CG Policy on Barging of Produced Water

by Spilman Thomas & Battle, PLLC
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As published in IOGA WV's January 2014 newsletter
1/30/2014

On October 30, 2013, the United States Coast Guard published a “Proposed Policy Letter:  Carriage of Conditionally Permitted Shale Gas Extraction Waste Water in Bulk” (“Proposed Policy”) pertaining to the barging of “shale gas extraction waste water” (“SGEWW”).  78 Fed. Reg. 64905 (Oct. 30, 2013).  The Proposed Policy is designed to specify the conditions under which a barge owner can transport SGEWW on inland waterways.  There are a number of issues with the Proposed Policy –including the prohibition of barging produced water if certain radium standards are not met.  The barging of SGEWW has the potential to reduce costs to industry, while also reducing other impacts associated with hydraulic fracturing (such as reduced truck traffic) in an environmentally responsive manner.  The Independent Petroleum Association of America, IOGA-WV and other state independent oil and gas associations submitted comments on the Proposed Policy on December 6, 2013 (“Comments”).  
 
In relevant part, the Proposed Policy requires every barge load of SGEWW to be tested for approximately 50 different chemicals or characteristics, and depending on the results of that test, certain other requirements may become applicable. It appears that the primary driver for the Proposed Policy is the potential for SGEWW to contain radium-226 (“Ra-226”) and radium-228 (“Ra-228”).  Ra-226 and Ra-228 are naturally occurring radioactive materials (“NORM”) found in certain produced water and are of limited concern or threat to humans or the environment. Nonetheless, the Proposed Policy established a concentration limit and total consignment activity limit per load that are purportedly based on Department of Transportation (“DOT”) regulations.  If the barge load exceeds either the concentration limit or consignment activity limit, the load is prohibited from being barged.  If the barge load is below the DOT thresholds, other requirements kick in.  
 
The Comments raised four primary concerns with the Proposed Policy.  The first issue raised by the Comments is that SGEWW is not defined in the Proposed Policy.  The “Background” section of the Proposed Policy states: “SGEWW, also known as ‘frack water,’ is a by-product of drilling for natural gas using unconventional hydraulic fracturing (or ‘fracking’) technology, which involves the injection of water, sand, and chemical additives.  The sand remains in the well but a substantial portion of the injected fluid re-surfaces after the drilling and must be handled as SGEWW.”  Proposed Policy at 2-3.  This is not a definition and for all intents and purposes, it appears that SGEWW is no different than produced water from non-shale formations.  The Comments asked the Coast Guard to define SGEWW and to explain how it is different than produced water such that it warrants differential treatment.  
 
Second, the Comments focused on the fact that while the Coast Guard proposed to characterize SGEWW has a “hazardous material,” it does not mean it is a “hazardous waste” under Subtitle C of the federal Resource Conservation and Recovery Act (“RCRA”).  42 U.S.C. § 6921.  The Environmental Protection Agency has specifically stated that the transfer of this waste for transportation to disposal sites does not alter its exempted status under RCRA.  The Comments requested that the Proposed Policy be revised to explicitly state that the Coast Guard’s characterization of the SGEWW as potentially “hazardous material” in no way affects the RCRA exemption.  
 
Third, the Comments raised concerns regarding the Coast Guard’s apparent misunderstanding of the DOT regulations.  49 C.F.R. Part 173 establishes general requirements for shipments of hazardous materials, and Subpart I establishes requirements for the packaging and transportation of Class 7 (radioactive) materials.  “Radioactive Materials” are defined as “any material containing radionuclides where both the activity concentration and the total activity in the consignment exceed the values specified in the table in § 173.436 . . ..”  49 C.F.R. § 173.403 (emphasis added).  Section 173.436 is entitled “Exempt material activity concentrations and exempt consignment activity limits for radionuclides” and includes a table of values for the concentration and consignment activity limits.  If the concentration or consignment activity limit is below the threshold set in the table, the material is not considered radioactive material and not subject to the relevant DOT regulations.  The Proposed Policy uses the thresholds contained in § 173.436 as a ceiling, prohibiting shipping  materials with levels above either of the limits, instead of the way the DOT intended—as a floor, below which no regulation is required.  The Proposed Policy incorporates additional stringency by prohibiting barging if either the concentration or the consignment activity level is exceeded, while the DOT regulations require that both limits be exceeded before the regulations become applicable.  Id.  The Proposed Policy also ignores an explicit statement in the “scope” or applicability section of Subpart I that the DOT regulations do not apply to materials containing NORM unless the activity concentration exceeds the values specified in 49 C.F.R. § 173.436 by ten.  Id. § 173.401(b)(4).
 
