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North America Shale Blog

BLM Issues New Draft Fracking Regulations

By Paul Enockson on Posted in Chemical Disclosure, Hydraulic Fracturing

On Thursday, May 16, the Bureau of Land Management (BLM) issued its lasted proposed fracking regulations.  The proposed regulations would require wider disclosure of fracking chemicals.  The regulations also require water management plans for flow back water and rules to assure wellbore integrity.  Chemicals used in the process would be disclosed to FracFocus.org, an online database that Colorado and ten other states use for disclosure of chemicals.  The regulations do provide an exemption for chemicals deemed to be trade secrets.   

According to media reports, the draft regulations have been criticized by both the oil and gas industry, and environmental groups.  The oil and gas industry continues to take the position that regulation is best left in state hands.  Environmental groups counter that the regulations now being proposed are weaker than those previously proposed by the BLM.  Colorado Governor John Hickenlooper is on record that regulation should be left to the states, testifying before Congress earlier this year on the subject. 

The regulations, if adopted, will apply to oil and gas operations on federal lands.  There are approximately 440 million acres nationwide, with 1.5 million acres currently used for producing oil and gas in Colorado and 4.2 million acres in Colorado that have been leased for possible future development.

The public has thirty days to comment on the proposed regulations.  The proposed regulations can be found here.

Media cover can be found here, here, and here.

Colorado Legislative Session Ends Without Any Significant Oil and Gas Bills Passing

By Paul Enockson on Posted in Colorado, Legislative

On Wednesday, May 8, 2013, the Colorado legislative session came to a close without any significant oil and gas legislation being passed by the state legislature.

The session was watched closely by the oil and gas industry given the ongoing lawsuits in Colorado that are pitting the state against municipalities over bans to hydraulic fracturing. A number of bills were introduced in the 2013 session, including proposed legislation that would have increased fines for oil and gas violations, increased groundwater testing at drilling sites, and changed the structure and focus of the Colorado Oil and Gas Conservation Commission (COGCC). A total of ten bills were introduced on oil and gas issues in the 2013 session. Only one bill passed—HB 13-1278 which will lower the amount of a spill of oil or exploration and production waste that must be reported to the state and local authorities from 5 barrels to 1 barrel or more. It is anticipated that Governor Hickenlooper will sign this bill into law. A copy of the bill can be found here.

While the legislative session did not result in any significant oil and gas legislation, Governor Hickenlooper did sign an Executive Order that requires COGCC to review its enforcement program, penalty structure and imposition of fines. Among other things, the Executive Order directs COGCC to establish minimum fines in cases with egregious or aggravating factors, and to apply the statutory maximum fines as necessary to protect public health, safety, welfare and the environment. A summary of the Executive Order can be found here. A copy of the Executive Order can be found here.

Media coverage of the Colorado legislature can be found here and here.

New York Court Upholds Local Hydraulic Fracturing and Oil and Gas Development Bans

By Cassie J. Dallas on Posted in Hydraulic Fracturing, Land Use, Litigation, New York, Uncategorized

Last Friday, a four judge panel of a New York appeals court upheld two local zoning laws that prohibit activities related to oil and gas exploration and development, including hydraulic fracturing.  The decisions in Norse Energy Corp. USA v. Town of Dryden and Cooperstown Holstein Corp. v. Town of Middlefield mark the first appellate ruling on the legality of such zoning bans in New York.  Copies of the court’s opinion in Dryden and Middlefield are available here and here, respectively.

In August 2011, the Town of Dryden amended its zoning ordinance to ban all activities related to the exploration, production, and storage of natural gas and petroleum within the town limits.  Prior to the amendment, Anschutz Exploration Corporation, the predecessor in interest of Norse Energy Corporation USA (“Norse”) had acquired gas leases covering approximated 22,000 acres in Dryden.  In September 2011, Anschutz sued the town seeking to invalidate the ordinance on the ground that it was preempted by the Oil, Gas and Solution Mining Law (“OGSML”).

In February 2012, the trial court granted the Dryden’s summary judgment motion, finding that the amended ordinance was not preempted, and dismissed the complaint.  Anschutz appealed.  During the pendency of the appeal, Norse acquired Anschutz’s interests in the Dryden and was substituted in the proceeding.  

