Hydraulic Fracturing - Davis Graham & Stubbs LLP
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Hydraulic Fracturing Regulatory And Litigation Update For The Rocky Mountain States Adam S. Cohen Shannon Stevenson Regulatory Summary Davis Graham & Stubbs LLP | www.dgslaw.com 2 Regulatory Summary Agenda Status of State Rules Summary of Major Rules Pre-Fracture Treatment Notifications Well Construction Fracturing Operations Disclosures Chemical Restrictions Davis Graham & Stubbs LLP | www.dgslaw.com 3 Status of State Rules Colorado 2008 revisions; rulemaking 12/2011 Montana New rules effective 8/2011 Wyoming New rules effective 9/2010 New Mexico Hearing on 11/17/2011 Idaho Temporary rules effective 4/2011 New rules effective in 2012 North Dakota Rulemaking 11/1/2011 Utah No current activity Davis Graham & Stubbs LLP | www.dgslaw.com 4 Pre-Fracture Treatment Notifications Colorado (Proposed) — Landowner notice to include COGCC Information Sheet (305.e(1)(A)) — 48 hours advance written notice to COGCC of HFT (316C) Montana — APD must describe HFT in detail — Notify MBOGC on Form 2 and receive approval Davis Graham & Stubbs LLP | www.dgslaw.com 5 Pre-Fracture Treatment Notifications Wyoming — APD must describe stimulation program (fluids, additives, pressures, etc.), geology, and fluid source — WOGCC approval required Idaho (Temporary Rule) — APD must describe formations, stimulation design, and fluid constituents Davis Graham & Stubbs LLP | www.dgslaw.com 6 Well Construction Montana — Test casing to max treating pressure — Fracturing string to 100’ below top of production cement — Pressure relief valve and shut-in device (36.22.1106) Wyoming — Pre-stimulation mechanical integrity testing may be required (45.a) Davis Graham & Stubbs LLP | www.dgslaw.com 7 Well Construction Idaho — Affidavit certifying test showing suitable mechanical integrity (56.03) North Dakota — Pressure relief valve, verify casing thickness and adequate cementing, pressure testing, frac valve, diversion line to pit or containment vessel (27.1) Davis Graham & Stubbs LLP | www.dgslaw.com 8 Fracturing Operations Colorado — Monitor bradenhead pressure — Report increase >200 psig Montana — Surface casing valve to remain open — Monitor annulus pressure between frac string and production casing — Pressure not to exceed rating for lowest rated component Davis Graham & Stubbs LLP | www.dgslaw.com 9 Fracturing Operations Wyoming — Monitor annulus pressure at bradenhead & intermediate/production casing annulus — Report increase >500 psig (45.i) New Mexico — Notify NMOCD and repair if fracturing injures the formation or casing (16.16) Davis Graham & Stubbs LLP | www.dgslaw.com 10 Fracturing Operations Idaho — Monitor annulus pressure at casinghead & intermediate/production casing annulus — Report increase >500 psig (56.04) North Dakota — Monitor annulus pressure between intermediate and surface casing or frac string and intermediate casing — Notify if pressure >300 psig (27.1.3) Davis Graham & Stubbs LLP | www.dgslaw.com 11 Disclosures Colorado (Current) — Inventory of chemicals used — Trade secret exemption — Exception to TS exemption for spill response and medical treatment (205) Colorado (Proposed) — Chemical Disclosure Registry Form on Fracfocus.org w/in 60 days after HFT (2/1/2012) — Similar TS exemption and exceptions (205A) Davis Graham & Stubbs LLP | www.dgslaw.com 12 Disclosures Montana — Report actual stimulation program upon completion to MBOGC or post on FracFocus.org — Trade secret exemption; exception for spill response and medical treatment (608, 1015,1016) Wyoming — Submit detailed stimulation report or job log to WOGCC — Trade secret exemption for products, not processes (45.f, h) Davis Graham & Stubbs LLP | www.dgslaw.com 13 Disclosures New Mexico — Post chemical composition information on FracFocus.org and verify compliance on completion report Idaho — Submit post-treatment report detailing chemicals and pressures used North Dakota — Post fluid composition and other stimulation detail on FracFocus.org if (a) fracture without frac string or (b) annulus pressure >350 psig Davis Graham & Stubbs LLP | www.dgslaw.com 14 Disclosure Summary Pre-Stim Report CO Post-Stim Report Fluids Other Information Trade Secret Exclusion FracFocus Post MT WY NM ID ND UT Davis Graham & Stubbs LLP | www.dgslaw.com 15 Chemical Restrictions Wyoming & Idaho — No injection of VOCs (BTEX) into groundwater — Use in hydrocarbon zones only with prior approval Local Government Activity — Santa Fe County, New Mexico: freshwater only and no toxic contaminants in frac fluids — Elbert County, Colorado (proposed): nontoxic substances only, closed-loop systems Davis Graham & Stubbs LLP | www.dgslaw.com 16 Pending Litigation in Rocky Mountain States Davis Graham & Stubbs LLP | www.dgslaw.com 17 Only Colorado Has Active Litigation Strudley v. Antero Resources Corp., et al. — — Denver District Court Single-family litigation Evenson v. Antero Resources Corp., et al. — — Denver District Court Class action litigation Davis Graham & Stubbs LLP | www.dgslaw.com 18 Strudley – Basic Facts Plaintiffs Strudley family (parents and two minor children) Defendants Operator, drilling company, and fracking company Tort Claims Nuisance, trespass, negligence (typical) Allegations Plaintiffs have abandoned their house and complain of a variety of health effects and loss of property value Davis Graham & Stubbs LLP | www.dgslaw.com 19 Evenson – Basic Facts Plaintiffs Purported class of landowners in Battlement Mesa, CO Defendants Owner/operator and “John Doe Well Service Providers”) Allegations Plaintiffs complain of one incident of odors emanating from one well pad Davis Graham & Stubbs LLP | www.dgslaw.com 20 Evenson – Relief Sought Based on the anticipated effects of natural gas drilling, Plaintiffs seek: — Compensation for diminution in property value from “stigma” attached to property in Battlement Mesa — Medical monitoring fund — Injunctive relief requiring Defendants to use unspecified “practices and devices” to prevent spills and discharges Davis Graham & Stubbs LLP | www.dgslaw.com 21 Preemption – General Principles Question of preemption arises when local entities attempt to regulate activities that are also regulated by the state Typical scenario: — Local entity passes an ordinance restricting oil and gas development — Operator sues to have the ordinance declared unenforceable Davis Graham & Stubbs LLP | www.dgslaw.com 22 Preemption – Fracking Cases Northeast Natural Energy, LLC v. City of Morgantown (Monongalia County, West Virginia) Local ordinances proliferating — — El Paso County, Colorado Santa Fe, New Mexico Evenson v. Antero Resources Corp., et al. — Plaintiffs ask court to impose additional drilling requirements Davis Graham & Stubbs LLP | www.dgslaw.com 23 Validity of Local Regulation Philosophical and pragmatic considerations: — Nature of local entity — Nature of state power — Conflict between local and state regulations Davis Graham & Stubbs LLP | www.dgslaw.com 24 Local Restrictions on Drilling Generally, not expressly or impliedly preempted Operational conflict? — Outright bans on drilling — Time/place/manner restrictions As more regulations are passed at the state level, less room for local regulation Davis Graham & Stubbs LLP | www.dgslaw.com 25 Medical Monitoring Principles A claim to recover the costs of additional medical expenses Theory: Through defendant’s negligent conduct, plaintiff has been exposed to a toxic substance, and plaintiff will incur costs to be monitored for potential effects from the exposure Policy considerations Davis Graham & Stubbs LLP | www.dgslaw.com 26 Medical Monitoring Cases United States Supreme Court – rejected Metro-North Commuter Rail Company v. Buckley Utah Supreme Court – accepted Hansen v. Mountain Fuel Supply Co. Other Rocky Mountain States - ??? Davis Graham & Stubbs LLP | www.dgslaw.com 27 Medical Monitoring Elements (1) exposure (2) to a toxic substance (3) which exposure was caused by the defendant’s negligence (4) resulting in an increased risk (5) of a serious disease, illness, or injury (6) for which a medical test for early detection exists (7) and for which early detection is beneficial, meaning that a treatment exists that can alter the course of the illness, (8) and which test has been prescribed by a qualified physician according to contemporary scientific principles Davis Graham & Stubbs LLP | www.dgslaw.com 28 Medical Monitoring Remedies Lump Sum Payment vs. Court-Supervised Fund Davis Graham & Stubbs LLP | www.dgslaw.com 29 Contact Information Adam Cohen Davis Graham & Stubbs LLP (303) 892-7321 adam.cohen@dgslaw.com Shannon Stevenson Davis Graham & Stubbs LLP (303) 892-7328 shannon.stevenson@dgslaw.com Davis Graham & Stubbs LLP | www.dgslaw.com 30 HYDRAULIC FRACTURING – REGULATORY AND LITIGATION UPDATE FOR THE ROCKY MOUNTAIN STATES Adam Cohen and Shannon Stevenson 1 TABLE OF CONTENTS Page I. INTRODUCTION .............................................................................................................. 1 II. REGULATORY SUMMARY AND UPDATE ................................................................. 1 A. COLORADO .......................................................................................................... 2 Chemical Disclosure ............................................................................................... 3 Well Construction and Siting .................................................................................. 5 Pressure Monitoring During Stimulation ................................................................ 6 Waste Management ................................................................................................. 7 Water Quality Monitoring....................................................................................... 8 B. MONTANA ............................................................................................................ 8 Permitting................................................................................................................ 9 Fluids Management and Disclosure of Stimulation Fluids ................................... 10 Well Construction and Pressure Testing ............................................................... 11 C. WYOMING .......................................................................................................... 12 Chemical Disclosures............................................................................................ 13 Permitting and Groundwater Protection ............................................................... 13 Drilling, Well Construction, and Integrity Testing ............................................... 15 Disposal of Stimulation Fluids.............................................................................. 15 D. NEW MEXICO ..................................................................................................... 16 Well Permitting, Construction, and Reporting ..................................................... 17 Chemical Disclosures............................................................................................ 17 County and Local Ordinances ............................................................................... 18 1 Adam Cohen and Shannon Stevenson are partners in the law firm of Davis Graham & Stubbs LLP. Mr. Cohen practices in the firm’s environmental group, assisting clients with matters involving hazardous substances and hazardous wastes, mining impacts, water quality, natural resource damages and other environmental concerns. Ms. Stevenson is partner in the trial group where she has litigated a wide variety of cases for clients in the mining, oil and gas, and renewable energy sectors, including toxic tort cases, contract disputes, mineral ownership disputes, surface owner disputes, implied covenant cases, and technology disputes. Recently, Mr. Cohen and Ms. Stevenson have defended clients in administrative and court proceedings against surface owners complaining about the impacts of hydraulic fracturing. 2092817.6 E. IDAHO .................................................................................................................. 18 Permitting.............................................................................................................. 19 Chemical Disclosure ............................................................................................. 20 Fresh Water Protection and Well Construction .................................................... 21 F. NORTH DAKOTA ............................................................................................... 22 Current Rules ........................................................................................................ 22 Proposed Rule Amendments and Additions ......................................................... 23 G. III. UTAH ................................................................................................................... 23 LITIGATION UPDATE: ADDRESSING EARLY ISSUES IN HYDRAULIC FRACTURING LITIGATION ......................................................................................... 25 A. Update On Current Rocky Mountain Hydraulic Fracturing Litigation ................ 25 1. Regulatory Hearing – In the Matter of the Alleged Violations of the Rules and Regulations of the Colorado Oil and Gas Commission, No. 1102-OV-04 (COGCC Mar. 23, 2011) .............................................. 25 2. Single-Plaintiff Litigation – Strudley v. Antero Resources Corporation, et al., Case No. 2011cv2218 (Denver Dist. Ct.) ................. 26 3. B. a. The Complaint .............................................................................. 26 b. Motion to Dismiss ......................................................................... 26 c. “Lone Pine” Case Management Order .......................................... 26 Class Action Litigation – Evenson, et al. v. Antero Resources Corp., et al., Case No. 2011cv5118 (Denver Dist. Ct.) ............................ 27 a. The Complaint .............................................................................. 27 b. Motion to Dismiss ......................................................................... 28 The Preemption Argument – Initiating Litigation To Prohibit Enforcement Of Local Bans Or Restrictions On Drilling Or Hydraulic Fracturing .................. 28 1. The Proliferation of Local Bans or Restrictions on Drilling and Hydraulic fracturing .................................................................................. 28 2. Legal Framework for Preemption Claims................................................. 29 3. Relevant Preemption Law from Rocky Mountain States ......................... 30 a. Colorado ........................................................................................ 30 ii C. New Mexico .................................................................................. 33 c. Wyoming....................................................................................... 35 Targeting Claims For Motions To Dismiss .......................................................... 37 1. 2. D. b. Strict Liability for Abnormally Dangerous or Ultrahazardous Activity ..................................................................................................... 37 a. General Law on Strict Liability for Abnormally Dangerous Activity: Restatement (Second) of Torts ..................................... 37 b. Strict Liability for Abnormally Dangerous Activity - Rocky Mountain States ............................................................................ 39 Medical Monitoring .................................................................................. 41 a. United States Supreme Court ........................................................ 41 b. Utah ............................................................................................... 42 c. Colorado ........................................................................................ 43 Procedural Advantages – The Lone Pine Order ................................................... 44 1. 2. Federal Authority ...................................................................................... 45 a. Ninth Circuit ................................................................................. 45 b. Eighth Circuit ................................................................................ 45 c. Tenth Circuit ................................................................................. 46 State Authority .......................................................................................... 47 iii I. INTRODUCTION Recent discoveries of new sources of oil and natural gas in the Rocky Mountain region and elsewhere in tight shale formations have spawned a sharp increase in the amount of natural gas drilling, including in areas that had not previously seen much conventional oil and gas exploration. This increase has pushed the well stimulation technique of hydraulic fracturing, or “fracking,” into mainstream popular culture and onto the agenda of federal, state, and local regulators. While the media emphasizes the alleged dangers of hydraulic fracturing, oil and gas companies tout the benefits of natural gas as a clean and abundant energy source and the advantages of increased domestic oil reserves. Communities and landowners struggle to weigh the financial benefits of drilling against their concerns for health and the environment. In response, the regulatory framework governing drilling activities is evolving as regulators attempt to address the public’s concerns over these activities. Nor has hydraulic fracturing gone unnoticed by landowners and lawyers – personal injury and property damage lawsuits are proliferating across the country in areas where hydraulic fracturing is occurring. This article will provide an up-to-date summary of the applicable regulations (in Section II) and litigation activity (in Section III) in the Rocky Mountain states. II. REGULATORY SUMMARY AND UPDATE This section examines the regulatory framework governing oil and gas operations, and more specifically hydraulic fracturing activities, in the Rocky Mountain region states. We identify the commissions, divisions, and other agencies that have jurisdiction over oil and gas operations in each state, reference the applicable statutes and regulations, and discuss the regulatory requirements particularly applicable to well drilling and hydraulic fracturing. A comprehensive annotation of all of the specific permitting, reporting, and well construction requirements in each state was beyond the scope of this paper, but the following discussion should serve as a practical guide to the various states’ regulatory programs. We have tried to provide thorough citations to each state’s statutes, rules, agency websites, and other summary materials, which may be used to guide more detailed research on this topic. It should be obvious from this discussion that the regulations governing hydraulic fracturing operations in the Rocky Mountain region states are in a state of rapid flux. We are increasingly seeing more stringent requirements for chemical disclosures, reporting, groundwater protection, and operational transparency. States are adding new regulations specially addressing hydraulic fracturing, where such activities previously had simply been implicitly governed under general rules covering well construction and operation. Several states, including Colorado, Idaho, and North Dakota, are (as of the writing of this paper) in the midst of or are soon to be commencing rulemaking proceedings. Others recently adopted new rules, the consequences of which have yet to be fully borne out. The heightened public attention focused on hydraulic fracturing is sure to stimulate further regulatory action at the federal, state, and local levels in the near future, particularly with respect to the disclosure of fracturing fluid constituents and well integrity verification. In this dynamic environment, practitioners are advised to repeatedly consult their state’s oil and gas agency’s websites and administrative codes to remain apprised of new rulemaking activities and regulatory changes. A. COLORADO In Colorado, hydraulic fracturing operations, as with other oil and gas drilling and production activities, are subject to the jurisdiction of the Colorado Oil and Gas Conservation Commission (the “COGCC”), whose mission is to “foster the responsible development of Colorado’s oil and gas natural resources.” 2 Colorado’s Oil and Gas Conservation Act 3 (the “Act”) established the COGCC as part of the department of Natural Resources. 