Ohio Passes New Energy and Hydraulic Fracturing Legislation

Ohio Governor John Kasich
The Ohio General Assembly passed SB 315 last week, which contains changes to Ohio's oil and gas conservation program.

The bill was sent to Governor Kasich on May 24, 2012. The Act will become law on June 5, unless vetoed by the Governor, which is not likely given his support for the bill.

The new law will then be filed with the Secretary of State and become effective 91 days after it is filed.

The bill contains various changes to Ohio’s oil and gas law, including changes to pooling and unitization appeals, increased liability insurance requirements, increased radius (to 1,500 feet) for pre-drilling groundwater sampling, disclosure requirements relating to hydraulic fracturing fluids, identification requirements regarding water sourcing and volumes used in production operations, measures to encourage renewable and alternative energy, changes to Ohio's underground injection control (e.g., brine disposal) program and fees, and changes to various other fees, among other provisions.

A summary of SB 315 is available on the Ohio Department of Natural Resources' web site.

This article was prepared by Janet McQuaid (jmcquaid@fulbright.com or 724 416 0427) from Fulbright's Environmental Law Practice.

Survey of Flaring Regs for Arkansas, Colorado, Louisiana, North Dakota, Pennsylvania, Texas and Wyoming

Natural gas production is booming in the United States.

Operators, aided by advances in hydraulic fracturing, have ramped up production, whether by reworking old oil wells or exploiting new formations altogether.

However, just because an operator has the ability to produce natural gas does not necessarily mean that it can sell the gas; compressors, pipelines, treatment plants, and other infrastructure must be prepared in order to get the gas to market. 

In some cases, this lack of infrastructure has led operators to vent or flare gas at the wellhead. 

In order to get a better understanding of where the law stands and in what direction it may head, below is a survey of the major gas-producing states’ regulations regarding flaring. 

Note:  this survey covers only the regulations that speak directly to the question of whether an operator may flare the gas on private lands. Flaring has other potential legal repercussions, such as the particles that are emitted in the process that could call into question state or federal clean air laws or endangered species, and different regulations apply to wells located on state- or federally-owned land. Those concerns are beyond the scope of this survey.

Arkansas

Arkansas allows operators to vent or flare gas within 7 days of when gas is first encountered in a well. After that time, gas may not be vented or flared unless the operator obtains an exception from the Arkansas Oil and Gas Commission.

Colorado

In Colorado, all flaring must be authorized by the Colorado Oil and Gas Conservation Commission unless it is done during an upset condition, well maintenance, well stimulation flowback, purging operations, or a productivity test.

Louisiana

In Louisiana, flaring of natural gas is prohibited unless the Louisiana Office of Conservation finds upon written application that such a prohibition would result in an economic hardship on the operator. The regulations further note that no such economic hardship can be found if the current market value—at the point of delivery for the gas proposed to be vented—exceeds the cost involved in making the gas available to market.

North Dakota

Gas may be flared during the first year of production from a well. N.D. Century code 38-08-06.4. After the one-year grace period, the well must be either connected to a pipeline or used at the wellhead to power an electrical generator, unless the producer applies for and obtains an exception. Id

Producers can obtain exceptions from the Industrial Commission for additional flaring if the producer presents evidence demonstrating the economic infeasibility of piping gas from the well. Id. 

It is economically infeasible to connect the well to a natural gas gathering line if the direct costs of connecting the well to the line and the direct costs of operating the facilities connecting the well to the line during the life of the well are greater than the amount of money the operator is likely to receive for the gas, less production taxes and royalties, should the well be connected to the gathering line. N.D. Century Code 43-02-03-60.2.

Oklahoma

In Oklahoma, an operator may vent or flare up to 50 mcf/day without a permit if: (i) it is not economically feasible to market the gas; (ii) a suitable stand, line, or stack is used to prevent a hazard to people; and (iii) there is less than 100 ppm of hydrogen sulfide in the gas. For venting or flaring at rate greater than 50 mcf/day, the operator must seek an administrative permit from the Conservation Division of the Oklahoma Corporation Commission.

Pennsylvania

Pennsylvania’s oil and gas conservation regulations do not address flaring, other than to say that it may be done so long as it does not endanger people.

Texas

Texas producers have a grace period of 10 days after the initial completion, recompletion in another field, or workover operations in the same field, during which they may flare natural gas. 16 TAC 3.32(f)(1)(A). Releases of gas that are not routinely measured (such as small amounts that escape during the initial completion of a well) are exempt from flaring requirements and need not be measured for the purposes of well allowables. 16 TAC 3.32 (d)(1)

Producers may also vent or flare gas when a well must be unloaded or cleaned-up to atmospheric pressure, but may only do so for fewer than 24 hours in one continuous event or a total of 72 hours in one calendar month. 16 TAC 3.32(f)(1)(B). Texas producers may obtain exceptions from the railroad commission for the release of gas when the operator presents information to show the necessity of the release. 16 TAC 3.322(f)(2)

However, such administrative exceptions shall not be granted for periods exceeding 180 days, though they may be renewed. 16 TAC 3.32(h).

