Shale producers face increased regulation on state level

16 November 2010 23:27  [Source: ICIS news]

HOUSTON (ICIS)--Producers in the shale plays of the US would face more red tape and mandates to divulge trade secrets as state legislatures pick up the slack from the federal government on regulating the industry, an environmental law attorney said on Wednesday.

“I see Congress having their hands full with the [President George] Bush tax extensions, fiscal issues and tax incentives as not funded by the federal government for next year,” said Baker Botts law firm partner Daniel Steinway at the Shale Environmental Summit  in Houston.

“So during the lame-duck session, they won’t be dealing with oil spills or anything along these lines,” he continued.

The states and the Environmental Protection Agency (EPA) have been given the job of regulating production and creating uniformity among the state laws concerning hydraulic fracturing.

Hydraulic fracturing, or fracking, is the process by which producers fracture rocks by inserting sand, ceramic, water and chemicals. Steinway said 90% of gas wells would need fracking in the future to be productive, and the product would account for 30% of the US recoverable oil and gas reserves.

More than 30 states having varying degrees of fracking to extract fuel. In the mid-1990s, however, environmental groups asked for more regulation of fracking under the Federal Safe Drinking Water Act.

The fracking products injected to break up rock are mainly water and sand, but on average, 0.5% are specialty chemicals such as biocides (to prevent bacterial contamination of the shale) and corrosion inhibitors. These chemicals have been the focus of the controversy. Many states are now regulating the process.

“My overwhelming view is that political influence is what’s fuelling this,” Steinway said. “You see’ 60 Minutes,’ you see ‘CSI New York’ and you read about [the documentary] ‘Gasland,’ and finally there’s the pressures from the White House.”

Colorado
set up the model for many states after more than a year of debate and hearings.

The Colorado rules included development of a comprehensive plan to identify possible drilling locations and how to minimise the effect on communities and the environment, a required distance of production from personal homes, and reporting chemical identities only in response to a related environmental or medical need. The chemical information would be reported to a state commission and kept confidential.

The industry has taken greatest issue with disclosing chemical identities.

“Everyone likes Coca Cola but we don’t actually know the formula of Coke,” Steinway said.  “So the industry felt chemical identities were a powerful trade secret and shouldn’t be required to be disclosed.”

New York
, Pennsylvania and Wyoming have all been active in creating similar regulations. New York has put a moratorium on hydraulic fracturing until regulations are debated and put in place. Wyoming requirements not only ask for companies to report the additive in the fracking process, but also the main ingredient in the additive.

Congress had addressed the issue in 2009, but Steinway said it would likely fade out as the Republicans took control.

US Representative Diane DeGette (Democrat-Colorado) introduced a bill in 2009 that would regulate hydraulic fracturing under the Safe Drinking Water Act. This has become known as the “Frac Act.”

Under this bill, producers would be required to disclose the chemical identities of all constituents of the fracking fluid to be put on an internet website. This would allow emergency crews and first responders to have access to chemicals in case of an emergency.

The industry has made some attempts to regulate itself. The Ground Water Protection Council, which includes several oil and gas majors, has been setting up a voluntary chemical registry for drilling operations. Chemical disclosure requirements vary state-to-state, so this would provide uniformity to reporting. The disclosure of chemicals on fracking jobs to this database would not be required.

In addition, Haliburton has been experimenting with ultra-violet light as an alternative to chemicals to kill bacteria.

To discuss issues facing the chemical industry go to ICIS connect


By: Sheena Martin
+1 713 525 2653



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