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News & Flashes

  • 07
  • August
  • 2017

D.C. Circuit Strikes Down EPA’s 90-day Stay – New Standards for Oil & Gas Sector

On July 3, 2017, in Clean Air Council, et al. v. E. Scott Pruitt, No. 17-1145, the D.C. Circuit struck down EPA’s 90-day stay on the June 3, 2016 final rule entitled “Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources,” which amended and established updated new source performance standards (“NSPS”) for the oil and natural gas sector. This final rule was codified in EPA’s NSPS regulations as Subpart OOOOa to 40 C.F.R. Part 60 or “Quad Oa.” The D.C. Circuit later recalled its mandate in Clean Air Council, et al. v. E. Scott Pruitt, No. 17-1145, giving EPA until July 27, 2017 to file a petition for rehearing or petition for rehearing en banc. On July 31, 2017, after EPA failed to file a timely petition, the D.C. Circuit reissued its mandate. Consequently, all Quad Oa provisions are now in effect.

On June 16, 2017, the United States Environmental Protection Agency (EPA) published a proposed rule that would stay for two years parts of Quad Oa. EPA’s proposed two-year stay was intended to be an extension of the 90-day stay that EPA announced on June 3, 2016 to delay implementation of Quad Oa and that was struck down by the D.C. Circuit. Like the 90-day stay, the proposed two-year stay covers aspects of Quad Oa related to leak detection and reporting requirements for (1) fugitive emissions at well sites and compressor stations and (2) fugitive emissions from pneumatic pumps as well as (3) the requirement of a professional engineer certification in relation to the closed vent system design and capacity for a number of affected facilities (e.g., centrifugal compressors, reciprocating compressors, pneumatic pumps, and storage vessels). If finalized, the proposed two-year stay would effectively suspend Quad Oa’s compliance deadlines. In addition to proposing a two-year stay on these aspects of Quad Oa, EPA’s July 16, 2017 proposed rule would include a review of Quad Oa in its entirety. EPA has held open the June 16, 2017 proposed comment rule period until August 9, 2017 because it received and granted a request for hearing on the proposed rule. EPA held the hearing in question on July 10, 2017.

When the D.C. Circuit issued its mandate, two main deadlines under Quad Oa became effective. First, Quad Oa requires that facilities covered by the rule conduct an initial monitoring survey by June 3, 2017. 40 C.F.R. § 60.5397a(f). Second, Quad Oa requires facilities covered by the rule to submit their initial annual monitoring by 90 days after the “initial compliance period” defined under the rule ended. This compliance period ended, at the latest, on August 2, 2017, meaning that facilities covered by Quad Oa have 90 days from that date to submit their initial annual monitoring report. See 40 C.F.R. §§ 60.5420a and 60.5410a. It remains to be seen (1) whether EPA will finalize its proposed two-year stay before the reporting deadline in Quad Oa passes and (2) whether EPA’s two-year stay withstands judicial scrutiny.

  • 20
  • June
  • 2017

TAMEST Report Concludes that Hydraulic Fracturing Has Not Induced Seismicity in Texas

On June 19, the Academy of Medicine, Engineering, and Science of Texas (“TAMEST”) issued its report titled Environmental and Community Impacts of Shale Development in Texas. The report includes several noteworthy findings, including that:

  • Potentially-induced, felt seismicity in Texas to date has been associated with Class II disposal wells, not with hydraulic fracturing operations; 
  • Direct fracturing into drinking water zones has not been observed in Texas, and such a result is unlikely given the depth separation between oil-bearing formations and drinking water zones; an
  • Shale development “primarily contributes positively to local, regional, and state economies.”

In addition to the above, the report includes other findings and recommendations on geology and earthquake activity, land resources, air quality, water quantity and quality, transportation, and economic and social impacts.  

Other of the report’s recommendations call on the industry to more closely track the environmental and ecological impact of shale operations, and make information surrounding shale development more transparent. For example, as to land resources, the report suggests that “baseline land and habitat conditions at the oil and gas play level should be characterized, and changes to wildlife populations and vegetation should be tracked over time where there are opportunities on both private and public lands,” and that “the existing, nonproprietary information about land impacts of shale development that is collected and evaluated by multiple state and federal agencies should be assembled and made available online to the public.”

The report is the culmination of the efforts of TAMEST’s Shale Task Force, which was convened in 2015 and consists of multiple academic and scientific representatives from institutions and organizations throughout Texas. Read the report in full here.

