By Patrick D. Joyce, Jeryl L. Olson, and Craig B. Simonsen

Blog - Fracking WaterSeyfarth Synopsis: With significant objection from Industry, EPA has issued its Final Report on whether hydraulic fracturing activities can impact drinking water resources under certain circumstances.

The U.S. Environmental Protection Agency published its controversial final report on “Hydraulic Fracturing for Oil and Gas: Impacts from the Hydraulic Fracturing Water Cycle on Drinking Water Resources in the United States.” In the report, which has already been subject to great objection from Industry, EPA issued its finding that hydraulic fracturing (fracking) activities in the U.S. may have impacts on the water lifecycle, affecting drinking water resources. The Agency had put out a draft of the report for public comment in June 2015, which we blogged on at that time. 80 Fed. Reg. 32111.

The report was prepared at the request of Congress. Its purpose was to follow water resources used for fracking through the entire water cycle from water acquisition, to chemical mixing at the well pad site, to well injection of fracking fluids, to the collection of fracking wastewater (including flowback and produced water), and finally, to wastewater treatment and disposal. EPA claimed that the study “identified conditions under which impacts from hydraulic fracturing activities can be more frequent or severe.” The report also identified “data gaps [that] limited EPA’s ability to fully assess impacts to drinking water resources both locally and nationally.” The final conclusions were based on review of over 1,200 cited sources.

In response to EPA’s report, the American Petroleum Institute (API) blasted the EPA’s “abandonment of science in revising the conclusions to the Assessment Report….” API and the fracking industry requested changes to EPA’s Draft Report that EPA did not incorporate in the Final Report. As a result, API Upstream Director Erik Milito said, “the agency has walked away from nearly a thousand sources of information from published papers, technical reports and peer reviewed scientific reports demonstrating that industry practices, industry trends, and regulatory programs protect water resources at every step of the hydraulic fracturing process.”

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Seyfarth Environmental Compliance, Enforcement & Permitting Team.

By Robert S. Winner, Andrew L. Berg, and Ashley M. Hymel

Energy sources conseptSeyfarth Synopsis: In this edition of Seyfarth Shaw’s Energy Insights Newsletter, our Energy and Clean Technologies team covers important developments in Q1 2016 for the energy industry including 1) the fate of the Clean Power Plan and potential impact on U.S. compliance with the Paris Agreement, 2) the increased pressure by the DOL to wage and hour practices in the oil and gas industry, and 3) growing interest and use of EB-5 financing for renewable energy projects and proposed changes to the program.

Clean Power Plan Awaits Decision

In June 2014, Environmental Protection Agency (EPA) issued its proposed Clean Power Plan (CPP) to regulate CO2 emissions from existing power plants under section 111(d) of the Clean Air Act (CAA), which proposes to limit carbon emissions from existing fossil fuel-fired electric generating units, including steam generating, integrated gasification combined cycle, or stationary combustion turbines (in either simple cycle or combined cycle configuration) operating or under construction by January 8, 2014.  Specifically, the CPP requires states to reduce carbon dioxide emissions from existing power plants by 32 percent below 2005 levels by 2030.  States are required to submit compliance plans to reduce their emissions by 2022, with full compliance not required until 2030.  The Department of Energy (DoE) believes implementing the CPP will forestall hundreds of millions of tons of greenhouse-gas emissions from human activities, a key driver of climate change.

However, immediately following the release of these proposed regulations, two dozen states and numerous interested corporations and industry groups sued the administration claiming the EPA overstepped its constitutional authority and statutory authority under the CAA.  And on February 9, 2016, the U.S. Supreme Court granted a stay preventing the implementation of the CPP pending further review. Oral arguments are scheduled for June 2nd and even though it could take up to a year for a final ruling to be released, some experts believe the three judge panel will seek to render a decision by the end of summer 2016 since the judges’ clerks change at the end of August, a potential delay.

Many have argued that the stay could, and if the CPP is struck down entirely, would, impact the U.S.’s ability to meet the United Nations Framework Convention on Climate Change (UNFCCC) Paris Agreement goals of (1) reducing emissions “in the range” of 17 percent below 2005 levels by 2020 and (2) a “further emission reduction” up to 26-28 percent of total reductions below 2005 levels by 2025.

