Oil and Gas Update
Hydraulic Fracturing Regulations - Bureau of Land Management
On May 16, 2013, the U.S. Department of Interior’s Bureau of Land Management (BLM) released a Supplemental Notice of Proposed Rulemaking and Request for Comment entitled “Oil and Gas Well Stimulating, Including Hydraulic Fracturing on Federal and Indian Lands.” This proposal updates the Department of Interior (DOI)’s May 11, 2012 proposed revisions to the BLM’s existing hydraulic fracturing rules codified at 43 CFR Part 3160. Changes to this revision include: the use of an expanded set of cement evaluation tools to help ensure that usable water zones have been isolated and protected from contamination; more detailed guidance on how trade secrets claims will be handled, based upon procedures adopted by Colorado; methods to reduce overlap between BLM’s regulations and state and tribal regulations. The rules do not apply to other “well stimulation” operations such as secondary and tertiary recovery methods of water flooding, steam injection or other methods.
In addition to the revisions to the proposed BLM revisions of its frac’ing rules, on March 31, 2013, the U.S. District Court of the Northern District of California held that the BLM violated the National Environmental Policy Act (NEPA) in its oil and gas leasing activities on federal land. See Center for Biological Diversity (CBD) v. BLM, No. C 11-06174-PSG (N.D. Ca. Mar. 31, 2013). Specifically, the court held that BLM violated NEPA when it failed to assess potential contamination from hydraulic fracturing in approving oil and gas leases on federal land in the Monterey Shale formation, where it considered instead conventional oil and gas development. Plaintiffs in the case are seeking an Environmental Impact Statement covering the lease transactions.
Air Permitting – Clean Air Act Aggregation of Major Stationary Source
We have covered the Summit Petroleum Corp. v. EPA case (wherein the U.S. Court of Appeals for the Sixth Circuit threw out EPA’s “aggregation policy” because it nullified the meaning of “adjacent” in determining which sources can be aggregated into a single Clean Air Act (CAA) major stationary source) and EPA’s subsequent December 21, 2012 guidance limiting the holding to the Sixth Circuit. On February 19, 2013, the National Environmental Development Association’s Clean Air Regulatory Project (NEDA/CAP) challenged the December 21, 2012 guidance memo as a “final agency action” that violates the CAA by creating a division among EPA’s regional offices in violation of the CAA § 301(a)(2) (treating differently those states within the Sixth Circuit, and those outside), seeking to overturn it as an abuse of discretion. EPA will likely argue that, as a mere memorandum and guidance, it is not a “final agency action” subject to appeal under the Administrative Procedures Act. In reviewing whether the guidance memo constitutes “final agency action,” the D.C. Circuit will review whether EPA’s memorandum represents “consummation” of EPA’s decision-making process and whether it determines a party’s “rights or obligations” or constitute an action from which “legal consequences flow.”
UIC Permitting – Focus on UIC Class II Induced Seismicity
On March 28, 2013, the EPA’s Environmental Appeals Board rejected EPA’s issuance of an Underground Injection Control (UIC) Class II brine injection well permit. See In Re: Stonehaven Energy Management, LLC, Permit No. PAS2D01BVEN, UIC Appeal No. 12-02. In Stonehaven, the Environmental Appeals Board (EAB) remanded the permit back to EPA for further action, supporting a land owner’s argument that EPA failed to provide adequate support in the administrative record for its response to public comments on the geological features of the injection zone and the risk of earthquake. Specifically, the EAB found that EPA did not identify in the record the basis for its conclusions that there was no evidence of seismic activity in the well area and that the evidence showed there were no transmissive faults that intersected or could be influenced by the intended zone of injection. The EAB held that if EPA “decides to reissue the permit, it must include specific findings, based upon evidence in the record, on earthquake risk and on the existence of faults and fractures in the confining zone for the …formation, and make those findings available to the public for review and comment.” While UIC Class II permit regulations do not require structural studies, nor specifically a review of induced seismicity, EPA must consider whether the geological conditions of the formation will prevent endangerment of the underground source of drinking water, and respond to public comment that earthquakes can result in contamination of drinking water with an adequate public record.
