Oil and Gas Companies Partner with Environmental Groups to Develop Performance Standards for the Industry

by Reed Smith

The Center for Sustainable Shale Development (“CSSD”), an environmental organization located in Pittsburgh, Pa., has announced a program of Performance Standards that has been mutually agreed to by a number of environmental groups and oil and gas companies. The program is voluntary and does not create any new requirements or restrictions for oil and gas companies. However, it is possible that state regulators will look to the Performance Standards when drafting new regulations and permitting requirements, or that the Performance Standards will become unofficial “best practices” in the industry.

Currently, the program is directed toward states in the Marcellus and Utica Shales, including Pennsylvania, West Virginia, Ohio, and New York. The participants include Shell, Chevron Appalachia, EQT Corporation, and Consol Energy, as well as the Environmental Defense Fund, the Clean Air Task Force, and the Pennsylvania Environmental Council. The program will be overseen by a 12-member board. Four seats on the board are reserved for the oil and gas industry, four are reserved for environmental groups, and the last four are reserved for various independent individuals, such as former Environmental Protection Agency Administrator Christine Todd Whitman and former Treasury Secretary Paul O’Neill.

The Performance Standards apply to unconventional oil and gas exploration, development, and gathering activities. There are 15 Performance Standards, eight addressing the prevention of contamination of groundwater and surface waters, and seven addressing the prevention of air pollution. For example, the Performance Standards require zero discharge of wastewater and drilling, flowback, and produced waters to the waters of each state. They also require operators to maintain a plan for recycling a minimum of 90 percent of flowback and produced water, as well as a plan to implement a closed-loop system to contain drilling fluids at the well pad. The Performance Standards call for the elimination of drilling pits at well pads, and require centralized impoundments to be double-lined with impermeable material and to have leak-detection systems installed. To protect groundwater and prevent migration of hydraulic fracturing fluids, the Performance Standards set up casing and cementing requirements, require operators to conduct a risk analysis and analyze the subsurface geology, and require operators to maintain a plan for monitoring water sources within a 2,500-foot radius of a wellhead. Regarding prevention of air pollution, the Performance Standards require that all pipeline-quality natural gas must be directed into a pipeline, and any natural gas that cannot be captured must be flared, not vented. The Performance Standards contain some specific requirements regarding the method, length, and efficiency of flaring. The Performance Standards set specific emission standards for non-road dedicated diesel drilling rig engines at the well pad, dedicated diesel fracturing pump engines at the well pad, compressor engines dedicated to unconventional drilling activities, and individual storage vessels at the well pad. The emission standards aim to reduce emissions of particulate matter, volatile organic compounds, and NOx associated with oil and gas activities.

Oil and gas companies are encouraged, but not required, to submit information to the CSSD. If they meet each of the applicable Performance Standards, the CSSD will issue a type of “stamp of approval” to that company. At this time, the specific procedure and process of the review contemplated by the Performance Standards are unclear. For example, it is unclear if the Performance Standards contemplate that an oil and gas company will submit information to the CSSD for each well pad, gathering line system, or other activity, or if the company’s general practices will be submitted and reviewed by the CSSD.

Reed Smith’s Oil & Gas Team is following the continued development of the Performance Standards and emerging details regarding the review process by the CSSD. If you have any questions on the CSSD’s Performance Standards or other oil & gas-related issues, please contact the authors of this Alert or any member of the Reed Smith Oil & Gas Team.

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