  • 19
  • June
  • 2017

EPA Proposes 2-Year Stay on Key Parts of Quad Oa — the 2016 Methane NSPS Rule for the Oil and Gas Industry

On June 13, 2017, the United States Environmental Protection Agency (EPA) published a proposed rule that would stay for two years parts of EPA’s June 3, 2016 final rule entitled “Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources,” which amended and established updated new source performance standards (NSPS) for the oil and natural gas sector. This final rule was codified in EPA’s NSPS regulations as Subpart OOOOa to 40 CFR Part 60 or “Quad Oa.” Detailed information about Quad Oa can be found here.

EPA has been signaling some form of stay on parts of Quad Oa for several months in connection with President Trump’s March 28, 2017 Executive Order on Promoting Energy Independence and Economic Growth (Climate Change Executive Order), which specifically called for EPA to review Quad Oa in connection with a mandate for agencies to review any regulations that “potentially burden the safe, efficient development of domestic energy sources.” On April 18, 2017, EPA Administrator Scott Pruitt announced by letter that EPA would be convening regulatory proceedings to reconsider Quad Oa. On June 5, 2017, EPA published a notice in the Federal Register stating that EPA would be staying for three months certain aspects of Quad Oa. On June 13, 2017, EPA issued its proposed rule requesting a two-year stay on parts of Quad Oa to allow EPA to review Quad Oa in connection with several petitions for reconsideration submitted to EPA regarding Quad Oa in August 2016.

EPA’s proposed rule does not stay Quad Oa in its entirety but instead stays only the parts of Quad Oa that relate to (1) fugitive emissions at well sites and compressor stations, (2) emissions from pneumatic pumps, and (3) the requirement of a professional engineer certification in relation to the closed vent system design and capacity for a number of affected facilities (e.g., centrifugal compressors, reciprocating compressors, pneumatic pumps, and storage vessels).

On June 5, 2017, several environmental non-governmental organizations (ENGOs) filed suit in the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) in connection with EPA’s three-month stay of Quad Oa. It appears likely that these ENGOs will seek to broaden this suit or file a separate suit in connection with EPA’s proposed two-year stay of Quad Oa. As noted elsewhere on the Vinson & Elkins Climate Change Blog, this litigation represents only the beginning of “the legal battles that will certainly ensue” in relation to agencies’ implementation of the Climate Change Executive Order.

  • 13
  • June
  • 2017

Environmental Groups Seek to Overturn Administrative Stay of Quad Oa Rules

On Monday, June 5th, multiple environmental groups filed an emergency motion seeking a stay of EPA’s decision to delay and reconsider certain provisions of the New Source Performance Standards for the oil and gas industry, also known as “Quad Oa,” finalized in June 2016. The motion followed on the heels of EPA’s June 3rd Federal Register publication granting reconsideration of certain rule requirements and delaying the effective date of certain portions of the rule by 90 days. Quad Oa aims to decrease methane emissions from new and existing oil and gas sources and was considered a cornerstone of President Obama’s climate change initiative. A key aspect of the rule is its requirement that oil and gas companies implement a leak detection and repair program to monitor equipment leaks from well sites and other components.

Under the rule, owners and operators were required to complete their first round of monitoring by June 3, 2017. The June 3rd Notice would retroactively stay the leak detection and repair program, as well as other requirements, for a period beginning on June 2nd through August 31st. The motion notes that a second notice, proposing to extend the stay for an indeterminate period of time, is pending at the Office of Management and Budget and that these actions are Administrator Pruitt’s “first steps” towards suspending, revising, or rescinding the entire rule. In addition to staying the leak detection and repair requirements, the Notice also stays the standard for pneumatic pumps and requirements that a professional engineer certify the proper installation of closed vent systems used to comply with certain standards in the 2016 rule.

The motion filed by the coalition of environmental groups challenges EPA’s authority to issue the stay, arguing that “[p]romulgated rules remain in effect unless and until they are validly challenged through the Clean Air Act’s enhanced rule-making procedures.” The groups argue further that EPA’s issuance of the stay does not meet the statutory requirements of a “reconsideration proceeding” allowed by the Clean Air Act. In the alternative, the environmental groups claim that the administrative stay is arbitrary and capricious because it is overbroad, because the Administrator failed to consider whether industry would be irreparably harmed by adhering to the original compliance dates, and because the Administrator did not assess the damage to public health and welfare that would be caused by the stay. It remains to be seen how the D.C. Circuit will respond to the emergency motion. In the meantime, owners and operators must determine whether to proceed as if the original compliance dates will remain in effect or to delay the implementation of their leak detection and repair programs pending further action by the court.  Read the emergency motion in full here.

