Posts Tagged ‘Utica shale’

(Posted by Grant Maki, OEC Attorney Of Counsel)

This is the first of a series of posts highlighting a few situations where a landowner could face liability for the conduct of a company that leases their land for natural gas drilling.

So you’ve signed on the dotted line to finalize an oil and gas lease, and now the trucks are rolling in and the drilling rig is being set up right there on your land.  You hear all the machines humming and see workers connecting hoses to some of trucks lined up on the pad.  For the first time, you realize just how much goes into drilling in the Marcellus shale.  You start to wonder: what will happen if something goes wrong?  Could you be left holding the bag for the cleanup of environmental contamination?

It turns out that you could.  Congress enacted the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”, also known as “Superfund”) in 1980 to help clean up sites that have been contaminated with hazardous substances.  The government can clean the contaminated sites and then use CERCLA to force the parties responsible for the contamination to pay back the costs.

Unfortunately for landowners, CERCLA can require payment from a very broad range of “potentially responsible parties,” including the owner or operator of a “facility” and the person who owned or operated a facility during which time the disposal of a hazardous substance occurred.[1]  The term “facility” is defined as “any site or area where a hazardous substance has . . .come to be located”.[2]  This has been interpreted by courts to include a the whole area around the contamination that had the same general function[3]—probably at least an entire well pad in the case of an oil and gas operation.

BUT ISN’T OIL & GAS EXEMPT FROM CERCLA?  It is true that 42 U.S.C. § 9601(14) exempts petroleum and natural gas from regulation under CERCLA.  It does not, however, exempt any materials that have been mixed with petroleum or natural gas, waste products from natural gas drilling operations, or chemicals brought in for use in such operations.  See, for example, United States v. Gurley, 43 F.3d 1188, 1199 (8th Cir.1994) (limiting the exemption to crude petroleum products or refined products, and declining to extend the exemption even to used petroleum products.)  

To make sense of these rules, let’s apply them to a hypothetical gas lease situation.  Say the landowner signs a lease to allow a company to drill for gas on his land.  The company drills the well, harvests the gas, plugs the well, and leaves.  Then, years later, something happens.  Maybe its a few cracks in the cement casing that is supposed to keep the hazardous chemicals that were forced underground from rising to the surface.  Maybe one of the tanks that stored a hazardous substance developed a slow leak that was never noticed until the chemicals seeped through the soil all the way to a nearby creek.  Whatever the cause, imagine that the contamination doesn’t becomes apparent until 30 years after the end of the lease.

If the site qualified for CERCLA, the government could come in and clean it up.  Then it would look for potentially responsible parties to pay them back under CERCLA.  Even though the landowner didn’t handle chemicals or drill the well, they are the “owner” of an “area where a hazardous substance has . . . come to be located”.  That is enough to make them a potentially responsible party under CERCLA.

Now things start to get pretty scary for the land owner.  CERCLA provides for strict liability for any potentially responsible party, without regard to who actually caused the contamination.[4]  CERCLA also provides that all of the potentially responsible parties are held jointly and severally liable for the contamination—this means that the government can put the whole bill on any one responsible party and leave it to them to settle the allocation amongst the other parties.[5]  This means that if the companies that caused the contamination have been dissolved, the landowner could be the only potentially responsible party left, and they would have to pay the entire bill.

It’s far past the scope of this blog post to get into the nuances of exactly when a landowner could be liable, and for how much.  I’s also past the scope of this post to discuss how and to what extent landowners can protect themselves from CERCLA liability—that’s an issue for an individual landowner to bring up with their attorney.

Our purpose here was to show that landowners could be exposed to liability under CERCLA if their land becomes contaminated with hazardous waste as a result of a shale gas lease, even though it wasn’t their fault.  Without the proper protections in the lease, the landowner could have to spend a considerable amount of time and money with a very qualified attorney to defend the case in federal court at the very least. At the worst, they could be left holding the bag for the entire cost of cleanup.


[1] 42 U.S.C. § 9607(a)(1) and (2)

[2] 42 U.S.C. § 9601(9)(B)

[3] See United States v. Twp. of Brighton, 153 F.3d 307, 312-13 (6th Cir.1998).

