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Fractured: The Road to the New EPA “Fracking” Study

September 17, 2010

For over a decade, a debate has raged over “hydraulic fracturing” (“fracking”), a method of increasing production at natural gas wells in coalbeds, shale formations and other unconventional sources. Fracking is exempt from federal drinking water regulations, but stands accused of threatening water supplies across the country. It has recently become the focus of intense scrutiny and widespread media attention as natural gas production has expanded toward the Atlantic seaboard. Now, the Environmental Protection Agency is reopening its investigation into fracking’s potential environmental impacts – a series of contentious public scoping meetings for the study wrapped up this week. As EPA contemplates the task ahead, this article explains how it arrived at this point – and why it matters.

Natural Gas in Shale – A Study in Pressures

Although the environmental risks associated with fracking are in the headlines today, those risks can be evaluated only in the context of the activity’s purpose: natural gas extraction in the face of finite resources and rising demand. That story begins 350 million years ago.

Lithostatic Pressure: Shale Gas Formation

The Marcellus Formation lies under a large part of the Appalachian Basin – from New York’s finger lakes region, spreading westward toward Lake Erie and southwest through central Pennsylvania, then sweeping south across the entirety of West Virginia and into Virginia and Maryland. It is a 50- to 1000-foot-thick layer of shale – a fissile sedimentary rock – lying nearly a mile deep at its northwest edge and sinking deeper as it moves under the Blue Ridge. It was once the seabed, laid down gradually, hundreds of millions of years ago, across a sloping limestone ridge under deep, oxygen-depleted waters.

Without oxygen, the organic matter that fell to those depths from a more hospitable surface did not decay. Over time, a rich mixture was buried under successive sedimentary layers on the sea floor. As pressure from the overlying strata increased, the shale formed and heated, and pyrolysis achieved what oxygen had not: the organic material decomposed into gaseous hydrocarbons—natural gas. Trapped in shale under limestone, the gas remained widely diffused throughout the rock’s pore spaces and, as the land shifted over geologic time, became concentrated in countless vertical fractures throughout the formation.

The result was vast reserves of natural gas deep underground in “low permeability” geologic formations – rock that does not allow gas or fluid to pass through it easily. The Marcellus Formation is believed, together with a number of similar shale layers found in the southeastern, midwestern and western areas of the country,[1] to be one of the largest potential sources of natural gas in the United States.

Economic Pressure: Natural Gas Development

Fast forward to the present, and natural gas has become an important and extremely valuable fuel. In recent years, the United States has consumed about 23 trillion cubic feet (TCF) of natural gas per year.[2] Of that, on average about 19 TCF[3] was produced domestically, and 4 TCF was imported.[4] Although these levels have declined in the immediate past, eventual economic recovery is expected to lead to steadily increasing U.S. natural gas consumption over the coming decades,[5] and, due to its relatively low carbon content, changes in energy policy – particularly a national regulatory regime for carbon – have the potential to drive U.S. natural gas demand much higher, very quickly.

The stability – or fluctuation – in natural gas prices is a function of the ability of the U.S. to replace those natural gas reserves consumed through production and consumption with new reserves, through exploration and development.[6] In recent years,[7] exploration and new production technologies have kept pace. For example, in 2007-2008 (an unusually good year), the U.S. proven natural gas reserves (237.7 TCF) were diminished by 20.5 TCF production, but replenished by 29.5 TCF total discoveries.

But the low-hanging fruit has largely been plucked, at least for conventional technologies. While easily accessible natural gas still is being discovered, the lion’s share of new proven reserves (including those added in 2007-2008) result from applying innovative extraction technologies and techniques to recover previously known resources that were uneconomical using conventional production methods. Over the last decade, this has lead to increased focus on extracting gas and oil from “unconventional” deposits – diffuse accumulations in low-permeability formations such as sandstones, chalks, coal beds, and shales. Hydraulic fracturing is one such technique.

Hydraulic Pressure: Shale Gas Extraction through Fracking

Shale does not give up its natural gas easily. The fractures (“joints”) in a shale layer – where most of the recoverable natural gas is – are roughly vertical, and a traditional, vertical well necessarily intersects very few of them. The rock’s low permeability means that gas does not flow into the well from adjacent, unconnected joints. Consequently, vertical wells have not been notably productive.

