Hydraulic Fracturing Myths and Maneuvers

Presented by

Cindy Bishop

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August 26, 2012

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Hydraulic Fracturing: Myths and Maneuvers

I. Hydraulic Fracturing 1011. What is it?2. Why do we care?3. What’s the problem?

II. Regulations – Who’s on First?1. Texas2. EPA

III. Myths (Studies)IV. Maneuvers

1. US v. Range Production Company2. Maryland v. Chesapeake Energy Corp. 3. Town of Dish v. Atmos Energy, et al.

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General Steps •Obtain water source•Well construction•Fracing•Waste disposal

Fracing•Liquid pressure•Fissures•Propping agent•Flowback water

What is Hydraulic Fracturing (“Fracing”)?

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•Natural gas heats ½ of US homes•Natural gas fuels more than 20% of annual electricity production•Natural gas use will increase as coal plants are retired•20% of U.S. gas supply will be from shale gas by 2020

Why do we care?

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NATURAL GAS PRODUCTION BY SOURCE (TCF/YEAR)

It is projected that shale gas will comprise over 20% of the total US gas supply by 2020 (EPA)

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•Since 2003 15,675 gas wells drilled and fracked in North Texas•2,000 wells in Fort Worth

Effect Locally

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About 1/3 flowback liquid returns

Disposal well Surface impoundment Land surface

Wastewater Disposal

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Waste Disposal – Surface Impoundment

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WHAT’S THE PROBLEM?

Natural Gas in Well Water

What’s the Problem?

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•Water for fracing•Fracing• Chemicals in frac water•Methane release•Disposal of flowback water•Air emissions•Noise, light, odor•Earthquakes

What’s the Problem?

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Regulating Fracing

Who’s on First?

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The Texas Railroad Commission has primary jurisdiction over oil and gas drilling. Tex. Nat. Res. Code § 81.051; 16 Tex. Admin Code § 3.5

Texas Commission on Environmental Quality has primary jurisdiction over conservation of natural resources and protection of the environment 30 Tex. Admin Code § 5.012

Texas Regulations

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• Well Drilling/re-completion• Disposal wells• Pits for storage of oil field fluids or oil

and gas wastes.• Spills associated with production• Oil and Gas Waste• Applicable Regs: 16 Tex. Admin. Code §3.8 (Water Protection); §

3.13 (Casing, Cementing, Drilling, and Completion Requirements); RRC Rule 38; 40 CFR §261.4(a)(12)

• Surface casing program (eff. 9/1/11)

Railroad Commission

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Disclosure of Fracing Chemicals (16 TAC § 3.29)

◦ Applies to fracturing operations where RRC has issued an initial drilling permit on or after Feb. 1, 2012

◦ Supplier/service company to operator – 15 days after completion of fracing

◦ Operator to RRC – disclose into online database on or before submission of well completion report to RRC (30 days after well completion)

Railroad Commission

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Disclosure of Fracing Chemicals (16 TAC § 3.29)

◦ Disclose: Volume of water used Each fracing chemical Concentrations Suppliers

◦ Exception for trade secrets

Railroad Commission

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Surface water use

Spills of hazardous substances

Nuisance Odor Complaints

Air Emissions◦ Permit by Rule (30 TAC §106.352)

New PBR: applies to Barnett Shale operations constructed or modified after April 1, 2011

◦ Existing operations in Barnett Shale claiming old PBR must notify TCEQ by Jan. 1, 2013

TCEQ

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Memorandum of Understanding: 16 TAC § 3.30

RRC or TCEQ?

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Wastewater discharges

Stormwater

Underground injection wells involving diesel

TSCA § 8(c)

NSPS/NESHAP revisions (final rule 8/16/12)

Federal Regulation

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Energy Policy Act of 2005 specifically excludes hydraulic fracturing operations.◦ Exemption for: “The underground injection

of fluids or propping agents (other than diesel fuels) pursuant to hydraulic fracturing operations related to oil, gas, or geothermal production activities.” 42 U.S.C. § 300h(d)(1)(B)(ii).

Federal Regulation

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No EPA action after 2005 Energy Policy Act Summer 2010 – EPA posts on its website

that fracing with diesel requires a UIC permit

August 2010 – Independent Petroleum Association v. EPA (D.C. Cir.)

