The Delaware River Basin is a 330-mile-long river watershed running through four states: New York, Pennsylvania, New Jersey, and Delaware. Since 1961, the Delaware River Basin Commission (“DRBC”), a regional interstate and federal agency, has managed the basin. The governors for the four basin states and the commander of the U.S. Army Corps of Engineers for the North Atlantic Division make up the voting members of the agency.

Almost a decade ago, in 2010, the Commission implemented a moratorium to study the potential effects of hydraulic fracking on the basin. According to the Commission, “about 40 percent of the basin’s geographic area are underlain by the Marcellus and Utica shales . . . [but the] presence of commercially viable natural gas from these formations within the basis is not known.” Nevertheless, with approximately fifteen million people relying on the basin for drinking water, the Commission has been cautious to permit any activity that could pollute or deplete the natural resource.

In September 2017, the commissioners directed the executive director to draft regulations prohibiting high volume hydraulic fracking for the production of natural gas in the basin. The Commission subsequently released draft regulations amending the DRBC’s Special Regulations and Administrative Manual – Rules of Practice and Procedure. According to the Commission, the purpose of the proposed prohibition is to “conserve, preserve and protect the quality and quantity of the Basin’s water resources.”

If adopted, the proposed regulations will not only permanently ban high volume hydraulic fracking within the basin, but will also discourage the “diversion, transfer or exportation of water from sources within the Basin to support hydraulic fracturing outside the Basin” and the “importation of wastewater.” While the median water use for a gas well is four million gallons per fracking activity, the regulations define “high-volume” as using “a combined total of 300,000 or more gallons,” effectively banning most, if not all, fracking activity.

During the comment period, the DRBC received over 8,600 comments and submissions from members of the public. Now, more than a year later, the Commission has yet to finalize the proposed regulations. While the Commission is under no deadline to decide its next steps, with three governors recently announcing their support—and New York’s governor preventing the construction of the NESE pipeline—the ban is expected to pass.

Beyond igniting public comment, the DRBC’s proposed regulations have also sparked legislation supporting both landowner’s rights and the basin’s environmental protection.

Last week, the Pennsylvania House debated  Bill 827, introduced by representative Jonathan Fritz, which proposes treating the fracking ban like a government taking in an eminent domain proceeding. If passed, Fritz’s bill will compensate landowners for economic loss due to the ban.

Moreover, on May 22, 2019, U.S. Congresswoman Bonnie Watson Coleman announced a $10 million dollar appropriation for the basin. In a statement, Congresswoman Watson Coleman told the media that the appropriation “represents an important investment in our environment, a step toward protecting our natural resources, and a tool to reverse the impact of various manmade threats to the river.”

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Because the oil and gas industry has a considerable global presence, the Shale Gas Handbook covers global oil and gas issues. For example, the second edition of the Shale Gas Handbook encompasses changes in Chile and Colombia where governments have rolled out shale oil and gas plans and placed new blocks up for auction, in the United Kingdom where the government released legislation regarding permitting and new requirements in dealing with wastewater and injection wells related to fracking, and in the United States where there have been changes to the governing regulations and case law. Although Norton Rose Fulbright intends to continuously update the Shale Gas Handbook, the firm will also provide real-time updates on oil and gas issues through its hydraulic fracturing blog.

Read the handbook.

On April 16, 2019, Colorado Governor Jared Polis signed Senate Bill 19-181, officially revamping the Colorado Oil and Gas Conservation Commission. Prior to the Act, the Commission’s purpose was to foster the development of Colorado’s natural resources. Now, the Commission has a new mission: to regulate the oil and gas industry and to protect the public’s health and safety and the environment.

Over the next year, the Commission is expected to unveil numerous regulations designed to carry out its freshly-minted mission. The Act expressly mandates regulations requiring energy companies to supply 24/7 pollution monitors, disclose more information to the public, and monitor flow lines.

The Legislature’s most substantial change, however, is not what type of new restrictive rules may be implemented, but who can implement them. Now, state law no longer pre-empts all local law governing oil and gas development. Municipalities are free to regulate fracking activity within their jurisdictions through zoning restrictions and ordinances. For example, the Act expressly permits local governments to impose noise restrictions, inspection requirements, and additional fees for leaks, spills, and omissions.

The legal effects of Colorado’s change in preemption law will largely depend on how Colorado communities wield their new power.

In Weld County—the county responsible for 89% percent of the State’s crude oil production— county commissioners have already announced plans to use their new authority to maintain a “working relationship” with the energy industry.

