Source: https://www.omm.com/resources/alerts-and-publications/alerts/current-developments-affecting-hydraulic-fracturing-operations-april-2016/
Timestamp: 2019-04-21 18:42:58+00:00

Document:
The new year brought with it several noteworthy developments in the fracking world. These include: a new lawsuit in connection with the Keystone Pipeline; legal action against the Department of Interior (“DOI”) Federal Bureau of Land Management (“BLM”) in connection with its proposed opening of public lands for oil and gas exploration; new methane emission rules proposed by BLM for Federal and Indian lands; and a report by the Science Advisory Board that was critical of the U.S. Environmental Protection Agency’s (“EPA”) assessment of groundwater contamination risk associated with hydraulic fracking operations. Several states were also active with new oil and gas regulations implemented in California, Colorado, Wyoming and Nebraska, while a nuisance lawsuit in Pennsylvania against a fracking operator resulted in a jury award. In many instances, we carry forward text from our prior information updates in order to provide context, although we encourage readers to refer to previous installments for a more in-depth analysis.
The states of Wyoming, Colorado and Utah argue that BLM’s reliance on the Federal Land Policy and Management Act and the Mineral Leasing Act, among other laws, is misplaced, as federal land management and leasing laws are intended to apportion various uses of the surface and mineral rights and do not act as environmental laws to protect underground water supplies. The states point to the Safe Drinking Water Act (“SDWA”) as the only federal law that protects underground water supplies, and contend that the use of SDWA to regulate fracking was mostly preempted by the Energy Policy Act of 2005.
The states also contend that applying the Final Rule across all federal and Indian lands creates a uniform standard that does not consider the varying environmental and geographic circumstances that impact wells differently across the country. Accordingly, the states claim they are in the best position to account for such variables and should be charged with regulating the industry.
The Independent Petroleum Association of America and the Western Energy Alliance also requested clarity and justifications for the rule, claiming that provisions in the rule are unclear or impractical making the rule arbitrary and capricious.
On March 21, federal attorneys asked the U.S. Court of Appeals for the Tenth Circuit to overturn the preliminary injunction currently holding up the application of BLM’s fracking rules, promulgated in 2015, pending resolution of consolidated lawsuits challenging the validity of the regulations.5 The appeal of the injunction is moving forward while the merits of the fracking rules themselves are contested in the U.S. District Court for the District of Wyoming by state, tribe and industry plaintiffs. As for the injunction, the federal appellants, backed by environmental groups, argue that BLM has the authority to regulate fracking and that the plaintiffs’ claims of irreparable harm justifying the injunction are without merit. The plaintiffs have until April 25 to respond to the federal appellants’ brief on the injunction, while the federal government responded in the underlying district court case in early April.
The SAB Report also urged EPA to recognize and analyze “local-level hydraulic fracturing impacts,” which can be severe when such impacts occur, including available EPA and state findings on impacts to water resulting from fracking operations in Pennsylvania, Wyoming and Texas, where citizens perceive fracking operations to have a significant impact on water resources.
The SAB Report further recommends that the Draft Study be revised to include illustrations, clarify ambiguities, and “be more precise in the presentation of major findings,” so that the general public can better access and understand EPA’s findings. Toward that end, the SAB held a teleconference on March 7, 2016 to solicit public input.
In response to the recent major natural gas leak at Aliso Canyon in California, the Energy Department and the Pipeline and Hazardous Materials Safety Administration have announced the formation of a natural gas storage safety task force.11 The task force will hold workshops with industry and government leaders to develop best practices to increase safety at storage facilities and refine emergency response policies and procedures. The task force, which will also include experts from EPA, the Department of Health and Human Services, DOI, the Federal Energy Regulatory Commission and the National Oceanic and Atmospheric Administration, will summarize and make public its findings later this year.
Under a legal settlement filed in January 2016 in federal court by the Center for Biological Diversity, the Environmental Defense Center (“EDC”) and DOI’s Bureau of Ocean Energy Management and Bureau of Safety and Environmental Enforcement (“BSEE”), in connection with a pending lawsuit brought by EDC, BSEE agreed to prepare a programmatic environmental assessment (“PEA”) of fracking, acid well stimulation, and other drilling techniques on the Pacific Outer Continental Shelf (“OCS”).13 The complaints accuse DOI of rubber-stamping permits for offshore drilling off the California coast without considering environmental effects. As part of the settlement, BSEE also agreed not to approve any applications for permits to drill or applications for permits to modify that involve fracking or acid well stimulation on the Pacific OCS until completion of the PEA.
