CHAPTER 12 ENVIRONMENTAL AND LIABILITY ISSUES ASSOCIATED WITH HORIZONTAL DEVELOPMENT
Jurisdiction | United States |
(Nov 2012)
ENVIRONMENTAL AND LIABILITY ISSUES ASSOCIATED WITH HORIZONTAL DEVELOPMENT
Ducker, Montgomery, Lewis & Bess, P.C.
Denver, CO
zwilliams@duckerlaw.com
EZEKIEL J. WILLIAMS is a partner with Ducker, Montgomery, Lewis & Bess P.C. in Denver, Colorado. He specializes in oil and gas, energy, environmental, and natural resources law and litigation. Zeke advises oil and gas companies on how to obtain, perfect, develop, and defend federal, fee, state, and Indian oil and gas leases in the Rocky Mountain states. He has litigated and arbitrated disputes involving oil and gas leases, federal exploratory units, title issues, operating agreements, accounting procedures, gas gathering and processing dedications, net profits interests, royalty obligations, produced water processing agreements, and exploration and development agreements. Zeke has extensive counseling and litigation experience with the National Environmental Policy Act, Federal Land Policy Management Act, National Forest Management Act, Mineral Leasing Act, Endangered Species Act, National Historic Preservation Act, Clean Water Act, Administrative Procedure Act, and other laws. Zeke advises oil and gas companies, midstream companies, renewable energy developers, ski areas, trade associations, and others on how to participate strategically in the preparation of NEPA documents, federal land use plans, and environmental permits that will govern their future actions. Zeke has taught Environmental Law and Natural Resources Law for six semesters as an adjunct professor at the University of Denver College of Law, is a former Trustee of the Rocky Mountain Mineral Law Foundation, and frequently speaks and writes on energy and natural resources issues. He graduated with honors in 1994 from the University of Denver College of Law where he was the Articles Editor of the Law Review, and has an undergraduate degree from Montana State University. After law school, Zeke worked as a judicial law clerk for the Honorable Bobby R. Baldock of the United States Court of Appeals for the Tenth Circuit.
I. Introduction
II. Federal and State Environmental Regulatory Programs Applicable to Horizontal Oil and Gas Development
A. Safe Drinking Water Act
B. Clean Water Act
C. Clean Air Act
D. Oil and Gas Development on Federal Lands
E. State Regulation of Oil and Gas Development on Fee Lands
III. Surface Use for Horizontal Development
A. Summary of Oil and Gas Surface Use Principles
B. Application of Surface Use Principles to Horizontal Development
1. Oil and Gas Leases
2. Surface Use Agreements
IV. Horizontal Development Specific Enactments
A. West Virginia Natural Gas Horizontal Well Control Act
B. Ohio Senate Bill 315
V. Federal and State Environmental Review Processes
A. The National Environmental Policy Act
B. State Environmental Review Processes
VI. Trespass and Horizontal Oil and Gas Development
A. Summary of Trespass Judicial Decisions
B. Trespass Damages and Horizontal Development
C. Trespass and Water Well Contamination
VII. Conclusion
I. Introduction
The number of horizontal (and directional) oil and gas wells drilled each year in the United States has sharply increased since 2000. Operators have improved and fine-tuned horizontal and directional drilling and hydraulic fracturing techniques to unlock oil and gas reserves that were previously inaccessible or uneconomic to produce. When combined with multiple stage hydraulic fracturing techniques, horizontal drilling has transformed multiple areas in multiple states into resource plays with thousands and tens of thousands of potential well locations and significant recoverable reserves. Examples include the Bakken formation in Montana and North Dakota, the Niobrara formation in Colorado and Wyoming, the Marcellus and Utica shale formations in New York, Pennsylvania, West Virginia, and Ohio, and the Eagle
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Ford and Barnett formations in Texas.1 Oil and gas produced by horizontal drilling-and the associated surface use for development and operations - has spiked. The Bakken formation in Montana and North Dakota is an example where oil production - mostly from horizontal wells - has increased from 2,000 barrels a day in 2000 to approximately 500,000 barrels a day in 2012.2
Horizontal oil and gas development in resource plays has surface use and environmental attributes that, at least in degree, are not associated with the development of vertical oil and gas wells. The most striking is that operators commonly drill and operate multiple horizontal wells from a single well pad. this promotes efficiency in drilling, including because operators can drill multiple wells in a shorter time than is possible when drilling one well per pad.3 It also reduces surface use impacts by concentrating the surface impacts of multiple horizontal wells on a single well pad, thereby avoiding constructing a well pad for each well. And horizontal development gives operators greater flexibility to site each well pad in a location that avoids sensitive surface resources and reduces conflicts with existing or planned land uses.4
But horizontal development creates new surface use issues. A single well pad that supports multiple horizontal wells is subject to more intensive surface use during the development and operations phases than is a single well pad for one vertical well. When compared to a single well pad for one vertical well, one well pad for multiple horizontal wells may yield more air emissions, truck traffic, noise, site runoff, fracking activity, produced water, waste, and activity during the operations phase. The attention that regulatory agencies and the public devote to horizontal development will likely increase.5 Legislative bodies and regulatory agencies may develop specific requirements for the more intensive surface use associated with horizontal development. At least two states - West Virginia and Ohio - have done so recently.
