Mineral rights owners’ suit against Denton to remain in federal court

To say that the city of Denton, Texas is embroiled in litigation concerning its drilling ban would be an understatement. The city is currently facing two lawsuits challenging the validity of the recently enacted ban against hydraulic fracturing, one suit filed by the Texas Oil and Gas Association and the other suit filed by the Texas General Land Office.

Although those lawsuits have garnered the majority of attention from onlookers, Denton is also facing another suit regarding a fracking moratorium adopted by the city while it debated enacting an actual ban.

On September 12, 2014, several mineral rights owners sued Denton in state court to challenge the city’s fracking moratorium. The plaintiffs alleged that the drilling moratorium was an unconstitutional taking under state and federal law, unconstitutionally interfered with private contracts, violated the election code, and constituted an inverse condemnation.

The city subsequently removed the case to state court on the grounds that the suit involved a federal question. In response, the plaintiffs filed a motion to remand the case to state court on the basis that the federal court lacked jurisdiction over the case. According to the plaintiffs, their state law takings claim had to be adjudicated before the federal takings claims could be decided.

It appears that the lawsuit will be decided in federal court. The district court rejected the plaintiffs’ request to remand the suit. According to the district court, the plaintiffs asserted a federal claim, and Denton was entitled to remove the lawsuit to federal court on that basis.

Read the opinion.

Wyoming to strengthen chemical disclosure requirements for fracking operations

The Wyoming Public Records Act (WPRA) requires that oil and gas companies disclose information about the chemicals used in their hydraulic fracturing operations. Specifically, companies must disclose the type of chemical used, the concentration of each chemical, the chemical compound name, and the CAS number—the unique number assigned to that chemical for purposes of public scientific literature. Companies may forgo disclosing this information, however, by requesting an exemption from the state’s disclosure rules on the basis that the information constitutes a trade secret, privileged information, or confidential information.

On January 23rd, the Wyoming Oil & Gas Conservation Commission (WOGCC) agreed to a settlement that would require the WOGCC to strengthen its criteria for requests to protect the confidentiality of chemicals used in fracking operations.

The settlement agreement resolves a suit filed by several environmental organizations against the WOGCC. The environmental groups challenged the WOGCC’s decision to exempt multiple oil and gas companies from the state’s chemical disclosure requirement.

The WOGCC’s decision was affirmed by the district court. However, on March 12, 2014, the Wyoming Supreme Court remanded the case back to the district court. The Supreme Court reasoned that the district court had to engage in an independent review of the companies’ request for an exemption instead of simply evaluating whether the WOGCC’s decision was arbitrary and capricious. The Supreme Court also held that, for purposes of the WPRA, trade secrets should be defined as the term is defined in federal case law for the Freedom of Information Act.

The new standards will require fracking companies to provide additional factual detail when filing a request for an exemption from the WPRA’s disclosure requirements. The WOGCC agreed to implement the heightened requirements within seven days of the district court’s approval of the settlement agreement. In addition, the WOGCC agreed to provide the parties to the suit with notice of at least thirty days before the WOGCC decided to amend, withdraw, or supersede the rule changes discussed in the settlement agreement. Moreover, the WOGCC agreed to reconsider the environmental groups’ request at issue in the suit. The companies with information requested by the environmental groups will have to submit revised requests for exemptions that conform with the heightened requirements set forth in the settlement agreement.

Read the settlement agreement.

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.

Another local fracking ban invalidated

Throughout the country, supporters and opponents of local fracking bans have engaged in a fierce debate over the legality of such legislation. Indeed, suits have been filed in California, Colorado, New York, Texas, and West Virginia to challenge anti-fracking measures enacted by localities. The majority of courts to consider the legality of these local ordinances have held that the anti-fracking measures are invalid. Yet another court has reached the same conclusion. In this latest case, the United States District Court for the District of New Mexico invalidated a fracking ban enacted by Mora County.

In 2013, Mora County adopted an ordinance that prohibited hydraulic fracturing within the county. Mora County’s anti-fracking measure also purported to remove the constitutional rights of corporations found violating the measures. In addition, the ordinance attempted to prohibit parties violating the measure from challenging the law or arguing that the measure is preempted. The ordinance stated that the doctrine of preemption would only be valid in those instances in which state or federal law did not weigh property rights as more important than the rights protected by the ordinance or when state or federal law gave the residents of Mora County greater protection than the ordinance.