The draft PEA, which was published in the Federal Register on February 22, 2016 and concludes that offshore fracking will not significantly impact the environment, is now under fire by the EDC and Surfrider Foundation, as well as certain members of Congress. The environmental groups allege that the PEA does not offer scientific evidence that fracking will not impact the local environment, and fails to adequately describe the chemicals, or their toxicity, used in offshore fracking. The final version of the PEA is anticipated to be issued on May 28, 2016.
BLM proposed a new rule18 in February 2016 (“Waste Prevention Rule”) intended to reduce waste and methane emissions from oil and gas operations, and limit oil and gas flaring, venting, and leaking on federal and Indian lands. The Waste Prevention Rule, which would phase in over several years if approved, would require operators to adopt current technologies to limit flaring to 1,800 cubic feet per month per well, inspect equipment for leaks, and replace equipment that vents methane into the air. The Waste Prevention Rule would reduce waste in the operation of pneumatic controllers and pumps, downhole well maintenance and liquids unloading, and calls for more efficient well drilling and completions. The Waste Prevention Rule would also permit BLM to increase onshore oil and gas royalties above the current 12.5%, but no such increase is proposed at this time. BLM estimated that the new method of applying royalties to unavoidable gas flaring could generate additional royalties of $9 million to $16 million a year. BLM estimates that the Waste Prevention Rule will reduce venting, flaring and leaking methane emissions and volatile organic compounds by 50% after a three-year phase-in of the regulations.
BLM’s recent decision to open one million acres of public land for oil and gas exploration is the subject of a lawsuit19 filed by an environmental group. The complaint alleges that BLM failed to comply with the National Environmental Protection Act when it issued an inadequate Environmental Impact Statement (“EIS”) that does not contemplate the effects of fracking. The environmental group notes that the EIS doesn’t mention fracking, which, according to the plaintiff, would result in significantly more harm to air quality, water quality, wildlife and human health than conventional drilling. According to the plaintiff, the area in question has approximately forty-two federally listed threatened and endangered animal species within its borders.
In March, a Louisiana appeals court upheld a state issued fracking permit, holding that state oil and gas laws preempt a local government’s zoning ordinance that would prohibit the drilling.23 In 2014, the state Office of Conservation issued a drilling permit for a location designated for residential use under a local ordinance. The local authority sued the commission, arguing that the permit violated the ordinance by approving an unpermitted use. The appellate panel pointed to state law related to oil and gas projects to support its finding that the legislature expressly provided its intent to preempt that area of law.
On March 30th, Nebraska Governor Pete Ricketts signed Legislative Bill 1082, which imposes additional disclosure regulations on operators of fracking and wastewater disposal wells. The bill requires injection well operators to conduct annual sampling and analysis of injected wastewater, and to report the results of such testing to the state Oil and Gas Conservation Commission. The new legislation also mandates periodic evaluation of the ability of each well operator to cover the costs of shutting down its wells, certification and monitoring of vehicles used to transport wastewater, and for the commission to issue public notices and hold public hearings when a well permit application is filed.
In March 2016, a Pennsylvania federal jury awarded $4.2 million to plaintiffs alleging that Cabot Oil & Gas acted negligently in drilling fracking wells, which created a private nuisance and harmed two Pennsylvania families in their use and enjoyment of their property.31 The claims alleged that Cabot’s natural gas drilling contaminated the families’ well water. It is unclear how this decision,32 which is a rare victory for plaintiffs in such lawsuits, will impact future decisions in similar cases against fracking operators, but some commentators predict that plaintiffs will be more emboldened to file such nuisance actions. Cabot has appealed the decision.
