Alberta taking steps to protect groundwater from hydraulic fracturing operations

The Government of Alberta has released a Water Conservation Action Plan which includes short and long-term strategic actions to protect groundwater from the risks associated with hydraulic fracturing operations.

The Plan outlines 20 short-term and five long-term actions that are intended to help protect Alberta's groundwater during oil and gas development. With respect to hydraulic fracturing, Environment and Sustainable Resource Development (ESRD) in collaboration with Alberta Energy and the Alberta Energy Regulator (AER) will:
  • expand the water conservation and allocation policy presently in place for oilfield injection to include water conservation measures for hydraulic fracturing, with the new policy to be finalized in early 2015; and 
  • develop and implement science-based standards for baseline water well testing near hydraulic fracturing operations, with the new standards to be in place in early 2015. 
In the long-term, ESRD will develop a regional approach to regulating hydraulic fracturing by considering the surrounding geological conditions of each region, which conditions can vary considerably across the province.

ESRD held 30 community meetings and consulted broadly in 2013 on how Albertans want to enhance groundwater protection. The Action Plan is meant to address some of the concerns raised in the consultations.


This post was written by Alan Harvie (alan.harvie@nortonrosefulbright.com or +1 403.267.9411) from Norton Rose Fulbright's energy practice group.

North Dakota adopts heightened safety standards for the transportation of oil by rail

The increase in the number of accidents involving the transportation of oil by rail has increased the scrutiny on shippers of Bakken crude oil. In response, the United States Department of Transportation has proposed new rules to govern the shipment of oil by rail and has also issued emergency orders on this topic. It appears that states are beginning to take an active role in the regulation of Bakken crude oil as well.

On December 9th, the North Dakota Industrial Commission (Commission) announced new regulations governing the shipment of Bakken crude oil in the state. Under the new standards, companies must separate light hydrocarbons from Bakken crude oil produced in the state and take measures to ensure that the hydrocarbons are not mixed into the oil before it is shipped. The new standards will take effect on April 1, 2015.

With the adoption of these new rules, North Dakota’s requirements for the shipment of Bakken crude oil are stricter than national standards. Whereas North Dakota now requires Bakken crude oil to have a vapor pressure of 13.7 pounds per square inch (psi) or lower, the national standards only require a psi of 14.7 or lower. To ensure compliance, North Dakota’s Department of Mineral Resources will conduct field inspections, and parties found violating the order could receive fines as high as $12,500 for each day they violate the new rules. The Commission has stated, however, that companies may request a hearing with the Commission if they wish to utilize an alternative stabilization process.

Read the order.

Methane emissions from fracking on the decline

Anti-fracking groups have been clamoring over the negative impact fracking has on the environment. One of the primary arguments raised by these groups is that fracking leads to high methane emissions. A newly released study suggests that anti-fracking groups may need to find a new argument against fracking.

The Cockrell School of Engineering at the University of Texas (UT) released a study, finding that methane emissions from natural gas production have decreased. The study also found that the majority of methane emissions come from a small group of natural gas wells and associated equipment. Therefore, most oil and gas operators have been able to successfully stop methane emissions from their natural gas wells. In addition, the study found that methane emissions are higher in older wells. The study focused on methane emissions caused by liquid unloadings and pneumatic controller equipment—devices that control the opening and closing of valves.

Several other studies also suggest that fracking’s impact on the environment is not as lethal as anti-fracking groups have claimed. The EPA released a study earlier this year with findings similar to those in the UT study. The EPA concluded that methane emissions from fracking are 73 percent lower than the methane emissions level in 2011. Additionally, Cornell University and the University of Maryland have released studies finding that the environmental impact from shale gas is significantly lower in comparison to coal’s impact on the environment.

Read the study.

Pennsylvania fracking trade secret rule in jeopardy

The fluids used during hydraulic fracturing are an integral component of the fracking process. Although the fracking fluids are primarily composed of water and sand, manufacturers add varying amounts of chemicals to the fluids. The composition of the chemicals used in fracking fluids are protected by companies as trade secrets. The ability of companies to protect this proprietary information is currently pending before the United States Court of Appeals for the Third Circuit in Rodriguez v. Secretary of the Department of Environmental Protection.

Under Section 3222.1(b)(10) and (11) of Title 58 of the Pennsylvania Consolidated Statutes, companies are required to provide doctors with the identity of or amount of chemicals used in their fracking fluid if the information is required in an emergency situation and the doctor agrees to keep the information confidential. Section 3222.1(b)(10) and (11) also prohibits doctors from disclosing any confidential information concerning the composition of hydraulic fracturing fluids.

These rules were challenged by Alfonso Rodriguez, a physician in Dallas, Pennsylvania. In the suit, Rodriguez argues that this law violates his rights under the First Amendment to disclose information regarding the fracking fluids to his patients and the remainder of the medical community. The United States District Court for the Middle District of Pennsylvania dismissed Rodriguez’s claims twice, reasoning that he lacked standing to challenge the law. On appeal, Rodriguez again argues that Section 3222.1(b)(10) and (11) violates his rights under the First Amendment.

The Pennsylvania Department of Environmental Protection (PDEP) has filed a brief in response, requesting that the Third Circuit dismiss Rodriguez’s claims. The PDEP argued that Rodriguez’s claims are hypothetical because he has never requested the protected information or been denied the information. The PDEP also claimed that Rodriguez is not entitled to a declaratory judgment on the constitutionality of Sections 3222.1(b)(10) and (11).

Read the PDEP’s brief.

Los Angeles well stimulation ban questioned

Earlier this year, the Los Angeles City Council passed a motion to ban any oil and gas well stimulation or the use of wells for waste disposal injection. After passing the motion, the City Council authorized the city attorney to write the ordinance with the assistance of the Department of City Planning (DCP).

Similar to other proposed drilling bans, however, the implementation process for the prohibition has not gone smoothly. In fact, the DCP has advised the City Council against prohibiting oil and gas operations. According to the DCP, the City Council should hire an expert and merely update the city’s zoning and land use ordinances.

The DCP expressed concern over the passage of the city ban in light of statewide legislation regulating oil and gas operations—SB 4—and the city’s lack of experience in this field. In support of its argument, the DCP cited the lawsuit filed against the Compton City Council regarding a prohibition similar to the one envisioned by the Los Angeles City Council.

Several commentators have spoken out in support of the DCP. Some commentators have pointed to the severe economic consequences of enacting the proposed ban—specifically, the loss of tax revenue. Moreover, Los Angeles would likely face multiple lawsuits similar to those filed against the city of Denton.

For instance, the proposed prohibition could be preempted by state law. In addition, a number of residents in the city would lose a significant amount of revenue and could therefore sue Los Angeles alleging unconstitutional takings under state and federal law. Commentators have also highlighted the overly broad language in the city council’s motion.

Read the DCP’s report.


This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.

Environmental groups seek to defend Denton fracking ban

Soon after the city of Denton passed a prohibition on fracking earlier this year, the city was sued by several parties alleging that the fracking ban was invalid. It appears that the city of Denton may have some support in its defense of the fracking ban. On December 4th, Earthwork and the Denton Drilling Awareness Group (DDAG) filed a petition to intervene in the state of Texas’s lawsuit challenging the ban.

In support of their request to intervene, Earthwork and DDAG argued that they would have been able to successfully defend the fracking prohibition if the suit had been filed against them. Earthwork and DDAG also contended that they would be prejudiced if the fracking prohibition was found to be invalid. Specifically, Earthwork and DDAG cited to the time and resources they dedicated to having the ban passed, including assisting with the drafting of the ban.

Earthwork and DDAG have been deeply involved with the Denton fracking ban. They actively campaigned in Denton to encourage voters to adopt the fracking prohibition. In fact, DDAG created the “Frack Free Denton” campaign. Earthwork assisted DDAG, collected signatures in support of the fracking ban, and took steps to educate the Denton community about the fracking prohibition.

