United States: TSCA On Hydraulic Fracturing: Gateway To New Federal Rules?

Last Updated: September 30 2014
Article by Michael L. Krancer, Margaret A. Hill and Frank L. Tamulonis III

Action Items: To avoid and discourage duplicative and unnecessary federal oil and gas regulations, oil and gas operators should resist federal efforts to federalize hydraulic fracturing regulations and should actively engage with state regulators to craft innovative and practical regulations at the state level.

Historically, states have taken the lead in regulating oil and gas development given the states' primary interest in securing rational oil and gas development in their own boundaries. Hydraulic fracturing—a 60-year-old technology used for oil and gas development—is a temporary process of pumping fluids underground for the purpose of extraction of natural gas or oil from deep formations lying 5,000 to 8,000 feet or more below the surface. Fresh groundwater is located from about less than 600 feet below the surface. Hydraulic fracturing has been practiced routinely for decades by operators in many states, including New York.

Hydraulic fracturing has, by design, never been regulated by the federal government. It has always been a matter of state regulation. The U.S. Environmental Protection Agency (EPA) has never intended or thought that hydraulic fracturing is or should be subject to any federal regulatory program, including the Safe Drinking Water Act's Underground Injection Control (UIC) program. Instead, the EPA shared the view that the practice was well-regulated by the various states in which it was taking place.

The federal imprimatur on state regulation of hydraulic fracturing was reaffirmed by Congress as recently as 2005 with the enactment of the Energy Policy Act of 2005, and by the EPA in a 2004 study that concluded that hydraulic fracturing poses little or no threat to drinking water, and that no further study is necessary. Importantly, the 2004 EPA study was reaffirmed by a new study just released from the much more agile—and more scientifically competent with respect to hydraulic fracturing—Department of Energy (DOE). This study shows no impact whatsoever between hydraulic fracturing and threats to drinking water supplies. The study, released Monday, was performed by the DOE's National Energy Technology Laboratory. It monitored a hydraulic fracturing operation in Greene County, Pa., for upward fracture growth out of the target zone and upward gas and fluid migration. Results showed that "fracture growth ceased more than 5,000 feet below drinking water aquifers and there was no detectable upward migration of gas or fluids from the hydraulically fractured Marcellus Shale."

Both the 2004 and 2014 studies focus on hydrology and geology in reaching their conclusions, and therefore support the practice to allow states to take the lead in regulating oil and gas production. The current practice is just common sense given the diverse geological and hydrogeological conditions present in states where hydraulic fracturing is done. It would be impractical and ineffective to craft a one-size-fits-all federal rule on hydraulic fracturing that could be implemented in states as geologically diverse as Texas, Wyoming, California and Pennsylvania.

Notwithstanding this common-sense notion that states should regulate hydraulic fracturing in their own backyards— a policy currently shared by presidents, the EPA and Congress—it appears that the EPA may be making a backdoor power grab to end the era of state primacy on this issue. Chief among the EPA's strategic arsenal is the use of the Toxic Substances Control Act (TSCA) to regulate hydraulic fracturing by regulating oil and gas chemicals used in energy development. The agency's strategy is indeed ironic given the fact that the states involved in hydraulic fracturing have extensive chemical substance disclosure requirements in place already.

The consideration of TSCA's disclosure requirements began in all too typical "friendly lawsuit or petition" fashion in 2011 when Earthjustice, and more than 100 other environmental groups, submitted a TSCA Section 21 petition requesting that the EPA initiate rulemakings for hydraulic fracturing chemicals under Sections 4 and 8 of the TSCA. Specifically, the petition requested that the EPA adopt a rule pursuant to TSCA Section 4 that would require chemical manufacturers and processors to conduct toxicity tests of chemical substances and mixtures used in oil and gas production. Additionally, the petition requested that the EPA adopt a rule pursuant to TSCA Section 8 that would require chemical manufacturers and processors to report information on all chemical substances used in oil and gas exploration. The EPA ultimately denied the requested Section 4 action, but shortly thereafter, the EPA partially granted the petitioners' requests under Section 8, stating, "We believe there is value in initiating a proposed rulemaking process using TSCA authorities to obtain data on chemical substances and mixtures used in hydraulic fracturing." The EPA filed a notice of its intent to publish an advance notice of proposed rulemaking (ANPRM), requesting comment on what information should be required to be reported or disclosed regarding hydraulic fracturing chemical substances and mixtures. That public comment period closed Thursday.

The TSCA is a "gateway" statute in that it allows the EPA to collect information that may be used to justify additional federal regulation in other programs. In that sense, the ANPRM, by itself, will not directly result in additional federal regulation. Nevertheless, the petition, and the EPA's response, represents a critical first step—it represents a call for new and comprehensive regulation over the oil and gas industry.