Interestingly, voting in favor of the stay was Justice Scalia’s last decision before passing away suddenly. A 4-4 decision would have upheld the lower court’s reversal and thus implementation of the CPP.

The Oil and Gas Industry’s Wage and Hour Practices Remain A High Priority for the Department of Labor

In 2012, the Department of Labor’s Wage and Hour Division (WHD) began an initiative to improve oil and gas industry compliance with the Fair Labor Standards Act (FLSA) and in particular, the federal law that requires overtime compensation for hours worked over 40 in a workweek. According to the WHD, this ongoing initiative was meant to “focus resources where data shows that violations are common and business models lend themselves to violations.”

Through 2015, the WHD has obtained several high-dollar settlements from oil and gas companies. Notable recent settlements include a $4.5 million settlement with an oil and gas exploration and production company for failure to compensate employees for pre-shift meetings and an $18.3 million settlement with an oilfield services company for misclassification of employees in 28 job positions.  These investigations, and their subsequent settlement, demonstrate both the depth and the breadth of the WHD’s expending reach.  Already in the first quarter of 2016, the WHD has touted settlements with six oil and gas companies for a total of almost $2 Million under similar wage hour theories. These companies’ services range from drilling to engineering to selling oil and gas equipment.  The WHD recently expressed its hope that industry executives will take the lead and serve as models for industry-wide compliance.

And, while the “industry” on the radar used to include only oil and gas exploration and production, or oilfield services, companies, the WHD has expanded its pursuit to include related businesses, such as water and stone haulers, trucking, lodging, water, and staffing companies.  One prime example of this expansion lies with a supply chain management company that settled with the WHD to the tune of over $146,000 in August of 2014 for failure to pay overtime at time and a half for hours worked over 40 in a week.

After four years, 1,100 investigations, and $40 million in settlements, the WHD is still on the hunt and it shows no signs of slowing down.  As the WHD stated in a recent press release, “employers must know and comply with the law.”  Employers in the oil and gas industry should continue to review their current wage and hour practices to ensure compliance.

Foreign Investors Going Green in Pursuit of Green Cards

For those who have heard of or read about “EB-5” financing, they may have only thought it was for certain categories of assets such as resorts, casinos, hotels, multi-family and mixed use office properties, which make up more than half the EB-5 funding distributed.  However, a smaller (3-5%), but growing segment of financing obtained from foreign investors participating in the employment-based, fifth-preference visa category (EB-5) has been within the renewable energy industry, and has significantly contributed toward the development of large-scale energy projects across the United States.  Not only has the percentage of EB-5 financing in the alternative energy space grown, so has the number and size of projects in the areas of utility scale solar power, alternative fuel production and lithium battery production, especially in California. As the nation’s preference for clean energy over traditional fossil fuels has gained momentum and states increasingly seek to implement aggressive renewable portfolio standards, marketing EB-5 projects to foreign investors has become much more common since it positively correlates with increased job creation.

By way of background, under the United States Citizenship and Immigration Services’ (USCIS) EB-5 Immigrant Investor Pilot Program (Program), foreign individuals who invest $1,000,000 (or $500,000 in targeted employment areas (TEA) in a new commercial enterprise are able to pursue permanent residency in the United States if they can prove that their investment created a minimum of ten full-time jobs.  The permitted $500,000 investment amount for projects located in areas of high unemployment or rural tracts of land is ideal for the alternative energy industry since the power plants, solar panel farms, and other energy-generating equipment installations require large amounts of land.

The Program was initially due to expire on September 30, 2015 and received a one-year extension. However, in connection with a potential further extension, some bad press and bad apples has caused lawmakers to draft new bills to provide additional protections for investors in EB-5 projects. For example, the Integrity Act, introduced by Senators Schumer, Flake and Cornyn on December 17, 2015, seeks to strengthen the Program by requiring greater government oversight of regional centers (entities that sponsor the EB-5 projects), including authority to assess fines for noncompliance, and requiring registration of all affiliated parties of regional centers. Other bills include increasing the required minimum investment amount in a TEA from $500,000 to $800,000, and from $1 million to $1.2 million for non-TEA investments. Further, the SEC has been carefully watching EB-5 financings and their compliance with securities laws. However, despite the new oversight, developers continue to move full-steam ahead and raise hundreds of millions of dollars in EB-5 funding to create jobs, including those in the renewable industry.

