It was recently announced that a voluntary program to regulate fracking has been agreed to by some of the nation’s biggest energy companies and environmental groups who have agreed on a voluntary set of standards for Gas and Oil “fracking” in the Northeast.  These new standards are expected to go further than existing State and Federal pollution regulations now on the books in some states.  The unlikely partnership includes huge energy corporations like Shell Oil and Chevron and environmentalists such as the Environmental Defense Fund, The Clear Air Task Force, and interested community members such as HEINZ Endowments, EQT Corp., Consol Energy, and the Pennsylvania Environmental Counsel. The new standards include limits on emission of methane; the flaring of unwanted gas; reduction of engine emissions; groundwater monitoring and protection; improved well designs; stricter waste water disposal; the use of less toxic fracking fluid; and seismic monitoring before drilling begins.

The geography covered will include the states of Pennsylvania, West Virginia, and Ohio, all neighbors of New York State sharing both the Marcellus and Utica Shale formations, which means New York is within the geographic footprint.

These new standards could easily be adopted here in New York.  However, with the moratorium on hydraulic fracturing in horizontal wells still in existence, New York continues to lag behind other states in finding acceptable solutions to the competing interests involved in hydraulic fracturing.  While New York’s eventual regulations may be stricter than what has been agreed to by both industries and environmentalists, nevertheless the minimum standards set by this new agreement will bring the other states much closer to what New York professes to be striving for: a responsible approach to hydraulic fracturing given the environmental concerns involved.

Related article published in The Buffalo News on March 21, 2013:

Tuesday February 12, 2013 DEC Commissioner Joseph Martens issued a statement that the Department of Health’s (DOH) Public Health Review of hydraulic fracking was not completed by the scheduled completion date of February 11, 2013 and that “a few more weeks” will be required to complete the studies of high volume hydraulic fracturing. Commissioner Martens further states that once the report is done if the health study finds that the SEGIS has adequately addressed health concerns and the DEC adopts it that hydraulic fracturing permit applications can be processed within ten days of issuance of SGEIS. Currently the extended deadline for issuing regulations is supposed to expire on February 27, 2013. It remains to be seen whether that deadline will be further extended by the time it takes for the Health Department to complete its studies. We will keep you posted of all developments

For more informaton, please see the following documents:

Statement from Commissioner Joseph Martens

Statement from Commissoner Nirav Shah

On November 29^th, 2012 the New York State Department of Environmental Conservation filed a notice with New York’s Department of State for a 90 day extension to its original deadline of Thursday November 29^th, 2012 to approve the proposed regulations on fracking.  In 2008, New York State banned high-volume fracking pending an analysis of potential environmental impact of the process.  Pursuant to that decision,
a Draft Supplemental Generic Environmental Impact Statement “DSGEIS” was published which set forth proposed new rules for drillers in the state.  Comments to the DSGEIS were originally due by November 29^th, 2012.    Earlier this year, Cuomo administration commissioned an additional study of the effects of fracking on public
health.  Apparently the public health review has not yet been completed and that is why the DEC has asked for a 90 day extension of its original deadline.  We will continue to follow this and keep you posted of all developments.

On November 15, 2012 the U.S. District Court for the Northern District of New York in the matter of Beardslee v. Inflection Energy, LLC, No. 3:12-CV-00242, 2012 U.S.
Dist. LEXIS 163177 (N.D.N.Y. Nov. 15, 2012) held that New York’s “moratorium” on issuing drilling permits involving hydraulic fracturing does not necessarily create a “force majeure event” that extends the primary term of an oil and gas lease.  The term “force majeure event” is usually restricted to acts of God such as floods, wind, lighting, and ice storms, and really unusual events such as war, pestilence, epidemics, etc.  Some courts have interpreted riots and strikes to be force majeure events as well.  New York gas lessors have invoked the New York “moratorium” on issuing drilling permits involving hydraulic fracturing as a force majeure event and that was challenged in the Federal Court.  Now that the lessors have lost this case at the Trial Court level it
will be interesting to see if they choose to appeal it.  Future updates will keep you posted as to the results of any appeal taken from this case.

Many municipalities in Upstate New York have passed bans on gas drilling. Many more municipalities have enacted moratoriums in anticipation of the DEC’s completing its environmental review. If the DEC lifts the four year old State moratorium, these local regulations will directly affect drilling activities in the subject municipalities. One company, Lenape Resources, has already sent a letter to the Department of Environmental Conservation Commissioner Joe Martens warning that a moratorium prohibiting natural gas development of wells located in the town of Avon forced them to
shut down wells there, we can expect to see these threats turn into lawsuits in New York State Courts in the not too distant future.

