Legislation and Regulation

The oil and gas industry is experiencing greater and more encompassing restraints from the legislative and regulatory bodies that have jurisdiction in their respective regions. This increase in regulatory restraint is seen in areas such as well permitting, process equipment approval, emission controls and parameters, production monitoring and reporting mechanisms, and produced water/brine disposal restrictions and limitations.

At the Federal level, more attention is being paid to hydraulic fracturing and produced water issues. For instance:

• US EPA is conducting a study on hydraulic fracturing and its potential impacts on drinking water resources. Initial research results are expected by end of 2012 with additional results in 2014 following further research. EPA Administrator Lisa Jackson states “EPA will use its authorities to protect local residents if a driller endangers water supplies and the state and local authorities have not acted”.
• US Secretary of Energy Dr. Steven Chu has created the Secretary of Energy Advisory Board’s (SEAB) Natural Gas Subcommittee tasked with examining hydraulic fracturing and produced water issues. Within 90 days of its first meeting (held June 2), the Subcommittee is to identify any “immediate steps” that can be taken to improve the safety and environmental performance of hydraulic fracturing. Within 6 months of its first meeting, the Subcommittee is to develop consensus and deliver recommended advice to federal agencies on shale extraction practices to “ensure the protection of public health and the environment” The findings are to be reviewed by SEAB, and Energy Secretary is to consult with the Interior Department and EPA on those recommendations.
• The US Bureau of Land Management has held national and regional forums on fracking as well, discussing among other things, disclosure of chemicals, well construction and integrity, produced water management, and other means of protecting drinking water.

The US Congress has also been focused on these issues:

• The House Science Committee recent held a hearing in which Chairman Ralph Hall stated that potential environmental risks posed by fracking must be looked at objectively and discussion must be science-driven – Hall questioned the objectiveness of the ongoing EPA study. Ranking Member Eddie Bernice Johnson said that fracking poses risks and chemical composition of fracking fluids should be publicly disclosed.
• Congressional Democrats have introduced the “FRAC Act” in House and Senate that would amend the Safe Drinking Water Act to mandate full disclosure of fracking chemicals.

There are numerous activities taking place at the state level as well, for instance:

• Texas legislature passed a bill requiring disclosure of chemicals used in hydraulic fracturing;
  • If enacted into law, Texas Railroad Commission is required to have rules in place by July 1, 2011 (chemicals deemed trade secrets exempted/subject to appeal by landowner, adjacent landowner, or state agency); MI, WY, AR have similar laws.
  • The Texas Railroad Commission is establishing a 12-member Eagle Ford Shale Task Force to be established and include producers, service companies, local elected officials, landowners, and environmental groups. The Task Force will work on recommendations for sustainable development of the Eagle Ford, including issues regarding produced water.
• New York has put forth a moratorium on drilling in Marcellus Shale (currently set to expire July 1) in order to give state authorities time to better understand issues surrounding hydraulic fracturing, water usage and produced water management and disposal. The NY Department of Environmental Conservation is conducting a hydraulic fracturing study and is expected to issue revised draft rules by July. The NY Attorney General has sued Delaware River Basin Commission, claiming it is a federal agency that has not carried out NEPA analysis prior to its expected issuance of rules governing fracturing.
• Pennsylvania’s state regulator is recommending tougher laws to protect drinking water and to allow states to assess harsher penalties. These recommendations include restricting well drilling within 1000 feet of public water supply, authorize DEP to require comprehensive tracking of drilling wastewater, expanded buffer requirements between gas wells and private drinking water wells, increased penalties for law violations and higher well-plugging insurance requirements, and extending presumptive liability for pollution or water loss from 1,000 to 2,500 feet of any gas well.