4 By its terms, the Act provides a framework for balancing effective oil and gas development in Colorado with the protection of the environment, wildlife resources, and public health. 5 Under the Act, and following revisions adopted by the Colorado General Assembly in 2007 increasing the COGCC’s regulatory jurisdiction and oversight obligations, the COGCC has broad authority with respect to the regulation of oil and gas operations in the state, including hydraulic fracturing, and the protection against adverse impacts to the environment and public health resulting from such operations. 6 Among other things, the COGCC has the power and authority to regulate with respect to: the shooting and chemical treatment of wells; 7 actions necessary to prevent and mitigate significant adverse environmental impacts “on any air, water, soil, or biological resource resulting from oil and gas operations;” 8 protection of underground sources of drinking water from the operation of class II injection wells, including wells into which fluids are injected for enhanced recovery of oil or natural gas; 9 and, in consultation with the Department of Public Health and Environment, protection of the “health, safety and welfare of the general public in the conduct of oil and gas operations.” 10 The COGCC exerts its authority through a broad array of rules, permit conditions, and enforcement activities. Colorado substantially updated the rules in late 2008 following a lengthy 2 See http://cogcc.state.co.us/. Colo. Rev. Stat. §§ 34-60-101 et seq. 4 Id. § 34-60-104(1). 5 The Colorado legislature has determined that it is in the interest of the public to foster the development of oil and gas while protecting wildlife and the environment. Id. § 34-60-102(1)(a). 6 Id. § 34-60-105(1): “The commission has jurisdiction over all persons and property, public and private, necessary to enforce the provisions of this article, and has the power to make and enforce rules, regulations, and orders pursuant to this article, and to do whatever may reasonably be necessary to carry out the provisions of this article.” Oil and gas activities are not, however, immune from local regulations in Colorado. For example, the El Paso County Commission recently voted to impose a four-month moratorium on oil and gas drilling permits, excluding temporary exploration activities, within El Paso County. The purpose of the moratorium was to provide time for the County Commission to determine whether additional local regulations on drilling activities are needed. Debbie Kelley, Temporary Ban on Oil, Gas Permit Doesn’t Sit Well With Some, Colorado Springs Gazette, October 3, 2011. Other Colorado state agencies may also be involved in the regulation of oil and gas activities, including the Colorado Department of Public Health and Environment and the Division of Water Resources. For example, under the Colorado Supreme Court’s 2009 ruling in Vance v. Wolfe, 205 P.3d 1165, 1170-73 (Colo. 2009), coalbed methane wells are subject to permitting requirements and water rights adjudication and administration pursuant to the Water Right Determination and Administration Act (Colo. Rev. Stat. §§ 37-92-101 to 602) and the Ground Water Management Act (Colo. Rev. Stat. §§ 37-90-101 to 143). The Vance Court also held that regulation of the extraction of water during coalbed methane production is not within the exclusive jurisdiction of the COGCC. 7 Colo. Rev. Stat. § 34-60-106(2)(b). 8 Id. § 34-60-106(2)(d). 9 Id. § 34-60-106(9). 10 Id. § 34-60-106(11)(a)(II). 3 2 and extensive rulemaking hearing process. 11 According to the COGCC, a major reason for adopting the new rules and rule revisions was to “address concerns created by the unprecedented increase in the permitting and production of oil and gas in Colorado in the past few years” and a rising “level of public concern for Colorado’s environmental and wildlife resources.” 12 The applicability of the COGCC rules to hydraulic fracturing activities falls into five basic categories: (i) chemical disclosures, (ii) well construction and siting, (iii) pressure monitoring during stimulation, (iv) waste management, and (v) water quality monitoring. Each category is discussed further below. Chemical Disclosure In Colorado, requirements for the documentation and disclosure of chemical products used in hydraulic fracturing activities are governed by COGCC Rule 205 (“Access to Records”). Rule 205 was revised in 2008 to ensure that chemical information would be accessible by COGCC staff, medical personnel, and public health officials as necessary to investigate and address public health concerns and environmental impacts attributable to oil and gas operations. The rule is designed to strike a balance between the need for health-related information and the importance of protecting the trade secrets and confidential information of chemical products vendors and service providers. Beginning June 1, 2009, Rule 205.c, required that operators maintain a “Chemical Inventory” of the “Chemical Products” brought to a well site and either used downhole or stored for use downhole during drilling, completion, and workover operations, including hydraulic fracturing. The requirement applies to all Chemical Products for which an amount exceeding 500 pounds is used or cumulatively stored during any quarterly reporting period. 13 As defined in Rule 100, the term “Chemical Product” includes any substance consisting of “one or more constituent chemicals that is marketed or sold as a commodity,” but not substances known to be “entirely benign, innocuous, or otherwise harmless, such as sand, walnut shells, and similar natural substances.” “Chemical Inventory” means a list of all Chemical Products brought to a well site for use downhole, and the maximum capacity of fuel stored on the oil and gas location during those operations. The Chemical Inventory must specify how much of the Chemical Product was used, how it was used, and when it was used. Inventories must be maintained in a “readily retrievable format” at the operator’s local field office and updated quarterly throughout the life of an operation, but they need not be submitted to the COGCC in the absence of a request. Rule 205 makes allowances for Chemical Products whose composition is considered a “Trade Secret” 14 by the vendor or service provider. For these materials, the operator need only 11 See Statement of Basis, Specific Statutory Authority, and Purpose, New Rules and Amendments to Current Rules of the Colorado Oil and Gas Conservation Commission, 2 CCR 404-1 at 5. 12 Id. at 1-2. 13 COGCC Rule 205.c. Operators shall also maintain a Chemical Inventory by well site for fuel stored at the well site during drilling, completion, and workover operations, including fracture stimulation, in an amount exceeding five hundred (500) pounds during any quarterly reporting period. Id. 14 Under Rule 100, “Trade Secret” means “any confidential formula, pattern, process, device, information, or compilation of information that is used in an employer’s business, and that gives the employer an opportunity to 3 maintain information about the product’s identity, but not the identity or quantities of its chemical constituents. Under certain circumstances, however, the vendor or service provider may be required to disclose the chemical constituent information. Specifically, upon receipt of a written request from the COGCC’s Director stating that the chemical constituent information is necessary to respond to a release of a Trade Secret Chemical Product or a complaint from an affected landowner, that information must be disclosed by the vendor or service provider to the COGCC Director or his designee. 15 In turn, the Director may disclose the chemical constituent information to other COGCC staff members, COGCC commissioners, and certain public health officials upon request; provided that the information shall be maintained by all such recipients as confidential and not publicly available. In addition, the vendor or service provider must disclose the chemical constituents of a Trade Secret Chemical Product to a medical doctor or other health professional who needs the information for diagnosis or treatment of an individual exposed to the Trade Secret Chemical Product. 16 Disclosure is required upon either (i) receipt of a written statement of need from the health professional and accompanying confidentiality agreement, or (ii) a health professional’s determination that a medical emergency exists and the chemical constituent information is necessary for emergency treatment, and a verbal acknowledgement by the health professional that the disclosed information will not be used for purposes other than the health needs of the patient. Finally, although the primary focus of the disclosure requirements for Trade Secret Chemical Products is on the vendor or service provider, Rule 205 makes clear that the operator is ultimately responsible for providing the information in the event the vendor or service provider fails to do so. 17 The operator may obtain relief from this responsibility only if it can show, after making a good faith effort, that it lacks the right or ability to obtain the requested information. 18 The prior discussion reflects the current status of the COGCC regulations governing disclosure requirements as of late October 2011. Recent comments made by Governor John Hickenlooper and David Neslin, the COGCC Director, suggest changes to Colorado’s chemical disclosure requirements are ahead. In an August 2, 2011 speech to the Colorado Oil and Gas Association, Governor Hickenlooper stressed the importance of being transparent, and suggested that Colorado should develop a new rule similar to rules currently in place in Texas and Wyoming, which impose more liberal disclosure requirements than those provided under the current Rule 205. 19 In an October 11, 2011 speech to the Colorado Hazardous Waste Management Society attended by the author, Director Neslin announced that the COGCC will publish a revised draft disclosure rule in the Colorado Register sometime in November 2011, and schedule a rulemaking to take up the proposed rule in December 2011. On October 25, 2011, just as this paper was being finalized, the COGCC published a report on its website announcing that it was commencing a rulemaking “for purposes of adopting rules governing the public disclosure of hydraulic fracturing chemicals, including notification of obtain an advantage over competitors who do not know or use it.” A “Trade Secret Chemical” means a “Chemical Product the composition of which is a Trade Secret.” 15 COGCC Rule 205.d. 16 COGCC Rule 205.e. 17 COGCC Rule 205.h. 18 COGCC Rule 205.i. 19 See Cathy Proctor, Hickenlooper: Expect fracking-ingredients rule, Denver Bus. J., Aug. 2, 2011. 4 hydraulic fracturing operations.” 20 The announcement asserts that members of the public have expressed interest in learning the identity of chemicals in hydraulic fracturing fluids, and many companies are already voluntarily providing such information through the fracfocus.org website. The proposed rule will be published in the Colorado Register on November 10, 2011; applications for party status must be filed by November 17, 2011; pre-hearing statements are due November 23, 2011; the pre-hearing conference will be held November 29, 2011; and the rulemaking hearing is scheduled for December 5, 2011. Well Construction and Siting The COGCC’s Series 300 Rules establish requirements for oil and gas well drilling, development, production, and abandonment. Several of the Series 300 Rules are either directly or indirectly applicable to hydraulic fracturing practices. Under Rule 303.a, any person intending to perform drilling operations in Colorado must first submit a Form 2 Application for Permit to Drill (“APD”) to the COGCC for approval. The APD provides specifics about the planned well’s location, targeted formations, spacing, and drilling and construction procedures, including casing and cementing. Before approving an APD, the COGCC’s engineers and permit technicians review this information to ensure the casing will be set and cemented so as to isolate any freshwater aquifers from the producing formation and to provide separation between the aquifer and well depths at which hydraulic stimulation will occur. The Colorado Geologic Survey and the Division of Water Resources have mapped the aquifers in the state, and the COGCC routinely uses this information and the records for water wells located within a one to two mile radius of the proposed oil or gas well in reviewing and conditioning APDs for approval. Applicants must also submit a Form 2A, Oil and Gas Location Assessment, under Rule 303.d, which provides information about the well’s location, major equipment components, nearby improvements, surface waters, and land uses. Reviewing staff may impose conditions of approval where necessary to protect public health and the environment, or they may require prior notice of hydraulic fracturing activities as a condition of approval on an APD or Location Assessment. Rule 317 establishes minimum standards for well construction, casing and cementing, several of which require protection of groundwater, surface water, and other environmental resources during hydraulic fracturing. Under Rule 317.d, a well’s casing program must be planned and maintained to protect against the infiltration of water into any penetrated oil or gas bearing horizons, and to prevent against the degradation of ground water resulting from the migration of oil, gas, or water from one horizon to another. Rules 317.e and 317.f require that surface casing be set and cemented to a depth below all known or reasonably estimated utilizable domestic fresh water levels (where subsurface conditions are unknown), or otherwise sufficient to protect all fresh water (where subsurface conditions are known), and to ensure against blowouts or uncontrolled flows. Under Rule 317.g, where a fresh water aquifer exists at a depth below the practical limits of surface casing, stage cementing of the intermediate or production 20 In the Matter of Changes to the Rules of the Oil & Gas Conservation Commission of the State of Colorado to Consider Hydraulic Fracturing Disclosure Rules, Cause No. 1R, Docket No. 1112-RM-04, Oct. 25, 2011. 5 casing string may be used in lieu of surface casing and cementing to isolate the aquifer. Solid cement must extend from 50 feet below to 50 feet above the fresh water aquifer needing to be protected. Rules 317.h and 317.i establish minimum compressive strength and coverage requirements for surface, intermediate, and production casing cement. To protect groundwater, surface casing must be cemented with a continuous column from the bottom of the casing to the well surface; intermediate and production casing cement must be circulated to at least 200 feet above the top of the shallowest known production horizon, and must extend from 50 feet below to 50 feet above any intervening freshwater aquifer. Rule 317.j requires pressure testing of production casing for conditions anticipated during completion and production operations, including conditions during hydraulic fracturing. Rule 317.k requires that fresh water aquifers be protected from adverse environmental impacts during any suspension of drilling operations that occurs prior to the running of production casing. And Rule 317.o requires a cement bond log for all production casing (or intermediate casing when a production liner is used) and open hole logs to verify the setting depth of surface casing and aquifer coverage. Additional protective requirements may apply to wells located within “Surface Water Supply Areas” 21 under Rule 317B, including special setback requirements, equipment usage, secondary containment, baseline sampling, notice, and emergency planning. Rule 324A provides for additional prohibitions against pollution and environmental impacts in the construction and siting of oil and gas wells. Under Rule 324A.a, operators must take appropriate precautions during operations to prevent adverse impacts to air, water, soil, or biological resources due to the unauthorized discharge or disposal of oil, gas, and wastes. And under Rules 324A.b and 324A.c, all oil and gas operations are expressly subject to Colorado’s water quality standards and air quality laws, regulations, and permits. Finally, special handling requirements may apply under Rule 317B with respect to hydraulic fracturing fluids stored at oil and gas wells located within a Surface Water Supply Area. For wells located 300 to 500 feet from a classified water supply segment, flowback and stimulation fluids must be contained within tanks that are placed on a well pad or in an area with downgradient perimeter berming. For wells located 500 to 2,640 feet from a classified water supply segment, operators must employ pitless drilling systems or contain all drilling flowback and stimulation fluids in lined pits constructed and maintained in accordance with Rule 904 (see discussion below). Pressure Monitoring During Stimulation The COGCC rules impose additional monitoring and reporting requirements specifically applicable to hydraulic fracturing activities. Rule 341 requires that all stimulation fluids must be confined to the targeted formations to the extent practicable. Confinement is verified by mandatory continuous monitoring and recording of the pressure in the bradenhead annulus and in the annulus between the intermediate casing (if present) and the production casing during stimulus operations. The bradenhead annulus is the sealed annular space between the production casing, intermediate casing (if present), and the surface casing. Elevated or changing pressure readings in the bradenhead annulus may be an indication of a defective gas well-bore and the 21 Under Rule 100, a Surface Water Supply Area means “the classified water supply segments within five (5) stream miles upstream of a surface water intake on a classified water supply segment.” 6 escape of fluids from the producing formation and deeper stages in the well where stimulation is occurring. According to the COGCC, “monitoring bradenhead pressures will help indicate if a hydraulic fracturing procedure or another stimulation procedure was not completely contained in the producing reservoir.” 22 Bradenhead pressure increases of more than 200 psig must be reported to the COGCC as soon as possible. Within 15 days of any elevated reading, the operator must submit a Form 4 sundry notice detailing the occurrence and the corrective actions taken. In addition to pressure monitoring, Rule 341 requires that operators maintain and make available for inspection all well stimulation records and pressure charts for a period of at least five years. Waste Management The COGCC rules include a number of requirements governing the handling and management of waste materials associated with oil and gas operations, including hydraulic fracturing wastes, flowback, and produced water. Many of the waste management requirements are contained in the Series 900 Rules. Rule 907 establishes general requirements to ensure that wastes are properly stored, handled, transported, recycled, or disposed to prevent adverse environmental impacts to air, water, soil, or biological resources. Under Rule 907.b, oil and gas wastes transported off-site for disposal may only be taken to facilities approved by the COGCC or the Colorado Department of Public Health and Environment or otherwise authorized and permitted to accept such wastes, and operators must maintain detailed records of each waste shipment. Rule 907.c requires that produced waters be treated to remove oil and condensate before placement in a production pit and specifies the allowable methods for produced water disposal, including injection into a permitted Class II well, evaporation in a permitted pit, off-site disposal at a permitted facility, roadspreading, and discharge to state waters under a permit issued in accordance with the Water Quality Control Act. 23 Several other Series 900 rules address waste storage in pits, including Rule 902 (operating standards), 903 (permitting and reporting requirements), 904 (lining requirements and specifications), and 905 (closure). Rule 906 requires that all spills and releases of oil and gas wastes, including produced fluids, must be controlled and contained immediately to protect the environment, public health, safety, and welfare, and wildlife resources; and any impacts must be investigated and cleaned up as soon as practicable. Under Rules 906.b and 906.c, spills exceeding five barrels or that impact or threaten to impact any waters of the state, residence, or occupied structure, livestock, or public byway must be reported to the COGCC and any affected surface owner. Cleanup requirements, including groundwater impacts, are addressed in Rules 906.d, 909, and 910. According to the COGCC, the majority of the waste water generated from oil and gas operations in Colorado is disposed of by injection into Class II Underground Injection Control 22 See Statement of Basis, Specific Statutory Authority, and Purpose, New Rules and Amendments to Current Rules of the Colorado Oil and Gas Conservation Commission, 2 CCR 404-1 at 36. 