Second edition of the Shale Gas Handbook released by Norton Rose Fulbright

On June 25, 2015, Norton Rose Fulbright released the second edition of the Shale Gas Handbook. Almost two years ago, Norton Rose Fulbright lawyers, realizing that the unconventional oil and gas phenomenon was having various results all around the world, came together to create the inaugural edition of the Shale Gas Handbook. The Shale Gas Handbook is a one of a kind, one-resource book that members of the oil and gas industry can turn to for questions about unconventional shale oil and gas drilling, production and hydraulic fracking. Since the launch of the first edition, there have been a number of exciting changes both in the United States and around the world.

Because the oil and gas industry has a considerable global presence, the Shale Gas Handbook covers global oil and gas issues. For example, the second edition of the Shale Gas Handbook encompasses changes in Chile and Colombia where governments have rolled out shale oil and gas plans and placed new blocks up for auction, in the United Kingdom where the government released legislation regarding permitting and new requirements in dealing with wastewater and injection wells related to fracking, and in the United States where there have been changes to the governing regulations and case law. Although Norton Rose Fulbright intends to continuously update the Shale Gas Handbook, the firm will also provide real-time updates on oil and gas issues through its hydraulic fracturing blog.

Read the handbook.

Colorado voters face opposing oil and gas measures at the ballot box this fall

On November 6, the Colorado ballot box will present voters with opposing oil and gas measures, Proposition 112 and Amendment 74. Both measures could have major conflicting implications on the state’s oil and gas development.

Proposition 112 would establish the minimum setback of all oil and gas wells to 2,500 feet from homes, schools, hospitals, and “vulnerable areas.” Current regulations mandate wells are 500 feet from homes and 1,000 feet from schools and hospitals.

Advocates of the oil and gas industry, such as Chip Rimer—a top executive at Noble Energy, warn that these new setback requirements could cut off as much as 80% of the state’s future energy development on nonfederal lands, causing 150,000 job losses statewide, and decreasing tax revenues by $1 billion. However, proponents of Proposition 112 believe the measure is necessary to protect the health and safety of residents in the Front Range Area where the population is booming and the industry continues to grow.

Voters will also consider Amendment 74 this fall. Amendment 74 would amend the Colorado Constitution’s taking clause to read: “[p]rivate property shall not be taken or damaged, or reduced in fair market value by government law or regulation for public or private use, without just compensation.”

Chad Vorthmann, Amendment 74’s sponsor and Vice President of Colorado Farm Bureau, says the measure is about “protecting Colorado’s farmers and ranchers from extremist attempts to enforce random setback requirements for oil and natural gas development . . . and strip away Colorado landowners’ right to use their land the way they wish.”

Opponents of Amendment 74 believe the regulatory takings claim will invite a flood of lawsuits and bankrupt small municipalities. Dan Grossman, a former Colorado state legislator who is the national director of state programs for the Environmental Defense Fund’s oil and gas program, claims that the measure will paralyze local governments. If local governments reject oil and gas developments they could face takings claims from mineral owners. But if the government approves the development, it could be faced with a takings claim from property owners.

Both initiatives passing would be the worst-case scenario, Sam Mamet, executive director of the Colorado Municipal League, says. Proposition 112 would invite legal challenges under Amendment 74. In fact, Eric Sondermann, an independent political analyst, calls Amendment 74 a “bit of an insurance policy” against Proposition 112.

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High Court rejects legal bid to prevent fracking in Lancashire, UK

The High Court has refused to grant an interim injunction preventing Cuadrilla from carrying out hydraulic fracking operations at the Preston New Road site in Lancashire. The ruling means that Cuadrilla can resume fracking in the UK for the first time since 2011.

Mr Justice Supperstone also refused permission for judicial review of Lancashire County Council’s decision over the adequacy of the risk assessment and emergency planning procedures.

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Cuadrilla had been granted a petroleum exploration and development licence and an environmental permit for the Preston New Road site, as well as planning permission in 2016 to develop the site as a temporary exploration site with permission to drill, hydraulically fracture and test the flow of natural gas from up to four horizontal wells. Having completed drilling for the UK’s first two horizontal shale gas wells, and obtained Hydraulic Fracturing Consent from the Secretary of State in July 2018, the company was due to commence hydraulic fracking.

The High Court initially granted an interim injunction on 5 October preventing the commencement of fracking until the hearing on 12 October. The claimant local resident sought to extend the interim injunction until such time as the High Court had an opportunity to consider the claimant’s proposed legal challenge.

