by James A. Pardo and Brandon H. Barnes
The practice of hydraulic fracturing (fracing) for natural gas is arguably the most visible and controversial energy/environmental issue of the day. Federal, state and local regulators across the country are racing each other to regulate. Academic, industry, environmental, community and a myriad of other interest groups and non-governmental entities are attempting to influence the regulatory process. The media, and the plaintiffs’ trial bar, is circling.
In “Drilling Down on Hydraulic Fracturing,” presented at the 63rd Annual Oil & Gas Law Conference in Houston in February 2012, McDermott trial partner, James A. Pardo, provides an overview of the most significant issues and recent developments that may effect fracing in 2012 and beyond. These issues are of potential importance not only to oil, gas and energy companies, but to any company with a "stake in the game" on fracing: financial institutions, private equity investors, pension funds, hedge funds, developers, etc.
In the weeks since that presentation, several developments have occurred which touch on one or more of the topics discussed in this paper. In one of the latest developments, the U.S. Environmental Protection Agency (EPA) announced on March 30 that it was dismissing claims that fracing by Range Production Company (RPC, a subsidiary of Range Resources Corporation) had contaminated groundwater near Fort Worth, Texas.
In December 2010, EPA issued a Safe Drinking Water Act (SDWA) emergency order requiring RPC to halt fracing activity and undertake remediation of the groundwater. Because fracing largely is exempted from the SDWA, the agency acted against RPC by invoking the “emergency powers” it retains under that statute to act when it believes a company’s activity may pose an imminent and substantial danger to human health. Fracing stakeholders have been concerned that EPA was using the action against RPC as a test case for broader “emergency powers” regulation of fracing that, in effect, would allow the federal agency to circumvent Congress’ SDWA exemption.
Considering that the facts in this action were particularly weak for EPA, the agency’s decision to drop enforcement of its emergency order (and a companion lawsuit) against RPC should not be interpreted as EPA disclaiming SDWA “emergency powers” entirely. Unless and until Congress revokes the SDWA exemption, EPA can be expected to continue its efforts to regulate fracing from several different angles. We would not be surprised to see the agency file another "emergency powers" action on better facts, and against a less-motivated opponent, in the coming weeks or months.
Nevertheless, EPA’s dismissal unquestionably is a setback for the agency that has been forced to beat two other retreats from fracing-related regulatory efforts in recent weeks (e.g., Pavillon, WY; and Dimock, PA).