23 Colo. Rev. Stat. § 25-8-501. 7 (“UIC”) wells under Rule 325. 24 This rule prohibits the underground disposal of water or any other fluids without prior authorization from the COGCC and submission of the necessary permit application forms. In addition, operators must report the volumes of all wastes disposed in a Class II UIC well monthly to the COGCC on the Form 7 Operator’s Monthly Report of Operations. Water Quality Monitoring Under several COGCC rules and administrative orders, hydraulic fracturing operations may be subject to baseline and ongoing water sampling requirements. For example, Rule 608.b requires initial baseline and post-completion water quality testing of water wells within a ¼ mile to ½ mile radius of a proposed coal bed methane well. The COGCC may require additional water well testing at any time in response to a complaint from a water well owner. Similarly, Rule 317B requires that operators conducting drilling and stimulation activities in a Surface Water Supply Area 25 perform baseline and post-completion surface water quality sampling downgradient of the oil and gas location. Rule 318A requires initial baseline water well sampling for certain oil and gas wells drilled in the Greater Wattenberg Basin. B. MONTANA The Montana Board of Oil and Gas Conservation (the “MBOGC” 26) regulates oil and gas operations in that state. As defined by statute, the MBOGC is a quasi-judicial board allocated to the Department of Natural Resources and Conservation for administrative purposes. 27 It consists of seven members, including at least three from the oil and gas industry and two landowners residing in oil or gas producing counties but not actively associated with the industry. 28 The MBOGC is tasked with preventing surface and underground contamination caused by oil and gas drilling and production, classifying wells for purposes of enforcing state laws and regulations, and adopting and enforcing rules. 29 In addition to other oil and gas producing operations, the MBOGC has exclusive jurisdiction over all “Class II injection wells” in the state and all pits and ponds operated in conjunction therewith, including authority to issue and oversee permits and adopt standards for the design, construction, testing, and operation of Class II 24 See Response of the Colorado Oil & Gas Conservation Commission to the STRONGER Hydraulic Fracturing Questionnaire, June 13, 2011 at 15 (http://cogcc.state.co.us/Announcements/Hot_Topics/Hydraulic_Fracturing/Hydra_Frac_topics.html): Colorado currently has 290 Class II UIC wells used for disposal, and the number of these wells is steadily increasing. They receive about 60% of the water that is currently produced by the oil and gas industry. The remainder of the water either evaporates or is discharged into surface waters pursuit to permits issued by the WQCD. Evaporation is a common disposal method in the Piceance Basin, while surface discharges are common in the Raton Basin, where coalbed methane is produced, water production is significant, and the water meets or can be treated to meet surface discharge standards. 25 See prior definition of Surface Water Supply Area, supra note 21. 26 http://bogc.dnrc.mt.gov/default.asp. 27 See Mont. Code Ann. § 2-15-3303. 28 Id. 29 Id. § 82-11-111(2). 8 injection wells. 30 A Class II injection well is defined generally to include any well used to inject fluids as part of an oil and gas operation, and more specifically a well used to inject fluids for the enhanced recovery of oil or gas. 31 The MBOGC very recently completed a rulemaking and has adopted a set of revised rules specifically addressing certain regulatory aspects of hydraulic fracturing. The new rules became effective August 27, 2011. In addition to the existing system of permitting, construction, and disposal requirements and restrictions applicable to all oil and gas wells, the new rules clarify that hydraulic fracturing activities will be subject to a specific series of disclosure, notification, and operating requirements. Permitting Subchapter 6 of the MBOGC rules addresses general well permitting requirements. Under Rule 36.22.601, an operator must file an application for permit to drill on Form No. 22 and obtain a drilling permit from the MBOGC before commencing the drilling of any oil and gas well in the state. Information must be provided concerning the well location, spacing, access, hole size, casing and cementing, associated pits, and plans for the disposal of reserve pit fluids and solids after the well is drilled. New Rule 36.22.608 now clarifies that all oil and gas well completions that include hydraulic fracturing, acidizing, 32 or other chemical stimulation must also be expressly described in detail in the permit application for that well. The description must include: the estimated total volume of treatment to be used; the trade name or generic name of the principle components or chemicals used; the estimated amount or volume of the principle components, such as viscosifiers, acids, or gelling agents; the estimated weight or volume of inert substances such as proppants and other substances injected to aid in well cleanup; and the maximum anticipated treating pressure or a written description of the well construction specifications which demonstrate that the well is appropriately constructed for the proposed fracture stimulation. If an operator is unable to determine that hydraulic fracturing will be used to complete the well at the time the permit application is filed, the operator must submit the required information at least 48 hours prior to the commencement of well stimulation activities. Also, instead of providing a well-specific design, the operator may provide a final well treatment design actually used for similar wells that reflects the likely design for the well to be permitted, or a generic design submitted for specific geologic formations, geographic areas, or well types likely to be used in a particular well. 30 Id. § 82-11-111(5). Id. § 82-11-101(3)(c); Mont. Admin. R. 36.22.1401(4)(e) . 32 Under Mont. Admin. R. 36.22.302(28), “Fracturing” means “the introduction of fluid that may or may not carry in suspension a propping agent under pressure into a formation containing oil or gas for the purpose of creating cracks in said formation to serve as channels for fluids to move to or from the well bore.” Under 36.22.302(1), “Acidizing” means “introduction of acid into a formation containing oil or gas to increase the producing ability of a well by dissolving a part of the reservoir rock or to clean the face of a formation.” 31 9 Fluids Management and Disclosure of Stimulation Fluids Subchapter 10 of the MBOGC rules covers drilling procedures, waste disposal, and the filing of completion reports, well logs, analyses, and surveys. Under Rule 36.22.1005, the well operator must contain and dispose of all solid waste and produced fluids that accumulate during drilling operations so as not to degrade surface water, groundwater, or cause harm to soils in accordance with all applicable local, state, and federal laws and regulations. In addition, pits must be emptied or fenced within 10-days of the cessation of drilling or completion operation and closed within one year. Rule 32.22.1011 requires that operators file a completion report with the MBOGC on Form 4 within 30 days after completion of a new well drilled for oil and gas. A detailed report of any repair, deepening, reconditioning, reperforating, or recompletion must also be filed on Form No. 2 within 30 days of completing any such activities on an existing well. New Rule 36.22.1010 imposes additional pre-notification and post-completion reporting requirements specific to hydraulic fracturing and other stimulation activities. An operator must submit a Form No. 2 and receive approval from the MBOGC before any well can be reperforated, recompleted, reworked, chemically stimulated, or hydraulically fractured. In addition, the operator must submit a subsequent report of the actual work performed within 30 days following completion. The rule makes an exception to the pre-performance notification requirement for repairs that do not substantially change the mechanical configuration of the well, acid and chemical treatments of less than 10,000 gallons, and similar cleaning treatments; however, such activities still must be documented on a Form No. 2 submittal within 30 days following completion of the work. New Rule 36.22.1015 also adds a requirement for the disclosure of stimulation fluids to the well completion information previously reported on either Form No. 2 or Form No. 4 for any well undergoing stimulation. Under the new rule, required information includes: a description of the intervals or formation treated, the type of treatment pumped into the well (acid, chemical, or fracture stimulation), and the amount and type of material used and the rates and maximum pressure during treatment. For wells undergoing hydraulic fracturing treatments, chemical specific information about the amount and type of material used must also be provided, including: a description of the stimulation fluid identified by additive types (e.g., acid, biocide, breaker, corrosion inhibitor, friction reducer, gel, proppant, surfactant, etc.), the chemical ingredient name for each ingredient of the additive used, and the rate or concentration of each additive. Interestingly, Rule 36.22.1015(4) provides for an express exception to the well stimulation disclosure requirement if an operator demonstrates that it has posted the required information on the FracFocus website 33 or a similar public disclosure website acceptable to the MBOGC. The requirement may also be satisfied by submitting a service contractor’s job log, final treatment report, well treatment job log, or other similar report containing the required information. 33 http://fracfocus.org/ 10 Under new Rule 36.22.1016, the MBOGC also recognizes an exemption to the well stimulation disclosure requirement where the chemical product or method used for stimulation is a trade secret as defined by Montana law. 34 In such circumstances, it will be sufficient to identify the material’s trade name, inventory name, or chemical family name, and the quantity used. Similar to Colorado, however, the Montana rule provides for an exception to the trade secret exemption if the constituent information is needed by the MBOGC to respond to a spill or release or by a health professional for purposes of diagnosis or treatment of an individual who may have been exposed to the chemical. The disclosure to a health professional may be prompted either by a written statement that the information is needed for diagnosis or treatment or upon a determination that a medical emergency exists. Whether the information is disclosed to the MBOGC or a health professional, it shall be maintained as confidential; and the operator or service provider may require that the recipient execute a nondisclosure or confidentiality agreement. Well Construction and Pressure Testing The MBOGC rules in Subchapter 11 address safety considerations, including fire prevention (36.22.1101, 1102), spill notification requirements (36.22.1103), and spill control and cleanup (36.22.1104). Under Rule 36.22.1103, spills of oil or high salinity water must be reported if they exceed 50 barrels or enter or degrade surface water or groundwater. Under Rule 36.22.110, all leaks, spills, and discharges must be promptly controlled and cleaned up regardless of amount. New Rule 36.22.1106 imposes additional construction and testing requirements for wells that will be stimulated by hydraulic fracturing. These requirements are intended to verify the mechanical integrity of the well and determine if there are any leaks that might cause groundwater contamination. Under the new rule, wells that will be stimulated by hydraulic fracturing must demonstrate suitable and safe mechanical configuration for the stimulation treatment proposed. If the well will be fractured through the production casing or intermediate casing, the casing must be tested prior to fracture stimulation to the maximum anticipated treating pressure. If the casing fails the pressure test, it must be repaired, or the operator must use a temporary casing string (fracturing string). If the operator proposes hydraulic fracturing though a fracturing string, it must be strung into a liner or run on a packer set not less than 100 feet below the cement top of the production or intermediate casing and must be tested to not less than the maximum anticipated treating pressure minus the annulus pressure applied between the fracturing string and the production or immediate casing. The MBOGC will consider a casing pressure test successful if the pressure applied is held for 30 minutes with no more than ten percent pressure loss. 34 See Mont. Code Ann. § 30-14-402(4): “Trade secret” means information or computer software, including a formula, pattern, compilation, program, device, method, technique, or process, that: (a) derives independent economic value, actual or potential, from not being generally known to and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. 11 C. WYOMING The Wyoming Oil and Gas Conservation Commission (“WOGCC” 35) regulates and has jurisdiction and authority under the Wyoming Conservation Act over all oil and gas activities in the state. 36 By statute, this includes the authority to regulate: the drilling and casing of wells in such a manner to prevent the escape of oil or gas out of one stratum into another and the pollution of fresh water supplies by oil, gas, or salt water; the shooting and chemical treatment of wells and the contamination or waste of underground water; and the noncommercial underground disposal of oil field wastes in class two injection wells in such a manner as to prevent contamination of the waters of the state. 37 The rules of the WOGCC are intended to prevent waste and to conserve oil and gas, protect human health and the environment, and ensure that drilling and production methods are designed to avoid contamination of soils, groundwater, and surface water. 38 The WOGCC is comprised of the Governor, the Director of the Office of State Lands and Investments, the State Geologist, and two members of the public appointed by the Governor. 39 The Governor serves as chairman, and the State Oil and Gas Supervisor, a registered professional petroleum engineer or petroleum geologist appointed by the WOGCC, serves as director and chief administrator. 40 By law, the State Oil and Gas Supervisor shall have access to all oil and gas properties and all well records for the purpose of conducting investigations to determine compliance with the requirements of the Act. 41 As with a number of other states, the WOGCC recently promulgated revisions to its oil and gas rules covering a variety of drilling practices, including hydraulic fracturing. The new rules, primarily contained in Chapter 3 (“Operational Rules, Drilling Rules”), were adopted June 8, 2010 and became effective September 15, 2010. Revisions relating to well stimulation and hydraulic fracturing were intended to address four primary issues: disclosure of well stimulation fluids; groundwater protection and identification of nearby water supply wells; well integrity, casing setting depths, casing design, and cementing properties; and handling and disposal of recovered well stimulation fluids. Sections of the WOGCC Chapter 3 Rules 42 establishing requirements directly applicable to hydraulic fracturing activities include Sections 1 (Notices: General and Emergency), 8 (Application for Permit to Drill or Deepen a Well), 10 (Notice of Intent to Change Plans), 12 (Well Completion or Recompletion Report and Log), 22 (General Drilling Rules), and 45 (Well Stimulation). 35 http://wogcc.state.wy.us/. See Wyo. Stat. Ann. §§ 30-5-101 to 30-5-126. 37 Id. § 30-5-104(d)(i)(C), (ii)(B), (ii)(E), (vi)(B). 38 WOGCC Rules and Regulations, Ch. 2, § 1(a), (b). 39 Wyo. Stat. Ann. § 30-5-103(a). 40 Id. § 30-5-103(c), (d), 108. 41 WOGCC Rules and Regulations, Ch. 2, §§ 3, 4. 42 Unless otherwise indicated, references to “Sections” in this discussion refer to Sections in Chapter 3 of the WOGCC Rules and Regulations. 36 12 Chemical Disclosures One of the more significant changes to the WOGCC Rules was the addition of a requirement for disclosure of the chemicals used during hydraulic fracturing. Subject to certain protections for proprietary information and confidential information, the rules now require both pre- and post-stimulation pubic reporting of well stimulation fluid chemical additives and compounds. Stimulation fluid disclosures are primarily addressed by Section 45(d). Under this rule, detailed information must be submitted to the WOGCC as part of the well drilling permit application about the base stimulation fluid source and, for each stage of the well stimulation program, the concentrations or rates of chemicals proposed to be mixed and injected. Specific items that must be identified in the stimulation fluid include: additive types (such as acid, biocide, breaker, brine, corrosion inhibitor, friction reducer, gel, proppant, surfactant), chemical compound names, and the proposed rate or concentration for each additive. If warranted by a spill, accident, or similar incident, the WOGCC may, in its discretion, request additional information, including the formulas of the chemicals used. 43 Post-stimulation reporting is also required. Section 45(h) requires submission of a report or job log providing information on a number of parameters used during hydraulic fracturing, including: the total well stimulation treatment volume pumped; amounts of fluids, proppant, and chemical additives pumped for each fluid stage; surface pressure and rate at the end of each fluid stage; the actual flush volume, rate, and final pump pressure; and shut in pressures. Under Section 45(f), an operator may request in writing that proprietary information contained in the disclosures submitted to the WOGCC be kept confidential, subject to the requirements of the Wyoming Public Records Act. 44 The Act prohibits public inspection of “trade secrets, privileged information and confidential commercial, financial, geological or geophysical data furnished by or obtained from any person.” 45 According to a clarification memorandum issued by the WOGCC, however, Rule 45(f) will generally not afford confidentiality protection for well drilling, completion, or stimulation “processes.” 46 The WOGCC will deny requests for confidential status for such processes without compelling evidence and proof of damage to the owner or operator of the well. Permitting and Groundwater Protection Groundwater protection from oil and gas drilling and hydraulic fracturing in Wyoming is addressed by a number of pre-drilling permitting and approval requirements. Under Section 8(a), before an operator can spud, begin drilling, or deepen any oil or gas well, the operator must first file an Application for Permit to Drill or Deepen (“APD”) (Form 1) with the WOGCC and 43 See Memorandum from Thomas E. Doll, State Oil & Gas Supervisor, Adoption of WOGCC Rules and Regulations; Clarifications at 4 (Aug. 24, 2010). 44 Wyo. Stat. Ann. § 16-4-203(d)(v); the WOGCC’s trade secret approvals are published at http://wogcc.state.wy.us/ap_trade_secrets_new.cfm. 45 Id. 46 See Doll Memorandum, supra note 43. 13 pay a fee of $50 for a permit. 47 Under Section 1(a), specific pre-approval must be sought to acidize, cleanout, flush, fracture, or stimulate a well. No drilling activity can occur until the application is approved and a permit to drill is issued by the WOGCC. And under Section 45(a), an approved APD or an approved sundry notice is specifically required prior to the initiation of any well stimulation activity. Under Section 8(c), the APD must provide a variety of information about well construction, subsurface conditions, nearby water resources, and the stimulation program. The operator must identify the proposed well depth and all water supply wells located within ¼ mile of the drilling or spacing unit (or within ¼ mile of the drill site if there is no such unit) and the depth from which water is being appropriated. 