Read the petition.


This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.

Potential fracking ban on the horizon in Florida

Several states are currently involved in heated debates concerning hydraulic fracturing. The debates have ranged from whether states should implement fracking bans to whether localities have the authority to issue such prohibitions. Florida appears to be joining the debate. On Tuesday, two Florida state senators—Darren Soto and Dwight Bullard—proposed a bill to ban hydraulic fracturing in the state beginning on July 1, 2015.

According to Senator Soto, the bill is necessary to ensure the integrity of the state’s water supply and environment. Specifically, Soto expressed concern that fracking may cause pollution and contaminate the water supply. Because Florida depends heavily upon tourism, Soto argued that it is imperative that the state take measure to protect the environment. As additional support for S.B. 166, Senators Soto and Bullard noted that Florida voters voted in favor of an amendment to the Florida constitution that would increase funding for natural lands in the state.

The impact of this proposed bill is questionable because Florida does not contain a significant amount of natural gas shale. That said, there are reports that companies are beginning to consider drilling operations in Florida. S.B. 166 isn’t the first bill concerning hydraulic fracturing in the state. Two bills were proposed in the Florida House of Representatives during the last legislative session that would require companies to disclose the chemicals used in their drilling operations.

Read S.B. 166.


This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.

Alberta extends with "play-based" regulation experiment

The Alberta Energy Regulator ("AER") has extended its pilot project for a "play-based" regulatory framework for unconventional oil and gas development in part of the Duvernay shale play in west-central Alberta.

The Duvernay shale play is a large, developing shale play covering much of western and northern Alberta and eastern British Columbia.  It is particularly rich in light oil and petroleum liquids such as propane and butane.  Hydraulic fracturing has been key in developing the vast underground rock formation that covers an area the size of South Korea.

The Duvernay play is still in its early stages with only about 200 wells drilled to date, with about 60 wells completed and on production.  The average initial production rate is about 2.5 mmcf per well per day.  The Kaybob area in the northwestern portion of the Duvernay is particularly liquids rich, with some wells having condensate yields of 200 - 480 barrels a day.

"Play-based" regulation involves implementing a single application and decision-making process for multiple wells, pipelines and facilities under different pieces of legislation.  It requires all of the operators in the pilot area to collaborate and jointly bring a single application for a single regulatory approval which will be used for regulating all of their  unconventional oil and gas activities in the pilot area. 

Presently, each activity by a company, such as building a road, diverting water, drilling a well, constructing a pipeline and so forth, requires its own separate AER regulatory approval.  This current approach makes it difficult to reduce the cumulative environmental impacts of the additional roads, well pads and pipelines required by each company in the area.  Extracting oil and gas out of shale requires many more wells, more pipelines and much more water usage than conventional oil and gas production.  Area landowners and communities are expected to benefit with play-based regulation as it is hoped that they will get a sense of the full scope of all development in the play area and have earlier input into how the play is developed on the surface.

Area operators have to submit the single application to the AER by January 31, 2015.  The pilot was scheduled to run until March 31, 2015 but has been extended until June 30, 2015 to allow oil and gas operators in the pilot area sufficient time to prepare the application and undertake the required stakeholder engagement.

The Duvernay shale play was chosen for the pilot as it is just starting to be developed and extensive drilling and production is expected over the next several years.

If playbased regulation is successful, the AER may implement it more broadly throughout Alberta in the future.

Review a copy of the AER's Play-Based Regulation Pilot Application Guide


This post was written by Alan Harvie (alan.harvie@nortonrosefulbright.com or +1 403.267.9411) from Norton Rose Fulbright's energy practice group.

Broomfield, Colorado: The latest town sued because of a local fracking ban

Several cities have recently passed local legislation banning the use of hydraulic fracturing. These local fracking bans have become the subject of litigation in a number of states. Broomfield, Colorado has become the latest locality to be sued for banning hydraulic fracturing within city limits.

In 2013, Broomfield voters passed Local Question 300— an amendment to the city’s charter that prohibits the use of fracking and the disposal or open pit storage of fracking waste within city limits for five years. According to the Colorado Oil & Gas Association (COGA), the measure passed by only twenty votes.

On November 24th, the COGA sued Broomfield in Colorado state court, challenging Local Question 300. Broomfield is not the first city in Colorado to be sued over local legislation banning hydraulic fracturing. Judges have held that state law preempts fracking bans in Longmont, Fort Collins, and Lafayette.

The COGA challenged the ban on several grounds. The COGA first argued that Local Question 300 is impliedly preempted by Colorado’s interest in the development of oil and gas. In addition, the COGA claimed that the local measure conflicts with several aspects of state law—specifically, the Safe Drinking Water Act, rules implemented by the Colorado Oil and Gas Commission (COGC) and the Oil and Gas Conservation Act. The COGA also argued that the COGC has implemented a comprehensive regulatory scheme for oil and gas operations.

Read the complaint.


This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.

US Forest Service issues plan allowing fracking in George Washington National Forest

On Tuesday, November 18, 2014, the United States Forest Service’s (USFS) Southern Regional Forester issued a Revised Land and Resource Management Plan and Record of Decision allowing natural gas drilling to take place on 177,200 acres of the George Washington National Forest located in Virginia and West Virginia. The new plan will go into effect in early 2015.

Notably, the plan does not prohibit operators from utilizing hydraulic fracturing technology to develop the forest lands. This differs from the original draft management plan which would have prohibited horizontal drilling. Prior to beginning operations, however, all development proposals are required to undergo an additional environmental impact analysis and will be subject to public comment.

The USFS’ announcement comes just months after Pennsylvania Governor Tom Corbett similarly lifted a 2010 moratorium banning Pennsylvania from leasing public parks and forest lands.

Following Governor Corbett’s decision, Pennsylvania negotiated a settlement with environmental groups which barred the issuance of any new leases until the Commonwealth Court ruled on a related lawsuit regarding whether Corbett’s decision to use funds from natural gas leasing in the general budget violated the Pennsylvania constitution. Oral arguments in that case were held in October but no ruling has been issued to date.


This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Shannon DeHont (shannon.dehont@nortonrosefulbright.com or +1 724 416 0431) from Norton Rose Fulbright's energy practice group.

Alberta Chief Justice keeps fracking lawsuit against environmental regulator alive

The Honourable Neil Wittman, Alberta's Chief Justice of the Court of Queen's Bench, has ruled that a landowner is entitled to carry on her lawsuit against Alberta's Environment and Sustainable Resource Development Department (ESRD) for allegedly being negligent in monitoring and regulating EnCana Corporation (EnCana) in the hydraulic fracturing of a well, and negligent in investigating the alleged contamination of her water well.

The landowner, Jessica Ernst, originally sued EnCana, ESRD and the Energy Resources Conservation Board (ERCB) in 2007. Recently, the case against the ERCB was thrown out on the grounds that the ERCB did not owe her a private duty of care and that the legislation under which it operates provided statutory immunity.

Please review our previous blog posts on these decisions, including:
The most recent development is that ESRD applied to the Court to strike out parts of Ms. Ernst's pleadings to allegations of negligent administration of a regulatory regime and the relief sought, including damages on the grounds that they failed to disclose a reasonable cause of action. In the alternative, ESRD sought summary judgment dismissing the case against it on the basis that Ms. Ernst's claim has no merit.

The Chief Justice ruled against both motions.

With respect to the application to strike part of the pleadings, the Chief Justice noted that striking the parts of the pleadings requested by ESRD would have the effect of having the entire claim against ESRD struck. ESRD argued that the test for striking an entire claim is whether it is plain and obvious or beyond reasonable doubt that the claim cannot succeed. The Court, however, disagreed and applied a test of whether, assuming the facts pleaded were true, there is a reasonable prospect that the claim will succeed.