To increase well productivity, well operators have needed to increase the network of fractures that the well can access. To get those fractures, they simply apply pressure: pumping larges volumes of hydraulic fracturing fluid into an isolated well section. The pressurized fluid – a mixture of water and chemicals – permeates the rock, fracturing the fissile shale. It carries with it a “proppant,” generally sand or ceramic beads, that lodges in the fractures, propping them open after the fracking fluid is pumped back out. With the fluid gone and the fractures opened, the shale gas escapes into the well.

Fracking is not a new technique. However, advances in directional drilling have allowed wells to be aligned within the semi-horizontal shale layer, perpendicular to the shale joints, maximizing each well’s interface with the shale and increasing the number of intersected fractures. These advances have finally made it economically feasible to extract natural gas from previously undeveloped sources – such as the country’s shale beds. No other technique shows such promise for meeting the U.S. demand from domestic natural gas resources so cheaply.

Fracking and the Environment – Twenty Years of Political Pressure

Allegations of water quality impacts associated with hydraulic fracturing date back to at least the early 1990s, but hard evidence has been scarce. In 2004, EPA concluded that there was no credible evidence of environmental risks from fracking. Although fracking opponents challenged the scientific soundness of EPA’s conclusion, Congress went on to exempt fracking from federal drinking water regulation the next year, and shale gas production has expanded rapidly since then.

That expansion has brought fracking into the public eye like never before. As states have adjusted to the influx of industry, conflicting policies of caution and expansion have made for a lively news cycle, and confusion and concern about the potential effects of fracking in different regions has spread. Now, Congress has urged EPA to conduct a “study on the relationship between hydraulic fracturing and drinking water.” As EPA moves forward, environmental interests say the study does not go far enough, while industry argues that the study has become a juggernaut far exceeding Congress’s intent.

1990 to 2005: Road to the Fracking Exemption

In 1974, Congress enacted the federal Safe Drinking Water Act (“SDWA”).[8] Part C of the Act established the Underground Injection Control (“UIC”) program,[9] prohibiting any “underground injection” (defined as the “subsurface emplacement of fluids by well injection”) that endangers underground drinking water sources.[10] EPA policy into the 1990s was that this law did not apply to hydraulic fracturing because, EPA had concluded, the UIC program applied only to operations where the “principal function” of an injection was the placement of fluids, and the principal function of fracking is resource recovery.[11] States, therefore, were left to regulate fracking under their own laws as they saw fit.

This interpretation stood unchallenged until 1995, when Alabama citizens living near a coalbed methane operation that used hydraulic fracturing reported contaminants in their drinking water wells, and petitioned EPA to require Alabama to regulate fracking under the UIC[12] Over objections from these landowners, EPA approved Alabama’s UIC regulations, which did not govern fracking. The residents appealed EPA’s decision and, in 1997, the Eleventh Circuit overruled EPA’s interpretation, instructing the agency to begin requiring states to regulate fracking under the SDWA.[13]

Although the Eleventh Circuit would limit its ruling in 2001,[14] the seeds of regulatory uncertainty had been sown. Two very different political pressures were quickly brought to bear: on the one hand, by those concerned with potential environmental impacts of a widespread and largely unregulated industrial practice; on the other, by those concerned that unnecessary government oversight would cripple energy development. The former wanted fracking’s environmental impacts studied, the latter wanted the practice exempted from environmental regulation.

Both sides had some initial success. EPA began studying the environmental impact of hydraulic fracturing during coalbed methane production to determine whether the practice posed risks to drinking water. Around the same time, newly elected President George W. Bush convened the National Energy Policy Development Group (“Energy Task Force”), lead by Vice President Dick Cheney, to make recommendations on the Administration’s energy policy.

