Hydraulic Fracturing: Latest Developments and Trends
Hydraulic fracturing (commonly called “fracking”) remains one of the most controversial environmental issues of the day. The process involves breaking open otherwise impermeable oil and gas bearing geologic formations using a pressurized mixture of water, “proppant,” and chemicals.
As the hydraulic fracturing industry matures and the nationwide controversy enters its fourth year, the legal landscape continues to change on numerous fronts. Continuing to identify trends within the massive amount of news remains an important task for those following the field, and this article seeks to highlight some of the most important recent developments. From chemical risks to water resources, from old battles over local bans to new battles over sand mines; governments, environmental interests, and industries across the country continue to struggle with governance of the fracking industry.
Fluid Chemicals, Storage, and Disposal – the Blackside Dace Die-off Report
Many opponents of hydraulic fracturing have emphasized the unknown risk characteristics of the chemicals used in the development of fracked oil and gas. They argue that the process has caused or has the potential to cause subsurface pollution of drinking water resources or to harm sensitive environmental receptors. They contend that fracturing may lead to the migration of unknown and potentially toxic chemicals into water resources. Proponents of hydraulic fracturing, on the other hand, contend that the fracturing process itself – occurring deep underground and geologically separated from near-surface water resources – is not likely to cause releases of chemicals to groundwater, and that a better focus is on well construction and integrity, and fluid handling and storage above ground. See generally Hydraulic Fracturing: Legislative and Regulatory Trends, Marten Law Environmental News (Oct. 4, 2011).
The U.S. Geological Survey and Fish and Wildlife Service recently released a joint report which is likely to provide ammunition to both sides of this argument. In Histopathological Analysis of Fish from Acorn Fork Creek, Kentucky Exposed to Hydraulic Fracturing Fluid Releases, published in August in the Southeastern Naturalist, federal scientists concluded that a surface spill of hydraulic fracturing fluids into a previously pristine stream inhabited by the blackside dace, a federally listed threatened fish species, was likely to have been the direct cause of a major die-off of that and other species in the stream. Although unable to identify precisely which chemicals were spilled (due to limitations on fluid chemical disclosure requirements), the federal scientists determined that immediately following the spill the stream’s pH dropped from 7.5 (neutral) to 5.6 (acidic), while stream conductivity increased dramatically, indicating the presence of dissolved heavy metals. Dead fish exhibited gill lesions consistent with exposure to acidic water and heavy metals, and thus the hydraulic fracturing fluid release was linked strongly to the die-off. This study is possibly the first to link a surface release of hydraulic fracturing fluid to significant ecologic harm, and certainly the first related to a federally listed species.While the facts underlying the report tend to support the argument that focus should be on surface and near-surface operations, not deep fracturing, the Kentucky blackside dace incident is likely to be influential in discussions over hydraulic fluid handling, storage, and disposal regulation going forward.
Water Resources and Scarcity – The Rise of Recycling and Acidization
The debate over hydraulic fracturing started with concerns about water quality, but greater concern may be with impacts on limited water resources. See Water Resources – Not Just Water Quality – Gains Attention of Opponents to Hydraulic Fracturing, Marten Law Environmental News (Apr. 22, 2013). Recent reports lend some support to these concerns. Ceres, a respected organization for the promotion of sustainable business practices, recently issued a report (available at this link) entitled Hydraulic Fracturing & Water Stress. Its core message – that shale plays are often located in water-stressed areas – supports the argument that industry needs to do everything it can to manage its water use. As one example of what can happen if this is not done, a recent report from the Texas Commission on Environmental Quality estimates that, given ongoing drought conditions and a large increase in groundwater withdrawals for oil and gas development, over thirty Texas communities face the unprecedented risk of running out of water entirely by the end of 2013.
