North America Shale Blog

North America Shale Blog

Texas Railroad Commission Adopts Rules for Disposal Wells in Potential High-Risk Seismic Areas

Posted in Disposal Wells, Shale, Texas

On Tuesday, October 28, 2014, the Texas Railroad Commission unanimously adopted amendments to rules concerning disposal wells in areas that have experienced or are likely to experience seismic activity. As covered by the North America Shale Blog in August, the amendments were proposed in response to questions from residents in towns sitting atop the Barnett Shale Formation in North Texas of whether a connection exists between disposal wells, which are used to dispose of saltwater and fluids used in hydraulic fracturing operations, and increased seismic activity in the area.

The amendments adopted on Tuesday take effect on November 17, 2014. The highlights of the amended rules are as follows: Continue Reading

City of Fort Collins, Colorado, Appeals Ruling Striking Down Fracking Bans

Posted in Colorado, Fracking, Oil and Gas

The week of September 22, the Fort Collins, Colorado, City Council voted to appeal a decision rendered last month that struck down the city’s fracking ban.  The North America Shale Blog previously covered that decision here.

In that August 2014 decision, a Larimer County District Court Judge ruled that Colorado’s 1951 Oil and Gas Conservation Act (“Act”) preempts the city’s five-year moratorium on fracking that was set to expire on August 5, 2018.  The decision addressed the conflict between Article XX of the Colorado Constitution, which gives local governments “home-rule” powers—defined as “the full right to self-government” on local and municipal matters—and local attempts to regulate oil and gas activities.  The court reasoned that Article XX does not permit a city to enact ordinances in areas of mixed state and local concern, or areas of statewide concern that intrude on state law, meaning that a local ordinance may be preempted where it would “conflict with the operation of a state statute.”  The court then reasoned that the Act impliedly, though not expressly, preempted the city’s five-year fracking ban because it impeded the state’s interest in oil and gas development.

The Fort Collins resolution council voted 6-1 on Tuesday to direct the city’s interim attorney to appeal that decision to the Colorado Court of Appeals and to seek a stay pending appeal.  If successful, a stay of the decision would leave the fracking ban in place pending the outcome of the appeal.  Before the vote, several citizens, including a representative of the group Citizens for a Healthy Fort Collins, made public comments in support of the appeal.  This appeal will make Fort Collins the second Colorado city to appeal a decision striking down a local fracking ban.  Fort Collins follows Longmont, Colorado, where a coalition of environmental groups appealed a similar Boulder County District Court decision to the Colorado Court of Appeals in September.

Additional coverage can be found here:

Fort Collins appeals judge’s fracking decision

Fort Collins appealing judge’s ruling on fracking ban

Fort Collins appealing to keep fracking ban

Multistate Regulators Meet in Columbus, Discuss Seismic Activity

Posted in Earthquakes, Hydraulic Fracturing, Ohio, Oil and Gas

From October 19th to 21st, the Interstate Oil and Gas Compact Commission hosted its 2014 annual conference in Columbus, Ohio.  The organization is a collection of regulators from states in which there is significant oil and natural gas exploration and development, and it advocates for states’ rights to govern petroleum resources within their borders.  One of the key topics at the conference was reported to be the potential implications of recent news published in a study in the journal Seismological Research Letters that numerous, unnoticeable earthquakes in Harrison County, Ohio, likely were connected to oil and natural gas exploration activities.  The earthquakes ranged from magnitude 1.7 to 2.2 on the Richter scale, and 190 of them occurred in the 39 hours after hydraulic fracturing activity occurred at one well in late September and early October 2013.  It has been suggested that this is the fifth documented instance of a linkage between hydraulic fracturing earthquakes on a fault.

One source indicated that, if the Ohio Department of Natural Resources’ recently-announced regulations had been in place when these earthquakes occurred, drilling activity in the state would have been halted. The stricter regulations, previously discussed on this blog, were announced in response to an earlier connection suggested by the Ohio Department of Natural Resources between hydraulic fracturing activity, seismic activity, and what is believed to be a previously unknown microfault near Youngstown, Ohio.  It remains unclear whether the links posited by this latest study will lead to further regulatory action, but the BakerHostetler North America Shale Blog will keep readers apprised of developments.

