Two New York State Courts Uphold Local Bans on Hydraulic Fracturing

On February 21, 2012, a New York state court issued an order upholding a local ordinance banning all activities related to the exploration for, and production or storage of, natural gas and petroleum in the Town of Dryden, New York.

In a case of first impression, the court in Anschutz Exploration Corp. v. Town of Dryden held that New York State’s Oil, Gas and Solution Mining Law (“OGSML”) did not preempt local zoning authority.

The petitioner-plaintiff, Anschutz Exploration (“Anschutz”), owns gas leases covering approximately 22,200 acres in the town of Dryden in upstate New York.

On August 2, 2011, the town of Dryden amended its Zoning Ordinance to “ban all activities related to the exploration for, and production or storage of, natural gas and petroleum,” which effectively banned all hydraulic fracturing in the area.

Anschutz then filed a declaratory judgment action seeking invalidation of the zoning amendment on the ground that it was preempted by the OGSML.

The court ruled in favor of the town, holding that the legislative intent of OGSML was not to preempt local zoning authority.  Instead, the purpose of OGSML is to “regulate any development or production of such resources which may occur in a manner that prevents waste, permits greater ultimate recovery of oil and gas, and protects the correlative rights of all persons.”

On February 24, 2012, a second New York state court upheld a local ban on natural gas drilling.  In Cooperstown Holstein Corp. v. Town of Middlefield, Judge Donald F. Cerio, Jr. upheld the New York Town of Middlefield’s local zoning law, implemented on June 14, 2011, which “effectively banned oil and gas drilling within the geographical borders of the township.” Cooperstown Holstein Corp. v. Town of Middlefield, No. 2011-0930 (N.Y. Sup. Ct. Feb. 24, 2012).

The Plaintiff, Cooperstown Holstein, claimed that the New York State Environmental Conservation Law (“ECL”) preempts local authorities from enforcing regulations relating to the regulation of gas, oil and solution drilling or mining due to its plain language, which states:
the provisions of this article shall supercede all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries; but shall not supercede local government jurisdiction over local roads or the rights of local governments under the real property law.”
The court looked to the legislative intent and history of the clause to determine that it “does not serve to preempt a local municipality such as defendant from enacting land use regulation within the confines of its geographical jurisdiction and, as such, local municipalities are permitted to permit or prohibit oil, gas and solution mining or drilling on conformity with such constitutional and statutory authority.”

Both decisions are expected to be appealed.

New York’s Department ofEnvironmental Conservation, which recently issued a 1,500-page report and set of draft regulations, is currently reviewing comments on those proposed new regulations, and the final rule on hydraulic fracturing could be released as soon as the end of the year.

New York has had a moratorium on hydraulic fracturing and horizontal gas drilling permits since 2008.

This article was prepared by Heather M. Corken (hcorken@fulbright.com or 713 651 8386) and Kristen Roche (kroche@fulbright.com or 713 651 5303) from Fulbright's Environmental Law Practice Group.

Judge Cites Plaintiffs’ “Deceptive Video” and Allows Range Resources’ Counterclaim to Proceed

On February 16, 2012, State District Judge Trey Loftin, sitting in the 43rd State District Court in Weatherford, Texas, denied plaintiffs’ motion to dismiss Range Resources’ counterclaim.   Previously, on January 27, 2012, Judge Loftin dismissed the plaintiffs’ complaint, which sought $6.5 million in damages. In its counterclaim, Range Resources seeks $4.2 million in actual damages, in addition to punitive damages to cover both legal fees and damage to its reputation.

This case stems from an allegation by Steve Lipsky and Shyla Lipsky that their water well was contaminated with methane due to improper casing and cementing of Range’s natural gas wells in the Barnett Shale.

Specifically, the Lipskys’ alleged that Range Resources failed to “cement the surface casing of the Butler and Teal wells to a depth of at least 1,000 feet[.]”  In December 2010, the U.S. Environmental Protection Agency (“EPA”) issued an order against Range, based on claims that Range’s gas wells either caused or contributed to the contamination of the water wells.  Range Resources is still trying to have this order dismissed.

