CHAPTER 5 STATE REGULATORY ISSUES RELATED TO DRILLING FOR SHALE GAS AND HYDRAULIC FRACTURING
| Jurisdiction | United States |
(Sep 2012)
STATE REGULATORY ISSUES RELATED TO DRILLING FOR SHALE GAS AND HYDRAULIC FRACTURING
Texas Tech University
Lubbock, Texas
CHRISTOPHER KULANDER teaches oil and gas law, property and mining law at the Texas Tech School of Law. He is also Of Counsel to Haynes and Boone, LLP. He joined the faculty in the summer of 2011 and is admitted to practice in Texas and New Mexico. He received his J.D. from the University of Oklahoma, where he was managing editor for the Oklahoma Bar Mineral Law Newsletter, note editor and assisting managing editor for the American Indian Law Review, and research assistant for Owen L. Anderson, Eugene Kuntz Chair of Oil and Gas Law. Before teaching, Professor Kulander practiced for four years in the Houston office of Haynes and Boone, LLP within the Energy Practice Group, focusing on energy lending, finance, and bankruptcy. Prior to that, he practiced for two years with Cotton & Bledsoe in Midland, Texas, focusing on oil and gas title and leasing. Before law school, he received his B.S. and M.S. in geology from Wright State in Dayton, Ohio, and his Ph.D. in geophysics (petroleum seismology) from Texas A&M, after which he worked as a geophysicist for the U.S. Geological Survey. He has written and published in the fields of oil and gas law, land use control, American Indian law as well as in geology and petroleum seismology.
Introduction2
Extraction of oil and natural gas from shale and coal and other formations previously thought to be unproductive is an American revolution. The resultant boom employs hundreds of thousands of people in good paying jobs nationwide and significantly reduces the United States' dependence on hydrocarbons imported from unstable and unfriendly countries. This revolution has the side effect of potentially harming freshwater assets if the related technology is not deployed correctly, however, and the states wherein shale hydrocarbon development is occurring are scrambling to establish regulatory schemes to protect their freshwater. Advancements in two different technologies, horizontal and directional drilling and hydraulic fracturing, have allowed widespread development of hydrocarbons in strata previously thought to be too impermeable for commercial development.
How states are reacting to hydraulic fracturing, a secondary recovery process used to extract hydrocarbons from shale and other impermeable rock, to protect their water assets is the subject of this paper. Before examining the laws and rules of a dozen select states wherein extensive shale development operations are prevalent, however, this report briefly describes both horizontal drilling and the hydraulic fracturing process and how such fracturing has--and may in the future--affect surface and groundwater. Following this, the general statutory and regulatory trends of twelve states are categorized and discussed. In the main portion of the paper, the recent laws and regulations of states that deal with hydraulic fracturing are described and analyzed. Finally, the paper concludes with some thoughts on threatened preemption of state regulation by the federal government.
Basics of Horizontal Drilling
'Horizontal' wells generally start as typical vertical wells but change direction at depth so that the drill stem and subsequent borehole is not vertical or even straight but rather is horizontal, sub-horizontal, or possibly even curved or corkscrewed. Because target rock formations lay horizontally, or tilted from horizontal to varying degrees, horizontal wells remain within the target formation over distances much longer than a vertical well. Therefore, fewer wells are needed to develop a field. In addition, multiple wells can be drilled from the same pad, lessening the "surface footprint" left by the developer. Not all wells that subsequently undergo hydraulic fracturing are horizontal wells.
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Drilling of a horizontal well is typically started in a way similar to a vertical well, with a rotary drill driving a string of drill pipe straight down from the rig. Drilling continues until the bottom of the hole is approximately five hundred feet above the target formation. At this "kick-off point"--that point where the well begins to turn from the vertical--a hydraulic motor is usually lowered into the hole directly above the drilling bit. One or more co-axial portions of the stem then turn the bit in the direction sought while the downhole motor provides the continued impetus to drive the bit. The motor itself is connected to the surface string on a flexible mount, allowing it to also be pointed in the desired direction.
