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State bans, law suits could influence the future of hydraulic fracturing in the US

By Kelli Ainsworth, Editorial Coordinator

Hydraulic fracturing, critical to the recovery of North American drilling activities, remains under threat in the US. Several states appear poised to ban hydraulic fracturing, including California and Maryland. Further, several legislation and legal actions are ongoing, including the US Bureau of Land Management (BLM) hydraulic fracturing rule that remains under appeal and a lawsuit in Oklahoma regarding fracturing and seismicity. At the same time, the general public remains very concerned about the effects of hydraulic fracturing – in terms of drinking water quality and induced seismicity, for example. Such concerns continue to drive the actions and decisions for many state agencies. “Perception affects what laws, regulations and bans go into place,” said Michael Gray, an attorney at Shook, Hardy and Bacon LLP. “What you do and how people perceive what you do will affect them calling their congressmen and asking for a ban,” he said in a presentation at the 2017 SPE Hydraulic Fracturing Technology Conference in The Woodlands, Texas, on 25 January.

Mr Gray cited an ongoing lawsuit in Oklahoma brought by the Sierra Club and Public Justice against Chesapeake, Devon and New Dominion alleging that hydraulic fracturing has caused earthquakes throughout the state. The plantiffs are requesting that a new regulatory body be formed to oversee hydraulic fracturing – even though the Oklahoma Oil and Gas Commission is already working to address seismicity issues related to fracturing and wastewater injection, Mr Gray said. Moreover, the lawsuit asks the state to require oil companies to reinforce vulnerable structures. Such a requirement would be nearly impossible to enforce, he added. The case, filed in February 2016, is still pending.

The state of Oklahoma has been working with industry to understand the relationship between fracturing and seismicity and to reduce seismic occurrences relating to hydraulic fracturing. Michael Teague, Oklahoma Secretary of Energy, helped create the Coordinating Council on Seismic Activity, which brings industry together with environmental groups and academia to understand and address seismic activity in the state. “He said if we’re going to fix this problem, we need input from everyone,” Mr Gray said.

One of the outcomes of this collaboration was that industry was able to help the state improve and update its map of fault lines. “Because they have more knowledge of where the faults are, they’ve been able to improve their response to the induced seismicity,” Mr Gray said. When an earthquake occurs, operators shut in all wells within a certain distance from its epicenter. “By implementing this process with new information supplied by the industry, Oklahoma has been able to radically reduce the number of daily earthquakes in the state,” he added.

While Oklahoma has been working closely with industry to address concerns around hydraulic fracturing, other states have implemented bans. Vermont was the first state to ban hydraulic fracturing, in 2012, though this ban didn’t dramatically impact the industry, Nicholas Deutsch, Partner at Shook, Hardy and Bacon, LLP, said, noting that a well hasn’t been drilled in the state since the 1980s. In 2015, New York joined Vermont in banning hydraulic fracturing, and Maryland could potentially be next, Mr Deutsch said. The state currently has a moratorium on fracking that expires this year. “The decision will have to be made whether the moratorium turns into a ban or gets lifted,” he said. “With no turnover in the state legislators, it looks very possible that there could be a ban in Maryland as well.”

At the same time, there is potential California may ban hydraulic fracturing. While Governor Jerry Brown has said that he would veto any bill attempting to ban fracking, the legislature may now be able to overturn his veto. In the most recent California legislative elections, Democrats secured a supermajority in the state legislator, which means the party could have the numbers to overturn a gubernatorial veto. Voters in Monterrey County recently voted to ban hydraulic fracturing, so a state level ban remains a possibility, Mr Deutsch said.

The BLM’s hydraulic fracturing rule, initially published in 2015, was successfully challenged by the industry and several states in a federal district court. In June 2016, a US District Court struck down the rule. “The rules they tried to implement caused significant restrictions and added costs and challenges for hydraulic fracturing on any public lands,” Mr Gray said. The judge ruled that the rule represented an overreach of the agency’s authority, but the BLM appealed this ruling. The 10th Circuit Court of Appeals had been set to begin hearing oral arguments in January but has opted to delay the arguments until March. “Due to the administration change, the 10th Circuit said they’re going to wait until March to see what the new BLM wants to say about this,” Mr Gray said. “Frankly, the new BLM may simply decide to withdraw the rule.”

While on a national level, the new administration might take a friendlier position towards the oil and gas industry and work to remove some regulation and red tape, the industry will continue to face public scrutiny, Mr Deutsch said. “There are many people who want more red tape, who believe the government needs to protect us. We will be under that microscope,” he said. “The future will really depend on our actions while we’re under the microscope.”

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