Uncertainty Prevails as Illinois Delays a Decision on Fracing Regulations

Posted in Fracking, Hydraulic Fracturing, Illinois

Last week, Illinois’s Joint Committee on Administrative Rules voted to push back its decision about whether to approve proposed rules governing horizontal fracturing operations until November 6.  The delay promises to fuel uncertainty among fracing supporters and opponents alike about the legality of conducting unconventional drilling operations within the State if the draft rules are not ultimately adopted.

If the committee chooses not to accept the regulations by November 15, the Illinois Department of Natural Resources (IDNR)—the agency responsible for promulgating the standards—is obligated to restart the rulemaking process which promises to further postpone the implementation of state-wide standards for the foreseeable future.  IDNR officials have said that the agency will not approve any unconventional drilling permits without rules in place, unless told otherwise by the courts. Continue Reading

An Update on Recent Oil- and Gas-Related Decisions in Ohio

Posted in Ohio, Oil and Gas

Due to increased drilling activity in the Utica shale formation, state and federal courts in Ohio and the 6th Circuit have recently issued decisions related to local drilling regulations, drilling permits, leasing, indemnity provisions, and whether a landowner can state a strict liability claim against a drilling company that survives a motion to dismiss.  While separate, future blog entries will discuss in more detail Ohio’s Dormant Mineral Rights Act and strict liability claims against fracking operations, the following post summarizes some recent developments in Ohio law that are relevant to the oil and gas industry. Continue Reading

Suit by Denton, Texas, Royalty Interest Owners Could be Harbinger of More Suits If Proposed Hydraulic Fracturing Ban Passes

Posted in Hydraulic Fracturing, Texas

Ahead of the November 4th vote that could make it the first city in Texas to ban hydraulic fracturing, the City of Denton has been sued by a group of royalty interest owners claiming that the city’s current temporary ban violates their property rights. As previously covered by the North America Shale Blog, on May 6, 2014, the Denton, Texas, city council enacted a drilling moratorium which prohibited the acceptance, receipt, processing, or approval of applications for gas well permits within the Denton city limits.

On September 29, 2014, Charles Chandler Davis filed suit in the 431st District Court of Denton County on behalf of his company, Arsenal Minerals and Royalty, NASA Energy Corp., and his son’s trust fund, claiming damages in excess of $1 million. The City of Denton has removed the suit to the United States District Court of the Eastern District of Texas. Davis’s suit alleges claims related to mineral takings, and states that prior to filing suit, Plaintiffs sought a “takings impact assessment”, which Plaintiffs allege the City should have conducted to determine the impact of the drilling moratorium.

Beyond the suit by Davis, various energy industry representatives have stated their intention, if the hydraulic fracturing ban passes, to file similar takings suits. At the July 15, 2014, meeting where the Denton City Council voted 5-2 to reject the proposed ban and set up the November 4th vote, Tom Phillips, a former chief justice of the Texas Supreme Court who is currently representing the Texas Oil & Gas Association, stated that “some members of [the Texas Oil and Gas Association] will undoubtedly sue.” Phillips also broadcast his belief that if citizens in Denton wish to ban hydraulic fracturing they should seek to do so at the state-wide, rather than municipal, level. “If they want Texas law to ban hydraulic fracturing, they should take their cause to the Texas Legislature. That is the only governing body in the state with the authority to grant the relief they seek.” Rep. Phil King, R-Weatherford, said the most likely action the legislature would take on the issue would be to outlaw cities from passing bans. “If it passes in Denton, I feel very confident that there will be legislation—in fact, I’ll probably file it myself—to prohibit cities from total bans on fracking,” he said.

North Dakota Reminds Negotiators: Be Careful What You Say

Posted in Mineral Rights, North Dakota

Do you think that what you say when negotiating a mineral lease does not matter once the agreement is inked and contains boilerplate language declaring it to “supersede all prior negotiations” and “be the complete agreement between the parties”?  Think again.  The North Dakota Supreme Court recently reminded negotiators that what you say does matter and may allow for rescission of a lease.[1]

This issue came before the North Dakota courts when Golden Eye Resources (“GER”) sought to quiet title in certain oil and gas leases in Williams County, leases that the mineral owners claimed had been cancelled.  The minerals owners contend they made it clear at the outset of negotiations that they would only lease to a company which could drill and operate the wells itself.  They also contend that GER made representations to this effect during negotiations and thus, despite being approached by another potential lessee offering more favorable financial terms, the mineral owners entered into leases with GER.  Continue Reading

