October 17, 2011
Practice Group:
Public Policy and
Law
Battles Over the Federal Policies
Regulating Hydraulic Fracturing
By Cliff L. Rothenstein, Michael W. Evans, Cindy L. O’Malley
Natural gas is a clean and abundant fuel source, offering significant potential for achieving 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.
Congressional Activity
As we near the end of the first session of the 112th Congress, the debate over hydraulic fracturing is
breaking largely along partisan lines, cast as a choice between federal or state environmental
regulations. In the U.S. federal legislative arena, Members of Congress, industry leaders 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.
Battles Over the Federal Policies Regulating Hydraulic Fracturing
Inside the Administration
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.
Environmental Protection Agency Activities
 Hydraulic Fracturing Study – Of particular interest is EPA’s congressionally mandated hydraulic
fracturing study to evaluate the potential impacts of hydraulic fracturing on drinking water and
waste water. Initial results are not expected until the end of 2012, but the study could be a
regulatory game changer.
 Treatment of Wastewater – 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.
 Aggregation of Air Emissions – 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.
 SDWA Permitting of Diesel Fuel – Finally, EPA is stepping up its enforcement activity and its
review of the use of diesel fuel in hydraulic fracturing. Of particular note is EPA’s soon to be
released guidance for permitting hydraulic fracturing operating under the Safe Drinking Water Act
(SDWA). Although the SDWA largely eliminated authority to regulate hydraulic fracturing
operations, EPA may permit such operations that use diesel fuel and is now considering a broad
definition of diesel fuel, thereby extending the reach of the SDWA.
Department of Interior and Department of Energy Activities
 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 created a panel to craft best industry practices for mitigating a host
of environmental impacts of hydraulic fracturing.
State Actions
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.
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Battles Over the Federal Policies Regulating Hydraulic Fracturing
 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.
International Developments
Hydraulic fracturing is not confined to our borders, nor is the controversy.
 France became the first country to ban hydraulic fracturing when its Government voted to halt the
process on June 30 of this year. A report issued to the French Government this past spring actually
highlighted the benefits of hydraulic fracturing including the economic benefits, and suggested
alternative drilling techniques. Environmental groups, however, took issue with the report, stating
it was heavily influenced by the country’s energy lobby. Mounting pressure from these opposition
groups led to a Senate vote to ban the practice. Some are speculating if the EU follow suit.
 In Canada the exploration of Natural Gas is moving at a quick pace, with companies seeking to
establish wells in new areas, such as New Brunswick. New Brunswick just introduced a
preliminary regulatory framework for exploration, and the Canadian government recently launched
two separate reviews on the impacts of hydraulic fracturing. These developments come as Quebec
has halted hydraulic fracturing operations.
The Future
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 of
combination 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.
Authors:
Cliff L. Rothenstein
Government Affairs Advisor
Michael W. Evans
Partner
Cindy L. O’Malley
Government Affairs Counselor
cliff.rothenstein@klgates.com
+1.202.778. 9381
michael.evans @klgates.com
+1.202.661.3807
cindy.omalley@klgates.com
+1.202.661.6228
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Battles Over the Federal Policies Regulating Hydraulic Fracturing
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