US Coast Guard proposes rules allowing fracking waste water to be transported by barge

The disposal of large volumes of wastewater produced during shale gas extraction has posed challenges for companies, regulators, and communities, especially in the Marcellus Shale region.

In 2012, the U.S. Coast Guard received two requests for approval for the bulk shipment of wastewater resulting from hydraulic fracturing operations in Pennsylvania and the northern Appalachia area. 

On October 30, 2013, in the Federal Register, the Coast Guard published proposed rules to allow barges to transport wastewater in bulk; thus, providing companies an alternative to storing the waste at the drilling site or transporting it by rail or truck to remote facilities.

The Coast Guard regulates the shipment of hazardous materials on the nation’s rivers and classifies cargoes for bulk shipment. 
[U]nder certain circumstances a bulk liquid hazardous material may be transported by a tank vessel if it is a ‘listed cargo’ (listed in any of several specified tables in Coast Guard regulations, [wastewater], however, cannot be treated as a ‘listed cargo’ because the specific chemical composition of [wastewater] varies from one consignment load to another and may contain one or more hazardous materials . . . , including radioactive isotopes such as radium-226 and radium-228.
Under the proposed rules, in order to carry wastewater, a barge owner must request approval from the Coast Guard prior to shipping, provide additional information and comply with new policies. 

To address concerns about the shipment of wastewater, the Coast Guard has issued a proposed policy letter entitled “Carriage of Conditionally Permitted Shale Gas Extraction Waste Water in Bulk,” which specifies the conditions under which a barge owner may request and be granted a Certificate of Inspection endorsement in order to transport wastewater. 

This proposed policy letter will be open for public comment through November 29, 2013. The Coast Guard specifically requests information about disclosing proprietary information to the government and testing the wastewater for radioactive material.

This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713.651.3662) from Norton Rose Fulbright's Energy Practice Group.
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Physician's challenge to Pennsylvania's “fracking gag order” dismissed

On February 14, 2012, the Pennsylvania Governor signed into law Act 13 of 2012 which regulates the disclosure of hydraulic fracturing chemical components.
Pa. Governor Tom Corbett

Section 3222.1(b)(10) of the Act requires that companies engaged in hydraulic fracturing disclose information regarding chemicals used in the process to medical providers contingent on the medical providers executing “a confidentiality agreement and provid[ing] a written statement of need for the information indicating all of the following:

  1. the information is needed for the purpose of diagnosis or treatment of an individual; 
  2. the individual being diagnosed or treated may have been exposed to a hazardous chemical; and 
  3. knowledge of information will assist in the diagnosis or treatment of an individual.” 
Dr. Alfonso Rodriguez, a licensed medical physician “who has treated patients that have been exposed to toxic fluids and/or environmental contamination caused by oil and gas operations,” filed a lawsuit on July 27, 2012, complaining that the “medical gag” provisions of Pennsylvania’s Act 13 of 2012 improperly restricted his First Amendment freedom of speech rights.

He argued that the “practice of medicine requires a free and open exchange of questions, answers and information between” the doctor and the patient, medical community, researchers and insurance companies, among others. Plaintiff sought an injunction from requiring him to sign any confidentiality agreement.

On October 23, 2013, the Court granted Defendants’ motions to dismiss, ruling that Plaintiff lacked standing because his “alleged injury…is too conjectural to satisfy the injury in fact requirement of [U.S. Constitution] Article III standing.”

The court continued, “Plaintiff has not alleged that he has been in a position where he was required to agree to any sort of confidentiality agreement under the act. Therefore…he has not yet…been prevented from engaging in any sort of communication as a result of the act. Similarly, plaintiff has failed to indicate that he has been forced to waive any of his fundamental constitutional rights.”

The case has been dismissed.
This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713.651.3662) from Norton Rose Fulbright's Energy Practice Group.
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Michigan to tighten Its hydraulic fracturing rules

The Michigan Department of Environmental Quality (“DEQ”) plans to strengthen its hydraulic fracturing rules by adding provisions to protect water resources and to require additional chemical data submissions. This announcement comes after roughly 200 public meetings held since 2011 and attended by the DEQ. 

