Environmental Toxic Torts Blog : Colorado Property Damage, Class Action & Fracking Lawyer & Attorney : Davis Graham & Stubbs Law Firm

Jeff Pilkington and Gail Wurtzler spoke at the Legal, Regulatory and Environmental Challenges of Hydraulic Fracturing Summit, presented by Information Forecast, Inc. on December 7th and 8th in Houston, Texas.  Jeff participated in a panel discussion titled "Litigation Round-up: Key Take-Aways for Drilling Companies and Their Advisors."  Gail moderated that panel and also presented on "Disclosure and Reporting of Fracking Fluid Chemicals: Legal Requirements and Best Practices" in a separate session.  To read more event related information, click here.

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Adam Cohen and Shannon Stevenson co-spoke at the Hydraulic Fracturing: Core Issues and Trends Workshop, which was presented by the Rocky Mountain Mineral Law Foundation, on November 17th at the Grand Hyatt in Denver, Colorado.  Adam and Shannon represented the Rocky Mountain region in "The States' Legal Framework" presentation.  To read more event related information, click here. 

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How may current statutes and regulations requiring disclosure of hydraulic fracturing chemicals impact private party litigation? What causation issues affect private party tort claims? To view the presentation slides entitled “Fracking Litigation: Disclosure and Causation Issues,” from speaker Gail L. Wurtzler, Partner at Davis Graham & Stubbs LLP, which were presented Tuesday, September 27th, as a segment of a Stafford webinar, “Hydraulic Fracturing and the Legal Onslaught: Preparing for EPA Actions, New Statutory Requirements, and the Growing Litigation Threat,” please click here. Learn more about disclosure issues – requirements, possible pitfalls, and possible claims – and causation issues – evidence, confounding factors, and litigation tools.

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By Robert Lawrence

In a significant development yesterday, a number of environmental organizations submitted a petition to EPA on August 4 seeking to require manufacturers and processors of chemicals used in hydraulic fracturing and other oil and gas exploration and production operations to disclose the contents of the "chemical substances and mixtures" used in these operations. Earthjustice’ New York office sent the 22 page petition to EPA on behalf of more than 100 environmental organizations, including branches of the Sierra Club, Environmental Defense Fund and the League of Women Voter, seeking relief under the Toxic Substances Control Act ("TSCA"). 

Specifically, the environmental organizations petitioned EPA under section 21 of TSCA  “to promulgate rules protecting public health and the environment from the serious risks posed by chemical substances and mixtures used in oil and gas exploration or production (“E&P Chemicals”).” The petitioners requested that EPA "adopt a rule requiring that manufacturers and processors of E&P Chemicals conduct toxicity testing of all E&P Chemicals and identify all chemical substances and mixtures tested." They also seek promulgation of a rule under TSCA section 8 requiring the maintenance and submission of various records related to E&P Chemicals, “calling in records of allegations of significant adverse reactions to E&P Chemicals, and requiring submission of all existing health and safety studies related to E&P Chemicals.”  

The petitioners allege that these rules are needed because EPA and the public lack adequate data about the identify of chemicals used in hydraulic fracturing operations, as wells as about the "significant adverse reactions posed by E&P Chemicals, and health and environmental hazards, exposures, and risks posed by E&P Chemicals."    

EPA reportedly is not commenting on the petition at this time.  

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On July 28, 2011, EPA proposed a set of standards to reduce emissions of volatile organic compounds (VOCs) and air toxics from the oil and natural gas industry. The rules also would significantly reduce methane, a greenhouse gas.  The Proposed Rule, EPA's Fact Sheet for the Proposed Rule and Overview Presentation and a Regulatory Impact Analysis are on EPA's Oil and Natural Gas Air Pollution Standards webpage.  The Proposed Rule has yet to be published in the Federal Register. 

