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Department of Interior Secretary Endorses Federal Regulation of Hydraulic Fracturing

by James A. Pardo and Brandon H. Barnes

Speaking about upcoming Bureau of Land Management/Department of Interior (DOI) rules for hydraulic fracturing (fracing) on federal land, DOI Secretary Salazar recently opined that state regulation of fracing was insufficient and suggested that more stringent federal regulations may be required.  This is a sea change for Salazar, who previously made clear his endorsement of state fracing regulation.  While it is possible that Salazar’s comments were meant only to defend the Obama Administration’s issuance of rules for fracing on federal land, that is not the way the comments have been interpreted.  Salazar’s criticism of state fracing efforts as being "not good enough for" him was unambiguous.  The DOI Secretary’s comments came on the same day that DOI extended the period for public comment on the DOI rules by 60 days to September 10, 2012.

The issue of state versus federal fracing regulation has been debated since the process first began garnering significant media attention in the late-2000s.  With some exceptions, the U.S. Environmental Protection Agency (EPA) and other federal agencies cannot regulate the fracing process themselves unless and until Congress reverses its 2005 exemption of fracing from the Underground Injection Control rules of the Safe Drinking Water Act.  Predictably, Salazar’s comments have been seized on by many national non-governmental organizations (NGOs) that have long advocated for federal control over what has always been a state regulated process.  His comments reinvigorate a debate that state regulation advocates appeared to have largely won last year, when Salazar and several members of President Obama’s Department of Energy Task Force on Fracturing openly and clearly expressed their support for state regulatory efforts.  Fracing stakeholders need to be keeping a close eye on the federal-versus-state regulatory debate, as it is certain to gain increased media coverage and political attention in this election year.

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EPA Releases Final Permitting Guidance for Fracing with Diesel Fuel

by James A. Pardo and Brandon H. Barnes

Hydraulic fracturing (fracing) on private land has long been overseen by state regulators enforcing state-specific permitting, installation and other requirements.  The one exception is wells fractured with diesel fuel, which remain subject to U.S. Environmental Protection Agency (EPA) oversight under the Underground Injection Control (UIC) rules of the federal Safe Drinking Water Act (SDWA).  EPA typically has delegated its UIC oversight responsibility to state regulators and, for more than a year, has quietly been providing direction to these state regulators about what EPA wants to see as a condition to issuing drilling permits for wells that will be fractured with diesel.  That direction now has been reduced to a formal guidance document, which the agency issued for public review and comment on May 10, 2012.  While EPA’s proposed guidance has attracted little media attention (principally because it was issued on the same day that the Department of Interior proposed long-awaited regulations for fracing on federal lands), EPA’s latest initiative to regulate fracing is something that all stakeholders – whether they use diesel or not – need to be following closely for several reasons:  

1. EPA has proposed defining "diesel" by reference to six Chemical Abstracts Service Registry Numbers (68334-3-5; 68476-34-6; 68476-30-2; 68476-31-3; 8008-20-6; 68410-00-4), all of which essentially describe different types of diesel fuel, fuel oil or kerosene.  However, the EPA has also proposed as an alternative three broader definitions that focus on the chemical and physical characteristics of "diesel" and which, if adopted, could apply to substances like mineral oil.  These alternative definitions of "diesel" could bring many more fracing fluids, and many more fracing stakeholders, under UIC and EPA regulatory control. 

2.  EPA has proposed significant changes to existing federal permitting requirements relating to (a) permit duration and well closure; (b) Area of Review analyses; (c) well monitoring and integrity analyses; (d) water quality testing and monitoring, including baseline groundwater testing before drilling; and (e) other data and information requirements for obtaining a permit including, potentially, requiring applicants to conduct expensive seismic surveys.  While much of this information is already required by state regulatory authorities, it is clear that the permitting scheme being contemplated by EPA would be more costly, time-consuming and burdensome than the rules imposed by most states.

3. Finally, in a notable departure from its own prior pronouncements, at page 16 of its guidance, EPA suggests that fracing can open conduits in the subsurface that might allow fracing fluid to migrate upward into shallow drinking water supplies:  "Due to high injection pressures, there is potential to induce fractures that may serve as conduits for fluid migration …"  EPA’s statement is troubling because it suggests that the agency is stepping back from decades of research (including studies by USGS and EPA itself) which demonstrates that deep fracing poses no threat to shallow groundwater located above thousands of feet of bedrock and other sub-strata.  EPA’s retreat on this important point potentially opens up a new line of attack [...]

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Drilling Down on Hydraulic Fracturing; EPA Dismisses “Emergency Powers” Claim in Latest Regulatory Twist

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).

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