Toxic Tort and Energy & Utilities Alert December 2008 Author: Clifton T. Hutchinson +1.214.939.5444 cliff.hutchinson@klgates.com K&L Gates comprises approximately 1,700 lawyers in 28 offices located in North America, Europe and Asia, and represents capital markets participants, entrepreneurs, growth and middle market companies, leading FORTUNE 100 and FTSE 100 global corporations and public sector entities. For more information, visit www.klgates.com. www.klgates.com Junk Science Meets Hydraulic Fracturing: Unfounded Environmental Scare Threatens Energy Development Faced with volatile petroleum and gasoline prices, limitations in proven domestic reserves, and instability in key regions of hydrocarbon supply, Americans have a greater need for robust domestic energy development than ever before. America’s oil and gas industry has responded to this need, with the identification of new natural gas reservoirs, such as the Haynesville Shale in Louisiana and the Marcellus Shale under the Appalachians. Both resources have increased the nation’s potential gas reserves by trillions of cubic feet in just the last two years. As the industry moves to bring these new resources into production, however, some environmental groups, with no scientific support, are urging regulatory authorities to restrict or even bar further development. Opponents to the development of these resources focus on an industry technique called hydraulic fracturing, or “fracking,” used by drillers to extract natural gas from tight rock formations deep within the earth. Studies by experts working for independent governmental agencies conclude that fracking poses no environmental threat when properly designed and implemented and serves to free up clean-burning natural gas that is a “green” answer to the nation’s energy needs. Based on known science and regulatory requirements already in place, challenges to hydraulic fracturing appear to be specious. Hydraulic Fracturing The first hydraulic fracturing treatment was used on a gas well in Grant County, Kansas in 1947. Since that time, fracking has become a standard methodology for improving the production of oil and gas wells. The process involves the pumping of a fluid into the well at a high pressure to create cracks or fractures in the producing rock formation. In many cases, a propping agent, or “proppant,” normally sand, is injected with the fluid to “prop open” the fractures to allow more complete production of the oil or gas. Like any “down-hole” process, fracking is regulated to preclude contamination of usable water formations. For many decades, state authorities have required1 oil and gas wells to be sealed from the surface to well below water-bearing strata so that no production fluids or hydrocarbons could contaminate potential water supplies. Such environmental protection is enhanced in the fracking process used for gas-bearing shale formations, because the strata are typically very deep, thousands of feet removed from any potentially usable water. 1 See, e.g., Texas Railroad Commission Rule 3.7: “Whenever hydrocarbon or geothermal resource fluids are encountered in any well drilled for oil, gas, or geothermal resources in this state, such fluid shall be confined in its original stratum until it can be produced and utilized without waste. Each such stratum shall be adequately protected from infiltrating waters. Wells may be drilled deeper after encountering a stratum bearing such fluids if such drilling shall be prosecuted with diligence and any such fluids be confined in its stratum and protected as aforesaid upon completion of the well. The commission will require each such stratum to be cased off and protected, if in its discretion it shall be reasonably necessary and proper to do so.” Toxic Tort and Energy & Utilities Alert Unfounded Environmental Claims “Junk” Toxicology In its recent evaluation of the fracking process, the United States Environmental Protection Agency (“EPA”) found no confirmed evidence of contamination of drinking water, despite the fact that thousands of wells are fractured every year. 2 In 1994 an environmental group successfully petitioned the EPA to regulate fracking for coal bed methane. In response, the EPA investigated the potential for fracking to contaminate underground sources of drinking water (“USDWs”). The resulting study found no environmental threat. “Based on the information collected and reviewed, EPA has concluded that the injection of hydraulic fracturing fluids into coalbed methane wells poses little or no threat to USDWs and does not justify additional study at this time.”3 The EPA determined that much of the fracking fluid was recovered and any remaining in the underground formation would naturally disperse or biodegrade. The production of gas from shale resources is even more unlikely to threaten water supplies, as these shales are typically much deeper than coal bed methane formations, and isolated from drinking water aquifers by thousands of feet of impermeable strata.4 Some environmentalists, however, continue to complain, by issuing publications with lurid headlines like “What EPA and the Oil and Gas Industry Don’t Want Us to Know About Hydraulic Fracturing,” and calling fracking a “toxic” technique and fracking fluids – over 99% pure water – a “toxic spew.” These groups seem to concede the dearth of evidence of any contamination, but demand more restrictive regulations nonetheless. Their transparent goal is not safe and efficient oil and gas production, but the halting of domestic energy development altogether. 