  • 08
  • June
  • 2017

DOE Solicits Input on New State Water Policy Database

On June 5, the Department of Energy (“DOE”) published a Request for Information (“RFI”) in the Federal Register soliciting input on a new Energy-Water Nexus State Policy Database (the “Database”), a draft version of which is available at http://energywaterpolicy.org. The intent of the Database is to provide “information about state-level water policies and programs that are relevant to energy systems in the United States.” The current draft version of the Database includes over 1,700 policy entries addressing topics such as discharge permitting regimes, underground injection control permitting, water rights, water quality standards, and water-related regulations applicable to hydraulic fracturing and electric generating operations. DOE is soliciting input on several aspects of the draft Database, including, most notably, the quality and completeness of the policy descriptions available via the Database and the availability of other data sources that could be connected to or coordinated with the Database. Stakeholders may submit responses to the RFI through August 4, 2017.

  • 05
  • April
  • 2017

Federal Court Dismisses Sierra Club’s Claim for Injunctive Relief Related to Oklahoma Seismicity

On April 4, 2017, Western District of Oklahoma Judge Stephen Friot dismissed an action brought under the Resource Conservation and Recovery Act (“RCRA”) by the Sierra Club against four deep fluid injection well operators. The plaintiff alleged that the defendants’ use of wastewater injection wells presented an “imminent and substantial endangerment to health or the environment” in violation of RCRA because it supposedly causes “waste-induced earthquakes.” The Sierra Club sought a wide range of injunctive relief, asking the court to order defendants to substantially reduce the volume of wastewater they inject into disposal wells, reinforce vulnerable structures, and establish a seismic activity monitoring center to further analyze (and predict) the potential for seismic effects of underground injection of oilfield wastes. 

Judge Friot granted defendants’ motions to dismiss under the Burford abstention and primary jurisdiction doctrines before reaching defendants’ substantive RCRA arguments. Pursuant to the Burford abstention doctrine, federal courts may decline to interfere with proceedings or orders of state administrative agencies where timely and adequate state-level review is available. The Court reasoned that the Oklahoma Corporation Commission (“OCC”) “has established and is operating its own authorized program to regulate these wells” and “has taken action to address the seismic activity which plaintiff maintains is linked to the Arbuckle disposal wells.” Oklahoma law also provides that any person affected by an OCC order may apply to the OCC for repeal, amendment, modification, or supplement of that order. The court also held that the OCC has primary jurisdiction over the harm alleged by the plaintiff for similar reasons. Judge Friot reasoned that the OCC was better equipped than the court to address seismicity concerns associated with fluid injection activities, and has “taken a series of actions, in response to seismic activity, to reduce the volume of wastewater injected into disposal wells.” The court also found that the OCC “has demonstrated diligence in resolving” seismicity issues, and, given its “scientific and technical expertise,” is the appropriate body to grant the type of injunctive relief requested by the plaintiff.

In closing, Judge Friot described the reality of being an Oklahoma resident – implying that he too lived with the tremors. “Every night, more than a million Oklahomans go to bed with reason to wonder whether they will be awakened by the muffled boom which precedes, by an instant, the shaking of the ground under their homes.” Finally, Judge Friot expressed his confidence in the seriousness of the OCC’s regulatory efforts, by noting that “responding to this earthquake activity is serious business, requiring serious regulatory action. The record in this case plainly demonstrates that the Oklahoma Corporation Commission has responded energetically to that challenge.”

Read the order dismissing plaintiff’s complaint in Sierra Club v. Chesapeake Operating, LLC, No. 5:16-cv-00134, here.

  • 05
  • April
  • 2017

Governor Signs Bill Banning Hydraulic Fracturing in Maryland

On April 4, 2017, Governor Larry Hogan signed into law a bill that makes Maryland the third state (following New York and Vermont) to ban hydraulic fracturing. Maryland’s ban is particularly notable as the Marcellus Shale formation extends into the western part of the state. Hydraulic fracturing has been under various moratoria in Maryland since June 2011, when former Governor Martin O'Malley issued an Executive Order directing the Maryland Department of the Environment ("MDE") and the Maryland Department of Natural Resources to study economic, environmental, and public health issues related to horizontal drilling and hydraulic fracturing in the Marcellus Shale. The final study, which was released in November 2014, concluded that any environmental or health risks from hydraulic fracturing could be adequately managed through regulatory measures, but, shortly after that study’s release, Maryland enacted a two-year moratorium that prevented the MDE from issuing any drilling permits for hydraulic fracturing before October 1, 2017. The new permanent ban on hydraulic fracturing takes effect on that same date—October 1, 2017. Read the full text of Senate Bill 740 here.

