Recent Developments in Federal and State Efforts to Regulate Hydraulic Fracturing

Obama Signs Executive Order Creating Hydraulic Fracturing Task Force

President Obama’s position that hydraulic fracturing must be conducted in a "safe and responsible" manner has been interpreted as suggesting the need for increased federal regulation of fracing. Indeed, various federal agencies have stepped forward with proposed regulations targeting air emissions, chemical disclosures, wastewater handling and other fracing-related issues.  Many natural gas stakeholders have expressed concern about this building wave of federal regulation, from different agencies and regulators, and the potential that this will result in inefficient, burdensome and even conflicting federal-versus-federal and federal-versus-state regulatory requirements. 

Perhaps in response to these concerns, on April 13, President Obama signed an executive order creating a task force of 13 federal agencies to "coordinate the efforts of Federal agencies responsible for overseeing the safe and responsible development of unconventional domestic natural gas resources and associated infrastructure and to help reduce our dependence on oil ...." While some in the oil and gas industry have applauded the creation of this task force for its potential to streamline and coordinate federal activity on fracing, stakeholders will keep a close eye on the path taken by the Obama Administration.  Since 2005, the bulk of hydraulic fracturing oversight has come from state regulatory authorities – who typically are better positioned to deal with the unique regional and local issues often presented by oil and gas development. 

Requiring coordination among 13 different federal agencies may be a positive development. However, the precedent of federal regulation – and the possibility that coordination may lead to calls for more regulation in the future – may be one that stakeholders will be less than enthusiastic about, particularly after the Environmental Protection Agency wraps up its multi-year study of fracing's impacts on groundwater in 2014.

Colorado Governor's Task Force Releases Draft Report

A task force established by Colorado Governor John Hickenlooper recently released a draft report on strategies regarding state and local development and regulation of oil and gas activities.  The task force determined that "drawing bright lines between state and local jurisdictional authority was not realistic or productive," thus refusing to find that local authority is completely preempted by the Colorado Oil & Gas Act.  The group also concluded that no new laws are necessary at this time, but that consideration of Colorado's oil and gas rules related to setbacks and air quality are topics for further discussion.  

The task force is comprised of representatives from counties, municipalities, the state, industry, civic organizations and the general public.  The Governor's task force was established only a few days after two New York trial courts rejected separate legal challenges to local zoning amendments that banned hydraulic fracturing – handing victories to those who advocate for "local" (not state) control over whether fracing is allowed.  Fracing supporters in Colorado had hoped that the task force report would conclude (or recommend) that state regulation preempted local ordinances like those in New York.  Fracing opponents had hoped for a conclusion that new and more stringent rules were required in Colorado.  The draft report's conclusions have disappointed both sides in the debate.  Stakeholders with interests in Colorado should keep a close eye on this task force as it begins issuing findings on key issues.

The final report and recommendations are available here.

California Makes A Late Entry Into Hydraulic Fracturing Regulation

California has no state laws specifically regulating hydraulic fracturing even though the process has been used for decades in the state.  That, however, is poised to change as state legislators weigh a spate of bills related to chemical disclosure rules that have been making their way through different committees this month.  Two of these bills appear to have a good chance of passing, and are briefly discussed below.

Senate Bill 1054, sponsored by Senator Fran Pavley (D - 23rd District), would require operators to notify property owners at least 20 days before hydraulic fracturing activities commence near their lands.  The bill defines property owners to include all owners or occupants of property above any underground water suitable for irrigation or domestic purposes that the well is reasonably anticipated to pierce.  That bill passed the Senate Natural Resources Committee on a party-line vote.

Assembly Bill 591, sponsored by Assemblyman Bob Wieckowski (D - 20th District),  would require operators to post fracing fluid constituents to FracFocus.org, a national registry set up by the Groundwater Protection Council and others to promote voluntary chemical disclosure.  The bill tracks similar provisions in Colorado statutes by requiring that disclosures be made within 60 days of fracing activity completion, and exempting certain trade secrets upon application by the operator.  AB 591 is due for consideration by several environmental committees before going to vote.