Friday, July 26, 2013

What's New in Fracking (Fracing, Hydrofracking, Hydraulic Fracturing) Law?

Whatever term you choose to describe the technique, hydraulic fracturing and horizontal drilling of oil and gas wells continues at a fast pace.  The law, too, is quickly changing.  If you're teaching or writing in this area this fall, I've listed some of my favorite resources below.  Some of these aren't so new--they're just helpful (I think). This post describes sources associated with unconventional oil and gas development generally--not just fracturing, which is one stage within a larger development process.

The relevant formations: Much of the oil and gas produced in the United States comes from unconventional oil and gas formations -- defined by Q.R. Passey et al. as “hydrocarbon-bearing formations and reservoir types that generally do not produce economic rates of hydrocarbons without stimulation"--meaning that something more than drilling is required.  These formations include coalbeds, tight sandstones, and shales, but shales contain the most abundant hydrocarbons.  This oil and gas comes from organic matter that was deposited "along the margins of lakes or seas" millions of years ago.  The quantity and type of oil and gas formed from this organic matter depends on a number of factors, including the type of organic matter deposited and the quantity of sunlight and nutrients it had; the rate and amount of organic matter destruction by microbes, oxidation, and other processes; and the mixing and diluting of this organic matter with other substances as sediment built up and the matter was trapped within rocks. Heat and the maturity of the organic matter and rock are also important: in most gas-containing shales, geologists would normally expect to see oil due to the type of organic matter there, but the shales are "mature" and were subjected to high heat, producing residual gas trapped within the rocks.  All of the above is a summary of Q.R. Passey et al.'s work, which does a much more accurate job of explaining the oil and gas production process. 

How much gas and oil?: The Energy Information Administration has a helpful report on global shale gas and oil reserves.  The Energy Information Administration projects a "44-percent increase in total natural gas production from 2011 through 2040" in the United States due largely to unconventional resources. Several liquefied natural gas export terminals are proposed.  The Federal Energy Regulatory Commission has approved the Cheniere/Sabine Pass LNG terminal in Louisiana, and the facility website indicates that the terminal will be "capable of liquefying and exporting natural gas in addition to importing and regasifying foreign-sourced LNG."  The project is still under construction.

The technology: It's not only fracturing that has caused domestic oil and natural gas production to rise dramatically.  There are three key changes that contributed to the modern boom. First, wells that will eventually be fractured are often drilled with a horizontal drilling technique--drilling vertically down to a formation (sometimes as far as 12,000 feet--see this Halliburton document for various formation depths) and then laterally through the formation to expose more surface area, and thus more oil and gas. Often, the portion of the formation targeted is quite narrow--often less than one meter thick, for example.  

Second, hydraulic fracturing is a key technology, but it has (as industry notes) been around for a long time.  Depending on how you parse terms, you could trace it back to the 1800s, when companies used nitroglycerin to break up underground formations.  The technique has, of course, changed quite a bit since then.  The fracturing used from about 1949 and on tended to use very heavy gels and large quantities of proppant (sand) to prop open fractures when they were formed.  Other older fracs used mostly water.  But what really changed in the late 1990s was the use of water (lots of it) combined with some chemicals, in a sort of hybrid of the earlier gel and water techniques.  Energy companies, with government support, developed this slickwater fracturing technique in Texas's Barnett Shale--and more recently transferred it to other formations. The water, injected at very high pressure down a well, rushes out of the perforated portions of the well and forms fractures in the formation around those portions.  Acid injected before the water can also help form fractures.

The third key technological component is the use of multiple, staged, fractures along one wellbore. Fracturing companies separate the well into different intervals (think of "compartments" within the horizontal well) using equipment called packers.  The companies fracture each interval, which greatly enhances well production. 

The regulation: I've written earlier posts about federal exemptions for oil and gas and fracturing. These exemptions, and tradition, leave much responsibility to the states, municipalities, and regional governments.  But the regulation of oil and gas development is very much in flux. 

