Tort Risks Related to California Fracking

This post was written by Todd Maiden, Marilyn Moberg, and Michael Mandell.

A few months ago, we discussed the Fiorentino case where Pennsylvania plaintiffs alleged an oil and gas company improperly conducted hydraulic fracturing, which allowed the release of toxic chemicals on their land and into their groundwater. At the time, the Fiorentino court was unwilling to dismiss the plaintiffs’ claims until the record was more fully developed. Among those claims was a claim for strict liability whereby the plaintiffs claimed that hydraulic fracturing is an abnormally dangerous activity under Pennsylvania law. Fiorentino v. Cabot Oil & Gas Corp., 750 F. Supp. 2d 506 (M.D. Pa. 2010). Recently, the Fiorentino court rendered a decision declining to “take a step which no court in the United States has chosen to take, and declare hydraulic fracturing to be an ultra-hazardous activity that gives rise to strict tort liability.” Fiorentino, No. 3:09-cv-02284, Doc. 489 at 1.
 

The court, adopting the magistrate judge’s report and recommendation, went through the six factors set forth in the Restatement (Second) of Torts § 520 to determine whether hydraulic fracturing legally qualifies as an ultra-hazardous activity giving rise to strict liability. Id. at 23. These are the same six factors that California courts use when evaluating whether strict liability should apply to individual cases without precedent. Edwards v. Post Transp. Co., 228 Cal. App. 3d 980, 985 (1991).
 

In short, Fiorentino found that the plaintiffs failed to meet any of the six factors because they had presented no evidence that a properly constructed and completed gas well would still lead to water contamination or fluid migration. Fiorentino, Doc. 489 at 29. Instead, the plaintiffs’ limited evidence consisted only of an expert report describing the possible negligence of the defendants (i.e., that fluid migration from the wells was “likely” due to a lack of due care relating to “faulty well design and/or construction”). Id. The court was also persuaded by the “surplus of evidence not only attesting to the relative safety of natural gas drilling operations, but also to the fact that such operations are a common, growing, and important part of a modern, highly industrial society . . . .” Id. at 10. Accordingly, the court granted the defendants’ motion for summary judgment on the plaintiffs’ claims for strict liability. Id. at 37.
 

That said, although strict liability may be an uphill battle for plaintiffs, other causes of action still remain viable. In April, a Texas family was awarded 2.9 million in the first toxic tort jury verdict over fracking. They succeeded on an intentional nuisance claim. Parr v Aruba Petroleum Inc., Tex. County Ct., No. CC-11-01650-E. Whether causes of action alleging intentional nuisance or strict liability can be successful in California courts has yet to be tested for fracking. However, when coupling the increased use of hydro-fracturing and other well stimulation techniques in California along with the rising tide of community opposition to such operations, upstream developers and landowners need to closely monitor the litigation risks associated with these activities.

USEPA Backs Away from Groundwater Contamination Investigation in Pavillion, Wyoming

This post was written by Mark Mustian

In a very low-key release on June 20, 2013, the U.S. Environmental Protection Agency (USEPA) announced that they did not intend to complete their investigation of possible groundwater contamination near Pavillion, Wyoming. As we discussed in late 2011, USEPA had previously issued a draft report which indicated that drinking water in the Pavillion area was likely contaminated by chemicals used in hydraulic fracturing of gas wells. As expected, this report was highly controversial. Following the release of the draft report, USEPA set in motion a follow-up investigation to collect additional information. It was expected that at some point in the future (possibly far in the future), USEPA would issue a final report of their investigation. Instead, USEPA announced that they will not finalize the report, or rely on the conclusions from the draft report. Instead, USEPA will support the Wyoming Department of Environmental Quality (WDEQ) and the Wyoming Oil and Gas Conservation Commission (WOGCC) as these two local agencies prepare a report which is supposed to be issued by September 30, 2014.

USEPA’s decision is expected to be as controversial as the original draft report, with diverging opinions as to the basis for that decision and likely no real answer.

Illinois Governor Signs Fracking Legislation

This post was written by Edward Walsh

Claiming that the legislation will give the state the strongest environmental standards for hydraulic fracturing operations, or “fracking” in the United States, on June 17, Illinois Gov. Pat Quinn signed into law a bill regulating the practice. The Hydraulic Fracturing Regulatory Act introduces the first comprehensive controls on fracking in the state. Among other things, it requires oil and gas drillers to disclose which chemicals they are using both before and after fracking operations and requires water sampling of pre- and post-fracking groundwater with operators liable for any ensuing water pollution. The New Albany shale formation in southern Illinois, believed to contain billions of cubic feet of natural gas, is the focal point of the now settled fracking debate in Illinois.

The law will be implemented by the Illinois Environmental Protection Agency and Department of Natural Resources. Applications for fracking operations are now subject to public comment periods and a public hearing. Once approved, operators must submit both pre- and post-fracking chemical disclosures to the state, in contrast to the practice in other states. Operators may attempt to shield the identity of the chemicals they use from public disclosure under “trade secret” provisions with such claims subject to challenge through the state’s freedom of information law.

In contrast to standard practice, wastewater from operations must be stored in above-ground closed tanks, rather than in pits typically used in the industry. Operators must test groundwater around the fracking area against a predrilling baseline, 6, 18 and 30 months after operations commence. Operators are responsible for groundwater impacts if testing shows that the baseline standard has been exceeded, absent convincing evidence that their fracking operation was not the source of the impact.

The law has the support both industry groups and environmental groups making legal challenges unlikely.

California Bill May Place Moratorium on Hydraulic Fracturing Permits

This post was written by Julia Butler, Don Ousterhout, and Todd Maiden.

On March 11, 2013, California State Senator Fran Pavley (D – Agoura Hills) introduced an amendment to Senate Bill 4, which the Senator herself had introduced on December 3, 2012, to further regulate hydraulic fracturing in California. Among other things, the amendment would (1) require the Secretary of the State Natural Resources Agency to conduct an extensive, independent and peer-reviewed scientific study of the potential hazards and risks that hydraulic fracturing treatments pose to natural resources and public, occupational, and environmental health and safety, and (2) preclude the Division of Oil, Gas, and Geothermal Resources (DOGGR) from issuing hydraulic fracturing permits from and after January 1, 2015, until the study, including the peer review component, has been completed. While the fracking permit moratorium would not go into effect until 2015 and the amendment theoretically requires the study to be completed before that date, the extensive requirements of the study, including the peer review component, suggest that completion of the study may take considerably longer and thus result in a lengthy period during which fracking would not be allowed to occur. This bill is set for hearing on April 9 before the Senate Natural Resources and Water Committee.

We will continue to monitor and report on legislative and regulatory developments regarding hydraulic fracturing in California.
 

Shale Gas in the UK: One Year On...

 This post was written by Lynne Freeman and Christopher Parrott

Following changes in personnel in the UK Government, opportunities may be on the horizon in the budding UK shale gas industry. Last year, we reported on the challenges in achieving large scale shale gas production in the UK, summarising them as:

  • The impact of Governmental decisions on energy policy;
  • Obtaining planning and other permissions to access the land and develop the shale reserves;
  • Overcoming environmental and safety concerns;
  • The influence of lobbyists and environmental pressure groups; and
  • Access to funding for exploration.

One year on, this Reed Smith Client Alert considers the progress in respect of these challenges, what has changed and what remains to be done before the impact of shale gas on the UK’s energy needs can be determined. 

