Texas, Other States Move Forward With Hydraulic Fracturing Disclosure Regulations

October 13, 2011 Authors: Barclay Richard Nicholson, Andrea Fair

Earlier this year, Texas became the latest state to draft regulations requiring the disclosure of chemicals used in the hydraulic fracturing process. Michigan and Montana issued similar regulations over the summer, joining Arkansas, Wyoming, and Pennsylvania as states recently active in regulating hydraulic fracturing.[1] The new regulations require specific disclosures by operators and outline requirements for construction and operation of the well and continued monitoring of well activity. Three additional states, Louisiana, New York, and North Dakota, have proposed regulations open for public comment. This briefing examines recent changes and additions in hydraulic fracturing regulations throughout the country.

Texas: Public Comment Period Closed

On October 11, 2011, the public comment period closed for the proposed hydraulic fracturing chemical disclosure regulations issued by the Railroad Commission of Texas. The Railroad Commission issued the new regulations on September 9, pursuant to HB 3328, passed by the Texas Legislature in June.[2] HB 3328 requires that the approved regulations be effective by July 1, 2012; however, it is expected that regulations will be finalized by the end of the year.

The proposed Texas regulations require public disclosure of chemicals used in the fracturing process that are either regulated by OSHA or are otherwise intentionally added, along with the actual or maximum concentrations of each chemical.[3] Companies would be required to use Chemical Abstracts Service (CAS) numbers to identify chemicals in the fracturing fluids, making the disclosure more transparent for shippers, suppliers, end users, and the public. The regulations specifically exempt from disclosure chemicals unintentionally added, chemicals that occur naturally, or chemicals not disclosed by the manufacturer, supplier, or service company. Companies can also claim trade secret exemptions, which must be approved by the Railroad Commission. If a trade secret exemption is granted, only three parties can challenge it: (1) the landowner on whose property the wellhead is located; (2) any adjacent property owners; and (3) government agencies.

In addition to chemical disclosures, operators must disclose the total volume of water used, the total volume of base fluid used, the date of the hydraulic fracturing treatment, and well-specific information, such as the county in which the well is located, the well name and number, the longitude and latitude of the wellhead, and the total vertical depth of the well. Under the proposed regulations, only wells with permits issued after the effective date are subject to the requirements.

Michigan: Regulations Effective June 22, 2011

Michigan's Supervisor of Wells issued new regulations in May 2011, which became effective June 22, 2011.[4] Under the regulations, well completions for high volume hydraulic fracturing must include the Material Safety Data Sheet and the volume used for all additives. High volume hydraulic fracturing is defined as an operation that is intended to use a total of more than 100,000 gallons of hydraulic fracturing fluid.

Additional regulations apply to wells with large volume water withdrawals, defined as withdrawals with a cumulative total of over 100,000 gallons per day. For these wells, permit applications must include: a water withdrawal evaluation (and in some cases a site-specific review by the DEQ); the proposed total volume of water needed; the number of water withdrawal wells; well locations, depths, and proposed pumping rates and frequencies; any freshwater wells within 1,320 feet; and the locations and dimensions of proposed freshwater pits. If there is a freshwater well within 1,320 feet, a monitor well must be installed and monitored daily during water withdrawal, and weekly thereafter. During the withdrawal process, injection pressures must be recorded. Upon well completion, records and charts showing fracturing volume, rates, pressures, and the total volume of flowback water must be included in the record of well completion.

According to the Michigan Department of Environmental Quality, no current hydraulic fracturing activity in Michigan would qualify as high volume under the proposed regulations.[5] Existing wells, which are located on the Antrim Shale, are shallow and typically use only 50,000 gallons of water in the fracturing process. The regulations were implemented in anticipation of development on the Utica Shale, a deeper formation that would require much larger volumes of water use.

Montana: Regulations Effective August 27, 2011

The Montana Board of Oil and Gas issued new regulations that became effective August 27, 2011.[6] Under the Montana regulations, applications for permits must include the volumes and types of materials to be used in the proposed hydraulic fracturing activities. Principal components or chemicals must be identified by trade name or generic name. Upon completion, fracturing operators must disclose the amounts and types of chemicals used, including the additive types, chemical ingredient names, and CAS numbers. Operators can qualify for trade secret exemptions, under which exempted chemicals must be identified by trade name, inventory name, chemical family name, or other unique name, and operators must disclose the quantity of the exempted chemical to be used. The regulations also require that permit applications include the processes to be used and the maximum anticipated treating pressure.

In addition to application requirements, the Montana regulations lay out specific structural and operational requirements. Fracturing wells must have a pressure relief valve and a remotely controlled shut-in device. Before stimulation, fracturing wells must undergo a casing pressure test. During the casing test, the maximum anticipated pressure must be applied for thirty minutes without the well losing more than ten percent of the pressure. Additionally, during operations, the annular space must be monitored. Upon completion, operators must describe the interval or formation treated and the amounts of maximum pressure during treatment.

New York: Out for Public Comment

In September 2011, the New York Department of Environmental Conservation issued extensive proposed regulations that outline permitting and operations requirements for hydraulic fracturing that uses more than 300,000 gallons of water cumulatively.[7] Under the proposed regulations, operators must follow the requirements of the application process for a normal drilling permit, as well as comply with State Pollutant Discharge Elimination System (SPDES) and Stormwater Pollutant Prevention (SWPP) plans. The New York regulations will be out for public comment through December 12, 2011.

