An Excerpt From:
K&L Gates Global Government Solutions ® 2011: Mid-Year Outlook
July 2011
Energy and Environment
Battles over the Regulation of Hydraulic Fracturing
Natural gas is a comparatively clean and abundant fuel source, offering significant
potential for achieving U.S. energy independence, reducing greenhouse gas
emissions, and creating jobs, especially in rural America. The ability to extract natural
gas from shale formations by using hydraulic fracturing promises greater opportunities
for natural gas development, and is rapidly becoming the extraction method of
choice, but not without some controversy over the potential impacts to the environment.
Pennsylvania’s Marcellus Shale region
has become ground zero in this debate
for industry and environmentalists alike.
According to some estimates, by 2020
this region could produce more than 13
billion cubic feet of natural gas per day,
creating 200,000 jobs and generating
$1 billion annually in state and local tax
revenues. These benefits, however, are
possible only if the issues over hydraulic
fracturing can be resolved in a way that
permits further development. National,
state, and local environmental groups
are questioning the safety of hydraulic
fracturing, and using legal and political
means in an effort to win over states, the
administration, and some in Congress.
They are making progress in these efforts.
Six months into the 112th Congress,
the debate over hydraulic fracturing
is breaking largely along partisan
lines, cast as a choice between state
or federal environmental regulations.
In the U.S. federal legislative arena,
Members of Congress, industry leaders
28
and environmental groups are squaring
off and drawing their lines in the sand.
A number of Democrats, supported by
environmental groups, have introduced
the so-called “FRAC Act,” which would
require greater federal controls over
hydraulic fracturing, including disclosures
of the chemicals used in this process.
On the other side of the issue are oil
and gas industry leaders, key House
committee chairmen and members of the
Congressional Natural Gas Caucus, who
support state oversight of the industry and
express concerns that federal regulations
will raise energy costs, suppress job
creation, and hinder the nation’s ability to
become energy independent.
Although hydraulic fracturing has
quickly become a divisive issue in
Congress, much of the activity over the
future of environmental regulations is
actually playing out within the Obama
administration and in state capitals.
K&L Gates Global Government Solutions ® 2011 Mid-Year Outlook
In Washington, the White House
Council on Environmental Quality is
coordinating department policies on
hydraulic fracturing, and the U.S.
Environmental Protection Agency (“EPA”),
the Department of Interior (“DOI”) and
the Department of Energy (“DOE”) are
moving forward on several fronts. Of
particular interest is EPA’s congressionally
mandated hydraulic fracturing study
to evaluate the potential impacts of
hydraulic fracturing on drinking water
and wastewater. Initial results are
not expected until the end of 2012,
but the study could be a regulatory
game changer. In response to a recent
controversy over wastewater discharges
in Pennsylvania, EPA is actively working
with state regulators to develop guidance
for the treatment of wastewater and to
set contaminant limits for the discharge
of wastewater. With little fanfare, EPA
is also moving toward a new approach
for aggregating air emissions by entities
engaged in multiple activities under
common ownership. This could result in
especially significant changes, potentially
requiring large numbers of air permits
and New Source Reviews for hydraulic
fracturing operations. Finally, EPA is
stepping up its enforcement activity and
its review of the use of diesel fuel in
hydraulic fracturing.
Energy and Environment
Hydraulic fracturing promises greater
opportunities for natural gas development...
but not without some controversy.
DOI is actively considering new
policies and regulations that would
tighten controls on hydraulic fracturing
operations, including mandatory
disclosure of chemicals used in hydraulic
fracturing on public lands and the use
of best practices for waste disposal and
well integrity. DOE Secretary Steven Chu
also recently created a panel to craft
best industry practices for mitigating
a host of environmental impacts of
hydraulic fracturing.
In addition to these federal actions,
many states are beginning to tighten the
regulatory grip on hydraulic fracturing
operations. Several states, including
New York, New Jersey and Maryland,
have imposed or are considering a
moratorium on drilling permits. The
Pennsylvania legislature has also
considered numerous bills to further
control natural gas development in
the state. Wyoming and Texas have
enacted new requirements for drillers to
disclose the quantity and composition of
toxic fluids used in hydraulic fracturing,
and California is considering similar
legislation. The New York Attorney
General recently filed a lawsuit to
require a full environmental review of
proposed hydraulic fracturing in the
Delaware River Basin.
Cliff L. Rothenstein (Washington, D.C.)
cliff.rothenstein@klgates.com
Michael W. Evans (Washington, D.C.)
michael.evans@klgates.com
Cindy L. O’Malley (Washington, D.C.)
cindy.omalley@klgates.com
These developments leave much
uncertainty about the development
of hydraulic fracturing operations.
While calls for overly stringent federal
controls on hydraulic fracturing are not
likely to prevail, it is also unlikely that
these issues will be left solely to state
regulation. The stringency, scope, and
mix of federal and state regulation in
this area will be resolved through the
political and regulatory processes.
For now, there remains a window of
opportunity for companies involved in
natural gas development to help shape
the regulatory future.
K&L Gates Global Government Solutions ® 2011 Mid-Year Outlook
29
Anchorage Austin Beijing Berlin Boston Brussels Charlotte Chicago Dallas Doha Dubai Fort Worth Frankfurt Harrisburg Hong Kong
London Los Angeles Miami Moscow Newark New York Orange County Palo Alto Paris Pittsburgh Portland Raleigh Research Triangle Park
San Diego San Francisco Seattle Shanghai Singapore Spokane/Coeur d’Alene Taipei Tokyo Warsaw Washington, D.C.
K&L Gates includes lawyers practicing out of 38 offices located in North America, Europe, Asia and the Middle
East, and represents numerous GLOBAL 500, FORTUNE 100, and FTSE 100 corporations, in addition to growth
and middle market companies, entrepreneurs, capital market participants and public sector entities. For more
information about K&L Gates or its locations and registrations, visit www.klgates.com.
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.
©2011 K&L Gates LLP. All Rights Reserved.