The Chief Justice then determined that prima facie there was a private duty of care owed by ESRD to Ms. Ernst as the allegations in the claim, assuming they are true, concern direct contact between ESRD officials and Ms. Ernst and assert that specific representations were made by ESRD to Ms. Ernst. The Chief Justice found that there were no public policy considerations which ought to negate or limit that private duty of care.

ESRD also argued that it had statutory immunity like had previously been found for the ERCB. However, the legislation under which ESRD operated was different than that of the ERCB, and that the provisions granting immunity only applied for acts and omissions of ESRD undertaken in good faith. As Ms. Ernst alleged that the ESRD had acted in bad faith, and as the Court presumed the facts alleged to be true for the purpose of the motion, the Court ruled ESRD did not have statutory immunity.

As for the summary judgment application, the Court applied the rule that a defendant is entitled to summary judgment when there is no merit to the claim against it. The Chief Justice noted that the onus was on ESRD to establish that there was no genuine issue requiring a trial, and that ESRD had failed to satisfy him that there was no merit in Ms. Ernst's claim.

Meanwhile, Ms. Ernst is trying to get the Supreme Court of Canada to hear her appeal of the decision allowing the ERCB to exit the lawsuit as an application for leave to the Supreme Court has been filed by Ms. Ernst.


This post was written by Alan Harvie (alan.harvie@nortonrosefulbright.com or +1 403.267.9411) from Norton Rose Fulbright's energy practice group.

Increased rail traffic leads to heightened regulations

Compared to last year, transportation of goods by rail has increased. The two commodities with the largest increase in rail traffic have been coal and crude oil products. Transportation of crude oil and petroleum products by rail has increased by 13.4 percent. From January to October 2014, more than 672,000 tank cars have transported oil and petroleum products. Commentators have suggested that the increase is a result of the increased production of crude oil and the limited amount of pipeline available to transport the material. The amount of crude oil and petroleum products transported by rail pales in comparison to the amount of coal transported. Approximately 4.9 million tank cars of coal were shipped from January to October 2014.

The increased rail traffic has led federal and state regulators to impose additional requirements on rail carriers. The United States Department of Transportation’s Surface Transportation Board (STB) recently imposed a requirement that rail carriers submit weekly reports on their delivery performance. These reports will permit the STB to track the shipments and identify any potential problems from the increased rail traffic.

In addition, Lynn Helms, the Mineral Resources Director for North Dakota, has proposed new regulations for rail carriers in the state. Under the new rules, companies must lower the volatility of crude oil before it can be transported by rail. Specifically, the proposed rules would require crude oil to have a vapor pressure lower than 13.7 pounds per square inch (psi). National standards only require crude oil to have a vapor pressure lower than 14.7 psi. The proposal has been submitted to the North Dakota Industrial Commission (Commission). The Commission will meet on December 11th to discuss whether to adopt the proposal.

Although several members of the Commission have expressed their support for the proposed rules, members of the oil and gas industry have stated their displeasure with the proposal. According to opponents of the regulation, the proposal unduly focuses on crude oil and fails to address the true problem—safe rail transportation. Opponents also argue that the treatment process envisioned by the proposal would increase the amount of volatile material needed to be transported. Lastly, opponents argue that the treatment process would cause increased emissions from the amount of heating required to remove the chemicals from the gas.


This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.

According to Pennsylvania, failure to run title search constitutes bad faith in trespass to minerals suit

The Pennsylvania Superior Court upheld an award of US$250,000 in favor of the owner of subsurface rights, who claimed that those rights were drilled on without his permission.

The owner of the subsurface rights properly recorded his interest pursuant to state statute in 1997. Several years later, the defendants improperly leased the mineral rights from the surface owner without conducting a full title search, which would have disclosed the subsurface owner’s interest.

Instead, the defendants only conducted a “bring down” title search which did not disclose plaintiff’s interest. Thereafter, the defendants drilled several producing wells and paid royalties to those with whom they had entered into leases.

The subsurface owner, who did not have a lease with the defendants, later discovered the activity and initiated a claim in 2010 for ejectment, trespass, and conversion.

The trial court found in favor of the subsurface owner, determining that the trespass had been made in good faith until 2008, after which time the trespass was in bad faith due to a conversation between the parties that should have put the defendants on notice they may be trespassing on the plaintiff’s interest.

The Superior Court partially overturned the lower court’s decision, holding that Pennsylvania’s recording statute placed the defendants on constructive notice of the plaintiff’s interest and, consequently, defendants’ trespass was in bad faith for its duration.

The effect of this ruling is to open defendants up to additional damages as a result of the bad faith finding.

The court also addressed the issue of whether the plaintiff had a duty to inspect his property and discover the trespass sooner. Rejecting defendants’ claim that the statute of limitations should bar plaintiff’s claim, the Superior Court upheld the trial court’s determination that under an objective standard, a reasonable person would not have discovered the trespass.

Read the Pennsylvania Superior Court’s opinion of Dennis Sabella v. Appalachian Development.


This post was written by Michael Gaetani (michael.gaetani@nortonrosefulbright.com or 724 416 0400) from Norton Rose Fulbright's Energy Practice Group.

Pennsylvania Supreme Court considers whether estoppel-by-deed applies to oil and gas lease

An exploration & production company urged the Pennsylvania Supreme Court to uphold a lower court ruling which held that the doctrine of estoppel-by-deed applied to an oil and gas lease. “Parties should not be able to convey, under a covenant of warranty, more than they actually own, only to quiet title when the value or price goes up, and then demand more to resell the same property that was not previously conveyed,” the E&P company argued in its brief filed October 27, 2014.

The dispute stems from a 2006 lease covering a 62-acre property. After signing the lease, a title search revealed a previously unknown 1894 deed reserving half of the property’s subsurface rights in favor of a third party. As a result, the E&P company reduced its bonus payment to the landowners by half. In 2008, the landowners filed a motion to quiet title to the half interest reserved by the 1894 deed, ultimately acquiring full title to all 62 acres of subsurface rights.

In 2011, the E&P company exercised its right to extend the lease in exchange for another bonus payment, paying the landowners for the full 62 acres and claiming that the original lease was operative to hold the entire 62 acres. The landowners argued that because they did not own the rights to all 62 acres when they signed the lease in 2006, the E&P company could not extend the lease with respect to all 62 acres, but only with respect to the half interest they owned in 2006.

The E&P company argued that the doctrine of estoppel-by-deed, which mandates that lessee be given the benefit of property that lessors erroneously claim to control at the time of executing a lease agreement, operated to prevent the landowners from excluding the half interest. In March 2014, the Pennsylvania Superior Court agreed with the E&P company, and the landowners appealed.

Read the Pennsylvania Superior Court’s opinion.


This post was written by Michael Gaetani (michael.gaetani@nortonrosefulbright.com or 724 416 0400) from Norton Rose Fulbright's Energy Practice Group.

Fracking bans may thrust California localities into contentious legal battle

On November 4th, Denton became the first city in Texas to enact a ban against hydraulic fracturing. The next day, several members of the oil and gas industry and the state of Texas sued Denton, alleging that the ban was invalid. It is possible that other parties are also planning on suing Denton over the fracking ban. Mendocino and San Benito counties may be following in Denton’s footsteps.

Mendocino and San Benito counties passed legislation on November 4th prohibiting hydraulic fracturing. A fracking ban was on the ballot in Santa Barbara county, but the ban was defeated. Observers have noted that unlike Santa Barbara, oil and gas operations in Mendocino and San Benito were not extensive. Thus, the impact of the bans is expected to be minimal. Mendocino and San Benito counties are not the only localities to adopt anti-fracking legislation. Several localities throughout California have enacted similar measures.

The anti-fracking measures will likely be challenged by oil and gas operators and landowners. It is possible that the state of California may also sue the localities just as Texas responded to the Denton fracking ban. The Western States Petroleum Association (WSPA) has already filed suit against the city of Compton’s fracking moratorium. In fact, although the lawsuit is still ongoing, Compton has withdrawn the moratorium.