Wyoming

Wyoming allows for flaring without any additional regulatory authorization in the following situations: 
  1. During emergencies or upset conditions, which are temporary situations that result in the unavoidable short-term venting or flaring of gas; 
  2. For well purging and evaluation tests;
  3. During initial or recompletion evaluation tests which shall not exceed 15 days unless otherwise authorized; or 
  4. If it is a venting or flaring of casinghead gas from an oil well that produces less than 60 MCF of gas per day, unless the Wyoming Oil & Gas Conservation Commission determines that waste is occurring.
If an operator wishes to vent or flare gas in any other circumstance, it must apply for authorization from the Oil and Gas Conservation Commission, and the application must include the information required by Section 39.

Texas RRC Press Release, May 23, 2012


Texas Railroad Commissioner David Porter discussed the possibility of new regulations in a May 23 news release. Noting that gas drilling activity “is outstripping capacity and awaiting pipeline infrastructure,” Commissioner Porter asserted that Texas “must proactively address flaring.” The only specifics provided in the news release were: 
  1. that the Railroad Commission is seeking to work in partnership with Texas electrical energy regulators to use excess gas for strategic generation in light of the threat of weather-induced power curtailment; and
  2. that the Railroad Commission is studying a pilot program for using gas as a source of power for on-lease operations in lieu of flaring the gas.

This article was prepared by Barclay Nicholson (bnicholson@fulbright.com / 713 651 3662) from Fulbright's Energy Law Practice.

ABA Energy Litigation: Fracking's Alleged Links to Water Contamination and Earthquakes

The American Bar Association's Section of Litigation- Energy Litigation Committee released its Vol. 11, No. 2 Newsletter for Spring 2012.

Fulbright attorneys Barlcay Nicholson, Kadian Blanson and Andrea Fair, contributed the article Frackings Alleged Links to Water Contamination and Earthquakes.

EPA's Final Rule Limiting Air Emissions From Fracking Operations

On April 17, 2012, the U.S. EPA released a final rule that establishes, under new Subpart OOOO in the New Source Performance Standards (NSPS) program of the Clean Air Act (CAA), the first-ever federal emissions standards for hydraulically fractured or re-fractured completions for natural gas wells, as well as new or revised rules relating to controlling other emission sources associated with oil and natural gas industry activities.

Starting 60 days after the final rule is published in the Federal Register (probably in early- to mid-July), owners or operators of fractured or re-fractured natural gas wells must reduce flowback emissions through flaring and route salable quality gas to a flowline “as soon as practicable.”

Starting January 1, 2015, owners or operators must, where feasible, utilize reduced emission completions (also known as “green completions”) for non-wildcat, non-delineation wells with sufficient pressure.

The proposed version of the rule faced significant opposition due, in part, to concerns regarding a lack of available equipment for conducting green completions.

Although the EPA has added significant flexibility to the timing of rule requirements, such as pushing the applicability of the green completion requirement to 2015, a number of criticisms remain. Prominent issues include the application of NSPS to temporary, construction-related emissions and allegations that the EPA’s true intent is to regulate methane, a greenhouse gas, and not VOCs.

Another issue that bears watching is how the regulation of flowback emissions under NSPS factors into preconstruction permit authorizations under the New Source Review (NSR) program. Generally, new stationary sources that are subject to the NSPS program are also subject to NSR.

New Subpart OOOO has placed in the forefront for the first time the issue of whether flowback emissions following the hydraulic fracturing of a natural gas well or other wellhead activities are subject to NSR permitting requirements.

Historically, the EPA has not explicitly required such emissions to be authorized in a NSR permit, apparently viewing these emissions as temporary and de minimis in nature. Some states do require NSR authorization for well emissions; many have assumed that these emissions are covered under permits by rule or exemptions.

At this time, the EPA has provided no real indication of whether it will now consider flowback emissions to be subject to NSR preconstruction review.

The agency did provide an exemption in the rule to prevent automatic major source NSR permitting due to NSPS applicability from re-fracturing of an existing well. (Rather paradoxically, the exemption requires doing everything that the rule would have required if it were applicable).

However, this exemption does not apply to new wells and the EPA’s discussion in the rule preamble falls far short of a declaration that minor NSR permitting should not apply to these types of emissions.

Additional information regarding control requirements imposed by the rule can be found in Fulbright’s Client Alert.


EPA Proposes Permitting Guidance for Diesel Fuels Use in Hydraulic Fracturing

On May 4, 2012, the U.S. Environmental Protection Agency (“EPA”) published draft UIC Program permitting guidance for oil and gas hydraulic fracturing activities using diesel fuels.

