Fracking Insider Readers: We are pleased to bring you Volume 12 of our State Regulatory Roundup, including updates on Maryland, Colorado, Texas and a notice of intent to sue the Environmental Protection Agency, filed by multiple states. As we explained in earlier volumes, we designed the Roundup to provide quick overviews on state regulatory activity. If you have any questions on any of these summaries, please do not hesitate to ask.

Maryland – Governor Martin O’Malley placed a moratorium on hydraulic fracturing in 2011.  At the time, the moratorium was intended to provide the state time to study the impacts of hydraulic fracturing and development activity in Maryland’s westernmost counties that contain key portions of the Marcellus Shale formation.   Even though Maryland’s study is not expected to be completed until 2014, it is already being lambasted by hydraulic fracturing opponents, including State Delegate Heather Mizeur.   Delegate Mizeur intends to introduce a bill in January to provide a statutory ban on hydraulic fracturing in the state regardless of the results of the as-yet released study.

Multiple States – On December 11, 2012, Connecticut, New York, Delaware, Maryland, Rhode Island, and Vermont filed with the U.S. Environmental Protection Agency (EPA) a notice of intent to sue the Agency over its New Source Performance Standards (NSPS) and National Emissions Standards for Hazardous Air Pollutants (NESHAP) for oil and gas operations.  EPA stated that the NSPS and NESHAP were aimed at limiting volatile organic compounds(VOCs), but stated that the rules had a “co-benefit” of cutting emissions of methane – a powerful GHG.   It was widely understood at the time that the methane reductions were driving the rule, but EPA was reluctant to acknowledge such because regulation of GHGs under the NSPS and NESHAP programs would cause a considerable backlash from legislators and industry that could be avoided by stating that the rules were directed toward VOCs.   EPA, at the time, was also reluctant to promulgate another GHG rule in a sagging economy and when the GHG rules it already promulgated were being aggressively challenged by industry and states.    Finally, directing the rules at methane emissions was, and is, premature because EPA has insufficient and, in some ways, inaccurate data on methane emissions from oil and gas operations.  

The petitioning states acknowledge that EPA oil and gas air rules did control methane emissions from oil and operations though, among other mechanisms, requirements to use costly reduced emissions completion technology.   Their contention, it seems, is that the rule was not “directed” at methane and did not control methane enough.   Unless EPA changes the final rule, the states will join several environmental groups in challenging the rule.

Colorado -  On December 17, 2012, the Colorado Oil and Gas Association filed a lawsuit in Weld County District court to invalidate the City of Longmont’s ban on hydraulic fracturing and to enjoin the city from ever enforcing it.   Longmont’s ban, which was approved in November, has already been the subject of public sparring with the Governor’s office and a lawsuit by the Colorado Oil and Gas Conservation Commission (COGCC).  

The Colorado Supreme Court has already ruled that municipalities could not impose bans on oil and gas operations within city limits.  To successfully defend this lawsuit, Longmont will have to convince a court that its regulations amount to something less than an outright ban.

Texas – In early December, the Texas Railroad Commission, which regulates oil and gas operations in Texas, released updated well construction standards.  Texas has very mature oil and gas regulations but they had not been updated since the 1970s.   The increased use of hydraulic fracturing for well stimulation was a catalyst for the proposed changes.  The updated regulations will cover the full spectrum of well integrity standards, including well casing oversight, cementing requirements, pressure testing, and well control systems like blowout preventers.    

Texas has recognized that the water contamination issues that many people attribute to hydraulic fracturing are actually caused by operators who improperly case and cement their wells.   The state’s revisions, therefore, are tailored to address those casing issues that have the potential to cause contamination, instead of the technology that has the drawn the most headlines.   It is a rational, risk-based proposal and is expected to pass the legislature in January with support from both industry and environmentalists.