Background

In January 2009, WildEarth Guardians and the San Juan Citizens Alliance sued EPA, claiming that EPA had failed to review new source performance standards and air toxic standards for the oil and natural gas industry.  In February 2010, the U.S. Court of Appeals for the D.C. Circuit entered a consent decree among the parties requiring EPA to sign its proposed rules related to the review of these standards by July 28, 2011 (thus EPA's notice of signature on EPA’s website on July 28) and to issue final standards by Feb. 28, 2012.

EPA’s proposal includes four air regulations for the oil and natural gas industry: a new source performance standard for VOCs; a new source performance standard for sulfur dioxide; an air toxics standard for oil and natural gas production; and an air toxics standard for natural gas transmission and storage.

In explaining the applicability of the Proposed Rule to hydraulic fracking operations, EPA stated:

The majority of new wells drilled today produce gas, and the majority of those new wells use a process known as hydraulic fracturing or "fracking." In this process, a mixture of water, chemicals and a proppant (usually sand) is pumped into a well at extremely high pressures to fracture rock and allow natural gas to escape. An estimated 11,400 new wells are fractured each year; another 14,000 are re-fractured to stimulate production or to produce natural gas from a different production zone. . . .Some of the largest air emissions in the oil and gas industry occur as natural gas wells that have been fractured are being prepared for production. During a stage of well completion known as "flowback," fracturing fluids, water, and reservoir gas come to the surface at a high velocity and volume. This mixture includes a high volume of VOCs and methane, along with air toxics such as benzene, ethylbenzene and n-hexane. The typical flowback process lasts from three to 10 days.

EPA Fact Sheet. 

The proposed NSPS would limit VOC emissions from gas wells in the well completion process.  It would apply to all hydraulically fractured wells - new wells as well as  existing wells that are fracked or refracked in order to obtain more gas from a well. EPA claims that “these processes are the source of an estimated 500,000 tons of VOC emissions each year, and that about 9,700 completions of new wells annually are not controlled.” EPA also asserts that “12,000 re-completions annually would fit the criteria but are not controlled.” See EPA Overview Presentation.

According to EPA, the rule would require a combination of “green completion” and flaring for most fractured wells.  It would also achieve 95% VOC reduction and 90% recovery of salable natural gas. The Proposed Rule would require flaring in those circumstances where criteria for reduced emissions are not met and where flaring is not a hazard.

Comments on the Rule will be due within 60 days of the date that EPA actually publishes the Proposed Rule in the Federal Register. If you would like to discuss the Proposed Rule or this blog post, please contact Robert Lawrence at 303-892-7409 or robert.lawrence@dgslaw.com.

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One of the earliest and most frequently expressed public concerns has been the lack of readily available information about the materials used in hydraulic fracturing. Over the last several months, steps have been taken to address that concern by industry, regulatory agencies and public interest groups. 

FracFocus maintains a voluntary hydraulic fracturing chemical registry website where industry members may post information and interested members of the public can research the materials used.

Some individual companies providing hydraulic fracturing services maintain their own webpages with materials information. One such page provided by Halliburton is found here.

Several state agencies also provide information. As required by O.R.C. 1509.10 (E), the Ohio Department of Natural Resources posts Material Safety Data Sheets for materials used in well completion operations by operators in Ohio. That webpage can be found here.  Similar information is available for Pennsylvania and is found on a webpage maintained by the Department of Environmental Protection -- Bureau of Oil and Gas Management.   Colorado’s Oil and Gas Conservation Commission provides information on materials as well as a number of other fracking topics at its website.

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One of EPA’s strategies for addressing potential environmental effects of fracking is to issue emergency orders under the Safe Drinking Water Act, 42 U.S.C. §300i(a), in situations that may present an imminent and substantial endangerment to health.  Such orders have been issued against drilling operations in Texas and Pennsylvania where neighboring well owners have claimed that their drinking water wells have been contaminated. The emergency orders typically direct the oil and gas operators to stop the contamination and impose environmental monitoring and reporting obligations.