In requesting permission for a judicial review, the claimant submitted that the local planning authority had failed to carry out an adequate risk assessment (categorising the risk of fracking as ‘medium’ rather than ‘high’); had failed to apply the ‘precautionary principle’; and had failed in its duty to communicate with the local community about the risks associated with fracking and emergency procedures.

However, the court refused both applications and held that there was not a ‘serious issue’ to be tried which would justify an interim order. In addition, the court held that the environmental and regulatory risk had been adequately assessed and that there was no evidence to support the claim that the risk should have been categorised as ‘high’ rather than ‘medium’. In this respect, the court was reluctant to intervene and substitute its own risk assessment for that of experts. The risk assessment had satisfactorily applied the ‘precautionary principle’ by considering the worst-case scenario and there was no arguable case that the local planning authority had failed to conduct appropriate emergency planning procedures.

Following the ruling, Cuadrilla announced its intention to start fracking immediately and news reports indicate that, notwithstanding a blockade by protestors at the entrance of the site, fracking commenced on 15 October. It has been reported that the claimant will appeal against the judge’s decision.

R. (on the application of Dennett) v Lancashire CC

Ineos granted permission in UK Green Belt for exploratory shale gas drilling

Ineos has been granted planning permission on appeal for exploratory shale gas drilling in the Green Belt, near Rotherham.

In May 2017, petrochemical firm Ineos sought temporary permission for a period of five years for a shale gas well, access track and ancillary facilities at Common Lane, Harthill near Rotherham. Ineos claims that the site has been chosen because it is within an area of interest based on existing seismic data.

Ineos intends to dig a 2.8km (1.7 mile) exploratory well to extract rock samples in order to test the viability of shale gas extraction.

Ineos lodged an appeal in December 2017 after Rotherham Metropolitan Borough Council failed to determine the application within the statutory determination period. The Council then refused the application in January 2018, primarily over concerns regarding the impact on the local highway network and insufficient submission of ecological details.

However, permission was granted on appeal by the Planning Inspectorate in June 2018.

The Planning Inspector considered the main issues in the case to be whether the proposal represented inappropriate development in the Green Belt and its impact on local highways.

On these issues, the Inspector found that the proposal would not necessarily have an unacceptable impact on local highways and that the extent and temporary nature of the development would ensure that the proposal would neither represent inappropriate development nor would not be harmful to the Green Belt.

While he acknowledged that the development could have negative impacts on biodiversity, the landscape and visual character of the surrounding area, he concluded that these would not outweigh the benefits from the investigation proposed in terms of future energy supplies to which he gave greater weight.

Through the imposition of suitable conditions, he considered that the development would be environmentally acceptable and that it would constitute safe and sustainable development in light of the National Planning Policy Framework.

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PA Superior Court revives trespass claim against fracking company

Last Monday, a three-judge panel of the Pennsylvania Superior Court revived a trespass claim against a fracking company. The claim, which was previously defeated by summary judgment, could return to the trial court for determination of its merits.

In 2015, plaintiffs filed suit against the fracking company alleging trespass and conversion. Plaintiffs claim the company used hydraulic fracturing to extract natural gas beneath the plaintiffs’ property, where the company did not have a lease, from an adjacent tract on which it had a lease.

Pennsylvania has long recognized the rule of capture, the principle that allows producers to collect, without incurring an obligation to pay neighboring landowners, oil and gas that flows to their wells from neighboring tracts. Under the rule, neighboring landowners are encouraged to “go and do likewise”—to produce oil and gas themselves—to protect their interests. The trial court relied on the rule of capture in granting summary judgment for the company.

Plaintiffs in this case argue the rule of capture should not apply when producers use hydraulic fracturing to collect oil and gas from neighboring tracts. They contend the differences between conventional oil and gas production and hydraulic fracturing, specifically the active way in which producers create channels for oil and gas to escape via hydraulic fracturing, make the rule of capture ill fitted to the technique. Hydraulic fracturing, they argue, allows producers to collect otherwise nonmigratory oil and gas in addition to the free-flowing oil and gas historically contemplated by the rule of capture.

The Pennsylvania appellate panel agreed with the plaintiffs and held that “hydraulic fracturing may constitute an actionable trespass where subsurface fractures, fracturing fluid, and proppant [sand] cross boundary lines and extend into the subsurface estate of an adjoining property for which the operator does not have a mineral lease, resulting in the extraction of natural gas from beneath the adjoining landowner’s property.” The court concluded that hydraulic fracturing, if protected by the rule of capture, would allow producers to expand their leases without incentive to negotiate with neighboring landowners.