Soon after the adoption of the ordinance, SWEPI, LP filed a lawsuit against Mora County, requesting that the court invalidate the measure. SWEPI argued that the fracking ban violated its substantive due process rights, the Equal Protection Clause, the First Amendment, and state law. In addition, SWEPI contended that Mora County lacked the authority to enact the ban.

The court primarily agreed with SWEPI. It held that the anti-fracking measure violated the Supremacy Clause because it conflicted with federal law. Moreover, the court found that the ordinance also contravened the First Amendment. The court also held that Mora County did not possess the authority to enact the anti-fracking measure.

Although the court ruled against Mora County, the court’s decision does not completely forbid future local ordinances that are less restrictive. Rather, the court noted that state law permitted localities to have concurrent jurisdiction with respect to some aspects of regulating oil and gas drilling. Other counties in New Mexico have already adopted legislation similar to that referenced by the district court. Sante Fe County has an ordinance that mandates oil and gas companies engage in extensive planning before initiating drilling.

Likewise, San Miguel County enacted an ordinance that requires companies to go through extensive planning before drilling and that also limits the areas in which companies may drill. If Mora County decides to not appeal the district court’s ruling, it will likely attempt to enact legislation that mirrors the approach of Sante Fe County and San Miguel County. Commentators have expressed concern that counties may not have the funds to enforce this type of legislation.

Read the decision.

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.

White House announces new plan to reduce methane emissions

Earlier this week, the Obama Administration announced its plan to reduce methane emissions from the oil and gas industry 40 to 45 percent by 2025. As currently constituted, the plan will involve efforts from multiple agencies, including the Environmental Protection Agency (EPA), Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA), Department of Energy (DOE), and the Department of Interior’s Bureau of Land Management (BLM).

Although the Obama Administration acknowledged that the oil and gas industry has decreased its methane emissions by 16 percent since 1990, the Administration predicted that methane emissions would increase by approximately 25 percent over the next ten years. The plan envisions a collaborative effort between several federal agencies, states, and members of the oil and gas industry.

As part of its efforts to implement the Obama Administration’s plan, the EPA has announced that it will take a multi-faceted approach to reducing methane and volatile organic compounds (VOC) emissions from the oil and gas industry. Specifically, the EPA stated that it would adopt standards to govern methane and VOC emissions by the oil and gas industry. However, before enacting the standards, the EPA noted that it would consult members of the oil and gas industry and states on the appropriateness of various measures.

In addition, the EPA noted that it would draft the standards under the assumption that states would continue to regulate air pollution from the oil and gas industry. The EPA also plans on publishing Control Techniques Guidelines (CTG) that would evaluate options for reducing VOC emissions in ozone nonattainment areas and states in the Ozone Transport Region. Lastly, the EPA announced that it would increase its efforts at securing voluntary commitments to reduce emissions from the oil and gas industry. As for the EPA’s timeline with respect to these new regulations, the EPA plans on issuing the proposed rules in the summer of 2015 and final rules in 2016.

A number of other federal agencies will also play a significant role in the Obama Administration’s plan. For example, the BLM plans on issuing revised standards later this year that will apply to existing as well as new oil and gas wells located on public land. The revised standards will update the current standards so as to decrease unnecessary venting, flaring, and leaks of natural gas. Moreover, the PHMSA will issue new pipeline standards that are expected to lower emissions.

The Obama Administration also proposes to provide the DOE with approximately 25 million dollars in funding to develop technology to detect and reduce losses from gas distribution and transmission systems and to initiate a program that will quantify emissions from natural gas operations. In addition, the DOE will circulate additional standards for natural gas and air compressors and conduct research on reducing the expense associated with detecting leaks. The Obama Administration will also circulate a Quadrennial Energy Review that will contain policy recommendations on reducing leakage from natural gas operations.

The Obama Administration’s plan is largely viewed as a compromise between the oil and gas industry and environmental groups. The plan only impacts new or modified drilling operations, thereby decreasing the costs incurred by the industry. Environmental groups had advocated for the adoption of rules governing the infrastructure for new and existing drilling operations. In contrast, members of the oil and gas industry had recommended that the Obama Administration rely on voluntary efforts to reduce emissions.