[4] State of N.Y. v. Shore Realty Corp., 759 F.2d 1032, 1042 (2d Cir.1985)

[5] J.V. Peters & Co. v. E.P.A., 767 F.2d 263 (6th Cir. 1985); U.S. v. ChemDyne Corp., 572 F. Supp. 802

(S.D. Ohio 1982).

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Keep the Burden on the Industry to Protect Ohio from Fracking’s Risks

(Posted by Grant Maki, Attorney, Ohio Environmental Council)

There are a lot of unknowns about the potential impacts of fracking.  The technologies involved in fracking have never been done on this kind of scale before, and the impacts have not been thoroughly studied.  How likely is groundwater contamination—and over what timeframe?  How do we reconcile the divergent reports about the risks to air quality and global warming?  Even our regulators admit that there are many unknowns, and industry is often two steps ahead of regulation.

OEC and its attorneys with the Ohio Environmental Law Center are working now to develop protective regulations to present to ODNR and Ohio EPA to make sure the air, land, and water in Ohio’s Gaslands are protected.

Because of the unprecedented scale of hydraulic fracturing activities expected to come to Ohio, we need an effective set of laws in place that will make sure that people are quickly and fully compensated even for risks that are well understood, like the risk that a truck carrying chemicals to a well site springs a leak.  But when there is so much uncertainty and the State has taken a regulatory approach that can be described as “drill first, ask questions later,” it becomes even more important to plan for the fact that many impacts caused by fracking will “fall through the cracks.”

Thus, lawmakers should be concerned with creating a set of rules that can quickly and cost-effectively adjudicate disputes surrounding the harms caused by fracking.   Lawmakers should also try to create a set of rules that gives the people who know the most about the industry—the fracturing companies themselves—the proper incentives to avoid harms by forcing them to internalize all of the costs of their activities.

So beyond the necessary water quality and property rights regulations that desperately need strengthened, the actual legal and regulatory structure, itself, also needs an overhaul.

The Law Center has developed a list of five recommendations for how lawmakers can prepare the legal system to “fill in the cracks” in our regulatory scheme.  Because there is so much unknown about this industry—in part because the technology and industry practices are changing rapidly and vary from site to site—the proposed framework is designed to assign costs to the drilling companies while placing minimal administrative burden on the courts.

Read the Law Center’s Fracking Litigation Report VOL. 1 Filling in the Structural Cracks of Fracking Regulation for details on what the General Assembly can do to fix the system.

First, pre-drilling, post-drilling, and continuous environmental quality monitoring should be borne by the industry . . period.

Secondly, drilling companies should be held strictly liable for all harms caused by fracking operations, and rules should be put in place to minimize the administrative burden on both the courts and on parties seeking redress.

Furthermore, insurance requirements should be required to provide for potential catastrophic risks, and a severance tax should be levied to pay for latent harms that are not yet apparent, and to plug the abandoned oil wells that provide a potential pathway for fracking fluid migration.

Finally, drilling companies should have to pay attorneys fees and court costs for plaintiffs who successfully sue them for damages.

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(Posted by Melanie Houston, OEC Director of Water Policy & Environmental Health)

The United States Forest Service announced on Monday that shale drilling, or “fracking” will be allowed in the Wayne National Forest.

In a statement issued by the agency, Anne Carey, Wayne National Forest Supervisor, concluded that there was no need to amend the 2006 Forest   Plan for the Wayne to incorporate potential surface level impacts associated with horizontal drilling. Carey stated “I have reviewed the new information contained in the Supplemental Information Report, and determined that further environmental analysis is not needed.” She further stated “I believe that the existing Forest Plan direction is adequate to   address the surface effects anticipated from the potential development of horizontal wells as projected by the Bureau of Land Management (BLM).” According to an analysis done by the U.S. Bureau of Land Management, shale wells could be drilled in as many as 13 sites throughout the Wayne forest by 2016.

The Ohio Environmental Council (OEC), along with Buckeye Forest Council and other environmental organizations, oppose Forest Service’s decision to allow fracking in the Wayne, Ohio’s only national forest. “This decision is premature and inconsistent with the agency’s mission ‘to sustain the health, diversity, and productivity of the nation’s forests and grasslands to meet     the needs of present and future generations’,” stated Melanie Houston Director of Water Policy and Environmental Health.

