Train derailment in West Virginia

Earlier this week, a train transporting crude oil derailed close to Boomer, West Virginia. The train was carrying oil from the Bakken shale in North Dakota to Yorktown, Virginia. CSX Corporation Inc. (CSX) operated the one hundred-car train.

Conflicting reports have emerged on the impact of the derailment. Some reports suggests that the derailment may have polluted the Kanawha River, a major waterway in West Virginia, because one of the rail cars entered the river. Other reports state that none of the rail cars entered the river. Approximately twenty of the rail cars were ignited.

West Virginia has declared a state of emergency for the county where the crash occurred, Fayette County, and a neighboring county, Kanawha County. A number of families have been evacuated. The West Virginia Department of Public Safety has issued a statement that its tests have not revealed any detectable amounts of crude oil.

It remains to be seen whether CSX will incur the same amount of litigation generated by previous derailments. Several companies involved in the train derailment in Quebec, Canada have filed for bankruptcy. Forty-seven people were killed in that incident. CSX has stated that the rail cars involved in the crash were updated models that were designed to withstand more damage than older models.

Review the proposed standards for crude oil shippers.

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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.

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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.

Chesapeake Appalachia, LLC, to pay large CWA 404 civil penalty

The U.S. Environmental Protection Agency and the Department of Justice announced on December 19, 2013, that Chesapeake Appalachia, LLC, will pay a $3.2 million civil penalty and spend an EPA-estimated $6.5 million to restore 27 sites damaged by discharges of fill material into streams and wetlands and to implement a Clean Water Act (CWA) 404 compliance plan at the company’s natural gas extraction sites in West Virginia.

Of the 27 sites, four are freshwater impoundments, one is a compressor station, six involve operations related to vertical wells, and the remaining 16 sites involve operations related to horizontal drilling.

In addition to a civil penalty of $3.2 million, the Consent Order requires restoration where feasible, mitigation, employee training for five years in West Virginia, Virginia, Maryland, and Pennsylvania, and integration of a CWA Section 404 compliance protocol into its operating procedures in West Virginia.

According to EPA’s press release, the civil penalty is one of the largest ever imposed for violations of CWA 404. The penalty will be divided between the United States and West Virginia. More information, including the Consent Order, is available on EPA’s web site.

The consent decree, lodged on December 19 in the Northern District of West Virginia, is subject to a 30-day public comment period and court approval.

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This post was written by Janet McQuaid (janet.mcquaid@nortonrosefulbright.com or +1 724 416 0427) from Norton Rose Fulbright's Energy Practice Group.

Flowback fluid recycling regulation in the Marcellus Shale

This is the second article in a series of blog posts evaluating the current status of flowback and produced water recycling regulations in the major shale play states. These waters are generated through the hydraulic fracturing process, and this blog post continues the discussion of the manner in which these waters are disposed. The Marcellus Shale, the largest in the country by geographic area, extends throughout much of the Appalachian Basin, under Maryland, New York, Ohio, Pennsylvania, Virginia, and West Virginia. However, this post will focus on flowback and produced water recycling regulation in the most active hydraulic fracturing states, specifically, Ohio, Pennsylvania, and West Virginia. Recycling of flowback and produced waters is a growing trend in the Marcellus Shale, as off-site disposal facilities are not often available in close proximity to oil and gas wells.

Ohio

Ohio’s Department of Natural Resources (“ODNR”) regulates the disposal of flowback and produced water from oil and gas drilling. ODNR also regulates the design and operation of lagoons/pits and tanks that are used at the drill site to temporarily store fluids that are either being recycled or collected. Long-term storage of these fluids in on-site pits is not authorized in Ohio. Ohio prohibits the discharge of any produced and flowback waters directly to waters of the state and also prohibits disposal of brine at any location other than an ODNR-permitted Class II injection well. However, the state strongly encourages recycling of flowback water.

Currently, Ohio’s regulations pertaining to the recycling of flowback and produced waters from hydraulic fracturing activity fall in the context of permitting the surface application of brine collected during the production of a well to roads, streets, highways, and other land surfaces owned or controlled by a county, township, or municipal corporation. Such application would be utilized to control surface dust or ice. However, flowback water and other fluids from well stimulation may not be applied to roadways or the land surface.

Pennsylvania

In April 2011, the Pennsylvania Department of Environmental Protection (“PADEP”) instructed 15 Publicly Owned Treatment Works (“POTWs”) to stop handling flowback fluids from the Marcellus Shale. At the time of the order, around two-thirds of flowback and produced waters were recycled in Pennsylvania.