By Robert S. Winner

In this edition of Seyfarth Shaw’s Energy Insights Newsletter, our Energy and Clean Technologies team covers important developments in Q4 2015 for the energy industry including 1) collateral tax benefits granted to YieldCos, 2) the finalization of the EPA’s renewable fuel targets, and 3) climate change initiatives in the wake of the Paris Agreement in some unlikely places.

Renewable Energy YieldCos May Have Received a Surprise Boost from Congress

The renewable energy industry is breathing a sigh of relief in the wake of Congress’s surprising broad support and passage of the Consolidated Appropriations Act of 2016 in the final days of 2015, which extended, both prospectively for five years and retroactively for 2015, the production tax credit (PTC) and the investment tax credit (ITC).  The PTC provides wind developers with a credit of 0.023/kWh for electricity generated to the power grid, phasing down at 80% of its present value in 2017, 60% in 2018 and 40% in 2019, and the ITC provides solar projects that are under construction by no later than December 2019 to fully qualify for the 30% ITC on costs, falling to 26% for projects starting construction in 2020 and 22% for projects starting construction in 2021.  While this is definitely good news for developers of these types of renewable energy projects, who, but for the length and certainty of these credits, would not be able to or find it more difficult to start, plan, finance or complete their projects, the tax extensions also are potentially good news for public companies known as “YieldCos” who purchase, manage and operate projects with predictable cash flows, typically through long-term power purchase agreements, to generate healthy dividends for their investors.

YieldCos are those dividend growth-oriented public companies that were formed to own operational assets to produce predictable cash flows, typically based on long-term power purchase contracts. YieldCos rose in popularity in 2013 as the renewable energy’s answer to the Master Limited Partnership (MLP) for those assets that, for tax reasons, do not qualify for the tax benefits of an MLP.  But their public stock prices have been in freefall through 2015.  Some have speculated the precipitous price drop is related to commodity oil and gas prices, or the future prices of electricity.  It can also be argued that the price drop is a result of project pipeline stagnation due to the uncertainty in passage of the tax credit extensions through 2015.  Aside from general market conditions, it will be interesting to follow the long term viability and strength of YieldCos.

At Long Last, the EPA Finalizes and Increases Renewable Fuel Standards

On November 30, 2015, after a two year delay, and a court-ordered mandate, the Environmental Protection Agency (EPA) released new renewable fuel targets for 2015 and 2016 under the federal Renewable Fuel Standard (RFS), including levels retroactive to 2014 and prospectively for biomass-based diesel through 2017.  The EPA believes the final requirements will boost renewable fuel production and provide for robust, achievable growth of the biofuels industry.  The EPA states that the final 2016 standard for advanced biofuel is nearly 1 billion gallons, or 35 percent higher than the actual 2014 volumes, while the total renewable standard requires growth from 2014 to 2016 of over 1.8 billion gallons of biofuel, or 11% higher than 2014 actual volumes.  The RFS targets are welcome news to developers and manufacturers of advanced biofuels who have, like several other regulated industries including wind and solar, found it difficult to plan and finance the development of advanced biofuels and the plants that manufacture them.

The ethanol industry, though, is less enthusiastic about the boost in standards given something called the “blend wall.”  The “blend wall”, as it is known, is the maximum quantity of ethanol that can be sold each year given legal or practical constraints on how much can be blended into each gallon of motor fuel.  According to the proponents of the ethanol industry, most notably the Renewable Fuels Association, the constraints are driven by the oil industry who has “steadfastly refused to invest in blender pumps, storage tanks, and other infrastructure compatible with E15-and-higher ethanol blends.”  Neither industry wants to be left behind in the advancement of renewable fuels.  How each survives in the renewable fuel market remains to be seen.

The First Actions under the Historic Paris Agreement on Climate Change Are From Auckland?

On December 12,  2015, 195 countries agreed to combat climate change, the first-ever universal and legally binding agreement of its kind.  The agreement’s main aim is to keep a global temperature rise this century well below 2 degrees Celsius and to drive efforts to limit the temperature increase even further to 1.5 degrees Celsius above pre-industrial levels.  The achieve this goal, the Paris Agreement addressed the following areas: (1) mitigation – reducing emissions fast enough to achieve the temperature goal, (2) a transparency system and global stock-take – accounting for climate action, (3) adaptation – strengthening ability of countries to deal with climate impacts, (4) loss and damage – strengthening ability to recover from climate impacts, and (5) support – including finance, for nations to build clean, resilient futures.