2 E PA, Office of Ground Water and Drinking Water, No. 816-R-04-003, Evaluation of Impacts to Underground Sources of Drinking Water by Hydraulic Fracturing of Coalbed Methane Reservoirs (2004). 3 Id. at 7-5. State regulatory authorities have also found no evidence of environmental impacts. Brian Macke, director of the Colorado Oil and Gas Conservation Commission, said that his agency had tested numerous wells after residents complained. “In any investigations we’ve made in Colorado, we’ve never determined there have been any impacts from any hydraulic fracturing operation by any of the constituent chemicals.” Reported in 115 Environmental Health Perspectives A76 (Feb. 2007). 4 See J. Daniel Arthur, et al., Hydraulic Fracturing Considerations for Natural Gas Wells of the Marcellus Shale, The Ground Water Protection Council, 2008 Annual Forum. The argument theorizing a drinking water threat, and the need for more federal regulation, derives from purported toxicological analyses of fracking fluids. But fracking fluids are typically 99% water, and the proppants are non-toxic grains of sand. Drillers use small amounts of gels with different formulas that add viscosity to allow the water to carry the sand. The most common material used as a gel is guar, a substance made from guar beans, although small amounts of other substances may be used. Relying on material safety data sheets for the fracking fluid components, activists allege that since some of the gel materials can be toxic at high levels, then the fracking fluid itself presents a hazard to human health. They posit that a toxicological effect for a pure amount of a substance can equate to potential effects for a trace amount within another compound. That theory, of course, violates the basic tenet of toxicology, that dose makes the poison. Any substance, even oxygen or pure drinking water, can be toxic at some dose, but the hazard doesn’t arise without that level of exposure.5 This theory also runs afoul of the key element in risk assessment: there is no toxic hazard in the absence of exposure.6 Fracking fluids are injected into rock formations thousands of feet underground where there could be no pathway of exposure to the surface. The presence of small amounts of a hydraulic gel thousands of feet under impervious shale layers thus could pose no threat, as the EPA recognized, because no person – and no wildlife – could ever be exposed, and certainly not at a toxic level. 5 See M. Alice Ottoboni, The Dose Makes the Poison: A Plain-Language Guide to Toxicology, at 29, 31, 43 (2d ed. 1991). 6 See Elaine M. Faustman and Gilbert S. Omenn, Risk Assessment, in Caserett and Doull’s Toxicology: The Basic Science of Poisons, at 96 (Curtis Klaasen, ed., 6th ed. 2001). December 2008 | 2 Toxic Tort and Energy & Utilities Alert Proposed Regulation Following the publication of the EPA’s 450-page study in 2004, Congress exempted fracking from regulation under the EPA’s underground injection control program and by the Safe Drinking Water Act. Congress had a bill in its last session, H.R. 7231,7 that would have removed the exemption, and some activists may urge such regulation.8 With no scientifically valid argument for the environmental claims, however, Congress should not restrict a technology vital to America’s energy needs. As Senator Jeff Bingaman, D-N.M., chairman of the Senate Energy and Natural Resources Committee, stated in 2002, “hydraulic fracturing . . is a valuable tool in reducing our dependence on foreign energy 7 A Bill to repeal the exemption for hydraulic fracturing in the Safe Drinking Water Act, and for other purposes, H.R. 7231, 110th Cong. (Sept. 29, 2008). 8 See Judith Kohler, Election May Bring Hard Look at Oil-Gas Exemption, cbs4denver.com (Nov. 27, 2008). supplies.”9 Hydraulic fracturing as used to produce natural gas from shale formations has opened up vast new resources of clean energy, without damaging the environment. Recent development activities show that natural gas production from shale can coexist comfortably with other uses of the environment, even in densely populated areas. As observed by one industry commentator, further regulation of this extraction methodology is simply “an answer looking for a problem.”10 Quoted in Kathleen Sgamma, Hydraulic Fracturing is Safe, Key to Energy Goals, denverpost.com (Dec. 1, 2008). 10 See statement by Doug Hock, spokesman for Encana Oil and Gas, quoted in Kohler, cbs4denver.com. 9 K&L Gates comprises multiple affiliated partnerships: a limited liability partnership with the full name K&L Gates LLP qualified in Delaware and maintaining offices throughout the U.S., in Berlin, in Beijing (K&L Gates LLP Beijing Representative Office), and in Shanghai (K&L Gates LLP Shanghai Representative Office); a limited liability partnership (also named K&L Gates LLP) incorporated in England and maintaining our London and Paris offices; a Taiwan general partnership (K&L Gates) which practices from our Taipei office; and a Hong Kong general partnership (K&L Gates, Solicitors) which practices from our Hong Kong office. K&L Gates maintains appropriate registrations in the jurisdictions in which its offices are located. A list of the partners in each entity is available for inspection at any K&L Gates office. This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer. ©1996-2008 K&L Gates LLP. All Rights Reserved. December 2008 | 3