One of the issues raised and decided in U.S. v. Range Production Co., Case No. 3:11-cv-00116 (N.D. Tex.), was whether the emergency order was final agency action subject to judicial review.  The court ruled that it was and denied Range’s motion to dismiss for lack of jurisdiction. Another issue raised but not yet decided is whether, after issuing the emergency order, EPA must then prove that the defendant’s drilling operations actually caused the contamination in order to enforce the order and obtain civil penalties.  Before reaching that issue, the district court judge sua sponte stayed the case pending resolution of a related Fifth Circuit action, Range Resources Corp. et al. v. EPA, Case No. 11-60040. Range Resources Corp. seeks to nullify the emergency order on the grounds that the SDWA provision under which the order was issued violates Range Resources’ constitutional due process rights.

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On July 1, New York Department of Environmental Conservation issued recommendations based on its hydraulic fracturing review. The recommendations revise several positions in the DEC’s 2009 draft Supplemental Generic Environmental Impact Statement (SGEIS) report. Among others, high-volume fracturing would be prohibited in the watersheds for New York City and Syracuse as well as in an area delineated as a buffer zone. In addition, drilling would be prohibited in primary aquifers and within 500 feet of their boundaries. The surface of state-owned land could not be used for drilling. 

The DEC recommendations also provide that no permits would be issued for well pads within a 100-year flood plain. An additional, third cemented casing would also be required for each well to prevent gas migration. This casing would be an intermediate casing between the surface casing and the production casing. The depths of both the surface and intermediate casing would be determined by site conditions for a specific well. Other recommendations include: new guidelines for control of flowback water and spills; a new permit process for stormwater protection; a special permit for withdrawal of large volumes of water for industrial or commercial purposes; provisions to ensure the proper handling of flowback water; disclosure of fracturing fluid chemicals; air protection provisions; and notice to local governments and certification of compliance with local land use and zoning laws.

The complete draft SGEIS will be available on the DEC website on July 8. The DEC notes that it is continuing to study socioeconomic, transportation and visual and noise impacts of hydraulic fracturing. That research is expected to be completed by July 31, 2011, and it will be reflected in the final draft of the SGEIS.

The DEC plans for a 60-day public comment period to begin in August. No permits will be issued until the public comment period has closed, public comments have been reviewed, and a final version of the SGEIS is released.   For more information, see www.dec.ny.gov/

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Despite requests from industry and environmental groups to initiate formal notice-and-comment rule-making, EPA continues to proceed with its plans to address potential environmental impacts of fracking through guidance documents rather than through rule-making.  In theory, use of guidance permits EPA to state its position on an issue more quickly and may thereby assist the regulated community to comply with existing laws more quickly. However, from the perspective of the regulated community, and sometimes the environmental community, guidance that does more than merely explain existing agency regulations or describe how EPA applies those regulations in specific situations can be problematic.  

As a matter of due process, guidance should not substitute for regulations adopted through a formal notice-and-comment rule-making.  The procedures required under the Administrative Procedure Act (APA) for formal rule-making are essential to provide due process. Following those procedures is also regarded by many courts as a critical prerequisite for judicial review of EPA’s action. Many courts find that guidance is not “final agency action” and therefore is not reviewable under the APA.  

EPA reliance on guidance documents to address fracking is legally vulnerable. EPA’s similar reliance on guidance to address mountaintop coal mining was recently held to exceed EPA’s authority under the APA and the Clean Water Act. See National Mining Ass’n v. Jackson, Case No. 10-1220 (RBW) (D.C. Cir.).  It is also possible that EPA’s guidance advising states on imposition of ozone fees may have a similar fate.  A case challenging the ozone fee guidance, Natural Resources Defense Council v. EPA, Case No. 10-1056 (D.C. Cir.), is currently pending.  The rulings in those two cases may be instructive regarding the ultimate decision in IPAA et al. v. EPA, Case No. No. 10-1233 (D.C. Cir.), where industry has challenged EPA’s guidance regarding use of diesel fuel in fracking. 