The fracking bans can be challenged on several grounds. First, opponents of the fracking bans can argue that the local measures are preempted by state law. In 2013, California enacted Senate Bill 4—a bill that permits oil and gas operations to continue while the state studies the potential impact of hydraulic fracturing on the environment. State lawmakers attempted to pass a moratorium on drilling until the studies were completed, but the bill was defeated. Second, parties challenging the bans can argue that the anti-fracking measures constitute unconstitutional takings. The WSPA raised both arguments in its suit against Compton. Observers have noted that a takings claim brings the added dimension of a potentially significant verdict against the counties. Many argue that localities may rescind their fracking bans rather than risk incurring a large financial obligation.

Read Senate Bill 4.



This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.

Alberta Court confirms regulatory immunity

The Court of Appeal of Alberta has confirmed that the Energy Resources Conservation Board (now known as the Alberta Energy Regulator) is immune from a negligence lawsuit by a landowner claiming that hydraulic fracturing caused hazardous amounts of methane, ethane and chemicals to contaminate her water well.
 
The appellant, Jessica Ernst, owns land near Rosebud, Alberta. She sued EnCana Corporation for damage to her fresh water supply allegedly caused by EnCana's activities, notably construction, drilling, hydraulic fracturing and related activities in the region. The Energy Resources Conservation Board had regulatory jurisdiction over the activities of EnCana, and the appellant has sued it for what was summarized as "negligent administration of a regulatory regime" related to her claims against EnCana. The appellant also sued the Province of Alberta, alleging that it (through its department Alberta Environment and Sustainable Resource Development) owed her a duty to protect her water supply, and that it failed to respond adequately to her complaints about EnCana's activities. 
 
In addition, Ms. Ernst alleged in her claim that she participated in many of the regulatory proceedings before the Board, and that she was a "vocal and effective critic" of the Board. She alleged that between November 24, 2005 to March 20, 2007 the Board's Compliance Branch refused to accept further communications from her. For this she has advanced a claim for damages for breach of her right to free expression under the Canadian Charter of Rights and Freedoms.
 
The Board applied to strike out certain portions of Ms. Ernst's pleadings for failing to disclose a reasonable cause of action. The case management judge found that the proposed negligence claim against the Board was unsupportable at law. He applied the three-part analysis relating to foreseeablity, proximity and policy considerations. He found no private law duty of care was owed to Ms. Ernst by the Board.
 
In the alternative, the case management judge found that any claim against the Board was barred by s. 43 of the Energy Resources Conservation Act:
 
  • 43 No action or proceeding may be brought against the Board or a member of the Board… in respect of any act or thing done purportedly in pursuance of this Act, or any Act that the Board administers, the regulations under any of those Acts or a decision order or direction of the Board.
The Alberta Court of Appeal agreed with the lower court and dismissed Ms. Ernst's argument that the Board failed to respond "reasonably" to EnCana's activities and held that a tortuous claim alleging an omission to act was barred by section 43 of the Act. The Court of Appeal also held that section 43 barred Ms. Ernst's Charter claim for a "personal remedy". The Court of Appeal concluded that even if the Board effectively breached Ms. Ernst's freedom of expression, that "protecting administrative tribunals and their members from liability for damages is constitutionally legitimate."
 
Ms. Ernst has said in the media she will appeal this latest decision against her to the Supreme Court of Canada.
 

Nova Scotia poised to outlaw fracking

The Nova Scotia Legislature has resolved to ban "high-volume, hydraulic fracturing" in Nova Scotia. On October 30, 2014, Bill 6, An Act to Amend the Petroleum Resources Act, received approval of the Committee of the Whole House to be passed into law on a future date.

Bill 6 will prohibit "high-volume hydraulic fracturing" in shale unless exempted by regulation for the purpose of testing or research. What exactly is "high-volume hydraulic fracturing" is to be make clear in future regulations.

This summer an independent panel of experts asked to review hydraulic fracturing by the Nova Scotia government recommend further study before the practice is allowed. The panel felt that it did not have enough information on the regional shales in Nova Scotia to decide if hydraulic fracturing should be allowed, and called for further research and a period of "reflection, dialogue and discussion".

Bill 6 will also authorize the Minister of Energy to conduct a review of "high-volume hydraulic fracturing" at a further date. The Minister will also have the power to review the prohibition on hydraulic fracturing provided consideration is given to the net benefit from hydraulic fracturing to Nova Scotians and social, economic, health and environmental issues.



This post was written by Alan Harvie (alan.harvie@nortonrosefulbright.com or +1 403.267.9411)from Norton Rose Fulbright's Energy Practice Group.

Pennsylvania congressman seeks records from Department of Environmental Protection related to fracking waste disposal

Rep. Matt Cartwright, a Democrat representing Pennsylvania 17th Congressional District, has asked the state’s Department of Environmental Protection (“DEP”) to provide records about its process for monitoring the handling and disposal of wastes from hydraulic fracturing. Rep. Cartwright made the request as the ranking member of the Subcommittee on Economic Growth, Job Creation and Regulatory Affairs, which is part of the House Committee on Oversight and Government Reform.

Waste from hydraulic fracturing is regulated as a non-hazardous waste by state governments under Subtitle D of the Resource Conservation & Recovery Act. “The Subcommittee minority is conducting this oversight to determine if state regulations and monitoring of fracking waste are sufficient to ensure accuracy, completeness and compliance with applicable environmental laws, ” Rep. Cartwright said in a letter to DEP Acting Secretary Dana Aunkst. Rep. Cartwright cited a July 2014 report from the state’s auditor general concluding that Pennsylvania’s current system of oversight of fracking waste “is not an effective monitoring tool” and is “not proactive in discouraging improper, even illegal, disposal of waste.” Rep. Cartwright asked for the records to be produced by November 12, 2014.

The full text of Rep. Cartwright’s letter to the DEP can be found here. Rep. Cartwright won reelection to a second term on November 4, 2014.


This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Michael Gaetani (michael.gaetani@nortonrosefulbright.com or 724 416 0400) from Norton Rose Fulbright's Energy Practice Group.

The Texas General Land Office sues Denton to stop enforcement of fracking ban

On November 4th, the majority of Denton residents voted in favor of a proposed ban on hydraulic fracturing, thereby making it the first Texas city to adopt such a measure. As many observers predicted, the ban has sparked legal challenges. The morning after the election, the Texas General Land Office (GLO) filed a motion for a permanent injunction against the enactment of the ban.

In the motion, the GLO emphasized that the ramifications of the Denton fracking ban will be felt throughout Texas. The Texas Constitution created the Permanent School Fund (PSF) to provide funding to Texas public schools. The PSF is supported by income from public land managed by the GLO. According to the GLO, the primary source of income from the land derives from oil and gas operations. Indeed, the GLO stated that it has a constitutional duty to ensure that the public land is put to its most profitable use. The GLO also stated that under the Texas Natural Resources Code, it is responsible for leasing Texas’s mineral rights. Currently, the GLO has several active leases in Denton. The GLO warned that the Denton ban would negatively impact every child in the Texas public school system and estimated that the ban would cost the State of Texas millions of dollars.

The GLO raised several legal challenges to the Denton ban. First, the GLO asked the court for declaratory relief, arguing that the fracking ban cannot be enforced against the State of Texas and its land and mineral interests. Second, the GLO requested that the court hold that the Denton measure is preempted by state law empowering the Railroad Commission of Texas authority over oil and gas operations in Texas and by state law authorizing the GLO to manage Texas’s mineral rights. Third, the GLO contended that the fracking ban should be invalidated because it is unreasonable, arbitrary, and capricious. Because the enforcement of the Denton fracking ban would harm Texas’s mineral interests, the GLO requested that the court issue a permanent injunction against the ban.

Read the complaint.


This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.

