New Fracking Rules Unveiled for Federal Lands

By on March 30, 2015

On March 26, 2015, the Department of the Interior Bureau of Land Management (“BLM”) published its long-awaited final rule regarding hydraulic fracturing (“fracking”) in the Federal Register, which becomes effective 90 days after publication, on June 24, 2015.  The new rules mark the first update to federal fracking standards in more than 30 years.  The new rules are effectively the first rules that squarely address horizontal hydraulic fracturing, as the technology did not exist in present form when the old rules were enacted.

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Fracking is an increasingly common, and politically polarizing, method for extracting fossil fuels.  At bottom, fracking is a drilling technique used to recover gas and oil from shale rock.  The process involves drilling into the earth and then injecting a high-pressured cocktail of water, sand, and chemicals down and eventually across horizontally drilled wells.  The pressurized liquid fractures the subsurface rock, which consequently releases trapped oil and gas that is eventually pumped back to the surface.

Fracking is credited with advancing the recent U.S. “energy renaissance,” which has reduced oil prices to a two-decade low and allowed the U.S. to double its oil production from 2008 to 2015.  In fact, the U.S. is now poised to become the world’s largest producer of oil and gas.  Fracking is not without harsh and staunch critics, however, and the process has raised concerns among some regarding alleged contamination to groundwater, waste disposal, and the public’s exposure to toxic chemicals.  Ardent opponents also point to air emissions and climate change, excessive water consumption, and even the increased risk of earthquakes.  A recent Gallup poll suggests that Americans are equally divided on the use of fracking as a means of increasing natural gas and oil production in the U.S.

These concerns prompted several years of debate, culminating in the BLM’s final rules.  The BLM intends
for the new rules to “serve[] as a much-needed complement to existing regulations designed to ensure the environmentally responsible development of oil and gas resources on Federal and Indian lands, which were finalized nearly thirty years ago, in light of the increasing use and complexity of hydraulic fracturing coupled with advanced horizontal drilling technology.”  The BLM’s final rules are the first set in what is expected to be a series of federal rules governing fracking.

In sum, the new standards impose numerous new requirements on companies.  The hallmarks include:

  • Companies must publicly disclose additive chemicals used in the fracking process on FracFocus, which is an industry-run website, within 30 days of completing fracking operations.  This requirement, however, has already been adopted by many states that have examined the issue.
  • Companies must allow government employees to inspect and validate (1) the safety of the concrete barriers lining fracking wells, and (2) chemicals being stored at the fracking site.
  • Companies must adhere to new requirements and specifications or how to safely dispose of contaminated water.
  • Companies must submit detailed information about every proposed operation, including the location of faults and fractures, the depths of usable water, and the depth of estimated volume of fluid to be used.
  • Companies must submit detailed information about the geology, depth, and locations of already exiting wells.

Despite what many perceive as laudable objectives, the fear among oil and gas companies is that the BLM’s new rules will drastically increase production costs (thereby adversely affecting oil prices), as well as stifle energy development.  Indeed, the American Petroleum Institute (“API”), relying on research and consulting firm Advanced Resources International, analyzed a draft of the final rule and “estimate[d] that the total costs associated with this rule could range from $30 million per year to $2.7 billion per year.”  The API suggests that the requirement of “cement evaluation logs” (“CELs”) on surface and intermediate casing before beginning the fracking process as a source of added cost.  The Western Energy Alliance (“WEA”)—whose members include ConocoPhillips, Halcon Resources Corp. and QEP Resources Inc.—relying on an economic research firm’s analysis, provided a more focused prediction that the added cost of compliance would be $97,000 per new well, or $345.592 million annually.  The WEA warns that considerable costs will emanate from initial delay costs, administrative costs, enhanced casing costs, cement log costs for “well types,” and cement log delay costs.  Although energy trade associations are still assessing the precise costs of the new rules, many expect that the associated costs will greatly exceed the BLM’s rather conservative estimate of $11,400 per well, or $32 million annually.

The new rules have already prompted several lawsuits challenging their legality, characterizing them as “arbitrary and unnecessary burdens” that are “a reaction to unsubstantiated concerns.”  One lawsuit was filed by the Independent Petroleum Association of American and the Western Energy Alliance.  Another was filed by the State of Wyoming.  These parties are significant stakeholders that have a sizeable presence on federal lands, and consequently they have a lot to lose with the increased cost of compliance with the new rules.  Even for those entities intent on compliance, the new rules are lengthy and complicated, and will require legal consultation with attorneys specializing in the area.

As a final and important note, the rules apply to fracking on federal lands, which accounts for only approximately 10 percent of all fracking nationwide and 5 percent of all domestic oil production.  The states have jurisdiction over fracking on state-owned and private land, and thus the BLM’s new rules do not apply.  Accordingly, these rules do not affect the vast majority of U.S. fracking operations.  Nonetheless, the BLM hopes that its new rules will eventually serve as a model and legislative benchmark for states seeking to regulate the fracking industry within their borders.

