BLM releases revised proposed rules on hydraulic fracturing

The U.S. Bureau of Land Management (BLM) oversees approximately 700 million subsurface acres of federal mineral estate and 56 million subsurface acres of tribal mineral estate across the United States. Currently, nearly 36 million acres of federal land are under lease for potential oil and gas development.

On May 11, 2012, BLM published a proposed rule governing hydraulic fracturing on federal and tribal lands for public comment. The May 2012 proposal sought to update rules for oil and gas drilling on public and Indian lands by requiring the disclosure of fracturing fluids, satisfaction of various well construction standards, and management of flowback waters. BLM received over 177,000 public comments on the proposed rule.

Today, BLM released a Supplemental Notice of Proposed Rulemaking and Request for Comment, updating its earlier proposal. The supplemental proposed rule revises the set of evaluation tools oil and gas operators may use to show that groundwater is being protected and provides more detailed guidance on how trade secrets claims will be handled, modeled on the procedures promulgated by the State of Colorado.

The 30-day public comment period will start when the proposed rules are published in the Federal Register.

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This post was prepared by Heather M. Corken (hcorken@fulbright.com or 713 651 8386) and Ted Bosquez (tbosquez@fulbright.com or 724 416 0423) from Fulbright's Environmental Law Practice Group.

House reintroduces FRAC Act

On May 9, 2013, the Fracturing Responsibility and Awareness of Chemicals Act of 2013 (the “FRAC Act”) was reintroduced in the U.S. House of Representatives. The FRAC Act was first introduced to Congress in 2008. If passed, the FRAC Act would repeal the exemption for hydraulic fracturing in the Safe Drinking Water Act. The Act establishes groundwater protection safeguards for hydraulic fracturing operations and requires the disclosure of chemicals used during the hydraulic fracturing process.

Specifically, the FRAC Act would require that persons conducting hydraulic fracturing operations disclose to the state: (1) a list of chemicals intended for use; (2) the Chemical Abstracts Service numbers for each chemical and constituent; (3) Material Safety Data Sheets when available; and (4) the volume of each chemical used. The same information must also be submitted within 30 days after hydraulic fracturing operations end. Similar to chemical disclosure rules adopted by many states, the FRAC Act would not require the public disclosure of proprietary chemical formulas.

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This article was prepared by Heather M. Corken (hcorken@fulbright.com or 713 651 8386) from Fulbright's Environmental Law Practice Group and Kristen Hulbert (khulbert@fulbright.com or 713 651 5303) from Fulbright's Environmental Law Practice Group.

Senate Committee to hold forum on shale development

The U.S. Senate Committee on Energy & Natural Resources will hold a Full Committee Forum on “Shale Development: Best Practices and Environmental Concerns” on May 23, 2013, beginning at 10 a.m. EDT. Witnesses will include representatives from oil and gas companies, environmental groups, and state and federal regulatory agencies. The forum will be webcast at FULL COMMITTEE FORUM: Shale Development: Best Practices and Environmental Concerns - Hearings and Business Meetings - Hearings - U.S. Senate Committee on Energy and Natural Resources. An archived video will be available on the Committee’s website shortly after the forum.

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This article was prepared by Barclay Nicholson (bnicholson@fulbright.com or 713 651 3662) from Fulbright's Energy Practice Group.

Ohio voters reject proposal to ban hydraulic fracturing in northeast Ohio

In February 2013, the City Council of Youngstown, Ohio agreed to include on its ballot a proposal to ban hydraulic fracturing within the city limits after an anti-fracking organization, Frackfree Mahoning Valley, collected sufficient signatures for a successful petition. The unofficial results of the election held on May 7, 2013 show voters rejected this proposal by a significant margin: 57 percent opposing the proposal vs. 43 percent supporting the proposal.

In Youngstown, the proposal resulted in an unusual alliance of interest groups united in their opposition to the ban. The local business community actively campaigned against the proposal and argued this prohibition and the litigation likely to arise from the ban would have prompted companies to reevaluate their decisions to invest and expand in the area. Likewise, organized labor opposed the proposal arguing the prohibition would have negatively impacted the economic recovery of the community.