In March 2011, after a two day evidentiary hearing, the Texas Railroad Commission found that the gas in the water wells was not due to Range’s wells, but a migration of gas from the Strawn formation, a formation lying only a few hundred deep below the surface and immediately below the aquifer.  The geological formation from which Range is drawing natural gas is a mile below the Strawn formation and the aquifer. 
Among other things, Judge Loftin cited a “deceptive video” as a reason not to dismiss Range’s counterclaim.  View the YouTube video titled “Hydraulic Fracturing turns gardenhose to flamethrower”.

Judge Loftin was concerned that the garden hose shown in the video was attached to the water well’s gas vent, not a water line as suggested to the media.  He wrote: “This demonstration was not done for scientific study but to provide local and national news media a deceptive video, calculated to alarm the public into believing the water was burning.”

The Lipskys intend to appeal the order. Range has indicated an intention to conduct discovery to determine the extent to which the Lipskys’ conduct influenced the EPA.


This posting was prepared by L. Poe Leggette (pleggette@fulbright.com or 303 801 2746), and Jennifer Cadena (jcadena@fulbright.com or 303 801 2755) of the firm's Energy Practice Group.

Department of Interior to Officially Release Hydraulic Fracturing Rules


On February 14, 2012, in remarks at the City Club of Cleveland, Secretary Salazar advised that the Department of Interior would formally release its proposed rule for hydraulic fracturing in a “few weeks.”  


This announcement is the culmination of multiple forums hosted by the Department of Interior’s Bureau of Land Management since October 2010 in an effort to inform the BLM as to what was important to the industry, the states, and other Federal agencies.  


“The Interior Department has a responsibility to study the potential impacts and to identify commonsense, best management practices that should be used in fracturing operations on public lands to ensure that this development is carried out in the right way and in the right places.” BLM To Hold Regional Forums on Hydraulic Fracturing in Natural Gas Production, Press Release (Apr. 1, 2011). 


A draft rule was revealed in February 2012.  A more detailed discussion of the draft rule can be found by clicking here.  

After publishing the proposed rule in the federal register, members of the industry and the public will be able to comment on the rule.

This posting was prepared by L. Poe Leggette (pleggette@fulbright.com or 303 801 2746), and Jennifer Cadena (jcadena@fulbright.com or 303 801 2755) of the firm's Energy Practice Group.

UT Study on Hydraulic Fracturing Officially Released

Today, the University of Texas study on hydraulic fracturing and shale gas development was released at the annual meeting of the American Association for the Advancement of Science in Vancouver, British Columbia. According to the reports, the study found that many problems ascribed to hydraulic fracturing are actually related to processes common to all oil and gas drilling operations, such as casing failures or poor cement jobs. For the full story please click here.

Preliminary findings of the study showing no direct link between fracking and groundwater contamination were previously released in November of 2011. For those reports please click here.





Congressman Introduces the "Keep American Natural Gas Here Act"


Rep. Ed Markey, (D-Mass.), the Ranking Member of the House Natural Resources Committee and a senior member of the House Energy and Commerce Committee, sponsored the "Keep American Natural Gas Here Act."  

According to reports, the bill "would require the Department of the Interior to accept bids to drill for natural gas on public lands only from companies that say they will offer the extracted natural gas for sale in the U.S."

Previously, in mid-January, Rep. Markey made related comments on exporting natural gas.  

According to a press release on his web page he states, "Today is a wake-up call to American consumers and businesses who rely on natural gas that higher prices are on the horizon if we don’t keep our natural gas here in America. . . . The affordable domestic supplies we’ve recently developed could soon become a thing of the past if companies are allowed to export large volumes of American natural gas supplies to foreign countries.”  Read Rep. Ed Markey's press release.  