The Texas Railroad Commission enacts new rules governing disposal wells

On Tuesday, the Texas Railroad Commission (Commission) adopted several amendments to the current rules governing disposal wells. The Commission circulated an earlier version of the amendments in August; however, the Commission made slight variations to the amendments based on several comments it received during the public comment period. The revised amendments are set to become effective on November 17th.

Under the amendments, an applicant for a disposal well must examine the United States Geological Survey seismic database to determine if earthquakes have occurred in the vicinity of the drilling location. In addition, the Commission is now authorized to change, cancel, or suspend any permit if information arises suggesting that the well may lead to an earthquake. Under some circumstances, the Commission may also require well operators to report the annual volumes and pressures associated with particular wells.

The amendments are largely in response to public concern that drilling may be linked to seismic activity. Indeed, the purpose of these amendments is to decrease the likelihood of earthquakes. Nonetheless, the Commission has also expressed a desire to not unduly hamper the development of natural resources in the state. The Commission plans to continue its study of the alleged connection between drilling and seismic activity.

Read the amendments.


This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.

Fracking dominates the November ballot

One of the most highly debated issues during the November election was the question of whether localities have the authority to enact fracking bans. Several cities throughout the country have attempted to enact prohibitions against hydraulic fracturing with varying degrees of success. Denton, Texas has become one of the latest cities to consider such a ban.

On November 4th, Denton residents voted on whether the city should enact a ban against hydraulic fracturing within the city limits. The measure passed with 59 percent of Denton residents voting in favor of the measure and 41 percent voting against it. The Denton City Council considered the measure initially; however, rather than enact the ban itself, the Council opted to place the ban on the ballot for the November elections. Denton currently has a moratorium in place banning drilling until January 20, 2015.

Several cities in California and Ohio also attempted to pass local bans against hydraulic fracturing. Specifically, fracking bans were on the ballot in the following localities: Santa Barbara County, California; San Benito County, California; Mendocino County, California; Athens County, Ohio; Gates Mills, Ohio; Kent, Ohio; and Youngstown, Ohio. Most of the proposed fracking bans were defeated. The majority of voters in San Benito County and Mendocino County voted in favor of the ban, but the anti-fracking measure was defeated in Santa Barbara. The anti-fracking measure was defeated in Gates Mills, Kent, and Youngstown, but voters in Athens County approved the fracking ban.

Multiple cities have already enacted prohibitions against hydraulic fracturing. Five cities in Colorado have passed ordinances prohibiting fracking, and several cities in California also have fracking bans. In addition, similar legislation exists in localities throughout New York, Hawaii, New Jersey, and New Mexico. Some cities have taken the alternative approach of enacting temporary prohibitions against hydraulic fracturing. Other cities in Texas may also follow Denton’s example. Anti-fracking groups in Alpine, Texas are attempting to garner support for a city ban on hydraulic fracturing.

Courts throughout the country have disagreed on whether localities can enact ordinances barring hydraulic fracturing. Whereas some courts have invalidated local fracking bans, other courts have upheld such local laws. Currently, there are legal challenges to similar local bans pending in California, New Mexico, and Ohio. Indeed, several landowners have already filed suit against Denton to challenge the city’s moratorium on drilling. Moreover, the day after the election, the Texas Oil and Gas Association filed a motion to stop the enforcement of the fracking ban. Although the law is not yet settled on the validity of local fracking bans, one thing is certain—the Denton ban will serve as precedent for other Texas cities considering fracking bans.


This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.

Texas appellate court affirms jury’s application of Texas’ temporary cessation of production doctrine

Factual background

A mineral estate lessee began producing oil before the end of its lease’s primary term, but in May 2011, the lessee was forced to temporarily cease production due to an equipment failure. The equipment in question was a heater treater, which was used to separate oil from produced water. The lessee admitted that oil was not produced on the lease for approximately four months due to the heater treater’s failure.

Another entity with an interest in the mineral estate (“Plaintiff”) filed suit alleging that the lessee’s failure to produce oil for four months terminated the lease. In response, the lessee argued that Texas’ temporary cessation of production doctrine applied and that its lease was therefore still in effect. The lessee highlighted the fact that the heater treater was difficult to fix and that rainy weather made it difficult to access the leasehold. The jury found in the lessee’s favor, and Plaintiff appealed on the ground that the evidence did not substantiate the jury’s finding.

The opinion

In addressing the appeal, the Eastland Court of Appeals first noted that Texas law necessarily implies a temporary cessation of production clause into oil and gas leases that do not contain express savings clauses in order to “avoid the harsh results brought about by automatic termination.” As the Court explained, “[u]nder the temporary cessation of production doctrine, the automatic termination rule is relaxed if the lessee can prove that the cessation of production is temporary and is due to sudden stoppage of the well, some mechanical breakdown of the equipment used in connection therewith, or the like.”

The Court then highlighted evidence supporting the jury’s finding, including testimony that:
  1. oil is not marketable absent a separation process like that done by the heater treater; 
  2. continued use of the heater treater would have polluted the leasehold and potentially drawn regulatory fines; 
  3. the lessee attempted to fix the heater treater several times before successfully doing so; 
  4. rainy weather hampered the efforts to fix the heater treater; and 
  5. production resumed once the heater treater was fixed. The Eastland Court of Appeals held that this constituted “ample evidence . . . to support the finding that” the cessation of production was temporary and was the result of a mechanical breakdown of some of the equipment used in connection with the well. The Court therefore affirmed the jury’s verdict that the temporary cessation of production doctrine applied and that the lease was still in effect.
Read a copy of the opinion.


This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Jim Hartle (jim.hartle@nortonrosefulbright.com or 713 651 5695) from Norton Rose Fulbright's Energy Practice Group.

Oklahoma orders shut down of disposal well after multiple earthquakes

The Oklahoma Corporation Commission (Commission) ordered the temporary shut down of a disposal well near Cushing. Cushing has reported several earthquakes in October. Two earthquakes with a 3.2 and 4.0 magnitude, respectively, occurred on October 7th, and a 4.3 magnitude earthquake occurred three days later. There was also a 2.7 magnitude earthquake later in the month. Despite these events, no major damage has been reported.

Officials caution, however, that people should not draw any correlation between the well and the recent earthquakes afflicting the nearby area. The well may simply have been drilled too deep. The commission stated that operators have never had permission to drill into the granite bedrock zone.

The Commission has ordered the temporary shut down of several wells. The wells cannot be operated again until they are plugged back to make the injections shallower. A number of operators have also volunteered to shut down their wells and make their injections shallower.

In addition, the Commission has enacted the “traffic light” program to combat the heightened seismic activity in the state. Under the program, any disposal well located within six miles of an earthquake with a 4.0 magnitude or higher is placed in the “yellow light” category. All wells in the yellow light category receive heightened scrutiny.

The Commission’s response to increasedseismic activity in the state.


This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.



Fracking goes to the ballot: Multiple venues to vote on hydraulic fracturing bans tomorrow

Recently, the debate over hydraulic fracturing has centered on whether localities have the authority to enact fracking bans. As one commentator described, courts are confronted with “the right of home rule versus the authority of the state to regulate natural resource development.”[1] Several cities throughout the United States have attempted to impose such bans with varying success. One of the latest cities to join this movement is Denton, Texas. Because Texas courts have not yet addressed this issue, it is unclear whether localities have the authority to pass that form of legislation. This article analyzes the viability of local bans in Texas. This article first examines the proposed ban at issue in Denton and similar bans nationwide. It then proceeds to discuss the possible responses by Texas courts to such a ban.