  • 22
  • February
  • 2017

DEP Concludes Seismic Activity in Pennsylvania “Likely Correlated” with Hydraulic Fracturing

On Friday, February 17, the Pennsylvania Department of Environmental Protection (“DEP”) published a report concluding that four specific low-magnitude seismic events that occurred on April 25, 2016 “were likely correlated” with hydraulic fracturing activity. The seismic events at issue were registered on the Pennsylvania Seismic Network and consisted of a series of four “microseismic events” at magnitudes unlikely to be noticed by humans. The report concludes that these seismic events showed a “marked temporal/spatial relationship” to hydraulic fracturing activities at a nearby well pad, but ultimately cautions that “there is no definitive geologic association of events at this time.” 

Nonetheless, the DEP’s report includes several recommendations that will likely have an impact on how operators conduct their fracturing activities in certain areas of the Utica Shale formation. The technique used at the time of the April 2016 seismic activity is called “zipper fracturing,” and involves conducting hydraulic fracturing operations concurrently at two horizontal wellbores that are parallel and adjacent to each other. The DEP report describes that DEP and the operator agreed to a seismic monitoring plan in November 2016 that requires the operator of the well at issue to (i) discontinue the use of the “zipper fracturing” technique during any future completions when there is less than a quarter mile between lateral portions of adjacent wellbores; (ii) maintain its own seismic network to detect events; and (iii) adopt a specific seismic reporting and response plan. The plan also requires the operator of the well at issue to abide by a “traffic light” system, whereby the operator must, among other things, (i) notify DEP of seismic activity above 1.0 magnitude within 6 miles of a wellbore path, (ii) suspend operations if three seismic events between 1.5 and 1.9 magnitude occur within three consecutive days within 3 miles of a wellbore path, and (iii) shut down well operations if a seismic event magnitude 2.0 or greater occurs within 3 miles of a wellbore path. The report recommends that other operators in North Beaver, Mahoning, and Union Townships in Pennsylvania follow similar plans.

The report’s “traffic light” system recommendations are particularly notable because they apply at conservative levels of seismicity compared to other jurisdictions. For example, Well Completion Seismicity Guidance applicable to operators in the Scoop and Stack plays published by the Oklahoma Corporation Commission in December 2016 requires reporting of seismicity at magnitude 2.5 or greater within 1.25 miles of fracturing operations, a temporary pause in operations at magnitude 3.0 or greater, and the suspension of operations at magnitude 3.5 or greater. It remains to be seen whether the report’s recommendations will affect the level of hydraulic fracturing activity in the affected townships.

  • 13
  • December
  • 2016

EPA Releases Final Assessment of Fracking Impacts on Drinking Water

On December 13, 2016, the United States Environmental Protection Agency (“EPA”) released its Final Assessment of the Potential Impacts of Hydraulic Fracturing for Oil and Gas on Drinking Water Resources. Issuance of the final report comes over eighteen months after EPA released a draft report for external review in June 2015, and approximately a year after an EPA Science Advisory Board panel released its initial recommendations regarding the closely-followed hydraulic fracturing study. Pursuant to those recommendations, the final report reflects the removal of the draft report’s overarching conclusion that EPA “did not find evidence that” hydraulic fracturing activities “have led to widespread, systemic impacts on drinking water resources in the United States.” In an accompanying set of “ Questions and Answers about EPA's Hydraulic Fracturing Drinking Water Assessment,” EPA explains that its scientists concluded that the conclusion of the draft report “could not be quantitatively supported” and that it did not “clearly communicate the findings of the report.” Instead, the final report concludes that “hydraulic fracturing activities can impact drinking water resources in the United States under some circumstances.” 

