On April 17, 2012, the US Environmental Protection Agency (EPA) issued regulations which include the first Federal air standards for natural gas wells that are hydraulically fractured.  The new regulations also have new requirements for several other sources of pollution in the Oil and Gas industry that currently are not regulated at the Federal level.  The final rule can be found at the following link:  http://www.epa.gov/airquality/oilandgas/

             To individuals in New York State who hope someday to use their properties for oil and gas exploration utilizing hydraulic fracking, this new EPA rule can be viewed as good news.  New York has been gaining a reputation throughout the country as being too heavy handed in formulating their regulations with respect to hydraulic fracturing.  However, as is often the case in new, risky, and potentially dangerous activity, individual states tend to regulate the activities with a myriad of often overlapping and conflicting regulations.  In the past when this has happened, the Federal government steps in and begins passing regulations that apply to all industry participants.  This is the first example of an industry wide federal regulation being enacted with respect to hydraulic fracturing.  It’s reasonable to believe that new and different rules will be issued by the EPA.  The net effect of these new rules will be to make the New York State Regulatory scheme look less burdensome to the industry and therefore make New York State more attractive to future oil and gas exploration.  This blog will try to keep you up to date on developments as they occur.

According to the 1992 GEIS, flow back water and cuttings could be stored in a surface pit dug from the ground and lined with plastic.  Contents of the pit would eventually be removed if oil conditions or pit construction did not cause the fluid and cuttings to escape prematurely.  The 2009 DSGEIS appeared to endorse this methodology of flow back water retention and discuss the fact that there could be alternatives to this method.  The revised DSGEIS published in 2011 now states that 100% of the flow back water will be recaptured in tanks on site to be removed from the site on a periodic basis.  The only exception to this rule will be if a special environmental review is undertaken by the driller and the DEC feels confident that adequate protections are put in place and the circumstances warrant an exception to the standard permitting rules.

This is a very important issue for landowners.  Many of the incidents involving hydrofracking fluids released into the environment have come as a direct result of storing the flow back water in surface pits.  Such events as tropical storm systems, freezes, spring time thaws and other events, have caused release from the surface pits of large volumes of contaminated water which affect crops, trees, livestock and the environment in general.  In addition, the construction of these pits are subject to numerous practical limitations, including the lining must be watertight, no sharp sticks or stones can protrude from the base of the pit to avoid punctures in the lining, and the pit has to be sized right.  The lining at the upper rim must be securely fastened so that it doesn’t slide down into the pit when the water pulls on it from below.  Essentially, what the DEC has required is that companies use a “closed system” to capture flow back water.  This is a clear improvement over prior permitting practices and should serve the landowners of New York State very well.

The reason most people are fearful of the high volume hydrofracking technique creating environmental problems is that it is well known that chemical additives to the water may be hazardous when highly concentrated.  The industry has heightened the individual concerns by refusing to disclose their proprietary concoctions of chemicals added to the water.  The DSGEIS has addressed these concerns and has offered solutions and mitigations.

THE CHEMICAL ADDITIVES

90+% of hydrofracking fluid is water according to the DSGEIS.  Approximately 9% of the volume is propant (usually sand).  The remaining <1% are chemicals designed to help in removing the fluid and gas from the well after the hydrofracking event occurs.  These chemicals have generic categories including biosides, acid, corrosion inhibitor, friction reducer, gelling agent, iron control, scale inhibitor and surfactant.

CHEMICAL DISCLOSURES

Operators must now disclose all additive products used to supply the Material Safety Data Sheet for those products so that appropriate remediation measures can be imposed if a spill does occur.  The DEC will publicly disclose information about the additive products, except information that meets the level of a “trade secret” which information the DEC will still be provided with, but will keep in the separate, secure site available to the DEC personnel in case a spill occurs.  This site will meet the DEC’s confidential business information exception to the DEC records access program.  The availability of this information, in the event of a spill, to DEC personnel, could provide both emergency and remedial assistance to any landowner adversely affected by hydrofracking fluid contamination.

FRESH DRINKING WATER

No single issue is of greater importance to landowners and residents in New York State than the protection of our fresh drinking water supply.  The SGEIS recommended at least six direct mitigation/avoidance measures that should protect our residents’ fresh drinking water.

UNFILTERED WATER SUPPLIES

New York City has spent billions of dollars to purchase protective easements in its watershed regions to protect the aquifers that supply its unfiltered drinking water.  Some people describe New York City’s water as the best tasting water in the world. Syracuse also has an aquifer that it receives its unfiltered drinking water from.  Both of these aquifer areas will be off limits to high volume hydrofracking operations and the buffer area surrounding them will be 4,000 feet.  Although not subject to filtration avoidance, there are an additional 18 highly productive aquifers which will be off limits to surface activities through a 500 foot buffer area around these aquifers where there can be no slight disturbances.  However, the primary aquifer areas can be accessed by horizontal drilling below the 1,000 foot level.

WELL WATER

Under the proposed new regulations, prior to drilling, operators will be required to check private wells within 1,000 feet of the drilling site to provide baseline information on the well for ongoing monitoring.  If there is no well within 1,000 feet, the survey area would extend to 2,000 feet.  This should provide landowners with the comfort of knowing that their wells will be tested and protected from degradation by the drilling process.  Additionally, any existing problem in the well can be corrected by the landowners to ensure their health and safety.  As a person who relies on well water for some use, I can say that in the 25 years since I have owned my well, I have not once tested it for contamination.  The pre-drilling test should provide information that most landowners do not have about their wells.  Additionally, the new regulations will require enhanced well casing.  That is, a third cemented “strain” of well casing will be added to the well bore to protect water resources from gas infiltration coming from the gas well bore directly into surface water wells.  To my knowledge, no other state has this requirement.

