that it plans to propose a reconsideration rule by May 2015 and to finalize the rule by May 2016.

States

Illinois: Court denies preliminary injunction in challenge to state hydraulic fracturing regulations. An Illinois Circuit Court judge denied the plaintiffs’ motion for a preliminary injunction to halt implementation of Illinois’ hydraulic fracturing regulations, holding the plaintiffs had failed to prove they would suffer irreparable harm from the regulations. The plaintiffs, who include a number of landowners in southern Illinois and the advocacy group Southern Illinoisans Against Fracturing Our Environment, allege the Illinois Department of Natural Resources (IDNR) failed to follow proper procedures when it proposed and accepted comment on draft hydraulic fracturing regulations and, by doing so, deprived them of an opportunity to participate in the rulemaking process. IDNR disputes the allegation, contending the agency satisfied the requirements of the Illinois Administrative Procedure Act. In the absence of a preliminary injunction, IDNR says it will begin processing applications for hydraulic fracturing permits.

Colorado: Colorado Oil and Gas Association challenges the City of Broomfield’s hydraulic fracturing ban. On November 24, 2014, the Colorado Oil and Gas Association (COGA) filed suit in state court challenging the 5-year ban on hydraulic fracturing recently approved by the City of Broomfield, Colorado. COGA contends that the ban is preempted by Colorado’s oil and gas laws. The practical effect of the ban is limited to date, as Broomfield has reached a separate agreement with Sovereign Operating Co.—the only company with active plans to develop wells in Broomfield—that will allow some hydraulic fracturing activities to continue. Similar local bans on hydraulic fracturing in Lafayette, Fort Collins and Longmont have recently been struck down by Colorado courts on preemption grounds.

Maryland agencies conclude that hydraulic fracturing can be conducted safely. A recent draft report published by the Maryland Department of the Environment and Department of Natural Resources concludes that the potential risks from hydraulic fracturing can be managed by a combination of best practices and agency enforcement. The report recommends new regulations, new legislation to expand enforcement authority, a severance tax to support state actions related to shale development, new monitoring programs and comprehensive region-wide gas development plans. A final report, along with proposed hydraulic fracturing regulations, is expected to be released after the Maryland Marcellus shale Advisory Commission reviews and comments on the draft report. There is a de facto moratorium on hydraulic fracturing in Maryland, pending finalization of the report.

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