Michigan’s current fracturing rules went into effect on June 22, 2011 and require the operator or the service company of a high volume hydraulic fractured (HVHF) well (using more than 100,000 gallons of fracking fluid) to provide:
  1. Material Safety Data Sheets for the chemical additives used, 
  2. the volume of each additive, and 
  3. the records and associated charts showing fracturing volumes, rates, and pressures. 
This information must be submitted to the DEQ within 60 days after completion of the well. The rules also require a water withdrawal plan and information showing the total volume of flowback water generated.

The proposed revisions would add the following requirements:
  • Water withdrawal assessment and monitoring – In the application for a drilling permit, the operator will be required to use the state’s water withdrawal assessment tool. Withdrawal will not be approved if the review indicates that the withdrawal may cause an adverse impact to rivers or streams. Also if there is a water supply within 1,320 feet of a proposed withdrawal, the operator must install a monitor well and report water levels. There will be specifications for water storage pits.
  • Water quality sampling – Oil and gas operators will be required to collect baseline samples from up to 10 water supply wells within 1,320 feet of a proposed withdrawal, six months or less before drilling begins.
  • Monitoring and reporting – Operators will be required to state in the permit application whether HVHF will be used, submit separate applications for HVHF operations on existing wells, notify the DEQ at least 48 hours in advance before starting the process, and monitor and report fluid pressures and volumes for all HVHF operations.
  • Chemical additive disclosures – Operators will be required to submit information regarding HVHF chemical additives on FracFocus.org. The information must include chemical constituents and maximum concentrations. For trade secrets, the chemical family and trade name must be identified.
There will be a period of public comment after Michigan’s rules committee reviews the DEQ’s proposed rules and finalizes a draft. It is anticipated that these new rules will be in place sometime in 2014.

As these new rules are being proposed, the anti-fracking group Ban Michigan Fracking is trying to get more than 258,000 signatures by May 2014 in order to have its initiative on the ballot in November 2014. The Michigan Chamber of Commerce is opposed to the fracking ban and has launched its own campaign to defeat the initiative.
This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713.651.3662) from Norton Rose Fulbright's Energy Practice Group.
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Pennsylvania proposes 60% increase in drilling fees

On September 14, 2013, the Pennsylvania’s Environmental Quality Board proposed changes to the structure of oil and gas well permit fees, including increased flat fees for unconventional well permits. The Independent Regulatory Review Committee is currently studying these proposed changes which would replace the current sliding fee structure based on wellbore length with flat fees. The current average fee for a Marcellus Shale well is $3,200. The proposed flat fees would be $5,000 for horizontal unconventional wells and $4,200 for vertical unconventional wells - an average fee increase of $1,000 to $1,800 per well or an average 60% increase per well. The Pennsylvania Department of Environmental Protection has stated that the permit fee increases are needed to maintain current staffing levels and to support permit reviews and other regulatory oversight obligations because of a 22% decrease in the number of new wells permitted since 2010.

Some energy companies have expressed opposition to the permit fee increases, stating that Pennsylvania’s gas industry will be adversely affected. They dispute whether the increases are necessary to maintain staff for permit reviews, pointing to the 22% decrease in well permits and the likelihood that this decline will continue with the fee increases and Pennsylvania’s stringent regulatory oversight.

This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713.651.3662) from Norton Rose Fulbright's Energy Practice Group.
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The European Parliament seeks to restrict hydraulic fracturing while France's Constitutional Council upholds hydraulic fracturing ban

On October 9, 2013, the European Parliament meeting in Strasbourg, France, voted (with 328 for and 311 against) to tighten rules on hydraulic fracturing by requiring a full environmental impact assessment from oil and gas companies seeking permits to use the process. An assessment would even be required for exploratory drilling. Another round of voting in the Parliament is required to finalize the rules. In the environmental assessment, the oil and gas companies must identify and describe the direct and indirect effects of the project on the population, human health, biodiversity, land, soil, water, air, and the landscape. The member state’s oil and gas authority must make a decision about issuing a permit within 90 days of receipt, and only after considering comments from the public and other interested parties, including independent, qualified and technically competent experts.