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EPA announced today that it has selected seven case studies located in various formations at locations across the country. EPA believes these locations and case studies will provide the most useful information about the potential impacts of hydraulic fracturing on drinking water resources under a variety of circumstances.  Two prospective case studies, where EPA will monitor key aspects of future hydraulic fracturing activities, are located in the Haynesville Shale - DeSoto Parish, LA, and in the Marcellus Shale - Washington County, PA.

EPA will also undertake five retrospective case studies, which will investigate reported drinking water contamination purportedly due to hydraulic fracturing operations at five existing sites. These sites are: 1) Bakken Shale—Killdeer and Dunn Counties, ND; 2) Barnett Shale—Wise and Denton Counties, TX; 3) Marcellus Shale—Bradford and Susquehanna Counties, PA; 4) Marcellus Shale—Washington County, PA; and 5) Raton Basin—Los Animas County, CO. 

EPA provides more information about these locations and the case studies, including key issues to be investigated and potential outcomes, on its hydraulic fracturing case studies website. The Agency plans on using the information obtained from these case studies in its hydraulic fracturing study, which EPA is undertaking pursuant to its hydraulic fracturing study plan.

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On June 17, 2011, Texas Governor Rick Perry signed a bill requiring natural gas producers to disclose information about the chemicals used in their hydraulic fracturing fluids. Texas is the first state to enact such a law.  Under the new law, operators are required to "complete the form posted on the hydraulic fracturing chemical registry Internet website of the Ground Water Protection Council and the Interstate Oil and Gas Compact Commission” with respect to the well in which fracking fluids are used. The referenced website, fracfocus.org, has been up and running for some time and is available for operators to post data about the chemical composition of their fracking fluids.  

The bill, which had broad industry support, becomes effective on September 1, 2011. However, the Texas Railroad Commission must adopt implementing regulations before the bill’s requirements become mandatory; the bill expressly provides that it "applies only to a hydraulic fracturing treatment performed on a well for which an initial drilling permit is issued on or after the date the initial rules adopted by the Railroad Commission of Texas under [the hydraulic fracking] subchapter take effect."

Some operators have lauded the Texas disclosure bill as a good example of how reasonable disclosure can take place.  A few environmental organizations have criticized the bill for its allegedly soft treatment of proprietary and trade secret information.   In any event, concerned stakeholders are likely to closely follow the implementation of the bill to see whether and the extent to which it impacts operators, and whether it lessens or serves to increase the call for even more disclosure.    

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In January, oil and gas industry trade associations, including the Independent Petroleum Association of America, sued EPA in the U.S. Circuit Court of Appeals for the D.C. Circuit challenging EPA’s statements on its website that fracking was subject to the Underground Injection Control program regulations for Class II wells. EPA has not wavered in its view and, as noted in a recent post to this blog, presented the planned scope of its guidance “Permitting for Oil and Gas Hydraulic Fracturing Activities Using Diesel Fuels” at several stakeholder meetings last month. 

Not surprisingly, EPA argues in a brief filed earlier this month that the case should be dismissed because the court lacks jurisdiction since there is no final agency action and the plaintiffs lack standing to sue because the alleged injury is caused by Congressional action, not the statement on EPA’s website.

EPA argues that “[t]he only question remaining after [the Energy Policy Act of 2005] was what type of UIC permit a party desiring to conduct hydraulic fracturing operations using diesel fuels would need, not whether a permit is needed at all.” Therefore, in EPA’s view there is no question whether “new” regulations are needed.

Briefing will conclude later this month. The outcome of this case may impact state regulatory programs, industry activities, pending private litigation, and participation in FracFocus, the public database created by state regulators.

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Last month, EPA presented the planned scope of its guidance “Permitting for Oil and Gas Hydraulic Fracturing Activities Using Diesel Fuels” at several stakeholder meetings. EPA will take public comment on its guidance scoping document through June 29.