A. Proposed ban in Denton

On November 4th, Denton residents will vote on whether hydraulic fracturing should be permitted within the city limits.[2] This issue initially was before the Denton City Council; however, rather than pass the ban itself, the Council opted to place the ban on the ballot for the November elections.[3] Although some members of the Council desired to pass the ban, they ultimately were unable to garner sufficient support from the other members.[4] Denton currently has a moratorium in place prohibiting drilling until January 20, 2015.[5]

This proposal has spawned a panoply of divergent views. Some Denton residents state that they simply desire that any drilling operations be conducted reasonably.[6] Others argue that the ban could not withstand legal scrutiny because the Texas Constitution prohibits local laws that contradict state law.[7] Members of the oil and gas industry have stated that the proposed ordinance would subject the city to potential suits from mineral rights owners.[8] In fact, the state of Texas has stated that it would sue if its mineral interests were harmed by the proposed ban.[9] One state legislator has stated that if the ban were to go into effect, the state legislature would likely pass legislation prohibiting localities from issuing bans on fracking.[10] The Mayor of Denton, Mark Burroughs, has even suggested that the proposed ordinance is illegal.[11] Aside from the legal ramifications, it is estimated that a ban on hydraulic fracturing could result in Denton losing a significant amount of jobs and revenue.[12]
B. Local fracking bans in other states

Denton is not the first city to attempt to prohibit hydraulic fracturing. After November 4th, other cities could also have local legislation barring hydraulic fracturing. Residents in the following locations will vote on legislation barring hydraulic fracturing very soon: Santa Barbara County, California;[13] San Benito County, California;[14] Mendocino County, California;[15] Athens County, Ohio;[16] Gates Mills, Ohio;[17] Kent, Ohio;[18] and Youngstown, Ohio.[19] Residents in Colorado were prepared to also vote in November on similar legislation—Initiative 89.[20] Under Initiative 89, local governments would have the authority to pass laws superseding state laws regarding hydraulic fracturing.[21] However, Governor John Hickenlooper agreed to a compromise with U.S. Representative Jared Polis to remove the initiative from the November ballot.[22] Instead, a commission will be formed to provide recommendations to the state on fracking regulations.[23] Voters in Butte County will also vote on a fracking ban, but the measure will not be placed on a ballot until the November 2016 election.[24] Meanwhile, county employees are working on an anti-fracking initiative so that the vote would be unnecessary.

A number of cities have already enacted prohibitions against hydraulic fracturing. Five cities in Colorado have passed ordinances prohibiting fracking.[25] Likewise, several cities in California have enacted fracking bans.[26] Similar bans also exist in various cities throughout New York,[27] Hawaii,[28] New Jersey,[29] and New Mexico.[30] Rather than impose a permanent ban, some cities have imposed temporary prohibitions against hydraulic fracturing.[31] Other states, like Illinois, are currently discussing potential statewide fracking regulations.[32] Moreover, in Michigan, groups are attempting to garner sufficient votes to have a proposed fracking prohibition submitted to a statewide vote.[33] Activists in Colorado are also seeking to get a measure permitting local fracking bans submitted for the November election.[34] In fact, other communities in Texas may be following Denton’s example. For instance, activists in Alpine, Texas are attempting to gather support for a fracking ban.[35]

C. Legal ramifications of a local fracking ban

Courts throughout the country have diverged on whether localities can enact ordinances barring hydraulic fracturing. Some courts have held that such bans are invalid. For instance, in Longmont, Colorado, the City enacted a ban on hydraulic fracturing as well as the storage or disposal of waste associated with fracking within the city limits.[36] The Colorado Oil and Gas Association and others sued, challenging the legislation.[37] The City argued that its authority to enact the bill derived from the doctrine of home rule and its ability to regulate land use.[38] The court granted summary judgment in favor of Plaintiffs, reasoning that the City’s bans were preempted by the Colorado Oil and Gas Conservation Act.[39] Specifically, the court relied on the doctrine of conflict preemption.[40] Nonetheless, the court held that the ban against hydraulic fracturing may continue until the time for an appeal elapsed.[41] Because Longmont is currently challenging the district court’s judgment before the Colorado Court of Appeals, the ban remains in effect.[42]

Courts in West Virginia have taken a similar approach to local bans against hydraulic fracturing.[43] The city of Morgantown enacted an ordinance prohibiting fracking not only within the city limits but also one mile outside of the city.[44] Northeast Natural Energy, LLC and Enrout Properties, LLC sued Morgantown, alleging that the ordinance was preempted by state regulations permitting fracking.[45] In response, Morgantown argued that it had authority under the home rule doctrine to issue the ordinance.[46] Relying on the field preemption doctrine, the court granted summary judgment in favor of the plaintiffs and held that the state completely occupied the field of regulating oil and gas such that Morgantown lacked the authority to enact an ordinance in that area.[47]

Pennsylvania also opted to take the preemption route, albeit unsuccessfully. Pennsylvania attempted to expressly preempt local ordinances concerning oil and gas by amending the Oil and Gas Act.[48] The amendment, Act 13, would, among other things, prohibit “any local regulation of oil and gas operations” and mandate “statewide uniformity among local zoning ordinances with respect to the development of oil and gas resources.”[49] In Robinson Township v. Commonwealth, the Pennsylvania Supreme Court held that the amendment was unconstitutional.[50] However, Pennsylvania courts have not been completely hostile to other preemption arguments. Pennsylvania courts have allowed municipalities to enact “traditional zoning regulations that identify which uses are permitted in different areas of the locality, even if such regulations preclude oil and gas drilling in certain zones.”[51] In contrast, a municipality cannot enact its own “regulatory scheme” to govern oil and gas operations.[52]

Conversely, in Matter of Wallach v. Town of Dryden, the New York Court of Appeals recently held that municipalities may enact local bans on fracking.[53] Matter of Wallach was a consolidated appeal involving challenges against fracking bans issued by the Town of Dryden and the Town of Middlefield.[54] Plaintiffs argued that the ordinances were preempted by the Oil, Gas, and Solution Mining Law (OGSML).[55] The court reasoned that the OGSML did not preempt the ordinances.[56] Rather, in the court’s view, the cities had authority under the doctrine of home rule and were therefore permitted to adopt zoning laws.[57] The court reasoned that the OGSML was limited to regulating oil and gas operations, not zoning.[58] The court acknowledged that the city bans would impact oil and gas operations but concluded that the local laws were focused primarily on zoning.[59]

Suits challenging similar fracking bans are also pending in California, New Mexico, and Ohio. The Western State Petroleum Association is suing Compton, its mayor, and members of the City Council, alleging that the City lacked the authority to enact a recent fracking ban.[60] Likewise, in New Mexico, the Independent Petroleum Association of New Mexico and several landowners are suing Mora County and its Board of County Commissioners to challenge a recently enacted ordinance prohibiting fracking.[61] In addition, the Ohio Supreme Court heard oral arguments earlier this year in State of Ohio ex rel. Morrison v. Beck Energy Corp., et al, a case in which the City of Munroe Falls is challenging the appellate court’s ruling that several of its ordinances regarding oil and gas operations are preempted by state law.[62]

Needless to say, the law is unsettled on this issue. Although there is some question as to whether the Denton fracking ban can withstand judicial scrutiny, if passed, the ban is certain to spawn a significant amount of litigation.

[1] Earl L. Hagstrom, State Legislation vs. Municipal Home Rule Over Fracking, Law 360, (Mar. 24, 2014 5:29 PM), http://www.law360.com/articles/520360/print?section=california.


[2] Nicholas Sakelaris, Denton frack ban won’t solve the problem, mayor says, Dallas Business Journal, (Jul. 21, 2014, 9:02 AM), http://www.bizjournals.com/dallas/blog/2014/07/denton-frack-ban-wont-solve-the-problem-mayor-says.html?page=all .


[3] Sakelaris, supra note 2.


[4] Id.


[5] Nicholas Sakelaris, Denton extends drilling moratorium until 2015; vote on frack ban looms, Dallas Business Journal, (Sept. 10, 2014, 11:21 AM), http://www.bizjournals.com/dallas/news/2014/09/10/denton-extends-drilling-moratorium-until-2015-vote.html?page=all .


[6] Richard L. Burleson, Burleson: Denton fracking ban could lead to a crippled Texas economy, Houston Chronicle (Aug. 1, 2014, 2:28 PM), http://www.chron.com/opinion/outlook/article/Denton-fracking-ban-could-lead-to-a-crippled-5663368.php.


