The Sidley Shale Gas and Hydraulic Fracturing Report

Energy and Environmental Update

Federal

NGOs and Unions ask EPA to issue national methane emission standards. In an October 10 letter to President Obama, the BlueGreen Alliance (a partnership of unions and environmental groups) urged the Environmental Protection Agency (“EPA”) to set national standards for methane emissions from the oil and gas sector. The group asserts that existing technology could eliminate nearly half of all methane emissions in the industry within five years. EPA Administrator Gina McCarthy has stated that the EPA is in the process of formulating a plan and will issue a national strategy later this fall, including possibly proposed regulations. According to EPA data, methane emissions are on the decline, with the largest reductions coming from wells using hydraulic fracturing techniques, where emissions have decreased nearly 73 percent since 2011.

Energy Secretary reports administration reconsidering crude oil ban. Energy Secretary Ernest Moniz told the Council on Foreign Relations that the Obama administration is evaluating the country’s 40-year-old ban on crude oil exports. The Energy Policy and Conservation Act of 1975 banned most crude oil exports, but allows the Commerce Department to approve exceptions. Industry representatives, including Exxon Mobil Corporation, Shell and the American Petroleum Institute, have called for the Administration to lift the ban; and recently, there has been interest from members of both houses of Congress. Since 2011, domestic oil production has jumped to nearly 8.5 million barrels a day, up from 5.4 million. Still, Secretary Moniz emphasized that the country remains a large oil importer and did not provide a time frame for any decisions regarding the ban.

States

California issues revised hydraulic fracturing rules. On October 9, the California Department of Conservation’s Division of Oil, Gas and Geothermal Resources released revised proposed regulations that, if implemented, will govern hydraulic fracturing and well stimulation operations in California. The proposed regulations are the third version to come out since the state legislature passed S.B. 4, a law that requires the state to draft new regulations to govern use the of hydraulic fracturing. The first two drafts each received around 100,000 comments, prompting the agency to issue a third proposal. Changes in this draft include raising the seismic activity reporting threshold, changing the application process for drilling permits and water use permits, and altering deadlines for neighbors to request water quality testing. The rules are scheduled to take effect on July 1, 2015, but must be approved by January 2015. The revised rules are now open for public comment.

Litigation

Colorado court finds hydraulic fracturing ban is not retroactive. A Colorado trial court recently determined that a voter-approved city ban on fracking did not apply retroactively to operations that were covered by an agreement executed before the voters approved the ban. The court found the company’s contractual rights in a memorandum of understanding it formed with the city had vested before passage of the ban and that Colorado’s Constitution prohibits ex post facto laws. Industry officials applauded the decision for recognizing that agreements reached between a city and an operator before the ban remain binding.

Michigan tribal court dismisses attempt to block use of water for hydraulic fracturing. The Little Traverse Bay Bands of Odawa Indians tribal court recently dismissed a lawsuit filed by political candidates Phil Bellfy (D) and Tim LaCroix (D) that alleged freshwater withdrawal permits for Michigan developers using hydraulic fracturing violated tribal law protecting the Great Lakes. The court dismissed the case based on a lack of subject matter jurisdiction, finding state and tribal laws do not allow for individual people to bring suit against the state for environmental violations. Bellfy and LaCroix plan to appeal the decision on the basis that the tribal constitution allows individual members to bring suit.

Studies

Satellites identify methane leaks in New Mexico. According to an article published on October 9 in the Geophysical Research Letters, New Mexico’s San Juan Basin was responsible for approximately 590,000 metric tons of methane emissions every year between 2003 and 2009. That is equivalent to 10% of all the methane emissions from the natural gas sector in the country. Notably, high emissions were recorded in 2003, before hydraulic fracturing was used in the area. The authors have theorized that that the higher emissions are due to greater use of coalbed methane extraction, but further study is required.

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