A second bill titled the "North America Natural Gas Security and Consumer Protection Act", was also introduced which would prevent the Federal Energy Regulatory Commission from approving new terminals that would export domestic natural gas.  

Read the Democrats' Natural Resource Committee press release

Texas Railroad Commissioners Send Letter to EPA

Yesterday, Texas Railroad Commissioners voted in favor of "sending a letter to the U.S. Environmental Protection Agency (EPA) in response to an EPA Draft Report released on Dec. 8, 2011 in which the EPA attempted to link groundwater contamination and hydraulic fracturing in Pavillion, Wyoming."

The Texas Railroad Commission posted a news release on the subject on their web page.  For the full news release please click here.

In the letter the Texas Railroad Commissioners state, "it appears EPA came to th[e] conclusion[s] [in the EPA Draft Report] based on limited and questionable data;dismissed reports, including a report from the United States Geological Survey of historical problems with ground water quality in the Pavillion area prior to any hydraulic fracturing activity in the area; and an examination of hydraulic fracturing as the only potential source of the poor quality deeper ground water in the Pavillion area.

The EPA may have avoided such flaws had it subjected the Draft Report to external, independent, scientific peer review, including a review by the State of Wyoming's own environmental and oil and gas experts." For a full copy of the letter please click here.

With this, the Texas Railroad Commission is the latest to criticize the EPA's Draft Report on "Investigation of Ground Water Contamination near Pavillion, Wyoming."  For a copy of the Draft Report please click here.  

Previously, Thomas Doll, head of the Wyoming Oil and Gas Conservation Commission, testified before the House Subcommittee on Energy and the Environment and stated that the EPA based its findings on thin data that wasn’t properly vetted by state agencies, independent scientists, and other stakeholders before publication.  For more on Mr. Doll's testimony earlier this month please click here.


Texas Law Requiring Mandatory Disclosure Becomes Effective Very Soon

Texas law requiring public disclosure of fluids used in hydraulic fracturing takes effect for all wells where an initial drilling permit is issued by the Texas Railroad Commission on or after February 1, 2012.

Therefore, while many companies have already been making these disclosures voluntarily, the mandatory reporting requirements will come in to play very soon.  (Hypothetically, if a well received its initial drilling permit on the first day, Feb. 1, 2012 and also hypothetically was drilled and had hydraulic fracturing performed that same day, then there could be some reporting requirements as early as Feb. 15th).  

The regulations require public disclosure of chemicals used for fracturing that are either regulated by OSHA or are otherwise intentionally added, along with the actual or maximum concentrations of each.   The regulations specifically exempt from disclosure chemicals unintentionally added, chemicals that occur naturally, or chemicals not disclosed by the manufacturer, supplier, or service company.   Companies can also claim trade secret exemptions, which must be approved by the Texas Railroad Commission.

The rules also require certain disclosures by “service companies” to the operator.

In addition to chemical disclosures, operators must disclose the total volume of water used and the total volume of base fluid used.

In addition to the foregoing, local municipalities have also proposed hydraulic fracturing regulations.  In August 2011, the North Texas city of Grand Prairie in the Barnett Shale became the first municipality in Texas to ban the use of city water for fracturing.

One month earlier, water officials for the Ogallala Aquifer in part of the Permian Basin included fracturing activities in the district’s first-ever water use restrictions.  And, in the Lubbock-based High Plains Underground Water Conservation District No.1, new water restrictions aimed at fracturing go into effect in 2012.  Other Texas municipalities are considering similar measures.

Department of Interior Releases Draft Rule on Well Stimulation


On February 3, 2012, the Department of the Interior became the latest government entity to release draft regulations governing hydraulic fracturing. The rules are in draft, meaning they are not yet being proposed for public comment. If adopted, the regulations would only govern hydraulic fracturing on federal and Indian oil and gas leases.

Fulbright prepared a client briefing summarizing the details of the draft.  For the full client briefing please click here.  

Two points bear emphasis. 