The Energy Task Force completed its work first, releasing its final report in May 2001. Although it did not go into much detail, the report did briefly discuss fracking, stressing the importance of the technique and mentioning the possibility of increased environmental regulation.[15] But the report was more significant for what it did not say: fracking had been the subject of debate among the report’s authors and EPA. Initial drafts had portrayed hydraulic fracturing as essential to energy development, and recommended that fracking be exempted from the SDWA; EPA officials had requested several times that the report caveat its conclusions in light of EPA’s ongoing fracking study, and drop the recommendation for exemption. The resulting language appears to have been a compromise: there was no legislative recommendation, but likewise no reference to the ongoing environmental investigation.[16]

EPA’s final report on fracking arrived in July 2004. For those that had been following the issue, its conclusion was a bombshell: “injection of hydraulic fracturing fluids into coalbed methane wells poses little or no threat to [underground sources of drinking water] and does not justify additional study at this time . . . EPA did not find confirmed evidence that drinking water wells have been contaminated by hydraulic fracturing fluid injection into coalbed methane wells.”[17]While the report vindicated the industry position, it quickly drew criticism. One EPA scientist went so far as to publicly call the report “scientifically unsound” and accused members of the report’s peer review panel of conflicts of interest.[18] These criticisms, whatever their merits, resonated with similar criticisms of Bush Administration science policy made during the same period,[19] and were widely heralded by the environmental community as proof that the EPA’s study could not be relied upon.

Meanwhile, the idea of exempting fracking from the SDWA – unmentioned in the 2001 national policy report but not forgotten – had taken root and gained traction in Congress. The first draft of what would eventually become the Energy Policy Act of 2005 (“EPAct 2005”) had been introduced in the House in early 2002. The bill, among many other things, proposed exempting hydraulic fracturing from SDWA regulation. The fracking exemption would become one of the many points of negotiation as Congress spent the next several years arguing over energy reform. When EPA issued its report in late 2004, Congress was already reaching the end of its long deliberations over energy reform. One might speculate that with the legislation nearing the finish line, the EPA report greatly simplified the debate over the fracking issue.

On July 29, 2005, the Senate approved a conference version of EPAct 2005. The law included an amendment to the SDWA, exempting from its scope “the underground injection of fluids or propping agents (other than diesel fuels) pursuant to hydraulic fracturing operations related to oil, gas, or geothermal production activities.”[20] Fracking (unless using diesel fuel) would not be federally regulated; states were free to continue to regulate as they saw fit.

2005 to 2010: Road to the New EPA Study

Most of the above action regarding fracking occurred largely outside the perception of the mainstream public. Fracking was not making headlines. In the wake of the EPA study and EPAct 2005, as natural gas exploration and development moved forward, fracking opponents began to change this.

The most prominent element of the campaign was to demand detailed disclosure of the chemicals used in fracking. Industry had long assured regulators that fracking fluids were fairly benign and, at any rate, would be contained underground or handled carefully on the surface, but resisted disclosing the precise chemical makeup because the formulas are proprietary intellectual property. Opponents pointed out that some chemicals used in fracking operations were known to be toxic, that increased use led to increased risk of spills, and that regulators would not know what to test for and medical professionals would not know what to look for if the chemicals remained secret. Disclosure bills have been proposed repeatedly at the local, state and federal level ever since.[21] Most recently, disclosure language was attached to the Senate’s legislative response to the Gulf Oil Spill.[22]

Some in the industry fueled the chemical exposure debate by continuing to use diesel as an additive to enhance proppant delivery, despite having agreed not to do so in 2003 and the exclusion in EPAct 2005 that subjects such injections to regulation.[23] In February 2010, the House Energy & Commerce Committee reported that two signatory companies had continued to use diesel through at least 2007. Although the companies involved have said that the diesel was used by mistake and it was not clear that the incidents occurred at locations covered by the MOA or the SDWA, the controversy has kept the disclosure question front and center.

Particularly in areas with air quality issues, opponents have focused on possible air impacts associated with the drilling operations themselves. Fracking requires pressure, pressure requires pumps, and pumps require fuel to burn, with associated air impacts. Concerns also have been raised that the fracking process itself may release air pollutants. Emissions from drilling operations, consequently, have been under fire.[24]

More than anything else, fracking opponents have sought evidence that fracking pollutes groundwater, as has long been suspected. In August 2009, EPA discovered chemicals used exclusively in fracking operations in several groundwater wells near natural gas operations in Pavillion, Wyoming. The Pennsylvania travails of Cabot Oil & Gas (fined for a several spills of fracking fluids) came to light around the same time and were widely publicized,[25] as was a natural gas well blowout that occurred at the same time as the Deepwater Horizon blowout was being repaired.