USEPA's Draft Guidance for Diesel Fuel in Hydraulic Fracturing Clarifies Compliance with Safe Drinking Water Act

This post was written by Jennifer Smokelin

Here's another environmental legal development we previewed at the beginning of the year. In 2005, Congress exempted hydraulic fracturing from requirements to obtain an underground injection permit under the Safe Drinking Water Act (SDWA), but still required a permit when diesel fuel is used as a fracturing fluid. On May 4, the U.S. Environmental Protection Agency (USEPA) published draft guidance for SDWA permits issued to oil and gas companies that use diesel fuels during hydraulic fracturing. The draft guidance outlines requirements for diesel fuels used for hydraulic fracturing wells, technical recommendations for permitting these wells, and a description of diesel fuels for USEPA underground injection control permitting. Note that the draft guidance only applies to USEPA permit writers and where USEPA is the permitting authority, The draft guidance includes six categories of fuels (based on CAS abstract numbers) deemed to be considered diesel, while stopping short of an outright ban on the use of the fuel. If these categories of fuels are being used, drillers will need to apply for a specific permit and this could delay drilling. The guidance does not address possible liability for companies that used diesel fuel in the past to fracture rock formations to free trapped natural gas.

USEPA will take public comment on the draft guidance for 60 days upon publication in the Federal Register to allow for stakeholder input before it is finalized.
 

"Best Practices" Guidance Released for Marcellus Shale Operators

This post was written by Jennifer Smokelin

In order to reduce liability for natural gas development, it is a given that companies "know the rules and make sure you comply with them." A corollary to this maxim is that companies understand the industry's "best practices" and strive to follow them. For hydraulic fracturing, the American Petroleum Institute had issued industry guidance/best practices on hydraulic fracturing and, a few days ago, the Marcellus Shale Coalition (MSC) released its first recommended practices (RP) that offers guidance on site planning, development and restoration. The RP will assist industry professionals operating in the Appalachian basin in improving their effectiveness in the site planning, development and restoration aspects of responsible natural gas exploration and production. The RP was developed by the MSC’s Land Affairs Committee and it set forth 11 steps in the site preparation, development and restoration process for natural gas development, beginning with identifying the need for a new well site, compressor station or pipeline, and ending with site monitoring, maintenance and repair. The guidance document is the first of many that MSC is expected to release in the coming months, and the additional guidance is expected to cover topics from well construction to air quality and water management.
 

DECC Publishes Report Advising UK Government on Hydraulic Fracturing

This post was written by Lynne Freeman and Laura Riddeck

A report commissioned by the Department of Energy and Climate Change (DECC) advising the UK Government that the controversial process of hydraulic fracturing, or “fracking”, should be allowed to continue, was published today. This is likely to thrust the process back into the spotlight, with Cuadrilla Resources Ltd likely to resume its activities and other companies to look to get a piece of shale gas action.

Background

Cuadrilla Resources Ltd began using fracking to explore sites for shale gas in Lancashire, north England, in March 2011.In April and May 2011, however, two seismic tremors were detected in the Blackpool region. These were immediately suspected to be linked to fracking processes in wells operated by Cuadrilla during exploration of a shale gas reservoir. As a result of the tremors, operations were suspended and Cuadrilla commissioned a number of studies examining the relationship between the fracking operations and the seismic activity.
 

Findings & Recommendations

Cuadrilla’s report, published in November 2011, found that:

  • The seismic activity was caused by direct fluid injection into an adjacent fault zone during the treatments. The fluid injection reduced the normal stress on the fault, causing it to fail repeatedly in a series of small earthquakes. The fault location, however, was not identified.
  • The maximum likely magnitude resulting from a similar treatment is estimated as 3.0 ML. An event of this size is not expected to present a significant hazard.
  • There is a very low probability of other seismic events during future treatments of other wells.
  • The potential for upward fluid migration was considered low. In the worst case, fluid could migrate along the fault plane, but this would be limited due to the presence of impermeable formations along the Bowland shale.

Subsequently, the DECC commissioned a further report to review these findings and advise the government on the risks posed by fracking. The report agreed with the main conclusions of Cuadrilla’s study regarding the nature and mechanism of seismic activity, but had two concerns:

  1. The probability of future seismic tremors: The report considered that there is not enough data to justify from a simple statistical analysis of the geomechanical situation that there is a low probability of encountering a similarly unique scenario in any future wells; and
     
  2. The potential for upward fluid migration: The DECC considered that this was overstated in the initial studies, based on micro-seismic shale gas data from the main US plays. Further analysis seems to indicate that fracture containment was good, with little vertical height growth. However, the DECC report states that it is difficult to reach any concrete conclusions without confirmatory information from fracture diagnostics.

This long awaited report concludes that the risks posed by fracking are relatively small and that the use of fracking in shale gas exploration should be allowed to resume. However, the DECC have advised that several precautions should be adopted in order to mitigate the risks posed by fracking:

  • The fracking procedure should invariably include a smaller pre-injection and monitoring stage before the main injection;
  • Fracking growth and direction should be monitored during future treatments;
  • Future fracking operations in this area should be subject to an effective monitoring system that can provide automatic locations and magnitudes of any seismic events in near real-time; and
  • Operations should be halted and remedial action instituted if events of magnitude 0.5 ML or above are detected.

The report also published a best practice guide for fracking operations which is based primarily on experience in the US. This guide can be found at Appendix B of the report.

Reaction & Next Steps

Mark Miller, Cuadrilla's chief executive, welcomed the report and was quoted as saying: “We are pleased that the experts have come to a clear conclusion that it is safe to allow us to resume hydraulic fracturing, following the procedures outlined in the review.” He said that Cuadrilla had already begun to amend procedures in light of expert advice.

However, implementing these recommendations is likely to add significantly to the cost of drilling operations. Some experts estimate it could be more than £100,000; others have suggested it could be many times that for each well. This may have a bearing.

The report is now open for a six week consultation period, with the DECC issuing a firm set of regulations after that. It seems likely that the government will follow the DECC’s recommendations in the report, and Cuadrilla will be able to resume its exploration in Lancashire in a matter of months.
 

Key Environmental and Safety Provisions in New Pennsylvania Gas Act

This post was written by Jennifer Smokelin

On February 14, 2012, Pennsylvania Governor Corbett signed House Bill 1950 into law as Act 13 of 2012, the Unconventional Gas Well Impact Fee Act (Act 13). This long bill (174 pages) provides for an impact fee, Oil and Gas Act (Title 58) amendments and local ordinance standards. We followed the legislative progression of the Act and, as promised, offer more detailed analysis of the environmental aspects of the Act here. In short, Act 13 provides for new well fees to be assessed on unconventional wells as well as restrictions on local government’s authority to impose burdens on oil and gas activities over and above those required by the state (which some municipalities are preparing to challenge). There are also new environmental and safety provisions for both surface and subsurface activities, some of which will be effective immediately while other will require a rulemaking by the Environmental Quality Board before becoming effective. This article discusses five significant “specifics” of the new environmental and safety provisions imposed by Act 13 and the implications on future permitting and operation of unconventional natural gas development.