Affirming the lower court, the four judge panel concluded that the OGSML does not preempt, either expressly or impliedly, a municipality’s power to enact a local zoning ordinance banning all activities related to the exploration, production, or storage of natural gas and petroleum within its borders.

The court reasoned that the zoning ordinance did not regulate the “details or procedure of the oil, gas and solution mining industries.  Rather, it simply establishes permissible and prohibited uses of land within the Town for the purpose of regulating land generally . . . .”  The court noted: “While the Town’s exercise of its right to regulate land use through zoning will inevitably have an incidental effect upon the oil, gas and solution mining industries, we conclude that zoning ordinances are not the type of regulatory provision the Legislature intended to preempt by the OGSML.”

The Town of Middlefield, New York enacted a similar zoning law in June 2011.  That ordinance was also challenged on preemption grounds.  Opponents of the ordinance lost at the trial court, and the New York appeals court affirmed the decision, relying entirely on the reasoning in Dryden to uphold that Town’s ordinance.

The challengers of the ordinances are likely to appeal the decisions to the state’s highest court, the New York State Court of Appeals. 

The North American Shale Blog will continue to track the progress of this case and report on important developments.

Pennsylvania Supreme Court Upholds Statewide Oil And Gas Conveyance Rules

By Jason Yearout on Posted in Hydraulic Fracturing, Land Use, Pennsylvania

In October of 2012 the Pennsylvania Supreme Court heard oral argument on two key cases that potentially could reshape the laws and rules applicable to hydraulic fracturing in the state.  We wrote extensively about these cases in 2012 and expanded on our analysis in a web interview with LXBN-TV.  Last week the Pennsylvania Supreme Court issued its decision in one of those cases — Butler v. Powers Estate — and unanimously declined to rewrite existing state law governing conveyances of oil and gas property interests.

In Butler, the court was tasked to determine whether shale gas rights are included as part of a deed’s oil and gas reservation of rights to “minerals and petroleum oils”.  In other words, the critical issue was whether shale gas counts as a “mineral” under state property law.  In 1882, the state supreme court instituted a rule in the case of Dunham & Short v. Kirkpatrick that a provision in a deed reserving “minerals” without mentioning natural gas or oil creates a rebuttable presumption that the grantor did not intend to reserve natural gas or oil rights, based on “the common understanding … that oil is not a mineral.”  This is known as the Dunham rule, and has governed transactions involving subsurface rights in Pennsylvania ever since (subsequent decisions expanded the rule to cover natural gas).

In the original suit concerning who owned Marcellus Shale gas rights on a particular property, the state trial court applied the Dunham rule and concluded that a reservation of rights in an 1881 deed did not include shale gas.  But the Pennsylvania Superior Court overruled this decision on appeal.  It determined that expert testimony was required at the trial court “on whether Marcellus shale constitutes a type of mineral such that the gas in it falls within the deed reservation.”  The Supreme Court accepted the appeal of this directive, and heard oral argument in late October.

Before the Supreme Court, appellants claimed that since the gas is trapped within the Marcellus Shale, it must be included as part of their claim to rights on “minerals and petroleum oils.”  They also claim that natural gas is a product of petroleum and therefore could not be considered separate from it.   Their opponents argued that shale gas must be treated differently than conventional gas due to geological concerns and the differing methods in extracting the gas.   Among other arguments, appellees compared Marcellus Shale “to Coca-Cola and the shale gas as the ‘fizz’ that emanates from the liquid soda, arguing that no court could ever reason that the ‘fizz’ is separate and apart from the Coca-Cola liquid.”

Last week the Supreme Court determined 8-0 that “Marcellus shale natural gas was not contemplated by the private deed reservation presented in this case” and reversed the Superior Court’s decision.  The court specifically expressed its reluctance to upset longstanding state property law, stating that “neither the Superior Court nor Appellees have provided any justification for overruling or limiting the Dunham Rule and its longstanding progeny that have formed the bedrock for innumerable private, real property transactions for nearly two centuries.”  And because the term “natural gas” did not appear in the 1881 deed’s reservation of rights, appellees needed to demonstrate by clear and convincing evidence that the parties at that time intended to reserve natural gas rights — a burden they could not meet.

Notably, the Supreme Court also explicitly rejected appellees’ Coca-Cola / fizz argument:  “While we recognize that hydrofracturing methods are employed to obtain both coalbed gas and Marcellus shale natural gas, the basis of the Dunham Rule lies in the common understanding of the substance itself, not the means used to bring those substances to the surface.”

