Department of Transportation publishes heightened standards for railcars transporting crude oil

On May 1, 2015, the United States Department of Transportation (DOT) released its final rules governing the transportation of oil by rail. The new rules apply to railcars transporting high-hazard flammable materials and largely correlate with the heightened standards applicable in Canada. The new rules are set to go into effect on October 1, 2015.

The DOT made several changes to the final rules in light of the comments it received in response to the proposed rule. For example, the DOT extended the deadline by which DOT-111 railcars must be retrofitted or replaced to three years rather than two years. As for the CPC-1232 railcars, companies will have five years to retrofit or replace those cars if the railcars do not have insulating jackets that satisfy the heightened requirements.

After October 1, 2015, all new railcars must comply with the DOT-117 standard. To satisfy the DOT-117 standard, railcars must have thicker shells, insulated jackets, updated pressure relief valves, and improved thermal protection. In addition, trains with at least 70 railcars that are carrying Class 3 flammable liquids, the most volatile category, must now have pneumatic braking systems before January 1, 2021. Trains merely transporting other flammable liquids only need to install the braking systems by 2023. The new rules also establish a speed limit of 50 mph. If the railcar doesn’t comply with the updated standards set forth in the rules, the railcar must comply with a 40-mph speed limit in urban areas.

Thus far, the new rules have received a significant amount of criticism. Environmentalists have argued that the rules are not sufficiently stringent. A number of environmental groups advocated for the immediate ban of the older DOT-111 railcars. Members of the oil and gas industry have argued that the cost to comply with the rules is excessive and that the deadline for retrofitting the railcars could result in a shortage of railcars. Others have argued that the new braking systems will not help in reducing accidents. The final rules will certainly be challenged. Some commentators have suggested that the new rules would not withstand judicial scrutiny, despite the favorable standard of review, because the DOT lacks supporting authority for the requirements.

Read the final rules.

This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.

Fracking bill approved by Texas Senate committee

On Thursday, April 30th, the Texas Senate Natural Resources & Economic Development Committee (Committee) voted to approve H.B. 40. As discussed in a previous post, H.B. 40 is a response to the fracking ban enacted by the city of Denton, Texas during the latter part of last year. The Committee voted unanimously in favor of the bill. If enacted, H.B. 40 would prohibit localities from enacting legislation governing oil and gas operations. In its current form, H.B. 40 would permit localities to adopt legislation regulating “surface activity that is incident to an oil and gas operation, is commercially reasonable, does not effectively prohibit an oil and gas operation, and is [not] otherwise preempted by state or federal law.”

H.B. 40 moved quickly through the Texas House of Representatives. In March, the House Committee on Energy Resources voted to approve the bill. A couple of weeks later, the House of Representatives voted to pass the bill. H.B. 40 appears to be poised to receive a similarly fast-paced approval by the Senate. H.B. 40 is sponsored by Representative Drew Darby.

Several detractors and supporters of the bill testified before the Committee. The detractors argued against the “commercially reasonable” standard of H.B. 40. According to the detractors, the “commercially reasonable” standard is too amorphous. In addition, some detractors suggested that the bill would result in the undoing of a number of environmental ordinances enacted by localities. Supporters for the bill stated that H.B. 40 was necessary because hydraulic fracturing and related activities need to be regulated by one entity.

Read H.B. 40.

This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.

Lawsuit challenging fracking disclosure requirements stayed

As discussed in a previous post, several environmental groups have sued the United States Environmental Protection Agency (EPA) in the United States District Court for the District of Columbia. The plaintiffs alleged that the EPA failed to properly respond to their 2012 petition that requested that the EPA issue a rule requiring companies engaging in hydraulic fracturing to disclose chemicals used in their drilling operations. According to the plaintiffs, the Administrative Procedure Act required the EPA to respond to their petition within sixty days.

On Friday, April 24th, the parties filed a joint motion to stay the lawsuit, which the district court approved. In the joint motion, the EPA stated that it would respond to the plaintiff’s petition later this year. Specifically, the EPA agreed to respond before October 30, 2015. The district court has scheduled a status hearing on November 13, 2015. The parties initiated settlement negotiations shortly after the lawsuit was filed.