The reuse of produced water is managed by the PADEP’s Residual Waste Division. This division has developed general permits for the beneficial use of residual waste, including WMGR123, a 2012 consolidation of General Permits WMGR119 and WMGR 121, that permits the processing, transfer and beneficial use of oil and gas liquid waste to develop or hydraulically fracture an oil or gas well. Oil and gas liquid waste is defined to include liquid wastes from the drilling, development and operation of oil and gas wells and includes contaminated water from well sites.

Pennsylvania also sets forth wastewater treatment requirements specifically for the handling of flowback and produced water from fracturing and other natural gas well operations. Under the requirements, well operators must develop a wastewater source reduction strategy and submit it to the PADEP upon request. Within the strategy, the operator must identify the methods and procedures that will be utilized to maximize the recycling and reuse of flowback and production fluids either to (1) fracture other natural gas wells or (2) for other beneficial uses approved under the regulations. According to a May 2012, NRDC study, the recycling of flowback and produced waters for use in additional hydraulic fracturing has increased by 10% between 2011 and 2012.

West Virginia

A recent study in West Virginia found that 81 percent of recovered flowback water was able to be recycled and re-used. A 2010 Memorandum of Agreement between the West Virginia Division of Highways and the West Virginia Department of Environmental Protection allowed for the beneficial use of natural gas well brines for roadway pre-wetting, anti-icing, and deicing. Such use is limited to natural gas well brines that fall within certain allowable levels.

West Virginia’s oil and gas regulations do set forth construction and maintenance requirements for flowback and produced water pits and freshwater impoundments. However, they do not contain any specific rules governing recycling of that water.

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

West Virginia court to consider rights of surface owner

A key issue in the case of Richard L. Cain v. XTO Energy Inc. and Waco Oil & Gas Co. Inc., No. 1:11-cv-00111, (N.D. W. Va., July 22, 2011), is whether a severance deed gives natural gas companies the right to drill horizontal wells on a landowner’s property in order to extract oil and gas from a shared pool of oil and gas estates. Because the resolution of this question could have far-reaching legal and economic implications for West Virginia’s oil and gas industry and because there is no clear controlling West Virginia precedent, on March 28, 2013, the federal judge hearing the case has certified this question to the West Virginia Supreme Court of Appeals.

View a copy of the Order.

Richard L. Cain filed his lawsuit to block XTO Energy, Inc. and Waco Oil & Gas Co. Inc. from putting horizontal wells on his property to access and develop nearby shale resources that do not lie beneath his land. Cain concedes that XTO is entitled to the oil and gas beneath his property by way of a 1907 severance deed, but argues that XTO’s activities are beyond those in usage and custom of the natural gas industry at the time of the 1907 deed. He also claims that the planned horizontal wells would take up the “best” of his surface land, leaving him with steep hillsides and that he would not be sufficiently compensated for the burden of the wells being on his land rather than on the land of the residents living above the neighboring mineral deposits. Cain had sought to certify additional questions relating to damages to the West Virginia Supreme Court of Appeals, but the federal judge found that these damages questions were not yet ripe for disposition.

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

Injection Wells and Their Possible Link to Seismic Activity

The use of injection wells, a preferred method for disposal of various fluids such as wastewater or brine (salt water), is a popular topic in the news media lately due to a suspected link between use of these wells and earthquakes.

Texas, Arkansas, Oklahoma, the United Kingdom, and most recently Youngstown, Ohio and central West Virginia have been experiencing frequent, small earthquakes. On New Year’s Eve, a 4.0 magnitude earthquake struck just outside of Youngstown, Ohio. This quake was just one of 11 earthquakes experienced in the area since March, 2011.

D&L Energy, whose affiliate Northstar Disposal Services LLC operates the Youngstown well, voluntarily shut the well down after the tenth earthquake occurred. Soon after, Ohio Governor John Kasich’s administration placed a temporary moratorium on injection wells within a 5-mile radius of Northstar No. 1, the particular Youngstown well believed to be the cause of the quakes.

This occurred less than a year after Arkansas declared a moratorium on disposal wells due to earthquakes during the development of the Fayetteville Shale. The Ohio Department of Natural Resources believes that fracking waste pumped into Northstar No. 1 has been seeping into a previously unknown fault line and, as a result, has caused this seismic activity.