 

  1. The Act provides enhanced hydraulic fracturing chemical disclosure requirements – this is a new requirement.

Act 13 requires operators of unconventional wells to disclose hydraulic fracture fluids to the Chemical Disclosure Registry (which is a website developed by the Ground Water Protection Council and the Interstate Oil and Gas Compact Commission) which will make information about chemicals and additives available to the public in a fully searchable format. Act 13 provides, “Within 60 days following the conclusion of hydraulic fracturing, the operator of the well shall complete the chemical disclosure registry form and post the form on the chemical disclosure registry in accordance with regulations promulgated under this chapter in a format that does not link chemicals to their respective hydraulic fracturing additive” (section 3221.1) Specific information regarding chemicals claimed as trade secrets and proprietary information can be protected from disclosure. Further, certain “trace amounts” of chemicals need not be disclosed.

Act 13 also provides for enhanced well reporting requirements, including production data.

The implication of this provision on future operation of unconventional natural gas development is clearly to require operators to know and disclose hydraulic fracking fluids, even if those chemicals are being supplied by a vendor. Further, it is intended that the Registry be “fully searchable” by the Pennsylvania Department of Environmental Protection (DEP) and the public by geographic region on state wide bases. This could have liability implications in penalty and alleged contamination cases.

  1. Producers must submit to DEP a report identifying and quantifying actual air contaminant emissions, with the report due by March 1 for air contaminant emissions during the preceding calendar year – this is a new requirement.

Section 3227 of Act 13 requires an owner or operator of a facility conducting natural gas operations in unconventional formations including development, production, transmission and processing to “submit to the [DEP] a source report identifying and quantifying actual air contaminant emissions from any air contamination source.” The reports under this section are due March 1 for the preceding year. Previously, on December 6, 2011, DEP alerted companies involved in unconventional natural gas development around Pennsylvania that they must submit to the department data on their facilities’ air emissions for 2011. The reports are due March 1, 2012. Details regarding the air emission inventory can be found here. It is unclear at this time whether and to what extent Act 13 changes or modifies the emission reporting requirements DEP notified regulated entities about in 2011.

  1. Increased record keeping for transportation of waste water fluids – this is a revised requirement.

Under Act 13, producers are now required to maintain transportation records regarding the movement of wastewater In many ways, this is yet another move on the part of the legislature and DEP to discourage disposal of fracking wastewater and encourage on-site reuse. DEP’s preference for onsite reuse can also be seen in another provision of Act 13 where DEP can now deny permits for “failure to submit a water management plan that does not include a reuse plan for fluids that will be used to hydraulically fracture a well.” Therefore, the implication of these provisions on future operations of unconventional natural gas development is to look for future policies to further encourage reuse of wastewater.

  1. Unconventional operators are presumed to be responsible for pollution of water supplies within 2,500 feet of the well bore when the pollution occurs within 12 months of the later of completion, drilling, stimulation or alteration of the well – this is a revised provision.

The Oil and Gas Act has always contained a rebuttable presumption of liability for pollution from gas wells. This rebuttable presumption was based on the distance of the well pad from the alleged pollution and the timing of the pollution event. Act 13 increases the distance of the rebuttal presumption of pollution from 1,000 feet to 2,500 feet from the water supply and the timing of such presumption is increased from six months to 12 months following the last drilling activity for unconventional drilling. The implication on future operation of unconventional natural gas development is an increase in an unconventional well operator’s window of presumed liability, both in distance and time.

  1. Additional permitting and penalty provisions – this is a revised provision.

There are many permitting and penalty provisions in Act 13, including newly required notices to municipalities, as well as water management plans. Further, the Environmental Quality Board must issue regulations for DEP to use in evaluating: impact to public resources, for “ensuring optimal development of oil and gas resources” and respecting property rights of oil and gas owners. Further, aligning itself with other PA environmental statutes, the Oil and Gas Act now explicitly states that permits may be denied for continuing violations by an applicant’s parent or subsidiary. Also, Act 13 increases threefold the “not to exceed” ceiling for civil penalty assessment against unconventional well operators, and it is now up to $75,000. The implications on future permitting operations of unconventional natural gas development could be significant, and the EQB regulations will be something to watch for.

 . . .

There are many other changes to the Oil and Gas Act under Act 13: bonding requirements, well siting and set-back provision changes, and well control emergency response - to name a few. This article serves to highlight five of the more significant measures. If you have questions with regard to other proposed changes (or the Act 13 changes listed here) please contact us. 

U.S. Shale Gas in 2012: Top 10 Environmental Legal Issues to Watch

This post was written by David Wagner and Jennifer Smokelin.

This article was published in Rigzone on February 16, 2012.

In his State of the Union address in late January, President Obama offered his support to further develop natural gas as an energy source and stated that “my administration will take every possible action to safely develop this energy.” The president also underscored that this development requires environmental safeguards. He added: “I'm requiring all companies that drill for gas on public lands to disclose the chemicals they use. America will develop this resource without putting the health and safety of our citizens at risk.” In this context, what can we expect from environmental regulators this year? In our outlook for 2012, we identify 10 environmental legal issues to watch.

1. U.S. Environmental Protection Agency’s First Report on the Impact of Hydraulic Fracturing on Drinking Water Resources

The U.S. Environmental Protection Agency (EPA) is studying the impacts of hydraulic fracturing on drinking water resources primarily in shale formations. Look for EPA’s initial study results this year and an additional report based on long-term study projects in 2014.

The results will no doubt be an impetus for regulatory and policy changes that could have a significant impact on the shale gas industry. Hydraulic fracturing involves injecting water, sand and chemicals deep underground to break up shale rock formations that contain natural gas. Under the study, EPA researchers, in collaboration with outside experts from the public and private sector, will examine the impacts of: large volume water withdrawals from ground and surface waters; surface spills resulting from hydraulic fracturing fluids; the injection and fracturing process; surface spills of flowback and produced water; and wastewater treatment and waste disposal.

2. EPA’s Development of Hydraulic Fracturing Wastewater Standards

EPA is also developing national standards for wastewater discharges produced by natural gas extraction from underground coalbed and shale formations. The federal Clean Water Act (CWA) effluent guidelines program sets national standards for industrial wastewater discharges based on best available technologies that are economically achievable. Effluent guidelines for oil and gas extraction prohibit the on-site direct discharge of wastewater from shale gas extraction into waters of the United States. While some of the wastewater from shale gas extraction is reused or re-injected, the rest still requires disposal. Currently, the disposal of wastewater generated by shale gas production activities is regulated by the states. In some states, wastewater is injected into deep underground shafts, while in others, wastewater has been sent to sewage treatment plants.

In 2012, EPA plans to gather data, consult with stakeholders – including industry stakeholders – and solicit public comment on a proposed rule for wastewater discharges produced by natural gas extraction from coalbed methane in 2013, and a proposed rule for shale gas in 2014. The schedule for coalbed methane is shorter because EPA has already gathered data in this area. In particular, EPA will be looking at the potential for cost-effective steps for pretreatment of wastewater based on practices and technologies that are already available and being deployed or tested by industry to reduce pollutants in these discharges.

3. EPA’s Permitting Guidance on Underground Injection Control for Facilities that Use Diesel Fuels in Injection Fluids

The Safe Drinking Water Act’s (SDWA) Underground Injection Control (UIC) program establishes requirements for proper well siting, construction, and operation to minimize risks to underground sources of drinking water. Even though the Energy Policy Act of 2005 excluded hydraulic fracturing for oil and gas production from permitting under the UIC Program, the exclusion did not include fracturing using diesel fuel. Armed with the authority to regulate hydraulic fracturing using diesel fuel, EPA is developingpermitting guidance for fracturing activities that use diesel fuels in fracturing fluids. The permitting guidance is expected this year and EPA has indicated that it will include a broad definition of diesel fuel, e.g., a definition that includes substances with physical and chemical characteristics of diesel such as BTEX compounds (benzene, toluene, ethyl benzene and xylene).

