Arkansas Oil and Gas Commission Puts Hydraulic Fracturing Disclosure Rule Up for Comment

Following Wyoming’s lead, on September 28, 2010, the Arkansas Oil and Gas Commission initiated a rulemaking to require producers to disclose the constituents of hydraulic fracturing fluid. The proposed rule B-19 is up for public comment, and if adopted, it will make Arkansas the second state to require the disclosure of the chemical constituents of fracing fluid.

The proposed rule will apply to all new wells. The rule sets requirements on casing and cementing to protect freshwater aquifers. The requirements include specifications on casing strength, depth, and cementing. The operator will have a duty to report any change in annulus pressure that might indicate a casing failure or any exceeding of the rated casing pressure to the AOGC within 24 hours. Any incident from the prior month will be reported at the next monthly meeting of the AOGC. The commission will have the discretion to take action as it sees fit to remediate the incident and prevent future incidents.

The rule also addresses wastes not already regulated by the Arkansas Department of Environmental Quality. The rule regulates the use of RCRA exempt materials and fluids used in fracturing. This includes storage in leak free containment vessels, reporting of spills, and a report of any spill to the AOGC with immediate remediation.

Under the rule, following the completion of a frac job, the operator must report a considerable amount of physical data regarding the frac job. This includes maximum pump pressure, volumes of fluid, volume of proppant, type of fluid, type of proppant, calculated fracture height. The rule will require the operator to furnish the types of additives in the frac fluid, the name of the additive, MSDS sheets, Chemical Abstract Numbers (CAS), and concentrations of the additives.

Finally, the rule imposes requirements on contractors who engage in hydraulic fracturing. Specifically, the rule mandates that contractors be authorized to do business in Arkansas, file Organization Reports as required by the AOGC, and provide MSDS and CAS numbers for the chemicals used in fracing.

The Wyoming rule requires the operator to file a form prior to initiating a well fracing, and the state retains the right to require testing of the well casing prior to fracing. The operator must provide the state detailed information about the constituents of fracing fluid, but the operator may request confidentiality from public disclosure. Under the rule, the state will know the classification, CAS numbers, rate, and concentration of every constituent of fracing fluid. In addition, the rule requires the operator to keep records of each frac job, including physical measurements of pressure at the surface, downhole, and in the production casing annulus. The operator must report any annulus pressure that exceeds 500 psi immediately. The rule further requires the reporting of the disposition of any fluids recovered from the frac job.

The Arkansas and Wyoming rules are similar in many respects. Their purpose is to collect data regarding critical control points in the frac job which might lead to the intrusion of frac fluids into groundwater, to insure proper storage and disposal of frac fluids, and to inform the public of the exact composition of frac fluid. There is no doubt the new rule will go far to keep the public’s confidence, but it will be a burden on oil and gas producers.

For better or worse, hydraulic fracturing garners controversy. E&P companies should monitor the ongoing EPA study, the Waxman and Markey congressional investigation of fracing, and the any proposed fracing regulations of oil and gas producing states such as Arkansas, Louisiana, Texas, Oklahoma, North Dakota, Wyoming, Colorado, West Virginia, and Pennsylvania where there are active tight oil and gas plays. If the states take proactive measures to police fracturing and gain the public’s confidence, federal regulation might be avoided.

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The above represents the opinion of the author and not of any organization or group to which the author may belong. This material is general information, and it is not intended to create any lawyer-client relationship. Neither the transmission nor receipt of this information is an offer to extend representation by the author. Any information, opinion, and comment provided herein should not be taken as legal advice or relied upon by the reader for any purpose. The author is licensed in the state of Arkansas. Commentary on cases and law from jurisdictions where the author does not hold license to practice are for demonstrative or scholarly purposes and do not represent the author is licensed or accepts cases in the applicable jurisdiction. If you are need of legal services, you should contact a licensed attorney in your jurisdiction.

EPA Rulemaking for Disposal of Coal Combustion Residuals Progresses

The EPA is nearing the end of a lengthy saga to regulate coal combustion residuals also commonly known as “fly ash.” The EPA issued a proposed rule on June 21, 2010, and began a series of nationwide hearings to receive public input on August 30, 2010.