Federal: As of January 1, 2015, onshore gas companies will have to capture the volatile organic compounds emitted from the well and the flowback water that comes out of the well after fracturing.This will greatly reduce methane emissions.  The EPA is also writing standards that require the treatment of flowback water and salty waters naturally produced from the well; it appears that these standards will apply to direct discharges to water and indirect discharges to a publicly owned treatment works.  The EPA initially suggested that it would require disclosure of the chemicals used in fracturing under the Toxic Substances Control Act, but not it appears that it will simply aggregate information disclosed at the state level.  Finally, the EPA is drafting Safe Drinking Water Act permitting guidance for hydraulic fracturing that uses diesel fuels, and the BLM has issued several versions of draft rules for fracturing on federal lands.

In terms of studies, the EPA had concluded in a draft report that fracturing in an unusually shallow zone contaminated groundwater in Pavillion, Wyoming, but industry has criticized the study, and the EPA recently passed control over continued study to the State of Wyoming.  The EPA's nationwide study of the impacts of fracturing on groundwater is ongoing; the most recent release was a lengthy progress report. The U.S. Geological Survey is conducting a broad-based water quality study in regions where there is drilling and fracturing.  One USGS study in Arkansas found no impacts on water quality from "gas-production activities."  The EPA is also investigating how to control induced seismicity issues caused by Class II underground injection control wells for oil and gas wastes, although it has not yet revised the Safe Drinking Water Act to address the problem. Finally, the DOE's Shale Gas Production Subcommittee produced a report with recommendations for generally improving regulation of shale gas development.

The Fish and Wildlife Service has also begun to be more active in this area.  On July 18, 2013, it issued a final rule listing the diamond darter--a species in the Marcellus Shale region--as endangered.

State: State regulation continues to change quickly, with Nebraska being one of the most recent states to propose required disclosure of fracturing chemicals.  In January 2013, Mississippi approved rules requiring that surface casing (steel lining cemented into the well) extend 100 feet below groundwater, and the rules also require chemical disclosure. In 2012, Utah enacted new rules requiring chemical disclosure and that wells be pressure tested before drilling and fracturing (thus helping to verify that the wells can withstand the high pressures of fracturing), among other protections. Also in 2012, Colorado implemented requirements for testing of water quality prior to drilling and fracturing (requiring testing of a maximum of four water sources around each well) and made other changes. Further, Ohio enacted SB 315 and SB 165 (2012), and West Virginia enacted HB 401 (2011), all of which modify oil and gas development rules.  Over the past few years, Arkansas, Montana, and other states also have changed their rules to address fracturing. For some recent summaries of state regulations, see Resources for the Future's The State of State Shale Gas Regulation and its Shale Maps; summaries and a report from the National Conference of State Legislatures; and American Law and Jurisprudence on Fracing by Haynes Boone.


Local and state:  The Pennsylvania Supreme Court has still not issued an opinion regarding the constitutionality of Act 13, which required municipalities to allow drilling and fracturing in nearly all zones and allowed them to impose a fee on unconventional gas wells.  A commonwealth Court in Robinson Twp. v. Commonwealth, 52 A.3d 463 (Pa. Cmwlth. 2012) struck down portions of the Act as unconstitutional, finding that it was a substantive due process violation to require municipalities to accept this industrial activity in most zones. In Anschutz Exploration Corp. v. Town of Dryden, 35 Misc.3d 450 (N.Y. Sup., 2012), and Cooperstown Holstein Corp. v. Town of Middlefield, 106 A.D.3d 1170 (N.Y.A.D. 3 Dept. 2013), New York trial courts determined that despite state language preempting laws "relating to the regulation of oil and gas," towns may use their land use authority to prohibit natural gas development.  A West Virginia court, on the other hand, found Morgantown's hydraulic fracturing ban preempted because of the relatively comprehensive (but not directly preemptive) state oil and gas law. See Northeast Natural Energy LLC v. City of Morgantown, Civil Action No. 11-C-411 (W. Va. Circuit Court 2011). In Colorado, where the citizens of Longmont banned hydraulic fracturing, the Colorado Oil and Gas Association made a similar argument against the ban--essentially arguing that Colorado's oil and gas rules occupy the field.  The state's Oil and Gas Conservation Commission was reportedly recently joined in the suit.

Industry best practices and recommended state regulations: The State Review of Oil and Natural Gas Environmental Regulations has guidelines for how states should regulate drilling fracturing, which are voluntary.  If states agree, STRONGER reviews state programs for compliance with these guidelines. The American Petroleum Institute also has a number of suggested best practices for hydraulic fracturing, and industry and environmental groups have proposed fifteen performance standards through the Center for Sustainable Shale Development.