Fourth, the Comments discussed the “Sample Calculations for Maximum Allowed Volume” included in the Proposed Policy and raised concerns that the Coast Guard may be underestimating the true impact of the Proposed Policy on the ability to barge SGEWW.  Sample calculations in the Propose Policy demonstrate that the concentration of Ra-226 (or Ra-228) will have a dramatic impact on the volume of produced water that can be shipped:  with an assumed Ra-226 concentration of 150 pCi/l, a barge owner could ship 28,571 barrels (well above the maximum capacity of the barge); but with an assumed Ra-226 concentration of 550 pCi/l, the maximum volume drops to 2279 barrels.  The Proposed Policy characterizes the 550 pCi/L as a “high” radium concentration without elaborating on the basis for this characterization.  Publicly available data suggest 550 pCi/L is not necessarily “high.”  The Comments highlighted that at some point, the allowed volume becomes so small that it will not be economical to ship SGEWW via barge.  
 
The Coast Guard has not indicated a time frame for addressing comments but IOGA-WV and IPAA have contacted the Coast Guard and offered to work together to craft a policy that is protective of human health and the environment while also allowing more efficient and cost-effective commercial disposal of SGEWW.  
- See more at: http://www.spilmanlaw.com/Resources/Attorney-Authored-Articles/Marcellus-Fairway/CG-Policy-on-Barging-of-Produced-Water#sthash.pS3LhqKl.dpuf

As published in IOGA WV's January 2014 newsletter

On October 30, 2013, the United States Coast Guard published a “Proposed Policy Letter:  Carriage of Conditionally Permitted Shale Gas Extraction Waste Water in Bulk” (“Proposed Policy”) pertaining to the barging of “shale gas extraction waste water” (“SGEWW”).  78 Fed. Reg. 64905 (Oct. 30, 2013).  The Proposed Policy is designed to specify the conditions under which a barge owner can transport SGEWW on inland waterways.  There are a number of issues with the Proposed Policy –including the prohibition of barging produced water if certain radium standards are not met.  The barging of SGEWW has the potential to reduce costs to industry, while also reducing other impacts associated with hydraulic fracturing (such as reduced truck traffic) in an environmentally responsive manner.  The Independent Petroleum Association of America, IOGA-WV and other state independent oil and gas associations submitted comments on the Proposed Policy on December 6, 2013 (“Comments”).  

In relevant part, the Proposed Policy requires every barge load of SGEWW to be tested for approximately 50 different chemicals or characteristics, and depending on the results of that test, certain other requirements may become applicable. It appears that the primary driver for the Proposed Policy is the potential for SGEWW to contain radium-226 (“Ra-226”) and radium-228 (“Ra-228”).  Ra-226 and Ra-228 are naturally occurring radioactive materials (“NORM”) found in certain produced water and are of limited concern or threat to humans or the environment. Nonetheless, the Proposed Policy established a concentration limit and total consignment activity limit per load that are purportedly based on Department of Transportation (“DOT”) regulations.  If the barge load exceeds either the concentration limit or consignment activity limit, the load is prohibited from being barged.  If the barge load is below the DOT thresholds, other requirements kick in. 

