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The broad expansion of onshore oil and gas production in the nation’s numerous shale formations has created an expansion of federal, state and local laws to address the environmental issues associated with this production. The new drilling techniques being employed to capture oil and gas from the nation’s shale formations, primarily hydraulic fracturing and horizontal drilling, are subject to a wide array of environmental laws to protect groundwater, surface water, the atmosphere and sensitive natural resources such as wetlands and wildlife. This article highlights some of the most important federal environmental regulations being developed to address these impacts.

I. EPA’s Fracing StudyIn December, 2012, EPA released an interim report entitled “Study of the Potential Impacts of Hydraulic Fracturing on Drinking Water Resources: Progress Report.” The Study provides an interim update on EPA’s two-year research effort aimed at assessing risks of fracing from various phases of the water cycle. The study consists of case studies examining fracing operations.1

While EPA has scaled back some aspects of its study (for example, dropping plans to assess possible adverse effects of interactions between fracing fluids and naturally

occurring materials in subsurface shale plays) industry sources argue that the study continues to expand too far.

II. Environmentalists Petition For New Fracing RulesEnvironmentalists are previewing several petitions designed to force EPA to develop rules governing hydraulic fracturing operations under existing legal authorities. In 2012, EPA agreed to partially grant one such petition, announcing that it would promulgate Toxic Substances Control Act (TSCA) reporting requirements for manufacturers of fracing chemicals. Also in 2012, environmentalists filed a petition under the Emergency Planning & Community Right-to-Know Act (EPCRA) asking EPA to add the oil and gas industry to those sectors required to report their chemical releases to EPA’s Toxics Release Inventory (TRI). EPA has not yet acted on this petition.2

In two other 2012 petitions, environmental groups requested EPA to use its Clean Air Act authority to require increased ozone air monitoring at oil and gas drilling sites. A second air-related petition requested EPA to craft guidance for how states can reduce emissions of ozone and other air pollutants (including methane) from various sources within the oil and gas sector.

Brad RaffleEnvironment, Land Use & Natural Resources+1.713.276.7696 brad.raffle@pillsburylaw.com

Mr. Raffle practices in the area of environmental law at our firm in an of counsel capacity. Mr. Raffle’s practice covers a wide array of environmental regulatory matters, including air and water pollution control, wetlands regulation and regulations affecting the oil and gas industry.

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Fracing and the EnvironmentThis article first appeared in Oil and Gas Monitor, March 1, 2013by Brad Raffle

III. Endangered Species Listings Affect Oil and GasThe upstream production and mid-stream pipeline segments of the oil and gas industry face increasing challenges to their expansion as a result of laws protecting endangered species. This challenge is accentuated by a November 2012 announcement by the US Fish and Wildlife Service (“FWS”) of its intention to list the Lesser Prairie Chicken (LPC) as “threatened” under the federal Endangered Species Act (“ESA”).3

Environmental activists are expected to argue that oil and gas projects in the five Mid-Continent states that LPC habitat (Texas, Oklahoma, Kansas, New Mexico and Colorado) will impact adversely impact that habitat. In fact, a concerted campaign is underway by environmental organizations to persuade or judicially compel the FWS to list species of plants and animals that are known to exist in areas of anticipated oil and gas expansion. In the Mid-Atlantic, various species of bats are attracting the attention of environmental groups. In Texas, this listing effort has focused on the Dunes Sagebrush Lizard and numerous species of fresh water mussels. In parts of West Texas and eastern New Mexico, the initiative has focused on the Greater Sage Grouse for which the FWS is actively pursuing Candidate Conservation Agreements with leading oil and gas companies. As noted above, the recently announced listing of the Lesser Prairie Chicken is expected to have a particularly significant impact on oil and gas infrastructure permitting efforts in the Mid-Continent. With the Presidential election now over, the FWS is likely to be more emboldened to pursue actual listings.

IV. EPA New Source Performance Standards Greatly Expand Air Emissions Limits for Oil and GasIn April, 2012, after months of extensive stakeholder negotiations and nearly 160,000 public comments, EPA finalized its New Source Performance Standards (NSPS) and Hazardous Air Pollutant Standards (NESHAP) for the onshore oil and gas sector. The revised standards, whose Federal Register publication was delayed until August 16, 2012, will have a significant impact on the oil and gas sector.4

The revised NSPS will apply to a wide array of onshore oil and gas equipment that has been newly constructed, modified or reconstructed (all defined terms) after August 23, 2011, the date the standards were proposed by EPA. While most of the new requirements will take effect for newly constructed, reconstructed or modified equipment sixty days after the 8/16/12Federal Register publication date, the most controversial NSPS provision, the “green” or “reduced emissions completion” (REC) requirement for new and modified hydraulically fractured gas wellhead completions, will not take effect until January 1, 2015.