Courts: Go here to see Columbia Law School's digest of hydraulic fracturing cases and here for Arnold and Porter's chart of hydraulic fracturing cases.  In 2008, the Texas Supreme Court in Coastal Oil v. Garza, which held that an individual could not recover trespass damages for the drainage of natural gas caused by fractures that extended into a mineral estate, but a federal district court in the West Virginia case of Stone v. Chesapeake Appalachia, 2013 WL 2097397 (N.D. W.Va. 2013), recently disagreed, finding, in denying summary judgment to defendants:

"[T]his Court finds, and believes that the West Virginia Supreme Court of Appeals would find, that hydraulic fracturing under the land of a neighboring property without that party's consent is not  protected by the “rule of capture,” but rather constitutes an actionable trespass."

There's also a split among district courts (and possibly circuit courts) on whether the Migratory Bird Treaty Act requires some sort of action directed at a bird in order for the actor to be liable.  When birds dies in North Dakota Bakken Shale waste pits, the federal district court found that this was not enough to make the oil company liable for a "take": "The terms “take” and “kill” as found in . . . the Migratory Bird Treaty Act are action verbs that generally denote intentional behavior."  See U.S. v. Brigham Oil and Gas, L.P., 840 F.Supp.2d 1202, 1212 (D.N.D. 2012). The U.S. District Court for the Southern District of Texas, on the other hand, found that "[i]f an operator who maintains a tank or pit does not take protective measures necessary to prevent harm to birds, the operator may incur liability under federal and state wildlife protection laws," including the MBTA.  United States v. Citgo Petroleum Corp., 893 F.Supp.2d 841, 847 (S.D. Tex. 2012).

Science:  Recent and semi-recent papers have been released that further describe the links between Class II underground injection control wells and induced seismicity, including in Dallas and Fort Worth, Texas, Oklahoma, and Ohio.  Nathaniel Warner and other authors who published an earlier study on potential methane migration from Marcellus Shale wells published a more recent paper exploring brine in shallow aquifers.  D.J. Rozell and S.J. Reaven also have a good paper addressing "five pathways of water contamination: transportation spills, well casing leaks, leaks through fractured rock, drilling site discharge, and wastewater disposal."  For those looking for an overall summary of potential environmental impacts, the National Park Service produced a useful document in 2008.

With respect to climate, MIT researchers published an interesting (and potentially disturbing) report suggesting that cheap gas threatens to substantially delay technologies like carbon capture and storage.  The International Energy Agency's "Golden Age of Gas" report also warns that gas alone will not lead to a goal of stabilizing average global temperature increases to 2 degrees Celsius.  Natural gas displaced coal in U.S. electricity generation in 2012, and domestic greenhouse gas emissions dropped, but in 2013, natural gas use in generation has declined from 2012 highs.  And with respect to methane leakage associated with natural gas production, for a good comparison of estimates see Jeff Tollefson's article in Nature.

Social impacts: For a report on gas attracting chemical companies and manufacturers to the United States, see this American Chemistry Council document.  For impacts on local economies, Penn State has a number of good sources.  And for interesting numbers showing the strain on infrastructure and services created by a booming oil or gas economy, see Williston, North Dakota's Impact Statement.

And if you haven't fallen asleep yet from this post, see also Gregg Macey's recent "Fracking Fatigue" post for great sources, commentary, and research ideas.  A post on recent fracturing scholarship and theory would be almost as long as this one--I'll save it for another day.

-Hannah Wiseman

http://lawprofessors.typepad.com/environmental_law/2013/07/whats-new-in-fracking-fracing-hydrofracking-hydraulic-fracturing-law.html

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Comments

Thanks for this informative post. I just moved to the region and was glad to have an overview of the current state of fracking and its regulations.

Posted by: Mandy | Dec 13, 2013 9:19:22 AM

Water is more important than oil in the whole scheme of things.Fracturing could disturb our ever sinking water table.

Posted by: Ed.scheibler | Sep 22, 2013 4:23:50 AM

My only concern is what the fracturing to to the water table

Posted by: Ed.scheibler | Sep 22, 2013 4:22:23 AM

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