It is difficult to predict precisely how the ANPRM will affect federal regulation of hydraulic fracturing. There are several other federal actions under way that could be directly impacted by the information and data garnered during the stakeholder process initiated by the ANPRM. For instance, the Department of the Interior's Bureau of Land Management (BLM) issued draft rules in May 2013 for hydraulic fracturing on federally owned lands. The ANPRM specifically mentions the BLM rules, which would require public disclosure of chemicals used in hydraulic fracturing operations on BLM-managed lands. It is unclear whether the BLM rules and TSCA rules will be similar in scope, but it is possible that oil and gas operators will face disclosure requirements under both.

Another program potentially affected by the ANPRM stakeholder process is the EPA's glacial ongoing study of what effects, if any, hydraulic fracturing may have on drinking water resources. That study, which began in 2010 and is expected to conclude in 2016, aims to understand the relationship between hydraulic fracturing and drinking water resources, and identify factors that may lead to human exposure and risks. Any information collected during this study could influence any TSCA-related rulemaking. Conversely, any information gathered during the rulemaking process could inform the drinking water study.

The ANPRM stakeholder process could also impact the exemption for wastes generated by oil and gas exploration and production (E&P wastes) activities under the Resource Conservation and Recovery Act (RCRA). Since 1988, certain E&P wastes have been exempt from RCRA Subtitle C hazardous waste management requirements. This exemption is justified on the basis that E&P wastes are large-volume wastes that are lower in toxicity than other wastes regulated under the RCRA hazardous waste program. Moreover, E&P wastes are generally subject to non-hazardous waste regulation under RCRA Subtitle D and applicable state regulations. Indeed, many states have specific regulations and guidance for E&P wastes. That said, the increase in hydraulic fracturing activities and shifting political winds have led to calls for additional E&P waste regulation under the RCRA umbrella. Any potential TSCA rulemaking could provide additional ammunition to environmental groups seeking to roll back the RCRA E&P exemption.

Another point of "mission creep" into the state's regulatory primacy is ASTM International's development of two standards related to hydraulic fracturing. ASTM Subcommittee D18.26 was established to pursue standards pertaining to all aspects of hydraulic fracturing. Additionally, ASTM Subcommittee D.19.09 will address hydraulic fracturing issues, including standards used for assessing water quality and determining the impact of spills and possible contamination. Although not yet finalized, the availability of ASTM standards could facilitate federal regulation of hydraulic fracturing by allowing Congress or federal agencies to incorporate those standards by reference into statutes or regulations.

All the while, states have continued to work hard to develop comprehensive regulatory schemes to permit and regulate oil and gas development including hydraulic fracturing activities. Numerous states have passed increasingly stringent disclosure laws and other regulations tailored to those states' hydraulic fracturing operations. For example, in March, Wyoming enacted one of the nation's most stringent regulations related to well water testing near drilling sites. Colorado also introduced the country's first standards for methane emissions from oil and gas operations. And, in Pennsylvania, we adopted Act 13, which contains one of the most forward-thinking and expansive disclosure laws in the nation. Our law provides for disclosure through a publicly accessible Web-based database known as FracFocus. org, and for mandatory disclosure—even of proprietary information—to health care professionals for the purpose of diagnosis or treatment and immediately in an emergency. Indeed, the Commonwealth Court held in July in Robinson Township v. Commonwealth of Pennsylvania, No. 284 M.D. 2012, that Act 13's medical disclosure provisions were appropriate and protective.

As a result of these state initiatives, energy companies are subject to an increasingly complex and stringent array of state regulations. The presence and success of these state-led efforts calls into question the necessity and potential effectiveness of greater federal intervention.

It is clear that the EPA is cognizant of the efforts undertaken by states to regulate hydraulic fracturing and, despite the increasing momentum favoring federal regulation, the EPA repeatedly stated in the ANPRM its interest in avoiding duplication and overlap with other regulatory disclosure programs. In so doing, the EPA has recognized that TSCA Section 9 requires that the EPA consult and coordinate with other executive departments and agencies to impose the least burden of duplicative requirements. Section 9 does not, however, prohibit the EPA from imposing disclosure requirements that are more restrictive than other state requirements. And yet, many states have engaged industry and other stakeholders to develop innovative approaches requiring best practices from industry. The EPA may be willing to continue to take a back seat where it is determined that state disclosure requirements and other hydraulic fracturing regulations are sufficiently comprehensive. Accordingly, oil and gas operators may find it advisable to actively engage with state regulators to craft innovative and practical regulations at the state level, so as to possibly avoid or discourage a duplicative one-size-fits-all federal solution.

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.

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Authors
Michael L. Krancer
Margaret A. Hill
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