48 Additional information about formation depth, geological and hydrological detail, and useable groundwater underlying the drilling and spacing unit must also be submitted, and groundwater must be protected unless it has been classified as unusable or unsuitable for use. The APD must also provide details about the proposed casing program (including size, setting depths, API grade, weight per foot, burst pressure, tensile strength, and yield pressure) and cementing program (including API class of cement, additives, slurry density, and estimated volumes). 49 For openhole and uncemented liner stimulations in high angle and horizontal wells, the APD must describe the isolation techniques used, including type and setting depth. Similar to Section 45(d), and specific to hydraulic fracturing, Section 8(c)(ix) requires that an APD describe the anticipated completion and stimulation program, including the base stimulation fluid and its source, the chemical additives, and proposed concentrations to be mixed. If this information is not available at the time of submission of Form 1, it must be submitted subsequently on a sundry notice (Form 4). No stimulation of the well can occur without the WOGCC’s prior approval of the stimulation program. Under Section 45(b), the operator of a well undergoing stimulation must also identify the geological names, geological description, and depth of the formation into which well stimulation fluids will be injected; and under Section 45(e), the operator must provide a detailed description of the proposed well stimulation design, including the anticipated surface treating pressure range, the maximum injection treating pressure, and the estimated or calculated fracture length and fracture height. Wyoming’s revised rules also include restrictions on the use of diesel and similar compounds in hydraulic fracturing. Under Section 45(g), the injection of volatile organic compounds (“BTEX”) or any petroleum distillates into groundwater is strictly prohibited, while the proposed use of such chemicals for stimulation into hydrocarbon bearing zones is authorized only with prior approval by the WOGCC. Under Section 10, details about any material change to previously approved plans must be submitted to and approved by the WOGCC before the work is performed, and verbal notice must be provided of any material change to the nature or scope of a well stimulation plan. Finally, under Section 12, a report must be submitted within 30 days after ceasing drilling, 47 48 49 See also Wyo. Stat. Ann § 30-5-115. Section 8(c)(iii) Section 8(c)(vi), (viii). 14 completion of a well, or completion of fracturing. The report must detail the work performed; the daily production of oil, gas, and water; the size and depth of the perforations; and the quantities of materials used in the operation. Drilling, Well Construction, and Integrity Testing General requirements for drilling and well construction, including requirements designed to protect groundwater resources and water wells, are contained in Section 22 of the WOGCC rules. Under Section 22(a)(i), surface casing must extend deeper than all known or reasonably estimated utilizable groundwater. Surface casing must also be set at least 100 to 120 feet below the depth of any permitted water supply wells located within a ¼ mile radius and cemented to the surface. In addition fresh water flows detected during drilling must be timely reported. The Section 22 rules also establish requirements for minimum compressive strength and circulation for casing cement (22(a)(ii), (v)); blowout preventers (22(a)(iii)); and reserve pits (22(b)). More stringent restrictions on casing, cementing, and well stimulation apply under Sections 22(e) and 22(f) for wells drilled within a “Special Sodium Drilling Area”. 50 These rules are intended to provide special protections for areas where it may be economical to extract trona mineral and to prevent significant dissolution of the trona. For all wells undergoing stimulation, the WOGCC Rules impose additional requirements designed to ensure that well integrity is maintained. Under Section 45(a), the WOGCC may require that an operator perform mechanical integrity testing of the casing or casing-tubing annulus prior to well stimulation. 51 Under Section 45(i), the bradenhead annulus pressure must be continuously monitored and recorded during the well stimulation operation; and if intermediate casing has been set, the pressure in the annulus between the intermediate casing and the production casing must also be monitored and recorded. The operator must verbally notify the WOGCC within 24 hours of any pressure reading increase of more than 500 psig and also provide details of the incident and any corrective action taken as an attachment to the well completion report. Disposal of Stimulation Fluids Section 45 also includes directives specifically addressing the handling and disposal of any well stimulation fluids recovered during flowback, swabbing, or from production facility vessels. The well completion report or sundry notice must describe the amounts of fluids recovered, the handling practices used, and how any fluids were either disposed of or reused. Fluids must be stored in tanks or lined pits to prevent impacts to groundwater; and if lined pits are used, they must meet the requirements of Chapter 4, Section 1 regarding the protection of wildlife and migratory birds. 52 50 See WOGCC Rules and Regulations, Chapter 1, Section 2(tt) and (uu). These are areas where “Trona Mining Resources” (as defined in Chapter 1, Section 2(eee)) exist. 51 See also Chapter 2, Section 6: “When deemed necessary or advisable, the Supervisor is authorized to require that tests or surveys be made to determine the … formation, casing, tubing, or other pressures; or any other test or survey deemed necessary… .” 52 See e.g., Chapter 4, Section 1(bb): “All pits shall be fenced completely and for any produced water pit, workover, completions, or emergency pit found containing oil, sheens, condensate, other hydrocarbons or chemicals proven to be hazardous to public health, safety and welfare, or to wildlife, domestic animals, or migratory birds, the 15 D. NEW MEXICO New Mexico’s oil and gas regulations currently contain very few requirements specific to hydraulic fracturing activities. As of the writing of this article, however, rule amendments were pending consideration that will require the disclosure of the composition of fluids used for hydraulic fracturing and establish new administrative requirements for horizontal drilling. In accordance with the Oil and Gas Act, 53 regulation of oil and gas activities in New Mexico falls under the jurisdiction of the Oil Conservation Division (“NMOCD”) and the Oil Conservation Commission (“NMOCC”). Oil and gas activities in the state are also subject to the requirements of the Surface Owners Protection Act, 54 which requires operators to compensate a landowner for property damage caused by oil and gas operations and provide advanced written notice of the proposed activities. The NMOCD has authority over all matters relating to the conservation of oil and gas. 55 It is empowered by statute to make and enforce rules, regulations, and orders regarding the drilling and operation of oil and gas wells and the disposition of any associated wastes. The NMOCD issues regulations for oil and gas development, oversees the drilling permit process, and ensures compliance with the oil and gas rules. The NMOCD is made up of several bureaus, including the Engineering and Geological Services Bureau, which processes administrative applications for exceptions to Division rules and oversees Division hearings, and the Environmental Bureau, which develops and enforces all of the environmental regulations and programs in the oil and gas industry for the prevention of ground water contamination. The NMOCC has concurrent jurisdiction and authority with the NMOCD to the extent necessary for the NMOCC to perform its statutory duties. 56 The NMOCC generally performs as an adjudicatory body, hearing cases on appeals from NMOCD decisions, rulemakings, and precedent-setting cases. In addition, the New Mexico Environment Department administers the New Mexico Water Quality Act 57 and the Air Quality Control Act, 58 both of which regulate environmental impacts of oil and gas development. New Mexico’s oil and gas rules are contained in Chapter 15 of Title 19 of the New Mexico Administrative Code. 59 Owner or Operator shall have these fluids removed as soon as practical or in accordance with Chapter 4, Section 1(dd) of these rules. If timely fluid removal is not possible, the pit should be netted or otherwise secured in a manner that avoids the loss of wildlife, domestic animals, or migratory birds.” 53 See N.M. Stat. §§ 70-2-1 to 70-2-38. 54 Id. §§ 70-12-1 to 70-12-10. 55 Id. §§ 70-2-6.A, 11.A, 12. 56 Id. §§ 70-2-4, 6.B, 11.B. 57 Id. §§ 74-6-1 to 74-6-16. 58 Id. § 74-2-1 to 74-2-22. 59 N. M. Code R. §§ 19.15.1 to 111. 16 Well Permitting, Construction, and Reporting As in other states, an operator must apply for and obtain a permit prior to commencing any oil and gas well drilling activities in New Mexico by submitting forms C-101 and C-102 to the NMOCD. 60 The forms require information concerning the proposed well’s location, casing and cement program, depth to groundwater, and distances to the nearest fresh water well and nearest surface water. Well construction requirements are set forth in N.M. Code R. § 19.15.16.10. Under these rules, wells must be equipped with surface and intermediate casing strings and cement as may be necessary to effectively seal off and isolate all water-, oil- and gas-bearing strata and other strata encountered in the well down to the casing point. Cementing and testing requirements are also specified, as are requirements for pressure testing and blowout prevention. Under § 19.15.16.16 (“Shooting and Chemical Treatment of Wells”), an operator must notify the NMOCD if shooting, fracturing, or treating of a well injures the producing formation, injection interval, casing, or casing seat, and may create underground waste or contaminate fresh water. The operator must diligently repair any damage or properly plug and abandon the well if it is irreparably damaged by fracturing. An operator need not submit documentation of a proposed stimulation plan prior to conducting hydraulic fracturing. 61 However, within 30 days after performing hydraulic fracturing activities (or any other “remedial work”), the operator must file a report on Form C103. 62 The report must contain a detailed accounting of the work done and the manner in which it was performed, including information about the daily production of oil, gas, and water both prior to and after the work; the quantity and type of crude, chemical, or other materials the operator employed in the operation; and any other pertinent information. This is in addition to the requirement under N.M. Code R. § 19.15.16.18 to file a completion report with the NMOCD on Form C-15 within 20 days after well completion. Chemical Disclosures As noted, the New Mexico oil and gas rules currently contain no specific restrictions on hydraulic fracturing activities and no requirements for monitoring or reporting on the chemical products used. This is likely to soon change. On August 8, 2011, the New Mexico Oil and Gas Association filed an application proposing an amendment to the existing NMOCD rules that would require disclosure of the composition of fluids used to hydraulically fracture new and recompleted wells. 63 The application is scheduled to be heard by the NMOCC on November 17, 2011. The proposal calls for revisions to N.M. Code R. § 19.15.16.18. Under the proposal, within 45 days of completion of hydraulic fracturing, an operator will need to complete and 60 N.M. Code R. § 19.15.14.9 Id. § 19.15.7.14.A. 62 Id. § 19.15.7.14.G 63 Copies of the application, a summary of the proposed rule amendments, and the proposed rule text are available on the NMOCD’s website at http://www.emnrd.state.nm.us/ocd/Rules.htm. 61 17 submit the Hydraulic Fracturing Fluid Composition template available on the FracFocus Registry website and verify compliance with the disclosure requirement on the well completion report (Form C-105) or sundry notice (Form C-103). Alternatively, the operator may submit the fluid composition information to the NMOCD directly on the appropriate form. County and Local Ordinances A number of New Mexico counties and municipalities have also enacted ordinances regulating oil and gas development within their borders, including at least one that specifically addresses hydraulic fracturing. 64 Under New Mexico law, local governments may adopt ordinances “not inconsistent with the laws of New Mexico” to provide for safety, health, and prosperity of residents. 65 In 2008, Santa Fe County passed an ordinance officially titled the “Santa Fe County Oil and Gas Amendment to the Santa Fe County Land Development Code.” 66 By its terms, the ordinance was “intended to address oil and gas exploration, drilling, production, transportation, abandonment and remediation” within the County, and was enacted to protect and promote the health, safety, and general welfare of County residents. Before conducting any oil and gas drilling or development activity in Santa Fe County, the operator must apply for and obtain approval from the County. Section 11.25 of the ordinance covers “fracturing and anodizing.” Among other requirements and restrictions, the ordinance specifies that: fracturing must be performed in strict compliance with applicable NMOCD rules; all oil and gas operations, including fracturing must be conducted only between 8:00 AM and 5:00 PM unless otherwise approved on a case-by-case basis; and fracturing shall not create excessive noise levels. The ordinance further states that fracturing shall only use fresh water as the fluid component of the fracturing material, and it prohibits the use of dissolved hydrocarbons, other toxic contaminants, synthetic fracturing fluids, and brine. The ordinance expressly prohibits the pollution of surface and subsurface fresh waters before, during, and after the fracturing process. E. IDAHO Oil and gas development in Idaho is governed by the Idaho Oil and Gas Conservation Act (the “Idaho Act”). 67 The Idaho Act establishes the Oil and Gas Conservation Commission of the State of Idaho (“IOGCC”) as the body charged with regulating oil and gas development. 68 It is the IOGCC’s duty to prevent waste, to encourage production, and to protect correlative rights. 69 64 See http://www.oilandgasbmps.org/laws/new_mexico_localgovt_law.php for a summary of New Mexico municipal and county ordinances and code provisions related to oil and natural gas surface operations. 65 See N.M. Stat. §§ 3-17-1.B, 4-37-1. 66 The Board of County Commissioners of Santa Fe County, Ordinance No. 2008-19, An Amendment to The Santa Fe County Land Development Code (Dec. 9, 2008). 67 Idaho Code Ann. § 47-329 (2011); IDAHO CODE, Title 47, Chapter 3; http://www.idl.idaho.gov/bureau/Minerals/min_leasing/iogcc.html. 68 Idaho Code Ann. § 47-317 (2011). 69 Id. at § 47-315 (2011) (“It is declared to be in the public interest to foster, encourage and promote the development, production and utilization of natural resources of oil and gas in the state of Idaho in such a manner as will prevent waste; to authorize and to provide for the operations and development of oil and gas properties in such a 18 To carry out that duty, the Idaho legislature has given the IOGCC broad statutory authority to carry out the Idaho Act. 70 The members of the Idaho State Board of Land Commissioners serve as the members IOGCC. 71 The Idaho State Board of Land Commissioners is a five-member board that is made up of the Governor, Secretary of State, Attorney General, Controller, and Superintendent of Public Instruction. 72 The Idaho Act applies to state and federal lands. 73 Idaho has had very little production of oil and gas. As of the date of this paper, the IOGCC has issued only 14 drilling permits since 2007, and there are three additional permit applications pending. 74 Despite the limited production in the state, the IOGCC has recently proposed a major overhaul of its rules (the “Proposed Idaho Rules”). 75 The Proposed Idaho Rules will, among other items, significantly add to the information required in an application for permit to drill; impose additional application, operating, and reporting requirements for well treatments and hydraulic fracturing (including chemical disclosures); and bolster well drilling and construction requirements for the protection of groundwater. 76 Permitting Current Idaho Rule 050 addresses applications for permits to drill, deepen, or plug back a well. Under the new Proposed Idaho Rule 050, an operator will need to submit information about nearby water supplies, best management practices for erosion and sediment control, and reclamation plans; and for those wells that will include well treatments, the operator will be required to submit detailed information on the well treatment as set forth in Proposed Idaho Rule 77 manner that a greater ultimate recovery of oil and gas may be obtained and that the correlative rights of all owners be fully protected;….”). 70 Id. at § 47-317(b) (2011) (“The commission shall have and is hereby given jurisdiction and authority over all persons and property, public and private, necessary to enforce the provisions of this act, and shall have power and authority to make and enforce rules, regulations and orders, and do whatever may reasonably be necessary to carry out the provisions of this act.”). 71 Id. at § 47-317(a) (2011). 72 Id. at § 58-101 (2011). 73 Id. at § 47-327 (2011) (“This act shall apply to all lands in the state of Idaho lawfully subject to its police power, and shall apply to lands of the United States, or to lands subject to the jurisdiction of the United States over which the state of Idaho has police power, except to the degree that it is inharmonious with the uses, activities or regulations of the United States, and furthermore, the same shall apply to any lands committed to a unit agreement approved by the secretary of the interior or his duly authorized representative, except that the commission may, with respect to such unit agreement, suspend the application of this act or any part of this act so long as the conservation of oil and gas and the prevention of waste as in this act provided is accomplished under such unit agreements, but such suspension shall not relieve any operator from making such reports as may be required by the commission with respect to operations under any such unit agreement.”). 74 http://www.idl.idaho.gov/bureau/oil-gas/permits/drillpermits.html (last visited October 19, 2011). 75 The IOGCC’s current rules are at IDAHO ADMIN. CODE r. 20.07.01 through .02 (2011). The Proposed Idaho Rules can be found at Vol. 11-10 Idaho Admin. Bull. Page 454-497 (October 5, 2011) (the “Notice of Proposed Idaho Rules”). 76 Notice of Proposed Idaho Rules at Page 454. 77 Idaho Admin. Code R. 20.07.02.050 (2011). 19 055. 78 A “well treatment” would be defined under Proposed Idaho Rule 010.51 as an “action performed on a well to acidize, fracture, or stimulate the target reservoir.” 79 Rule 055.01 would require reporting of all information about the well treatment. 80 That information would include, among other items: depth to interval, source of water or base fluid, additives to the base treatment fluid, pump pressures, information related to hydraulic fracturing operations pursuant to Proposed Idaho Rule 056 (see discussion below), fresh water protection plans, certifications from the operator that the well construction is designed to meet the requirements of the proposed well treatment, affidavits stating that neighboring landowners have been notified of the well treatment, proof of publication of a description of the well treatment, and any additional information required by the Idaho Department of Lands. 81 The public will be given a 15-day comment period after the operator’s submission of the application. 82 The Commission will post “relevant” comments on its website. 83 If the application for permit to drill includes hydraulic fracturing operations, the operator must submit the information required by Proposed Idaho Rule 056. 84 A “hydraulic fracturing operation” would be defined under Proposed Idaho Rule 010.24 as “a method of stimulating or increasing the recovery of hydrocarbons by perforating the production casing and injecting fluids or gels into the potential target reservoir at pressures greater than the existing fracture gradient in the target reservoir.” 85 Proposed Idaho Rule 056 will require the operator to submit such information as the formations impacted, a detailed description of the well stimulation design, and the chemical constituents of the stimulation fluid. 86 Chemical Disclosure Under Proposed Idaho Rule 056, operators will be required to disclose the chemical constituents in their hydraulic fracture fluid. 