On January 19, 2016, Pennsylvania Governor Tom Wolf announced33 that the state would embark on a mission to implement new regulations to reduce methane leaks in the oil and gas industry. Governor Wolf cited the state’s position as the country’s second largest natural gas producer as the motivation for the new regulations. The plan will implement a four-prong strategy that will address leakage (i) at new wells using innovative permitting that will require modern technology, better record keeping and quarterly monitoring inspections; (ii) at new compressor stations and processing facilities by updating best-available technology obligations and requiring more stringent leak detection and repair requirements; (iii) at existing wells with new regulatory standards; and (iv) at transmission and distribution pipelines by requiring better detection and repair protocols and implementation of best management practices. The new rule will draw upon current federal and state standards, as well as best practices already utilized by industry leaders.
New rules governing bonding requirements and applications for permits went into effect on February 1. Under the regulations, new blanket bonds will be $100,000, while individual bonds are $10 per foot of vertical well bores. The cost of applications for permits to drill were raised from $50 to $500, but permits will be effective for two years rather than just one. On February 9th, the Wyoming Oil and Gas Conservation Commission approved amendments to its rules governing flaring and venting of natural gas at drill sites. The rule mandates new monthly reporting on venting and flaring, including a description of how the gas is metered, and that a compositional analysis of the gas be submitted biannually. Environmentalists claim, however, that the new rules are inadequate, arguing that the commission should have banned venting with only limited exceptions.
On April 14th, BSEE issued final rules governing spill prevention and other best practice requirement for off shore oil and gas rigs. The rules as issued are responsive to oil and gas industry leader comment, urging that the rules allow greater flexibility on methods and time frames for implementing the new requirements, especially in respect of inspection/replacement of blow-out prevention technology. The new rules implement a number of new features on blowout preventers, including a requirement for double sets of shear rams, and outside audits of equipment and real-time onshore well monitoring, as well as set standards related to well design, well casing, well cementing, and subsea containment systems.34 The rules, which were originally proposed in April 2015,35 received criticism from the industry as being impractical and too costly.
The federal government, environmental groups, and various railroad industry leaders once at odds over the Pipeline and Hazardous Materials Safety Administration’s (“PHMSA”) May 2015 final rule governing new tank car standards for high-hazard flammable trains36 are now in agreement that such contentions are no longer timely. In March, the parties filed a joint brief in the D.C. Circuit37 advising that the recently enacted Fixing America’s Surface Transportation (“FAST”) Act addressed most of the issues between the adversaries, with the exception of the PHMSA rule’s requirement for certain trains to be fitted with electronically controlled pneumatic, or ECP, brakes. The railroads have requested an abeyance of their claims, with the right to contest the special brake rule in the future, while the government has sought a full dismissal of all claims for a lack of ripeness. The FAST Act requires the U.S. transportation secretary to issue a new regulatory impact analysis and determination on the ECP brakes requirement by December 2017, which is why the railroads seek to defer their brake arguments until a later date.
The U.S. Geological Survey (“USGS”) recently released its short-term forecast for seismic activity that, for the first time, includes discussion of “Induced Earthquakes.” The study, which comes after a significant hike in the incidence of earthquakes in the U.S., reports that the states facing the highest risk from human-induced earthquakes are, in order, Oklahoma, Kansas, Texas, Colorado, New Mexico and Arkansas, with the largest populations at risk located in Oklahoma and Texas. The USGS concluded that wells with higher rates of injection are more likely to be associated with induced seismic activity.
A recent lawsuit38 filed by Sierra Club seeks a court order requiring substantial reductions of underground injections of fracking waste liquids from a handful of operators in Oklahoma. The complaint contends that the reductions are necessary to help stem a recent spike in seismic activity in the area, based on the findings of an independent earthquake monitoring and prediction center. Sierra Club filed the lawsuit after the region experienced a 5.1 magnitude earthquake in mid-February, the third-strongest recorded in the state. The environmental group’s action follows lawsuits filed in January by residents of the City of Edmund, who allege that operators should have known that well activity would increase the likelihood of earthquakes. Such claims are becoming more common in the region.
The Coast Guard officially rescinded its 2013 policy proposal to regulate the transport of fracking wastewater by barge.40 According to the Coast Guard, the policy, which called for chemical analysis, radiation surveys, and other protections, was intended to protect workers and the public from radioactive isotopes in transported wastewater. The Coast Guard based its decision to forgo development of the policy due to the lack of industry interest in this form of transport, noting that more than 70,000 comments were submitted in connection with the proposal, and only twenty-one of them supported finalization of the proposal.
