Oil & Gas Industry Law Alert: U.S. EPA Continues Refinery Enforcement, Focuses on Flares

Posted by Mike Mills on May 14, 2012

The U.S. Environmental Protection Agency (EPA) and the U.S. Department of Justice recently announced the latest proposed settlement in EPA’s Clean Air Act enforcement initiative against petroleum refiners. Hess Corporation will pay an $850,000 civil penalty and spend more than $45 million on new pollution controls at its Port Reading, New Jersey refinery to resolve alleged CAA violations.

This settlement includes several measures related to New Source Performance Standards and flaring. EPA has declared flaring an enforcement priority, and this settlement reflects the agency’s focus and will require Hess to adopt a number of new compliance and monitoring requirements.

This latest settlement follows April’s settlement with Marathon Petroleum Company for several CAA violations and continues a trend that has seen now 31 such agreements with petroleum refineries in the U.S. since 2000. As a result of these settlements, refiners have invested more than $6 billion in new pollution controls to reduce sulfur dioxide, nitrogen dioxide, and other emissions.

Click here to continue reading this alert including details on this latest settlement.

CALIFORNIA REVIVES FRACKING BILL AND ANNOUNCES PLANS FOR FRACKING REGULATIONS

Posted by Mike Mills on May 08, 2012

Last month, the California legislature revived a bill that was shut down last year that would require the disclosure of fracking chemicals.  In a compromise with industry, the revived bill (AB 591) includes trade secret protection.  Current law requires the owner or operator of a well to file a history of the work performed within 60 days of the end of ceasing operation.   The new bill requires that history to include a list of the chemicals used that will be made publicly available, subject to the trade secret exceptions now in the bill.

Last week, California’s Department of Conservation released a road map outlining a plan to develop regulations governing fracking procedures.  This announcement follows the Department of Conservation’s request at the end of March for operators to report their fracking operations to a disclosure registry, Frac Focus.  The Department specifically requested information relating to the location and depth of wells and the chemicals used.

Co-Authored by Michael Mills and Robin Seifried. 

 

FEDERAL AGENCIES TAKE ACTION ON FRACKING GUIDELINES

Posted by Mike Mills on May 08, 2012

At the end of last week, EPA and BLM each released draft requirements relating to fracking.  EPA released draft Underground Injection Control (UIC) Class II well permitting guidance for fracking activities that use diesel fuels.  BLM released draft rules requiring public disclosure of fracking chemicals used on public and Indian lands.

The EPA guidance applies the Safe Drinking Water Act (SDWA) and regulations to fracking activities using diesel fuel.  The injection of fracking fluids or propping agents, other than diesel fuels, are excluded from the requirements of the SDWA by the 2005 Energy Policy Act.  EPA concludes in the guidance that fracking operations that use diesel fuel as a fracking fluid or propping agent are subject to Class II UIC permitting requirements for oil and gas activities.  To determine whether diesel fuels are used in fracking, EPA proposes to use six Chemical Abstracts Service Registry Numbers (CASRNs) that are commonly identified as diesel fuels.  EPA also proposes alternative permit terms and area of review delineation methods specific to wells used for fracking operations.  EPA has requested comments on the proposed guidance relating to the use of the six CASRNs to identify the use of diesel fuels and data relating to the volumes and frequency of diesel fuels currently used in fracking operations.

The BLM draft rule regulates fracking operations on public and Indian land.  The rule applies to “well stimulation,” described as “activities conducted in an individual well bore designed to increase the flow of hydrocarbons from the rock formation to the well bore by modifying the permeability of the reservoir rock,” (i.e. acidizing or fracking).  The rule requires approval of the engineering design for fracking operations in connection with the existing approval process for general well drilling activities.  Wells that are already generally approved would require an additional approval for fracking operations.  The rule also requires a mechanical integrity test, a cement bond log to assess the impact on water, an estimate of the total volume of fluid that will be used and a plan for the handling of recovered fluids.  The rule imposes monitoring and reporting requirements, including post-operations disclosure of the fluids used and the actual volumes of fluids and dimensions of the well.  BLM says it plans to finalize the rule by the end of the year.

Co-authored by Michael Mills and Robin Seifried. 