So far the towns issuing bans have been successful because judges have ruled that the bans are not regulations, and therefor they do not violate the New York State law against local regulation of gas development. Other states have been dealing with this  same issue. In Pennsylvania a court has ruled that a state can’t restrict localities
from using zoning laws to regulate oil and gas drilling within their borders. The state of Ohio passed a law in 2004 banning townships from passing local ordinances. West Virginia courts have overturned ordinances passed by local municipalities that banned gas drilling.

The basic legal issue at stake here is called “preemption”. Everybody recognizes that Federal Government can preempt State Government on issues such as constitutionality, federal taxes, and interstate trade. Likewise, in theory, States can preempt local municipalities on issues of public policy that affect the entire state.  New York is somewhat unique as its governance model is based upon the Dutch model, which allows for more discretion at the local government level. This is why New York is known as a “Home Rule” state. It will be interesting to see how this issue is ruled upon by Appellate Divisions in the State of New York. In all likelihood, the New York Court of Appeals will have to rule to resolve any conflicting case decisions that are decided here in New York.

The Obama Administration has adopted New York State’s approach to full disclosure
of chemicals being used in hydraulic fracturing. The proposal will allow companies to file disclosure reports after drilling operations are completed rather than before as required in New York State. Interior Secretary Ken Salazar has been quoted as saying “that the public will now be fully aware of the chemicals that are being injected into the underground”. The new regulation will not affect drilling on private land.

To view the EPA Rule please see the following link:

www.epa.gov/hydraulicfracturing

New York’s SGEIS and media reports regarding it have used several technical terms that are not well-defined in the articles that the terms appear in. Below is a glossary of terms listed in alphabetical order to help you to understand the terms used in hydraulic and horizontal drilling:

Black shales: such as Marcellus Shale and Utica Shale, are fine grain sedimentary rocks that contain high levels of organic carbon.

Directional well: while these wells are drilled at angles other than 90 degrees from the surface designed to access suspected or proven reservoirs of natural gas located in target areas beneath the surface generally in a straight line, albeit slanted, from the well pad.

Environmental Assessment Form (EAF): this is a shortened, program specific environmental assessment form which was included in the 1992 GEIS. What is expected to be a 2012 EAF addendum has been developed for gathering and compiling the information needed to evaluate high volume hydraulic fracturing projects, whether for horizontal or vertical wells (greater than or equal to (>/=) 300,000 gallons).

Fairway: gas production fairway is the portion of the shale most likely to produce gas
based on evaluation.

High volume hydraulic fracturing: defined in the SGEIS as hydraulic fracturing that uses 300,000 or more gallons
of water, regardless of whether the well is vertical, directional or horizontal.

Horizontal well: this well is drilled initially at a 90 degree angle to the earth’s surface but then completes a 90 degree turn to access the target geological formation containing the gas reservoir sought by the driller.

Marcellus Shale: another name for the Marcellus formation, a middle Devonian aged member of the Hamilton group, that underlies approximately 18,700 square miles in New York with surface outcrops to the norht and east and reaching depths of 5,000 feet in the Southern Tier.

Naturally Occurring Radioactive Materials (NORM): is present in varying degrees in virtually all environmental medium, including rocks and soils. Black shale typically contains trace levels of uranium and gamma ray logs that indicate that Marcellus shale is known to contain concentrations of NORM.

Proppants: generally this word describes the additive to the hydraulic fracturing fluid that keeps the veins open after fracturing to allow the nature gas to escape into the well bore. Most of the time, the proppant is some form of sand, although other proppants are being experimented with and utilized by certain operators.

Slick water fracturing: this term is used to describe high volume hydraulic fracturing utilizing special chemical agents and additives to create improved conditions for the hydraulics involved and pumping water into and out of the gas reservoir areas of low permeability reservoirs of shale and rocks.

Supplemental Generic Environmental Impact Statement (SGEIS): in final form, this is expected to be issued in 2012 regulating high volume hydraulic fracturing projects (> or = to 300,000 gallons) as well as horizontal drilling projects.

Utica Shale: an upper Ordovician-aged black shale that extends across New York from Lake Erie to the Catskills front covering approximately 28,500 square miles in New York. It is exposed in outcrops along the southern and western Adirondack Mountains
and dips gently south to depths of more than 9,000 feet in the Southern Tier of New York.

Vertical well: This is a well generally drilled 90 degrees from the well pad to the target formation, where fracturing occurs to release the gas for production.

             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.