Filed under Advanced Resources International, American Petroleum Association of America, American Petroleum Institute, Bureau of Land Management, Climate Change, Department of the Interior, fossil fuels, Fracking, Groundwater Contamination, Hydraulic Fracking, Hydraulic Fracturing, Western Energy Alliance

Hydraulic Fracturing Risks and Opportunities

By on April 19, 2012

On April 18, 2012, Winston & Strawn and the Environmental Law Institute co-hosted an informative seminar on, “Hydraulic Fracturing Risks and Opportunities: Regulator, NGO, Industry and Investor Perspectives,” in New York City. The meeting was expertly chaired by May Wall, a partner in the law firm’s Environmental Law Department in Washington, D.C. The panelists included Kate Sinding, an NRDC Senior Attorney and Deputy Director of NRDC’s New York Urban Program; John Imse, a principal at Environ in Denver, who advises clients in the oil and gas industry; Lawrence A. Wilkinson, an analyst with Standard & Poor’s Oil & Gas Team; and Carol P. Collier, the Executive Director of the Delaware River Basin Commission. All four speakers were knowledgeable, informative and articulate. Unfortunately, there is insufficient space here to summarize all of the speakers’ discussion points.

John Imse emphasized how horizontal drilling evolved from the development of  “game-changing technology,” which has spurred significant changes in the gas exploration industry. As a result of new technology, there may be multiple horizontal wells drilled and developed from a single pad location – four to eight wells from a single drilling pad is not uncommon. Each well may have from as few as four to as many as twenty fracturing intervals. According to Imse, “these are not your wildcat wells of the early twentieth century,” but represent highly sophisticated technology.

Imse also discussed the evolving environmental consciousness of the gas exploration industry. He emphasized that “protective steel casing” and “a good cement job” is critical to a well’s success. Contrasting prior poor practices with current practices, Imse described the construction of drilling pads as “highly engineered sites” with liners and berms for spill control, and structural panels on working surfaces to protect the integrity of the liner. He emphasized the evolving consciousness concerning materials management, including the handling of chemicals in large volume containers; spill containment and secondary containment; and on-site 24/7 spill response.

To date, thirteen states have enacted statues requiring disclosure of fracking chemicals used by industry. These thirteen states account for 90% of current gas drilling, according to Imse. In response to pressure by the public and environmentalists, the additives used in fracking have evolved to “more green and more benign components.” For example, Halliburton is increasingly using guar-based gels and food grade mineral oil carriers, and less diesel for fracking.

There are a number of new web-based resources available to the industry. For example, the University of Colorado Natural Resources Law Center has assembled a compilation of Best Management Practices, which Imse strongly recommends as a reference.

Carol R. Collier, the Executive Director of the Delaware River Basin Commission, discussed the importance of the Delaware River Basin to New York City, which extracts 8.7 billion gallons of water per day. Collier’s “bosses” are the governors of the four states that comprise the Delaware River Basin – Pennsylvania, New Jersey, New York and Delaware. Significant portions of Marcellus Shale underlie portions of the Delaware River Basin. Water withdrawal from the Delaware River Basin is a significant concern. In addition to the 100,000-500,000 gallons of water extracted during the drilling of the well, another 5,000,000 gallons of water is withdrawn during the production life of each well.

Kate Sinding, a Senior Attorney with NRDC, discussed the highly charged political backdrop to the fracking controversy. According to Sinding, experiences in Pennsylvania over the past three to four years have given rise to much of the current environmental debate. Fracking has challenged the long held assumption that natural gas is a more environmentally benign fuel than coal, an assumption that is now coming under fire. Sinding expressed concern about environmental issues that she believed were “not amenable to best practices.” 

 

Filed under Delaware River Water Basin" "horizontal drilling" "Marcellus Shale", Environ, Environmental, Hydraulic Fracking, Institute, Law, NRDC, Oil & Gas Tagged with

Public Comment For NYS’s Draft Hydro Fracking Draft Regulations

By on September 29, 2011

 

Recently, New York DEC issued its draft regulations for hydraulic fracturing based on the proposed requirements in the revised supplemental generic EIS released earlier this month. Public comment began yesterday and will run concurrently with the public comment period on the DSGEIS, which ends on December 12.  DEC  also released the proposed SPDES general permit for storm water discharges associated with hydraulic fracturing.  Public hearings will be held during November and here in New York on Nov. 30 at Tribeca Performing Arts Center. No permits can be issued for hydraulic fracturing until the SGEIS is finalized and the DEC issues the required Findings Statement.  The summary of express terms can be found on the DEC website at  http://www.dec.ny.gov/regulations/77373.html

Filed under DEC, Hydraulic Fracking, Hydraulic Fracturing, NYDEC, Oil & Gas, public comment, Regulations Tagged with

Gas Exploration In Marcellus Shale: Water Quality and Water Usage Issues

By on April 9, 2010

Eileen Millett is Counsel to the law firm of Epstein Becker & Green, P.C. where she represents clients on environmental matters, including solid and hazardous waste and the Clean Water Act,  and counsels clients on general regulatory compliance questions, including issues related to toxic waste and water quality, permitting, emerging obligations under impending climate regulations and other federal, state, and local environmental statutes and regulations.  Ms. Millett previously served as Assistant Counsel with the Hazardous Waste Task Force at NYDEC and as General Counsel to the Interstate Environmental Commission, a tri-state water and air quality enforcement authority, where she conducted and managed litigation to control and abate water pollution and ensure adequate water and sewer infrastructure.  She teaches environmental law at the Syracuse University College of Law. 
 

