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Energy States Embracing Frack Rules

Disclosure of the chemicals used for hydraulic fracturing (fracking) well stimulation is becoming the law of the land in the energy-rich Ark-La-Tex region, a natural gas breadbasket for the country, and elsewhere. However, in environmentally conscious California legislation to require disclosure has stumbled.

Recently Texas released for public comment a proposed rule on fracking that was drafted in response to a bill (HB 3328) signed into law earlier this year (see Shale Daily, Aug. 30). Late last year the Arkansas Oil and Gas Commission enacted disclosure requirements (see Shale Daily, Dec. 10, 2010). And in Louisiana the state's Department of Natural Resources (DNR) Office of Conservation recently began taking comments on its own proposal (see Shale Daily, Sept. 1).

Additionally, Pennsylvania and Wyoming (see Daily GPI, Aug. 31, 2010) have frack fluid disclosure requirements of their own, and Michigan's Department of Environmental Quality in May announced new regulations for high-volume fracking operations that use more than 100,000 gallons of fluid.

But in California a bill to require disclosure (see Shale Daily, Sept. 2) appears to be stymied, at least for the current legislative session. AB 591 has not moved out of committee and it's not likely to, Western States Petroleum Association (WSPA) spokesman Tupper Hull told NGI recently. "I think the expectation is that there are some issues relating to trade secret protections that could not be worked out," he said.

Meanwhile, regulators in Louisiana are weighing their own proposed fracking rules

"The intense development of the Haynesville Shale in Louisiana and other shale resources across the United States has created a large amount of public interest in the hydraulic fracturing process and its potential effect on the environment," said the DNR's Office of Conservation at a hearing held last week on the proposal.

DNR noted that last November a review of Office of Conservation policies on fracking was conducted by the nonprofit, multi-stakeholder organization STRONGER Inc. to assess current regulations. That report, finalized in March, recommended some of the changes included in the proposed amendment to Louisiana rules now being considered, DNR said.

"...[A] proposed rule was drafted by staff of the Office of Conservation using portions of the hydraulic fracturing regulations recently promulgated in the State of Arkansas and statutes recently passed in Texas as models," DNR said.

The proposed rule would require that a work permit be obtained from the Office of Conservation prior to initiating hydraulic fracture stimulation operation on a well. Following completion of fracking, information on fracturing fluid composition and volumes would need to be reported to the Office of Conservation or to a publicly accessible registry.

"...[T]he additional information required by the proposed rule will simply be added to existing paperwork," DNR said. "In the event reporting requirements cannot be handled by existing regulatory personnel employed by the exploration and production [E&P] company, industry representatives estimate the incremental cost to be $1,200 per hydraulically fractured well.

"In 2010 there were 817 wells drilled to the Haynesville Shale. Assuming all of these wells were hydraulically fractured results in an additional cost of $980,000 per year for the entire E&P industry. For comparison, assuming an average cost to drill and complete a Haynesville Shale well is $10,000,000, the percentage cost increase associated with the new requirements would be 0.012%."

Thanks to the Marcellus Shale, Pennsylvania is giving the Ark-La-Tex a run for its money as home to part of the nation's leading shale play. In Pennsylvania, operators must disclose frack chemicals used; disclosures are submitted with well completion reports for each well. Protected trade secret information must be disclosed; however, this information is kept out of public files maintained by the state's Department of Environmental Protection.

Expectations of development of the Utica Shale in Michigan led regulators in that state to require operators to provide them with Material Safety Data Sheets for fracking chemicals used in high-volume fracturing operations. Operators must also provide regulators with details on their sources of fracking water.

As in Arkansas, Texas and other states, Louisiana's proposed rule also makes allowance for information considered to be a trade secret. "An operator will not be responsible for reporting information that is not provided to them due to a claim of trade secret protection by the entity entitled to make such a claim," the proposed rule says.

"The operator may furnish a statement signifying that the required information has been submitted to the Ground Water Protection Council Hydraulic Fracturing Chemical Registry [www.fracfocus.org] or any other similar registry, provided all information is accessible to the public free of charge, to satisfy some or all of the information requirements..."

The Texas rule drafted by the Railroad Commission of Texas (RRC) to implement HB 3328 has been published in the Texas Register. The public comment period ends Oct. 11 following a public comment meeting scheduled for Oct. 5 in Austin. An online comment form also will be available on the RRC website.

In its analysis the RRC determined that the financial impact on the oil and gas industry for complying with disclosures will be modest.

"The commission anticipates that the proposed new rule may have an adverse economic impact on suppliers, service companies and operators, but it will be relatively minor," the RRC said. "The economic impact on the regulated industry of the proposed rule to implement HB 3328 may include costs for new or increased record-keeping; for new or increased reporting requirements to the commission; for modifying existing processes and procedures; and for consulting with professionals, including attorneys and engineers."

In fact, the RRC found that numerous companies already are disclosing frack fluid chemicals through the FracFocus Chemical Registry. As of Aug. 16, data related to nearly 950 wells in Texas had been entered at the registry since it began April 1, the RRC said.

"During that same period, operators submitted completion reports for 2,141 oil and natural gas wells, or approximately 1,820 wells that underwent hydraulic fracturing treatment if the commission assumes that 85% of all wells undergo hydraulic fracturing treatment. Therefore, the commission estimates that operators already are voluntarily entering data into FracFocus for approximately 50% of all wells on which hydraulic fracturing treatment is performed."

The RRC listed more than two dozen companies that are voluntarily providing data to FracFocus.

During the legislative session an analysis of HB 3328 found that it "could create the nation's strongest hydraulic fracturing fluid disclosure regime, thus earning the support of several environmental groups and the backing of many in industry because the legislation provides certain limited trade secret protections that will allow operators and service providers to protect their intellectual property."

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