The focus of the REC requirement is the collection of gas liberated from flowback water during the multi-day period after injected fracturing fluids flow back to the surface and release entrained hydrocarbons from pits or tanks that are used to hold these fluids. The REC standards will apply to “well completion operations” that involve the use of hydraulic fracturing, i.e. activities that would “allow the produced hydrocarbons in flowback fluids to vent to the atmosphere from open pits or tanks.”

V. Ozone Nonattainment AreasIn May, 2012, EPA issued new ozone nonattainment area designations that may complicate oil and gas operations in many parts of the country. Approximately 50 new ozone

“non-attainment areas” have now been designated by EPA. EPA has stated that the list of non-attainment areas may expand in 2013 because cooler than normal 2009 summer temperatures led to correspondingly lower ozone readings in many parts of the nation.5 As specified by the Clean Air Act, states are required to develop implementation plans to attain new or revised ambient standards within specific statutory timeframes. In its May, 2012 rulemaking, EPA specified deadlines ranging from 3 – 20 years for affected states to attain the 2008 ozone standard, depending on the severity of each designated area’s most recent (2008-2011) ozone readings.

The new designations could have a significant impact on oil and gas development activities, particularly within expanding urbanized parts of the nation such as metropolitan Denver, Dallas/ Fort Worth, parts of Wyoming and across many shale areas in the northeast and Mid-Atlantic. This is because EPA’s policy for designating ozone nonattainment areas encompasses still-rural areas on the outskirts of expanding metropolitan areas. If modeling evaluations indicate that current or anticipated VOC emissions activities in these semi-urban areas contribute to violations of the ozone standard in the area’s urbanized region, these emissions sources will be subject to demanding nonattainment requirements.

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Environment, Land Use & Natural Resources

VI. Fracing Injections with Diesel In early 2012, the Independent Petroleum Association of America (IPAA) and the U.S. Oil and Gas Assn. settled a lawsuit against EPA concerning the Agency’s website announcement of its intention to regulate, under the Safe Drinking Water Act’s Class II UIC program, hydraulic fracturing activities entailing the use of diesel fuel in the injection fluid. In settling the case, EPA agreed to withdraw certain aspects of its website announcement and to subject the diesel fracing guidance it had developed to formal public notice and comment. The Agency initiated the required notice and comment process in the Federal Register in May 2012.6

The diesel guidance is still a work in progress. It stems from provisions of the Energy Policy Act of 2005 that

re-defined the term “underground injection” under the Safe Drinking Water Act (SDWA) so as to exclude hydraulic fracturing operations. However, the exclusion does not extend to fracturing operations that use “diesel fuel” as part of the injection formula. Thus armed with the legal authority to regulate hydraulic fracturing activities that employ diesel fuel, EPA decided to formally develop UIC permitting guidance for diesel-based fracturing. The guidance will apply directly in those four states where EPA itself administers the Class II UIC program, i.e. Pennsylvania, New York, Kentucky and Tennessee. However, many view the Agency’s objectives in developing the diesel fracing guidance as pressuring “primacy” states that operate their own delegated UIC programs (e.g. Texas, North Dakota, Wyoming, Colorado, New Mexico

and Oklahoma) to follow EPA’s lead. Indeed, the guidance’s reference to the legal necessity of holding a UIC “permit” for diesel-based fracturing has created uncertainty in these primacy states, none of which issue conventional UIC permits for diesel-based fracing. The issue is particularly contentious in North Dakota where the use of diesel-like compounds in Bakken Shale fracing fluids is more common. EPA’s guidance is also viewed as providing the Agency, as well as states without a history of oil and gas regulation, with a template for more broadly regulating all hydraulic fracturing activities, regardless of their use of diesel fuel. Even if Congress does not repeal the 2005 UIC exemption for hydraulic fracturing, the states are not precluded for adopting such requirements under the SDWA.

Endnotes1 http://www.reuters.com/article/2013/01/11/usa-epa-fracking-idUSL1E9CB59J20130111.

2 http://stateimpact.npr.org/pennsylvania/2012/10/24/environmental-groups-petition-epa-over-fracking-disclosure/

3 http://www.fws.gov/southwest/es/LPC.html

4 http://yosemite.epa.gov/opei/rulegate.nsf/byRIN/2060-AP76

5 http://www.epa.gov/glo/designations/

6 http://water.epa.gov/type/groundwater/uic/class2/hydraulicfracturing/wells_hydroreg.cfm

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Fracing and the Environment

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