Environmental and Safety Law Update

By Eric E. Boyd and William R. Schubert

On May 4th, the Bureau of Land Management at the Department of the Interior (DOI) issued a proposed rule, published at 77 Fed. Reg. 27691 (May 11, 2012), on hydraulic fracturing activities that would require, among other things, disclosure of the chemicals used in hydraulic fracturing operations under its jurisdiction.  The proposed rule includes a new version of 43 C.F.R. § 3162.3-3, which would implement a new authorization process and set new reporting requirements for hydraulic fracturing activities on public or Indian lands.

Hydraulic fracturing, or “fracking,” is a method of extracting oil or natural gas on land.  To separate the oil or gas from sediment (so that extraction is possible), fracking requires the injection of pressurized fluids into the ground. 

Fracking technology has risen in popularity over the past several years, but accompanying this trend has been an increase in concern over long-term safety implications.  Environmental groups have raised concern about possible groundwater contamination resulting from the injection of certain fracking chemicals.

Disclosure of Fracking Fluids and Protection of Confidential Information

The DOI does not currently require pre-approval of routine fracking activities.  State law provides most of the industry’s regulation.  In acknowledgement of existing regulation, the DOI states that it intends to incorporate widely-accepted standards in order to minimize unnecessary duplication and compliance costs. 

For example, although an older draft of the proposed rule would have required disclosure of fracking chemicals prior to commencement, the DOI has changed course on this issue.  Under the current proposal, it seeks to require companies to report this information within 30 days of completion of operations.  Specifically, proposed § 3162.3-3(g)(4) and (5)) would require that companies file the following information:

• A report (table) that discloses all additives of the actual stimulation fluid, by additive trade name and purpose (such as, but not limited to, acid, biocide, breaker, brine, corrosion inhibitor, crosslinker, demulsifier, friction reducer, gel, iron control, oxygen scavenger, pH adjusting agent, proppant, scale inhibitor, or surfactant); [and]
• A report (table) that discloses the complete chemical makeup of all materials used in the actual stimulation fluid without regard to original source additive (see paragraph (f)(4) of this section). . . .

The rule would put the burden of preventing disclosure of trade secrets and other legally protected information on companies.  The relevant provision (proposed paragraph (h)) provides that “[a]t the time of submission of any information required under this section, operators must:

1. Specifically identify particular information claimed to be exempted from public disclosure by a Federal statute or regulation;
2. Identify the Federal statute or regulation that prohibits the public disclosure of each piece of particular information, and explain in detail why the information is subject to the prohibition of the identified Federal statute or regulation; and
3. Inform the BLM whether the particular information is available to the public through other means, such as disclosures required by state law.”

The industry is already accustomed to disclosure requirements for chemicals used in fracking operations.  In addition, many companies disclose this information to the public via the website FracFocus.com (whether voluntarily or pursuant to state law).

Other Noteworthy Provisions in the Proposed Rule

Approval for New Well Stimulation Activity (See Proposed Paragraph (c))

To obtain approval for future well stimulation activities, companies would need to file a notice of intent with the DOI that includes, among other things:

• Geological descriptions and measurements;
• Identification of the areas in which fluids will be injected, and the estimated volume of fluid that will be recovered; and 
• Submission and approval of the cement bond log (in order to prove that all occurrences of useable water have been protected from contamination).

Mechanical Integrity Testing (MIT) (See Proposed Paragraph (d))

Companies would be required to test the casing of the wells prior to well stimulation.  The proposed rule provides that “[t]he MIT will be considered successful if the pressure applied holds for 30 minutes with no more than a 10 percent pressure loss.”

Protection of Usable Water

The proposal contains an amendment to 43 C.F.R. § 3162.5-2 that would add the following provision:

(d) Protection of usable water and other minerals. The operator shall isolate all usable water and other mineral-bearing formations and protect them from contamination. Tests and surveys of the effectiveness of such measures shall be conducted by the operator using procedures and practices approved or prescribed by the authorized officer.

The DOI would also change its definition of “usable water” (per proposed 43 C.F.R. § 3160.5) to mean “generally those waters containing up to 10,000 ppm of total dissolved solids” rather than 5,000 ppm, as § 3162.5-2 currently indicates.