Environmental Groups Ramp-up the Crude-by-Rail Fight in the Courtroom

Posted in California, Litigation, Oil and Gas

Bakken crude producers and midstream transportation companies already experience transportation woes related to inadequate pipeline infrastructure, railroad capacity, tank car supply, rail accidents, and new regulations. But they also increasingly face a new problem: lawsuits. In September alone, the Sierra Club, one of the largest environmental organizations in the United States, filed two lawsuits challenging different aspects of crude-by-rail transportation. First, on the national level, the Sierra Club seeks to stop the transportation of crude oil in allegedly outdated and unsafe tank cars. And second, at the state level, the Sierra Club accuses a local agency of illegally permitting a rail-to-truck facility.

The first lawsuit challenges the continued use of older DOT-111 tank cars, the tank car commonly used to transport Bakken crude oil.[i] On July 15, 2014, the Sierra Club and ForestEthics, through Earth Justice (collectively “petitioners”), petitioned the United States Department of Transportation (“DOT”), asking for an “emergency order prohibiting the shipment of Bakken crude oil in unsafe tank cars” (“Rail Car Petition”).[ii] The petitioners allege that shipping crude oil in these unsafe “legacy DOT-111” tank cars poses an “imminent hazard” requiring the immediate cessation of their use.[iii] Roughly a month after receiving the Rail Car Petition, the DOT, through the Pipeline and Hazardous Materials Administration and the Federal Railroad Administration, issued a proposed rule that addresses many of these concerns.[iv] Continue Reading

Environmental Group Calls for Tighter Regulation of Frac Sand

Posted in Hydraulic Fracturing, Oil and Gas, Shale, Wisconsin

The U.S. shale boom has generated a boom in a related industry: “frac sand.” Sand has become an integral component of hydraulic fracturing. Oil companies use sand as a “proppant”: after shale formations are injected with water and chemicals, the proppant keeps the newly formed cracks open to allow natural gas or crude oil to escape more easily.

Hydraulic fracturing requires a special kind of sand, which is most commonly found in Wisconsin. This so-called “frac sand” is high quality quartz, which is highly resilient and has spherical grains. It is crush-resistant, and can withstand pressures between 6,000 and 14,000 pounds per square inch. A spike in the demand for frac sand has motivated other states to start producing sand. According to most experts, the best rock units to produce frac sand are the St. Peter Sandstone, Jordan Sandstone, Oil Creek Sandstone and Hickory Sandstone. Wisconsin and Minnesota are the biggest players currently, and have a total of 164 active frac sand facilities, and another 20 that have been proposed.  Continue Reading

Ninth Circuit Upholds TERO Requirements in Indian Country Mineral Leasing

Posted in Arizona, Land Use, Mineral Rights, Oil and Gas

Conducting commercial operations on tribal lands can pose significant challenges for non-Indian companies. Demonstrating sensitivity to the cultural nuances of Native American society and navigating the complex web of federal and tribal regulations applicable to Indian Country requires expertise and invariably adds time and costs to projects. Among the more difficult aspects of operating on tribal lands is managing compliance with applicable tribal preference requirements.  These requirements, often expressed through a Tribal Employment Rights Ordinance (“TERO”), require commercial entities doing business in Indian Country to give preference to tribal members and member-owned businesses when making employment and contracting decisions in association with projects conducted on Indian lands.

Although TERO laws are common on Indian reservations around the country, some commentators have questioned the enforceability of TERO provisions, arguing that the preference requirements represent impermissible discrimination on the basis of national origin, a practice that Title VII of the Civil Rights Act of 1964[1] prohibits. On September 26, 2014, the United States Court of Appeals for the Ninth Circuit became the first federal appellate court to address the merits of this question. In EEOC v. Peabody Western Coal Co.,[2] the Ninth Circuit upheld the validity of Navajo hiring preferences in coal leases issued to private companies on the Navajo Nation’s Reservation. In reaching its result, the Ninth Circuit concluded that the Navajo hiring preference in the leases represented a political classification, rather than a classification based on national origin, and therefore did not violate Title VII. While the question remains open in other circuits, most notably in the Eighth and Tenth Circuits (where significant private mineral development is occurring on tribal lands), the decision in Peabody Western is likely to be influential in how tribes apply, and courts interpret, tribal TERO requirements in the future. Continue Reading