Much has been written about how the breakthrough agreement was achieved. Reasons range from stellar diplomacy over decades to China’s inability to ignore its economic growth and carbon footprint resulting therefrom.  But with this framework in place, which country has taken the first action towards compliance?  Yes, you guessed it ……Auckland, New Zealand.  While it is true that the United States has extended renewable energy tax credits and boosted renewable fuel standards, and the EPA has reinforced the U.S.’s commitment to the President’s Clean Power Plan, and even China, in an unprecedented move, has halted the approval of any new coal mines for three years (unlike India who still plans to double coal output although, to be fair, seeking to quadruple solar installations), it is the Mayor of Auckland, New Zealand that has stepped up efforts towards meeting its already ambitious pledged goals.  In addition to being admitted to the C40 climate group, the Mayor has announced plans to move to a zero waste city, with further announcements to transform its public transport system and cycle and pedestrian walkways, citing a statistic that 35% of its CO2 emissions come from road transport.  Many experts have cited local initiatives and private investment will be the ultimate drivers of meeting the Paris Agreement goals, and Auckland is an excellent example thereof.

By Joshua L. Ditelberg and Robert S. Winner

In this edition of Seyfarth Shaw’s Energy Insights Newsletter our Energy and Clean Technologies team covers important developments in Q3 2015 for the energy industry including 1) the latest initiatives from the Environmental Protection Agency on clean power, climate and chemical regulation, 2) the National Labor Relations Board’s major shift on joint-employer status impacting contractor relationships, and 3) the surprising results upon Mexico opening its energy markets.

The EPA Has a Very Busy Third Quarter

In a flurry of activity in this past quarter, the Environmental Protection Agency (EPA) issued its final version of the Clean Power Plan (CPP), proposed new regulations to reduce methane emissions under the Climate Action Plan (CAP), and tightened chemical regulations for safe use, ahead of the proposed changes to the Toxic Substances Control Act of 1976 (TSCA).

The CPP is specifically geared towards the reduction of carbon emissions from power plants and energy producing facilities.  In the final rules the Clean Power Plan call for a reduction in greenhouse gas emissions from their 2005 levels by 32% by the year 2030, but the deadline for commencing reduction has been pushed back to 2022.  Opponents are already challenging the right of the EPA under the Clean Air Act to implement and enforce such rules and it is expected that the legal challenge will reach all the way to the Supreme Court, potentially further delaying implementation.

Similar to the Clean Power Plan, the EPA’s proposed regulations under the Climate Action Plan announced back in 2013 to reduce methane gas emissions from oil and gas producing activities, such as hydraulic fracking, also has its sights on reduction in such emissions by 45% by the year 2025.

Finally, the EPA took the lead in identifying a list of 83 “Work Plan” chemicals for further risk assessments and potential regulation. The TSCA grants the EPA the power to regulate the manufacture and sale of chemicals that may be a risk to the public.  Congress is expected to finally pass The Toxic Substance Control Modernization Act, which will, among other things, significantly overhaul some outdated methods, provide for a shift in expense towards the chemical companies, and set safety standards for thousands of chemicals currently unregulated.

The often maligned EPA may be hitting its stride in the twilight of Obama’s second term and ahead of the UN Climate Change Conference set for Paris in November.

The Browning-Ferris Decision and Potential Implications on Energy Industry

In a ruling that will affect most business relationships and extends far beyond either labor law or the concept of employment generally, the National Labor Relations Board (NLRB) recently issued a much awaited decision, Browning-Ferris Industries of California (Browning-Ferris), that expansively broadened the definition of who is a joint employer — an unrelated entity that arguably does not determine matters governing essential employment terms of another employer’s employees but that nevertheless is found to bear responsibilities to those employees under the National Labor Relations Act (NLRA).

Under the NLRB’s newly expanded test, two or more otherwise unrelated employers may be found to be a joint employer of the same employees under the NLRA “if they ‘share or codetermine those matters governing the essential terms and conditions of employment.’ In determining whether a putative joint employer meets this standard, the initial inquiry is whether there is a common-law employment relationship with the employees in question. If this common-law employment relationship exists, the inquiry then turns to whether the putative joint employer possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful collective bargaining.” Affecting both unionized and non-union companies (and even entities that have no employees of their own) alike, the decision has broad implications for other employment laws and government agencies such as the Department of Labor, EEOC and OSHA.