It is uncertain whether the fracking company will appeal the decision. Regardless, if the case returns to the trial court, it will be plaintiffs’ burden to show that the fracking company’s fractures, fluid, and proppant entered the plaintiffs’ subsurface estate, and to demonstrate the amount and value of gas collected by the company as a result. The Pennsylvania appellate court noted these significant “evidentiary difficulties.”

Of note, in 2008 the Texas Supreme Court decided a similar case and held that “damages for drainage by hydraulic fracturing are precluded by the rule of capture.” The Texas Supreme Court focused on the remedies already available to neighboring landowners—self-help, lawsuits, and pooling—and the “preferable authority of the Railroad Commission to regulate oil and gas production.”

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Study observes possible links between hydraulic fracturing wastewater injection and seismic activity in Kansas

A new study published this month purports to link seismic activity in Kansas to wastewater disposal associated with hydraulic fracturing. Justin Rubinstein, the lead researcher, suggested that further research was needed to examine the effects of wastewater injections, stating that this study was “the tip of the iceberg as far as what we’re going to learn.”

The study examined ongoing seismicity in two counties in southern Kansas from 2013-2016, observing correlations between increases in seismic activity subsequent to increases in wastewater disposal via deep-injection wells. Additionally, seismic activity appeared to decreased at the same time as economic and regulatory forces reduced wastewater injection. Analyzing over 6,845 earthquakes, the study also identified six earthquakes of magnitude 4 or greater in Kansas since 2012, the first such earthquakes in the state.

Importantly, the study notes that hydraulic fracturing and oil production do not correlate in space or time with seismicity. The study’s conclusions instead attribute increases in seismic activity solely to wastewater injection. Moreover, the researchers indicated that not all wastewater injection disposal sites are associated with earthquakes because some areas may be more susceptible to the purported geological effects of wastewater injection than others.

Similar studies on wastewater disposal have failed to explain why other areas of the country have experienced few earthquakes despite having disposal wells with high injection rates. Rubinstein’s study reflects this important discrepancy, observing an absence of seismicity near the largest injection operations in the study area. The researchers attribute this observation to differences in local geological conditions. However, this inconsistency potentially undermines the study’s conclusion that higher levels of wastewater injection can lead to increased earthquakes.

Many state lawmakers have increased regulatory restrictions as a result of similar observations regarding wastewater injection. The Kansas Corporation Commission, for example, promulgated regulations in 2015 to limit wastewater injection. These regulations reduced wastewater injection in the area monitored in Rubinstein’s study by nearly 50%. Still, Rubinstein stated that it is difficult to tell how much economic shifts or new regulations concerning wastewater disposal contributed to decreases in seismic activity.

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Controversial study attempts to link fracking to poor infant health

Last month, in an article published in the journal Science Advances, economics professors at Princeton University, the University of Chicago, and the University of California, Los Angeles attempted to link fracking to low birth weight. The study is controversial, and has been criticized since its publication.

Over the course of ten years, Janet Currie, Michael Greenstone, and Katherine Meckel, the authors of the study, analyzed 1.1 million births in Pennsylvania, where fracking is common. They concluded that living within 1 kilometer of a fracking well while pregnant increased the odds that one’s baby would be born with a low birth weight by 25%.

The study is headline-grabbing but has significant flaws. The authors concede that forces other than fracking could explain low birth weights in Pennsylvania frack zones. “[M]others whose babies are potentially exposed to nearby fracturing in utero are younger, less likely to have been married at the time of birth, and less educated—characteristics that might lead to worse infant health outcomes even in the absence of fracturing.” The authors also note that the study relies on possible exposure to fracking pollutants, not actual exposure shown through real monitoring data.

Author Michael Greenstone—again an economist, not a natural scientist—stated to the press, “This study provides the strongest large-scale evidence of a link between the pollution that stems from hydraulic fracturing activities and our health, specifically the health of babies.” His statement belies, however, his and his colleague’s failure to collect real pollution-monitoring data, the core of their work being actual human exposure to fracking pollutants. His statement also ignores the other potential causes of poor infant health in Pennsylvania frack zones.

The study begins, “The growth in unconventional gas production involving hydraulic fracturing . . . has transformed the energy landscape, reducing energy prices, decreasing conventional air pollution by displacing coal in electricity generation, disrupting international energy trading arrangements, and increasing the prospects for energy self-sufficiency for the United States.” Many have encouraged readers to glean from the article’s opening this truth and to discount the unfounded assertions made thereafter.

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Cuadrilla discovers ‘sizeable quantity’ of UK shale gas as UK anti-fracking case is rejected

On 12 January 2018, exploration and production company Cuadrilla announced that it has recently discovered a “very sizeable quantity” of shale gas at its Bowland site in Lancashire (the Site).