This new high volume hydraulic fracturing (sometimes called slick water fracturing) raised new, potentially significant adverse impacts not studied in the 1992 Department of Environmental Conservation’s (DEC) previous Generic Environmental Impact Statement (1992 GEIS).  High volume hydraulic fracturing is distinct from other types of well completion that have been permitted in the state under the 1992 GEIS due to the much larger volumes of water and additives used to conduct hydraulic fracturing operations.  Horizontal drilling can be done from a central location of multiple well heads which can be drilled from the same well pad, thus making the well pad larger and the industrial activity taking place on the pad more intense.  The issue the DEC zeroed in on was that hydraulic fracturing requires chemical additives, some of which may pose hazards when highly concentrated.  Also, the adulterated water associated with such drilling may result in significant adverse impacts where they enter water supplies and/or waste water treatment and are trucked offsite for disposal.  Each wellbore of 4,000 linear feet can consume up to 3 million gallons of specially treated water.  This horizontal drilling correspondingly generates greater volumes of drilling waste (cuttings).  In 2009 the DEC published a Draft Supplemental Generic Environmental Impact Statement (DSGEIS) which began a study of all the issues raised by high volume hydraulic fracturing and horizontal drilling that were not covered in the original 1992 GEIS.

The SEQR law gives each and every individual in New York State the opportunity to individually comment on SEQR issues before, during and after the study has been published. In fact, this was done in New York State as a draft scoping document was sent out for public review in October 2008 and public scoping sessions were held in six venues in the Southern Tier and Catskills. A total of 188 comments were received at these sessions, together with 2,770 written comments regarding the proposed scope of the SEQR review. On September 30, 2009, a draft Supplemental Generic Environmental Impact Statement (DSGEIS) was released for public review and four public hearings were held. 425 people attended these public hearings and more that 200 verbal comments were delivered. In addition, 15,000 written comments were also received by the DEC. The revised draft SGEIS was published in June of 2011, and public comments on the revisions are being accepted until January 11, 2012. In the meantime, a moratorium has been imposed on permits for high volume hydraulic fracturing in New York State. It is anticipated that a final SGEIS will be published sometime in 2012, which will incorporate all the volumes of the 1992 GEIS. Use this link http://www.dec.ny.gov/energy/76838.html to make your comments by January 11, 2012.

New York State’s approach to hydraulic fracturing permitting appears to differ from the approach other states have taken.  As of this date, we are well aware of the reported incidents involving natural gas exploration using hydraulic fracturing in other states such as Pennsylvania,Texas and Colorado, as well as others.  Hydraulic fracturing combined with horizontal drilling as a technique is new, but these other states issue permits based upon the knowledge base and experience accumulated from vertical well drilling. New York State, however, has the State Environmental Quality Review Act (SEQR), which required a full analysis of the horizontal drilling and hydraulic fracturing of the deep, low permeability shale found in the Marcellus and Utica Shale formations.  This review of the science and current knowledge base related to horizontal drilling prior to issuing drilling permits gives New York State an opportunity to prevent accidental spills, evaluate risks and propose mitigations to minimizing risks before issuing permits.

I am an attorney admitted to practice in New York State and I began representing landowners in the late 1980s with respect to oil and gas lease negotiations. Land owners from across New York State began to call me to negotiate their leases for oil and gas exploration. I was doing so much leasing work that I authored an article entitled “Should You Lease Your Land?” which appeared in the January/February 2001 issue of Forest Owner, the New York Forest Owners Association’s magazine. For the first 20 years of negotiating oil and gas leases, I primarily concentrated on leases that concerned vertical wells in the Medina, Theresa, and Trenton-Black River formations.

In early 2009, word began to spread that high volume hydraulic fracturing was a proven stimulation technique that greatly increased the ability to extract natural gas from very tight rock. This combined with horizontal drilling and a multi-well pad development increased production of domestic natural gas reserves from deep underground shale deposits. This has dramatically altered the future energy supply projections and has the promise of lowering the cost for users and purchasers of this energy commodity. This news was accompanied by geological maps indicating that large portions of the Marcellus Shale and Utica Shale formations were located within New York State borders. In fact, each shale formation is names after a New York State municipality. I began to field inquiries on leasing opportunities in the Marcellus and Utica Shale formations and formed the Western New York Oil and Gas Coalition of landowners wishing to aggregate their acres available to lease to increase their bargaining power.

This blog will examine the conclusions published in the 2011 updated Draft Supplemental Environmental Impact Statement (DSGEIS). I will focus my comments and attention primarily to areas of change identified by the DEC in the 2011 DSGEIS from the 2009 DSGEIS and try to correlate those changes to how they impact drilling in the Marcellus Shale and Utica Shale formations that cover so much of New York State. I will also focus on topical issues, industry trends, scientific findings, relevant commentary and market activity related to the Marcellus Shale and Utica Shale explorations efforts in New York State and any issues related thereto. Please feel free to comment on any subject raised as my intent is to relay factual, relevant, supportable information to the general public to provide them with solid information.

What Does the DSGEIS Mean to a Landowner?

It is hard to summarize the most salient features of a report that runs 1100 pages in length. Based on my extensive experience in negotiating oil and gas leases for landowners, I intend to focus on the major issues that I have dealt with in representing landowners and how they are addressed in the DSGEIS. If the reader feels that the DSGEIS has not addressed any subject adequately they can make an appropriate comment to the DEC before January 11, 2012.