 

Injunction on California's Low Carbon Fuel Standard Lifted Pending Appeal

Posted by Allison Smith on April 24, 2012

The Ninth Circuit Court of Appeals has lifted an injunction that prevented the California Air Resources Board (CARB) from enforcement of the state’s low carbon fuel standard (LCFS), pending appeal of a lower court decision enjoining the LCFS.  In December 2011, a federal district court found the LCFS in violation of the dormant commerce clause, as discriminating against corn-derived ethanol from out-of-state and favoring California corn-derived ethanol.  CARB appealed the decision to the Ninth Circuit earlier this year.  The LCFS requires a 10% reduction in the carbon intensity of motor fuels sold in California by 2020.  In its ruling yesterday, the Ninth Circuit also granted a request for expedited briefing in the consolidated cases appealing the LCFS decision.  Plaintiffs’ opening brief in Rocky Mountain Farmers Union et al. v. Goldstene et al. (case no. 12-15131) will be filed by May 25, 2012, with answering briefs due a month later and an optional reply brief to be filed no later than 14 days thereafter.  For additional information on the LCFS and the district court decision, see our earlier Energy Law Alert.

State Water Resources Control Board Issues Section 401 Certification for Various Army Corps of Engineers' Nationwide Permits

Posted by Melissa Foster on April 20, 2012

On April 19, 2012, the State Water Resources Control Board (“State Board”) certified 13 of 50 Nationwide Permits (“NWP”) published by the Army Corps of Engineers on February 21, 2012.  (77 Fed. Reg. 10184-01 (Feb. 21, 2012).)  On February 27, 2012, the State Board posted notice of the Corps’ application for 401 certification of the NWPs on the State Board’s 401 Program web page.  The 45-day notice period ended on April 12, 2012. 

In a letter dated February 29, 2012, the Corps requested that the State Board review the newly issued NWPs (which took effect on March 19, 2012 and expire on March 18, 2017) and determine whether to certify, certify with conditions, or deny certification pursuant to Clean Water Act section 401 (33 U.S.C. § 1341).  After reviewing the full list of NWPs and considering comments, the State Board granted 401 certification (with conditions) to 13 of the 50 NWPs that are exempt from the California Environmental Quality Act (“CEQA”).  The full list of NWPs certified by the State Board, including applicable CEQA exemptions, is available at http://www.waterboards.ca.gov/water_issues/programs/cwa401/generalorders.shtml.

For more information, please contact Melissa Foster or Barbara Brenner.

 

Feds Announce Air Pollution Rules for "Fracked" Natural Gas Wells - Delay Implementation

Posted by Mike Mills on April 20, 2012

On April 17, the Environmental Protection Agency issued new rules designed to curb the emission of air pollutants from “fracked” natural gas wells. Originally submitted last summer, the new rules will be gradually implemented over the next two to three years and look to curb emissions by 95%. The EPA commented that the need for the phase-in period was to “…ensure emissions reduction technology is broadly available.” The new rules would also cut emissions from traditional oil and gas wells by an additional 25%. While the implementation period didn’t achieve universal affirmation, the adoption of new rules found acceptance from both industry representatives and other diverse groups, such as the American Lung Association. Read more about this story from the EPA here and find the rule here.

California Senate Committee and President Obama Act on Fracking

Posted by Mike Mills on April 19, 2012

Last week, the California Senate’s National Resources Committee advanced a bill requiring notice to nearby property owners of planned fracking operations, and President Obama issued an Executive Order setting up an interagency working group to support safe and responsible fracking.

California law requires the operator to file a written notice of intent to commence drilling with the State Oil and Gas Supervisor or district deputy and deems the notice approved if there is no response within 10 working days from receipt.  The Senate Bill (SB 1054) passed by the National Resources Committee last Tuesday amends existing law to extend the period for the State Oil and Gas Supervisor’s response to 15 working days from receipt of the notice and requires additional notice for fracking operations.  The bill also requires that the well owner/operator notify property owners and occupants within a certain distance of the well, as well as property owners, occupants and water suppliers above underground waters that may be used for irrigation or domestic purposes.  The notice would include the location of the well and a description of the planned operations.  In its analysis, the Senate Committee noted that several other states include public notification to surface property owners as a part of the permit process for new wells, many including fracking provisions.

In related news, President Obama issued an Executive Order last Friday establishing an interagency working group to “support the safe and responsible production of domestic unconventional natural gas.”  The EO instructs the working group to coordinate agency policy activities; coordinate the sharing of scientific, environmental and related technical and economic information; engage in long-term planning and ensure coordination relating to research, natural resource assessment, and infrastructure development; and promote interagency communication with stakeholders.  The EO indicates that natural gas provided 25% of energy consumed in the US in 2011 and that natural gas production creates jobs, can reduce our dependence on oil, and provides a cleaner energy source (with appropriate safeguards).

For more information, please contact Mike Mills or Robin Seifried.