The European Parliament’s proposed rules are being met with opposition from oil and gas companies who see the rules as an expensive hurdle to doing business with the member nations. These companies may turn to other areas of the world to develop shale gas in order to avoid the extensive assessment reporting requirements, which may take as much as one year to prepare. It is thought by some that the rules are a reaction to a recent report (released September 30, 2013) from the United Nation’s Intergovernmental Panel on Climate Change (IPCC) which stated that methane gas is 86 times more damaging to the climate than carbon dioxide over a 20-year period.

Two days after the European Parliament vote, on October 11, 2013, the French Constitutional Council, which is made up of judges and former French presidents and has the power to deem a law unconstitutional, reviewed the French legislature’s 2011 ban on hydraulic fracturing. The Council upheld the ban. France’s environmental minister applauded the decision as an environmental and political victory while oil and gas industry groups complained that the ruling deprives the country of needed oil and gas exploration and development. The U.S. Energy Information Administration (EIA) has estimated that France has 137 trillion cubic meters of technical recoverable shale gas and 4.7 billion barrels of technical recoverable shale oil in the Paris basin and the Rhone Valley.

This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713.651.3662) from Norton Rose Fulbright's Energy Practice Group.
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Environmental group urges moratorium on California offshore hydraulic fracturing operations

In a letter dated October 3, 2013, the Center for Biological Diversity (CBD) urged federal offshore regulators at the Bureau of Ocean Energy Management and the Bureau of Safety and Environmental Enforcement, Pacific Region, “to place an immediate moratorium on new oil and gas approvals” and to suspend existing approvals “involving hydraulic fracturing (fracking) and other unconventional extraction techniques to protect our marine environment and comply with your statutory stewardship duties.” The CBD states that these agencies are violating federal environmental statutes, including the National Environmental Policy Act (NEPA) and the Outer Continental Shelf Lands Act (OCSLA), by allowing hydraulic fracturing and unconventional drilling in the Pacific Ocean without conducting a supplemental NEPA review to analyze the risks to human health and endangered marine life and a full environmental impact statement. The group points to records which indicate that at least a dozen wells in California state waters have been fracked in the past three years using dangerous substances such as “2-Butoxyethanol, methanol and other cancer causing chemicals.”

The Center for Biological Diversity was recently successful in a similar case involving hydraulic fracturing on federal land in the central California Monterey Shale Formation, finding that the federal agency failed to assess the risks of fracking before issuing the leases. On March 31, 2013, in Center for Biological Diversity and Sierra Club v. The Bureau of Land Management and Ken Salazar, Secretary of the Department of the Interior, No. CV-11-06174 (N.D. Cal., December 8, 2011), the Court ruled that the BLM failed to conduct the “hard look” analysis required by NEPA by dismissing any development scenario involving hydraulic fracturing when used in combination with technologies such as horizontal drilling. See prior blog entitled “BLM Violated NEPA by Granting Leases without Evaluating Fracking Risks,” dated April 10, 2013.

This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713.651.3662) from Norton Rose Fulbright's Energy Practice Group.
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Marcellus Shale Coalition releases drilling and hydraulic fracturing guidelines

On October 9. 2013, the Marcellus Shale Coalition (MSC), whose members include some of the major operators in the Marcellus Shale, issued guidelines for drilling and completion of shale gas wells, covering the topics of (1) planning, (2) general health and safety considerations, (3) well control, (4) high pressure equipment, (5) drilling operations, and (6) hydraulic fracturing and flow back operations. The MSC considers “the drilling phase and hydraulic fracturing and completions process [to be] two of the most crucial” steps to bring a shale well into production. These guidelines are not binding requirements but are a continuation of recommended practices developed by the MSC since April 2012, beginning with 11 key steps to help operators improve site planning, development and restoration. The new guidelines include the following recommendations:

  • Planning: The guidelines provide a check list of items that must be considered before moving the rig and other completions equipment into place. Operators need to consider regulatory requirements, traffic, lighting, noise, water management and recycling, erosion and sediment controls and secondary containment.
  • Health and Safety: Operators must ensure that all personnel are properly trained.
  • Well Control: Two mechanical barriers in the flow path should be used during all phases of drilling and completions operations when feasible. The mechanical barrier equipment would include blow-out preventers which must be carefully tested, inspected and maintained.
  • High Pressure Equipment must be routinely tested and inspected to ensure proper operation.
  • Drilling Operations: Operators should identify the depth of groundwater aquifers and other oil and gas wells within 1000 feet of the surface location and 500 feet of the horizontal portion of the wellbore.
  • Hydraulic Fracturing and Flow Back Operations: “Operators should commit to transparency in their operations by disclosing the composition of hydraulic fracturing fluid additives to the extent permitted by suppliers, while respecting related intellectual property rights, and proprietary and confidential business information.” Operators should monitor adjacent oil and gas wells during the fracturing process. During flow back operations, operators should minimize the release of produced gases and contain produced liquids through capture or temporary flaring. Venting is discouraged.

This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713.651.3662) from Norton Rose Fulbright's Energy Practice Group.
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Ohio advises drillers to comply with EPA chemical reporting requirements

In September 2012, the Ohio legislature passed regulations requiring oil and gas well operators to report the contents of fracking fluids, recycling fluids, and wastewater to the state’s Department of Natural Resources. These reporting regulations went into effect on September 11,2012, and require the disclosure of the trade name and volume of all “products, fluids, and substances,” maximum concentrations of additives in the fluid, Chemical Abstract Service (CAS) numbers, and maximum concentrations of ingredients intentionally added to the fluid. The total volume of any recycled hydraulic fracturing fluids must also be disclosed. Ohio Rev. Code Ann. § 1509.10(A). This information must be made available to the public on the FracFocus website or by other means approved by the Department. Ohio Rev. Code Ann. § 1509.10(F) The regulation does allow for the protection of trade secrets, but it requires operators to share chemical information with medical professionals in emergencies. § 1509.10(H). It also allows for disclosure of trade secrets in the event of spills and investigations (with confidentiality protections).

In addition to abiding by these Ohio regulations, on September 11, 2013, the Ohio State Emergency Response Commission (SERC) advised oil and gas well owners and operators that they must also comply with the federal Emergency Planning and Community Right-To-Know Act (EPCRA) by reporting all hazardous chemicals (any substance requiring a Material Safety Data Sheet under the Occupational Safety & Health Administration) over the 10,000 pound threshold that are stored at the well site. Written notification of these hazardous chemicals must be given to SERC, the Local Emergency Planning Committee (LEPC), and the local fire department within 90 days of receiving the shipment or producing the substance on site. For any “Extremely Hazardous Substances” (EHS) in amounts from 1 to 500 pounds, depending on the substance, notice must be given within 60 days. The EPCRA also requires annual reports identifying all hazardous chemicals and/or EHS at or above the threshold weights at any time on the site during the calendar year. This information must be provided to the SERC, the LEPC, and the local fire department. Under the EPCRA, there is a procedure for claiming that a reportable chemical is a trade secret. To protect trade secrets, the well owner or operator will have to apply to both the EPCRA and SERC for protection. The SERC points out that failure to comply with EPCRA requirements may result in an enforcement action by the U.S. Environmental Protection Agency with the possibility of civil penalties up to $32,500 per day.