The Comments raised four primary concerns with the Proposed Policy.  The first issue raised by the Comments is that SGEWW is not defined in the Proposed Policy.  The “Background” section of the Proposed Policy states: “SGEWW, also known as ‘frack water,’ is a by-product of drilling for natural gas using unconventional hydraulic fracturing (or ‘fracking’) technology, which involves the injection of water, sand, and chemical additives.  The sand remains in the well but a substantial portion of the injected fluid re-surfaces after the drilling and must be handled as SGEWW.”  Proposed Policy at 2-3.  This is not a definition and for all intents and purposes, it appears that SGEWW is no different than produced water from non-shale formations.  The Comments asked the Coast Guard to define SGEWW and to explain how it is different than produced water such that it warrants differential treatment. 

Second, the Comments focused on the fact that while the Coast Guard proposed to characterize SGEWW has a “hazardous material,” it does not mean it is a “hazardous waste” under Subtitle C of the federal Resource Conservation and Recovery Act (“RCRA”).  42 U.S.C. § 6921.  The Environmental Protection Agency has specifically stated that the transfer of this waste for transportation to disposal sites does not alter its exempted status under RCRA.  The Comments requested that the Proposed Policy be revised to explicitly state that the Coast Guard’s characterization of the SGEWW as potentially “hazardous material” in no way affects the RCRA exemption. 

Third, the Comments raised concerns regarding the Coast Guard’s apparent misunderstanding of the DOT regulations.  49 C.F.R. Part 173 establishes general requirements for shipments of hazardous materials, and Subpart I establishes requirements for the packaging and transportation of Class 7 (radioactive) materials.  “Radioactive Materials” are defined as “any material containing radionuclides where both the activity concentration and the total activity in the consignment exceed the values specified in the table in § 173.436 . . ..”  49 C.F.R. § 173.403 (emphasis added).  Section 173.436 is entitled “Exempt material activity concentrations and exempt consignment activity limits for radionuclides” and includes a table of values for the concentration and consignment activity limits.  If the concentration or consignment activity limit is below the threshold set in the table, the material is not considered radioactive material and not subject to the relevant DOT regulations.  The Proposed Policy uses the thresholds contained in § 173.436 as a ceiling, prohibiting shipping  materials with levels above either of the limits, instead of the way the DOT intended—as a floor, below which no regulation is required.  The Proposed Policy incorporates additional stringency by prohibiting barging if either the concentration or the consignment activity level is exceeded, while the DOT regulations require that both limits be exceeded before the regulations become applicable.  Id.  The Proposed Policy also ignores an explicit statement in the “scope” or applicability section of Subpart I that the DOT regulations do not apply to materials containing NORM unless the activity concentration exceeds the values specified in 49 C.F.R. § 173.436 by ten.  Id. § 173.401(b)(4).

Fourth, the Comments discussed the “Sample Calculations for Maximum Allowed Volume” included in the Proposed Policy and raised concerns that the Coast Guard may be underestimating the true impact of the Proposed Policy on the ability to barge SGEWW.  Sample calculations in the Propose Policy demonstrate that the concentration of Ra-226 (or Ra-228) will have a dramatic impact on the volume of produced water that can be shipped:  with an assumed Ra-226 concentration of 150 pCi/l, a barge owner could ship 28,571 barrels (well above the maximum capacity of the barge); but with an assumed Ra-226 concentration of 550 pCi/l, the maximum volume drops to 2279 barrels.  The Proposed Policy characterizes the 550 pCi/L as a “high” radium concentration without elaborating on the basis for this characterization.  Publicly available data suggest 550 pCi/L is not necessarily “high.”  The Comments highlighted that at some point, the allowed volume becomes so small that it will not be economical to ship SGEWW via barge. 

The Coast Guard has not indicated a time frame for addressing comments but IOGA-WV and IPAA have contacted the Coast Guard and offered to work together to craft a policy that is protective of human health and the environment while also allowing more efficient and cost-effective commercial disposal of SGEWW.  

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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