One way Colorado communities have historically managed to strike a balance of welcoming development while protecting citizens’ health and safety is through operating agreements. In a statement to the media, president and CEO of the Colorado Oil and Gas Association Dan Haley noted that operating agreements “are a way to coordinate and construct unique approaches to local energy development that values community interest, property owners and business needs.”

Still other cities are expected to attempt to revive previously-thought-dead fracking bans. In 2016, the Colorado Supreme Court struck down fracking bans imposed by Boulder and Longmont based on state-preemption law. Now, the Supreme Court’s ruling is in jeopardy.

Colorado’s legislative overhaul is not the State’s first recent attempt to increase energy regulations. Last November, environmental activists attempted to pass Proposition 112, which would have increased setback requirements for drilling from 500 feet to 2,500 feet from certain vulnerable areas like neighborhoods and schools. While the proposition ultimately failed, the Commission subsequently adopted a more moderate setback rule.

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The BLM’s supplemental report comes in response to a 2017 lawsuit in which environmental groups alleged that the BLM’s 2014 proposed Resource Management Plan (2014 Plan) violated the National Environmental Policy Act. Judge Michael Fitzgerald of the U.S. District Court for the Central District of California granted the environmental groups’ motion for summary judgment, finding that the BLM’s initial plans failed to take a “hard look” at the potential environmental impact of the proposed hydraulic fracking. On May 3, 2017, the parties filed a settlement agreement in which BLM agreed to re-review its 2014 Plan.

Now, after further review, the BLM sees no reason to update the 2014 Plan. In its supplemental report, the agency claims to have found “no conflicts . . . between the estimated impacts of hydraulic fracturing and the resource or program management goals and objectives” set forth in the 2014 Plan. The additional review did not reveal any “notable increases” to the Plan’s estimated total environmental impact.

So far, the BLM’s new report has received harsh criticism from environmental groups concerned about the potential negative effects of hydraulic fracking. According to the BLM, however, due to the nature of California’s reservoirs, hydraulic fracking in the proposed region is typically performed in a vertical manner to stimulate wells and access small pockets. As a result, only “a relatively small number of new [California] wells are hydraulic fractured,” with most of the fracking occurring in old fields on existing leases. Nevertheless, environmental groups are still expected to pursue further legal action.

As it is currently written, the BLM report does not intend to alter any existing rights or authorities of private landowners or surface management agencies. The public may submit written comments from now until June 10.

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On April 3, 2019, the Briggs family filed its brief urging the Pennsylvania Supreme Court to affirm the Superior Court’s decision in its favor and preserve Pennsylvania’s  “centuries old concepts of land ownership, trespass and conversion law.” The Briggs compared the energy company’s fracking activity to slant drilling, claiming that the proppants of hydraulic fracturing “serve the same purpose as a drill bit invading the land.”

Previously, on January 30, 2019, the energy company also filed its brief with the Supreme Court. The energy company argued that the age-old rule of capture applies to all methods of oil and gas development, including hydraulic fracking. The company also raised numerous public policy arguments in its brief, claiming that “exposing oil and gas operators to liability for their development activities would harm Pennsylvania’s economy and increase the cost of energy.” Additional public policy concerns raised included fear of impinging landowners’ rights, burdening courts with speculative and unwieldy litigation, and overstepping the General Assembly’s legislative role.

Both parties’ briefs thoroughly discussed an almost identical 2008 Texas Supreme Court case, Coastal Oil & Gas Corp. v. Garza Energy Trust. In Coastal Oil, Justice Hecht delivered the majority opinion for the Court, which held that the rule of capture does apply to modern day fracking.

Like Texas, energy is a major part of Pennsylvania’s economy. Pennsylvania is currently the nation’s second largest gas-producing state. At least six gas industry trade groups have filed amicus curiae briefs in support of the energy company. Regardless of the decision reached, the Pennsylvania Supreme Court’s holding will no doubt set lasting precedent affecting numerous landowners and the oil and gas industry.

On April 15, 2019, the Court granted the energy company’s application to reschedule oral argument for a later date. No date has been set, but the energy company’s reply brief is due May 22, 2019.

You can see our previous post about the Superior Court’s decision in favor of the Briggs family.

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The Pennsylvania Supreme Court will consider a single question on appeal: “[d]oes the rule of capture apply to oil and gas produced from wells that were completed using hydraulic fracturing and preclude trespass liability for allegedly draining oil or gas from under nearby property, where the well is drilled solely on and beneath the driller’s own property and the hydraulic fracturing fluids are injected solely on or beneath the driller’s own property?”