Fracking, therefore, has suffered from its own successes. In July 2008, Pennsylvania lifted a five-year moratorium on new drilling in state lands to allow access to the Marcellus shale.[26] At almost the same time, New York streamlined its own leasing process to meet the sudden rise in interest.[27] Fracking quickly moved into the back yards of a major portion of the mid-Atlantic, an extremely populous area recently unused to resource extraction industries. Combined with the above incidents fueling concern over the practice, the expansion has generated a large political backlash. Most recently, on August 3, 2010, the New York State Senate approved a moratorium on new drilling permits in the Marcellus Shale through May 15, 2011.[28]

Amid all of this, the number of studies focused on the environmental impacts of fracking have remained small, and so the evidence still sparse. To remedy this situation, on October 8, 2009, Congress adopted a conference report for EPA’s funding bill that

urge[d] the [EPA] to carry out a study on the relationship between hydraulic fracturing and drinking water, using a credible approach that relies on the best available science, as well as independent sources of information . . . to be conducted through a transparent, peer-reviewed process that will ensure the validity and accuracy of the data.

The 2004 fracking study would be reopened.

Conclusion

All eyes are now focused on EPA. In its conceptual model circulated for public comment, EPA identifies a number of potential transport pathways into groundwater for contaminants that it believes may merit further review: infiltration from natural fractures or fractures created during fracking operations deep in the well; leakage from higher in the well, either during or after operations, due to improper construction, damage, abandonment, etc.; and surface leaching from storage pits and spills. According to industry, there is limited risk from deep injections because the majority of fracking fluids are withdrawn from the well after injection and handled pursuant to state and federal waste management regulations, while what is left is isolated deep underground, separated from drinking water supplies by impermeable strata. Environmental interests argue that more fluid remains underground than industry claims, and that recent incidents show a need for stricter federal oversight; and are urging EPA (over industry objections) to expand the study’s scope into air and other impacts. Interested parties must submit comments on EPA’s study scope before September 28, 2010, as described here.

For more information about hydraulic fracturing or shale gas development, contact any member of Marten Law’s Energy group.

[1] E.g., the Barnett Shale in the Forth Worth Basin under Dallas; the Fayetteville Shale in the Arkoma Basin between Arkansas and Oklahoma; the Haynesville Shale in the North Louisiana Salt Basin extending into Texas and Arkansas; the Woodford Shale in the Anadarko Basin in south-central Oklahoma; the Antrim Shale in the Michigan Basin; and the New Albany Shale in the Illinois Basin, extending across Indiana and into northern Kentucky.

[2] U.S. Energy Information Administration, Natural Gas Consumption by End Use (U.S. Annual) (2004-2009).

[3] U.S. Energy Information Administration, Natural Gas Withdrawals and Production (U.S. Annual) (2004-2009). Exports are about 1 TCF per year. See U.S. Energy Information Administration, Natural Gas Exports by Country (U.S. Annual) (2004-2009).

[4] U.S. Energy Information Administration, Natural Gas Imports by Country (U.S. Annual) (2004-2009).

[5] U.S. Energy information Administration, Annual Energy Outlook 2010, p. 56 and Figure 41.

[6] See U.S. Energy Information Administration, U.S. Crude Oil, Natural Gas and Natural Gas Liquids Reserves 2002 Annual Report, p. 29 and Figure 18 (showing replacement between 1993 and 2002); U.S. Crude Oil, Natural Gas and Natural Gas Liquids Reserves 2007 Annual Report, p. 29, Figure 18 (showing replacement between 1997 and 2007).

[7] For complete details, see U.S. Energy Information Administration, U.S. U.S. Crude Oil, Natural Gas and Natural Gas Liquids Reserves 2007 Annual Report, Appendix G.