4. EPA to Start Rulemaking Process on the Disclosure of Chemicals Used in Hydraulic Fracturing

In November 2011, EPA stated that it will begin a rulemaking procedure under the Toxic Substances Control Act (TSCA) to require companies to disclose information on the chemicals used in hydraulic fracturing. In a response to a petition filed by Earthjustice and 120 other organizations, EPA stated that it “believe[s] there is value in initiating a proposed rulemaking process using TSCA authorities to obtain data on chemical substances and mixtures used in hydraulic fracturing.” EPA has not stated what information will be subject to disclosure, but has limited disclosure to substances used in hydraulic fracturing. EPA said it will attempt to avoid duplication of “the well-by-well disclosure programs already being implemented in several states,” and its regulations will “focus on providing aggregate pictures of the chemical substances and mixtures used in hydraulic fracturing.” In 2012, EPA is expected to issue an advanced notice of proposed rulemaking followed by a stakeholder process and public comment period.

5. U.S. Department of the Interior’s Proposed Regulations Related to Hydraulic Fracturing on Public Lands

For shale gas production on public lands, the U.S. Department of the Interior is drafting a regulation on hydraulic fracturing disclosure requirements for companies drilling there. In late January, Interior Secretary Kenneth Salazar said that more information on the proposed rule would be forthcoming in the next several weeks. In addition to chemical disclosure provisions, the rules are expected to address wellbore integrity following hydraulic fracturing and the management of wastewater.

 

6. Increased Discussion and Proposed Legislation on a “Clean Energy Standard” that Includes Natural Gas

Despite the challenges of passing legislation in an election year, look for more discussion on a “clean energy standard” in the U.S. Congress and proposed legislation on the matter. Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.) has said he will introduce a clean energy standard (CES) early this year.

Under a national CES, all electricity supply companies would have to produce a certain percentage of their electricity from clean energy sources, purchase a like amount of credits, or a combination of both. In 2011, a proposal from the Obama administration included efficient natural gas (i.e., combined cycle) as a clean energy source and it was awarded “half credits” under the president’s proposal. In developing a CES, Sen. Bingaman has to address many design questions that require careful consideration. And the decisions made in the design of such a standard will necessarily favor certain priorities over others. As you might expect, discussion and debate on a clean energy standard will focus on, among other issues, effectiveness, fairness, and the likelihood of bipartisan support.

7. EPA Final Rule Related to Air Emissions from the Oil and Natural Gas Sector

Turning to air emissions, EPA is expected to promulgate final rules under the Clean Air Act on emissions from oil and natural gas exploration, production, transmission, and storage facilities by April 3, 2012. The rules will broaden EPA’s regulation of oil or gas production to reach most operations associated with production activities and address both new and existing sources. In particular, the rules are likely to include a New Source Performance Standard that will regulate volatile organic compound and sulfur dioxide emissions from non-combustion sources in the oil and gas industry, and in midstream natural gas industry. The rules are also expected to amend and expand two existing National Emissions Standards for Hazardous Air Pollutants that regulate emissions of air toxics from these industry sectors for both new and existing sources. As proposed, the new rules will regulate emissions from several types of emission sources that have never before been subject to federal standards, including hydraulic fracturing operations, gas-driven pneumatic devices, centrifugal and reciprocating compressors, condensate and crude oil storage tanks, and small glycol dehydrators.

8. Aggregation of Air Emissions

At least five pending litigation actions address the scope and application of aggregation. Aggregation is the process of determining whether emissions from multiple operations should be combined (or aggregated) into a single source for air permitting purposes. If emissions from individual operations such as wells, processing plants and compressor stations are combined, they could constitute a “major stationary source” or a “major facility” for purposes of the Prevention of Significant Deterioration, New Source Review and Title V permitting programs under the Clean Air Act. The aggregation concept derives in part from EPA’s definition of “stationary source,” which means any building, structure, facility, or installation that emits or may emit a regulated pollutant.” Moreover, a “building,” “structure,” “facility,” or “installation” is defined as all the pollutant-emitting activities that: (1) belong to the same industrial grouping; (2) are located on one or more contiguous or adjacent properties; and (3) are under the control of the same person. Typically, the “adjacent” analysis is at the core of an aggregation determination.

This definition, especially as it relates to “adjacent,” is likely to be applied differently in some of the litigation cases, and the case outcomes should be looked at closely in 2012. For example, two of the cases are in Pennsylvania (which is in EPA’s Region 3): Clean Air Council v. DEP (EHB Docket No 2011-072-R), pending before the state’s Environmental Hearing Board; and Citizens for the Future of Pennsylvania v. Ultra Resources, 4:11-cv-01360-JEJ, pending in the U.S. District Court for the Middle District of Pennsylvania. These two cases will presumably be decided under the Pennsylvania Department of Environmental Protection’s new “Guidance for Performing Single Source Determination for Oil and Gas Industry,” which was effective October 12, 2011. In the guidance, the state regulators indicated that, when considering the “adjacent” analysis, they will not consider the interrelatedness of operations. This interpretation contrasts with the interpretation supported by EPA in Summit Petroleum Corporation v. EPA (Case No. 09-4348). In the Summit Petroleum case, pending before the federal Sixth Circuit Court of Appeals (and in EPA’s Region 5), EPA has argued that, in considering the “adjacent” analysis, the test for operations should be “functional interdependence.”

With cases in different EPA regions and the potential for different interpretations, it is likely that, following any court decision, EPA will attempt to resolve conflicting standards.

9. Private Lawsuits Alleging Personal Injury and Property Damage from Hydraulic Fracturing

Environmental tort liability under federal and state laws provides legal rights including nuisance, trespass, negligence, strict liability, restitution and waste. Compensation may be available for property damage, bodily injury, emotional distress, medical expenses, loss of profits, and punitive and injunctive relief. In 2012, these legal theories will be tested as to their applicability to damages alleged from hydraulic fracturing. On this issue, plaintiffs’ lawyers are already investigating property damage claims and trying to connect the proximity of residents to drilling operations with increased disease diagnosis (e.g., leukemia). Look for more filings of these types of cases.

While private litigation increases liability exposure for drillers, there are possible ways to mitigate the risk. For example, one type of potential action relates to strict liability (or near strict liability) provisions. In Pennsylvania, the state’s Oil and Gas Act establishes baseline protections against the contamination of public and private water supplies. Under the law, a well operator is presumed “to be responsible for the pollution of a water supply that is within 1,000 feet of the oil or gas well, where the pollution occurred within six months after the completion of the drilling or alteration of such well.” This law shifts the burden of proof to the well operator to show that the pollution was pre-existing, from a source other than drilling operations, or outside of the time and distance parameters in the statute. If the landowner or water rights owner believes that it has suffered contamination, it could file a complaint with the state. If a subsequent state investigation indicates the well operator has polluted the water supply, the well operator must restore or replace the water supply. To reduce liability exposure and preserve the pre-existing pollution defense, well operators should conduct a pre-drilling survey of the water assessment against EPA water quality criteria.