For the energy industry, which heavily relies on staffing companies, subcontractors and outsourcing to perform services such as well drilling, well-head services, equipment operation and services, and water and oil and gas transportation, to name just a few, the implications can be far reaching and potentially crippling.  Employers will need to reevaluate their relationships and protections against unintended liability or consequences.

A Tale of Two Energy Markets in Mexico: Renewables Ramp Up While Oil Falters 

In August of 2014, Mexico passed sweeping legislation opening up its largely closed energy markets, breaking up the government’s 70+ year monopoly in the areas of oil and gas, electricity and other power segments.  Large oil and gas blocks would now be available and auctioned off for foreign investment and lease, and changes in the electricity market would cause new competition with longer fixed price power purchase contracts, with a clearly defined push towards clean energy / renewable power generation of 35% by 2024.

A year after that legislation passed, Mexico held its first auction for oil and gas reserve blocks and by all accounts, the auction was a “disappointment”, with only two of the fourteen block up for auction actually sold.  Some blamed the oil market in general, others blamed minimum prices, the terms and conditions of the auction.  Whatever the circumstance or reasoning, Mexico is finding it difficult to offload large oil and gas reserves to foreign investment.

Conversely, the first auction for renewable energy projects will be held later this year and interest is strong, in particular for solar energy projects.  5-10 GW of solar power projects have already been permitted in 2015 and if proposed goals are to be met, much more will be required.  The longer term 15 year PPAs at fixed price with clean energy certificate obligation lasting 20 years, and solar prices on par with other power generating facilities, the conditions are ripe for Mexico to take advantage of the opportunity.

Let’s hope officials learned from their mistakes at the oil and gas auction and listen to the bidding public on what they need to make projects financially attractive.

Energy Insights: An Update from the Third Quarter of 2015

By Patrick D. Joyce and Craig B. Simonsen

pumpjack, West Texas, cottonwood treeThe U.S. EPA announced earlier this week a proposed rule to reduce emissions of greenhouse gases (GHG) and volatile organic compounds (VOC) from the oil and natural gas industry. The proposal is nearly 600 pages long. Proposed rule (August 18, 2015).

The proposed rule will add methane to the list of gasses regulated at new, modified, and reconstructed equipment at completed hydraulically fractured oil and gas well sites, compressor stations, and processing plants. The proposed rule also expands the regulation of VOCs to cover certain existing sources such as storage tanks, pneumatic controllers, compressors, and fugitive emissions in ozone nonattainment areas.

The oil and gas industry has expressed concern that the proposed regulations will hurt productivity and points out that the industry has already taken great strides to reduce methane emissions at well sites.

We had previously blogged about the Administration’s goal, under the President’s Climate Action Plan, to cut methane emissions from the oil and gas sector to 40 to 45 percent below 2012 levels by 2025. EPA indicated that methane is the second most prevalent greenhouse gas emitted in the United States “from human activities,” and that nearly “30 percent of those emissions come from oil production and the production, transmission and distribution of natural gas.” Pound for pound, methane’s impact on the environment is 25 times greater than carbon dioxide.

The proposed standards will affect certain new, modified, and reconstructed equipment, processes and activities, and are “based on practices and technology currently used by industry.” To cut methane and VOC emissions, the proposed rule requires:

  • Finding and repairing leaks;
  • Capturing natural gas from the completion of hydraulically fractured oil wells;
  • Limiting emissions from new and modified pneumatic pumps; and
  • Limiting emissions from several types of equipment used at natural gas transmission compressor stations, including compressors and pneumatic controllers.

The Agency’s fact sheet on the proposed rule indicates that the rule is “a step estimated to yield a 95 percent reduction in VOCs, and a similar methane reduction as a co-benefit.”

In addition to the proposed rule, the Agency also issued a 310 page Control Techniques Guidelines for the Oil and Natural Gas Industry (Draft). EPA-453/P-15-001 (August 2015). The fact sheet provides guidance to states for the regulation of VOCs in ozone nonattainment areas and the mid-Atlantic and northeastern states in the Ozone Transport Region.

