06 July 2015

Sidley Shale Gas and Hydraulic Fracturing Report

Vol. 4, No. 27

Topics discussed in this week’s Report include:

  • New York officially bans hydraulic fracturing.
  • Oklahoma Supreme Court revives lawsuit alleging that hydraulic fracturing caused earthquake.
  • England: Lancashire County denies application for hydraulic fracturing.
  • BCG study shows U.S. manufacturing becoming more competitive as a result of hydraulic fracturing.
  • Researchers conclude that few hydraulic fracturing chemicals have potential for groundwater contamination.
  • SRBC reports no change in water quality due to hydraulic fracturing.

Vol. 4, No. 27

States

New York officially bans hydraulic fracturing. On June 29, 2015, New York’s Department of Environmental Conservation officially banned high-volume hydraulic fracturing after concluding that it posed risks to public health and the environment. The ban came after a more than six-year evaluation process during which time high volume hydraulic fracturing was subject to a temporary moratorium. The state issued a public health analysis in December 2014 and a supplemental generic environmental impact statement in May 2015, both of which concluded that hydraulic fracturing should not be conducted in the state. While opponents of hydraulic fracturing are hailing the decision as a significant victory, proponents of hydraulic fracturing are considering options for challenging the decision in court.

Oklahoma Supreme Court revives lawsuit alleging that hydraulic fracturing caused earthquake. The Oklahoma Supreme Court recently revived a lawsuit involving personal injury and property damages related to a 2011 earthquake. Plaintiffs allege that the 5.0 magnitude earthquake was caused by hydraulic fracturing. A lower court dismissed the lawsuit after concluding that the Oklahoma Corporation Commission (OCC) had exclusive jurisdiction over all issues related to oil and gas development. The Supreme Court disagreed, holding that the OCC’s exclusive authority to regulate oil and gas development did not deprive the courts of their jurisdiction over lawsuits alleging common law injuries.

International

England: Lancashire County denies application for hydraulic fracturing. On June 29, 2015, the Lancashire County Council’s Development Control Committee denied an application by Caudrilla Resources Ltd. to develop natural gas using hydraulic fracturing. The proposal was denied despite a recommendation for approval from the council’s planning officers. The application sought approval to develop four wells in northwest England. Hydraulic fracturing was temporarily banned in England after two seismic events several years ago. Although the ban was lifted in 2012, no permits for hydraulic fracturing have been approved. Caudrilla is reportedly reviewing the council’s decision and evaluating options for appeal.

Studies

BCG study shows U.S. manufacturing becoming more competitive as a result of hydraulic fracturing. A recent report published by the Boston Consulting Group (BCG) found that U.S. manufacturing costs have dropped significantly in recent years and are only five percent higher than those in China and 10 – 20 percent lower than those in Europe. BCG projects that if current trends continue, manufacturing in the U.S. may become cheaper than in China by 2018. While rising wages in China and increased productivity in the United States are contributing to this trend, increased availability of low-cost oil and gas due to hydraulic fracturing is the most significant driver. In fact, BCG has determined that U.S. industrial electricity prices are as much as 50 percent less than other major exporters. Industry has responded to these changing prices by investing more than $138 billion in new capital projects to take advantage of improved competitiveness in the manufacturing sector.

Researchers conclude that few hydraulic fracturing chemicals have potential for groundwater contamination. A recent paper published by University of Colorado, Boulder researchers concluded that few of the hydraulic fracturing chemicals used in the state have the potential to contaminate groundwater. After evaluating 659 chemicals from the FracFocus registry, the researchers identified the 15 chemicals based on their chemical properties and their potential to migrate. The researchers noted that the chemicals are rare, with only four appearing in more than five percent of FracFocus reports. The study is part of a $12 million grant from the National Science Foundation to evaluate responsible natural gas development.

SRBC reports no change in water quality due to hydraulic fracturing. A recent report from the Susquehanna River Basin Commission (SRBC) concluded that there has been no change in water quality due to hydraulic fracturing in the basin. The report followed three years of continuous monitoring in 58 watersheds within the Susquehanna River basin. The study, which evaluated pH, conductance, temperature, dissolved oxygen and turbidity, did not find any relationship between water quality and upstream oil and gas development. The SRBC is an interstate commission formed by the U.S government, Maryland, New York, and Pennsylvania and is responsible for managing the 27,510 square mile basin.

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