Marcellus Shale is shale formation that extends deeply underground from Ohio and West Virginia, northeast into Pennsylvania, and into New York’s southern tier. Although the shale is exposed in some locations in New York, it descends to a depth of as much as 7,000 feet or more below the ground surface along New York’s Pennsylvania border.  Estimates project that this shale formation contains enough natural gas to fuel New York State’s energy needs for decades to come. Some geologists have estimated that the entire Marcellus Shale formation could contain between 168 trillion to over 500 trillion cubic feet of natural gas throughout its entire extent. New York uses approximately 1.1 trillion cubic feet of natural gas a year. How much gas will be recoverable from the shale is not yet known. Nonetheless, natural gas has emerged as an energy source capable of contributing to alleviating some of the United States’ dependence on foreign oil. Thus, the ability to effectively capture natural gas in the Marcellus shale efficiently and in an environmentally sound manner is of the utmost importance.

It is the process associated with the recovery of natural gas from the shale and the attendant interstate environmental impacts that have become the subject of much debate. The natural gas is both very deeply and very tightly embedded in the shale. However, of late, new technological developments with extraction, notably hydraulic fracturing, have demonstrated promising results.   Interest has naturally advanced because of the shale’s proximity to high demand markets and the development of the Millennium Pipeline. This interest, however, has not been without question about the effects on the surrounding communities and the environment. The concerns raised have been with the technology, horizontal drilling and hydraulic fracturing.

Horizontal drilling is one of the techniques used in the process of reaching the natural gas. One drills down vertically first and then special tools are used to turn the well horizontally. This type of drilling has two advantages, one, is the production of more gas from a single well, since perpendicular penetration of the vertical rock fractures allow engineers to drill more area in the zone of gas producing rock, and, two, many more horizontal wells may be drilled from the same surface location, thus, disturbing less ground surface as compared to using vertically wells. Both, horizontal drilling and hydraulic fracturing technologies have enhanced the cost-efficient recovery of natural gas contained within Marcellus shale. The NYDEC website provides a description of the drilling technology.

Hydraulic fracturing is the high pressure pumping of fluid with a material adept at propping, such as sand, to both expand or fracture the rock to facilitate recovery of the gas, and at the same time, allow the space that’s been expanded to stay open long enough to allow the maximum amount of gas to flow into the well. Unlike of types of drilling, no blasting is used. The hydraulic fracturing process is especially helpful for the type of “tight” rock formation found in rocks like shale. Water and fine sand are pumped through the rock with pressure, fracturing the shale and leaving the grains propping up the rock so that gas escapes. Extracting gas from shale is not as simple as this process may sound. Each shale rock formation is different, thus, to achieve the optimal gas production, could require one to change the amount and mix of fluid and sand. The results cannot be guaranteed and experience and experimentation is the normal way of operating.  

Concerns have been raised that the fracking technique could contaminate groundwater, and that its use should be closely regulated. Most fractured wells are thousands of feet below any potable water zone, thus concerns about groundwater while understandable may be misplaced.  Notable among the concerns is the volume of water required for the process, the chemical composition of the fluid used and the challenges posed by the proper disposal of those fluids. First, Hydraulic fracturing requires the use of large volumes of water to fracture the rocks and produce gas, with each well using up to a million gallons of water. Secondly, the fracturing fluid contains compounds added to it to make the process more effective.   These fluids could include chemicals to reduce friction, inhibit the growth of bacteria, assist in carrying the propping agents into fractured rock, substances to ensure that the propping agent stays in the fracture and agents to prevent or retard corrosion of pipes in the wells. Thirdly, fluid removed from the wells is required to be handled, transported and disposed of properly.

ANALYSIS OF THE WATER QUALITY ISSUE

Among the many issues of concern for the environment in the water quality context are water usage, effluent content, and disposal. Among the most pressing of these issues are the following: the amount of water usage, the need to withdraw surface water, what authority controls and regulates the withdrawal of public drinking water, what authority regulates the withdrawal of surface water for commercial and industrial use, the management of the water withdrawals outside of the authority of water quality commissions (the Delaware River Basin Commission (DRBC), the Susquehanna River Basin Commission (SRBC) and the Great Lakes Commission (GLC)), what approved pretreatment programs exist, and the adequacy, the capacity and the ability of treatment facilities to properly treat and dispose of water. The challenge for attorneys and for courts will arise as communities grapple with:

● Managing the use of water, water withdrawals, what authority controls and who regulates;

● Impacts if any on waterbodies and aquatic life in affected water bodies accepting chemical fluids of varying composition;

● Adequacy and availability of treatment and pre treatment facilities.

Filed under DEC, Fracking, Hydraulic Fracking, Industries, Marcellus Shale, Millenium Pipeline, Millett', NYDEC, Oil & Gas, water quality, water usage Tagged with