In a statement after the Wayne decision, Nathan Johnson, staff attorney for the Buckeye Forest Council, stated, “The Wayne’s decision is extremely disappointing.”

“We believe the Wayne is violating federal law by failing to update their 2006 study and plan, and litigation is a distinct possibility,” added Johnson.

According to Buckeye Forest Council’s analysis, Federal law requires the Forest Service to conduct a new environmental study and update their plan whenever ‘significant new circumstances or information’ arise. High volume horizontal fracking is clearly a significant new circumstance demanding study and additional protections.

Trent Dougherty, Director of Legal Affairs at OEC stated, “The Forest Service has failed to conduct their due diligence in reviewing the environmental impacts associated with unconventional gas drilling in national forestland. They have decided to take a short-cut rather than fully assess fracking’s impacts on the long-term viability of this treasure of Southern Ohio.”

Ohio’s lone National Forest is now fertile ground for industrial-scale  fracking.

The Forest Service itself acknowledged in their supplemental informational report that there are drastic differences between  conventional oil and gas drilling and the new horizontal drilling: larger well pads, more surface area disturbance, and much greater water usage.

“There will also be more air emissions, more noise, and more light pollution, which will be disturbing not only to the surrounding public and    forest visitors, but also to the federally endangered Indiana bat and  sensitive species little brown bat.” added Houston.

Read the US Forest Service’s report:

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Columbus, OH – The Ohio Environmental Council (OEC) is praising State Representative Mark D. Okey (D-Carrollton) and echoing his call to action for state leaders to prevent exploitation of Ohio’s property owners and natural resources.  Today, Rep. Okey called on Governor John Kasich and legislative leaders to act on his proposed legislation to protect Ohio’s landowners from predatory leasing practices by the oil and gas industry.

“The OEC stands side by side with Rep. Okey in urging the Kasich administration and Statehouse leaders to put an end to predatory leasing and to establish consumer rights for property owners who wish to lease their land for oil and gas production,” said Trent Dougherty, Director of Legal Affairs for the Ohio Environmental Council.  “Land owners need better protection from unscrupulous oil and gas ‘landmen.’   The law should assure arms-length dealings for Ohio’s gasland communities.”

The call for strengthened consumer rights comes just days after a recent Wall Street Journal article chronicled Chesapeake Energy’s attempts to renegotiate Ohio landowners’ leases in an attempt to help the cash-strapped company.  The article cites that since 2008, more than 100 lawsuits have been filed across the country by landowners, who claim the company breached contracts.

Rep. Okey’s recently introduced “Truth in Leasing Act” (House Bill 493) would guarantee an honest leasing process by requiring “landmen” who secure leases on behalf of drillers to be subject to registration, licensing, and disclosure requirements, and establish consumer protection rights for property owners.

In February of this year, the state’s top lawyer, Attorney General Mike DeWine, urged, among other improvements in Ohio law, that his office or another state agency be empowered to help landowners with complaints about lease agreements for drilling.

“Arms-length lease negotiations will not only help protect landowners’ pocketbooks, but also protect the localized environment,” Dougherty added. “Absent fully protective regulations, effective lease negotiations can secure better protections for landowners’ safety and protection of their air, land, and water resources.

“From negotiating longer setbacks, to requiring post-drilling testing of water wells, to dictating how the land is reclaimed, the lease can be a powerful tool for a landowner to protect his or her property from environmental risks.  However, that is only the case if the landowner is on equal footing with the operator and the ‘landmen’ are held accountable,” said Dougherty.

OEC fully supports and endorses HB493. The OEC advocated for many of the bill’s provisions during the debate over the Governor’s Energy Bill (SB315).

“Gov. Kasich has renewed his push to make the 0il and gas industry pay its fair share in taxes.  The industry’s henchmen also should be ‘taxed’ with mandatory licensing, registration, and financial disclosure to protect landowners from the unscrupulous practices of predatory ‘landmen.’”

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(Posted by Trent Dougherty, OEC Director of Legal Affairs)

Last week, a decision of the Ohio Environmental Review Appeals Commission (ERAC) opened the door for Patriot Water Treatment, Inc. to treat brine and fracking wastewater in its facility, and the City of Warren to discharge the brine through its wastewater treatment plant into the Mahoning River.