Industry is not unaware of these challenges, and entrepreneurial companies have been busy developing technology to minimize water usage in hydraulic fracturing. These technologies include both equipment to process and recycle used frac water (separating chemicals from flowback and produced water for reuse), and development of methods to better utilize brackish (salty) groundwater in the hydraulic fracturing process, minimizing the need for freshwater withdrawals. Currently, such methods are generally voluntary. The interesting question from a business perspective is whether (or when) such technologies will become cost-effective enough to be put into widespread use. Following from this, it will be important to watch the extent to which regulatory bodies, particularly state oil and gas agencies, impose limitations on freshwater withdrawals or require the use of recycled water over time.
In California – a state familiar with water scarcity – industry is looking to a third, more controversial option to avoid a water scarcity problem. The term “acidization” is not yet a household word, but in California it may become one in short order. In brief, Californian oil and gas producers face unique challenges due to California’s unique geology, transformed by earthquakes over millennia into a complex and fragmented jumble, often not conducive to directional drilling and high volume hydraulic fracturing. An alternative method is to pump mixtures of water and hydrofluoric and hydrochloric acids into the well to dissolve the rock and release the oil and gas trapped within. Acidization requires much less water than hydraulic fracturing – the acid must generally be diluted below 15% concentration in water, but at much lower volumes (the two processes can also be combined: an “acid frac”). It is unclear whether or to what extent such activities would be exempt from regulation under the Safe Drinking Water Act’s hydraulic fracturing exemption (which specifically references “hydraulic fracturing”). See 42 U.S.C. § 300h(d)(1)(B)(ii). In any event, there is little question that hydrofluoric and hydrochloric acids are dangerous hazardous chemicals and environmental and water protection interests have begun to urge California lawmakers to take a closer look at the process, which resulted in an amendment to a bill recently passed in California which would do just that. As hydraulic fracturing has spread west, it will be important to observe the extent to which use of and concern over acidization spreads east – and how the states and federal government will respond.
Supply Line Warfare – The Battle Over Frac Sand
In addition to direct assaults on the hydraulic fracturing industry, opponents have started moving down the supply chain to target the makers of process inputs. In the case of hydraulic fracturing, the focus has turned to “frac sand” – the proppant that, together with water and chemicals, allows hydraulic fracturing to work. Frac sand is what it sounds like – silica sand – and makes up 80% of the multi-billion dollar proppant industry. The best sand is very round-grained, has high quartz content, and can withstand very high pressures. It must be mined, and mining requires permits. Consequently, opponents in jurisdictions without any significant oil and gas development have found a way to involve themselves in the debate, joining forces with local interests concerned with the environmental effects – particularly air, light, noise, traffic, and stormwater pollution – associated with frac sand mining.
The fight has been especially heated in Wisconsin, which hosts the nation’s largest accessible reserves of high quality frac sand, and where over 100 frac sand mining operations have started business in the last several years, largely in previously undeveloped wilderness areas. Wisconsin’s pro-business Walker administration strongly supports the economic benefits and jobs that this increased mining has brought, and is planning infrastructure improvements to permit the industry to expand even further. In response, environmental groups and concerned citizens have begun filing lawsuits over individual mining approvals, particularly with respect to review of the industry’s primary air emission: fine silicate particles smaller than 2.5 micrometers (PM 2.5), which are subject to EPA regulation. It takes around 2,000 tons of sand to frac a well – and the business and environmental stakes of these lawsuits will be very high.
Other states face similar issues, but have taken different paths. Minnesota, across the Mississippi River, imposes much stricter environmental review standards on its sand mines, but even there new mines have been approved and are operating – over local opposition. In neighboring northeastern Iowa, there is currently only one frac sand mine operating. However, operators have been scouting additional locations, prompting two county governments in northeastern Iowa (the location of the most viable deposits) to impose 18 month mining moratoriums earlier this year. The frac sand mining debates are currently the Midwest’s primary contribution to the larger fight over hydraulic fracturing, and interested parties should keep an eye on sand mining proposals elsewhere.
Meanwhile, the federal government has become indirectly involved, as the Occupational Health and Safety Administration (OSHA) has just announced a long-delayed proposed rule on crystalline silica exposure (OSHA rulemaking information available at this link) that will affect both mining and hydraulic fracturing operations where exposure occurs. Current rules are over 40 years old, and the new proposed rule would significantly lower the permissible exposure limits (PEL) for workers. OSHA has promulgated a notice of proposed rulemaking, which as of this writing is yet to be published in the federal register. Upon its publication, interested parties will have 90 days to submit comments on the proposed rule.