In 2015, the Briggs family brought suit in Susquehanna County Court alleging Southwestern Energy trespassed and converted gas from their 11-acre tract. The Briggs family claimed Southwestern Energy had used hydraulic fracturing to extract natural gas from under their property since 2011. The Briggs family’s claim was defeated on summary judgment.

In an opinion published on April 2, 2018, a two-judge panel of the Superior Court overturned decades of the state’s oil and gas law by holding hydraulic fracturing may constitute an actionable trespass. In reaching its decision, the Pennsylvania Superior Court noted the distinction between conventional reservoirs where the “gas can migrate freely within the reservoir and across property lines” compared with unconventional reservoirs where gas is trapped in tight shale formations and “nonmigratory in nature.”

In its brief, seeking the Pennsylvania Supreme Court’s intervention, Southwestern Energy argued the rule of capture had been the common law in Pennsylvania for centuries. In Southwestern Energy’s petition for appeal, the company pointed to Texas, the only state to take up the issue in the context of hydraulic fracturing, which held the rule of capture did apply. Southwestern Energy says the lower court’s ruling will throw “the law surrounding oil and gas rights into chaos.”

In response to the Pennsylvania Supreme Court’s allocatur grant, counsel for the Briggs family, Laurence Kelly, said “I’m just looking forward to presenting my client’s case in the Supreme Court.” A Southwestern Energy spokesman said “[w]e appreciate the court’s thoughtful decision to review this ruling, especially given the case’s potential to negatively impact Pennsylvanians who depend on natural gas for royalty payments, jobs, and affordable energy. Bringing legal clarity and certainty to this potential far-reaching matter—while avoiding pitting neighbor against neighbor in costly and speculative legal disputes that could unnecessarily overburden our courts—are top priorities for Southwestern Energy.”

No dates have been set for briefs or oral arguments before the Supreme Court.

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The study examined the correlation between seismicity and wastewater injection wells in Oklahoma’s Arbuckle Formation—located adjacent to the basement. Additionally, the study noted seismic activity appeared to decrease in connection with reduced wastewater injection rates. According to the study, wastewater injection wells are the culprit of the increased seismic activity in Oklahoma, not hydraulic fracturing.

Similar studies on wastewater injection wells focused their research on regional areas, not exceptional study areas like the Arbuckle Formation. These studies revealed seismicity is rare considering the extensive injection activity that has occurred in close proximity to active faults. The USGS emphasized only a small fraction of wastewater disposal wells have induced seismicity. In fact, Thomas Goebel, researcher and lecturer at the University of California, emphasized the specific geologic setting and nearby faults makes some areas more susceptible to seismicity.

The National Research Council reiterated hydraulic fracturing “does not pose a high risk for inducing felt seismic events.” A combination of many factors including injection rate, total volume, the presence of faults, large stresses, and the pathway of the injected fluids are necessary for injection to induce felt earthquakes. In fact, Keith B. Hall, Director of the Mineral Law Institute, emphasized “[t]he vast majority of injection operations, including those associated with the oil and gas industry, do not trigger earthquakes.”

Although Scanlon noted the Oklahoma Corporation Commission reduced wastewater injection rates by 40 percent in the Arbuckle Formation in 2015, Oklahoma regulators are cognizant about cooperating with producers. When setting fracking and injection regulations, fracking proponents argue regulators need to keep in mind the benefits of fracking such as, access to an abundant source of domestic energy, fewer CO₂ emissions than coal, and economic benefits like providing jobs, revenues, and taxes for local governments.

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Proposition 112 would have expanded existing setback requirements from 500 feet to 2,500 feet from homes, schools, hospitals, and “vulnerable areas.” If Proposition 112 passed, Colorado would have approved the country’s largest mandatory buffer zone between new wells and homes. Proposition 112 would have made future oil and gas development on nonfederal land within the state nearly impossible.

The groups in opposition of the measure like Protect Colorado, funded almost exclusively by the oil and gas industry, spent nearly 43 times more money than the groups backing the measure like Colorado Rising. Colorado Rising spokesperson Anne Lee Foster said the group was “excited that almost 800,000 Coloradans voted for a safer distance from drilling and fracking despite a massive opposition campaign.”

Dan Haley, president and CEO of the Colorado Oil and Gas Association, said “we’re grateful Coloradans saw this for what it was, which was an attempt to run oil and gas out of the state.” But, Haley reiterated he wants “every Coloradan to know we are committed to developing our resources in a responsible manner that protects our environment and keeps our employees and community healthy and safe.”