Under a 2010 modification to the City of Warren’s wastewater discharge permit, treated brine water produced from oil and gas drilling activity could be sent to the city of Warren’s wastewater treatment plant. The city’s 2012 permit renewal from the Ohio Environmental Protection Agency, which took effect April 1, however, contained a provision that did not allow the city to accept the water from Patriot.

The change in permit terms came with the change of Administrations, and a subsequent change (or more aptly, a clarification) of Ohio EPA policy toward discharge of drilling wastewater into waters of the state. The essential clarification was that it was the Ohio Department of Natural Resources (ODNR), and not Ohio EPA, who was the authority to permit disposal of drilling-related wastewater.

The Commission’s decision thus hinged on whether that policy could be enforced through the City of Warren permit. The Commission said no.

The Commission’s ruling does not necessarily permit the brine to be accepted by Warren and discharged into the Mahoning (especially if you ask Ohio EPA – read their reaction).  However, it does strike the provision that Ohio EPA inserted into Warren’s 2012 water quality permit that prohibited the discharge of brine unless and until ODNR approves of it as a disposal method.

Under current Ohio law (ORC 1509.22), the only approved methods of disposing of brine and other wastefluids from oil and gas drilling is through Class II injection wells or application on roads for dust/ice control.  Yet, that law does allow the ODNR to approve other methods of disposal, but has yet to ever do so.  The main crux of the decision was that it was unlawful for Ohio EPA to enforce ODNR’s law through the City of Warren’s permit.

The ball, then, is squarely in ODNR’s court to definitively state whether discharging treated “brine” into waters of the State of Ohio is an acceptable and approved method of disposal. The Department has a choice:

  1.  defend their statements that underground injection is the best and safest disposal method and prohibit Warren from discharging;
  2. approve the treatment and discharge through the wastewater treatment plant as an ODNR approved brine disposal method, and begin the, hopefully, public debate about which disposal method is the safest (if either);
  3. or do nothing, and let its executive agency cousin, Ohio EPA, fight the battle.

For almost a decade, Ohio law has put the “sole and exclusive authority to regulate the permitting, location, and spacing of oil and gas wells and production operations within the state” to ODNR’s Division of Oil and Gas Resources.  However, that law also, exempts from that authority “those activities regulated under federal laws for which oversight has been delegated to the environmental protection agency and activities regulated under sections 6111.02 to 6111.029 of the Revised Code.” So there are three important questions that should be answered:

  1. Whether Patriot’s “treated” brine is still brine under Ohio’s law?
  2. Whether discharging it through a wastewater treatment plant is disposing of brine?
  3. Is regulating it an activity granted to Ohio EPA by the Clean Water Act, and thus not under ODNR’s authority at all?

The answer to those questions not only determines who has authority over these operations (left unanswered in last week’s decision), but where the great influx of shale drilling waste is headed for the foreseeable future.

The state can just add these to the list of other questions that need to be addressed as we ramp up to the 2000 shale permits envisioned by ODNR and the industry, and the hundreds of millions of gallons of wastewater that comes with it.

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(Posted by Trent A. Dougherty, Director of Legal Affairs, Ohio Environmental Council, Director of Ohio Environmental Law Center)

Today, State Representative Jay Goyal (D- Mansfield) introduced the first sweeping update of Ohio’s fracking waste disposal since the shale boom began, and the first reforms in reaction to the nearly dozen injection well induced earthquakes in Youngstown throughout 2011.

Ohio Environmental Council was honored to play a role in the crafting of the legislation, and the reforms in the bill echo many of the recommendations OEC made before the Youngstown City Council in January.

Here are some of the highlights of the legislation:

  •  Increase public notice and commenting requirements
  • Allows local entities (e.g. city councils, county commissioners, etc) to deny injection well permits
  • Require injection well owners to conduct chemical tests to determine what chemicals will be injected into the disposal well
  • Require injection well owners to conduct ground water monitoring
  • Require seismic testing
  • Requires background checks on operators;
  • Requires recycling of waste fluid FIRST, Disposal SECOND.

As horizontal drilling and fracking rip across much of Ohio, the need for safe disposal methods for the millions of gallons of waste fluid must be a top priority for Ohio.

Thank you, Representative Goyal for the foresight to introduce legislation to not only protect Ohioan’s right to be protected against the risks of fracking waste disposal, but give back citizens and local governments their voice.

