Hydraulic Fracturing Disclosure: A Brief Comparison of State Disclosure Requirements

May 8, 2016
  1. Introduction

Advancements in hydraulic fracturing have fueled the domestic oil and gas industry in recent years. According to the Energy Information Administration, fracking now accounts for more than half of all U.S. oil output and “has allowed the U.S. to increase its oil production faster than at any time in its history”.[1] However, fracking has not been free from criticism because of its potential environmental effects. Fracking involves pumping large volumes of water, sand, and chemicals into the ground at extremely high pressure to break up rocks containing oil and gas to release the resources.[2] It has been suggested that this process leads to groundwater contamination. Because of this public concern, there has been a strong push for regulations requiring the disclosure of fracturing fluid composition.

 

Because oversight of fracking was left to the states, regulations differ immensely within the United States.[3] This also leads to the effectiveness of each regulation to vary. The effectiveness of disclosure regulation depends on many factors including: when disclosure is required, what information is mandatory, and whether the information is accessible.[4] While not a comprehensive comparison of state disclosure requirements, this analysis will provide insight into these factors that dictate the effectiveness.

 

  1. Analysis

Limited Access To Disclosures

Disclosure is only effective if it is accessible and comprehensive. Most states today utilize FracFocus.org as the designated disclosure location. FracFocus has a user-friendly interface, but the disclosures on the website are limited because the website uses a standardized disclosure form.[5] The result of this standardized form is that there is not a single state whose disclosures on the site contain all information required by the state.[6] Fortunately, many states also have their own disclosure websites. However, these suffer from their own obstacles; many are difficult to navigate and do not provide an easy way to search for wells.[7] For example, a number of these states only allow searches by county that list wells by confusing geographic information such as longitude and latitude.[8] Overall, members of the public are faced with a challenge when attempting to access disclosures.

 

Pre-fracturing Chemical Disclosure

Disclosure of chemicals that will be used prior to the commencement of drilling allows landowners to perform baseline testing before fracking begins. Without these baseline tests, it is difficult for the landowner to isolate the true cause of any contamination. However, only Arkansas, California, Indiana, Montana, West Virginia, and Wyoming ensure that there is pre-fracturing disclosure.[9] These disclosure requirements vary immensely. For example, Wyoming requires operators to disclose all chemicals they propose to use while Indiana only requires the disclosure of chemicals used on certain fractured wells.[10] Yet, while Indiana’s requirements may seem to be lacking, they are still an improvement over the states that require no pre-fracturing disclosure.

 

Chemical Identification Requirements

Typically, states differentiate the disclosure necessary between “products” and “additives.” “Products are substances made up of one or more chemical constituents. Products generally have a “trade name” under which they are sold (e.g. “Bactron K-31W”) and a function they serve (e.g. biocide). Additives are the individual chemical constituents which constitute products.[11]” Because of this, it is much more important to require disclosure of additives. Chemical Abstract Service (CAS) numbers simplifies this requirement. Each chemical is designated a CAS number by the American Chemical Society and this allows for easy identification. Unfortunately, only eight states: Arkansas, California, Montana, Ohio, Pennsylvania, Texas, and Wyoming require disclosure of CAS for all additives.[12] Additionally, only California, Montana, and Wyoming require the concentrations of the additives. [13]Without the CAS numbers for each additive, and to a lesser extent the additive concentration, it is impossible to determine what chemicals were used, what possible contaminants may be present, and to what extent.[14]

 

Trade Secret Exemptions

Most states provide an exemption to the disclosure requirement for information deemed to be a “trade secret.” A trade secret is information that derives economic value and is the subject of efforts to maintain its secrecy.[15] Oil and gas companies desire to keep their proprietary chemical mixtures a secret, while the public desires to know what is being pumped into the ground below them. For the exemption to be truly effective, regulators must have an appropriate process in place to determine which information deserves protection. However, because no two states apply the same regulatory scheme, the process to determine whether a trade secret exemption is appropriate widely varies. For example, Wyoming requires a factual justification to be submitted and has a process in place to evaluate the legitimacy of the trade secret.[16] On the other hand, in Michigan, operators do not have to disclose proprietary information to either the public or regulators without any process to evaluate the use of the trade secret exemption.[17] This disparity leads to costly effects within the oil and gas industry. Industry players that operate in multiple states must comply with these state regulations, and a trade secret that must be disclosed in one state will typically destroy trade secret status in all states.

 

III. Conclusion

Hydraulic fracturing fluid disclosure can be seen as necessary not only to protect public health and water quality, but also to alleviate any public worries of safe hydraulic fracturing. However, state disclosure rules are not currently living up to the standards necessary to provide useful information. No state can provide a comprehensive rule; each state has a gap in their disclosure policy, whether it be lax trade secret exemptions or the inaccessibility of disclosure information. But by enacting disclosure rules most states have taken an important step towards providing for the public good. However, states should continue to move towards comprehensive disclosure. Thousands of wells are hydraulically fractured each year. Thus, it is important that rules are in place to adequately inform the public on the chemicals use during the process.

 

 

[1] Matt Egan, Oil milestone: Fracking fuels half of US output, KSAT (March 27, 2016, 4:56 PM), http://www.ksat.com/web/ksat/news/oil-milestone-fracking-fuels-half-of-us-output_.

[2] Matthew McFeely, State Hydraulic Fracturing Disclosure Rules and Enforcement: A Comparison, National Resource Defense Counsel, http://www.nrdc.org/energy/files/fracking-disclosure-IB.pdf.

[3] See Hannah Wiseman, Fracturing Regulation Applied, 22 Duke Envtl. L. & Pol’y F. 361, 367 (2012).

[4] Id.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] See Code Ark. R. 178.00.1-B-19; Cal. Pub. Res. Code § 3160; 312 Ind. Admin. Code 16-3-2; Mont. Admin. R. 36.22.608; W. Va. Code §22-6-13; Wyo. Code Rules and Regs. Oil Gen. §45.

[10] See 312 Ind. Admin. Code 16-3-2; Wyo. Code Rules and Regs. Oil Gen. §45.

[11] McFeely, supra.

[12] See Code Ark. R. 178.00.1-B-19; Cal. Pub. Res. Code § 3160; Admin. R. Mont. 36.22.1015; Ohio Rev. Code 1509.10(10); 58 Pa. Cons. Stat. § 3222; Wyo. Code Rules and Regs. Oil Gen. §45.

[13] See Cal. Pub. Res. Code § 3160; Admin. R. Mont. 36.22.1015; Wyo. Code Rules and Regs. Oil Gen. §45.

[14] McFeely, supra.

[15] Unif. Trade Secrets Act § 1(4).

[16] Wyo. Code Rules and Regs. Oil Gen. §45.

[17] Harold R. Fitch, Mich. Dep’t of Envtl. Quality, High Volume Hydraulic Fracturing Well Completions, Supervisor of Wells Instruction No. 1- 2011, at 1 (May 23, 2011), available at http://www.michigan.gov/documents/deq/SI_1-2011_353936_7.pdf.

William Coleman Jr. is a 2L at the University of Texas School of Law. He is originally from Pittsburgh and graduated from the Pennsylvania State University with a BS in Enterprise Risk Management. William will be returning to Pittsburgh this summer to work for Jones Day.