Greenhouse Gas Inventory Reporting – Natural Gas Systems GHG Inventory Falling
In April 2013, EPA released its Greenhouse Gas Inventory report for 1990-2011 (Inventory). With this Inventory, EPA reported significant reductions in GHG from natural gas systems between 1990 and 2011. Specifically, EPA found a 10% reduction in CH4 emissions and a 14% reduction in non-combustion CO2 emissions. EPA credits the reductions to voluntary reductions and a decrease in cast iron and unprotected steel pipelines. In estimating emissions, EPA incorporated data gathered by the API and ANGA from liquids unloading operations which include impacts of widespread use of control technologies and shorter emission duration from liquids unloading. EPA provides that the recalculations in the current Inventory relative to the previous report primarily impacted CH4 emission estimates in the production sector, which in 2010 decreased from 126.0 Tg CO2 Eq. in the previous Inventory to 57.2 Tg CO2 Eq. in the current Inventory. The key reason for this change is the recalculation for liquids unloading, which in 2010 decreased CH4 emissions from 85.6 Tg CO2 Eq. in the previous Inventory to 5.4 Tg CO2 Eq. in the current Inventory. See “Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2011," EPA 430-R-13-001 (Apr. 12, 2013). Just prior to the release of EPA’s report, in a report dated February 20, 2013, EPA’s Inspector General called for improved methods in collecting emissions data from the oil and natural gas production sector, calling into question the reliability of EPA’s emission factors used in calculating emissions from oil and gas operations. See “EPA Needs to Improve Air Emissions Date for the Oil and Natural Gas Production Sector,” Report No. 13-P-0161 (Feb. 20, 2013).
To review the EPA’s GHG Inventory, click here.
To review the EPA Inspector General’s report, click here.
TSCA Reform and Chemical Safety
On May 22, 2013, Senators Frank Lautenerg (D. NJ) and David Vitter (R. LA) introduced a new bipartisan bill to reform the Toxic Substances Control Act (TSCA). The new bill, entitled “Chemical Safety Improvement Act of 2013,” called a “surprise” in the trade press, would significantly revise the existing TSCA, enacted in 1976 and not yet modified to date. The revision would require EPA to screen new chemicals for safety and create “high” and “low” priorities for chemicals based upon their risk to public health and the environment. Those chemicals in the “high” priority would trigger EPA safety evaluations. The revision would also provide EPA with authority to respond to any chemical found to be “unsafe” with action to label the chemical, phase it out or even ban it. EPA would be required to prioritize chemicals for review in a transparent manner, secure necessary health and safety information from chemical manufacturers, promote innovation and safer chemistry, protect children and pregnant women, and give states and municipalities a voice in prioritization, safety assessment and safety determination processes. Both the American Chemical Counsel (ACC) and the Environmental Defense Fund (EDF) have issued statements in support of the new bill, though the Environmental Working Group has expressed strong objections.
Also on May 22, 2013, the ACC released its new Responsible Care Product Safety Code. The code includes a set of 11 management practices which manufacturers can use to evaluate, demonstrate and continuously improve product safety. The management practices specifically verify manufacturers: undertake scientific analyses of products taking steps to assure they can be used safely; enhance cooperation and communications along the chemical value chain; consider impacts on public health, the environment and overall sustainability; determine whether chemicals pose risks based on new research, how the chemicals are used and whether sensitive groups may be exposed; provide the public with access to safety information; ensure manufacturing executives commit to a culture of product safety and accountability. Membership in the ACC is contingent upon complying with the code, which ACC says it will phase in over the next several years.
Read about the CSIA here.
Read about the Responsible Care Product Safety Code here.