First, the Department’s draft would slow the permitting process for hydraulic fracturing the producing formation when completing a well. Currently the Department does not routinely require prior approval for “routine fracturing or acidizing jobs.” 43 C.F.R. § 3162.3-2(b). The draft rule requires a lessee to file for approval of any well stimulation work (including fracturing) “at least 30 days before commencement of operations[.]” 43 C.F.R. § 3162.3-3(a) (draft).

Second, the Department has not yet released the documentation showing its compliance with the Paperwork Reduction Act. 44 U.S.C. § 3501 et seq. Among others things, that Act’s purpose is to reduce duplicative paperwork, and the requirements in Interior’s draft are duplicative of most information requirements of state oil and gas conservation commissions.

This action by the Department of the Interior comes shortly after President Barack Obama’s State of the Union address, in which he indicated his administration would require “all companies that drill for gas on public lands to disclose the chemicals they use.”

The draft regulations are in line with the concerns expressed by President Obama regarding the protection of usable water, conservation of water, chemical disclosure, casing integrity, and flowback water. 

The briefing was prepared by L. Poe Leggette (pleggette@fulbright.com or 303 801 2746), Barclay Nicholson (bnicholson@fulbright.com or 713 651 3662) and Jennifer Cadena (jcadena@fulbright.com or 303 801 2755) of the firm's Energy Practice Group.

CAPP Issues Latest Report on Hydraulic Fracturing


The Canadian Association of Petroleum Producers or CAPP recently issued its "Canada-Wide Hydraulic Fracturing Operating Practices."  According to the CAPP website these operating practices are "designed to improve water management and water and fluids reporting for shale gas and tight gas development across Canada."  


This release follows CAPP's "Guiding Principles for Hydraulic Fracturing" which it released in September of 2011.  Importantly, these guiding principles outline CAPP's suggestions on public disclosure of hydraulic fracturing fluid.  With this, CAPP is the latest group to weigh in on the hydraulic disclosure rules.


Injection Wells and Their Possible Link to Seismic Activity

The use of injection wells, a preferred method for disposal of various fluids such as wastewater or brine (salt water), is a popular topic in the news media lately due to a suspected link between use of these wells and earthquakes.

Texas, Arkansas, Oklahoma, the United Kingdom, and most recently Youngstown, Ohio and central West Virginia have been experiencing frequent, small earthquakes. On New Year’s Eve, a 4.0 magnitude earthquake struck just outside of Youngstown, Ohio. This quake was just one of 11 earthquakes experienced in the area since March, 2011.

D&L Energy, whose affiliate Northstar Disposal Services LLC operates the Youngstown well, voluntarily shut the well down after the tenth earthquake occurred. Soon after, Ohio Governor John Kasich’s administration placed a temporary moratorium on injection wells within a 5-mile radius of Northstar No. 1, the particular Youngstown well believed to be the cause of the quakes.

This occurred less than a year after Arkansas declared a moratorium on disposal wells due to earthquakes during the development of the Fayetteville Shale. The Ohio Department of Natural Resources believes that fracking waste pumped into Northstar No. 1 has been seeping into a previously unknown fault line and, as a result, has caused this seismic activity.

The chairman of the Department of Earth and Atmospheric Sciences at Cornell University analogizes by saying the water pressure essentially “greases the wheels of the earthquake process that is there naturally and causes the earthquakes to occur at lower stress levels than they might normally have needed to occur.” At the same time, for the seismic activity to occur, the wastewater would need to be injected specifically into a stress region.

Seismographs from Columbia University’s Lamont-Doherty Earth Observatory were set up in Youngstown and concluded that the earthquake occurred nearly 2 miles below the surface, the same depth as the well. Ohio has over 177 injection wells throughout the state.

However, the Ohio Department of Natural Resources’ director stated that the Northstar No. 1 well is the only well that has been related to seismic activity in the state since injection wells were first installed in the 1970s.