The Agency will accept public comment on the proposed rule for 60 days after the publication in the Federal Register.

By Patrick D. Joyce and Philip L. Comella

Today, the U.S. Environmental Protection Agency issued two proposed rules lowering the threshold at which landfills must control methane gas emissions.

For active landfills, EPA proposes to reduce the threshold from 50 metric tons of non-methane organic compounds annually to 34 metric tons. As a practical matter, this means that roughly 100 active landfills – with emissions over 34 metric tons but under 50 metric tons — would have to install a gas collection and control system in accordance with 40 CFR Part 60, subpart WWW. The proposal would also require closed landfills that exceed 50 metric tons of emissions per year to install a control device.

At the same time, the Agency also issued a supplemental proposed rule lowering the emission threshold for new landfills from 40 metric tons per year (as it proposed in 2014) to 34 metric tons.  This reduction is based on the Agency’s position that the lower threshold is achievable at a reasonable cost.

These reductions will affect not only the compliance obligations of smaller landfills but may also have an impact on eligibility for greenhouse gas credits or other environmental attributes.

We will provide a more complete evaluation of the proposals soon.

By Patrick D. Joyce and Craig B. Simonsen

Blog - Fracking WaterThe U.S. Environmental Protection Agency released a draft assessment study last week showing that hydraulic fracturing (“fracking”) activities in the U.S. may have potential impacts on the water lifecycle, affecting drinking water resources. 80 Fed. Reg. 32111 (June 5, 2015).

The report, Assessment of the Potential Impacts of Hydraulic Fracturing for Oil and Gas on Drinking Water Resources (External Review Draft), prepared at the request of Congress, follows the water used for fracking through the entire water cycle from water acquisition, to chemical mixing at the well pad site, to well injection of fracking fluids, to the collection of fracking wastewater (including flowback and produced water), and finally, to wastewater treatment and disposal. Dr. Thomas A. Burke, EPA’s Science Advisor and Deputy Assistant Administrator of EPA’s Office of Research and Development, noted that “EPA’s draft assessment will give state regulators, tribes and local communities and industry around the country a critical resource to identify how best to protect public health and their drinking water resources.”

While EPA’s study, which included over 950 sources of information, found specific instances where well integrity and waste water management related to fracking activities directly impacted drinking water resources, the number of instances found were “small compared to the large number of hydraulically fractured wells across the country.”

The study identified specific vulnerabilities to drinking water resources including:

  • Water withdrawals in areas with low water availability;
  • Fracking conducted directly into formations containing drinking water resources;
  • Inadequately cased or cemented wells resulting in below ground migration of gases and liquids;
  • Inadequately treated wastewater discharged into drinking water resources; and
  • Spills of fracking fluids and fracking wastewater, including flowback and produced water.

The study noted that while there were few instances of drinking water contamination cause by fracking, this may be due to a lack of pre- and post-fracturing data on water quality and the inaccessibility of some information on fracking activities.

The draft study will be finalized after review by the Science Advisory Board and public review and comment. Public teleconferences are scheduled on the draft report, on September 30, 2015, October 1, 2015, and October 19, 2015. Public face-to-face meetings will be held on October 28, 2015, October 29, 2015, and October 30, 2015.

Public written statements for the teleconferences or for the face-to-face meetings should be received by the EPA Docket,  No. EPA–HQ–OA–2015–0245, by August 28, 2015.

By Philip L. Comella and Craig B. Simonsen

In another move to implement the President’s Climate Action Plan, the Obama Administration today announced a new goal to cut methane emissions from the oil and gas sector by 40 to 45 percent from 2012 levels by 2025.

According to EPA, methane emissions accounted for nearly ten percent of U.S. greenhouse gas emissions in 2012, with nearly thirty percent of that coming from the production, transmission, and distribution of oil and natural gas. To achieve this goal, and building on five technical white papers issued last spring, EPA will initiate a rulemaking to set standards for methane and VOC emissions from new and modified oil and gas production sources, and natural gas processing and transmission sources. EPA plans to issue the proposed rule in the summer of 2015, with a final rule 2016.

Law360 reported that Dan Utech, the Special Assistant to President Barack Obama for Energy and Climate Change, said that to implement the Administration’s goal, this new set of new rules will first target new sources such as hydraulic fracturing operations, under section 111(b) of the Clean Air Act. Utech estimated that the rules will save up to 180 billion cubic feet of gas that would otherwise be “wasted.” “The overall plan will also include efforts to reduce volatile organic compounds, and a voluntary component for industry.”