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Another significant attribute of horizontal development is that it commonly involves pooling multiple tracts to form spacing units under state spacing rules or orders.6 This creates at least two significant issues. First, it is likely that the surface use for a horizontal well supports development of other tracts. The prudent operator should ensure that it has authorization from the surface owner to use the surface to develop minerals located off the premises. Second, it is unclear how trespass doctrines and judicial decisions developed for vertical wells apply to horizontal oil and gas development.
This paper addresses environmental and liability issues associated with horizontal oil and gas development. Part II briefly summarizes the principal federal and state environmental regulatory programs that apply to horizontal oil and gas development, none of which are unique to horizontal development. Part III addresses surface use issues that arise in horizontal oil and gas development. Part IV addresses the horizontal well-specific legislative enactments in Ohio and West Virginia. Part V explores how horizontal well development arises in state and federal environmental review processes. Part VI summarizes the law of trespass as it may - or may not - apply to horizontal oil and gas development. I have opted not to address hydraulic fracturing because it is a topic unto itself and is beyond the scope of this paper.7
II. Federal and State Environmental Regulatory Programs Applicable to Horizontal Oil and Gas Development
Oil and gas development - conventional, unconventional, vertical, directional, and horizontal - is subject to multiple federal and state environmental regulatory programs. Oil and gas landmen, lawyers, and business representatives are familiar with those programs. A detailed summary of the federal and state regulatory regimes applicable to oil and gas development - and horizontal development - is beyond the scope of this paper. But the list certainly includes the following:
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A. Safe Drinking Water Act
The SDWA is the main federal law that ensure the quality of drinking water.8 It applies to oil and gas development through the Underground Injection Control ("UIC") program under which the Environmental Protection Agency ("EPA") or a state with an approved program regulates the injection of fluids underground, including the injection of produced water from oil and gas operations.9 An operator seeking to inject produced water underground (including frack flowback water) must obtain a UIC permit from the EPA or state.
B. Clean Water Act
The Clean Water Act is the nation's principal federal charter for the protection of surface water quality.10 Section 402 of the Act requires a permit for the discharge of a pollutant from a point source into waters of the United States.11 The Section 402 permitting program - known as the National Pollutant Discharge Elimination System program ("NPDES") - is administered by the EPA and by states with approved programs.12 The Clean Water Act prohibits the discharge from a point source of oil and gas produced water into a surface water unless the discharger obtains and complies with a properly issued NPDES permit.13
Section 404 of the Act requires a permit for the discharge of dredge or fill material from a point source into waters of the United States. The Army Corps of Engineers administers the Section 404 program, although a few states are authorized to administer Section 404 within their borders.14 For oil and gas developers, the Section 404 program regulates the development of facilities, structures, and roads that may impact waters of the United States, which may include wetlands.
C. Clean Air Act
The Clean Air Act regulates air pollution from mobile and stationary sources.15 The EPA, or states with approved programs, administer the Clean Air Act, which is one of the most complex federal regulatory...
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