This debate over hydraulic fracturing is increasingly on display in local level elections as anti-fracking organizations pursue similar proposals to ban or otherwise restrict operations within resource-rich eastern Ohio. In November 2012, voters in Mansfield and Broadview Heights approved proposals to amend their city charters to permit the regulation of injection wells capable of storing waste associated with hydraulic fracturing operations. In Athens, an organization named the Bill of Rights Committee is collecting signatures to put the issue on the upcoming November ballot as a referendum.

Ohio sits atop the gas-rich Utica Shale formation and will likely remain a key battleground for the legal and political struggle over hydraulic fracturing. State officials anticipate the development of this formation will generate much-needed tax revenue and employment opportunities for the region.

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This post was prepared by Ted Bosquez (tbosquez@fulbright.com or 724 416 0423) from Fulbright's Environmental Law Practice Group.

USGS assesses undiscovered oil resources in Bakken and Three Forks Formations

The U.S. Geological Survey (USGS) recently completed a geology-based assessment of the oil and gas resources of the Bakken and Three Forks Formations, located in North Dakota, Montana, and South Dakota, finding that these formations together hold an estimated mean of 7.38 billion barrels of oil, 6.7 trillion cubic feet (tcf) of gas, and 0.53 billion barrels of natural gas liquids. See USGS Fact Sheet 2013–3013: Assessment of Undiscovered Oil Resources in the Bakken and Three Forks Formations, Williston Basin Province, Montana, North Dakota, and South Dakota, 2013. The Three Forks Formation was found to have 3.73 billion barrels of estimated mean resource of oil, with the Bakken Formation having a 3.65 billion barrels (approximately the same amount as was found in the USGS’ 2008 assessment of the Bakken Formation). The formations combined estimate ranges from 4.42 million barrels with a 95% change of production to 11.43 billion barrels with a 5% chance. Gas estimates ranged from 3.43 tcf (with a 95% chance of production) to 11.25 tcf (with a 5% chance) and 0.23 billion barrels (95%) to 0.95 billion barrels (5%) of natural gas liquids. This assessment was undertaken as part of the USGS’ nationwide project to assess U.S. petroleum basins using standardized methodology and protocol. Data for this assessment was provided by the North Dakota Geological Survey, North Dakota Industrial Commission, Montana Board of Oil and Gas, and multiple industry groups working in the formations.

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This article was prepared by Barclay Nicholson (bnicholson@fulbright.com or 713 651 3662) from Fulbright's Energy Practice Group.

Pending hydraulic fracturing bills in Illinois legislatures

Currently there are four bills pending in the Illinois legislatures relating to high volume hydraulic fracturing activities. One bill creates the Illinois Hydraulic Fracturing Regulatory Act, two bills would ban fracking, and one requires fracking regulations to be added to the Illinois Oil and Gas Act. All of these bills are currently in committees.

House Bill 2615 which creates the Illinois Hydraulic Fracturing Regulatory Act has provisions requiring permits for hydraulic fracturing and the disclosure of fracking fluids.

• High volume hydraulic fracturing operations require a permit. The permit application must contain detailed well and operations information, including: 
• A detailed description of the proposed well to be fracked, including total depth, proposed angle and direction, the approximate depth at which well deviates from vertical, angle and direction non-vertical portion of the wellbore, and estimated length and direction of proposed horizontal lateral or wellbore. 
• Estimated depth and elevation of the lowest potential fresh water along the entire length of the proposed wellbore. 
• A detailed description of the proposed high volume hydraulic fracturing operations, including the formation affected by the operation, the anticipated surface treating pressure range, the maximum anticipated injection treating pressure, the estimated fracture pressure of the producing and confining zones, and the planned depth of all proposed perforations or depth to the top of the open hole section. 
• A chemical disclosure report identifying each chemical and proppant anticipated to be used in the fracking fluid for each stage of the fracturing operation, including the anticipated total volume of water, fracturing additives to be used, each chemical to be intentionally added to the base fluid, and percent concentration of each chemical added. Trade secrets can be protected with appropriate information provided to the Department of Natural Resources. 
• A plan for handling, storage, transportation, and disposal or reuse of hydraulic fracturing fluids and hydraulic fracturing flowback. 
• Within 60 days after concluding hydraulic fracturing operations, the operator must file a high volume horizontal hydraulic fracturing operations completion report which requires the following information: 
• The total water volume used and the type and total volume of base fluid used. 
• The quantity of hydraulic fracturing flowback recovered from the well and a description of its disposal or re-use. 
• A chemical disclosure report identifying each chemical and proppant used in the fracturing fluid for each stage of the hydraulic fracturing process. Trade secrets can be protected if the party seeking protection presents: 
• Redacted and unredacted copies of documents that contain the chemical disclosure information. 
• A justification of the claim containing a detailed description of how the information has been protected, identification of persons to whom the information has been disclosed, a certification that the information has not been published, an explanation of why the information is of competitive value, and any other information supporting the claim. 

