Sidley Shale and Hydraulic Fracturing Report - December 22, 2015

Federal

United States appeals preliminary injunction issued by district court judge staying new Bureau of Land Management (BLM) rules governing hydraulic fracturing on federal and tribal lands. The United States has appealed to the U.S. Court of Appeals for the Tenth Circuit a September 30, 2015 district court order granting the state plaintiff’s motion for a preliminary injunction staying the implementation of BLM’s new rules governing hydraulic fracturing on federal and tribal lands. The state plaintiff, joined by industry intervenors, challenged the rules on a number of grounds, including that BLM did not have authority to issue the regulations. During the appeal of the preliminary injunction, the litigation will proceed in district court, as the lower court denied a motion by environmental groups that had intervened on behalf of BLM asking the court to consolidate the merits with the preliminary injunction so that the full litigation could be heard in one appeal to the circuit court. The groups had argued the preliminary injunction was on a dispositive legal issue, but the lower court disagreed, holding its findings were based on the preliminary injunction standard and that state and industry plaintiff/intervenors should be able to pursue their challenges based on the complete administrative record before a final judgment is reached.

“Sue and settle” agreement between the United States Environmental Protection Agency (EPA) and environmental groups over toxic release inventory (TRI) reporting. EPA and a group of environmental non-governmental organizations (NGOs) filed a joint stipulation to dismiss a lawsuit in which the NGOs had sought to compel EPA to act on the NGOs’ 2012 petition to extend TRI reporting requirements to the oil and gas extraction sector. EPA had responded to the petition in October by agreeing to start a rulemaking process to add natural gas processing facilities to the scope of facilities covered by TRI rules but denied the request as to other activities, including drilling operations. 

Studies

U.S. Geological Survey (USGS) reports substantial recoverable natural gas resources in the Barnett Shale. A recent USGS study concludes that the Barnett Shale in Texas has extensive oil and natural gas resources recoverable for production. In particular, the USGS estimates the Barnett Shale might have up to 53 trillion cubic feet of undiscovered, technically recoverable, natural gas. That figure is double the agency’s 2003 estimate, which was prepared before the widespread use of horizontal drilling and hydraulic fracturing. The USGS also reports that the Barnett Shale has 172 million barrels of recoverable oil. USGS estimates take into account only oil and gas that are technically recoverable with existing technology — without considering the market economics of doing so.

Study indicates mixed effects of hydraulic fracturing on local property values. A recent study by university academics and researchers at an environmental group concluded that hydraulic fracturing operations can have both positive and negative effects on local housing prices, depending on the water source used by nearby residents. The researchers looked at data from Pennsylvania and concluded that groundwater-dependent homes located near hydraulic fracturing operations suffered negative effects on housing value but homes that obtained drinking water from public water supplies generally experienced upswings in property value. The study was published in the American Economic Review.