Some state senators have called for the U.S. Environmental Protection Agency to intervene and for an indefinite, statewide moratorium on the use of injection wells.
A statewide moratorium could present a major problem, both for the livelihoods of thousands of Ohio residents as well as for other states who rely on these injection wells for disposal of water generated from oil and gas activities in those states.

Prior to its shutdown, nearly 5,000 42-gallon barrels of brine water were pumped into Northstar No. 1 dailyA majority of this water came from oil and gas wells in Pennsylvania. A similar situation has arisen in West Virginia, which experienced 10 quakes in 2010 and another one in January 2012.

After the initial quakes in 2010, the West Virginia Department of Environmental Protection worked with Chesapeake Energy to reduce the amount of fluid being injected into its disposal wells in the area.
According to news reports, Chesapeake Energy had recently begun to slowly increase the amount of injected fluid when the latest earthquake struck. While West Virginia’s Department of Environmental Protection believes there is a link between the earthquake and Chesapeake Energy’s increased injection fluid, there currently is no evidence that these events are related.

The company is skeptical that any link exists given that the earthquake occurred 6 miles from the disposal well, nearly 3 miles below the well’s disposal zone, and 25 earthquakes have been reported within 100 miles of the current seismic activity since 2000, one of which struck before the injection well was even drilled.
Since seismic monitors were not present at the site, the link between the quakes and the increased injected fluid remains unproven. Studies attempting to link earthquakes to underground injection are ongoing.

U.S. EPA has not yet weighed in on this issue, but as the news media continues to focus on the issue and public concerns continue to rise, that may change.


This article was prepared by Heather M. Corken (hcorken@fulbright.com or 713 651 8386) and Kristen Roche (kroche@fulbright.com or 713 651 5303) from Fulbright's Environmental Law Practice Group.

SOURCES
Henry Fountain, Ohio: Sites of Two Earthquakes Nearly IdenticalN.Y. Times, Jan. 3, 2012, available at http://www.nytimes.com/2012/01/03/science/earth/ohio-sites-of-two-earthquakes-nearly-identical.html?_r=1&ref=us.
Julie Carr Smyth, Company cautions against linking well, Ohio quakesThe Washington Times, Jan. 12, 2012, available at http://www.washingtontimes.com/news/2012/jan/12/company-cautions-against-linking-well-ohio-quakes/.
Joe Vardon, State links quakes to work on wellsThe Columbus Dispatch, Jan. 1, 2012, available at http://www.dispatch.com/content/stories/local/2012/01/01/state-links-quakes-to-work-on-wells.html.
Edward McAllister, Avoiding Fracking Earthquakes May Prove ExpensiveScientific American (Jan. 3, 2012), available at http://www.scientificamerican.com/article.cfm?id=avoiding-fracking-earthquakes-expensive.
Ohio Connects Quakes to Injection Well, Previously Unknown Fault Line NearbyBusiness Journal Daily (Jan. 12, 2012), available at http://business-journal.com/ohio-connects-quakes-to-injection-well-previously-unknown-fault-line-nearb-p20690-1.htm.
Spencer Hunt, A seismic shift in Ohio’s concerns over earthquakesThe Columbus Dispatch, Jan. 9, 2012, available at http://www.dispatch.com/content/stories/local/2012/01/09/a-seismic-shift.html.
Joe Vardon, State links northeast Ohio quakes to injection wellsThe Columbus Dispatch, Dec. 31, 2011, available at http://www.dispatch.com/content/stories/local/2011/12/31/new-quakes.html.
The Associated Press, W.Va. DEP: Injection, quakes could be tiedStar Gazette, Jan. 13, 2012, available at http://www.stargazette.com/article/20120113/NEWS11/120113015/W-Va-DEP-Injection-quakes-could-tied.
The Associated Press, Chesapeake skeptical of quake-drilling connectionCharleston Gazette, Jan. 13, 2012, available at http://wvgazette.com/News/Business/201201130127.