Other Post-Completion Submissions (See Proposed Paragraph (g))

In addition to disclosing the chemicals used, companies would need to report other information on the actual operations within 30 days of their completion.  This would include, among other things:

• Actual results obtained in the course of operation (see proposed paragraphs (e)(1) and (e)(2) for required monitoring and reporting requirements effective during operation) and afterwards, including measurements of perforations, the fracture length and height, the volume of fluid used, measurements of the surface pressure, flush volume, and pump pressure, and information pertaining to the recovery, handling, and extraction of fluids;
• Certifications pertaining to the legality of treatment fluid and maintenance of wellborne integrity; and
• Documentation and explanation of deviations from the approved well stimulation plan.

EPA Draft Guidance

The EPA’s Draft Permitting Guidance for Oil and Gas Fracturing Activities Using Diesel Fuels was also released on May 4th.  See the related notice at 77 Fed. Reg. 27451 (May 10, 2012). The guidance would only apply to fracking activities in which diesel fuels (as defined by the EPA) are used.  Although EPA guidance is non-binding, permitting authorities are likely to consider it instructive.

Public Comment Period

Public comments are invited on the proposed regulation, and are due on or before July 10, 2012. 

Eric E. Boyd's profile was highlighted in the New Member Spotlight section of the May 2 edition of the Defense Research Institute's The Voice.

By Adam W. Walsh

An article, “Green Issues to Consider in Drafting and Negotiating Office Building Leases,” by Seyfarth Real Estate partner Adam Walsh was published in the March 6 issue of Bloomberg BNA’s Real Estate Law & Industry Report. In the article, Adam discusses the finer points involved in drafting contracts for office buildings with Leadership in Energy and Environmental Design (LEED) designations and U.S. Green Building Council (USGBC) ratings.

According to the article, it is becoming increasingly common for owners of buildings to request LEED designations or USGBC ratings, both with new and older complexes. Accordingly, this shift requires owners  to “green” office building standard lease forms. Adam identifies the primary issues surrounding the contract changes as being with “construction, tenant operations and maintenance, and the ability of landlords to pass through ongoing green operating costs and expenses to tenants.”

 “Although the lease provisions remain new and will require an active dialogue between the parties, the good news is that as the provisions become more common, a market set of compromise positions is developing that often works for both parties,” Adam remarks.

By William R. Schubert and Eric E. Boyd

The U. S. Environmental Protection Agency (EPA) issued a proposed rule that would reach a new milestone for environmental regulation in the United States: substantive limits on carbon dioxide (CO₂) emissions at the source.  The rule would apply to new fossil fuel-burning electric utility generating units (EGUs) with generating capacities of over 25 megawatts, setting the limit at 1,000 lbs of CO₂ per megawatt-hour.  Coal-fired power plants are the most likely to be affected; emissions from natural gas units would remain below the threshold.  The EPA suggested that natural gas is already the fossil fuel of choice at new EGUs for economic reasons.

An alternate compliance option would exist for new coal-fired or pet coke-fired units.  The proposed rule states that these units “could meet the standard either by employing carbon capture and storage (CCS) of approximately 50% of the CO₂ in the exhaust gas at startup, or through later application of more effective CCS to meet the standard on average over a 30- year period.”  However, regulated entities are likely to rule out this option as too costly.

“Transitional sources,” i.e., certain units that are soon to be built, would be exempt from the rule.  EPA described the scope of the “transitional sources” exemption as covering projects that “have acquired a complete preconstruction permit by the time of this proposal and that commence construction within 12 months of this proposal.”

Public comments should be marked with docket number, EPA-HQ-OAR-2011-0660, and must be received on or before June 12, 2012.

By Philip L. Comella

Rulemaking procedures underway before the Illinois Pollution Control Board’s (Board) in the First Notice of proposed amendments to Clean Construction or Demolition Debris (CCDD) Fill Operations (35 Ill.Adm.Code 1100) show that battle lines have been drawn over how CCDD will be regulated in the State of Illinois.  One of the key battles taking shape now is whether the Board will implement the legislative directive to protect groundwater at CCDD and uncontaminated soil fill operations by imposing groundwater monitoring requirements on the “back-end” (receiving facility) or by increasing the stringency of certification requirements on the “front-end” (source of material).

