CHAPTER 3 STATE EOR REGULATION: COMMON THEMES AND IDIOSYNCRASIES
| Jurisdiction | United States |
(May 2015)
STATE EOR REGULATION: COMMON THEMES AND IDIOSYNCRASIES
Ashley M. Jackson
Partner
Crowley Fleck PLLP
Cheyenne, Wyoming
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LYNNE BOOMGAARDEN opened the Crowley Fleck PLLP Cheyenne office in August 2013, and is a Partner with the firm. Prior to that, she was a Partner at Belcher & Boomgaarden LLP. Her practice areas include oil and gas, mining, administrative law, federal and state land transactions, energy and mineral transactions and projects, outreach and governmental affairs, and appellate advocacy. Lynne received a Bachelor of Science in Zoology in 1983 from the University of Wyoming, and graduated with honors from the University of Wyoming College of Law in 1991. Lynne clerked for the Honorable Wade Brorby on the U.S. Tenth Circuit Court of Appeals. In addition to her private practice experience, she was an Assistant Professor at the University of Wyoming College of Law, teaching Oil and Gas Law, Mining Law, Agricultural Law, Constitutional Law, and Legal Writing. Lynne served from March 2003-April 2010 as Director of the Wyoming Office of State Lands & Investments and chaired the Wyoming Oil and Gas Conservation Commission. Lynne and her husband Rick enjoy Wyoming Cowboy and Cowgirl athletics, fly fishing, bird hunting, and spending time with their two daughters and their families.
I. Introduction1
Enhanced oil recovery2 (EOR) operations have generated laws, rules and regulations to assure the conservation of oil and gas, protect correlative rights, and, most notably, to mitigate possible environmental impacts, particularly water pollution. A majority of these laws and regulations are incorporated into the rules and regulations of state conservation agencies and address the protection of underground water sources. This paper provides an introduction to the various state conservation agencies and a survey of those laws, rules and regulations that govern EOR permitting and compliance.
This paper also provides recommendations for navigating through the various regulations and working with the conservation agencies involved in permitting EOR projects in eleven different states which have an established EOR regulatory framework. Finally, the paper identifies relevant new legislation, rules and regulations, and trade associations and policy advisors that can help in planning an EOR project. This paper is intended to be an introductory guide; readers are encouraged to contact the agencies and other resources identified herein for guidance specific to any given EOR project or issue.
A. Safe Drinking Water Act: UIC Primacy
Congress passed the Safe Drinking Water Act (SDWA) in 1974. 42 U.S.C.A. §§ 300f -300j (West 2014). The Act was amended in 1986 and 1996 to include drinking water sources such as rivers, lakes, reservoirs, springs and ground water wells. The SDWA authorizes the United States Environmental Protection Agency (EPA) to set national standards for drinking water to protect against naturally-occurring and man-made contamination.
The EPA's Underground Injection Control (UIC) Program under the SDWA regulates the construction, operation, permitting and closure of injection wells that place fluids underground. 42 U.S.C.A. § 300h (West 2014). The UIC Program regulates several types of injection and disposal wells, including Class II wells related to oil and gas production.3 EOR injection wells are classified as Class II
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wells.4 States may apply for primacy to regulate Class II wells under either Section 1422 or 1425 of the SDWA. 42 U.S.C.A. § 300h-1(b)(3) (West 2014); 42 U.S.C.A. § 300h-4(c) (West 2014). Section 1422 requires states to meet, or adopt rules that meet, the EPA's minimum requirements for UIC programs. 42 U.S.C.A. § 300h-1 (West 2014). Section 1425 allows states to demonstrate their existing standards are effective in preventing endangerment of Underground Sources of Drinking Water (USDW). 42 U.S.C.A. § 300h-4 (West 2014). Accordingly, regulatory jurisdiction can be asserted as a matter of:
a. Exclusive Federal Control - This will occur where the state has no similar law or where the federal government is the only legal authority. In these cases, only a federal permit is required. Please see Appendix A for the EPA-managed programs.