10. State Efforts to Impose Moratoriums

Although moratoriums on hydraulic fracturing are frequently discussed in the press, the hoopla seems to grow out of the threat of a moratorium. Only one state, New York, has actuallypassed a moratorium, and it is a temporary ban pending review of regulations. New York placed a moratorium on drilling permits in 2008 and has spent the past three years reviewing its regulations. Most recently, a public comment period on the review of impacts from fracturing and proposed regulations closed January 11, 2012.

Some of the proposed moratoriums in other states include:

  • Vermont, where a bill imposing a three-year moratorium on hydraulic fracturing is working its way through the legislature
  • Ohio, where proposed legislation would establish a moratorium on horizontal stimulation of oil and gas wells until EPA publishes a report containing the results of a study of the relationship of hydraulic fracturing to drinking water resources, and the state issues a related report
  • Michigan, where several bills would impose a two-year moratorium on the issuance of any new permits for hydraulic fracturing until EPA and the state are able to study its effects

This year, we can expect to see more political discussion on these issues, which may result in delaying some drilling efforts. However, for a few reasons, a permanent moratorium in any state is unlikely. EPA has assured states it will not issue a moratorium on hydraulic fracturing. Also, keep in mind that legislatures (and, based on the State of the Union address, the Obama administration) are not opposed to developing these energy resources. Rather, as the president said, the issue is developing “this resource without putting the health and safety of our citizens at risk.” Stay tuned.

Upcoming in 2012: 10 Environmental and Energy Issues to Watch in the United States

This post was written by Lawrence Demase, Douglas Everette, Robert Frank, Arnold Grant, Todd Maiden, Jennifer Smokelin, Robert Vilter and David Wagner.

As we look forward to 2012, the environmental and energy attorneys at Reed Smith will be on top of a range of issues, and offer the following analysis of what we view, in no particular order, to be 10 key issues likely to affect you and your business in 2012. This post is based on input and analysis from Reed Smith attorneys across the United States. The 10 issues to watch are:

  1. Offshore wind power generation
  2. Renewable energy incentive programs
  3. Hydraulic fracturing regulation
  4. Aggregation
  5. Greenhouse gas litigation
  6. California's cap-and-trade program
  7. California's Green Chemistry program
  8. New mercury standards for coal and oil-burning power plants
  9. Fallout from CERCLA decision in Burlington Northern and Santa Fe Railway Co. v. U.S.
  10. Conflict minerals and disclosure requirements

Please return to blog regularly and participate in our quarterly teleseminar to get updates and analysis on these and many other environmental and energy issues.

1. Offshore Wind Power Generation (Robert Vilter, New York)

The Obama Administration is pursuing the development of 10 gigawatts of offshore wind-generating capacity by 2020, and 54 gigawatts by 2030. This would produce enough energy to power 2.8 million and 15.2 million homes, respectively. However, because of complicated and overlapping federal and state regulations, it takes anywhere from seven to 10 years to receive approvals and to fully permit an offshore wind project – more than double the amount of time it takes to permit an offshore oil or natural gas platform. The U.S. Department of the Interior has announced a “Smart from the Start” wind energy initiative to facilitate siting, leasing and construction of new projects in an effort to shorten this time line. Keep in mind that offshore wind farms, such as Cape Wind, also face local hurdles to development, oftentimes in the form of opposition by well-funded citizen groups.

2. Renewable Energy Incentive Programs (Arnold Grant, Chicago)

The cash grant program enacted under Section 1603 of American Recovery and Reinvestment Act in order to help renewable energy developers has expired except for projects that (i) began construction before January 1, 2012, and (ii) are placed in service before a specified date. The date varies depending on the type of project. The major remaining federal tax benefits are the energy tax credit under IRC Section 48, the production tax credit under IRC Section 45, and accelerated tax depreciation under IRC Section 168. Various structures are available to help renewable energy developers monetize these incentives.

3. Hydraulic Fracturing Regulation (Larry Demase, Pittsburgh)

Hydraulic fracturing or “fracking” is a practice of stimulating and maximizing production of natural gas in shale formations that has been in use in the United States for more than 50 years, but which has recently gained public attention. It involves pumping, under high pressure, a mixture of very large quantities of water and very small quantities of chemicals and proppants to create fissures in the shale and to hold fissures open so that gas will flow in greater quantities to the well bore. The controversy over its use concerns the amount of water being withdrawn from ground and surface resources, alleged contamination of drinking water from the fracking fluid and the disposal and treatment of waste water. In 2011 the U.S. Environmental Protection Agency (EPA) announced it will study the impacts of hydraulic fracturing on drinking water resources. The results of EPA’s study are intended to provide decision makers with some answers to fundamental questions about the effect of fracking on drinking water. The results will also no doubt be the impetus for regulatory and policy changes that could have a significant impact on the shale gas industry. A panel of experts will analyze the effect of fracking using reported cases of alleged groundwater contamination, laboratory studies, toxicological assessments of chemicals used in hydraulic fracturing, their degradation and/or reaction products, and naturally occurring substances that may be released or mobilized as a result of fracking.

There will be two reports resulting from EPA’s study with the first to be completed in 2012. An additional report based on long term study projects is to be issued in 2014. In the meantime, look for states to address these issues in various ways.

4. Aggregation (Larry Demase, Pittsburgh)

As we’ve discussed in previous posts, aggregation is the process of determining whether emissions from multiple operations should be aggregated into a single source for air permitting purposes. A significant issue related to oil and gas operations is whether emissions from individual operations, such as wells, processing plants and compressor stations, should be combined so that they become major sources for permitting purposes, subject to Title V requirements and New Source Review.

In 2011, a number of public interest groups challenged air permits issued by the Pennsylvania Department of Environmental Protection (DEP) on the grounds that DEP should have included multiple sources of emissions in those permits so that they would be considered “major” permits. The Clean Air Council, Group Against Smog and Pollution, and Citizens for Pennsylvania’s Future have asserted before the Pennsylvania Environmental Hearing Board and the United States District Court for the Middle District of Pennsylvania, that DEP failed to properly apply the three-part test for deciding whether sources should be “aggregated” together for permitting purposes. One case asserts that the permittee should be penalized for failing to submit an “aggregated” permit application. Decisions in these cases could result in precedents that will impact development of the shale gas industry in Pennsylvania.

Initial decisions in all three cases are expected in 2012, but final results could be extended if the losing parties seek appeals.

5. Greenhouse Gas Litigation (Jennifer Smokelin, Pittsburgh)

Regarding greenhouse gas (GHG) litigation, there are two main areas to watch in 2012: (i) the United States Supreme Court (and the Ninth Circuit) in the aftermath of American Electric Power v. Connecticut (AEP), and (ii) four consolidated cases in the D.C. Circuit challenging the endangerment finding slated for argument at the end of February.

Before the Supreme Court ruled in Massachusetts v. EPA, certain states sued the nation’s five largest coal-fired electric power corporations in the Southern District of New York under federal and state common law, charging AEP and other defendants with contributing to the public nuisance of global warming and seeking an injunction to cap and reduce their carbon dioxide emissions. The AEP Court voted unanimously that federal common law had been “displaced” by the Clean Air Act (and the Obama Administration’s efforts to regulate emissions), and thus states cannot use federal common law to restrict greenhouse gas emissions. The AEP ruling leaves open the question of (i) whether states can sue under state law, and (ii) whether climate change victims can seek damages through the courts. The issues are likely to be litigated in 2012 in a case, Kivalina v. Exxon Mobil.