CCDD occupies a unique niche in the state’s regulatory scheme.  CCDD is not a “waste” if, among other things, it is used as fill in a “quarry, mine or other excavation.”  415 ILCS 5/3.160.  The Board’s rulemaking, following the General Assembly’s directive in P.A. 96-1416, also establishes a new category of facility call an “uncontaminated soil fill operation” and defines “uncontaminated soil.”  415 ILCS 22.51a.  

The problem, as it seems with many environmental laws, is how one defines “clean” and “uncontaminated.” The Illinois Environmental Protection Act’s (Act) definition of “CCDD” is “uncontaminated broken concrete without protruding metal bars, bricks, rock, stone, reclaimed asphalt pavement, or soil generated from construction or demolition activities.”  In the 2010 amendments to the Act , the Illinois General Assembly defined “uncontaminated soil” by reference to the State’s Tiered Approach to Corrective Action Objectives (TACO), though the General Assembly did not mandate the use of TACO.

The General Assembly expressed an intent to protect groundwater at both CCDD operations and uncontaminated soil fill operations, but used different language to implement this directive for the two types of facilities.  CCDD operations, it said, must include standards and procedures necessary to protect groundwater, which may include a number of measures, including groundwater monitoring.  415 ILCS 22.51(f)(1).  “Uncontaminated soil fill operations” also must protect groundwater but on this occasion the General Assembly listed “testing and certification of soil” and “requirements for recordkeeping,” but not “groundwater monitoring.”  Id. 22.51a(d)(1)

The rules proposed by the Illinois Environmental Protection Agency (Agency) required groundwater monitoring for all CCDD and uncontaminated soil fill operations in operation one year after the effective date of the final rules.  Facilities that have entered post-closure within that one year period would be exempt.  (Proposed Rule, 35 Ill. Adm. Code 1100, Subpart G.)

The Agency said it believed the groundwater monitoring requirements were necessary “because the facilities are not required to have a protective liner to control contaminant migration and because they are consolidating a large volume of off-site materials into one area with that material often placed directly into the groundwater flow.”   

The Agency balanced the groundwater monitoring requirement on the back-end with relatively flexible certification requirements on the front-end.  The owner/operator of the receiving facility must document that for all soil, it will either obtain a certification from the owner of the source site that the source site is not potentially impacted property, and is thus presumed to be uncontaminated, or will obtain a certification from a licensed PE or PG that the source soil is uncontaminated.  Id. 1100.205(a).  The forms relied upon by the Agency to implement these two certification requirements did not mandate testing, provided there is a basis for the owner’s or PE/PG’s certification.

In the Board’s First Notice Order and Opinion, issued on February 2, 2012, it inverted the Agency’s proposal by doing away with the groundwater monitoring requirement entirely and imposing certification requirements for uncontaminated soil on the front-end based on the ASTM standards.  Under the Board’s First Notice, source site owners or operators must use the ASTM E 1528-06 Transaction Screen to establish that the source site is not a “potentially impacted property” and hence, any removed soil is presumed to be uncontaminated.  If the source site owner is unable to make this certification or if the property is “potentially impacted,” then the fill site operator must obtain a certification from a professional engineer or geologist that the source site soil is uncontaminated based on an evaluation conducted in accordance with ASTM 1527-05, Phase I Environmental Site Assessment Process.  This certification must include analytical testing to show that the soil does not contain contaminants in excess of the maximum allowable concentrations, based on the lowest applicable Tier 1 standards under TACO.

The Board found no factual evidence that that CCDD operations were actually contaminating groundwater and no legal directive that it necessarily had to include groundwater monitoring among the measures to ensure the protection of groundwater.

The Board heard testimony on its First Notice on March 13-14th and issued an order setting April 18, 2012 as the deadline for comments, and April 27, 2012 as the deadline for responses to those comments.  Under the Act, the Board must issue final rules by July 29, 2012.

Thus, as matters now stand, the regulated community is sliding somewhere between mandatory groundwater monitoring requirements, which may drive many CCDD facilities out of business, and the mandatory use of ASTM procedures, which appear ill-suited for the majority of construction and excavation projects that generate CCDD and uncontaminated soil.

Stay tuned for further developments, as this rulemaking continues to unfold.