Pyrrhic Victory For Parties Seeking Fracking Fluid Disclosures

by Orrick - Trade Secrets Group
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http://blogs.orrick.com/trade-secrets-watch/files/2014/04/3Apr14-200x150.jpgParties advocating public disclosure of the chemical makeup of fracking fluids may have won a recent battle in Wyoming, but are they losing the war?  On March 12, 2014, the Wyoming Supreme Court in Powder River Basin Resource Council v. Wyoming Oil and Gas Conservation Commission reversed a district court’s order exempting fracking fluid information from public disclosure.  The court made two key findings.  First, the court clarified that parties seeking disclosure in Wyoming are entitled to de novo district court review of administrative decisions exempting fracking fluid information from disclosure as trade secrets.  Second, it held that the “narrow” definition of trade secrets under FOIA applies to exemption claims.

But parties seeking public disclosure still face an uphill battle.

Specifically, trade secrets are not the only category of information exempt from public disclosure under the Wyoming Public Records Act (“WPRA”).  Instead, much like FOIA, both trade secrets and “confidential commercial, financial, geological or geophysical data” are exempt from disclosure.  The Wyoming Supreme Court did not directly address this second category of information in Powder River Basin, but the court recognized in a footnote that even if the fracking chemical information was merely “confidential” it could be exempt from public disclosure on that basis.  Because “confidential” information is a broader category, the court’s adoption of a narrow definition of “trade secret” information may render the trade secrets category less important.  Most FOIA cases are now litigated under the “confidential” standard rather than as trade secrets, and we should expect the same development in fracking cases under the WPRA.

Even under the FOIA definition of trade secrets adopted by the court, which requires a “direct relationship” between the trade secret and the productive process, fracking chemical information may be exempt from public disclosure in Wyoming.  In fact, when the district court examined the question using the FOIA definition—albeit under the wrong standard of review—it concluded that the chemical compounds and concentrations used in fracking fluids were trade secrets.  The Resource Council faces significant challenges to its disclosure request on remand.

Nevertheless, operators will have to remain vigilant about protecting the confidentiality of fracking chemical information, and the Powder River Basin ruling effectively increases their costs in Wyoming by recognizing a right to de novo review in the courts.  Moreover, because fracking disclosure rules vary widely across the states, industry players with nationwide operations continue to face the risk that public disclosures mandated by a single state could destroy the confidential nature of the information, effectively forcing disclosures in every state in which they operate.

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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