[8] 42 U.S.C. § 300f et seq.

[9] 42 U.S.C. § 300h et seq. Under the UIC, EPA issues regulations establishing minimum requirements for states to follow, and, if requested, reviews proposed state UIC programs for compliance with these minimum requirements. States may also choose not to regulate, in which case EPA runs the program.

[10] 42 U.S.C. § 300h(b)(1). Underground injection “endangers drinking water sources if such injection may result in the presence in underground water which supplies or can reasonably be expected to supply any public water system of any contaminant, and if the presence of such contaminant may result in such system’s not complying with any national primary drinking water regulation or may otherwise adversely affect the health of persons.” 42 U.S.C. § 300h(d)(2).

[11] Legal Envtl. Assistance Found., Inc. v. U.S. E.P.A., 118 F.3d 1467, 1471 (11th Cir. 1997).

[12] The campaign to regulate fracking in Alabama appears to have begun as early as 1989. Coalbed Methane Association of Alabama, History of Coalbed Methane in Alabama.

[13] Id, 118 F.3d at 1478.

[14] Legal Envtl. Assistance Found., Inc. v. U.S. E.PA., 276 F.3d 1253 (11th Cir. 2001), cert. denied, 537 U.S. 989 (2002).

[15] Report of the National Energy Policy Development Group: National Energy Policy, 5-6 (May 2001).

[16] T. Hamburger & A. Miller, A Changing Landscape: Halliburton’s Interests Assisted by White House (L.A. Times, Oct. 14, 2004).

[17] EPA, Evaluation of Impacts to Underground Sources of Drinking Water by Hydraulic Fracturing of Coalbed Methane Reservoirs, EPA 816-R-04-003, at 7-5 (2004). EPA noted that “the risk posed to USDWs by introduction of [fracking] chemicals is reduced significantly by groundwater production and injected fluid recovery, combined with the mitigating effects of dilution and dispersion, adsorption, and potentially biodegradation.” EPA also noted that “high stress contrast between adjacent geologic strata results in a barrier to fracture propagation” – i.e., deep fractures do not generally extend upward through impermeable layers toward shallower groundwater sources.

[18] In October 2004, an EPA environmental engineer in Denver named Weston Wilson sent a letter and report to his Congressional representatives in Colorado, particularly concerned that coal beds in which fracking is conducted can occur within aquifers that are drinking water sources. W. Wilson, Letter to Wayne Allard, Nighthorse Campbell and Diana DeGette (Oct. 8, 2004).

[19] Union of Concerned Scientists, Scientific Integrity in Policy Making (2004).

[20] 42 U.S.C. § 300h(d)(1).

[21] E.g., the current Fracturing Responsibility and Awareness of Chemicals (“FRAC”) Act (S. 1215) (H.R. 2766).

[22] Clean Energy Jobs and Oil Company Accountability Act of 2010 (S. 3663), Title XLIII.

[23] In late 2003, EPA and several development companies entered into a Memorandum of Agreement to end the practice in coalbed methane wells near underground sources of drinking water. Memorandum of Agreement between the United States Environmental Protection Agency and BJ Services Company, Halliburton Energy Services, Inc., and Schlumberger Technology Corporation: Elimination of Diesel Fuel in Hydraulic Fracturing Fluids Injected into Underground Sources of Drinking Water During Hydraulic Fracturing of Coalbed Methane Wells (Dec. 12, 2003).

[24] Greenwire, EPA weighs tougher air pollution rules on drillers (Aug. 5, 2010).

[25] They have recently received widespread national attention. C. Bateman, A Colossal Fracking Mess (Vanity Fair, June 21, 2010).

[26] Greenwire, Pa. lifts drilling moratorium on state lands to tap Marcellus (July 17, 2008).

[27] Greenwire, Marcellus boom poses threat to N.Y. reservoirs (July 23, 2008).

[28]The law must also pass the state’s lower legislative body before becoming law. M. Navarro, N.Y. Senate Approves Fracking Moratorium (N.Y. Times, Aug. 4, 2010); E. Honan, New York AG candidates back natgas drilling moratorium (Reuters, Sept. 10, 2010).

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