For Marcellus shale gas owners in Pennsylvania, the Butler decision foreclosed the possibility of upending 130 years of state property law, which would have prompted reexamination of thousands of titles and conveyances.  But one critical case remains before the Pennsylvania Supreme Court — Robinson Township, which concerns newly-enacted state restrictions on local government powers to regulate zoning as applied to shale development.  This blog will provide a full analysis of that decision once it is released.

Texas Court Allows Defamation Claim Against Landowner to Proceed

By Cassie J. Dallas on Posted in Groundwater, Hydraulic Fracturing, Litigation, Texas, U.S. EPA

On Monday, Texas’s Second District Court of Appeals partially affirmed a District Court order allowing Range Resources Corporation’s (“Range”) defamation and business disparagement claims against a landowner to proceed.  A copy of the court’s opinion is available here.

This is the latest development in a case that gained notoriety when a video purporting to show water from the landowners’ well ignite went viral.

In the summer of 2010, Steven and Shyla Lipsky and Alisa Rich notified the U.S. Environmental Protection Agency (“EPA”) of possible gas contamination of the Lipskys’ water well at their home in Weatherford, Texas, which was near oil and gas drilling operations conducted by Range.  In December 2010, the EPA issued an Emergency Administrative Order (“EAO”) pursuant to the Safe Drinking Water Act stating that Range’s production activities had caused or contributed to the gas in the Lipskys’ water well and that the gas could be hazardous to the Lipskys’ health.  The EPA later withdrew its EAO on March 29, 2012.

The Texas Railroad Commission (“TRC”) also stepped in to investigate the claims.  In March 2011, the TRC issued an order exonerating Range and other defendants in the investigation.  The TRC stated that Range’s wells were not responsible for the contamination of the Lipskys’ water and that the gas present in the water was likely naturally occurring.

Later in 2011, despite the TRC’s finding, the Lipskys sued Range and other defendants, alleging that Range’s oil and gas drilling activities caused contamination of their water well at their home.  In their original petition, the Lipskys claimed that the contamination had caused their water “to be flammable.”  A video taken from the Lipskys’ residence, which was broadcast by two local television stations, appeared to show water from the Lipskys’ well being lit on fire. 

Range responded to the Lipskys’ petition by filing a counterclaim against them and a third-party claim against Rich, an environmental consultant who was alleged to have advised and conspired with the Lipskys.  Range asserted claims for civil conspiracy, aiding and abetting, defamation, and business disparagement.

The Lipskys and Rich sought to dismiss Range’s claims under Chapter 27 of the Texas Civil Practice and Remedies Code, also known as the Texas Citizens’ Participation Act.  The Act creates an avenue for dismissing unmeritorious suits based on a defendant’s exercise of the rights of free speech, petition, or association.

The Lipskys and Rich argued that Range’s counterclaim and third-party claims should be dismissed.  But the trial court found that there was “clear and specific” evidence to prove Range’s claims and denied the Lipskys’ motion to dismiss. 

The Lipskys and Rich then filed an interlocutory appeal challenging that decision.  In August 2012, the Second District Court of Appeals dismissed the appeal, but allowed the mandamus action to proceed.  The court’s August 2012 opinion is available here.

The Court ruled Monday that Range’s counterclaims for defamation and business disparagement could proceed against Steven Lipsky.  The court held, however, that all of Range’s claims against Shyla Lipsky and Alisa Rich, as well as Range’s claims for civil conspiracy and adding and abetting against Steven Lipsky, should be dismissed.

The North American Shale Blog will continue to track the progress of this case and report on important developments.

BakerHostetler Attorneys Presenting On Shale And Safety Issues At OSBA Seminar

By Jason Yearout on Posted in Hydraulic Fracturing, Ohio DNR, Ohio EPA, Transmission

This week several BakerHostetler attorneys will be participating in the Ohio State Bar Association’s (OSBA) 28th Annual Ohio Environment, Energy, and Resources Law Seminar.  The seminar is presented by the OSBA Environmental Law Committee and the Natural Resources Law Committee.  It runs Thursday, April 25 through Saturday, April 27, at the Cherry Valley Lodge in Newark, Ohio.