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Pennsylvania legislator proposes oil and gas lease protection package

In July 2013, the Pennsylvania legislature passed Act 66 of 2013 which regulates how oil and gas royalty information is provided to lessors. As noted in prior blog postings, the law requires transparency in the issuance of royalty checks, with each check stub containing an itemization of all deductions. On September 30, 2013, State Senator Gene Yaw, R-Lycoming, announced his proposal to expand the rights of leaseholders with increased transparency under his “Oil and Gas Lease Protection Package.” The three components of this Package are:
  • Landowners would be allowed to inspect the oil and gas company’s records to verify the amount of royalty paid, but must keep this information confidential.
  • If the landowner questions the accuracy of any royalty payments, the oil and gas companies cannot retaliate against any landowner by terminating the lease or by ceasing development of the land.
  • Within 30 days of a lease’s end, the oil and gas company would be required to file in the county deed records a “satisfaction piece” providing details about the end of the lease. 
In the Pennsylvania House of Representatives, Rep. Michelle Brooks, R-Crawford/Mercer, announced her proposed legislation to ban the practice of forced pooling under Act 66 of 2013. See prior blog for more information.

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North Carolina returns EPA grant for hydraulic fracturing study

On September 3, 2013, the State of North Carolina, through its Department of Environment and Natural Resources (“DENR”), rejected a $222,595 federal grant for water quality monitoring in areas where hydraulic fracturing is likely to occur in the future. The grant would have been administered through the U.S. Environmental Protection Agency and was likely to cover research in the Sanford Basin of Lee County, located south of Raleigh. The DENR also returned a $359,710 federal grant for wetlands monitoring in the region.

Tom Reeder, Director of the Division of Water Resources, noted that the state will conduct a study to examine the potential impacts of hydraulic fracturing on groundwater, but at a later date. He also said the study would be conducted by a different agency than that which applied for the funding from the EPA. The Program Development Unit, which housed experts in aquatic ecosystems, would have received the grants, but that unit will no longer exist due to the Division of Water Resources’ reorganization.

At the request of the North Carolina Mining and Energy Commission, which is charged with developing rules on hydraulic fracturing, the DENR explained its return of the EPA funds at a meeting on September 27, 2013. At that meeting, Drew Elliott of DENR stated that although DENR had a “deep background knowledge” of the Sanford Basin, more information would be needed from the Mining and Energy Commission in order to conduct a detailed baseline study of hydraulic fracturing. Mr. Elliott stated that such information would include when and where hydraulic fracturing would occur first, the specific constituents of concern, and what, if any, groundwater could be potentially impacted. The federal grant contained no mention of coordination with the Mining and Energy Commission or the Department of Energy, Mineral and Land Resources. Mr. Elliott also stated that the DENR would be open to suggestions from the Commission about where and how the baseline study can be conducted in the future.

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New York advocacy group sues Department of Health for disclosure of documents related to hydraulic fracturing

On September 13, 2013, the Seneca Lake Pure Waters Association, an advocacy group based in Finger Lakes, New York, sued the New York Department of Health (NYDOH), seeking the disclosure of documents related to the state’s review of hydraulic fracturing, which has been banned in New York since 2008.

The NYDOH is conducting an ongoing review of the state’s Supplemental Generic Environmental Impact Statement, which addresses permit conditions required for gas drilling in the Marcellus Shale and other areas of New York, to determine whether those guidelines would adequately protect public health.

In its filing, the group, which is critical of natural gas drilling and hydraulic fracturing, requested the disclosure of any factual documents or statistics that were used in the state’s decision-making process for banning hydraulic fracturing in the state.

The request was filed under Article 78 of New York’s Civil Practice Law, under which interested persons may challenge the decision of a state governmental body, agency, or official.

The Seneca Lake Pure Waters Association has previously filed requests under the Freedom of Information Law, seeking NYDOH documents used in the state Department of Environmental Conservation’s draft environmental review of large-scale hydraulic fracturing and the Health Commissioner’s assessment of that review.

This article was prepared by Lauren Brogdon (lauren.brogdon@nortonrosefulbright.com or 713 651 5375) from Norton Rose Fulbright's energy practice.
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