CHAPTER 20 HYDRAULIC FRACTURING: A COMPARISON OF REGULATORY APPROACHES AND TRENDS FOR THE FUTURE

• Jurisdiction: Derecho Internacional

International Mining and Oil & Gas Law, Development, and Investment
(Apr 2013)
CHAPTER 20
HYDRAULIC FRACTURING: A COMPARISON OF REGULATORY APPROACHES AND TRENDS FOR THE FUTURE
David Neslin ^*
Partner, Davis Graham & Stubbs
former head of Colorado Oil & Gas Conservation Commission
Denver

DAVID NESLIN is a partner in the Denver, Colorado law firm of Davis Graham & Stubbs LLP. From November 2007 through February 2012, he served as Director of the Colorado Oil and Gas Conservation Commission. During his tenure, the Commission worked to balance energy production with environmental protection by undertaking the first comprehensive updating of its regulations in more than a decade, implementing new environmental requirements, significantly reducing administrative review times, working collaboratively with local governments, and adopting hydraulic fracturing regulations that are considered a national model. During his State tenure, David served as the Chair of State Review of Oil and Natural Gas Environmental Regulations, Inc., which conducts peer reviews of state environmental programs, and as Colorado's representative on the Interstate Oil and Gas Compact Commission, which provides leadership on U.S. oil and gas issues. He also helped develop and promote the hydraulic fracturing website www.FracFocus.org. He has testified before Congress and frequently speaks on hydraulic fracturing and other energy-related topics to local, national, and international audiences. Before joining the State, David spent 24 years with the law firm of Arnold & Porter, LLP, where he handled precedent-setting litigation under the Clean Water Act, National Environmental Policy Act, National Environmental Policy Act, and Nuclear Waste Policy Act. He is a graduate of the University of Washington and the University of Washington law school.

TABLE OF CONTENTS

I. INTRODUCTION

II. BACKGROUND

A. Hydraulic Fracturing

B. Public Benefits

1. Energy Production

2. Economic Improvement

3. Greenhouse Gas Reduction

C. Public Concerns

1. Water Contamination and Consumption

2. Air Emissions

3. Chemical Exposure

4. Other Concerns

III. COMPARISON OF FEDERAL AND STATE REGULATIONS

A. Federal Regulation

1. Safe Drinking Water Act

2. Clean Water Act

3. Clean Air Act

4. Comprehensive Emergency Response, Compensation, and Liability Act

5. Emergency Planning and Community Right-to-Know Act

6. Other Regulatory Actions

B. State Requirements

1. Colorado

2. North Dakota

3. Ohio

4. Pennsylvania

5. Texas

6. STRONGER

IV. REGULATORY TRENDS

A. Frequent Action

B. Incremental Improvement

C Diverse Issues

D. Prescription and Performance

E. Interagency Coordination

F. New Tools

V. CONCLUSION

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I. INTRODUCTION

Experts from around the world have touted the potential benefits of unconventional oil and gas development. According to the International Energy Agency, natural gas is "poised to enter a golden age" which promises "greater energy diversity and more secure supply" as well as "reduced energy costs."¹ An Advisory Board to the United States Secretary of Energy has noted the "enormous potential" for "economic and environmental benefits" from shale gas development.² And the European Parliament Committee on Industry, Research and Energy has noted that unconventional gas production can promote energy security and diversity while also providing a "quick, temporary and cost-efficient way of reducing reliance on other, dirtier fossil fuels before moving to fully sustainable low-carbon power generation."³

The unconventional resources in question include onshore shale, tight sandstone, and coalbed methane formations.⁴ Historically, the low permeability of shale and tight sandstone formations had limited their development.⁵ But recent technological advances in horizontal drilling combined with multi-stage hydraulic fracturing are allowing operators to develop these resources economically.⁶ This is increasing oil and gas production in the United States and expanding it into new regions and areas,⁷ while creating opportunities for similar production and expansion overseas.⁸ But the proliferation of unconventional development is also raising public concern over potential water, air, seismic, and other effects attributed to hydraulic fracturing.⁹ In particular, concerns have been raised that spills and faulty well construction could contaminate ground and surface water resources and that emissions of pollutants could adversely affect public health and the environment.¹⁰ These are not just American issues but global considerations, which increasingly attract worldwide media attention.¹¹