The EPA proposes to regulate the disposal of fly ash in landfills and surface impoundments under the the Resource Conservation and Recovery Act (RCRA). The justification for the use of RCRA is toxicity. Certainly, the 2008 retention pond failure in Harriman, Tennessee is not far from the EPA’s memory. The EPA cites the Harriman accident as one of its proven damage cases, noting that “[s]ampling results for the contaminated residential soil showed arsenic, cobalt, iron, and thallium levels above the residential Superfund soil screening levels.” According to the EPA, fly ash contains potentially toxic metals such as Antimony, Arsenic, Barium, Beryllium, Cadmium, Chromium, Lead, Mercury, Nickel, Selenium, Silver, and Thallium. The EPA proposes two competing approaches under RCRA: 1) As a “special waste” under subpart C of RCRA; 2) As a “solid waste” under subpart D of RCRA.

The former option is the more expensive one for ratepayers. Under subpart C, the federal government or the states (under state implementation plans) will issue permits to dispose of fly ash. The permitting body will have authority to impose financial assurance, monitoring requirements, and closure requirements. Additionally, the permitting agency will have enforcement authority. In general, the EPA will require liners to separate the disposed of fly ash from the soil, a leachate collection system, and groundwater monitoring systems for new landfills and additions to existing landfills. For existing landfills, the EPA will require only groundwater monitoring wells.

The subpart C regulation requires retrofitting of existing surface impoundments with a liner and the impounded waste to meet land disposal restrictions. This, in effect, phases out surface impoundments within 5 years of the final rule. Additionally, the subpart C option imposes requirements on storage and transport of fly ash.

The subpart D option attenuates the authority of the state and federal government, lowering the costs to generators and ratepayers. The subpart D option does not require permits. Instead, citizens (including states) will enforce the regulations through citizen suits. There will be no direct requirement for financial assurance unless the EPA uses authority under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA). There are no requirements for storage and transport of fly ash. New and existing landfills are treated substantially the same under subpart D and subpart C. Surface impoundments receive less scrutiny under subpart D. The rule requires existing impoundments to retrofit with liners within 5 years or close, but there are no land disposal requirements to meet and a retrofit will allow the facility to continue to receive fly ash. New impoundments will require a liner, but there are no land disposal restrictions.

Because coal remains America’s largest power source, the EPA faces a difficult rulemaking. According to the Energy Information Institute, coal accounts for 337,300 megawatts or about 30% of the USA’s electricity generating capacity. In Arkansas, coal accounts for about 50% of electric generation capacity. America’s coal burning generates 136,000,000 tons of fly ash per year, with 37% or 50,320,000 tons recycled for uses like road base and cement. About 22% or 29,920,000 tons goes into surface impoundments (large ponds filled with fly ash sludge), 8% or 10,880,000 tons as filling for abandoned mines, and 34% or 46,240,000 tons in landfills. Presently, there is no federal regulation of fly ash disposal. The stakes are high for the electric power generators and the ratepayers who rely on them, as the cost of disposal under proposed federal regulations will range from $587,000,000 to $1,500,000,000 per year adding between 0.2% to 0.8% to consumers’ electric bills. The rate figures published by the EPA are averages. Doubtlessly, Arkansas ratepayers will suffer disproportionately because of Arkansas’ higher than average coal generation capacity.

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The above represents the opinion of the author and not of any organization or group to which the author may belong. This material is general information, and it is not intended to create any lawyer-client relationship. Neither the transmission nor receipt of this information is an offer to extend representation by the author. Any information, opinion, and comment provided herein should not be taken as legal advice or relied upon by the reader for any purpose. The author is licensed in the state of Arkansas. Commentary on cases and law from jurisdictions where the author does not hold license to practice are for demonstrative or scholarly purposes and do not represent the author is licensed or accepts cases in the applicable jurisdiction. If you are need of legal services, you should contact a licensed attorney in your jurisdiction.