Following the decision in Massachusetts v. EPA, but before AEP was decided in the U.S. Supreme Court: (i) EPA published two endangerment findings under the Clean Air Act, triggering a mandatory duty for EPA to adopt regulations to control emissions from power plants, industries, motor vehicles, and other sources; (ii) EPA issued tailpipe emission standards for new cars and trucks under the Clean Air Act; and (iii) EPA issued Best Available Control Technology (BACT) guidance for new sources and New Source Performance Standards (NSPS) for existing sources of GHG emissions under the Clean Air Act. Four cases are consolidated in the D.C. Circuit that challenge EPA’s Endangerment Findings. The cases are Coalition for Responsible Regulation Inc., et al. v. EPA, case numbers 09-1322, 10-1092 and 10-1073; and American Chemistry Council v. EPA, case number 10-1167, in the U.S. Court of Appeals for the District of Columbia Circuit. Argument will take place February 28 and 29, 2012. This is a very complex series of cases that will affect not only utilities but many other industries as well, since the fundamental underpinning to all GHG regulation under the Clean Air Act is essentially up for review.

6. California’s Cap-and-Trade Program (Todd Maiden, San Francisco)

In October 2011, the California Air Resources Board approved final regulations implementing a “cap-and-trade” program under the state’s climate law (more commonly referred to by its legislative bill number, “AB 32”). These regulations became effective January 1, 2012, and many consider California a possible test case for similar programs in other parts of the country. Regulated entities under the first phase of this program include utilities and large industrial facilities (i.e., emitters of greater than 25,000 metric tons of CO2 equivalent per year). The regulations trigger two 2012 auctions for buying and selling rights to emit, and requires entities to comply with a series of progressively stringent emission caps beginning January 2013.

7. California's Green Chemistry Initiative (Todd Maiden, San Francisco)

In October 2011, California’s Department of Toxic Substances Control (DTSC ) released revised “informal” draft regulations of its Green Chemistry initiative titled the “Safer Consumer Products Regulation.” DTSC’s new informal draft makes substantial changes, specifically in the areas of timeframes, the prioritization of chemicals and products, alternative assessment compliance, and exemptions. The informal draft also significantly broadens the chemicals that will initially be regulated to include an estimated 3,000 Chemicals of Concern without limits on which product categories may initially be considered. These draft regulations are highly controversial, yet DTSC is projecting that it will likely finalize these regulations – or something close to them – in spring 2012.

In a related development, California’s Office of Environmental Health Hazard Assessment recently finalized separate regulations that regulate the hazard traits in chemicals of concern. While finalized, these regulations remain controversial within the regulated community, and we anticipate administrative or litigation challenges to these regulations as well.

8. New Mercury Standards for Coal and Oil-Burning Power Plants (Douglas Everette, Washington, D.C.)

The final version of EPA's Mercury and Air Toxics Standards, or MATS rule, was signed December 21, 2011. For the first time in history, power plants will have to reduce all of their air toxic emissions, not just mercury, arsenic and lead – but a wide range of toxic chemicals. For coal-fired generators, the MATS rule sets emissions limits for mercury, particulate matter (a surrogate for toxic metals), and hydrogen chloride (a surrogate for acid gases). For oil-fired units, limits are set for particulate matter, hydrogen chloride and hydrogen fluoride. Also revised are new source performance standards for power plants to address emissions of particulate matter, sulfur dioxide and nitrogen oxides. According to EPA, approximately 1,400 existing coal and oil-fired units are affected. Existing sources are required to comply within three years of the effective date of the MATS rule, with case-by-case extensions up to five years beyond the effective date for documented electric reliability issues. These extensions are not offered to new or reconstructed sources. Vigorous debate centers on the practical implementation of the MATS rule deadlines and whether the electric grid will have enough capacity to avoid outages stemming from coal power plant retirements.

9. Fallout from Burlington Northern and Santa Fe Railway Co. v. U.S. (Robert Frank, Philadelphia)

In Burlington Northern and Santa Fe Railway Co. v. United States (BNSF), 556 U.S. 599 (2009), the U.S Supreme Court decided two key issues for parties facing Superfund liability: the standard for establishing “arranger” liability and the standard for establishing divisibility of liability. Since then, more than 100 courts have cited the decision. On arranger liability, including two at the federal appellate level, the cases illustrate that courts are following the Supreme Court’s directive to conduct a fact-intensive inquiry into a defendant’s purported “intent” to dispose of a hazardous substance. It’s fair to say that courts have been more reluctant to establish liability under an arranger theory than in the era preceding BNSF and look for that trend to continue in 2012.

For example, last year, the Ninth Circuit issued its first “arranger” liability decision under CERCLA since being reversed by the Supreme Court in the 2009 Burlington Northern decision.

In Team Enterprises, LLC v. Western Investment Real Estate Trust, 647 F.3d 901 (9th Cir. 2011), plaintiff argued that the requisite "intent to dispose" element necessary to trigger CERCLA arranger liability could be inferred from the fact that the dry cleaning machine was designed in a way that made disposal inevitable. Plaintiff also argued that the fact that the manufacturer exercised control over the disposal process provided a sufficient basis to infer the requisite intent necessary to trigger CERCLA arranger liability. The Ninth Circuit held that a manufacturer of equipment used to recycle wastewater from dry cleaning machines, as a matter of law, had neither the intent nor the control necessary to be held liable as an arranger. The court held that, to sustain an arranger claim against a “company selling a product that uses and/or generates a hazardous substance as part of its operation,” the plaintiff must prove “that the company entered into the relevant transaction with the specific purpose of disposing of a hazardous substance.” The holding underscores the high bar plaintiffs must meet in order to establish CERCLA arranger liability following the BNSF decision.

Regarding divisibility, there have been fewer cases applying the Supreme Court’s divisibility holding in BNSF. Generally, the courts looking at whether a “reasonable basis” for apportionment exists have reviewed the evidence that defendants have submitted to determine whether they have met their burden of proof. These cases have been very fact-intensive and, so far, it is difficult to identify a trend.

10. Final Rules for Conflict Minerals (David Wagner, Pittsburgh)

Section 1502 of the Dodd-Frank Act requires the Securities and Exchange Commission (SEC) to issue disclosure and reporting regulations regarding manufacturers’ use of conflict minerals from the Democratic Republic of Congo (DRC) and adjoining countries. The SEC was required to issue its conflicts minerals rules last year but missed the deadline. Look for the final rules – and plenty of implementation concerns – sometime in 2012. The legislation for conflict minerals is part of a broader multilateral effort to require manufacturers and other users of certain minerals to closely track and publicly disclose where their raw materials originate. It is designed to suppress end-use demand for minerals produced in certain high-risk areas where minerals operations and revenues have been linked to violent and repressive rebel groups.

The law focuses on forcing supply chain transparency for users of certain minerals (which are used primarily in electronic components, engine components, aerospace equipment, jewelry and other industries). It does not directly impose restrictions on mining or metals companies, or create any sort of embargo on the DRC.