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In the United States, these concerns have led to a variety of regulatory actions by federal and state governments, as well as the development of potential new regulatory models and tools by several non-governmental organizations. This paper summarizes some of the most significant benefits and concerns associated with hydraulic fracturing, and it provides an up-to-date comparison of representative regulatory regimes and proposals. It also suggests emerging regulatory trends, which may help shape the approach to these issues in other countries. Responsible regulation of hydraulic fracturing is critical because it can help bridge the widening gap between the pivotal promise and the perceived peril of this process; like Bertram Russell's description of philosophy, responsible regulation allows us "to live without certainty and yet without being paralyzed by hesitation."¹²

II. BACKGROUND

The commercial application of hydraulic fracturing to stimulate oil and gas production is more than 60 years old.¹³ It is now routinely used to complete oil and gas wells in the United States, particularly those drilled into shale, tight sandstone, and other unconventional formations. More than one million oil and gas wells in the United States have been hydraulically fractured, and experts believe that up to 80 percent of all wells drilled in the United States during the next decade will require hydraulic fracturing.¹⁴ This process has produced significant public benefits and created a host of "shale plays" across the United States, including the Marcellus and Utica in the Northeast, the Barnett, Haynesville, and Fayetteville in the Southeast, the Bakken in the Northern Plains, and the Niobrara in the Rocky Mountains.¹⁵ But it is also stimulating a variety of environmental and public health concerns.

A. Hydraulic Fracturing

Hydraulic fracturing occurs after the well is drilled, and is used to increase oil and gas production. The United States Environmental Protection Agency ("EPA") has described the process as follows:

Hydraulic fracturing involves the pressurized injection of fluids commonly made up of water and chemical additives into a geologic formation. The pressure exceeds the rock strength and the fluid opens or enlarges fractures in the rock. As the formation is fractured, a 'propping agent,' such as sand or ceramic beads, is pumped into the fractures to keep them from closing as the pumping pressure is released. The fracturing fluids (water and chemical additives) are then returned back to the surface. Natural gas will flow from pores and fractures in the rock into the well for subsequent extraction.¹⁶

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In other words, hydraulic fracturing is the injection of a fluid mixture down the wellbore to create small fractures in the hydrocarbon formation in order to increase the rate at which gas and oil are produced.

Water and sand constitute 98% to 99.5% of the hydraulic fracturing fluid,¹⁷ and the volume of water used varies by well type and geologic formation. EPA estimates that 50,000 to 350,000 gallons of water may be required to fracture a vertical well in a coatbed methane formation while two to five million gallons of water may be needed to fracture a horizontal well in a shale formation.¹⁸ Depending upon the site, 15% to 80% of the injected fluids may return to the surface.¹⁹ These "flowback fluids" may be recycled, returned deep underground using a permitted underground injection well, treated and discharged to surface water, or applied to land.²⁰

Chemical additives constitute .5% to 2% of the hydraulic fracturing fluid, and they too vary by well and formation.²¹ Each additive serves a specific purpose. For example, friction reducers decrease pumping friction, gels improve sand distribution, and biocides eliminate bacteria that can cause corrosion.²² Many of these additives are common chemicals which are encountered in everyday life, but some can be harmful in certain quantities or circumstances.²³

To protect ground water, wells are constructed with multiple layers of steel pipe called "casing," which are surrounded by layers of cement.²⁴ The steel casing and surrounding cement isolate the internal portion of the well from the surrounding geologic formations, which may include fresh water aquifers; they thereby help ensure that neither the fracturing fluids injected down the wellbore nor the oil and gas flowing up the wellbore can reach the aquifers.²⁵ Measures to prevent surface spills and releases include lined pits, setbacks from surface waters, and "closed loop" fluid handling systems.²⁶

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Trucks are often used to transport water and other supplies to and from the well site, and the hydraulic fracturing of one horizontal well can potentially generate hundreds of truck trips.²⁷ In addition, mobile engines are often used to produce the pressure necessary to inject the fluids and fracture the formation.²⁸ These trucks and engines can create air emissions and noise, and the trucks can also cause road wear.²⁹ Methane may also be released during "flowback," that is, when the fracturing fluids return to the surface at the conclusion of hydraulic fracturing.³⁰ Measures to address these air, noise, and road impacts include reduced emission or "green" completions...