House Bill 3086 and Senate Bill 1418 would amend the Illinois Oil and Gas Act to create the Hydraulic Fracturing Task Force to gather information, evaluate and make recommendations for the regulation of hydraulic fracturing in Illinois. Until the Task Force provides its findings, all high volume horizontal hydraulic fracturing operations are banned.

Senate Bill 3280 would amend the Illinois Oil and Gas Act to require well integrity tests before hydraulic fracturing, disclosure of fracking fluids (except for trade secrets), and re-use or disposal of flowback at an appropriate disposal facility. Operators of hydraulically fracked wells would be required to disclose all chemicals used on the FracFocus website. A service company that performed the hydraulic fracturing or a supplier of any additive used in the fracking fluid must provide to the operator the information needed for the operator to respond to the FracFocus.org website. Trade secret information may be withheld.

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This article was prepared by Barclay Nicholson (bnicholson@fulbright.com or 713 651 3662) from Fulbright's Energy Practice Group.

Proposed hydraulic fracturing legislation and rules in california may chill development in the Monterey Shale

Members of the California legislature have been extremely busy proposing ten (10) laws that would rein in hydraulic fracturing and possibly chill the development of the Monterey Shale formation. This play extends more than 1,700 miles and is believed to contain 15.4 billion barrels of oil, approximately two-thirds of the U.S. shale oil reserves. Legislation in the General Assembly (A.B. 1301) would block hydraulic fracturing until the legislature passes rules specifying under what conditions it could be done safely. A.B. 1323 imposes a moratorium on fracking until regulators examine its health and environmental impacts (a report which is due in 2019). Another Assembly bill (A.B. 649) would ban hydraulic fracturing near an aquifer until a determination is made that the drilling would not endanger health. S.B. 4 [Bill Text - SB-4 Oil and gas: hydraulic fracturing.] would regulate hydraulic fracturing operations, including the construction of wells and well casings and the disclosure of fracturing fluids. It would require an independent scientific study on hydraulic fracturing treatments, and it would prohibit the issuance of hydraulic fracturing permits until the report is completed and peer-reviewed (which would be January 1, 2015 or after).

Along with the proposed moratoriums, the California Department of Conservation proposed rules that would require oil and gas companies to reveal the locations of wells being hydraulically fractured and to disclose the chemicals used.

These potential delays and the required disclosures may have energy firms considering whether the Monterey Shale’s resources are worth the wait.

Additional pending legislation includes the following:

• S.B. 395 would classify hydraulic fracturing wastewater as a hazardous substance.
• S.B. 665 would amend bonding requirements for operators of natural gas wells.
• A.B. 7 would require the disclosure of the chemicals used in hydraulic fracturing, while providing protection for trade secrets.
• A.B. 288 would give the Division of Oil, Gas and Geothermal Resources 30 days to approve a new drilling permit application, extending the deadline from 10 days.
• A.B. 669 would require the operator to get approval from the regional water quality control board for the method and location of wastewater disposal before starting to drill.
• A.B. 982 would require groundwater monitoring before and after any hydraulic fracturing operation.

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This article was prepared by Barclay Nicholson (bnicholson@fulbright.com or 713 651 3662) from Fulbright's Energy Practice Group.