Slides and Audio from Reed Smith's January 25 Environmental and Energy Law Resource Teleseminar

On Wednesday, Reed Smith held its quarterly environmental and energy law resource teleseminar and the slides and audio are available for download. We were ambitious and discussed 10 key issues likely to affect you and your business in 2012. Our high level discussion was on the following:

  1. Offshore wind power generation
  2. Renewable energy incentive programs
  3. Hydraulic fracturing regulation
  4. Aggregation
  5. Greenhouse gas litigation
  6. California's cap-and-trade program
  7. California's Green Chemistry program
  8. New mercury standards for coal and oil-burning power plants
  9. Fallout from CERCLA decision in Burlington Northern and Santa Fe Railway Co. v. U.S.
  10. Conflict minerals and disclosure requirements

Be sure that we will monitor and analyze these issues and many other environmental and energy issues through the year on our blog and in future teleseminars.

USEPA Draft Report Indicates Likely Ground Water Contamination From Fracking

This post was written by Mark Mustian.

On December 8, U.S. Environmental Protection Agency (USEPA) Region 8 released a draft report detailing the results from an investigation of suspected ground water contamination from natural gas drilling and gas production near Pavillion, Wyoming. After four rounds of sampling, detailed analysis, and an evaluation of various explanations, USEPA concluded that "the data indicates likely impact to ground water that can be explained by hydraulic fracturing." Furthermore, EPA stated that the data suggested "enhanced migration of gas has occurred within groundwater at depths used for domestic water to supply and to domestic wells." In its study, USEPA measured a variety of organic compounds, including benzene, xylenes, gasoline range organics, and diesel range organics. USEPA also measure measured pH, alkalinity and inorganic chemical compounds which were indicative of chemicals used in fracking solutions. The concentrations and depth profiles were such that USEPA was unable to identify an alternative contamination scenario which would explain the findings. The explanation which best fit the facts was that "inorganic and organic constituents associated with hydraulic fracturing have contaminated ground water supply at and below the depth used for domestic water supply."

Though opponents of hydraulic fracturing may seize upon this report as proof of the dangers of shale gas production, it is important to look beyond the surface of this report to understand that the situation in Pavillion, Wyoming is unique, and is not indicative of conditions in other parts of the country. Hydraulic fracturing in the Pavillion gas field occurred within zones of gas which were located within an underground source of drinking water. Hydraulic fracturing occurred at unusually shallow depths in the region, while many domestic water wells are screened unusually deep. USEPA's review of well completion reports showed instances of poor cement bonding on the completed wells. Furthermore, the geology of the region shows little lateral and vertical continuity of hydraulically fractured tight sandstones and no laterally continuous shale units to stop upward vertical migration of constituents of hydraulic fracturing. Finally, there were numerous unlined surface pits in the area used for storage of drilling wastes and produced water. In other words, the conditions in the region were unique and not like the conditions present in other parts of the country where hydraulic fracturing is utilized.

The report is interesting, and in some ways, useful. But it is just one link in a long chain of information which much be collected in order to properly understand the possible impacts of hydraulic fracturing and shale gas production.

USEPA Announces Final Study Plan to Assess Hydraulic Fracturing

This post was written by Jennifer Smokelin.

This week, the U.S. Environmental Protection Agency (USEPA) announced its final hydraulic fracturing study plan and indicated that initial research results are expected by the end of 2012 with a final report in 2014. The overall purpose of the study is to understand the relationship between hydraulic fracturing and drinking water resources. The final study plan looks at the full cycle of water in hydraulic fracturing, from the acquisition of the water, through the mixing of chemicals and actual fracturing, to the post-fracturing stage, including the management of flowback and produced or used water as well as its ultimate treatment and disposal. Earlier this year, USEPA announced its selection of locations for five retrospective and two prospective case studies.

This study got its start in a 2010 budget report in which the U.S. House of Representatives Appropriation Conference Committee identified the need for a focused study of hydraulic fracturing. Since then, USEPA has held a series of public meetings across the nation to receive input from states, industry, environmental and public health groups, and individual citizens.

USEPA Announces Schedule to Develop Natural Gas Wastewater Standards for Shale Gas and Coal Bed Methane under Clean Water Act

This post was written by Jennifer Smokelin.

The U.S. Environmental Protection Agency (USEPA) announced today that it will propose a rule for wastewater from coal bed methane in 2013 and a proposed rule for shale gas wastewater in 2014. The announcement is part of the effluent guidelines program (Clean Water Act § 304(m)), which sets national standards for industrial wastewater discharges based on best available technologies that are economically achievable.

To ensure that these wastewaters receive proper treatment and can be properly handled by treatment plants, USEPA will gather data, consult with stakeholders, including ongoing consultation with industry, and solicit public comment on a proposed rule for coal bed methane and for shale gas. The time frame for coal bed methane is shorter because USEPA feels it already has a leg up on data necessary for the coal bed rule whereas there is more information to gather with regard to shale gas wastewater.

A Few More Details

Hydraulic fracturing is a method of releasing natural gas from highly impermeable rock formations by injecting large amounts of fracturing fluids at high pressures to create a network of fissures in the rock formations and provide the natural gas a pathway to travel to the well for extraction. Geologic pressure within the shale formation forces these fracturing fluids back to the surface, where they are referred to as “produced water” or shale gas wastewater. Based on a review of available data, USEPA is initiating a rulemaking to control wastewater produced by natural gas extraction from underground shale formations. Under this proposed rulemaking, EPA will consider standards based on demonstrated, economically achievable technologies, for shale gas wastewater that must be met before going to a treatment facility.

New Federal Energy Subcommittee to Review Fracking; Group Includes Former Pennsylvania Department of Environmental Protection Chief Kathleen McGinty

This post was written by Jennifer Smokelin.

Following through on President Obama’s request to look at shale gas drilling safety, Steven Chu, the Secretary of the U.S. Department of Energy Secretary, expanded a panel of experts and ordered recommendations. After the Secretary’s Energy Advisory Board created a three-member Natural Gas Subcommittee in January, it expanded to seven members last week. It was also given the mandate to make recommendations within 90 days about how to make drilling safer, particularly hydraulic fracturing. Within six months, the group is to offer advice to other agencies on how they could better protect the environment from shale gas drilling. The four new members are former Pennsylvania Department of Environmental Protection chief Kathleen McGinty, Stephen Holditch, chairman of the Department of Petroleum Engineering at Texas A&M University, Environmental Defense Fund President Fred Krupp, and Stanford University geophysics professor Mark Zoback.

Notes from the USEPA's Science Advisory Board Panel for the Review of Hydraulic Fracturing Study Plan

This post was written by Nicolle Bagnell and Ariel Nieland.

Reed Smith, represented by Nicolle Bagnell, attended the Science Advisory Board Panel's public meeting on March 7, 2011 in Washington D.C. The purpose of the panel, comprised of a distinguished group of 22 professors and practitioners ranging in expertise from public health, hydrogeology, water quality engineering and environmental justice, is to provide an independent review of the U.S. Environmental Protection Agency's (USEPA's) proposed Hydraulic Fracturing Study Plan for scientific soundness of the draft plan. The panel was selected from nominations made in response to a request in the Federal Register last July. In addition to the Panel's review, USEPA received over 300 sets of public comments on the draft plan. There were also twelve speakers who provided 5-minute commentaries either in person or by phone and roughly 50 members of the public who attended the meetings.