Partner Martin Booher, co-leader of the firm’s National Shale Practice Team, will be speaking on environmental and energy issues. Partner Patricia Poole will be speaking on health and safety issues.

Booher, along with two other panelists, will be presenting on “Next Generation Shale Issues” on Friday, April 26, at 1:00 p.m.

“I look forward to speaking to the Ohio bar to showcase the firm’s national oil and gas practice, particularly our experience in the siting of large-scale energy projects such as pipelines and processing facilities,” Booher said.

Poole will be speaking at the seminar on “Environmental Health and Safety” at 4:30 p.m. on April 25.

“I will have an opportunity to highlight our OSHA capabilities to a significant number of attorneys and firms who have no such practice capabilities in-house and need the services of experienced OSHA lawyers from time to time,” Poole said.

Associate Jason Yearout will be moderating the midstream oil and gas panel and serves on the planning committee for the OSBA seminar.

Attendees of the seminar will receive 14.25 CLE credit hours, including 1.0 hour of ethics, 1.0 hour of professionalism and .5 hours of substance abuse instruction.

Click for more information or to register for the seminar.

USEPA Proposes Updates To Oil And Gas Air Rules For Storage Tanks

By Jason Yearout on Posted in Air Emissions, Hydraulic Fracturing, U.S. EPA

Two months ago, the U.S. Environmental Protection Agency (USEPA) requested that a federal judge stay the lawsuits challenging its oil and gas air rule revisions to allow the agency to revisit controversial aspects of the rules.  On Friday, April 12, USEPA published proposed rules revising its prior VOC performance standards for storage tanks used in crude oil and natural gas production. 

According to USEPA’s fact sheet accompanying its new proposal, the changes “reflect recent information showing that more higher-volume storage tanks will be coming on line than the agency originally estimated.”  As a result, not enough emission control equipment will exist on the market until 2016 to meet industry needs.  USEPA’s new proposed rules would, among other things:

  • Revise the definition of storage vessels to refer only to containers holding oil, gas condensate, intermediate hydrocarbon liquids, or produced water.
  • Roll back compliance deadlines by exempting existing units that meet certain emissions criteria from installing pollution-limiting devices, while newer units would have until April 2014 to comply.
  • Establish alternative emission limits for storage vessels at well sites that can be demonstrated to have less than 4 tons per year of emissions without emission controls (but if a monthly measurement predicts annual emissions over 4 tpy, the initial rule’s 95% reduction requirement would apply for at least one year).
  • Streamline compliance monitoring requirements during the period in which USEPA is reconsidering its rules.

A 30-day public comment period (ending May 12) has been allotted for USEPA’s proposal.  USEPA anticipates taking final action on these proposed rules by the end of July, and plans to address other issues raised in petitions challenging the prior rules by the end of 2014.  Public comments on the proposed rules can be submitted on www.regulations.gov (reference docket number:  EPA-HQ-OAR-2010-0505). 

Our prior coverage and analysis of EPA’s new air rules for the oil and gas industry can be found here, here, here, here, and here.  The North America Shale Blog will continue tracking the progress of these draft rules.

Ohio Legislators Strip Radioactive Drilling Waste, Severance Tax Provisions From Budget

By Jason Yearout on Posted in Hydraulic Fracturing, Legislative, NORM, Ohio DNR, Ohio EPA

Yesterday we discussed the grim prospects for the NORM and TENORM provisions in Ohio Governor John Kasich’s proposed budget. Both industry and environmentalists opposed the provisions, and state legislators recently expressed their desire to address the issue in separate legislation.

The Ohio House of Representatives released its proposed changes to HB 59 yesterday and, as predicted, the NORM and TENORM provisions were nowhere to be found. The full text of the House’s proposed substitute bill is over 4,000 pages, but a handy summary of the changes can be found here.

Beyond removing provisions on radioactive drilling wastes, the House made several other changes bearing on oil and gas development in Ohio. These changes to the Governor’s budget proposal include: Continue Reading

Ohio Legislative Proposal Regulating Radioactive Drilling Wastes To Be Delayed Until Fall

By Scott Bent on Posted in Hydraulic Fracturing, Legislative, NORM, Ohio DNR, Ohio EPA

Ohio Governor John Kasich’s proposed budget was introduced in the Ohio House of Representatives in early February as HB 59. Our prior analysis of the original bill can be found here.  HB 59 includes amendments requested by three Ohio agencies that would govern the disposal of drilling wastes containing naturally occurring radioactive materials (NORM) and technologically-enhanced naturally occurring radioactive materials (TENORM). See our summary of HB 59’s NORM/TENORM provisions here. But these provisions may be on their way out of the budget bill.

