Hydraulic Fracturing: Update on EPA Actions; Background on Environmental Issues

May 22, 2012


In the face of mounting public debate over the long-term risks of hydraulic fracturing, federal and state authorities have recently proffered new regulatory regimes that will impact the oil and gas producing sector. This Alert provides an overview of these initiatives and a primer on the issues they address.

EPA Issues Draft Guidance on Diesel Fuel Fracking

The U.S. Environmental Protection Agency (“EPA”) has released its draft Underground Injection Control Program permitting guidance for oil and gas hydraulic fracturing (“fracking”) activities using diesel fuels. The draft guidance is directed toward EPA permit writers who issue permits under the Safe Drinking Water Act (“SDWA”) and aimed at ensuring the protection of underground sources of drinking water. The comment period is open for 60 days (until July 9, 2012) to allow stakeholders the opportunity to provide input and feedback before the guidance is finalized.

The SDWA requires owners or operators of injection wells to obtain a permit for hydraulic fracturing when diesel fuels are used in fracturing fluids. The guidance is intended to address the risks of diesel fuel injection during hydraulic fracturing. EPA is the permitting authority for Underground Injection Control programs (including Class II oil- and gas-production wells) in Arizona, Washington, D.C., Florida, Hawaii, Iowa, Kentucky, Pennsylvania, Michigan, Minnesota, New York, Tennessee, Virginia, American Samoa, the Virgin Islands, and most Indian tribal areas. It is anticipated that other state, tribal, and territorial programs will utilize the guidance developed for permitting programs in those jurisdictions.

The draft guidance seeks to address potential contamination via six key “pathways of contamination;” routes by which fluids can breach the injection well system and enter the groundwater. The guidance also provides recommendations on permit duration, well closure requirements, well construction (including mechanical integrity testing), financial responsibility, and public notification.

Industry sources suggest that the guidance as proposed will have limited impact because the industry has generally moved away from using diesel fuel in fracturing liquids. The final rule may have greater significance should EPA broadly define “diesel fuel” in such a way as to extend the guidance to fracturing fluids containing diesel components, such as benzene, toluene, ethylbenzene, and xylenes.

The proposed guidance can be found at http://water.epa.gov/type/groundwater/uic/class2/hydraulicfracturing/upload/hfdieselfuelsguidance.pdf.

EPA Regulates Emissions from Fracking Operations

On April 17, 2012, the EPA issued regulations aimed at reducing air emissions from oil- and natural-gas-production facilities. The regulations include federal air standards for natural gas wells that are hydraulically fractured, and requirements for several other sources of pollution in the oil and gas industry that currently are not regulated at the federal level. The EPA expects the rules to yield a nearly 95 percent reduction in volatile organic compounds (“VOCs”) emitted from more than 11,000 new, hydraulically fractured gas wells each year.

The new rules rely on a process referred to as “reduced emissions completion,” or “green completion,” designed to capture natural gas that currently escapes into the air during the fracking process. Special equipment is required to separate gas and liquid hydrocarbons from the flowback that comes from the well as it is being prepared for production. The gas and hydrocarbons are then intended to be treated and used or sold. Several types of wells are exempt from green completions, including wildcat and delineation wells, and non-wildcat and non-delineation low-pressure wells. These wells must employ flares where practicable.

The rules create a New Source Pollution Standard (“NSPS”) category (subpart OOOO), “Standards of Performance for Crude Oil and Natural Gas Production, Transmission and Distribution,” and revises certain National Emission Standard for Hazardous Air Pollutants (“NESHAP”)-subparts. These new NSPS and NESHAP standards contain requirements that will impact both the upstream (drilling operations) and midstream (primarily compressors, sweetening units, pipelines, and dehydration units) operations in the oil and gas sectors.

The final rules give affected sources until January 1, 2015 to conduct green completions, allowing time to install control equipment and train operators. During this transition period, flaring will be required to reduce VOC emissions.

Additional information and the complete final rule can be found at http://www.epa.gov/airquality/oilandgas/actions.html.

Debate Continues

Although the EPA has now taken action as noted, there remains considerable controversy regarding the overall safety and environmental impacts of fracking.

Groundwater Contamination

Anecdotal information suggests that drinking-water wells in areas where fracking has been newly introduced have been impacted, not only by methane, but also by heavy metals, other hydrocarbons, and increased turbidity. However, the exact source of the contaminants is still very much in question. Many have argued that the contamination is naturally occurring, and not the result of fracking. Because fracking operations generally follow immediately after drilling operations, it may be difficult to determine if the contamination is related to either or both of the operations, if at all. Well-bore integrity and cementing could also play a role in groundwater contamination, as could surface spills of fracturing fluids. Reports suggest that fracturing risks will be highly variable depending on the influence of the above-noted factors in any given setting.

Water Usage

Fracking requires large quantities of water. Depending on the depth of the well and its geological characteristics, between 4.5 to 5.5 million gallons of water are needed per well, with about 5 percent used for drilling and 95 percent used for fracturing.

Fracking proponents point out that water is required for all energy production, and that the water used for fracking does not compare unfavorably with amounts of water used to grow corn for ethanol, or amounts used in refineries to produce methanol. Recycling of water has become a major issue in the industry. Generally, 40 to 70 percent of the water used for fracking is returned to the surface. Some estimate that up to 90 percent of the returned water could be reused with the proper treatment and sufficient storage.

Opponents point out that fracking water is generally unusable for other purposes due to high suspended solids, radioactivity, or contamination with fracking fluids. No cost-effective treatment technologies exist for processing this water. The water is often injected into disposal wells, which some have blamed for seismic activity in the areas where fracking is taking place. Opponents also point out that water used to grow corn or other crops for ethanol, or to cool power plants, remains available in the environment for other uses, while fracking water does not. Finally, ground or surface water withdrawals required for fracking may impact sensitive ecosystems, such as in headwater areas where surface flows are minimal but essential for species survival.

Surface Impacts

The biggest surface impacts relate to increased activity around drilling pads. It is estimated that over one thousand heavy truck trips are required to bring one gas well to production. Even after production begins, several hundred trips are required to maintain the well, and refracturing a well also requires hundreds of heavy truck trips. In many areas where drilling and fracking occur, roads and bridges are not built for heavy trucks, and thus the service life of these roadways may be impacted. Road maintenance is generally a state or local issue, so approaches to funding road and bridge repair differ around the country.

Drilling activities create noise and lighting impacts that may not be common to rural and remote areas.

Counterbalancing these concerns are new opportunities for employment, new income through landowner royalties, new economic development, and an increased tax base.

Chemical Use

Reporting and disclosure requirements for fracking chemicals differ from state to state. Proponents of disclosure argue that greater disclosure of fracking chemicals would allow more focused testing of drinking-water wells. Reporting of chemicals on Material Safety Data Sheets would provide emergency responders with more complete information on the hazards they could encounter at a drilling site.

The fracking industry generally regards its fracking chemical mixture as a trade secret. Manufacturers of these chemicals may be unwilling to disclose the identity of the chemical components. They may also not wish to provide information on the proportions of chemicals in the mixture.

The U.S. Department of the Interior recently published a proposed rule to require companies to disclose the chemicals used in hydraulic fracturing operations on public and Indian lands. The proposed rule would require public disclosure of chemicals used during hydraulic fracturing after fracturing operations have been completed. Additionally, the rule requires operators to provide greater assurance regarding well-bore integrity in order to verify that fluids used in wells during fracturing operations are not escaping. Operators also must have a water management plan in place to handle fracturing fluids that flow back to the surface.