[7]Id.


[8] Id.


[9] Sakelaris, supra note 2.


[10] Marissa Barnett, Denton voters to consider state’s first ban on fracking, Dallas News, (Sept. 23, 2014, 10:53 PM), http://www.dallasnews.com/news/metro/20140923-denton-voters-will-consider-ban-on-fracking-a-first-in-texas.ece.


[11] Alex Dropkin, What a Ban on Fracking in Denton Could Mean for the Rest of Texas, StateImpact Texas, (April 8, 2014 9:13 AM), http://stateimpact.npr.org/texas/2014/04/08/what-a-fracking-ban-in-denton-could-mean-for-texas/.


[12] Nicholas Sakelaris, Frustrated Denton Councilman sees fracking ban as the only option, Dallas Business Journal, (Sept. 23, 2014, 12:08 PM), http://www.bizjournals.com/dallas/blog/2014/09/frustrated-denton-councilman-sees-fracking-ban-as.html?page=all.


[13] Fracking ban initiative becomes Measure P on November ballot, Santa Maria Times, (June 26, 2014 12:00 AM) http://santamariatimes.com/lompoc/news/local/fracking-ban-initiative-becomes-measure-p-on-november-ballot/article_bff3e0fb-ad67-520a-93fa-4e6d1165c454.html.


[14] Elizabeth Cook, San Benito County Divided Over Fracking Measure On November Ballot, CBS San Francisco, (Sept. 30, 2014 8:10 PM), http://sanfrancisco.cbslocal.com/2014/09/30/san-benito-county-divided-over-fracking-measure-on-november-ballot-campaign-2014-hydraulic-fracturing-oil/.


[15] Fracking bans, minimum wage among local measures, Houston Chronicle, (Oct. 4, 2014 5:22 PM), http://www.houstonchronicle.com/business/energy/article/Fracking-bans-minimum-wage-among-local-measures-5801489.php.


[16] David DeWitt, Fracking ban proposal will go on November ballot, The Athens News, (Feb. 19, 2014), http://www.athensnews.com/ohio/article-41775-fracking-ban-proposal-will-go-on-november-ballot.html.


[17] Sara Dorn, Anti-fracking bill of rights will be on Gates Mills November ballot after village officials change stance, Cleveland.com, (Sept. 8, 2014 12:30 PM), http://www.cleveland.com/hillcrest/index.ssf/2014/09/anti-fracking_bill_of_rights_w.html.


[18] Election 2014: Fracking Bans on the Ballot, Common Dreams (2014), http://www.commondreams.org/election-2014-fracking-bans-ballot.


[19] David Skolnick, Anti-fracking charter amendment to be on Nov. 4 ballot in Youngstown, Vindicator, (Sept. 3, 2014).


[20] Rachael Seeley, Momentum shifts in favor of development in Colorado, Unconventional Oil & Gas Report, (Oct. 16, 2014), http://www.ogj.com/articles/uogr/print/volume-2/issue-5/momentum-shifts-in-favor-of-development-in-colorado.html.


[21] Id.


[22] Id.


[23] Id.


[24] Jerry Olenyn, Anti-fracking measure headed to 2016 Ballot, KRCR News, (Aug. 26, 2014), http://www.krcrtv.com/news/local/antifracking-measure-headed-to-2016-ballot/27740486.


[25] David O. Williams, A Big Oil and Gas Drilling Battle Brews in Colorado, Government Executive, (Aug. 4, 2014), http://www.govexec.com/state-local/2014/08/colorado-fracking-local-drilling-regulations/90440/.


[26] Sean McLernon, Calif. City Fracking Ban Faces Industry Challenge, Law360, (July 24,2014, 7:35 PM), http://www.law360.com/articles/560717/calif-city-fracking-ban-faces-industry-challenge.


[27] Kate Taylor & Thomas Kaplan, New York Towns Can Prohibit Fracking, State’s Top Court Rules, The New York Times, (June 30, 2014), http://www.nytimes.com/2014/07/01/nyregion/towns-may-ban-fracking-new-york-state-high-court-rules.html?_r=0.


[28] Erin Miller, Council OKS ban on fracking, Hawaii Tribune Herald, (Oct. 17, 2013 12:05 AM), http://hawaiitribune-herald.com/sections/news/local-news/council-oks-ban-fracking.html.


[29] Nora Carnevale, Council votes to officially ban fracking in town, The Princeton Sun, (Sept. 25, 2014 2:55 PM), http://theprincetonsun.com/2014/09/25/council-votes-officially-ban-fracking-town/.


[30] New Mexico county first in nation to ban fracking to safeguard water, Los Angeles Times, (May 28, 2013), http://articles.latimes.com/2013/may/28/local/la-me-fracking-ban-20130529.


[31] Heather Palmer, Battles Continue Over Local Bans on Hydraulic Fracturing, The National Law Review, (July 28, 2014), http://www.natlawreview.com/article/battles-continue-over-local-bans-hydraulic-fracturing.


[32] Jason Keyser, No vote on Illinois oil and gas fracking rules until November, Penn Energy, (Oct. 15, 2014), http://www.pennenergy.com/articles/pennenergy/2014/10/no-vote-on-illinois-oil-and-gas-fracking-rules-until-november.html?cmpid=EnlWeeklyPetroOctober172014.


[33] Christopher Behnan, ‘Fracking’ stirs up controversy, Livingston County Press (Sept. 15, 2013).


[34] Simon Lomax, The Campaign Goes On: ‘Ban Fracking’ Groups Target New Colorado Task Force, Breaking Energy, (Sept. 2, 2014).


[35] Travis Bubenik, Big Bend Area Residents call for Local Fracking Ban, StateImpact Texas, (July 2, 2014 4:16 PM), http://stateimpact.npr.org/texas/2014/07/02/big-bend-area-residents-call-for-local-fracking-ban/.


[36] Colorado Oil & Gas Assoc. v. City of Longmont, Colorado, No. 13CV63, at 2 (Dist. Ct.—Boulder Cnty. July 24, 2014).


[37] Id. at 1.


[38] Id. at 2.


[39] Id. at 17.


[40] Id. at 16.


[41] Id.


[42]Cathy Proctor, Longmont, other groups appeal judge’s order that tossed city’s fracking ban, Denver Business Journal, (Sept. 11, 2014 5:54 PM), http://www.bizjournals.com/denver/blog/earth_to_power/2014/09/longmont-other-groups-appeal-judge-s-order-that.html?page=all.


[43] Northeast Natural Energy, LLC and Enrout Properties, LLC v. The City of Morgantown, West Virginia, No. 11-C-411 (W.Va. Cir. Ct.—Monongalia Cnty. Aug. 12, 2011).


[44] Id. at 1.


[45] Id.


[46] Id. at 2.


[47] Id. at 6–7.


[48] Robinson Township v. Commonwealth, 83 A.3d 901, 915 (Pa. 2013).


[49] Id.


[50] Id. at 985.


[51] Range Res.—Appalachia, 964 A.2d 869,872 (Pa. 2008).


[52] Id. at 875.


[53] 23 N.Y.3d 728 (June 30, 2014).


[54] Id. at 739–41.


[55] Id. at 740–41.


[56] Id. at 739.


[57] Id.


[58] Id. at 745.


[59] Id.


[60] Palmer, supra note 25.


[61] Amended Complaint, Vermillion v. Mora Cnty., No. 1:13-cv-01095 (D.N.M. Jan. 10, 2014)


[62] Brief of Plaintiffs-Appellants at 3, State of Ohio ex rel. Morrison v. Beck Energy Corp., No. 13-0465 (Ohio Mar. 22, 2013).


This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.