The proposed guidance is intended to fill a perceived gap in the agency’s ability to oversee fracking due to an exemption in the 2005 energy law. EPA intends to apply existing Underground Injection Control regulations (UIC) for Class II wells to use of diesel fuels in fracking fluids. However, the Class II regulations specifically apply to injection wells for disposal of oil and gas drilling waste, enhanced oil and gas recovery projects and underground storage of liquid hydrocarbons.  40 C.F.R. § 146.5(b). Those operations are different than fracking in several ways, such as purpose, nature of material involved, or anticipated duration. In addition, several stakeholders have objected to EPA’s attempt to regulate through guidance rather than a formal rulemaking. And, as a further complication, many states have their own EPA-approved Class II well UIC programs. Often, those programs are run by the state oil and gas regulatory authority.

A draft of the guidance may be issued for public comment later this summer. EPA currently intends to finalize the guidance this fall.

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The Attorney General of the State of New York, Eric Schneiderman, has sued the Army Corps of Engineers, the U.S. Fish and Wildlife Service, the National Park Service, the U.S. Dept. of the Interior, and U.S. EPA  (the "Federal Agencies") in federal district court in the Eastern District of New York, seeking to shut down natural gas development in areas of the Delaware River Basin, including areas over the Marcellus Shale.  State of New York v. United States Army Corps of Engineers et al., (E.D.N.Y.  Complaint signed May 31, 2011). 

Specifically, the New York AG seeks to require that the Federal Agencies prepare an EIS before adopting Delaware River Basin Commission (DRBC) regulations that would authorize natural gas development within the Delaware River Basin (the "Basin").   Until an EIS is prepared,  the State seeks to have natural gas development shut down. 

In its Complaint, the State alleges that promulgation of the DRBC regulations "is expected to result in the development of between 15,000 and 18,000 natural gas wells within the Basin in Pennsylvania and New York."   The State contends that EPA has expressed "serious reservations" about whether gas drilling in the New York City watershed is consistent with the vision of long-term maintenance of a high quality, unfiltered water supply.

As background, on May 19, 2009, the DRBC issued a determination prohibiting natural gas extraction projects within "Special Protection Waters" in the Basin.  These Waters include the full extent of the Basin in New York and nearby waters in Pennsylvania which lie within the Marcellus Shale.  The  State alleges that "hydrofracking in the Basin will involve pumping millions of gallons of water containing "fracking" additives into the ground under high pressure, at each well."   Moreover, the State claims that flowback waters and some production waters will contain fracking additives "and other potential contaminants" and thus must be "properly handled."

New York asserts that while the DRBC has found that natural gas development in the Basin poses "potentially significant adverse environmental impacts",  it nevertheless refuses to comply with NEPA and prepare an EIS.  The Federal Agencies also have refused to prepare an EIS.

New York claims that widespread drilling could result in a parade of horribles -  spills and discharges "risking contamination of the water supply with brine, radioactive materials, methane, aromatic hydrocarbons, heavy metals, pathogens, turbidity, phosphorus and other potentially harmful substances."

The Complaint references the recent April 19, 2011 "blowout" of a Chesapeake Energy Corp. natural gas well in Bradford County, Pa. "during the hydraulic fracturing process", despite the fact that the Complaint acknowledges that the well is located outside of the Basin.  

New York's concerns extend beyond fracking, and surface water and groundwater impacts.  In a separate section of the Complaint, the State alleges that gas development will result in air pollution and potential health impacts, and that the DRBC regulations would allow natural gas development without evaluating potentially adverse climate change impacts resulting from the venting and leakage of methane during production, storing, distribution or use of natural gas within the Basin.

Attorney General Schneiderman seeks to have the Federal Agencies promptly prepare an EIS and to "enjoin Defendants immediately to cease approving or carrying out any aspect of the Action [the development of the DRBC Regulations authorizing natural gas development within the Basin] until they have fully complied with their obligations under NEPA."   If the Court grants this request for injunctive relief, natural gas development over areas of the Marcellus Shale in the Basin could be shut down for years while the NEPA process runs its lengthy course.  

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