State Representative Dave Hall—chairman of the House Agriculture & Natural Resources Committee—said in a recent interview (subscription required) that HB 59’s drilling-waste amendments “just needed a little more work and I expect that will probably end up being a bill itself.” Hall predicts that the safe and proper handling of radioactive drilling waste will become more important as drillers begin recycling hydraulic fracturing fluids, which can become radioactive when they come in contact with naturally-occurring radium underground. According to Rep. Hall, this complicated issue should be addressed in a comprehensive review of landfills, which he anticipates his Agriculture & Natural Resources Committee will tackle after summer recess.

Both the oil and gas industry and environmentalists agree that the NORM/TENORM provisions should be removed from the budget. In recent testimony before the Agriculture & Development Subcommittee, Ohio Oil and Gas Association (OOGA) Treasurer Jim Aslanides said that “the [oil and gas] industry is not aware of any issue with Ohio’s current regulatory structure for TENORM.” Aslanides noted that the Ohio Department of Natural Resources has presented General Assembly testimony stating that “tests at Utica well sites ‘indicate very low levels of NORM and TENORM.’” Aslanides also expressed concern that the budget’s drilling-waste provisions may confuse Ohio’s current TENORM regulatory structure by spreading responsibility and authority across multiple agencies.  Conversely, environmental groups contended in recent testimony that the NORM/TENORM provisions do not fully address radioactive drilling wastes, and recommended the materials instead be shipped to landfills licensed to handle low-level radioactive waste.

While the drilling-waste provisions may not find a home in Ohio’s budget bill, some form of drilling-waste regulation will likely end up on the books. The North America Shale Blog will continue to track this issue and report on new developments as they arise.

Texas Railroad Commission Amends Fracturing Fluid Recycling Rules to Encourage Water Conservation

By George Skupski on Posted in Disposal Wells, Groundwater, Hydraulic Fracturing, Legislative, Texas, Water

Under rules adopted by the Texas Railroad Commission (Commission) on March 26, 2013, effective April 15, 2013, Texas hydraulic fracturing operators may recycle fracturing fluids on their own leased or owned land used for fracturing activities or may transfer the fluids for recycling on the land of another operator without a permit. According to the adopting press release issued by the Commission, the amended Rule § 3.8 of the Texas  Oil and Gas Division regulations governing this “non-commercial fluid recycling,” as it is defined under the rule, was designed to encourage Texas operators to “continue their efforts at conserving water used in the hydraulic fracturing process for oil and gas wells.”

The key operative provisions of amended Rule § 3.8 enable on-site, permit-free storage of fluids awaiting recycling or treated fluids in “non-commercial fluid recycling pits,” subject to various pit construction, use, maintenance and operation requirements. The Commission also adopted a binary approach to the permissible reuse of recycled fluids. Recycled fluids may be reused without a Commission permit in (i) oil and gas operations and (ii) non-oilfield related uses other than discharge into the state’s waters if the use occurs pursuant to another state or federal permit or the fluid is in the form of distilled water.

In addition, the Commission adopted parallel amendments to the commercial fluid recycling permitting rules. Those revisions clarify the application requirements and expand the two existing permit categories to five, with a view toward more accurately facilitating the range of recycling practices utilized in the industry.

While the Commission notes that hydraulic fracturing operations and mining together only account for one percent of fresh water use in Texas, Commissioners quoted in the press release acknowledge that water use has been a primary concern, and that the aim of the new rules is to encourage oil and gas operators to recycle by removing regulatory hurdles. But resource conservation is not the only incentive to expand the practice of fluid recycling. The streamlined regulatory requirements may better position oil and gas outfits to reap significant cost savings from reduced water use. Considering the often steep expense associated with fresh water and fluid disposal transportation, an energy analyst quoted in a recent Wall Street Journal article predicts that fluids recycling has the potential to be a multi-billion dollar industry.

As the political and regulatory environment continues its shift toward natural resource protection and use constraints, other states may follow Texas’ lead in adopting pro-recycling regulations. This blog will continue to monitor the states’ efforts in this space.