Read the Obama Administration’s announcement.

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.

New appeal provides Pennsylvania Supreme Court the opportunity to reverse fracking approach

One of the most highly debated issues facing states recently has been the legality of local fracking bans. In response to this issue, the Pennsylvania legislature opted to amend the state’s Oil and Gas Act by adding Act 13. Act 13 imposed a statewide regulatory scheme for oil and gas operations and prohibited localities from enacting any contradictory drilling ordinances.

In 2013, however, the Pennsylvania Supreme Court issued a split decision in which it held that a number of provisions of Act 13, including the provisions governing oil and gas operations, were unconstitutional. Recent events have sparked hope in some that the Supreme Court will alter its jurisprudence on fracking.

Two of the Supreme Court justices who voted in favor of striking down portions of Act 13 recently retired. Robert Powelson, chairman of Pennsylvania’s Public Utility Commission (PUC), has expressed his desire that in light of the absence of the retired justices, the Supreme Court will reconsider its ruling on Act 13.

According to Powelson, under the current system, drilling operators could be forced to comply with varying standards because localities would have the authority to enact contradictory drilling ordinances. It is therefore imperative, in Powelson’s view, that the Supreme Court agree to hear another appeal involving Act 13.

Currently pending before the Supreme Court is a decision on remand from the Court’s earlier opinion concerning Act 13. A state appeals court ruled that the PUC lacks the authority to oversee local rules governing drilling operations to ensure that they comply with Act 13. In the suit, the PUC argued that it had the authority to assess local ordinances governing drilling activities despite the Supreme Court’s prior ruling that invalidated several portions of Act 13. The Supreme Court has not yet decided whether it will hear the appeal.

Read the Supreme Court’s 2013 opinion and the appellate court decision.

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.

Environmental group sues federal agencies for fracking-related documents

Earlier this week, the Center for Biological Diversity (Center) filed suit in the United States District Court for the District of Columbia against the Bureau of Safety and Environmental Enforcement (BSEE) and the Bureau of Ocean Energy Management (BOEM).

The Center alleges that Defendants failed to comply with its request under the Freedom of Information Act (FOIA). In addition, the Center argues that it believes Defendants have issued permits to allow fracking in the Gulf of Mexico without proper evaluation.

The Center alleges that it sent Defendants a FOIA request for its records concerning any hydraulic fracturing activities in the Gulf of Mexico. Specifically, the Center requested any information detailing the extent of fracking operations in the Gulf of Mexico, Defendants’ role in the permit approval process, and whether Defendants had engaged in any environmental analysis before approving the permits. Defendants notified the Center that they were reviewing the FOIA request; however, the Center alleges that Defendants did not comply with their obligations under FOIA.

The Center contends that Defendants’ failure to provide it with the requested information has not only harmed its interests but also the interests of the public-at-large. According to the Center, hydraulic fracturing should not be permitted in the Gulf of Mexico because it is a fragile ecosystem. If it is given the requested information, the Center argues that it will educate the public on the fracking operations in the Gulf of Mexico. The Center requests that the Court find that Defendants violated FOIA and order Defendants to respond to its FOIA request.

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.

Congressional report suggests that fracking does not cause increased seismicity

The increase of seismic activity in the United States has led many to blame hydraulic fracturing (fracking) operations. However, a recent study from the United States Congressional Research Service suggests that those allegations are unwarranted. The report largely discredited claims that hydraulic fracturing is the culprit for increased seismic activity.

According to the report, fracking leads to microseismicity that is generally too small in magnitude to cause any damage. In fact, any seismic activity caused by fracking is usually too small to be noticed. As for the small number of earthquakes associated with fracking that are detectable, the earthquakes are generally not large enough to cause any damage.

Although the report found more of a correlation between the use of disposal wells and increased seismicity, the connection is still tenuous. In fact, the report concluded that only a small number of disposal wells are even associated with earthquakes.

Moreover, the report noted that the EPA has suggested that other factors must usually exist before disposal wells cause any seismic activity. Ultimately, the report concluded that future efforts aimed at reducing seismicity will likely focus on the small number of disposal wells found to have a connection with seismicity rather than disposal wells in general.

Read the report.

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.