Local Bans – Court Challenges Continue
Finally, continuing a trend that has its roots in local opposition to hydraulic fracturing in the Mid-Atlantic region, some individual municipalities continue to exercise their authority to ban oil and gas development at the local level.
Local bans on fracking started in upstate New York, where municipalities have won significant victories in court against challenges to their home rule authorities. The towns of Dryden and Middlefield have each passed resolutions banning hydraulic fracturing within their borders. These local ordinances were upheld by New York State trial courts – see Local Bans on Hydraulic Fracturing Upheld in New York State, Struck Down in West Virginia (April 10, 2012). The towns also prevailed in New York State intermediate appellate courts earlier this year. Given the lower courts’ reliance on prior binding precedent from New York’s highest court, the Court of Appeals, it was no surprise that the losing parties (landowners and drilling companies) sought review there. On August 29, 2013, the Court of Appeals agreed to hear argument on both cases, meaning that the question of the legality of local bans in New York state should be finally answered within a year.
Next door in Pennsylvania, things have taken a slightly different course. The Pennsylvania state legislature passed Act 13 of 2012. Among its provisions, the law specifically preempted local governments from banning oil and gas development. See 58 Pa. CS. § 3304 (Act 13 available at this link). A coalition of local governments challenged the constitutionality of the law’s preemption provisions as impinging upon their ability to protect the health and safety of their residents. In Robinson Township v. Pennsylvania, Case No. 284 M.D. 2012 (July 26, 2012), the Commonwealth Court of Pennsylvania (the state’s special court of appeals for cases involving the Commonwealth) struck down the law’s preemption provisions, paving the way for municipalities in Pennsylvania to enact municipal zoning bans. The decision was appealed and argued to the state’s Supreme Court in late 2012, but no decision has yet come from the six justices who heard the case, prompting speculation that the court is deadlocked and calls for re-argument before a seven-judge court. In the meantime, Pennsylvania lawmakers will consider a proposal to be introduced that would repeal the controversial provisions prior to a decision being made.
Most recently, a milestone has been reached in a long-running controversy in the city of Dallas, Texas. After leasing land – in a floodplain considered municipal parkland – to a gas developer for $19 million in 2008, the City of Dallas delayed issuing necessary drilling permits after strong public opposition rose to what would be the first hydraulic fracturing to be performed within the City’s limits. On August 28, 2013, the Dallas City Council finally voted to reject the company’s permit applications (the vote was 9-6 for approval, but required a supermajority of 12 to pass). The City’s Mayor has warned that the result of the vote will very likely be a costly lawsuit. A lawsuit in Texas would be one to watch carefully, as it could raise not only municipal home rule issues, but also constitutional takings questions due to the prior lease of the land for development purposes.
The above is an overview of some of the most important recent developments in the world of hydraulic fracturing. Many others deserve honorable mention. In Colorado, an appeals court has ruled that plaintiffs need not present prima facie evidence of harm (so called Lone Pine showings) before pursuing discovery in a toxic tort case related to hydraulic fracturing, a decision which was just argued to the state’s Supreme Court. In Pennsylvania, landowners are contending that they are not receiving the royalties they were initially promised in lease agreements, which will likely lead to lawsuits. In North Carolina, a controversial proposal is under consideration to require so-called “forced pooling,” under which landowners would be forced to lease their mineral rights if a certain number of their neighbors do so (a practice intended to protect parties from having the gas stolen from underneath them by migration to the neighboring property, but with obvious property rights implications). Tracking current developments requires acknowledging that after the last several years of hydraulic fracturing, the industry is maturing. Many “firsts” have come and gone; the law is stabilizing and jurisdictions confronting new issues have an ever-larger body of precedent to refer to. Certainly, new fights are brewing, but the industry continues to grow, and opponents in general have yet to slow the train down.
For more information, please contact any member of Marten Law’s Energy practice group.
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