29 September 2014

Sidley Shale Gas and Hydraulic Fracturing Report

Volume 3, No. 39

Federal

GAO Report offers mixed review of PHMSA oversight of oil and gas transportation. A recent report by the Government Accountability Office (GAO) found that Pipeline and Hazardous Materials Safety Administration’s (PHMSA’s) recent rulemaking for the transport of oil by rail provided adequate precautions to address potential environmental risks. At the same time, the GAO reported that additional regulations were needed to address risks associated with larger, higher pressure gathering lines associated with natural gas development. In response, the PHMSA agreed that additional regulations were required, and noted that gathering lines were not subject to the same degree of PHMSA oversight as other natural gas pipelines. The GAO report was requested by Sens. Rockefeller (D-W.Va.), Thune (R-S.D.), and Wyden (D-Ore.).

Environmental group petitions EPA to prohibit discharge of produced water from hydraulic fracturing. On September 23 Public Employees for Environmental Responsibility (PEER) petitioned the Environmental Protection Agency (EPA) to conduct a rulemaking to prohibit the discharge of produced water from hydraulically fractured wells into surface streams in the western United States. Produced water is water obtained from a well bore during the production phase after the well has been completed. Under current regulations, produced water from oil and gas development can be discharged into streams if the water quality is acceptable for wildlife or for use in agriculture. The regulations were intended to increase water flow in arid states across the west. PEER argues in its petition that produced water from hydraulically fractured wells may contain chemicals from the hydraulic fracturing fluid that may be harmful to human health or the environment.

States

Texas: Eagle Ford shale formation poised to surpass Bakken in oil production. An ongoing study by the University of Texas, San Antonio has concluded that the Eagle Ford shale formation will soon overtake the Bakken shale and become the top oil producing field in the U.S. Researchers noted that the Eagle Ford also has the most capital investment of any shale field in the U.S. The economic effects of this growth are significant and the researchers project that the economic impact of oil development in 2023 will exceed $137 billion over a 21-county area where the Eagle Ford is located. This is a nearly $50 billion increase over last year’s estimates. At present, the oil industry’s activities in the Eagle Ford shale have generated 155,000 full-time jobs with payrolls of more than $5.6 billion.

Standards

API issues standards for transporting crude oil by rail. On September 25, the American Petroleum Institute (API) issued new standards and best practices addressing the transport of crude oil by rail. The standards address the development of sampling and testing programs for crude oil, the frequency of testing and methods to avoid overfilling rail cars. The standards were developed through collaboration with members of the oil and gas industry, the rail industry and the PHMSA. Representatives from the rail industry expressed support for the standards, while PHMSA representatives stated that the final standards were still under review.

Studies

Studies show lack of groundwater contamination from hydraulic fracturing. A recent study conducted by Ohio State University, Duke University, and the University of Rochester, as well as a second study by the Department of Energy, both found that hydraulic fracturing operations do not contaminate groundwater. The university study focused on potential contamination during the hydraulic fracturing process, while the Department of Energy study focused on potential contamination from fracturing fluids left behind after well completion. These studies confirmed that faulty well casings – as opposed to the practice of hydraulic fracturing itself –are the most likely pathway for any potential shale resource development to impact groundwater. This is consistent with the focus in many states on further strengthening existing regulations governing well casings and well integrity.

Report questions climate benefits of natural gas. A recent article published in Environmental Research Letters questions whether an increased emphasis on natural gas development will reduce GHG emissions. The authors concluded that a number of factors related to natural gas development could have a detrimental effect on overall GHG emissions, including potential methane leaks, a shift in investment from renewable energy to natural gas development and increased electricity consumption due to low energy prices. The study modeled a number of different policy scenarios including a carbon tax or cap on carbon emissions and concluded that a renewable portfolio standard mandating renewable energy has the most promise for reducing GHG emissions.

Report outlines NGO concerns about silica mining for hydraulic fracturing. A recent report by the Civil Society Institute’s Boston Action Research in cooperation with the Environmental Working Group and Midwest Environmental Advocates identified potential public health and environmental concerns associated with the mining of silica for hydraulic fracturing. Silica mining is based primarily in Wisconsin and Minnesota, as well as a handful of other states, but could expand depending upon demand. The report’s primary focus is on air quality and the health risks posed by respirable silica dust to workers and nearby landowners. The report also concludes that silica mining may pose risks for water resources due to the volume of water required to operate a mine and the discharge of wastewater associated with silica processing.

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