87 Idaho’s proposed chemical disclosure rules appear to be modeled after Wyoming’s recently-adopted chemical disclosure rules. 88 In fact, a number of the proposed rules are identical to Wyoming’s recently-passed rules. 89 Like Wyoming, Proposed Idaho Rule 065 will require the operator to identify, as to each stage of the well stimulation program, the chemical additives, proppants, concentrations, and rates proposed to be mixed, including: stimulation fluid identified by additive type; chemical compound name and Chemical Abstracts Service number; proposed rate or concentration for each additive and the 78 Notice of Proposed Idaho Rules at Page 463. Id. at Page 461. 80 Id. at Page 464. 81 Id. at Pages 464 and 465. 82 Id. at Page 464, Rule 051. 83 Id. 84 Id. at Page 464. 85 Id. at Page 459. 86 Id. at Page 467. 87 Id. at Page 467. 88 See WOGCC Rules and Regulations, Ch. 3, § 45. In addition to the chemical disclosure rules, several other of the Proposed Idaho rules appear to be modeled, or are identical, to Wyoming’s rules. See, e.g., WOGCC Rules and Regulations, Ch. 3, § 1(a), and Notice of Proposed Idaho Rules at Page 464, Rule 055.01.a. through c. 89 See, e.g., WOGCC Rules and Regulations, Ch. 3, § 45(d)(i) through (iii) and Proposed Idaho Rule 056. 79 20 total volume; and the formulary disclosure of the chemical compounds used in the well stimulation. 90 The operator will also be required to closely monitor the well before, during, and after the hydraulic fracturing treatment. Proposed Idaho Rule 060.03 will require the operator to conduct an integrity test of the casing prior to any hydraulic fracturing treatment. 91 Proposed Idaho Rule 060.04 then requires annulus pressure testing during the hydraulic fracturing treatment. 92 Once the operator has completed the operation, Proposed Idaho Rule 060.05 will require the operator to submit a post-treatment report. 93 As in Wyoming, an operator may request in writing that trade secrets be treated as confidential. 94 Fresh Water Protection and Well Construction As touched on above, the Proposed Idaho Rules require the operator to protect fresh water during its well treatment or hydraulic fracturing programs. The Proposed Idaho Rules will define “fresh water” as “all surface waters and those ground waters that are used, or may be used in the future, for drinking water, agriculture, aquaculture, or industrial purposes other than oil and gas development…[, and] [t]he possibility of future use is based on hydrogeological conditions, water quality, future land use activities, and social/economic considerations.” 95 First, Proposed Idaho Rule 055 dealing with well treatments will also require a fresh water protection plan that describes the site-specific measures to protect water quality from activities associated with well treatments. 96 Further, the operator will be required to conduct fresh water monitoring before and after any well treatment. 97 Finally, operators will be prohibited from injecting any BTEX compound or any petroleum distillate into ground water in excess of applicable ground water quality standards. 98 Operators will be able to use BTEX or petroleum distillates for well stimulations if approved by the Director. 99 The Proposed Idaho Rules will have several new sections that address general well construction requirements for the protection of fresh water. For example, Proposed Idaho Rule 080.01 will require the operator to design a casing and cementing program to protect the migration of oil and gas from one horizon to another. 100 Additionally, drilling mud temperatures must be monitored on a daily basis due to Idaho’s high geothermal gradient. 101 Further, the operator will be required to install and cement at least 40 feet of conductor casing. 102 Additionally, the operator must set surface casing, intermediate casing, and production casing in 90 Notice of Proposed Idaho Rules at Page 464, Rule 056.b. Id. at Page 468. 92 Id. 93 Id. 94 Id. at Page 457, Rule 006.02. 95 Id. at Page 459, Rule 010.20. 96 Id. at Page 464. 97 Id. at Page 464, Rule 055.07.c. 98 Id. at Page 467, Rule 056.02. 99 Id. The Director of the IOGCC is the head of the Idaho Department of Lands and Secretary to the Oil and Gas Conservation Commission. Id. at Page 458, Rule 010.17. 100 Id. at Page 470. 101 Id., Rule 080.03. 102 Id. at Page 470-471, Rule 080.04. 91 21 an effort to protect groundwater and prevent migration of oil and gas from one horizon to another. 103 Finally, the IOGCC will require operators to conduct mechanical integrity tests on all active and inactive wells every five years. 104 F. NORTH DAKOTA The North Dakota legislature has determined it to be in the public interest to promote the development of oil and gas and encourage and authorize secondary recovery operations to obtain the greatest possible economic recovery of oil and gas. 105 The legislature has also specifically designated hydraulic fracturing to be an acceptable recovery process in the state. According to state statute: “[n]otwithstanding any other provision of law, the legislative assembly designates hydraulic fracturing, a mechanical method of increasing the permeability of rock to increase the amount of oil and gas produced from the rock, an acceptable recovery process in this state.” 106 The North Dakota Industrial Commission (“NDIC”) has authority over oil and gas operations and production in the state, including the drilling, casing, and operation of wells, the shooting and chemical treatment of wells, and operations to increase recovery; and it has authority to adopt and enforce rules and orders to effectuate these purposes. 107 The NDIC has delegated regulatory authority to administer the state’s oil and gas rules to the Oil and Gas Division (“NDOGD”). 108 The NDOGD oversees the drilling and plugging of wells, the restoration of drilling and production sites, the disposal of saltwater and oil field wastes, the spacing of wells, and the filing of reports on well location, drilling, and production. Current Rules The current regulations governing oil and gas well drilling and operations in North Dakota are found primarily in Chapter 43-02-03 of the North Dakota Administrative Code. The current regulations contain only a few rules specific to hydraulic fracturing, including a provision – 43-02-03-27 – providing the NDIC with authority to require pre-treatment casing pressure testing and other operational requirements to protect wellhead and casing strings during hydraulic fracturing. Under the same rule, operators must immediately report any damage to the well casing that results from perforating, fracturing, or chemically treating a well, and take appropriate steps to correct the damage. As in other states, numerous general requirements apply to the permitting, casing, cementing, and operation of oil and gas wells, including those undergoing fracturing. These include requirements for bonding (43-02-03-15); permitting (43-02-03-16); reserve pits and waste disposal (43-02-03-19, 19.2); casing and cementing (43-02-03-21); and underground disposal (43-02-03-56). Under Rule 43-02-03-20, steps must be taken to prevent the passage of oil, gas, and water from one producing strata into another; and all freshwaters and otherwise usable groundwater sources must be confined to their respective strata and adequately protected 103 104 105 106 107 108 Id. at Pages 471-473, Rules 080.05, .07, and .08. Id. at Page 479, Rule 105.01.c. Id. § 38-8-01. Id. § 38-8-25. N.D. Cent. Code § 38-8-04. See https://www.dmr.nd.gov/oilgas/. 22 by methods approved by the NDIC. Under Rules 43-02-03-21 (“Casing, tubing and cementing requirements), wells must be completed with strings of casing cemented at sufficient depths to adequately protect and isolate all formations containing water, oil, or gas or any combination of these; protect the pipe through salt sections encountered; and isolate the uppermost sand of the Dakota group. Among other requirements, surface casing must be set and cemented at a point not less than fifty feet below the base of the Fox Hills formation, and sufficient cement must be used on the surface casing to fill the annular space behind the casing to the bottom of the cellar, if any, or to the surface of the ground. Under Rule 43-02-03-30, operators must notify the NDIC within twenty-four hours after the discovery of any leak, spill, blowout, or release of fluid, unless it involves less than one barrel in volume and remains entirely on-site. Proposed Rule Amendments and Additions On September 23, 2011, the NDIC proposed a fairly extensive set of amendments and additions to the oil and gas rules, including an entirely new section devoted to hydraulic fracture stimulation. A public hearing to address the proposed amendments is scheduled for November 1, 2011. Among other changes, the proposed rules will impose new requirements for casing, pressure testing, cement evaluation, and public disclosure of fracturing fluid composition. The requirements vary somewhat depending on whether hydraulic fracture stimulation is performed through an intermediate casing string or through a frac string run inside the intermediate casing string. Where no frac string is run, the operator will need to verify adequate intermediate casing wall thickness and cementing prior to stimulation. For both types of wells, the operator will need to pressure test the intermediate casing and monitor and control the pressure inside the wellhead and treating lines during stimulation. As for chemical disclosures, the proposed rules will require that an operator notify the NDIC within 24 hours and post detailed information about the well location and fracturing fluids used – including the trade name, supplier, purpose, ingredients, chemical abstract number, maximum ingredient concentration in additive, and maximum ingredient concentration in hydraulic fracturing fluid – anytime the pressure inside the intermediate casing-surface casing annulus exceeds 350 psi. For wells stimulated through the intermediate casing (without the use of a frac string), the requirement to post the location and fracturing fluid composition information will apply upon the completion of hydraulic fracture stimulation, regardless of the pressure readings recorded during stimulation. Additional information about the proposed rules, including a summary of the rule amendments and additions and the full set of proposed changes to Chapter 43-02-03, is available on the NDOGD’s website at https://www.dmr.nd.gov/oilgas/. G. UTAH Oil and gas exploration, drilling, and development in Utah are subject to the requirements of the Utah Oil and Gas Conservation Act. 109 The Act prohibits the waste of oil and gas and supports a policy of promoting oil and gas development and practices that ensure the greatest 109 Utah Code Ann. §§ 40-6-1 – 19. 23 possible economic recovery of oil and gas, while protecting the correlative rights of all owners. 110 The Act establishes and defines the jurisdiction of the Utah Board of Oil, Gas, and Mining, which “shall be the policy making body for the Division of Oil, Gas, and Mining.” 111 The Board is responsible for promulgating oil and gas regulations, considering appeals of Division actions, making regulatory policy determinations, and rulemaking functions. The seven members of the Board are appointed by the Governor with Senate concurrence. 112 The Board has the authority to adopt rules and make orders necessary to administer the location and drilling of wells in a manner that prevents the escape of oil, gas, and water out of a formation; the intrusion of water into an oil and gas reservoir; and the pollution of fresh water supplies, subject to the requirement that any such rules be consistent with applicable federal requirements. 113 The Act also establishes the Utah Division of Oil, Gas and Mining (“DOGM”) within the Department of Natural Resources to implement the policies and orders of the Board and to perform all other duties delegated by the Board. 114 As a matter of practice, the DOGM has oversight responsibility for all operations for and related to the production of oil or natural gas in Utah including: well drilling, completion, and operation; operations to increase oil and gas recovery; and waste disposal. 115 Among its other duties, the DOGM approves new drilling operations, inspects new and existing oil and gas operations for regulatory compliance, and ensures that oil and gas wells are properly plugged and abandoned. The Utah oil and gas regulations are found in Title R649 of the Utah Administrative Code. Similar to New Mexico’s current rules, the Utah rules contain few requirements specific to hydraulic fracturing. Drilling and operating practices are covered by R649-3, including bonding (649-3-1), location and siting (649-3-2), permitting (649-3-4), drilling (649-3-6), casing (649-3-8), protection of upper strata and groundwater (649-3-9), pollution prevention (649-315), reserve pits (649-3-16), recompletion and workover activities (649-3-23), and underground disposal (649-3-25). Rule R649-9 addresses waste management and disposal. Under R649-9-2, waste disposal facilities must be permitted and in good standing with the DOGM, and operators must file annual waste management plans accounting for the proper disposition of produced water and other exploration and production wastes. Under R-349-3-32, the DOGM must be notified of all fires, leaks, breaks, spills, blowouts, and other undesirable events occurring at any oil or gas drilling, producing, or transportation facility, or at any injection or disposal facility. General reporting requirements, including specifications for various reporting forms, are addressed by Rule R649-8. These include the application for permit to drill (Form 1), report for water encountered during drilling (Form 7), well completion or recompletion report (Form 8), and sundry notices (Form 9). R649-8-17 and Form 15 allow for claiming a tax credit for oil and gas well workover and recompletion work. According to the rule, workover and recompletion 110 111 112 113 114 115 Id. § 40-6-1, 40-6-3. Id. § 40-6-4. Id. § 40-6-4. Id. § 40-6-5. Id. § 40-6-15. Id. § 40-6-16. 24 operations that may qualify for a Utah state tax credit include well stimulation activities, such as hydraulic fracturing jobs. III. LITIGATION UPDATE: ADDRESSING EARLY ISSUES IN HYDRAULIC FRACTURING LITIGATION Currently, Colorado is the only Rocky Mountain state to see hydraulic fracturing litigation. Only a few cases have been filed in Colorado thus far – one regulatory action, one single-family complaint, and one class action complaint. Nevertheless, these cases provide a fairly representative sample of the types of hydraulic fracturing litigation pending around the country. The two civil cases are in their early stages, with neither case having yet reached the discovery phase. Several issues in this litigation and other litigation around the country have emerged as the prominent issues in early hydraulic fracturing litigation. Given the continued heated nature of the hydraulic fracturing debate, practitioners in other states should prepare to address these early issues in light of the law in their own state. Below, we provide an update on each of the litigation matters pending in Colorado. We then describe several issues that arise early in hydraulic fracturing litigation – preemption, motions to dismiss, and case management orders – and discuss these in light of the existing law in various Rocky Mountain states. A. Update On Current Rocky Mountain Hydraulic Fracturing Litigation 1. Regulatory Hearing – In the Matter of the Alleged Violations of the Rules and Regulations of the Colorado Oil and Gas Commission, No. 1102-OV-04 (COGCC Mar. 23, 2011) 116 In this action before the Colorado Oil and Gas Conservation Commission (“COGCC” or “Commission”), a landowner requested that the Commission issue an Order Finding Violation against an oil and gas operator related to its hydraulic fracturing operations. Immediately after the well was fractured, the landowner complained to the Commission of turbidity in his well, which he alleged rendered his groundwater unusable. After an exhaustive investigation, the Commission staff issued a lengthy report, concluding that the well had not been impacted by the hydraulic fracturing process and that the most likely cause of the turbidity was a shock chlorination procedure that the landowner had performed on the well shortly before the nearby gas well was fractured. The landowner appealed to the Commission, alleging that the operator had violated several of the Commission’s rules related to the drilling and completion of the well and seeking an Order Finding Violation. The Commission held an evidentiary hearing and took testimony from the landowner, the Commission staff, and representatives of the operator. Following the hearing, the Commission concluded that the fracture treatment of the well “did not cause chemical, gaseous, or other impacts” to the landowner’s water well; that the turbidity in the water well was not caused by the hydraulic fracturing; and that operator’s drilling and completion of the well complied with the applicable commission rules. No appeal was taken. 116 Available at http://cogcc.state.co.us/orders/orders/1V/363.html. 25 2. Single-Plaintiff Litigation – Strudley v. Antero Resources Corporation, et al., Case No. 2011cv2218 (Denver Dist. Ct.) a. The Complaint This case was filed in Denver District Court in March 2011 and concerns the claims of the Strudley family against the owner and operator of the wells, the hydraulic fracturing company, and the drilling company that worked on wells near the Strudley residence in Silt, Colorado. The plaintiffs complain of “environmental contamination and polluting events caused by the conduct and activities of the defendants [], who caused the releases, spills and discharges of combustible gases, hazardous chemicals and industrial wastes from their oil and gas drilling facilities and as a result of their gas drilling and exploration activities.” 117 The plaintiffs specifically complain about the drilling and completion of three wells located within one mile of their property. 118 Plaintiffs assert that the defendants caused the release of hydrogen sulfide, toxic hydrocarbons, combustible gases, and other hazardous pollutants into the air, ground, and water around their house. 119 They assert claims for negligence, negligence per se, nuisance, strict liability, trespass, and medical monitoring trust funds, and request damages for remediation of the hazardous substances and contaminants; the cost of future health monitoring; past and future medical costs and expenses; loss of use and enjoyment of their property; loss of quality of life; emotional distress; personal injury; and diminution of property value, as well as costs and attorney’s fees. 120 b. Motion to Dismiss In response to the Amended Complaint, the hydraulic fracturing company defendant moved to dismiss plaintiffs’ claim for negligence per se, which asserts that all of the defendants violated Section 308 of the Colorado Hazardous Waste Act and Commission Rules 324A, 607, 906, and 912. The hydraulic fracturing company argued that each of these regulations applies only to the owner and/or operator of the wells. Thus, because plaintiffs did not allege that the hydraulic fracturing company was the owner or operator of any of the wells at issue, it could not have violated any of the regulations and thus could not be liable on a theory of negligence per se. The Court agreed, also holding that fracturing fluids and other oil and gas materials were not “wastes” under the Colorado Hazardous Waste Act, and dismissed plaintiffs’ claim of negligence per se against the hydraulic fracturing company. 121 c. “Lone Pine” Case Management Order Defendants have also collectively moved the Court to enter a “Lone Pine” modified case management order pursuant to Colorado Rule of Civil Procedure 16, which would require the parties to address as a threshold matter the issues of exposure, injury, and causation. “Typically, Lone Pine orders require plaintiffs to provide an expert affidavit by a specific date that states (1) the identity and amount of each chemical to which the plaintiff was exposed; (2) the precise 117 118 119 120 121 Amended Compl. ¶ 12. Id. ¶¶ 44-48. Id. ¶ 50. Id. at 14, “Wherefore” clause. Order of July 20, 2011, Strudley v. Antero, Case No. 2011cv2218 (Denver Dist. Ct.). 26 disease or illness from which the plaintiff suffers; and (3) the evidence supporting the theory that exposure to the defendant’s chemicals caused the injury in question.” 