The Energy Policy Act of 2005 exempted hydraulic fracturing operations from requirements to obtain an underground injection control (“UIC”) permit under the federal Safe Drinking Water Act ("SDWA"), except when diesel fuels are used as a fracturing fluid. However, the Act did not define the term “diesel fuels.”

The proposed guidance attempts to provide clarity for EPA permit writers issuing UIC permits under the SDWA.

Environmental groups had lobbied for EPA to broadly define the term “diesel fuels” to include any material containing benzene, toluene, ethylbenzene, and xylene compounds (“BTEX”).

Industry advocated for a narrower, more traditional definition of diesel fuels. In the proposed guidance, EPA has adopted an approach based on the Chemical Abstract Service Registry Numbers (“CASRNs”) for diesel fuels.

In determining whether a hydraulic fracturing activity requires a UIC permit, EPA permit writers are to determine whether the injection fluid has any of the following six CASRNs:

  • 68334-30-5 Primary Name: Fuels, diesel Common Synonyms: Automotive diesel oil; Diesel fuel; Diesel oil (petroleum); Diesel oils; Diesel test fuel; Diesel fuels; Diesel Fuel No. 1; Diesel fuel [NA199311]; Diesel fuel oil; EINECS12 269-822-7
  • 68476-34-6 Primary Name: Fuels, diesel, no. 2 Common Synonyms: Diesel Fuel No. 2; Diesel fuels no. 2; EINECS 270-676-1, No. 2 Diesel Fuel
  • 68476-30-2 Primary Name: Fuel oil No. 2 Common Synonyms: Diesel fuel; Gas oil or diesel fuel or heating oil, light [UN1202] #2 Home heating oils; API No. 2 fuel oil; EINECS 270-671-4; Fuel Oil No. 2; Home heating oil No. 2; Number 2 burner fuel; Distillate fuel oils, light; Fuel No. 2; Fuel oil (No. 1,2,4,5 or 6) [NA1993];
  • 68476-31-3 Primary Name: Fuel oil, no. 4 Common Synonyms: Caswell No.13 333AB; Cat cracker feed stock; EINECS 270-673-5; EPA Pesticide Chemical Code 063514; Fuel oil no. 4; Diesel Fuel No. 4
  • 8008-20-6 Primary Name: Kerosene Common Synonyms: JP-5 navy fuel/marine diesel fuel; Deodorized kerosene; JP5 Jet fuel; AF 100 (pesticide); Caswell No. 517; EINECS 232-366-4; EPA Pesticide Chemical Code 063501; Fuel oil No. 1; Fuels, kerosine; Shell 140; Shellsol 2046; Distillate fuel oils, light; Kerosene, straight run; Kerosine, (petroleum); Several others
  • 68410-00-4 Primary Name: Distillates (petroleum), crude oil, Common Synonyms: Fuel, diesel (VDF) (EPA SRS14), Straight PWN diesel (EPA SRS), Aruba gas oil; EINECS 270-072-8 
The proposed guidance will be subject to public notice and comment.

The prepublication Federal Register notice has been posted on EPA’s website. Notice of the draft guidance was published in the Federal Register on May 10, 2012. The comment period ends on July 9, 2012.

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.

DOI Releases Long-Awaited Proposed Rules on Hydraulic Fracturing on BLM and Indian Lands

On May 4, 2012, the Department of Interior released long-awaited proposed rules concerning hydraulic fracturing on Bureau of Land Management and Indian lands.

These proposed rules stems from a forum in November 2010 covering hydraulic fracturing on federal and Indian lands, followed by several meeting with interested stakeholders.

The draft rules were leaked to the media in February 2012, which is discussed in Fulbright’s Client Briefing, Department of Interior Releases Draft Rule of Well Stimulation.

Recently, President Obama issued an Executive Order calling for safe and responsible development of unconventional domestic natural gas resources, which created an interagency task force comprised of 13 agencies and offices, including, but not limited to:
The goal of the task force is to coordinate agency policy, share scientific, environmental, and related technical and economic information, and engage in long-term planning to ensure coordination amongst the agencies.

The DOI has indicated that these proposed rules received feedback from these agencies.

Oil and gas operators will be required to disclose chemicals in hydraulic fracturing operations, but this disclosure of chemicals only needs to be provided after drilling has begun. 

Previously, the draft rules required that the disclosure of chemicals occur before any proposed stimulation of the well. Additionally, the goal of the proposed rules are to improve assurances of well-bore integrity and ensure that a water management plan is in place for handling flow back fracturing fluids.

Fulbright's Shale and Hydraulic's Task Force is preparing a more detailed Client Alert concerning the revisions from the draft rules and the proposed impact to oil and gas operators.

DOI Resources