The plaintiffs’ primary dispute with the EPA revolves around the Toxics Release Inventory (TRI) and the Emergency Planning and Community Right-to-Know Act (EPCRA). The EPCRA empowers the EPA to mandate that the oil and gas industry disclose any chemicals used in their drilling operations. Currently, the oil and gas industry is not subject to the TRI’s requirements. In 2011, the EPA released a proposal to increase the number of industries subject to the TRI disclosure requirements but decided to not subject the oil and gas industry to the disclosure requirements.

Read the joint motion to stay the proceedings.

This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.

Florida House of Representatives passes bill to strengthen hydraulic fracturing requirements

Earlier this week, the Florida House of Representatives passed a bill targeted at hydraulic fracturing. The bill, H.B. 1205, would heighten the regulatory requirements on fracking. The bill passed easily with a sizeable majority voting in favor of the bill. 82 members of the House of Representatives voted in favor of passing the bill and 34 members voted against enacting the bill.

Under H.B. 1205, operators would be required to obtain a fracking permit before engaging in fracking operations. Moreover, operators would be required to declare that they intend to use hydraulic fracturing before beginning any drilling operations. In comparison, the current rules only require operators to receive a general drilling permit. The current rules also permit operators to wait until drilling operations have commenced to notify the Florida Department of Environmental Protection (FDEP) that they intend to use hydraulic fracturing.

In addition, H.B. 1205 provides for a stricter permit approval process and additional disclosure requirements. The new bill authorizes the FDEP to examine the history of parties applying for fracking permits. In fact, H.B. 1205 would permit the FDEP to base its decision on an applicant’s actions in other states. The current regulatory scheme does not permit the FDEP to use an applicant’s out-of-state conduct as a basis for approval or denial of a fracking permit. H.B. 1205 would also increase the fines for violations and the bond minimums. Furthermore, H.B. 1205 mandates that companies disclose any chemicals injected into the ground.

The new bill requires the FDEP to conduct a study on hydraulic fracturing. Specifically, the FDEP’s study must address the potential connection between hydraulic fracturing and groundwater and whether recycled water can be used during fracking operations. Additionally, the study must examine the disposal process for fluids.

Thus far, the bill has received mixed reviews. Some observers have championed the bill as a method of preventing violations. Opponents of the bill have argued that the bill should be replaced with a ban against hydraulic fracturing. Other commentators have suggested that H.B. 1205 prioritizes business interests over public health.

Read H.B. 1205.

This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.

Opposition to federal fracking rules grows

Earlier this year, the Department of Interior’s Bureau of Land Management (BLM) released its final version of rules governing hydraulic fracturing on federal land. As discussed in a previous post, these rules will not only impose heightened requirements on drilling operations but also increase the reporting duties for drilling operators. Shortly after the BLM released its proposal, the Independent Petroleum Association of America (IPAA) and Western Energy Alliance (WEA) sued the BLM in Wyoming to challenge the proposed rules. The IPAA and WEA argued that the BLM’s rules are unnecessary because states adequately regulate hydraulic fracturing. The IPAA and WEA have also alleged that the BLM’s final rules are unsubstantiated.

A second lawsuit was later filed by Wyoming against the BLM. In its petition for review of the BLM’s fracking rules, Wyoming stated that the BLM exceeded its authority and its fracking rules would hamper state regulation of hydraulic fracturing. Specifically, Wyoming has argued that the BLM’s authority under the Mineral Leasing Act and the Federal and Policy and Management Act do not authorize the agency to enact the hydraulic fracturing rules. According to Wyoming, the BLM’s rules also conflict with the Safe Water Drinking Act, which grants states the exclusive right to regulate underground injections. North Dakota later joined Wyoming’s petition for review. North Dakota has stated that it is one of the largest oil and gas producers in the United States and the BLM’s rules inhibit the state’s ability to regulate hydraulic fracturing in the state.

The opposition to the United States Bureau of Land Management’s (BLM) rules for hydraulic fracturing is growing. Colorado has also joined the lawsuit challenging the BLM’s new rules for hydraulic fracturing. Cynthia Coffman, the Attorney General for Colorado, describes the BLM’s rules as an encroachment on an area that has historically been regulated by states. Coffman further noted that Colorado has sufficient regulations governing hydraulic fracturing. In addition, Coffman stated that although hydraulic fracturing should be regulated, the BLM lacked the authority to enact the rules.