The chairman of the Department of Earth and Atmospheric Sciences at Cornell University analogizes by saying the water pressure essentially “greases the wheels of the earthquake process that is there naturally and causes the earthquakes to occur at lower stress levels than they might normally have needed to occur.” At the same time, for the seismic activity to occur, the wastewater would need to be injected specifically into a stress region.

Seismographs from Columbia University’s Lamont-Doherty Earth Observatory were set up in Youngstown and concluded that the earthquake occurred nearly 2 miles below the surface, the same depth as the well. Ohio has over 177 injection wells throughout the state.

However, the Ohio Department of Natural Resources’ director stated that the Northstar No. 1 well is the only well that has been related to seismic activity in the state since injection wells were first installed in the 1970s.

Some state senators have called for the U.S. Environmental Protection Agency to intervene and for an indefinite, statewide moratorium on the use of injection wells.
A statewide moratorium could present a major problem, both for the livelihoods of thousands of Ohio residents as well as for other states who rely on these injection wells for disposal of water generated from oil and gas activities in those states.

Prior to its shutdown, nearly 5,000 42-gallon barrels of brine water were pumped into Northstar No. 1 daily. A majority of this water came from oil and gas wells in Pennsylvania. A similar situation has arisen in West Virginia, which experienced 10 quakes in 2010 and another one in January 2012.

After the initial quakes in 2010, the West Virginia Department of Environmental Protection worked with Chesapeake Energy to reduce the amount of fluid being injected into its disposal wells in the area.
According to news reports, Chesapeake Energy had recently begun to slowly increase the amount of injected fluid when the latest earthquake struck. While West Virginia’s Department of Environmental Protection believes there is a link between the earthquake and Chesapeake Energy’s increased injection fluid, there currently is no evidence that these events are related.

The company is skeptical that any link exists given that the earthquake occurred 6 miles from the disposal well, nearly 3 miles below the well’s disposal zone, and 25 earthquakes have been reported within 100 miles of the current seismic activity since 2000, one of which struck before the injection well was even drilled.
Since seismic monitors were not present at the site, the link between the quakes and the increased injected fluid remains unproven. Studies attempting to link earthquakes to underground injection are ongoing.

U.S. EPA has not yet weighed in on this issue, but as the news media continues to focus on the issue and public concerns continue to rise, that may change.

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

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SOURCES
Henry Fountain, Ohio: Sites of Two Earthquakes Nearly Identical, N.Y. Times, Jan. 3, 2012, available at http://www.nytimes.com/2012/01/03/science/earth/ohio-sites-of-two-earthquakes-nearly-identical.html?_r=1&ref=us.

Julie Carr Smyth, Company cautions against linking well, Ohio quakes, The Washington Times, Jan. 12, 2012, available at http://www.washingtontimes.com/news/2012/jan/12/company-cautions-against-linking-well-ohio-quakes/.

Joe Vardon, State links quakes to work on wells, The Columbus Dispatch, Jan. 1, 2012, available at http://www.dispatch.com/content/stories/local/2012/01/01/state-links-quakes-to-work-on-wells.html.

Edward McAllister, Avoiding Fracking Earthquakes May Prove Expensive, Scientific American (Jan. 3, 2012), available at http://www.scientificamerican.com/article.cfm?id=avoiding-fracking-earthquakes-expensive.

Ohio Connects Quakes to Injection Well, Previously Unknown Fault Line Nearby, Business Journal Daily (Jan. 12, 2012), available at http://business-journal.com/ohio-connects-quakes-to-injection-well-previously-unknown-fault-line-nearb-p20690-1.htm.

Spencer Hunt, A seismic shift in Ohio’s concerns over earthquakes, The Columbus Dispatch, Jan. 9, 2012, available at http://www.dispatch.com/content/stories/local/2012/01/09/a-seismic-shift.html.

Joe Vardon, State links northeast Ohio quakes to injection wells, The Columbus Dispatch, Dec. 31, 2011, available at http://www.dispatch.com/content/stories/local/2011/12/31/new-quakes.html.

The Associated Press, W.Va. DEP: Injection, quakes could be tied, Star Gazette, Jan. 13, 2012, available at http://www.stargazette.com/article/20120113/NEWS11/120113015/W-Va-DEP-Injection-quakes-could-tied.

The Associated Press, Chesapeake skeptical of quake-drilling connection, Charleston Gazette, Jan. 13, 2012, available at http://wvgazette.com/News/Business/201201130127.