Once drilling has reached the designated end point, the bit, downhole motor and the drilling string is removed after production casing is cemented in place by cement pumped down the annulus and out the end of the string. Successful "cement jobs" are crucial to preventing gas or fluids from coming up the annulus and potentially protecting freshwater aquifers. Next, the production casing in the portion of the well located within the target formation is punctured by perforating guns containing explosive charges. The perforated segments are spaced about fifty to eighty feet (50-80 ft.) apart and blow shrapnel outward in a series of controlled salvos starting at the end of the borehole. The shrapnel rips a multitude of small holes through the production casing and into the formation--usually shale--beyond. Now the hydraulic fracturing can begin.
Basics of Hydraulic Fracturing
Hydraulic fracturing, popularly abbreviated to "frac'ing," "fracking," and as used in this paper, "fracing," is a process in which fluid or gel is injected into a well at very high pressures in order to either widen and deepen existing cracks or create new fractures in the tight formation.3 About one-half of one percent (0.5%) of fracing fluid is made up of chemicals and ninety-nine and a half percent (99.5%) of it is made up of water and proppant.4 "Proppant" is the solid material, usually sifted sand which is sometimes coated with resin, that is pumped into the induced fractures along with fracing fluid to hold open the fractures so the gas can flow.
The actual fracing takes place in three phases. The first phase, called the "pad," occurs when the hydraulic fluid is first pumped into the productive zone without any proppant. This is done to instigate the fractures in the rock and to prime the location so that any fluid leakage into immediately adjacent zones are accounted for. A mixture of water and acid may first be introduced to help clear the holes in the production casings. The second stage occurs when the proppant is added to the mix, generally in concentrations increasing from 0.25 to over 4.0 pounds per gallon of frac fluid. The proppant is usually some variety of sand sifted for uniformity in grain size and mineral composition, or man-made materials such as ceramic beads or sintered bauxite. The proppant holds the fractures open, allowing the oil or gas to flow after the fracing fluid is pumped out. Without the proppant, the pressures at depth could largely reseal the fractures, defeating the value of the operation. Finally, the last stage is the flushing of the reservoir to remove excess proppant from the borehole and to propel the proppant further into the
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formation. The flushing fluid can be either water or the same fluid used to start the process as the 'pad.'5
How Fracing and Shale Gas Development Affect Water Supplies
The pressure in the hole is closely monitored throughout the process so that any significant leakage of the fracing fluid from the borehole interval being 'fraced' is immediately detected. If a leak is detected, the operation can be stopped. Leaks at or near the bottom of the casing string are separated by hundreds or thousands of feet of intervening strata from shallower freshwater aquifers.6
Fracing operations have typically required significant water. For example, a typical fracing operation in the Marcellus Shale requires between one to five million gallons of fracing fluid, mostly water, per well.7 About twenty to forty percent (20%-40%) of the fluid can be expected to return to the surface through the borehole after the proppant has been injected and the water is being drawn out. In general, there are three ways to deal with fracing fluid left over from operations: (a) inject it back via a disposal well, similar to those used to dispose excess brine from more traditional operations; (b) treat the fluid through evaporation and/or settling at the surface; or (c) gather the used fracing fluid, dilute it with freshwater, and truck or pipe it to another project and reuse it again.8
General State Regulatory Trends and Issues
Current Regulations that Effect Fracing
Despite the dissimilarities among the shale plays, abundance and location of water, regional water needs, topography, population centers and associated roads, common threads can be seen running through the response of state legislatures and regulators to fracing and its resultant waste materials.
Though specific state rules vary, older state law provisions typically did not expressly mention or include fracturing in existing laws and regulations such as those requiring that logs and pressure test results are included in disclosures to state authorities. Much of the state regulation of fracing operations is simply an extension of the regulations that have always covered oil and gas exploration and development processes generally. For example, the Texas Railroad Commission (the "RRC") formulates and enforces regulations over almost all oil and gas matters in Texas and has jurisdiction over all "oil and gas wells in Texas; persons owning or operating pipelines in Texas; and persons owning or engaging in drilling or operating oil or gas wells...
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