Site Sections to Include

NEWS & INSIGHTS

March 24, 2014
Sidley Shale and Hydraulic Fracturing Report

Federal

EPA seeks advice on addressing recent methane emissions data. EPA has requested public comments on how it can incorporate a series of ongoing studies of methane emissions from natural gas sources into its annual GHG Inventory. In contrast to EPA’s current reliance on emissions estimates, the studies conducted by the Environmental Defense Fund (EDF) and the University of Texas at Austin (UT) provide actual measurements of methane emissions leaks during well development and flowback. The emissions reported by the EDF and UT studies are significantly lower than EPA’s emissions estimates and may undercut calls for EPA to regulate methane emissions from the oil and gas sector.

BLM holds first public forum to discuss methane emissions from oil and gas development. On March 19, 2014 the Bureau of Land Management (BLM) held a public forum in Colorado to discuss options to address methane emissions released during oil and gas development. Developing rules for methane emissions has been on BLM’s regulatory agenda since 2010, and the Administration’s Climate Action Plan has targeted reducing methane emissions as part of its overall efforts to address climate change. In presentations at the forum, BLM explained that it believed existing rules were out of date and provided a range of options that could be considered in a future rulemaking. BLM plans to hold additional listening sessions during May in North Dakota, New Mexico and Washington, D.C.

States

California: Carson issues temporary moratorium on oil drilling. The city council of Carson, California, which sits above the Dominguez field, unanimously voted to prohibit oil development temporarily. The moratorium is for 45 days, but the council can extend it to last as long as two years. The city council vote marks the first time that a California city with oil reserves has issued such a moratorium. Reportedly, the city council adopted the temporary moratorium to allow it to consider for itself the potential effects associated with using hydraulic fracturing to develop oil resources, as well as the content of the state regulations that are to be issued in response to California’s hydraulic fracturing legislation.

Illinois: Johnson County voters defeat effort to ban hydraulic fracturing. In a March 18, 2014 referendum, voters in Johnson County, Illinois defeated a non-binding ballot measure that would have directed the county commissioners to ban hydraulic fracturing within the county. Proponents had argued that hydraulic fracturing is contrary to Johnson County residents right to a safe and clean environment. The referendum was the first local vote involving a ban on hydraulic fracturing since Illinois passed the Hydraulic Fracturing Regulatory Act in 2013.

Oklahoma: New rules would increase data collection from oil and gas disposal wells. The Oklahoma Corporate Commission has proposed new rules that would require daily recordkeeping of volume and pressure data for oil and gas disposal wells. The rules require approval by the Oklahoma legislature and governor. The Commission believes the increased data will help the state evaluate whether disposal wells are contributing to recent increases in seismic activity in the state. The rules have widespread support, and the Oklahoma Independent Petroleum Association has stated that, while burdensome, additional data would ultimately help to alleviate public concern over hydraulic fracturing.

Minnesota: Minnesota EQB approves silica mining regulations. The Minnesota Environmental Quality Board (EQB) approved model regulations that could be used by local governments seeking to regulate silica mining. While an earlier draft had included some mandatory requirements, such as the enclosure of silica mining operations, the final regulations provide a “toolbox” of standards as guidelines that local governments can consider when developing their own regulations. The EQB was required to issue the guidance under the terms of legislation passed in 2013.

North Dakota: State to issue regulations to track radioactive waste. North Dakota Governor Jack Dalrymple has directed the state’s health department to prepare regulations requiring the tracking of radioactive waste generated during oil and gas development. The directive came after potentially radioactive filter socks were found in Watford City and Noonan, North Dakota earlier this month. Radioactive waste is a natural byproduct of oil and gas development in North Dakota, but the state prohibits in-state disposal. The draft rules are expected to be released for public comment in June.

Texas: City of Denton to hold vote on hydraulic fracturing moratorium. Frack Free Denton, a grassroots organization opposed to hydraulic fracturing, announced that it has collected enough signatures to place its proposal to ban hydraulic fracturing on the November ballot. Landowners in the Denton area recently filed lawsuits regarding alleged emissions from gas wells and royalties from gas production. Last fall, the City of Denton unsuccessfully sought an injunction barring new gas wells within the city limits.

International

EU excludes shale gas operations from environmental assessment directive. The European Parliament voted recently to strengthen an environmental assessment directive that will apply to approximately 200 types of projects including bridges, ports and landfill sites. Shale gas operations, however, were excluded from the revised directive. Analysts observed that the EU’s decision reflects an increased concern over energy security which has been exacerbated by the ongoing conflict in Ukraine.

Studies

ICF: North American oil and gas industry must invest more than $30 billion per year in infrastructure. A recent ICF International study projects that over the next twenty years, the oil and gas industry in the United States and Canada will need to invest $641 billion on midstream infrastructure. The $30 billion per year projection is more than double what ICF projected in 2011 and nearly three times more than current investments. Necessary infrastructure would include new pipelines, pumping stations, gas compressors and other equipment. While natural gas will require the most significant expenditures, oil and natural gas liquids account for a large and growing share of the total costs. ICF found that the necessary investments would create more than 432,000 jobs and generate $300 billion in taxes. ICF also noted that political issues, including U.S. approval of liquefied natural gas exports and international conflicts in places like Ukraine will also influence the market and infrastructure needs for domestic oil and gas.

CATF: Oil and gas industry have cost-effective options to reduce methane emissions. The Clean Air Task Force (CATF) released a report suggesting that new technology would allow the oil and gas industry to cost effectively reduce methane emissions from gas processing plants, compressor stations and well sites. The report highlighted the use of infrared cameras, as opposed to visual inspection, to detect leaks, claiming that the costs to use infrared cameras are low and in 90% of cases, offer a payback period of less than one year by preventing the loss of saleable product. The report focused on annual inspections, finding that the costs associated with more frequent monitoring programs would not be cost effective. CATF is using the study as part of a campaign urging EPA to adopt regulations that include expanded leak detection requirements.

Wood Mackenzie: U.S. is leader in world ethylene market. According to a recent report by Wood MacKenzie, a worldwide shift from oil to natural gas as a feedstock for plastics production has put the United States in the forefront of this field. Shale gas development has produced an abundance of low-cost ethane which has fueled expansion and investment in plastics production in the United States. At the same time, previously strong markets in Europe and East Asia that rely on naphtha for ethylene production are struggling to compete with newly available feedstocks. The Wood MacKenzie report projects strong growth in the ethylene market with worldwide production increasing from 130 million metric tons to 230 million metric tons by 2030.

If you have any questions regarding this update, please contact the Sidley lawyer with whom you usually work.


Sidley is excited to announce that our weekly update “This Week in Hydraulic Fracturing” is now available as a blog on the internet. Please visit The Sidley Shale and Hydraulic Fracturing Report.

Firm clients and other interested parties can now sign up for email alerts that will notify them when new posts are added to the blog. If you have any editorial questions or comments, you should contact Roger Martella (DC), Sam Boxerman (DC), Joel Visser (DC) or Jim Wedeking (DC).


The Environmental Practice of Sidley Austin LLP

The Energy Practice of Sidley Austin LLP 

To receive future copies of this and other Sidley updates via email, please sign up at www.sidley.com/subscribe.

Sidley Austin provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship.

Attorney Advertising - For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212.839.5300; One South Dearborn, Chicago, IL 60603, 312.853.7000; and 1501 K Street, N.W., Washington, D.C. 20005, 202.736.8000.