Carbon Sequestration Bill Advances in California Legislature

Posted by Mike Mills on April 18, 2012

Yesterday the California Senate’s Committee on Environmental Quality unanimously approved SB 1139(Carbon Capture and Storage Act of 2012), which was introduced by Senator Rubio (D – East Bakersfield) earlier this year.  SB 1139 would advance carbon capture and storage by closing certain key gaps in California law identified in the California Carbon Capture and Storage Review Panel’s final report, which found that “[t]here is a public benefit from long-term geologic storage of CO2 as a strategy for reducing GHG emissions to the atmosphere as required by California laws and policies.”  Specifically, SB 1139 would 

  • Expressly provide that pore space useful for geologic carbon sequestration is part of Civil Code § 659’s definition of “land.”  (According to the analysis prepared for the Senate’s Committee on Environmental Quality, SB 1139’s intent is to provide that the surface estate owner holds title to the pore space, subject to the dominance of the mineral estate.)
  • Give the State Fire Marshal regulatory authority over intrastate carbon dioxide pipelines.  The current version of SB 1139 defines carbon dioxide as “a fluid consisting of more than 90 percent carbon dioxide molecules.”
  • Direct the Air Resources Board to adopt by January 1, 2015 a methodology for quantifying the amount of carbon dioxide geologically sequestered for purposes of AB 32 compliance, including simultaneous geologic sequestration by enhanced oil recovery (EOR) projects that use carbon dioxide.  The methodology would also need to be suitable for demonstrating compliance with SB 1368’s emission performance standard for baseload electric generation and should harmonize with other state, federal, and international greenhouse gas emission reduction programs.
  • Direct the Division of Oil, Gas, and Geothermal Resources (DOGGR) to regulate EOR projects that use carbon dioxide, including those projects that simultaneously geologically sequester carbon dioxide, under its Class II Underground Injection Control (UIC) program.

These issues were discussed in the Approaches to Pore Space Rights, Carbon Dioxide Pipelines, and Enhanced Oil Recovery as Carbon Dioxide Sequestration white papers Stoel Rives prepared for the California Carbon Capture and Storage Review Panel in 2010. 

SB 1139 now goes to the Senate Rules Committee.  For more information on SB 1139, please contact Mike Mills, Jerry Fish, or Eric Martin.

CA State Agency Claims Nail Polish Contains Toxic Chemicals

Posted by Melissa A. Jones on April 11, 2012

As reported by the Associated Press, the California Department of Toxic Substances Control ("DTSC") has issued a report claiming that nail polish has been sold in the State containing the chemicals toluene, dibutyl phthalate (DBP), and formaldehyde, which the agency has referred to as "the toxic trio."

The agency's report noted that the use of the chemicals in the products is legal if properly labeled.  But agency officials said the failure to include warnings about the existence of the chemicals may violate California's Proposition 65.  The AP also reports that the Attorney General's office is determining whether the companies will face legal action, which can include penalities and/or the requirement to provide warnings.

DTSC's press release can be found here: http://www.dtsc.ca.gov/PressRoom/upload/Media-Advisory-Nail-Polish.pdf

Wyoming Lawsuit May Influence Proposed Hydraulic Fracturing Legislation in California

Posted by Mike Mills on April 05, 2012

As I last reported here, regulation of hydraulic fracturing is poised to be a hot topic in California this legislative session.  Last session’s AB 591 stalled in the Senate due to outstanding issues over the mandatory reporting of hydraulic fracturing fluid components and confidentiality issues based on trade secret concerns. 

The application of a Wyoming law, similar to what may be the ultimate legislative compromise here in California, is the subject of a lawsuit filed last week by Earthjustice in Wyoming state court.  In that case, the plaintiffs, environmental organizations and groups, seek a court order requiring the Wyoming Oil & Gas Conservation Commission to release information it has received from oil and gas companies identifying the constituents of hydraulic fracturing fluids.  The oil and gas companies had submitted the information pursuant to Wyoming regulations that mandated the reporting of constituents in hydraulic fracturing fluids.  Wyoming’s reporting requirements were the first in the nation and had been promoted as a model for AB 591.  Wyoming’s regulatory scheme provides that the reported information will become public, but a reporting company can request that the information so reported be kept confidential, if the composition of certain substances in the hydraulic fracturing fluid constitutes a trade secret.  If the state accepts the trade secrets application, the constituents are shielded from public disclosure.  Similarly, California’s Public Records Act currently recognizes a trade secrets exemption from the general presumption of public disclosure.  Including a similar trade secrets exemption in AB 591 had been the subject of much debate in the Legislature last session. 

The plaintiffs in the Wyoming case argue that the trade secret applications made to the state were insufficient to justify the confidentiality of the reported information.  The outcome of this case could portend significant effects on proposed legislation requiring the disclosure of hydraulic fracturing fluid constituents in California.  The case is Powder River Basin Resource Council, et al. v. Wyoming Oil and Gas Conservation Commission, March 23, 2012, Seventh Judicial District Court, State of Wyoming, County of Natrona.