1 Department of Interior Bureau of Land Management, Oil and Gas; Hydraulic Fracturing on Federal and Indian Lands 43 CFR 3160 (Mar. 26, 2015), available at https://www.gpo.gov/fdsys/pkg/FR-2015-03-26/pdf/2015-06658.pdf. BLM published a minor correction to the Final Rule on March 30, 2015, addressing two references to the date September 22nd, 2015, which should have read December 26th, 2014.
2 Eric Rothenberg, et al., “Hydraulic Fracturing Developments,” ENERGY LAW REPORT (Vol. 16-3, March 2016), at page 102.
3 Eric Rothenberg, et al., “Hydraulic Fracturing Developments,” ENERGY LAW REPORT (Vol. 16-3, March 2016), at page 102.
4 Response to Ute Tribe’s Merits Brief re Motion for Permanent Injunction, Wyo. v. Dep’t of Interior, No. 2:15-CV-00043 (D. Wyo. Apr. 4, 2016).
5 Opening Brief for the Federal Appellants, Wyoming v. Jewell, No. 15-8134, (10th Cir., Mar. 21, 2016).
6 Assessment of the Potential Impacts of Hydraulic Fracturing for Oil and Gas on Drinking Water Resources (External Review Draft), U.S. Environmental Protection Agency, Washington, D.C. (EPA/600/R-15/047, 2015), available at https://www.epa.gov/sites/production/files/2015-07/documents/hf_es_erd_jun2015.pdf.
7 U.S. Environmental Protection Agency Science Advisory Board, Science Advisory Board (SAB) Draft Report (2/16/16) to Assist Panel Deliberations, available at https://yosemite.epa.gov/sab/sabproduct.nsf/LookupWebProjectsCurrentBOARD/444FC752302EB12585257F5B005D49CD/$File/2-16-16+Draft+SAB+HF+rpt.pdf.
8TransCanada Keystone Pipeline LP et al. v. Kerry, et al., No. 4:16-cv-00036 (S.D. Tex., Jan. 6, 2016).
9 Eric Rothenberg, et al., “Hydraulic Fracturing Developments,” ENERGY LAW REPORT (Vol. 16-3, March 2016), at page 104.
10 Motion to Dismiss for Failure to State a Claim, TransCanada Keystone Pipeline LP et al. v. Kerry, et al., No. 4:16-cv-00036 (S.D. Tex., Apr. 1, 2016).
11 Department of Energy, Working Together to Address Natural Gas Storage Safety (Apr. 1, 2016), available at http://energy.gov/articles/working-together-address-natural-gas-storage-safety.
12 U.S. GAO Report to Congressional Requesters, Drinking Water: EPA Needs to Collect Information and Consistently Conduct Activities to Protect Underground Sources of Drinking Water (February 2016), at pages 31-35, available at http://www.gao.gov/assets/680/675439.pdf.
13 Settlement Agreement, Center for Biological Diversity v. Bureau of Ocean Energy Mgmt., No. 2:15-cv-01189 (C.D. Cal. Jan. 29, 2016), available at https://www.biologicaldiversity.org/campaigns/offshore_fracking/pdfs/Offshore_Fracking_Settlement_Agreement_1_29_16.pdf.
14 80 F.R. 56579, available at https://www.federalregister.gov/articles/2015/09/18/2015-21026/source-determination-for-certain-emission-units-in-the-oil-and-natural-gas-sector.
15 John Kennedy, White House to Review EPA Oil, Gas Infrastructure Proposal, LAW 360 (April 7, 2016).
16 Summit Petroleum Corp. v. EPA, 690 F.3d 733 (6th Cir. 2012).
17 FACT SHEET: Administration Takes Steps Forward on Climate Action Plan by Announcing Actions to Cut Methane Emissions (Jan. 14, 2015), available at https://www.whitehouse.gov/the-press-office/2015/01/14/fact-sheet-administration-takes-steps-forward-climate-action-plan-anno-1.
18 81 F.R. 6616, available at http://www.blm.gov/style/medialib/blm/wo/Communications_Directorate/public_affairs/news_release_attachments.Par.15043.File.dat/VF%20Proposed%20Rule%20Waste%20Prevention.pdf.