To obtain a permit for hydraulic fracturing, operators must include the following information: the minimum and estimated maximum depths; the proposed volume of water and source of the water; distances from certain types of water supplies; identities of nearby abandoned wells; the engines and fuel to be used and air emission control measures; and information on blowout preventer measures. The New York regulations also contain detailed requirements for setbacks, water and pressure testing, casing structure, and construction, including site preparations and maintenance.

To comply with SPDES and SWPP requirements, operators must disclose particular information and submit plans aimed at preventing water contamination and sediment erosion. Operators must disclose: the proposed additives and each additive's proposed volume; copies of Material Safety Data Sheets for each product to be used; the proposed percent of water, proppants, and each additive product; documentation showing that the proposed additives have reduced aquatic toxicity and pose a lower potential risk to water resources and the environment than available alternatives (or that available alternative products are not equally effective or feasible); and the identification of the service company. Trade secret protection is available if granted by the Department of Environmental Conservation. Plans to prevent water contamination and sediment erosion require operators to continually monitor well activity, such as stormwater discharges, water usage, and flowback and produced water volumes. Operators must have certification for planned disposal methods, secondary containment measures, spill prevention plans, and methods to store flowback water.

Louisiana: Out for Public Comment

On August 30, 2011, the Louisiana Department of Natural Resources released a proposed rule for public comment.[8] The rule requires operators upon well completion to disclose the types and volumes of the hydraulic fracturing fluid, a list of additives including trade names and suppliers, CAS numbers for hazardous chemicals, and maximum ingredient concentrations. The proposed rule has a provision for trade secret protection under which only the chemical family must be disclosed.

The Department of Natural Resources has not officially issued an anticipated effective date. According to reports, the rule is expected to become effective in October 2011.

North Dakota: Out for Public Comment

The North Dakota Industrial Commission proposed new regulations for hydraulic fracturing on September 23, 2011.[9] Under the proposed rules, companies who do not use a frac string running inside the intermediate casing string must disclose the hydraulic fracturing fluid composition, including the trade name, supplier, ingredients, CAS number, and the maximum ingredient concentrations of all additives in the hydraulic fracturing fluid. No disclosure is required for wells that use a frac string inside the intermediate casing string. The proposed rules also outline specific safety systems that must be used, including pressure relief valves, diversion lines, and remote operated frac valves. The North Dakota regulations are currently out for public comment, and a public hearing is scheduled for November 1.

This article was prepared by Barclay R. Nicholson (bnicholson@fulbright.com or 713 651 3662) and Andrea Fair (afair@fulbright.com or 713 651 3782) from Fulbright's Litigation Department.

Learn more about Fulbright's Shale and Hydraulic Fracturing Task Force at www.fulbright.com/shale.

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[1] See 25 Pa. Code §78.55 (as part of the permitting process, drilling companies must disclose the names of all chemicals to be stored and used at a drilling site in the Pollution Prevention and Contingency Plan submitted to the Department of Environmental Protection); Wy. Oil & Gas Comm'n § 3-8(c) (operators must disclose chemical additives and proposed concentrations in the Application for Permit to Drill or Deepen). Ariz. Admin. Code § 12-7-117 (operators of wells using "artificial stimulation" must report the amount and types of material injected within 15 days of the procedure).

[2] HB 3328, 2011 Leg., 82 Sess. (TX 2011), available at http://www.capitol.state.tx.us/tlodocs/82R/billtext/pdf/HB03328F.pdf#navpanes=0. For an in-depth analysis of HB 3328 and the proposed Texas disclosure requirements, see Texas Legislature Joins Growing Number of States in Requiring Disclosure of Hydraulic Fracturing Fluids, Fulbright Briefing (June 16, 2011), available at http://www.fulbright.com/index.cfm?fuseaction=publications.detail&pub_id=4973&site_id=494&detail=yes.

[3] 36 Tex. Reg. 5765 (2011) (to be codified at 16 Tex. Admin. Code § 3.29) (proposed September 9, 2011) (Railroad Commission of Texas), available at http://www.sos.state.tx.us/texreg/pdf/backview/0909/0909prop.pdf.

[4] Supervisor of Wells Instruction 1-2011, High Volume Hydraulic Fracturing Well Completions, State of Michigan Department of Environmental Quality (May 23, 2011), available at http://www.michigan.gov/documents/deq/SI_1-2011_353936_7.pdf.

[5] Keith B. Hall, Michigan Issues New Hydraulic Fracturing Regulations, Oil & Gas Law Brief, Stone Pigman Walther Wittmann L.L.C., available at http://www.oilgaslawbrief.com/hydraulic-fracturing/michigan-issues-new-hydraulic-fracturing-regulations/.

[6] Administrative Rules of Montana, Title 36, Chapter 22, available at http://bogc.dnrc.mt.gov/PDF/FinalFracRules.pdf.

[7] N.Y. Comp. Codes R. & Regs. tit. 6, Parts 52, 190, 550–556, 560, 750, available at http://www.dec.ny.gov/regulations/77353.html.

[8] LAC 43:XIX Subpart 1, Chapter 1, available at http://dnr.louisiana.gov/index.cfm?md=calendar&tmp=detail&eid=110.

[9] N.D. Admin. Code § 43-02-03-27.1, available at https://www.dmr.nd.gov/oilgas/rules2012changes.pdf.