The meetings began with a presentation from USEPA giving an overview of the Draft Study Plan, along with a discussion of the proposed case studies, which include both retrospective and prospective case studies to be conducted in North Dakota, Texas, Pennsylvania, and Colorado. In the Marcellus, two retrospective studies are planned for Bradford and Susquehanna Counties and Wetzel, Greene and Washington Counties. Prospective studies are planned in Washington County at a Range Resources site and also at a Chesapeake site that will likely lie outside of the Marcellus, but has not yet been selected. After the overview concluded, public comments were heard. Public Commenters included Gary Slagel of Consol Energy on behalf of the Marcellus Shale Coalition, Tim Stewart representing the Western Energy Alliance, Susan Olliver, a New York landowner in favor of natural gas production, Dennis Degner of Range Resources, Cynthia Lane of the American Water Works Association, Sara Gingold of Food and Water Watch, Amy E. McDonnell from the Chesapeake Bay Foundation, Lauren Pagel of Earthworks, Briana Mordick of the Natural Resources Defense Council, Lynn Howard Ehrle from the International Science Oversight Board, Jeff Zimmerman from Damascus Citizens for Sustainability and Friends of the Upper Delaware River and Deborah Cowden, a physician. Generally, the commentators raised issues regarding the breadth and scope of the plan, some arguing it is too broad and others believing it is too narrow, concerns about the sources being used, and calls for unbiased information to be provided to the public as quickly as possible. Concerns were also raised about the treatment of wastewater before it is discharged, particularly in the Marcellus region, and the impact on humans from multiple chemical exposure. Copies of the speakers' written comments are available here.

Once the public comment period concluded, the panel discussed its 5 charges from Director of the Office of Science and Policy and the contents of the draft plan. Those charges generally asked the panel to comment on the appropriateness of the water lifecycle identified by USEPA to characterize hydraulic fracturing to be used as the framework of the plan, whether the research questions identified by USEPA are correct questions, whether the research approach identified is sufficient, whether the proposed research activities adequately answer the questions, and whether the proposed research will be able to identify the key impacts, if any, of hydraulic fracturing on drinking water resources and provide relevant information on the toxicity and exposure pathways of chemicals associated with hydraulic fracturing. Lively discussion, and at some points debate, ensued as the experts discussed comments, critiques and questions about the proposed plan. In particular, it seemed that the panel wanted some of the terms used, such as "water quality," to be better defined. The panel also agreed that the research questions were too general and needed to be made more specific to comply with the requirements of a scientific approach to answering the questions. Another overarching theme to the discussion was the need to study the interrelatedness of not just the many steps to drilling, but also the impact of increased drilling in a region over many well sites.

Once completed, the Panel will provide comments to the USEPA for consideration before the final Study Plan is published.

Stakeholders Speak Out to USEPA on Hydraulic Fracturing

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

Reed Smith joined an audience of 1,200 attendees at last night's "Opportunity for Stakeholder Input on Criteria for Selecting Case Studies for Consideration in USEPA's Hydraulic Fracturing Research Study" meeting in Southpointe, PA, just outside of Pittsburgh. The standing-room only event marked the largest turnout yet in this series of public hearings sponsored by the U.S. Environmental Protection Agency (USEPA). Approximately 600 people attended the first hearing in Fort Worth, Texas on July 8, while nearly 350 attended in Denver, CO on July 13. The last hearing in the series of four will take place in Binghamton, NY on August 12.

USEPA has explained that the purpose of the hearings is to solicit input from community and industry stakeholders on the design of USEPA's upcoming study of the potential impact of hydraulic fracturing ("hydro-fracking")­—which involves pumping large volumes of water mixed with frac fluid and sand into geologic formations to extract natural gas—on groundwater and drinking water. To facilitate this goal, USEPA welcomed members of the community to register for two-minute slots of speaking time during which they could address their thoughts on the scope and design of the study, as well as on the potential costs and benefits posed by Marcellus Shale natural gas production in Pennsylvania.

It became clear from the comments of the 130 or so speakers that public concern over the potential adverse environmental and health impacts of hydro-fracking has reached fever pitch. Some concerned community members advocated for a moratorium to be placed on all Pennsylvania natural gas drilling, similar to the one currently in effect in New York state, until USEPA completes its hydro-fracking study (expected sometime in late 2012). Industry supporters expressed fears that over-regulation could chill the significant increases in job opportunities and government revenue expected in Pennsylvania as a result of Marcellus Shale natural gas development and production.

According to USEPA, the study is scheduled to begin in early 2011, with preliminary study results expected in 2012. In addition to conducting the series of four public hearings, USEPA is also soliciting comments from the public via email at hydraulic.fracturing@epa.gov on the following inquiries: (1) where should USEPA prioritize its efforts?; (2) where are gaps in current knowledge?; (3) is there data and information already in existence that USEPA should be aware of?; and (4) are there potential candidate sites or case studies that would be useful for the study?

USEPA to Host Public Meetings on Hydraulic Fracturing and its Potential Impact on Drinking Water

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

Starting in July, the U.S. Environmental Protection Agency (USEPA) will begin holding a series of public information meetings to discuss a newly proposed study of the potential adverse effects of hydro-fracking on drinking water, including one scheduled at the Hilton Garden Hotel in Southpointe, Pennsylvania on July 22 from 6 p.m. to 10 p.m. Other meetings are in Fort Worth, Texas on July 8; Denver, Colorado on July 13; and Binghamton, New York on August 12. The purpose of the meetings is to provide the public with information about the study itself, which is still in its initial planning stages, as well as to solicit comments on its design and scope. According to USEPA, "[n]atural gas plays a key role in our nation’s clean energy future and hydraulic fracturing is one way of accessing this vital resource." However, due to the "serious concerns" that have been raised about the possible impact of hydro-fracking on human health and the environment, the relationship between the fracking technique, which involves the pumping of frac fluid (water and chemicals) and sand into shale formations to create fractures through which natural gas can flow to production wells, and its effects on water supplies needs to be better understood.

 

Wyoming Passes Landmark Mandatory Disclosure Rules for Fracking Chemicals

This post was written by Ariel Nieland.

The Wyoming Oil and Gas Conservation Commission voted unanimously yesterday to pass two new regulations that require energy companies to disclose all chemicals used in the fracking process as well as to identify all groundwater sources and state-licensed wells in proximity to well heads. One of the major industry concerns over such disclosure requirements is the protection of trade secrets, i.e. what chemicals comprise each company's frac fluid and in what proportion. To address this concern, the regulations impose confidentiality requirements on state regulators in possession of proprietary information. The disclosure requirement is the first of its kind in the nation; however, other states, including Pennsylvania have proposed similar regulations.

 

In Pennsylvania, Proposed Regulation to Require Public Disclosure of Chemicals Used in Hydraulic Fracturing

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

During a Marcellus Shale public forum meeting held last week near Scranton, Pennsylvania, the Pennsylvania Department of Environmental Protection (DEP) proposed a new regulation to be added to the most recent draft of proposed legislation regulating well construction. Under the proposed regulation, gas drilling companies would have to provide information about chemical usage on a well-by-well basis. This new proposal would require each company, upon completion of well construction, to disclose in a report a list containing all the names and total volume of chemicals used in the hydraulic fracturing process. The new proposal will be presented at a Pennsylvania Environmental Quality Board meeting for discussion on May 19, 2010. Scott Perry, director of DEP's Bureau of Oil and Gas Management, explained that this proposed regulation was drafted in response to a growing desire by the public for increased transparency with respect to well site development.