19 Los Padres Forestwatch, et al. v. U.S. Bureau of Land Mgmt, et al., No. 2:15-cv-04378 (C.D. Cal. Jun. 10, 2015).
20 State Announces Comprehensive Natural Gas Storage and Inspection Mandates (February 5, 2016), available at http://www.conservation.ca.gov/index/Documents/2016-03%20Emergency%20regulations%20for%20natural%20gas%20storage%20wells%20go%20into%20effect.pdf.
21 Tripp Baltz, New Colorado Rules Require Drillers to Notify Communities, Bloomberg BNA (January 26, 2016).
22 We note that there is no further update to the appeal of municipal fracking bans before the Colorado Supreme Court. See Eric Rothenberg, et al., “Hydraulic Fracturing Developments,” ENERGY LAW REPORT (Vol. 16-3, March 2016), at page 105.
23 St. Tammany Parish Government v. James H. Welsh, 2015CA1152 (La. App. 1 Cir. 3/9/16).
24 Media Advisory - Regional Earthquake Response Plan for Central Oklahoma and Expansion of the Area of Interest (Mar. 7, 2016), available at http://www.occeweb.com/News/2016/03-07-16ADVISORY-AOI,%20VOLUME%20REDUCTION.pdf.
25 Media Advisory - Regional Earthquake Response Plan for Western Oklahoma (Feb. 16, 2016), available at http://www.occeweb.com/News/2016/02-16-16WesternRegionalPlan.pdf.
26 Oklahoma House Bill 3158, pg. 5-6, amending 17 O.S. 2011, Section 52, available at https://legiscan.com/OK/text/HB3158/2016.
27 Paul Stinson, Oklahoma Passes Bill to Clarify Seismicity Response, Bloomberg BNA (April 11, 2016).
28 Pennsylvania Independent Petroleum Producers Association v. Commonwealth of Pennsylvania et al., No. 219 MD 2016 (Pa. Commw. Mar. 24, 2016).
29 Pennsylvania Dept. of Environmental Protection, Oil and Gas Surface Regulations, Final Rulemaking (Feb. 3, 2016), Chapter 78 and 78a, available at http://files.dep.state.pa.us/PublicParticipation/Public%20Participation%20Center/PubPartCenterPortalFiles/Environmental%20Quality%20Board/2016/February%203/Final%20Annex%20A.pdf.
30 Environmental Quality Board, Minutes, Environmental Quality Board Meeting, Feb. 3, 2016, available at http://www.portal.state.pa.us/portal/server.pt/document/1621967/february_3_2016_eqb_minutes.pdf.
31 Jury Verdict, Ely v. Cabot Oil & Gas Corp, No. 09-cv-02284 (M.D. Pa, Mar. 10, 2016).
32 Fiorentino v. Cabot Oil & Gas Corporation, No. 3:09-cv-02284 (M.D. Pa, Nov. 19, 2009).
33 Governor Wolf Announces New Methane Rules to Improve Air Quality, Reduce Industry Loss (Jan. 19, 2016), available at https://www.governor.pa.gov/governor-wolf-announces-new-methane-rules-to-improve-air-quality-reduce-industry-loss/.
34 Ari Natter, Oil Firms Urge White House to Weaken Well-Control Rule, Bloomberg BNA: Daily Environment Report (March 25, 2016).
35 BSEE, Proposed Well Control Rule Fact Sheet, available at http://www.bsee.gov/Regulations-and-Guidance/final-well-control-rule/.
36 80 F.R. 26643, available at https://www.federalregister.gov/articles/2015/05/08/2015-10670/hazardous-materials-enhanced-tank-car-standards-and-operational-controls-for-high-hazard-flammable.
37 Association of American Railroads v. DOT, et al., No. 15-1415 (D.C. Cir. Nov. 12, 2015).
38 Sierra Club v. Chesapeake Operating, LLC, No. 16-cv-00134 (W.D. Okla. Feb. 16, 2016).
39 Paul Stinson, Oklahoma Company Agrees to Disposal Well Cuts, Bloomberg BNA (January 28, 2016).
40 81 F.R. 8976, available at https://www.federalregister.gov/articles/2016/02/23/2016-03674/carriage-of-conditionally-permitted-shale-gas-extraction-waste-water-in-bulk.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.