b. Exclusive State Control - This will occur when the state has assumed administration of the UIC program either by adopting the Federal minimum standards under Section 1422 or by demonstrating that state standards are effective under Section 1425. In these cases the EPA will oversee the state's activities, but a separate federal permit is not required and the state will have primary enforcement responsibility. 42 U.S.C.A. §§ 300h-1 , 300h -2 , 300h -4 (West 2014). Please see Appendix A for states which have exclusive state control.
c. Dual Program Control - This will occur when the state has a program of its own, but that program does not meet federal standards. In this case, an operator needs both state and federal permits. As an example of dual program control, please see the Michigan standards set forth in this paper. Please also see Appendix A for a listing of EPA-managed programs with dual state regulations.
State UIC program primacy does not extend to lands owned by an Indian Tribe. 42 U.S.C.A. § 300h-1(e) (West 2014). EPA prescribes UIC programs on tribal lands unless and until a Tribe applies for and obtains primacy. Id. If an EOR project includes tribal lands, the operator will need to contact the EPA or specific tribal authority.
B. Pre-Application Preparation
Prior to seeking approval of an EOR project the EOR operator should define its facility site. If multiple sites are available, contact with the state or federal conservation agency, landowners, affected working interest owners and operators5 in each of the areas, and other state environmental agencies can be helpful in selecting the best site. Only after a site is selected, can an operator accurately determine which agency(ies) have jurisdiction and what statutes and regulations will apply.
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The operator must then determine whether the project must be unitized in accordance with state law6 and the timing of unitization approval relative to project and/or individual well approvals. Most unitization provisions are set forth in state statutes, whereas some states may include unitization application requirements only in the conservation agency rules In states such as Colorado, Michigan and North Dakota unitization applications can be combined with area-wide or EOR project approval applications. In other states where area-wide or EOR project applications are not required, such as Kansas, unitization will be a prerequisite to applying for injection wells. Because the regulations often are vague as to timing, operators should check with each state agency to determine if unitization applications can be combined with EOR project and injection well applications.
The states addressed below have statutes and regulations pertinent to EOR projects. These selected states are intended to be representative and not exclusive, with the hope of providing the reader a basic understanding of EOR regulation. It is recommended that an operator contact the applicable agency and visit the agency website for the state in which its EOR project will be located prior to beginning the permitting process. Please see Appendix B for agency contact information for each state outlined in this paper. Operators may also want to review agency forms and past dockets with approved permit applications and orders for a more detailed understanding of the permitting process. These documents can often be found on the agency website.
Due to ever advancing EOR technologies, existing rules and regulations may not contemplate or adequately address a specific proposed operational plan. Operators in this situation should contact the state agency prior to beginning the permitting process to discuss possible issues and alternatives. Early communication will be key to timely permitting success.
Finally, an operator will need to be mindful of new laws and regulations that could affect a project. Conservation agency websites will typically list proposed rules; new legislation can generally be found on each state's legislative website. State trade associations and governmental policy advisors can be helpful as well.
C. Conservation Statutes and Regulations: An Overview
Although each state regulates EOR operations differently, common themes emerge and the purpose of such regulation is the same in every state: an EOR project will not be approved unless the operator can demonstrate that the proposed project will not endanger fresh water sources. Permitting an EOR project typically involves a two step process. First, the EOR project as a whole must be approved. Some states require that specific forms be completed and submitted for approval; other states do not.
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Most states require that a public hearing be held before an EOR project or unitization application will be approved. Second, individual injection and production wells must be permitted. Several states have forms that an operator can use for obtaining individual well approvals. Well approvals can sometimes be made on an area wide basis, especially in those states which do not require project applications or employ unitization principles. In some jurisdictions a hearing must be held prior to approving individual well permits; in other jurisdictions these permits can be approved administratively.
D. Select EOR States
The pertinent conservation agency, statutes, rules and regulations are set forth below for the following states with an established EOR regulatory framework: Colorado, Kansas, Louisiana, Michigan, Mississippi, Montana, New Mexico, North Dakota, Oklahoma, South Dakota...
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