Federal Regulation

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Federal Air RegulationsNSPS Revised:• Equipment Leaks (KKK)• SO2 (LLL)

New (OOOO):• Hydraulic Fracturing• Gas-driven Pneumatic Devices, Centrifugal and

Reciprocating Compressors• Storage Vessels

Applies to new facilities that were constructed or modified after August 23, 2011

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Federal Air RegulationsNESHAP Revised• Oil & Gas Production Facilities (HH)• Gas Transmission and Storage (HHH)

New• Small Glycol Dehydrators• Storage Vessels at Major Sources

Must Notify EPA within 1 year after rule becomes final

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Conceptual equipment layout

REC timelineAugust 23

NSPS Applicability June 1-ish

Predict Final

Publication

Phase I “Flare-Friendly”

2011 2012 2013 2014 2015 2016 Etc.

Phase II “Full REC”

60 Days from Publication August 1-ish

Gas vented during flow-back for hydraulic fracturing of gas wells must be controlled and contained, sold or used

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Chemical disclosure statutes in Arkansas, Pennsylvania, Wyoming and Colorado, Michigan, Texas, California

Drilling moratoriums: NY, Maryland, PA

State Actions

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Barnett Shale

◦ City of Fort Worth rules on drilling

◦ Town of Dish blocks drilling

◦ City of Dallas has not issued any drilling permits

task force for considering drilling requirements

Local Attempts at Regulation

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Current Studies

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Sampled 68 drinking water wells in PA and NY

Methane concentrations were 17 times higher in water wells near active vs. inactive wells

Methane was thermogenic “Methane Contamination of Drinking

Water Accompanying Gas Well Drilling and Hydraulic Facturing”

Duke Study (May 2011)

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85% of wells sampled contained thermogenic methane – regardless of location

No fracing fluid detected in shallow water

Water properties consistent with historical data

Methane likely did not come from actual fracing

Duke Study (May 2011)

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Methane is a GHG Fracing has a higher carbon footprint than

coal 3.6 to 7.9% escapes in fracing 1.7 to 6% escapes in regular drilling “Hogwash”

Cornell Study (April 2011)

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January 6, 2012 New Cornell Study Prior study was “seriously flawed” Fracing has a carbon footprint that is half

to a third that of coal

Cornell Study

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2012 - EPA proposed year to release interim results

2012 to 2014 - additional results to be released as particular investigations completed

2014 - EPA proposed year to release another report

New EPA Study of Hydraulic Fracturing for Shale Gas

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Draft Study – Dec. 8, 2011 Studied rural water wells in response to

complaints Wells in area since the 1950s 169 production wells 33 surface pits EPA collected soil and gw samples Conclusions: (1) pits are a source of

shallow gw contamination (2) likely impact to gw from hydraulic fracturing

EPA Wyoming Study

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Draft Study – no peer review Area has a shallow gas field EPA drilled monitoring wells into a gas

reservoir and found natural gas – duh Results from water well tests do not exceed

drinking water standards Pits are already in remediation program May 2012 - An independent review concluded

federal regulators had insufficient data to suggest the natural gas drilling technique allowed methane to contaminate groundwater

EPA Wyoming Study - Problems

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UT Energy Institute Groundwater study in Barnett, Haynesville

and Marcellus formations Findings – no direct link between fracing

and groundwater contamination Undergoing independent review

UT Study

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Austin American-Statesman : “Study links fracking and earthquakes”

Lubbock Avalanche Journal: “Study finds no relation between fracking,

earthquakes”

UT Study – Part 2Earthquakes (August 2012)

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LITIGATION

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• 12/7/10 – EPA issued Emergency Administrative Order against Range under SDWA

• Methane in 2 drinking water wells in Parker County “likely” due to fracing from Range wells in the area

United States v. Range Production Co.

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4/19/11 – Chesapeake well blowout releases flowback water onto neighboring farmlands and into nearby creek

4/29/11 – Maryland files Notice of Intent to Sue under RCRA and CWA◦ Injunctive relief◦ Attorneys’ fees

5/17/11 – Chesapeake Settles with PAfor $1 million

Maryland v. Chesapeake Energy Corp.

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February 2011, Town of Dish, Texas sued six natural gas pipeline companies that own and operate compressor stations near the town for releasing harmful substances into the air

Town of Dish v. Atmos Energy, et al

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Allegations of Drinking Water Contamination◦4 cases in TX

Other Lawsuits

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Lone Pine Order◦ Expert Opinion on Causation

◦ Data Showing Contamination

◦ Medical Records

◦ Evidence of Diminution in Value

Defense of Litigation

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Where’s the science? Evolution of Regulations/Laws

Conclusions

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Hydraulic Fracturing Myths and Maneuvers

Presented by

Cindy Bishop

214-893-5646cbishop@cbishoplaw.com

www.cbishoplaw.com