Importantly, however, EPA’s findings that underlie the final report’s conclusion are generally consistent with those set forth in the June 2015 draft report. For example, both the draft report and the final report identify above- and below-ground mechanisms in the hydraulic fracturing water cycle that “have the potential to impact drinking water resources.” Similarly, both the draft report and the final report characterize the number of identified cases of drinking water resource contamination as “small” in comparison to the number of hydraulically fractured wells in the United States. Finally, consistent with the draft report, most of the small number of "impacts on drinking water resources" identified by EPA appear to be unrelated to fracturing activity itself. Nonetheless, like the draft report, the final report identifies the “potential for hydraulic fracturing fluids . . . to reach underground drinking water resources” via the fracture network. On this topic, the final report identifies with more specificity those areas in which hydraulic fracturing activity has occurred within underground drinking water resources—namely “in some areas in the western United States (e.g., the Wind River Basin near Pavillion, Wyoming, and the Powder River Basin of Montana and Wyoming).” 

Unlike the draft report, the final report includes a list of “combinations of activities and factors” associated with hydraulic fracturing activity that EPA concludes “are more likely than others to result in more frequent or more severe impacts” to drinking water resources. That list consists of:

  • Water withdrawals in times or areas of low water availability, particularly in areas with limited or declining groundwater resources;
  • Spills during the management of hydraulic fracturing fluids, chemicals, or produced water that reach groundwater resources;
  • Injection of hydraulic fracturing fluids into wells with inadequate mechanical integrity, allowing gases or liquids to reach groundwater resources;
  • Injection of hydraulic fracturing fluids directly into groundwater resources (a practice primarily associated with coalbed methane production)
  • Discharge of inadequately treated hydraulic fracturing wastewater to surface water resources; and
  • Disposal or storage of hydraulic fracturing wastewater in unlined pits, resulting in contamination of groundwater resources.

Notably absent from this list of increased risk activities is hydraulic fracturing of deep shale formations. Indeed, the final report acknowledges that the presence of “thousands of feet of rock between hydraulically fractured rock formations and underground drinking water resources can reduce the frequency of impacts on drinking water resources” during well injection. Read the final report in full here.

For more insight on water laws and regulation, visit V&E’s Water Blog.

  • 23
  • November
  • 2016

Two Lawsuits Relating to Induced Seismicity Filed in Oklahoma

Two lawsuits recently filed in courts in Oklahoma allege claims relating to induced seismicity following a September 8, 2016 earthquake, which measured magnitude 5.8 and had an epicenter approximately 8 miles northwest of Pawnee, Oklahoma.  That quake was the largest reported in Oklahoma since seismic record-keeping began.

The first case, filed in Oklahoma state court on November 17, is a putative class action brought by an Oklahoma resident against 27 oil and gas companies that have engaged in injection well operations near Pawnee, 25 of which are unnamed in the class action petition. The petition generally alleges that defendants’ disposal of fracking wastewater in injection wells caused dozens of earthquakes near Pawnee from September through November 2016 (including the magnitude 5.8 earthquake on September 3) and asserts claims of absolute liability for ultrahazardous activities, negligence, private nuisance, and trespass.  The petition seeks damages for physical damage to real and personal property, market value losses to real property, and punitive damages, and alleges that the defendants are jointly and severally liable for such damages.  Read the Class Action Petition in James Adams et al. v. Eagle Road Oil LLC et al., case number CJ201678, in the District Court of Pawnee County, Oklahoma here.

The second case, brought by the Pawnee Nation of Oklahoma (the “Pawnee Nation”) in federal court, involves claims against the United States Bureau of Indian Affairs, the Bureau of Land Management, and Sally Jewell as Secretary of the Interior.  Specifically, the complaint alleges that defendants’ approval of various oil and gas leases and drilling permits on Pawnee land failed to comply with several federal laws, including the National Environmental Policy Act (“NEPA”), the National Historic Preservation Act, and the American Indian Agricultural Resource Management Act of 1993. The complaint links these failures to various impacts on Pawnee land that have occurred as a result of oil and gas development, including earthquakes allegedly caused by hydraulic fracturing operations.  Like the petition in Eagle Road discussed above, the Pawnee Nation’s complaint makes specific reference to the magnitude 5.8 earthquake that occurred on September 3.  Among the myriad of violations alleged in the complaint is a claim that environmental assessments prepared to comply with NEPA in association with the issuance of drilling permits were deficient for failing to consider earthquakes as an “indirect impact.”  The complaint asks the court to set aside 17 leases approved in 2013, as well as at least 10 related permits to drill and associated sundry notices, and to enjoin the defendants from approving any other activities on the relevant leases until defendants have complied with all federal laws.  Read the complaint in Pawnee Nation of Oklahoma et al. v. Jewell et al., case number 4:16cv00697, in the U.S. District Court for the Northern District of Oklahoma here.

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