Marcellus operator unable to stay administrative proceeding regarding alleged water pollution

On October 7, 2014, the Pennsylvania Department of Environmental Protection (“DEP”) filed a complaint against a Marcellus operator with the Pennsylvania Environmental Hearing Board (“the Board”), alleging that the operator had violated Pennsylvania’s Clean Streams laws.  Prior to the complaint, the operator had filed a declaratory judgment action in Pennsylvania state court.  In the declaratory judgment action, the operator sought to establish the number of days that alleged violations occurred.  The operator alleged that an offer of settlement by the DEP, which the operator said miscalculated the number of days, constituted sufficient grounds to find that a controversy existed such that a declaratory judgment action was appropriate.

In response to the DEP’s October 7 complaint, the operator filed a motion to stay the administrative proceedings relating to the complaint.  The operator argued that resolving parts of the dispute before the Board will be a waste of time because any finding will be appealed to the court in which the declaratory judgment action is pending.  In response, the DEP noted that it has filed a motion to dismiss the operator’s declaratory judgment action on the grounds that the operator had failed to exhaust administrative remedies and was simply forum shopping.

On October 28, 2014, the Board denied the operator’s motion to stay.  The Board said that the “case is precisely the sort of case that is the raison d’ĂȘtre for the [Board],” and noted that a stay of Board proceedings is “an extraordinary measure that should only be granted for compelling reasons.”  The Board then opined that there was “significant value and efficiency in allowing . . . discovery [in the Board proceedings] because that factual development will eventually be needed one way or the other.”  Ultimately, the Board was skeptical that that motion to stay was anything other than a dilatory tactic and refused to grant a stay that, in the Board’s opinion, would have little benefit to the administration of justice.


Seismic activity and fracking concerns prompt new rules for oil and gas disposal wells in Texas

On October 28th, the Railroad Commission of Texas (“RRC”) amended its existing oil and gas disposal well regulations to require seismic activity data in permit applicants, provide for more frequent monitoring and reporting for certain wells, and allow modification, suspension, or termination of permits on grounds that a disposal well is contributing to seismic activity.  Specifically:
  • Applicants for a disposal permit must provide U.S. Geologic Survey (“USGS”) data regarding seismic events within a circular 100 square mile area centered on the well (a radius of approximately 5.64 miles).
  • The RRC may require additional information, including logs, geologic cross-sections, pressure front boundary calculations, and structure maps.
  • The RRC may require more frequent monitoring and reporting for disposal wells for which conditions may exist that would prevent fluids from being confined to the injection interval.
  • The RRC may modify, suspend, or terminate a permit if disposal is contributing to seismic activity, after notice and an opportunity for a hearing.
The amendments will be published in the Texas Register on November 14, 2014, and will go into effect on November 17, 2014.  The new rules are unlikely to pose a significant additional burden for most new wells and the estimated 50,000 existing oil and gas disposal wells in Texas.  However, if seismicity increases in the area of a well, the RRC will now have explicit regulatory provisions allowing it to impose injection pressure and rate limits, a temporary injection ban, or even outright cancellation of a disposal well permit.  

Background

The amendments are the result of growing public scrutiny of hydraulic fracking and concerns over the past several years of a connection between earthquakes and the disposal of frack flowback and produced water.  Although disposal by underground injection is not new—the first federal Underground Injection Control regulations were promulgated in 1980—opposition to fracking, new wells, and certain seismic events have spurred many recent studies and debates. 
In March 2014, the RRC hired a seismologist to assist the agency in understanding the potential impact of oil and gas extraction activities and to clarify the root causes of earthquakes that some contend are connected to fracking.  RRC Commissioner David Porter commented that bringing a seismologist on board would allow the agency “to further examine any possible correlation between seismic events and oil and gas activity and gain a more thorough understanding of the science and data available.”[1]
In its introduction of the text of the now-final amendments, the RRC states that “[w]hile few earthquakes have been documented over the past several decades relative to the large number of disposal wells in operation, seismic events have infrequently occurred in areas where there is coincident oil and gas activity.”[2]  Therefore, the amendments incorporate several provisions that require additional collection and evaluation of seismic activities near proposed disposal wells, and the potential to impose additional monitoring and reporting of seismic data for areas surrounding existing disposal wells.

Amendments to Section 3.9 and Section 3.46

The new amendments modify Title 16, Sections 3.9 and 3.46 of the Texas Administrative Code, relating respectively to Disposal Wells and to Fluid Injection into Productive Reservoirs.  Although these sections regulate disposal into different types of formations, the language in both sections adopts the same new requirements and provides the RRC with the same level of authority. 
Section 3.9 governs disposal of saltwater or other oil and gas waste by injection into formations not productive of oil, gas, or geothermal resources.[3]  Section 3.46 governs fluid injection operations, including disposal, involving reservoirs productive of oil, gas, or geothermal resources.[4]  Of note, although Section 3.46 regulates injection into productive formations for both enhanced recovery and disposal, the new language relating to seismic activity applies only to wells permitted for disposal.
The new requirements for applicants are found in Sections 3.9(3)(B) and 3.46(b)(1)(C).  The amendments to these two subsections require applicants for disposal permits to include with the application a printed copy or screenshot showing the results of a survey of information from the USGS regarding the locations of any historical seismic events within a circular area of 100 square miles centered around the proposed disposal well location.
The above provisions are the primary difference between the amendments proposed by the RRC in August 2014 and the final amendments that are now adopted.  The proposal would have required that applicants include USGS historical seismic event information for within the estimated radius of the 10-year, five pounds per square inch (“psi”) pressure front boundary of the proposed disposal well location.  Ultimately, the RRC agreed with several comments that this requirement was too complex and had the potential for error and, instead, adopted the 100 square mile area language discussed above.[5]
The other amendments formally recognize the RRC’s authority to regulate seismic activity related to the disposal wells.  For example, if the well is to be located in certain areas seen as having an increased risk that fluids will not be confined to the injection interval,[6] the amendments authorize the RRC to request additional information during the permitting process (Sections 3.9(3)(C) and 3.46(b)(1)(D)) and more frequent monitoring and reporting of injection pressure and injection rates (Sections 3.9(11)(A)–(B) and 3.46(i)(1)–(2)).  For certain wells, the RRC might impose additional monitoring as a condition of the issued permit.  One would also expect that, after identifying an increase in seismic events, the agency would impose increased monitoring on existing wells in the area.
Additions to Sections 3.9(6)(A)(vi) and 3.46(d)(1)(F) amend the RRC’s existing authority to modify, suspend, or terminate a disposal permit to allow such an action based on grounds that the injection is likely to be or has been determined to be contributing to seismic activity.  These actions would require notice to the well operator and a hearing.  This amendment could allow the RRC to terminate permits, but could also be used to impose limits on injection rates and pressures, or other conditions intended to mitigate any contribution to seismic activity.

Read the final rule.
[3] 16 Tex. Admin. Code § 3.9.  
[4] 16 Tex. Admin. Code § 3.46(a). 
[5] Of note, the RRC may still require that applicants submit pressure-front data; however, this data would likely be requested only if the well is an area “where conditions exist that may increase the risk that fluids will not be confined to the injection interval.”  See infra text accompanying note 6.  A “pressure front” is defined as the zone of elevated pressure that is created by the injection of fluids into the subsurface.  A “10-year, five psi pressure front boundary” is defined as the boundary of increased pressure of five psi after 10 years of injection at the maximum requested permit injection volume. 
[6] The RRC identifies the following conditions as several factors that may increase the risk that fluids will not be confined to the injection interval: complex geology, proximity of the basement rock to the injection interval, transmissive faults, and/or a history of seismic events in the area shown by information from the USGS.




This post was written by Eva Fromm O'Brien (eva.obrien@nortonrosefulbright.com or +1 713.651.5321), Jennifer Caplan (jenn.caplan@nortonrosefulbright.com or +1 713.651.5372) and  Bob Greenslade (rgreenslade@fulbright.com / 303 801 2747) from Norton Rose Fulbright's Environmental Practice Group