EPA expects that other actions under this new goal may also include:

  • New Guidelines to Reduce Volatile Organic Compounds.
  • Enhancing Leak Detection and Emissions Reporting.
  • Lead by Example on Public Lands.
  • Reduce Methane Emissions while Improving Pipeline Safety.
  • Drive Technology to Reduce Natural Gas Losses and Improve Emissions Quantification.
  • Modernize Natural Gas Transmission and Distribution Infrastructure.
  • Release a Quadrennial Energy Review (QER).
  • Expand the Natural Gas STAR Program.

We will continue to monitor and blog on this important topic.

By Brent I. Clark and Craig B. Simonsen

OSHA has just released a new Safety Bulletin on “Hydraulic Fracturing and Flowback Hazards Other than Respirable Silica” (OSHA 3763-12 2014).

Hydraulic fracturing involves pumping large volumes of fluid blended with proppant and chemicals at pressures necessary to fracture a “hydrocarboncontaining formation.” According to OSHA, each year, an estimated 35,000 wells are hydraulically-fractured in the U.S. Since the oil and gas extraction industry as a whole has a relatively “higher fatality rate compared to most of the U.S. general industry” OSHA has prepared and published this Safety Bulletin for hydraulic fracturing and flowback operations to “educate and protect workers.”

The Safety Bulletin provides this “Simplified Flow Sheet for Hydraulic Fracturing and Flowback Processes”:

 

Appendix A, Safety Bulletin at page 35.

The Safety Bulletin sets out and divides the primary tasks and issues associated with hydraulic fracturing and flowback, listing hazard information, and provides suggestions for “prevention strategies.” Analysis is provided for:

  • Hazards during transport, rig-up, and rig-down
  • Hazards during mixing and injection
  • Hazards during pressure pumping
  • Hazards during flowback operations
  • Hydrogen sulfide (H2S) and volatile organic compounds (VOCs)
  • Employer responsibility to protect workers

The Appendix D is especially interesting, providing a chart analysis of “Potential Hazards Related to the Job Steps of Hydraulic Fracturing.” Safety Bulletin at page 38-41.

Employers in these industries are encouraged to review this new OSHA publication. You may be sure that OSHA inspectors that visit your projects sites will have an active knowledge of this information, and will be looking to see if “prevention strategies” have been implemented. Employer policies and training materials may need to be updated to ensure that liabilities may be minimized.

By Patrick D. Joyce, Philip L. Comella, and Craig B. Simonsen

The Illinois Department of Natural Resources’ proposed rules on “High Volume Horizontal Hydraulic Fracturing” were recently approved, and will soon be published in the Illinois Register.

Bloomberg BNA reported that the Illinois’ Joint Commission for Administrative Rules (JCAR), approved the DNR rules implementing the Part 245: Hydraulic Fracturing Regulatory Act – Revised Rules on November 6, 2014.

Although the final rules are substantially similar to draft rules released by DNR on August 29, 2014, there are some key differences:

  • Public Participation and Transparency: The final rules clarify how the public can comment on pending fracking drilling permits.  The final rules also require oil and gas companies to disclose water use volumes, chemicals used in their fracking fluids, and anticipated flowback rates of fracking fluid to the surface.
  • Enforcement: The final rules enhance penalties for administrative violations, to a maximum penalty of $5,000 per day.  In addition, the final rules include new well site safety requirements, new flaring reporting requirements, and strengthen DNR’s ability to oversee and remedy potential water pollution violations.
  • Environmental Protection: The final rules require oil and gas companies to test wastes and fracking fluids for radioactivity, require monitoring of air emissions during flowback and production, and require companies to restore land to its original condition once drilling has ceased.  The final rules also prohibit flowback fracking fluids from being stored in open pits for more than seven days.

We previously blogged about the draft fracking regulations when they were first proposed. In addition, Phil Comella recently gave a presentation to a group of professional engineers titled: “All About Fracking”.

Feel free to reach out to the authors, one of Seyfarth Shaw’s Environmental Compliance, Enforcement & Permitting team members, or your Seyfarth attorney with any questions on this important topic.