04 November 2014

Sidley Shale Gas and Hydraulic Fracturing Report

Volume 3, No. 44

Federal

Interest groups discuss BLM rule with White House. On October 30, environmental groups, including representatives from Sierra Club and the Natural Resources Defense Council, met with officials from the Office of Management and Budget (“OMB”) and the Council on Environmental Quality to discuss a Bureau of Land Management (“BLM”) proposed rule to expand regulation of hydraulic fracturing on public lands. Environmental groups believe that BLM must evaluate the proposed rule under the National Environmental Policy Act, while the industry continues to object to the rule as an unnecessary regulation of primarily state operations. If finalized, the rule is expected to require additional public disclosure, increased wellbore integrity requirements and water management plans for wells on public lands. The final rule is presently expected to be released following the November 4 election.

States

California: Three counties weigh voting bans. In this week’s election, three coastal counties in California will be voting on local initiatives to ban the use of hydraulic fracturing. Santa Barbara, San Benito and Monterey are all situated on the Monterey Shale, a deposit believed to contain over 600 million barrels of oil, but none of the counties currently have shale oil development operations, leading some opponents to believe that the vote is unnecessary. Opponents additionally are concerned that the local initiatives will extend to other forms of drilling beyond high volume hydraulic fracturing. Supporters claim the risk to drinking water and the increased threat of earthquakes as among the reasons to vote in favor of the initiatives.

Pennsylvania representative launches investigation of oil and gas waste. Representative Matthew Cartwright (D-Pa.) recently began an investigation of Pennsylvania’s shale oil and gas waste disposal program. In 2013, Rep. Cartwright proposed a related initiative to eliminate the exception for the oil and gas industry from certain hazardous waste requirements, and has stated that he believes that this new investigation will advance that legislation. As an initial step, the investigation will require the Pennsylvania Department of Environmental Protection to answer several questions about its regulatory programs by mid-November.

Texas: Denton citizens considering state’s first fracking ban. Voting is ongoing for a hydraulic fracturing ban in Denton, Texas. Located above the Barnett Shale, Denton has numerous wells within the city limits. Last year, Denton passed a 1,200 foot setback requirement, following complaints from homeowners about increased noise, dust and traffic. At least one company contended it was exempt from the setback regulation, arguing it was grandfathered because it had commenced drilling before Denton enacted the setback requirement. Opponents of drilling are now seeking an outright ban. If passed, it would be the first jurisdiction to enact a ban on hydraulic fracturing within Texas. Other Texas cities have restricted drilling, but none has completely banned the activity within the city limits.

Business

Kinder Morgan schedules merger vote. Shareholders will vote on the proposed merger between Kinder Morgan Energy Partners, Kinder Morgan Management, and El Paso Pipeline Partners on November 20, 2014, according to SEC filings. If approved, the merger, valued at $44 billion, would be the second largest energy merger in United States history.

Studies

Online journal reports data showing air pollutants above federal limits. The online Journal of Environmental Health has reported that in the vicinity of wells in Arkansas, Colorado, Ohio, Pennsylvania and Wyoming, eight chemicals, including benzene and formaldehyde, are present in air quality samples at levels above federal limits. Local volunteers collected the samples near drilling sites and compressors, which were then analyzed by laboratories for the researchers. Industry groups have criticized the report, arguing the local volunteers are not trained objective researchers, but interested stakeholders.

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