A Colorado Rising representative told the media it’s too soon to say whether the group will take the setback issue back to the ballot box. But, Foster told the media “this is not going away.” Colorado Rising added we have “momentum we will continue to build upon.”

Industry executives are aware this issue did not permanently go away when voters rejected Proposition 112. The executives do not want a replay in 2020 of this year’s ballot fight. In fact, industry executives said they are willing to talk to any reasonable group about proposals to resolve this issue.

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Colorado

Proposition 112

This measure mandates that new oil and gas development on nonfederal lands, including fracking, be at least 2,500 feet from occupied buildings such as homes, schools, hospitals, and other “vulnerable areas.” Vulnerable areas are defined as “playgrounds, permanent sports fields, amphitheaters, public parks, public open space, public and community drinking water sources, irrigation canals, reservoirs, lakes, rivers, perennial or intermittent streams, and creeks, and any additional vulnerable areas designated by the state or a local government.” Reentering abandoned oil and gas wells would be considered new development and the setback requirements would apply. The current setback requirements are 500 feet from homes and 1,000 feet from schools and hospitals.

Amendment 74

This measure would amend the state constitution to require property owners be compensated for any decrease in the fair market value of their property caused by state laws or regulations. If amended, Article II, Section 15 of Colorado’s Constitution would read, “[p]rivate property shall not be taken or damaged, or reduced in fair market value by government law or regulation for public or private use, without just compensation.” If the local government limits oil and gas development, this amendment would likely allow an owner of mineral rights to file a takings claim for the reduced fair market value of their property.

Florida

Amendment 9

Amendment 9 would prohibit “drilling, either for exploration or extraction, of oil or gas on all lands beneath state waters,” which would encompass offshore fracking. State-owned waters extend from the mean high water line to the state’s outermost territorial boundaries. Amendment 9 is bundled with vaping bans.

California

Measure G (San Luis Obispo County)

Measure G would prohibit “new petroleum extraction, and all well stimulation treatments, including fracking and acid well stimulation, on all lands within the unincorporated area of the county.” Although fracking is not currently used in San Luis Obispo County, the county is worried fracking could be used in the future.

Michigan and Ohio

Measures that did not make the ballot

The Michigan Fracking Ban Initiative is not on Michigan’s November ballot. The Measure would have banned the use of horizontal fracking and prohibited the production, storage, disposal, and processing of fracking waste in the state.

The Ohio Supreme Court ruled that a measure meant to ban fracking in Columbus, Ohio was illegal and will not appear on the November ballot. The court reasoned that state law specifically reserves the right to regulate oil and gas activity. The measure would have “prohibit[ed] most hydrocarbon-extraction activities within the city and impose[d] strict liability on any government or corporation that violate[d] its terms.”

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Proposition 112 would establish the minimum setback of all oil and gas wells to 2,500 feet from homes, schools, hospitals, and “vulnerable areas.” Current regulations mandate wells are 500 feet from homes and 1,000 feet from schools and hospitals.

Advocates of the oil and gas industry, such as Chip Rimer—a top executive at Noble Energy, warn that these new setback requirements could cut off as much as 80% of the state’s future energy development on nonfederal lands, causing 150,000 job losses statewide, and decreasing tax revenues by $1 billion. However, proponents of Proposition 112 believe the measure is necessary to protect the health and safety of residents in the Front Range Area where the population is booming and the industry continues to grow.

Voters will also consider Amendment 74 this fall. Amendment 74 would amend the Colorado Constitution’s taking clause to read: “[p]rivate property shall not be taken or damaged, or reduced in fair market value by government law or regulation for public or private use, without just compensation.”

Chad Vorthmann, Amendment 74’s sponsor and Vice President of Colorado Farm Bureau, says the measure is about “protecting Colorado’s farmers and ranchers from extremist attempts to enforce random setback requirements for oil and natural gas development . . . and strip away Colorado landowners’ right to use their land the way they wish.”

Opponents of Amendment 74 believe the regulatory takings claim will invite a flood of lawsuits and bankrupt small municipalities. Dan Grossman, a former Colorado state legislator who is the national director of state programs for the Environmental Defense Fund’s oil and gas program, claims that the measure will paralyze local governments. If local governments reject oil and gas developments they could face takings claims from mineral owners. But if the government approves the development, it could be faced with a takings claim from property owners.

Both initiatives passing would be the worst-case scenario, Sam Mamet, executive director of the Colorado Municipal League, says. Proposition 112 would invite legal challenges under Amendment 74. In fact, Eric Sondermann, an independent political analyst, calls Amendment 74 a “bit of an insurance policy” against Proposition 112.

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