122 In the motion, the defendants argue that plaintiffs have provided only vague allegations of injury and exposure and assert that plaintiffs have failed to identify any “current or future disease or to allege that any treating or other physician or other qualified scientist has connected any such disease (1) to exposure to specific chemicals or wastes, (2) in sufficient quantities to cause injury, (3) as a result of Defendants’ operations.” 123 Defendants further note that the plaintiffs’ initial disclosures pursuant to Colorado Rule of Civil Procedure 26 did not remedy any of these pleading deficiencies. 124 The defendants point to substantial evidence – including the conclusion of the COGCC that plaintiffs’ well had not been contaminated – that exposure to any harmful contaminants was unlikely. 125 In light of these circumstances, defendants request that the Court require plaintiffs to make a prima facie showing of exposure, injury, and specific causation by providing expert affidavits on these topics, any reports of contamination on the property, and their medical records. 126 As of the writing of this article, the plaintiffs have not responded to the motion, nor has the Court ruled. 3. Class Action Litigation – Evenson, et al. v. Antero Resources Corp., et al., Case No. 2011cv5118 (Denver Dist. Ct.) a. The Complaint In July 2011, another group of plaintiffs sued Antero Resources Corporation, Antero Resources Piceance Corporation, and unknown “John Doe Well Service Providers,” asserting claims on behalf of a class of landowners in the town of Battlement Mesa in Garfield County, Colorado. Plaintiffs’ Complaint alleges one incident in which petroleum odors emanated from one well pad near Battlement Mesa and summarizes a Health Impact Analysis conducted by the Colorado School of Public Health for the Garfield County Board of County Commissioners. 127 The Health Impact Analysis describes potential health and other effects of natural gas drilling operations. Based on these facts and the anticipated effects of future natural gas drilling in Battlement Mesa, the plaintiffs seek (1) compensation for diminution in value of their property resulting from “a stigma [that] has attached to the real property in Battlement Mesa;” 128 (2) creation of a medical monitoring fund; 129 and (3) equitable relief requiring the defendants to use unspecified “practices and devices for the prevention of hazardous releases, spills, emissions, and discharges.” 130 122 Defendants’ Motion for Modified Case Management Order at 5 (Sept. 19, 2011) (citing McManaway v. KBR, Inc., 265 F.R.D. 384, 385 (S.D. Ind. 2009)). 123 Id. at 6. 124 Id. at 7. 125 Id. at 8-10. 126 Id. at 16-17. 127 Compl. ¶¶ 31-33, 41-43. 128 Id. ¶¶ 56-64. 129 Id. ¶¶ 66-74. 130 Id. ¶¶ 76-80, p. 16, ¶ E. 27 b. Motion to Dismiss The Antero defendants have moved to dismiss the Complaint, arguing that plaintiffs have not asserted any actual legal claims for relief, but only requested remedies based on conduct that has not yet occurred. With respect to plaintiffs’ claim for equitable relief, the Antero defendants argue that, by seeking to impose additional drilling and operational requirements on Antero, plaintiffs are attempting to “supplant the jurisdiction of the expert agency [COGCC] that permits natural gas activity,” in violation of the principles of separation of powers, administrative exhaustion, and preemption. 131 With respect to plaintiffs’ claim for diminution in value, the Antero defendants argue that the claim must be dismissed because plaintiffs have failed to plead any injury to their property. 132 With respect to medical monitoring, the Antero defendants argue that this claim must be dismissed because it has never been recognized as a cause of action by any Colorado appellate or trial court. 133 Finally, the Antero defendants argue that all of the plaintiffs’ claims must be dismissed for lack of ripeness, as the claims are based on defendants’ speculative future drilling and operational activities. 134 As of the writing of this article, the plaintiffs have not responded to the motion to dismiss, nor has the Court ruled on it. B. The Preemption Argument – Initiating Litigation To Prohibit Enforcement Of Local Bans Or Restrictions On Drilling Or Hydraulic Fracturing 1. The Proliferation of Local Bans or Restrictions on Drilling and Hydraulic fracturing In the wake of the tsunami of media attention on hydraulic fracturing, many local communities have started to regulate or prohibit the drilling or hydraulic fracturing of gas wells within – and even outside of – their jurisdiction. Counties, cities, and towns in New York and Pennsylvania have passed ordinances seeking to impose such restrictions. In the Rocky Mountain states, El Paso County, Colorado, recently imposed a four-month moratorium on drilling, 135 and other local entities have initiated their own studies into the safety of hydraulic fracturing. 136 Such bans and restrictions can have the effect of prohibiting oil and gas companies from completing wells that have been duly permitted through the state’s oil and gas commission. In a recent case, the city of Morgantown, West Virginia passed an ordinance prohibiting the drilling of any gas well “for the purpose of extracting or storing oil or gas using horizontal drilling with fracturing or hydraulic fracturing methods within the limits of the City of 131 Antero Defendants’ Motion to Dismiss at 5-10. Id. at 10-11. 133 Id. at 11-18. 134 Id. at 18-20. 135 Debbie Kelley, “Temporary Ban on Oil, Gas Permit Doesn’t Sit Well With Some,” Colorado Springs Gazette, Oct. 3, 2011. 136 See, e.g., Battlement Mesa Health Impact Assessment, available at http://www.garfield-county.com/publichealth/battlement-mesa-health-impact-assessment-draft2.aspx. 132 28 Morgantown or within one mile of the corporate limits of the City of Morgantown.” 137 The ordinance had the effect of prohibiting Northeast Natural Energy from completing wells that it had duly permitted through the West Virginia Department of Environmental Protection (WVDEP). Northeast sought an injunction to prohibit the City’s enforcement of the ordinance, principally arguing that the regulations of the WVDEP preempted the local ordinance. 138 After considering the statutory scope of authority granted to the WVDEP and the statutory authority granted to home-rule municipalities in West Virginia, the court concluded that the State’s statutes on oil and gas provided “for the exclusive control of this area of law to be within the hands of the WVDEP. 139 As such, there was no “exception or latitude to permit the City of Morgantown to impose a complete ban on fracking or to regulate oil and gas development and production.” 140 2. Legal Framework for Preemption Claims “The purpose of the preemption doctrine is to establish a priority between potentially conflicting laws enacted by various levels of government.” 141 Thus, a local ordinance may be invalid if it conflicts with or is preempted by state law. In general, there are three different theories of preemption: (1) Express preemption, where the express language of a state statute clearly and unequivocally indicates its intent to preempt local ordinances. (2) Implied preemption, where a state statute implies legislative intent to completely occupy a given field, as measured by the statutory language and the purpose and scope of the legislative scheme. (3) Operational preemption, where the operational effect of a local ordinance conflicts with the application of the state statute and materially impedes or destroys the state interest. To determine whether a local regulation is preempted by state law in the area of oil and gas drilling, courts examine the nature of the local entity – i.e., statutory county or municipality versus home-rule county or municipality – and the nature of authority granted to that entity; the nature of the delegation of power to the relevant state agency – e.g., the oil and gas commission or environmental agency; and whether there is a conflict between the local ordinance and the relevant state law, such that one of the three preemption doctrines applies. 137 Order at 3-4, Northeast Natural Energy, LLC v. City of Morgantown, Civil Action No. 11-C-411 (W.V. Circuit Court, Monongalia County, Aug. 12, 2011). 138 Id. at 1. 139 Id. at 9. 140 Id. 141 Colo. Min. Ass’n v. Bd. of Cnty. Comm’rs, 199 P.3d 718, 723 (Colo. 2009) (quoting Cnty. Comm’rs v. Bowen/Edwards Assocs., 830 P.2d 1045, 1055 (Colo. 1992)). 29 3. Relevant Preemption Law from Rocky Mountain States a. Colorado Nature and Power of Local Entities. Local entities in Colorado include statutory counties and municipalities, as well as home-rule counties and municipalities. A statutory county or municipality “is not an independent governmental entity existing by reason of any inherent sovereign authority of its residents; rather, it is a political subdivision of the state, existing only for the convenient administration of the state government, created to carry out the will of the state.” 142 As such, it possesses only the regulatory authority “expressly conferred upon [it] by the constitution and statutes, and such incidental implied powers as are reasonably necessary to carry out such express powers.” 143 Statutory municipalities and counties have “the power to enact ordinances not inconsistent with state law that are necessary and proper to provide for the health, safety, prosperity, order, comfort, and convenience” of their citizens. 144 The Local Government Land Use Control Enabling Act provides that “the policy of this state is to clarify and provide broad authority to local governments to plan for and regulate the use of land within their respective jurisdictions,” 145 and the County Planning Code authorizes a county planning commission to enact a zoning plan for all or any part of the unincorporated territory within the county. 146 In Colorado, both municipalities and counties also can elect to exercise home rule, which provides them greater governing authority than that of statutory municipalities and counties. 147 A “home-rule” municipality has exclusive jurisdiction over purely local or municipal matters. 148 It has the power to enact any law within its boundary that the state legislature could adopt. Currently, there are ninety-six home rule municipalities in Colorado 149 and four home-rule counties. 150 The Colorado Oil and Gas Conservation Act. Colorado cases that have considered whether local ordinances regulating oil and gas activities are preempted by state law have considered the nature of the delegation of power to the COGCC in Colorado’s Oil & Gas Conservation Act, § 34-60-101 et seq. (“COGCA” or the “Act”). In Board of County Commissioners v. Bowen/Edwards Associates, the Colorado Supreme Court, in addressing a question of preemption with respect to the state’s oil and gas laws, considered the purposes of the Act, as declared in Colo. Rev. Stat. § 34-60-102(1): 142 Bd. of Cnty. Comm’rs v. Love, 470 P.2d 861, 862 (Colo. 1970). Id. 144 Town of Frederick v. N. Am. Res. Co., 60 P.3d 758, 761 (Colo. App. 2002). 145 Colo. Rev. Stat. § 29-20-101 et seq. 146 Id. § 30-28-111. 147 Colo. Const. Art. XX, § 6 (providing for home-rule municipalities); Colo. Rev. Stat. § 30-35-101 et seq. (providing for home-rule counties). 148 Boulder Cnty. Apt. Ass’n v. City of Boulder, 97 P.3d 332, 336 (Colo. App. 2004). 149 Colorado Dep’t of Local Affairs, at https://dola.colorado.gov/lgis/lg_type.jsf. 150 Pitkin and Weld counties are incorporated as home-rule counties. In addition, Denver and Broomfield are organized as combined home-rule city-county governments. See Colorado Counties, Inc., at http://www.ccionline.org/index.cfm/ID/33. 143 30 The declared purposes of the Oil and Gas Conservation Act are as follows: to promote the development, production, and utilization of the natural resources of oil and gas in the state; to protect public and private interests against the evils of waste; to safeguard and enforce the coequal and correlative rights of owners and producers in a common source or pool of oil and gas so that each may obtain a just and reasonable share of production therefrom; and to permit each oil and gas pool to produce up to its maximum efficient rate of production subject to the prohibition of waste and subject further to the enforcement of the coequal and correlative rights of common-source owners and producers to a just and equitable share of profits. 151 The Court further considered the jurisdiction of the COGCC as articulated in Colo. Rev. Stat. § 34-60-105(1), and its authority to issue permits for oil and gas drilling operations, to “regulate the drilling, production, and plugging of wells, the shooting and chemical treatment of wells, the spacing of wells, and the disposal of salt water and oil field wastes, as well as to limit production from any pool or field for the prevention of waste and to allocate production from a pool or field among or between tracts of land having separate ownership on a fair and equitable basis so that each tract will produce no more than its fair and equitable share,” as well as the COGCC’s authority to enforce all of its technical requirements related to developmental and operational aspects of oil and gas production and to “promulgate rules and regulations to protect the health, safety, and welfare of the general public in the drilling, completion, and operation of oil and gas wells and production facilities.” 152 No Express or Implied Preemption by the COGCA. Despite these relatively broad powers, the Court concluded that the Act does not expressly or impliedly preempt local ordinances governing oil and gas development. It found no express preemption, as there was no clear and unequivocal statement of legislative intent to prohibit a county or municipality from exercising its traditional land use authority over areas where oil and gas development might take place. 153 The Court also found no implied preemption, concluding that the state’s interest in oil and gas activities was not so patently dominant over a county’s interest in land use control or that their respective interests were so “irreconcilably in conflict, as to eliminate by necessary implication any prospect for a harmonious application of both regulatory schemes.” 154 The Court remanded the case, however, for a determination of whether there was any operational preemption. If the operational effect of the county’s regulations, for example, imposed technical requirements on drilling or pumping that were not imposed by the state or imposed safety regulations or land restoration requirements contrary to state law, the county regulations would be preempted to the extent of the conflict. 155 151 152 153 154 155 830 P.2d at 1048-1049. Id. at 1048-49 (citing Colo. Rev. Stat. § 34-60-106(11), § 34-60-106(2), § 34-60-106(3)(a)). Id. at 1058. Id. Id. at 1060. 31 Operational Preemption for Statutory and Home-Rule Counties and Municipalities. When conducting an analysis of whether operational preemption exists, courts must consider the powers possessed by the local regulating authority. Because the powers of home-rule counties and municipalities are much broader than those of statutory counties and municipalities, a different preemption analysis is conducted: Because home rule land use authority has a basis in the Colorado Constitution, we utilize a four-part test when examining the validity of a local ordinance or regulation enacted by a home rule city or county, in the face of an alleged state conflict: “whether there is a need for statewide uniformity of regulation; whether the municipal regulation has an extraterritorial impact; whether the subject matter is one traditionally governed by state or local government; and whether the Colorado Constitution specifically commits the particular matter to state or local regulation.” 156 In Voss, decided the same day as Bowen/Edwards, the Colorado Supreme Court considered whether the City of Greeley – a home-rule city – could completely ban oil and gas development within the city. While acknowledging that the Oil and Gas Conservation Act did not expressly or impliedly preempt the Greeley ordinance, and while noting the greater power of a home-rule city to exercise its zoning authority, the Court nevertheless concluded that the total ban on drilling went too far. Applying the factors identified above, the Court held that “the state’s interest in efficient oil and gas development and production throughout the state, as manifested in the Oil and Gas Conservation Act, is sufficiently dominant to override a home-rule city’s imposition of a total ban on the drilling of any oil, gas, or hydrocarbon wells within the city limits.” 157 By contrast, in cases involving statutory counties or municipalities, “we have applied the ordinary rules of statutory construction to determine whether a state statute and a local ordinance can be construed harmoniously or whether the state statute preempts the local ordinance. If a conflict exists and the state statute contains a specific provision addressing the matter, the state statute controls over the statutory county’s general land use authority.” 158 “A county ordinance and a statute may both remain effective and enforceable as long as they do not contain express or implied conditions that are irreconcilably in conflict with each other.” 159 For example, in Town of Frederick v. North American Resources Company, 60 P.3d 758 (Colo. App. 2002), the defendant oil and gas corporation challenged the town’s regulations, which required the company to obtain a permit from the town, a $1,000 application fee, and compliance with certain location and setback requirements, noise mitigation, and visual impact and aesthetics regulations. 160 Applying the operational conflicts test articulated in Bowen/Edwards, the Court 156 Colo. Min. Ass’n, 199 P.3d at 723 (quoting Voss v. Lundvall Bros., Inc., 830 P.2d 1061, 1067 (Colo. 1992)). 157 Voss, 830 P.2d at 1068. Col. Min. Ass’n, 199 P.3d at 724 (internal citations omitted); Colo. Rev. Stat. § 30-15-411 (prohibiting a statutory county from adopting an ordinance that “is in conflict with any state statute). 159 Bowen/Edwards, 830 P.2d at 1056-57. 160 60 P.3d at 760. 158 32 concluded that the regulations imposed technical conditions on well drilling where no such conditions were imposed by state regulation, and were thus preempted by state law. 161 In sum, Colorado courts have determined the COGCA does not expressly or impliedly preempt local regulation of oil and gas development. However, depending on the nature of the locality and the degree of conflict with state law, some local regulation may be operationally preempted. b. New Mexico New Mexico applies a preemption rubric similar to that of Colorado, but has not addressed preemption specifically in the context of local ordinances regarding oil and gas development. Like Colorado, New Mexico distinguishes between statutory counties and municipalities and home-rule municipalities: A municipality is an auxiliary of the state government. Depending on whether they have adopted a charter, municipalities have two potential sources of authority: home rule power and police power. For home rule power, the New Mexico Constitution provides that a municipality which adopts a charter may exercise all legislative powers and perform all functions not expressly denied by general law or charter. The purpose of this section is to provide for maximum local self-government. . . . By contrast, it is well settled that municipalities have no inherent right to exercise police power; their right must derive from authority granted by the State. Similarly, a county is but a political subdivision of the State, and it possesses only such powers as are expressly granted to it by the Legislature, together with those necessarily implied to implement those express powers. 162 When a county ordinance is challenged, the typical preemption analysis is applied -- “A local governmental body’s ability to regulate in an area may be preempted either expressly, by the language of a statute, or impliedly, due to a conflict between the local body’s ordinances and the contents, purposes, or pervasive scheme of the statute.” 163 Applying these principles in San Pedro Mining Corporation, the court concluded that the state mining law and regulations had neither expressly nor impliedly preempted the county’s mining ordinance. Because the state regulations and the county ordinance were concerned with different aspects of the effects of mining, the Court concluded that there was no implied preemption and concurrent jurisdiction was possible. 164 Finally, while acknowledging the possibility of operational preemption, the 161 Id. at 765. See also Bd. of Cnty. Comm’rs v. BDS Int’l, LLC, 159 P.3d 773, 778-82 (Colo. App. 2006) (applying operational conflicts analysis to hold certain county ordinances facially invalid and to remand others for evidentiary hearing). 