On August 29, 2011, the Railroad Commission of Texas (the "Commission") approved a proposed rule that sets forth requirements for the disclosure of chemicals used in hydraulic fracturing operations. The proposed rule would implement Texas House Bill (HB) 3328 relating to Disclosure of Composition of Hydraulic Fracturing Fluids, which was signed by Governor Rick Perry in June. HB 3328 called upon the Commission to promulgate disclosure rules for hazardous chemicals used in hydraulic fracturing by July 1, 2012 and to complete a rulemaking for all other chemicals by July 1, 2013. The Commission appears to be placing this rulemaking process on an expedited track. The proposed rule would be codified at 16 Texas Administrative Code § 3.29. The proposed rule would apply to a hydraulic fracturing treatment performed on a well in the State of Texas for which the Commission has issued an initial drilling permit on or after the effective date of the rule.

Required Disclosures

Consistent with the provisions of HB 3328, Section 3.29(c) of the proposed rule sets forth disclosure requirements for suppliers, service companies, and operators involved in hydraulic fracturing operations. Specifically, the proposed rule provides that, no later than 30 days following the completion of a hydraulic fracturing treatment on a well, suppliers and service companies must provide the operator of the well with the identity of each chemical ingredient intentionally added to the hydraulic fracturing fluid, specifically including any chemical ingredient for which a Material Safety Data Sheet (MSDS) must be prepared pursuant to 29 C.F.R. § 1910.1200(g)(2) and all other chemical ingredients that were intentionally included in, or used for the purpose of creating, a hydraulic fracturing treatment for the well.

A "chemical ingredient" is defined under the proposed rule as "a discrete chemical constituent with its own specific name or identity, such as a CAS [Chemical Abstracts Service] number, that is contained in an additive." An "additive" is defined as "any chemical substance or combination of substances, including a proppant, contained in a hydraulic fracturing fluid that is intentionally added to a base fluid for a specific purpose whether or not the purpose of any such substance or combination of substances is to create fractures in a formation."

Operators, in turn, are required to submit information to the hydraulic fracturing chemical disclosure registry website of the Ground Water Protection Council and the Interstate Oil and Gas Compact Commission known as "FracFocus," referred to in the proposed rule as the Chemical Disclosure Registry, on or before a well completion report is submitted the Commission. The information that must be provided to the Chemical Disclosure Registry includes:

  • Operator name;
  • Date of the hydraulic fracturing treatment;
  • County in which the well is located;
  • API number for the well;
  • Well name and number;
  • Longitude and latitude of the wellhead;
  • Total vertical depth of the well;
  • Total volume of water used in the hydraulic fracturing treatment or the type and volume of the base fluid, if something other than water is used;
  • Each additive used in the hydraulic fracturing treatment and the trade name, supplier, and a brief description of the intended use or function of the additive;
  • Each chemical ingredient used in the hydraulic fracturing treatment for which an MSDS is required;
  • All other chemical ingredients intentionally added by the operator; and
  • The actual or maximum concentration of each additive and/or chemical ingredient in percent by mass.

The requirement to disclose the concentration of additives or chemical ingredients in percent by mass is significant and may result in many claims for trade secret protection by fracturing service companies and operators.

In addition to the disclosures above, operators also must submit to the Commission with the well completion report for each well on which a hydraulic fracturing treatment was conducted:

  • A copy of the disclosure form posted on the Chemical Disclosure Registry; and
  • A supplemental list of all chemicals and their respective CAS numbers, not listed on the Chemical Disclosure Registry form, that were intentionally included in and used for the purpose of created the hydraulic fracturing treatment for the well.

The operator may provide all of the required information on the Chemical Disclosure Registry form.

Section 3.29(d) of the proposed rule exempts certain ingredients from disclosure. Specifically, suppliers, service companies, and operators are not required to:

  • Disclose ingredients that are not disclosed to it by the manufacturer, supplier, or service company;
  • Disclose ingredients that are not intentionally added to the hydraulic fracturing treatment;
  • Disclose ingredients that occur incidentally, are otherwise unintentionally present, may be the incidental result of a chemical reaction or process, or may be constituents of naturally occurring materials that become part of a hydraulic fracturing fluid; or
  • Identify specific chemical ingredients that are eligible for trade secret protection based on the additive in which they are found or provide the concentration of such ingredients.

Trade Secret Protection

The proposed rule provides that a supplier, service company, or operator may claim that the specific identity and/or concentration of any additive or chemical ingredient is entitled to trade secret protection and withhold disclosure of this information on this basis. "Trade secret" is defined in the rule as "any formula, pattern, device, or compilation of information that is used in a person's business, and that gives the person an opportunity to obtain an advantage over competitors who do not know or use it." Establishing that information is a trade secret requires a factual showing to the Office of the Attorney General, Open Records Division, that the information meets specified factors set forth in the proposed rule.

If a supplier, service company, or operator withholds this information based on a claim that it is a trade secret, the withholding party must disclose to the Commission information that:

  • Discloses the chemical family associated with the chemical ingredient;
  • States that the specific identity and/or concentration of the chemical ingredient are entitled to protection as trade secret information; and
  • Discloses the properties and effects of the withheld chemical ingredient.

The proposed rule further sets forth procedures and requirements for challenging a trade secret claim. The proposed rule provides that only certain parties may seek to challenge a trade secret claim, including:

  • The landowner on whose property the relevant wellhead is located;
  • The landowner who owns real property adjacent to the property where the relevant wellhead is located; and
  • A department or agency of the State of Texas with jurisdiction over a matter to which the claimed trade secret information is relevant.

A request to challenge a party's entitlement to trade secret protection initiates an administrative process through which the party claiming trade secret protection may respond to the challenge and seek to substantiate its entitlement to trade secret protection. A supplier, service company, or an operator is not required to disclose trade secret information unless the Office of the Attorney General or a court of proper jurisdiction determines that the information is not entitled to trade secret protection under Texas Government Code Chapter 552. A supplier, service company, or operator may not, however, withhold information related to chemical ingredients used in hydraulic fracturing operations, including information identified as a trade secret, from any health professional or emergency responder who needs the information for diagnostic, treatment, or other emergency response purposes.

What This Means to You

The proposed rule is expected to be published in the Texas Register on September 9, 2011, after which there will be a 32-day comment period. The Commission also is scheduled to conduct a hearing to take public comments on Wednesday, October 5, 2011, at the Commission's headquarters in Austin, Texas. In addition, the proposed rule and an online comment form is available on the Commission's website, so interested parties may submit comments prior to the rule being published. Interested parties should carefully track this proposed rule and participate in the public comment process, which will conclude on October 11, 2011.

A copy of the proposed rule is available here. The online comment form is available here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.