Cuadrilla revealed it has drilled to a depth of 2.7km at the Site and to date has recovered 375 feet of core samples. When combined with data gathered from existing shale exploration wells, this has left the company optimistic as to its ability to “drill two horizontal wells…in gas rich zones”. This is complemented by the “excellent” rock quality in the vicinity. These properties are believed to make the site “very suitable to hydraulically fracture”.

Cuadrilla has confirmed that the necessary planning permissions for the construction of the exploratory wells are in place and that preliminary construction has commenced. The fracking process is expected to commence in Spring 2018, with flow rates being tested around six months later.

The announcement of this discovery came on the same date as the Court of Appeal rejected an anti-fracking pressure group’s claim that the use of the Site for fracking purposes was illegal. The application to use the Site for fracking was initially rejected by Lancashire County Council. However, it was subsequently granted by the UK Communities Secretary. This led the pressure group in question to take the case to the Court of Appeal. The Court have now established that the Communities Secretary’s decision contained no legal or procedural errors and have now allowed it to stand.

The pressure group have confirmed their intention to take the case to the UK Supreme Court.

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BLM to rescind 2015 fracking rule

Thursday, the Bureau of Land Management (“BLM”) announced that it will publish a final rule to rescind a 2015 regulation requiring companies to disclose the chemicals they use in hydraulic fracturing.

Decried by both the BLM and oil and gas trade associations as costly and duplicative of existing regulations, the repeal of this rule marks the final nail in the coffin for a legal battle that began over two years ago.

When the rule was originally proposed in 2015, it drew broad opposition from trade associations like the Independent Petroleum Association of America (“IPAA”), and state and local governments like Colorado, North Dakota, Utah, Wyoming, and the Ute Indian Tribe. Accordingly, the announcement of the rule’s final repeal today is seen by many as a major victory for government efficiency and spending.

As the BLM put it, “all 32 of the 32 states with federal oil and gas leases have regulations that address hydraulic fracturing,” and the number of “companies [that] are using state regulatory agencies and/or databases such as FracFocus to disclose the chemical content of hydraulic fracturing fluids” is increasing. Thus, rescinding this federal rule seems to be a common sense way to achieve the goal of “reduc[ing] the costs of regulatory compliance.”

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The US EPA and BLM eye major reforms

Earlier this week, the Environmental Protection Agency  (“EPA”) released an advanced notice of proposed rulemaking to solicit public comments for possible modifications to the Clean Power Plan (“CPP”).US EPA and BLM eye major reforms

An important step in the rulemaking process, this notice came as no surprise after the EPA’s announcement in late October that it was interested in repealing the CPP.

Although the notice itself did not actually propose a future rule, the areas of interest that the EPA specifically requested public comment on provide strong hints at what the shape of any future amendments to the CPP would look like.

Specifically, the notice makes it clear that the EPA is interested in empowering the states, rather than the federal government, with setting emissions guidelines for electric utility generating units. And, that the EPA seeks to amend the system of emission reduction currently in the CPP.

In a similar move to deregulate the oil and gas industry, the Bureau of Land Management (“BLM”) is expected to finalize their decision to rescind a rule regulating fracking on federal and tribal lands next month. Criticized by the BLM itself as duplicative of other state and tribal regulatory programs, repeal of this rule will likely allow industry participants to avoid unnecessary compliance costs and purposeless information requirements.

The BLM has also signaled that they will be proposing a rule revising or rescinding a previous rule limiting the venting and flaring from gas wells on public land. Although this rule proposal is still in a preliminary stage, this could also have significant positive effects on the oil and gas industry.

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PA federal judge strikes down municipal fracking ban

Late last month, a federal magistrate judge in Pennsylvania struck down a township’s ban on fracking activities. The ban, which prevented the injection of fracking waste into a well underlying the town, was preempted by state and federal law, said the judge.

The judge ruled that the ban was preempted by the federal Safe Drinking Water Act and Pennsylvania’s Act 13, which prevents municipalities from passing ordinances that regulate oil and gas activity except through limited channels, namely the state’s Municipalities Planning Code and Flood Plain Management Act.

The ban, part of the municipality’s “community bill of rights,” was adopted in 2013. It was conceived in response to a resource corporation’s plan to store fracking waste beneath the township.

The corporation’s waste storage plan received EPA approval in 2014, and with that approval the corporation challenged the township’s ban in federal court. The township came under new leadership in 2016 and stopped defending the ban, but voters last November adopted a similar measure.

The judge, despite the township’s unwillingness to defend the ban, examined its merits. Two nonprofit organizations attempted to defend the ban in lieu of the township.

The town is Elk County’s Highland Township in the northwest part of the state.

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