162 City of Albuquerque v. New Mexico Pub. Regulation Comm’n, 79 P.3d 297, 300 (N.M. 2003) (internal quotations and citations omitted). 163 San Pedro Mining Corp. v. Bd. of Cnty. Comm’rs, 909 P.2d 754, 758 (N.M. Ct. App. 1995). 164 Id. at 759-60. 33 Court declined to undertake that analysis because the plaintiff argued only that the county ordinance was preempted in its entirety. 165 When the local entity that passed the ordinance is a home-rule entity, however, a slightly different analysis is applied: Limitations on home rule authority are evaluated in a two-step process. In the first step, a court asks whether a state law is a “general law,” that is, a law that applies generally throughout the state, relates to a matter of statewide concern, and impacts inhabitants across the entire state. . . . In the second step, we determine whether the general law “expressly denies” the City’s power . . . . The Court must consider (a) whether the statute “evinces any intent to negate such municipal power”; (b) whether the effect of the statute implies “a clear intent to preempt that governmental area from municipal policymaking”; and (c) whether the grant of authority to another governmental body “makes its exercise by [the City] so inconsistent with the [statute] that it is equivalent to an express denial.” 166 In Smith, plaintiffs challenged a city ordinance regulating their ability to drill domestic water wells that had been permitted by the state. With respect to the first step, the Court concluded that the state law regarding permitting of domestic wells was a “general law” because it applied generally throughout the state and because access to water was a matter of statewide concern. 167 With respect to the second step, the Court concluded that the language of the state statute did not “evince an intent to negate municipal authority to deny drilling of domestic wells;” 168 that the state and city regulations addressed different areas of concern, permitting concurrent jurisdiction; 169 and that the “limited grant of authority [to the state engineer] in regard to domestic wells [did] not rise to the level of an express denial of home rule authority to act in this area.” 170 As described in the first part of this article, ordinances governing hydraulic fracturing have already been passed by municipalities in New Mexico. 171 Whether these ordinances will be held to be preempted by New Mexico’s oil and gas law or regulations is yet to be seen. The Oil Conservation Division of the state energy, minerals and natural resources department is granted broad statutory “jurisdiction and authority over all matters relating to the conservation of oil and 165 Id. at 760. Smith v. City of Santa Fe, 133 P.3d 866, 869-870 (N.M. Ct. App. 2006) (internal citations omitted), aff’d in relevant part, 171 P.3d 300, 308 (N.M. 2007) (distinguishing San Pedro because it did not construe home-rule authority). 167 Id. at 869. 168 Id. at 871. 169 Id. at 871-72. 170 Id. at 873. 171 See supra nn. 65-66 (describing Santa Fe ordinance on hydraulic fracturing). 166 34 gas and the prevention of waste of potash as a result of oil and gas operations in this state,” including the “jurisdiction, authority and control over all persons, matters or things necessary or proper to enforce effectively the provisions of [the Oil and Gas Act] or any other law of this state relating to the conservation of oil or gas and the prevention of waste of potash as a result of oil and gas operations.” 172 The New Mexico Oil Conservation Commission is granted concurrent authority with the Oil Conservation Division “to the extent necessary for the commission to perform its duties as required by law.” 173 While these duties are broad, 174 whether they will preempt local ordinances on oil and gas drilling will likely depend on the nature of the local entity passing the ordinance and the specific nature of the ordinance passed. c. Wyoming Wyoming’s municipal law is somewhat different. Following a constitutional amendment in 1972, all towns and cities have home-rule authority, and the courts ostensibly distinguish between counties and home-rule municipalities. 175 While counties are authorized to “promote the public health, safety, morals and general welfare of the county,” they are specifically prohibited from passing any zoning resolution or plan that prevents “any use or occupancy reasonably necessary to the extraction or production of the mineral resources in or under any lands subject thereto.” 176 No case has yet determined whether oil and gas resources are “mineral resources” for purposes of this statute. 177 In contrast to counties, municipalities have been given home-rule authority pursuant to constitutional amendment: All cities and towns are hereby empowered to determine their local affairs and government as established by ordinance passed by the governing body, subject to referendum when prescribed by the legislature, and further subject only to statutes uniformly applicable to all cities and towns, and to statutes prescribing limits of indebtedness. The levying of taxes, excises, fees, or any other charges shall be prescribed by the legislature. 178 The Wyoming Supreme Court, however, has not interpreted this grant of power broadly. 179 Even after the adoption of the home-rule amendment, the Wyoming Supreme Court has stated: 172 N.M. Stat. §§ 70-2-5, 70-2-6. Id. § 70-2-6(B). 174 See id. § 70-2-1 et seq. 175 See Dunnegan v. Laramie Cnty. Comm’rs, 852 P.2d 1138, 1141 (Wyo. 1993) (distinguishing the authority of counties from the authority of municipalities in Wyoming). 176 Wyo. Stat. § 18-5-201. 177 See River Springs Ltd. Liab. Co. v. Bd. of Cnty. Comm’rs, 899 P.2d 1329, 1330 (Wyo. 1995) (determining that sand, gravel, rock and limestone are not “minerals” for purposes of this statute). 178 Wyo. Const. Art. 13, § 1(b). 179 See generally Thomas S. Smith, No Home on the Range for Home Rule, 31 Land & Water L. Rev. 791 (1996) (recounting development of home-rule law in Wyoming). 173 35 Legislation by cities and towns must not conflict with statutes uniformly applicable to cities and towns, and it must be subordinate and subservient to such statutes. Each enactment must be measured in its own right to determine if it pertains to a “local affair” and if it is “subject to” statutes uniformly applicable. ... To the extent that a statute of the state in some way conflicts with a claimed power of the municipality, the municipal provision must yield, even with respect to any police power. 180 Because of the more limited view of the power of municipalities, the Wyoming courts have thus far declined to undertake a preemption analysis where there is a perceived conflict between state law and a municipal ordinance. Instead, they ask “whether the municipality has been granted the authority claimed”: A court must analyze any pertinent constitutional proviso or appropriate statute for the purpose of determining whether express or implied authority has been conferred upon a municipality. In deciding whether authority has been granted to a municipality to pursue a claimed governmental purpose, we apply a rule of strict construction, resolving any doubt against the existence of the municipal power. If we find that appropriate authority has been conferred upon a municipality by the legislature, we then liberally construe the method invoked to exercise the conferred power, asking only if it is reasonable. 181 Applying these standards to a municipal ordinance that allowed for municipal licensing of public utilities, the Court concluded that there existed no statutory authority that allowed municipalities to license public utilities; thus, the ordinance was invalid. 182 Similarly, the Court refused to apply a preemption analysis to determine the validity of a county ordinance which required a permit to conduct mining activities in residentially-zoned areas of the county. 183 The Court concluded that the county did have the authority to regulate mining, so long as the mined materials were not “minerals” under Wyo. Stat. § 18-5-201. Nevertheless, after examining the state’s statutory scheme and grant of authority to the Department of Environmental Quality, the Court was “satisfied the [Environmental Quality Act] [wa]s sufficiently broad in this area to control the regulation of the removal of the identified materials from the earth for reuse or further processing. It follows that the Board [of county commissioners] has no authority to regulate [the] activity.” 184 Although this analysis strongly 180 KN Energy, Inc. v. City of Casper, 755 P.2d 207, 213 (Wyo. 1988); id. (“Even though the language of [the home-rule] constitutional provision is quite broad, the power of the legislature to control even the local activities of the municipality cannot be debated.”). 181 Id. at 211 (citations omitted). 182 Id. at 216. 183 River Springs, 899 P.2d at 1335. 184 Id. at 1336. 36 resembles an implied preemption analysis, the Court clearly disclaimed that preemption analysis applies in this type of case. 185 Although there is no Wyoming case directly addressing the efforts of a county or municipality to regulate oil and gas drilling, it seems likely that such an ordinance would face significant hurdles in Wyoming. If oil and gas are “minerals” pursuant to Wyo. Stat. § 18-5-201, their extraction cannot be regulated by the counties. And, under the analysis of KN Energy, home-rule municipalities may pass ordinances only if they are specifically authorized to do so. Where a state agency has extensive authority in an area, such as in River Springs, it seems likely the Court will conclude that there is no such municipal authority to regulate. The delegation of authority to Wyoming’s Oil & Gas Conservation Commission is significant. The Commission “has jurisdiction and authority over all persons and property, public and private, necessary to effectuate the purposes and intent of this act, including the authority to set, assess and collect reasonable fees as provided in this subsection.” 186 In light of all these circumstances, local regulation of oil and gas drilling in Wyoming would appear to be vulnerable to challenge. C. Targeting Claims For Motions To Dismiss One of the first decisions to be made by defendants in hydraulic fracturing litigation is whether to move the court to dismiss any of the claims. In reviewing these motions, the court must assume that all of the facts pleaded by the plaintiff are true. Thus, the claim can be dismissed only if, assuming all of the facts are true, the plaintiff has failed to plead a viable legal theory. Many of the claims commonly asserted by hydraulic fracturing plaintiffs – such as negligence or trespass – are usually not appropriate for a motion to dismiss because they depend on issues of fact. Other claims, however, such as strict liability, negligence per se, or medical monitoring are more vulnerable to dismissal because they turn on legal rulings that can be made by the court. Below, we describe the case law on these two claims in several Rocky Mountain jurisdictions. 1. Strict Liability for Abnormally Dangerous or Ultrahazardous Activity Several states recognize the tort of strict liability for abnormally dangerous or ultrahazardous activity. While most states have shown reluctance to extend the doctrine of strict liability beyond certain activities, such as blasting, hydraulic fracturing plaintiffs will attempt to classify hydraulic fracturing as an abnormally dangerous activity. Whether a strict liability claim is in the case is significant because it can render a defendant liable, even if the defendant acted with utmost care. It may even preclude the defendant from putting on evidence at trial to show the reasonableness of its conduct. a. General Law on Strict Liability for Abnormally Dangerous Activity: Restatement (Second) of Torts The Restatement (Second) of Torts describes the general principle of strict liability for abnormally dangerous activity as follows: “One who carries on an abnormally dangerous activity 185 186 Id. at 1335 (“[W]e have no occasion to invoke the doctrine of preemption.”). Wyo. Stat. § 30-5-104. 37 is subject to liability for harm to the person, land or chattels of another resulting from the activity, although he has exercised the utmost care to prevent the harm.” 187 Under this tort, a defendant may be held liable regardless of his intent and even if he has used the utmost care. 188 The liability is based upon “the abnormal danger of the activity itself, and the risk that it creates, of harm to those in the vicinity.” 189 Strict liability for abnormally dangerous activity, however, “is limited to the kind of harm, the possibility of which makes the activity abnormally dangerous.” 190 Whether an activity constitutes an “abnormally dangerous activity” should be determined by the court upon consideration of several factors. 191 Specifically, the Restatement (Second) of Torts lists six factors to be considered: a) existence of a high degree of risk of some harm to the person, land or chattels of others; b) likelihood that the harm that results from the activity will be great; c) inability to eliminate the risk by the exercise of reasonable care; d) extent to which the activity is not a matter of common usage; e) inappropriateness of the activity to the place where it is carried on; and f) extent to which its value to the community is outweighed by its dangerous attributes. 192 While each of these factors should be considered, and usually several will exist, every factor does not need to be present for strict liability to apply. 193 Because determining whether an activity is abnormally dangerous requires an analysis of the facts and situation of each case, no one specific definition of abnormally dangerous activity exists. 194 Both factor d – whether an activity is a common usage – and factor f – the value to the community – may have particular importance in hydraulic fracturing litigation. An activity meets the common usage requirement if “it is customarily carried on by the great mass of mankind or by many people in the community.” 195 Although there are certainly areas of the country where hydraulic fracturing is a common drilling practice, courts are somewhat unlikely 187 Restatement (Second) of Torts § 519(1). Id. at cmt. d. See also Sunburst Sch. Dist. No. 2 v. Texaco, Inc., 165 P.3d 1079, 1095 (Mont. 2007) (finding that since strict liability applied, the defendant was liable regardless of the care with which it operated its refinery). 189 Restatement (Second) of Torts § 519 cmt. d. 190 Id. § 519(2). See also Crane v. Conoco, Inc., 41 F.3d 547, 550 (9th Cir. 1994) (affirming summary judgment finding refinery owner was not subject to strict liability because employee’s injury, which resulted from the employee fleeing the sight, was not what makes refinery operation abnormally dangerous, such as the risk of catastrophic fire or explosion). 191 Restatement (Second) of Torts § 520 cmt. l. 192 Id. § 520(a)-(f). 193 Id. at cmt. f. 194 Id. 195 Id. at cmt. i. 188 38 to conclude that it is an activity conducted by many people. 196 However, in contrast, it is likely that hydraulic fracturing may have a great value to the community, and courts in Texas and Oklahoma have noted that oil and gas activities may not be abnormally dangerous for such reason. 197 b. Strict Liability for Abnormally Dangerous Activity - Rocky Mountain States While most of the Rocky Mountain States recognize a cause of action for strict liability for abnormally dangerous activity, there is an absence of case law in these states regarding whether hydraulic fracturing is an abnormally dangerous activity. 198 Many of the Rocky Mountain States, however, have addressed whether strict liability applies to oil and gas activities, as well as activities which result in soil and water contamination. These cases provide some guidance on how the particular states would view hydraulic fracturing. Whether an activity is an abnormally dangerous activity remains a fact-intensive determination that may be swayed by the strength or weakness of any of the factors in Section 520 of the Restatement (Second) of Torts. Accordingly, while these cases may provide guidance, each hydraulic fracturing case facing a strict liability claim will be evaluated individually on its facts. Colorado. Colorado recognizes the tort of strict liability for abnormally dangerous activity. 199 Specifically, Colorado has held that blasting with dynamite and impounding of water may be abnormally dangerous activities such that strict liability applies. 200 The Tenth Circuit has also opined that pursuant to the factors in Section 520 of the Restatement (Second) of Torts, Colorado would further extend the application of strict liability to the clean-up by a defendant of a toxic lake. 201 Colorado, however, has usually declined to extend the doctrine of strict liability to cases involving oil and gas activities. 202 One Colorado state district court has denied a motion to dismiss a claim of strict liability in a hydraulic fracturing case, where unusual circumstances 196 See id. (finding that the drilling of oil wells is not a matter of common usage because “relatively few people are engaged in the activity”). See also Anderson v. Farmland Indus., 136 F. Supp. 2d 1192, 1200 (D. Kan. 2001) (refusing to find that “operating a petroleum refinery is something carried on by a large mass of people”). 197 See Restatement (Second) of Torts § 520(f) cmt. k (noting that an activity’s value to the community may outweigh the danger, especially “when the community is largely devoted to the dangerous enterprise and its prosperity largely depends upon it”). See also Greene v. Prod. Mfg. Corp., 842 F. Supp. 1321, 1327 (D. Kan. 1993) (finding metal fabrication process was not abnormally dangerous, noting that metal “manufacturing activities are indispensable to the economy of Wichita”). 198 Wyoming has not adopted strict liability for abnormally dangerous activities. See Wyrulec Co. v Schutt, 866 P.2d 756, 761 (Wyo. 1993) (refusing to adopt strict liability for abnormally dangerous activity and instead requiring a showing of negligence). 199 See Daigle v. Shell Oil Co., 972 F.2d 1527, 1543-44 (10th Cir. 1992). 200 Id. (citations omitted). 201 Id. at 1545. 202 See Walcott v. Total Petroleum, Inc., 964 P.2d 609, 614 (Colo. App. 1998) (refusing to extend doctrine of strict liability to dispensing gasoline at a service station); Hartford Fire Ins. Co. v. Pub. Serv. Co., 676 P.2d 25, 27 (Colo. App. 1983) (declining to extend the doctrine of strict liability to the transmission of natural gas). But see City of Northglenn. v. Chevron U.S.A., Inc., 519 F. Supp 515, 516 (D. Colo. 1981) (holding Colorado would apply strict liability to the storage of large quantities of gasoline in a residential area). 39 existed. 203 The Court simultaneously noted, however, that “frac[k]ing is not generally considered an ultra-hazardous activity under Colorado law.” 204 Kansas. Kansas recognizes the tort of strict liability for abnormally dangerous activity, but has been reluctant to extend the doctrine to oil and gas activities. 205 In Williams, the plaintiffs alleged that natural gas had leaked into their wells causing damage. Analyzing the factors set forth in Section 520, the Kansas Supreme Court held that “the drilling and operation of natural gas wells is not an abnormally dangerous activity in relation to the type of harm sustained by [the farmers].” 206 In reaching this decision, the Court noted that natural gas was not harmful and did not “ruin drinking water.” 207 Similarly, the United States District Court for the District of Kansas, applying the Section 520 factors, held that the operation of an oil refinery is not an abnormally dangerous activity. 208 Montana. Montana recognizes the tort of strict liability for abnormally dangerous activity. 209 Montana has not explicitly addressed oil and gas drilling, but it has applied the doctrine of strict liability to the operations of a gasoline refinery. In Sunburst School District No. 2 v. Texaco, Inc., 338 Mont. 259, 283 (2007), the Montana Supreme Court held that strict liability for abnormally dangerous activity applied to the operation of the refinery, which resulted in gasoline leaking from pipes, contaminating soil and subsurface groundwater, and migrating under the plaintiffs’ town. New Mexico. New Mexico recognizes the tort of strict liability for abnormally dangerous activity. 210 While New Mexico state courts have only found blasting to be an abnormally dangerous activity, case law suggests that the state has not excluded the possibility of extending the doctrine further. 211 Utah. Utah recognizes the tort of strict liability for abnormally dangerous activity. 