Introduction
Concerns
Regulatory amendments

Introduction

On October 28 2014 the railroad commission of Texas (RRC) amended its existing oil and gas disposal well regulations to:

  • require the inclusion of seismic activity data in permit applications;
  • provide for more frequent monitoring and reporting for certain wells; and
  • allow modification, suspension or termination of permits on grounds that a disposal well is contributing to seismic activity.

Specifically:

  • applicants for a disposal permit must provide US Geologic Survey (USGS) data regarding seismic events within a circular 100 square mile area centred on the well (a radius of approximately 5.64 miles);
  • the RRC may require additional information, including logs, geologic cross-sections, pressure front boundary calculations and structure maps;
  • the RRC may require more frequent monitoring and reporting for disposal wells for which conditions may exist that would prevent fluids from being confined to the injection interval; and
  • the RRC may modify, suspend or terminate a permit if disposal is contributing to seismic activity after notice and opportunity for a hearing.

The amendments were published in the Texas Register on November 14 2014 and came into effect on November 17 2014. The new rules are unlikely to pose a significant additional burden for most new wells and the estimated 50,000 existing oil and gas disposal wells in Texas. However, if seismicity increases in the area of a well, the RRC now has explicit regulatory provisions allowing it to impose injection pressure and rate limits, a temporary injection ban or even outright cancellation of a disposal well permit.

Concerns

The amendments are the result of growing public scrutiny of hydraulic fracking and concerns over the past several years of a connection between earthquakes and the disposal of frack flowback and produced water. Although disposal by underground injection is not new – the first federal Underground Injection Control regulations were promulgated in 1980 – opposition to fracking, new wells and certain seismic events have spurred many recent studies and debates.

In March 2014 the RRC hired a seismologist to assist it in understanding the potential impact of oil and gas extraction activities and to clarify the root causes of earthquakes that some contend are connected to fracking. Commissioner David Porter commented that bringing a seismologist on board would allow the RRC "to further examine any possible correlation between seismic events and oil and gas activity and gain a more thorough understanding of the science and data available".(1)

In its introduction to the final amendments, the RRC states that:

"[W]hile few earthquakes have been documented over the past several decades relative to the large number of disposal wells in operation, seismic events have infrequently occurred in areas where there is coincident oil and gas activity."(2)

The amendments thus incorporate several provisions that require additional collection and evaluation of seismic activities near proposed disposal wells, and the potential to impose additional monitoring and reporting of seismic data for areas surrounding existing disposal wells.

Regulatory amendments

The new amendments modify Title 16, Sections 3.9 and 3.46 of the Texas Administrative Code, which relate to disposal wells and fluid injection into productive reservoirs, respectively. Although these sections regulate disposal into different types of formation, the language in both sections adopts the same new requirements and provides the RRC with the same level of authority.

Section 3.9 governs disposal of saltwater or other oil and gas waste by injection into formations not productive of oil, gas or geothermal resources.(3) Section 3.46 governs fluid injection operations involving reservoirs productive of oil, gas or geothermal resources, including disposal.(4) Although Section 3.46 regulates injection into productive formations for both enhanced recovery and disposal, the new language relating to seismic activity applies only to wells permitted for disposal.

The new requirements for applicants are found in Sections 3.9(3)(B) and 3.46(b)(1)(C). The amendments to these two sections require applicants for disposal permits to include a printed copy or screenshot showing the results of a survey of information from the USGS regarding the locations of any historical seismic events within a circular area of 100 square miles centred around the proposed disposal well location.

The above provisions are the primary difference between the amendments that the RRC proposed in August 2014 and the final amendments that have been adopted. The proposed amendments would have required that applicants include USGS historical seismic event information for within the estimated radius of the 10-year, five pounds per square inch (psi) pressure front boundary of the proposed disposal well location. The RRC agreed with several comments that this requirement was too complex and had the potential for error, and adopted the 100 square mile area language discussed above instead.(5)

The other amendments formally recognise the RRC's authority to regulate seismic activity related to the disposal wells. For example, if the well is to be located in certain areas seen as having an increased risk that fluids will not be confined to the injection interval,(6) the amendments authorise the RRC to request additional information during the permitting process,(7) and more frequent monitoring and reporting of injection pressure and injection rates.(8) For certain wells, the RRC might impose additional monitoring as a condition of the issued permit. It would also be expected that, after identifying an increase in seismic events, the RRC would impose increased monitoring on existing wells in the area.

Additions to Sections 3.9(6)(A)(vi) and 3.46(d)(1)(F) amend the RRC's existing authority to modify, suspend or terminate a disposal permit to allow such an action based on grounds that the injection is likely to be or has been determined to contribute to seismic activity. These actions would require notice to the well operator and a hearing. This amendment could allow the RRC to terminate permits, but could also be used to impose limits on injection rates and pressures or other conditions intended to mitigate any contribution to seismic activity.

For further information on this topic please contact Bob Greenslade at Norton Rose Fulbright LLP's Denver Office by telephone (+1 303 801 2700), fax (+1 303 801 2777) or email (bob.greenslade@nortonrosefulbright.com). Alternatively, contact Eva Fromm O'Brien or Jennifer Blair Caplan at Norton Rose Fulbright LLP's Houston Office by telephone (+1 713 651 5151), fax (+1 713 651 5246) or email (eva.obrien@nortonrosefulbright.com or jenn.caplan@nortonrosefulbright.com). The Norton Rose Fulbright website can be accessed at www.nortonrosefulbright.com.

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Endnotes

(1) See www.rrc.state.tx.us/news/032814/.

(2) See www.rrc.state.tx.us/media/24613/adopt-amend-3-9and3-46-seismic-activity-102814-sig.pdf.

(3) 16 Tex Admin Code § 3.9.

(4) 16 Tex Admin Code § 3.46(a).

(5) The RRC may still require that applicants submit pressure-front data, but this data will likely be requested only if the well is in an area "where conditions exist that may increase the risk that fluids will not be confined to the injection interval". See infra-text accompanying note 6. A 'pressure front' is defined as the zone of elevated pressure that the injection of fluids into the subsurface creates. A '10-year, five psi pressure front boundary' is defined as the boundary of increased pressure of five psi after 10 years of injection at the maximum requested permit injection volume.

(6) The RRC identifies the following conditions as several factors that may increase the risk that fluids will not be confined to the injection interval: complex geology, proximity of the basement rock to the injection interval, transmissive faults and/or a history of seismic events in the area shown by information from the USGS.

(7) See Sections 3.9(3)(C) and 3.46(b)(1)(D)

(8) See Sections 3.9(11)(A)–(B) and 3.46(i)(1)–(2)