Read the amended petition for review.


This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.

Colorado Supreme Court refuses to authorize Lone Pine orders in fracking cases

On Monday, April 20th, 2015, the Colorado Supreme Court issued its opinion in Antero Resources v. Strudley, a case closely watched by many in the oil and gas industry. The Supreme Court was confronted with the issue of whether the Colorado Rules of Civil Procedure permit a trial court to issue a Lone Pine order—that is, a modified case management order requiring a plaintiff to submit prima facie evidence in support of the lawsuit before permitting full discovery. Lone Pine orders are used primarily in complex cases to ferret out meritless claims and ensure that litigation progresses expeditiously.

Strudley involved tort claims asserted by the Strudley family against Antero Resources and others involved in drilling operations near the plaintiffs’ home. After the parties exchanged their initial disclosures, the defendants requested that the trial court issue a modified case management order stating that the plaintiffs must provide prima facie evidence supporting their claims before full discovery would be allowed. The plaintiffs argued that they were entitled to discovery before the court ruled on the merits of their claims. The trial court agreed with the defendants and issued a Lone Pine order. Because the plaintiff produced insufficient information, the court dismissed the plaintiffs’ claims.

The plaintiffs appealed to the Colorado Court of Appeals. The Court of Appeals reversed the trial court, reasoning that Colorado law did not recognize Lone Pine orders. The Court of Appeals concluded that the discretion afforded district courts under Federal Rule of Civil Procedure (FRCP) 16 is greater than the discretion given under Colorado Rule of Civil Procedure (CRCP) 16. Trial courts issuing Lone Pine order generally rely on FRCP 16 as authority for issuing the order. The Court of Appeals also held that Colorado case law disfavored requiring a plaintiff to provide evidence in support of a claim before discovery.

The Colorado Supreme Court affirmed the Court of Appeals, reasoning that Lone Pine orders are prohibited under Colorado law. The Supreme Court agreed with the Court of Appeals that FRCP 16 granted trial courts more discretion than CRCP 16. In fact, the Supreme Court concluded that FRCP 16 explicitly authorized trial courts to issue Lone Pine orders. The Supreme Court noted that although there are similarities between FRCP 16 and CRCP 16, Colorado did not adopt the language in FRCP 16 that empowered district courts to reduce potential burdens on defendants in complex litigation. However, the Supreme Court noted that CRCP 16 permits district courts to manage discovery in a manner that ensures litigation moves expeditiously. In addition, the Supreme Court concluded that based on its review of other jurisdictions, this lawsuit was not the type of complex lawsuit that warrants a Lone Pine order.

Justice Boatright dissented, arguing that the trial court was merely using its discretionary authority under CRCP 16 when it issued the Lone Pine order. Justice Boatright also contended that the precedent the majority relied on was inapposite because those cases dealt with an earlier version of CRCP 16. According to Justice Boatright, the majority opinion will unduly constrain a trial court’s ability to manage its docket.

Read the opinion.


This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.

State bill prohibiting local fracking bans one step closer to enactment

After Denton, Texas adopted a ban against hydraulic fracturing, many commentators predicted that the anti-fracking measure would be short-lived. While the lawsuits challenging the local fracking ban are still in the early stages, the Texas Legislature is quickly taking steps to block local fracking bans. On Friday, the Texas House of Representatives passed H.B. 40—one of several bills recently proposed to address anti-fracking measures similar to Denton’s fracking ban.

Under H.B. 40, localities are expressly preempted from adopting legislation concerning oil and gas operations. Localities would, however, have the authority to adopt ordinances that regulate “surface activity that is incident to an oil and gas operation, is commercially reasonable, does not effectively prohibit an oil and gas operation, and is not otherwise preempted by state or federal law.” The bill was proposed by Representative Drew Darby.

H.B. 40 was criticized by some members of the House of Representatives. Approximately ten amendments to the bill were proposed, but they were all rejected. If accepted, the amendments would have ensured that localities retained the authority to regulate some aspects of oil and gas operations. One of the proposed amendments would have created a grandfather clause that local ordinances that have been enacted for at least ten years are not preempted. Now, H.B. 40 advances to the Texas Senate.

Read H.B. 40.


This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.