212 In Branch, the Utah Supreme Court recognized and applied the doctrine of strict liability for abnormally dangerous activity to the defendant, who collected contaminated water on its land for the purpose of having it enter the groundwater. 213 In contrast to Branch, however, the Utah Supreme Court more recently found activities which may affect the purity of water not to be 203 Mobaldi v. CER Corp., Case No. 06-cv-6355 (Dist. Ct. Denver, Colo., May 24, 2007) (unpublished). Id. 205 See Williams v. Amoco Prods. Co., 734 P.2d 1113, 1123 (Kan. 1987) (adopting the Restatement (Second) of Torts Sections 519 and 520 regarding abnormally dangerous activity). 206 Id. 207 Id. 208 See Anderson, 136 F. Supp. 2d at 1198. 209 See Matkovic v. Shell Oil Co., 707 P.2d 2, 3-4 (Mont. 1985) (adopting the Restatement (Second) of Torts Sections 519 and 520 regarding abnormally dangerous activity). 210 See First Nat’l Bank v. Nor-Am Agric. Prods., Inc., 537 P.2d 682, 687 (N.M. App. 1975) (noting that New Mexico has adopted Sections 519 and 520 of the Restatement of Torts regarding abnormally dangerous activity). 211 See Schwartzman, Inc. v. Atchison, Topeka, & Santa Fe Ry. Co., 842 F. Supp. 475, 479 (D.N.M. 1993) (finding that strict liability in New Mexico is not limited to blasting and that New Mexico recognizes a strict liability action for cases involving hazardous waste). 212 See Branch v. W. Petroleum, 657 P.2d 267, 275-76 (Utah 1982). 213 Id. 204 40 abnormally dangerous. 214 In Walker Drug, the plaintiffs, who alleged contamination of their property, sought strict liability against gas station operators for operating a gas station with underground gasoline storage tanks and lines that had leaked. 215 Considering the factors provided by the Restatement (Second) Torts in Section 520, the Court refused to find the operation of a gas station with underground storage abnormally dangerous. Indeed, the Court found that almost all of the factors weighed against such activity being “abnormally dangerous.” 216 2. Medical Monitoring Medical monitoring is a claim or remedy often asserted in toxic tort or pharmaceutical product liability cases where a plaintiff has no present injury. The theory of the claim is that a defendant is required to pay a plaintiff for the anticipated costs of monitoring to detect a disease that may arise in the future from exposure to contaminants, but does not require that the plaintiff show a present injury. Although the United States Supreme Court rejected such a claim in a Federal Employers’ Liability Act case, many states have recognized a plaintiff’s ability to recover these costs. a. United States Supreme Court In Metro-North Commuter Rail Company v. Buckley, Buckley, a pipefitter for a railroad, sued the railroad claiming that he had been exposed to asbestos during his work. 217 Buckley, while not experiencing any symptoms, had attended an “asbestos awareness” class and become worried that he would develop cancer. 218 As a result, Buckley brought claims under the Federal Employers’ Liability Act (“FELA”) for negligent infliction of emotional distress and for the costs to cover future medical monitoring. 219 The district court dismissed his claims, but, on appeal, the Second Circuit reversed, holding that Buckley could recover medical monitoring costs. 220 The Supreme Court, however, disagreed, holding that the Second Circuit’s recognition of a separate cause of action for medical monitoring that allowed medical monitoring damages to be awarded in a lump sum “went beyond the bounds of currently ‘evolving common law.’” 221 In analyzing the medical monitoring claim, the Court first distinguished Buckley’s case from cases where a plaintiff has symptoms or injuries, noting that the “parties do not dispute – and we assume – that an exposed plaintiff can recover related reasonable medical monitoring costs if and when he develops symptoms.” 222 The Court, noting that no other FELA decision on 214 See Walker Drug Co. v. La Sal Oil Co., 902 P.2d 1229, 1233 (Utah 1995). Id. 216 Id. (finding (1) it unclear that the risk of underground leakage was great; (2) it possible that the risk could be eliminated by the exercise of reasonable care; (3) that operation of the gas station was common; (4) that the gas station was operated in an appropriate area; and (5) that the gas station provided significant value to the community). 217 521 U.S. 424, 427 (1997). 218 Id. 219 Id. 220 Id. at 428. 221 Id. at 439-40 (citations omitted). The United States Supreme Court rejected Buckely’s emotional distress claim under FELA, finding that Buckley could not recover damages for emotional distress until he had actual symptoms of a disease. Id. at 427. 222 Id. at 438. 215 41 this issue could be located, reviewed state law cases considering “whether the negligent causation of this kind of harm (i.e., causing a plaintiff, through negligent exposure to a toxic substance, to incur medical monitoring costs) by itself constitutes a sufficient basis for a tort recovery.” 223 The Court noted that the state law cases that did authorize recovery for medical monitoring when symptoms are not present, did not permit lump sum awards to plaintiffs, but rather required limitations, such as a court supervised fund, on remedies. 224 The Court also considered various policy considerations, such as the difficulty of determining the costs of medical monitoring damages. 225 In addition, the Court discussed the “potential systemic effects of creating a new, full-blown, tort law cause of action” for medical monitoring, noting that “tens of millions of individuals may have suffered exposure to substances that might justify some form of substance-exposure-related medical monitoring,” which could flood the courts. 226 The Court also noted that “existing alternative sources of payment” for such injuries already exist.227 In conclusion, the Court determined that there was not “sufficient support in the common law for the unqualified rule of lump-sum damages recovery” that was before it. 228 The Court noted, however, that its decision did not express any view about the result of a different medical monitoring claim under FELA, with a “more finely tailored”rule. 229 b. Utah In Hansen v. Mountain Fuel Supply Company, 858 P.2d 970 (Utah 1993), the Utah Supreme Court, addressing a question of first impression, held that Utah did allow medical monitoring claims and set forth a test for recovery for medical monitoring damages. 230 In Hansen, several renovation workers sued the owner of a building, claiming that that they had been exposed to asbestos during their work. 231 Plaintiffs brought claims against the owner of the building for personal injury, negligent infliction of emotional distress, and cost of medical monitoring. 232 In support of their medical monitoring claim, the plaintiffs contended that “because they have been exposed [to asbestos], they must undergo periodic medical tests to facilitate early diagnosis and treatment of diseases stemming from their exposure.” 233 In sum, the plaintiffs claimed that “but for their exposure to asbestos, they would not be obligated to incur these additional medical expenses.” 234 After having all three of their claims dismissed on summary judgment, plaintiffs appealed the decision. 235 The Utah Supreme Court, while affirming the rulings dismissing the personal injury and negligent infliction of emotional distress claims, reversed the order granting summary 223 224 225 226 227 228 229 230 231 232 233 234 235 Id. at 440. Id. at 440-41. Id. at 441. Id. at 443. Id. Id. Id. at 444. 858 P.2d at 979. Id. at 972. Id. Id. at 976. Id. Id. 42 judgment on the plaintiffs’ claims for medical monitoring, remanding the case for the trial court to apply the newly articulated standard to the medical monitoring claim. 236 The Utah Supreme Court, in analyzing whether Utah should recognize a claim for medical monitoring, considered holdings of other jurisdictions as well as policy considerations for and against such claim. 237 The Court then concluded that a “plaintiff forced to incur the cost of medical monitoring as a result of a defendant’s negligent conduct should be entitled to compensation for those expenses.” 238 However, the Court further held that “mere exposure” is not sufficient to entitle plaintiffs to recovery; rather the Court set forth a test for determining whether a court should award medical monitoring costs. 239 Recognizing that proof of several of these elements will usually require expert testimony, the Court nonetheless held that a before recovery for a medical monitoring claim, a plaintiff must prove: (1) exposure (2) to a toxic substance, (3) which exposure was caused by the defendant’s negligence, (4) resulting in an increased risk (5) of a serious disease, illness, or injury (6) for which a medical test for early detection exists (7) and for which early detection is beneficial, meaning that a treatment exists that can alter the course of the illness, (8) and which test has been prescribed by a qualified physician according to contemporary scientific principles. 240 The Court further noted that only “reasonable and necessary” medical monitoring costs would be provided and that medical monitoring costs are “recoverable only for the duration of the latency period, if known, of the illness in question.” 241 Finally, the Court held that a successful plaintiff on a medical monitoring claim should not be paid a lump sum of money, but rather, any recovery must be limited to “the medical monitoring that has been necessitated by the actions of that defendant.” 242 Therefore, the trial court must “fashion a suitable equitable remedy,” such a trust fund to pay for the actual medical monitoring that takes place, and any money in such fund that is not used for medical monitoring must be returned to the defendant. 243 c. Colorado A federal district court, applying Colorado law, concluded that, while Colorado has yet to do so, “the Colorado Supreme Court would probably recognize, in an appropriate case, a tort claim for medical monitoring.” 244 Cook involved claims against the operators of a nuclear weapons plant from individuals and businesses who owned land near the plant. Explaining the theory of medical monitoring claims, the Court stated: 236 237 238 239 240 241 242 243 244 Id. at 972, 981. See id. at 976-79. Id. at 978. Id. at 978-79. Id. at 979. Id. at 981. Id. at 982. Id. Cook v. Rockwell Int’l Corp., 755 F. Supp. 1468, 1477 (D. Colo. 1991). 43 When a plaintiff is exposed to a hazardous substance, it is often sound medical practice to seek periodic medical monitoring to ascertain whether the plaintiff has contracted a disease. Because this need for medical monitoring was caused by a defendant’s tortious acts or omissions, a defendant may be required to pay the cost of monitoring. 245 Recognizing Colorado would likely recognize a tort claim for medical monitoring, the Court the permitted the plaintiffs leave to amend their complaint. 246 In a subsequent opinion in the case, the court further addressed medical monitoring claims. In Cook II, one of the defendants moved to dismiss, among other claims, plaintiffs’ request for medical monitoring injunctive relief. 248 Addressing such motion, the Court noted that a plaintiff may receive two forms of relief for a medical monitoring claim. 249 Plaintiffs may either be (1) “awarded a lump sum of money” or (2) “awarded a lump sum which is placed into a fund that is administered by the court.” 250 The Court then denied the motion to dismiss, finding that the plaintiffs claim for medical monitoring injunctive relief alleged a valid claim for relief. 251 247 D. Procedural Advantages – The Lone Pine Order Another issue that arises early in litigation is the procedural framework – or case management order – under which the case will go forward. These orders determine the timing and nature of disclosures and discovery to be made by the opposing parties and can significantly impact the expense incurred in litigating a case. Both state and federal courts typically have “presumptive” case management orders that govern ordinary cases, but all courts have significant, inherent authority to modify the presumptive order and manage cases to ensure speedy and just resolution. In toxic tort litigation generally (and hydraulic fracturing litigation specifically), one of the major issues is whether the plaintiff has in fact been exposed to any harmful substance, and, if so, whether that substance caused the plaintiff’s alleged injury. Where these issues of exposure and causation exist – and are potentially dispositive of the case – many courts have required these issues to be addressed before subjecting defendants to extensive discovery regarding their allegedly tortious practices. Originating from the case Lore v. Lone Pine Corporation, these modified case management orders are often referred to as “Lone Pine” orders. 252 As discussed below, there is authority for these orders in both federal and state courts in the Rocky Mountain region. 245 246 247 248 249 250 251 252 Id. at 1477. Id. Cook v. Rockwell Int’l Corp., 778 F. Supp. 512 (D. Colo. 1991) (“Cook II”). Id. at 514. Id. at 515. Id. Id. 1986 WL 637507 (N.J. Super. Ct. Law Div. 1986). 44 1. Federal Authority a. Ninth Circuit In Avila v. Willits Environmental Remediation Trust, 633 F.3d 828, 833-34 (9th Cir. 2011), the Ninth Circuit affirmed dismissal of plaintiffs’ toxic tort action for failure to comply with a Lone Pine case management order. Although the Ninth Circuit had affirmed dismissal in cases requiring a similar prima facie showing, Avila is the first time the Ninth Circuit directly addressed a Lone Pine order. The Avila litigation involved over 1000 plaintiffs alleging injury from contamination allegedly caused by a manufacturing plant in Willits, California. After five years of litigation, the district court entered a Lone Pine order requiring plaintiffs who had never lived Willits or lived there after the plant had ceased operations to make a prima facie showing of exposure and causation. The Lone Pine order required: written statements setting forth “all facts” supporting non-resident and post–1988 resident plaintiffs’ claimed exposure, together with a written statement from an expert describing the condition for which recovery was sought, identifying the chemical to which the plaintiff was exposed, explaining the route of exposure, opining on causation, and setting forth the scientific and medical basis upon which the opinion was based. 253 The plaintiffs timely complied with the order. The defendant then moved to strike the plaintiffs’ expert on exposure and causation. Finding that the expert report did not satisfy Rule 702 and Daubert requirements, the district court granted the motion to strike and dismissed the plaintiffs’ claims for lack of causation. In affirming dismissal, the Ninth Circuit agreed with the Fifth Circuit case, Acuna v. Brown & Root, Inc., 200 F.3d 335 (5th Cir. 2000), which held “that district judges have broad discretion to manage discovery and to control the course of litigation under Federal Rule of Civil Procedure 16.” 254 The Court also relied upon on Federal Rule of Civil Procedure Rule16(c)(L) in finding that the district did not abuse its “wide discretion” to impose a Lone Pine order upon this particular group of plaintiffs. 255 In response to plaintiffs’ arguments that the order improperly required plaintiffs to make expert disclosures before defendants, the court stated that Rule 26(a)(2)(C) gives the district court “authority to determine when—and in what sequence— expert testimony must be disclosed.” 256 b. Eighth Circuit Two district courts within the Eighth Circuit have endorsed the use of a Lone Pine order. 253 254 255 256 633 F.3d at 833. Id. (citing Acuna, 200 F.3d at 340). Id. at 834. Id. 45 In Schwan v. CHN America LLC, the United States District Court for the District of Nebraska granted defendants’ motion for summary judgment against 130 plaintiffs who failed to comply with a Lone Pine case management order. 257 And, in Burns v. University Crop Protection Alliance, the United States District Court for the Eastern District of Arkansas entered a Lone Pine order requiring evidence that the defendants’ herbicide came into contact with the plaintiffs’ allegedly damaged cotton crops. 258 The order required: • Separately for each Defendant’s product at issue, the date, location, and amount of each product application at issue and the name of the applicator. • Separately for each Plaintiff, the location and acreage of each cotton field claimed to have been injured by one or more of Defendant's products in 2006. • Separately for each cotton field identified, the manufacturer, distributor and brand name of each product allegedly transported to said field and the location from which the product was allegedly transported. • The facts supporting Plaintiffs’ claim that each Defendant's product was transported to Plaintiffs’ cotton fields, including any testing or modeling supporting said claims. • If Plaintiffs rely on expert opinions to identify the specific products that allegedly harmed Plaintiffs’ crops or to support the allegation that any Defendants’ products were transported to Plaintiffs’ cotton fields, the preliminary facts, data, and other grounds relied on by each expert for each such opinion, and each expert's qualifications to render an opinion. 259 c. Tenth Circuit In Wilcox v. Homestake Mining Co., twenty-eight plaintiffs alleged injury from the release of radioactive and other hazardous substances by defendants from their uranium milling facility near Milan, New Mexico. 260 The Court entered a case management order giving plaintiffs 120 days to “produce expert affidavits which make a prima facie showing of harmful exposure and specific causation for each injury” alleged. After twenty-five of the plaintiffs failed submit expert affidavits, their claims were dismissed. 257 258 259 260 No. 4:04CV3384, 2007 WL 1345193, at *2 (D. Neb. Apr. 11, 2007). No. 4:07CV00535 SWW, 2007 WL 2811533, at *2–3 (E.D. Ark. Sept. 25, 2007). Id. at *2. Case No. CIV 04-534 JC/WDS, 2008 WL 4697013, at *1 (D.N.M. Oct. 23, 2008). 46 2. State Authority Although more limited, there is also some authority among state courts to support a Lone Pine order. In Schelske v. Creative Nail Design, 933 P.2d 799 (Mont. 1997), the Montana Supreme Court affirmed summary judgment in favor defendants based upon plaintiffs’ failure to comply with a case management order. The plaintiffs, a beautician and her husband, filed suit against cosmetic manufacturing companies and other defendants alleging exposure to toxic substances that allegedly caused her to experience “pains, swelling, and digestive disorders.” 261 The trial court issued a case management order just four months after the suit was filed, requiring the plaintiff to produce: a list of products, the circumstances of the alleged exposure, an identification of each specific chemical which allegedly caused harm, and a physician’s opinion of a causal connection between exposure and injury. The CMO required that the affidavit from the physician stating his or her opinion must: (1) list all injuries, illness, or conditions suffered by Mischelle; (2) specify the chemical(s) that caused each illness, injury or condition; and (3) state the scientific bases for the physician’s opinion. 262 The trial court’s order was modeled after a case management order issued by the United States District Court for the District of Montana in Eggar v. Burlington N. R.R. Co., 1991 WL 315487 (D. Mont. Dec. 18, 1991) (issuing order requiring plaintiffs to present physician affidavits specifying, for each plaintiff, the precise injuries suffered, the particular chemical or chemicals that caused each injury, and the scientific and medical bases for the physician’s opinions; court provided that “‘laundry list’ of injuries and chemicals” in affidavit would not be sufficient). Similar to Eggar, in Schelske the trial court required identification of an actual injury and causation through at least prima facie evidence, stressing that: “[i]t will not be sufficient for the affidavit to state a ‘laundry list’ of injuries and chemicals. Each injury . . . must be itemized and specifically linked to the chemical or chemicals believed to have caused that particular injury.” 263 The Montana Supreme Court found that the trial court’s issuance of the Lone Pine order was “wholly within its discretion as a management tool contemplated by Rule 16.” 264 In affirming judgment for defendants, the Court stated the plaintiffs’ failure to comply with the Lone Pine order resulted in a failure to establish any genuine issue of material fact. 265 261 262 263 264 265 933 P.3d at 801. Id. Id. Id. at 802. Id. 47