For years Ohio has been the low rent, high risk dumping ground for out of state waste fluid.  This legislation will give Ohio the tools to protect our communities from health and safety risks of disposing this waste.

Beyond the much needed environmental and human health protections in this bill, Rep. Goyal’s proposal will provide the public with more and better notification of these and the ability for communities to say NO if their Sometimes whole communities do not know that an injection well until it’s drilled, or unfortunately, in rare occasions, the moving earth lets them know.

This bill will give the power to the people to be adequately notified, and for local citizens and governments be full participants in the permitting process.

Read Rep. Goyal’s Press release on the legislation.

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(Posted by Trent A. Dougherty, Director of Legal Affairs, Ohio Environmental Council, Director of Ohio Environmental Law Center)

Ohioans are six months removed from Governor Kasich’s 2-day Energy Summit, and everyone has been waiting with baited breath for his energy plan to hit the General Assembly. Rumors are bounding the halls of Capitol Square that the Energy Bill will be introduced with in the next couple weeks, with the rush put on to pass the bill by June 30.

The Governor previewed the plan to the Greater Cleveland Partnership last week.  As expected the 10-Pillar Plan has a little bit for everyone – increasing utilization of Waste Heat Recovery, renewable energy and energy efficiency, coal research, streamline energy related permitting, and alternative fuel vehicles.  But of course, the first pillar in Kasich’s plan (which also resonates throughout the ten pillars) is Shale Gas Extraction.  We are sure to have a few words to say about the other nine pillars once the bill is officially introduced, but the focus on shale needs special attention by OEC.

The Gov’s shale provisions in the energy plan will combine new taxes, fees and regulations on shale drillers. His plan will “modernize” ODNR and Ohio EPA rules on drilling impacts.   The translation: increasing the quantity and quality of the regulations, but also making permitting quicker and simpler — frackers will have to do less to get permits, but will have to meet a few additional regulatory protections.

These regulatory changes are sorely needed, especially as it concerns disposal of waste product into underground injection wells.  So too, are necessary increases in the fees and taxes the industry pays that hopefully will help curb the unfunded mandate on local communities.

The industry has already cried foul, and stated that they already pay their share.  But with the projections of billions of dollars of resources under our feet, a few extra bucks to make sure that local first responders and local infrastructure can carry the burden of protecting the health and safety of Ohio’s Gaslands is a solid investment.

A few ‘Green’ recommendations for Team Kasich’s Energy Bill
While OEC continues to call for a slowdown on permitting until proper regulations and environmental/safety protections are put in place, we are feverishly working on our own recommendations for the Shale Pillar of the energy bill.

OEC supported SB 165 (the much needed update and modernization of ODNR’s Oil and Gas Drilling laws in 2010) as a tremendous step forward in regulating drilling.  However, much of the focus was on fixing the problems with traditional vertical drilling, and more specifically with urban drilling in light of the Bainbridge Township explosion of December 2007.

OEC, among other groups, advocated for many changes to strengthen SB 165. Yet, only a few recommendations were incorporated into the final bill.

To supplement what SB 165 accomplished, especially in light of the huge influx of industrial scale, deep shale horizontal fracking, OEC believes that the regulations must increase regulations for safety, accountability, and liability.

Here is a snapshot of some concepts must be incorporated into Ohio law.

Public safety and environmental protection

  1. Prohibit open pits and the burial of hazardous waste and use of known toxic chemicals at drilling sites;
  2. Require monitoring of hydrogen sulfide gas and other air emissions; and
  3. Require monitoring and first alert warning technology to detect spills, leaks, or explosions that jeopardize human health.
  4. Prohibit drilling in 100-year floodplain, and prohibit tank battery to be located with in the 100-year floodplain;
  5. Expand the present law to require more extensive testing of well and stream water near the drilling site before and after drilling occurs. In advance of drilling, the Operator is required to test water (using a comprehensive wide-spectrum analysis) in multiple water-well locations as well as in streams and ponds within ¼ mile of the drilling location, and to submit these samples to an independent laboratory. Within 14 days of the completion of the drilling, tests of stream and pond and well water will be repeated. The operator will pay for all tests, and the results shall be submitted to ODNR.

Accountability

  1. Revise composition of the Oil and Gas Commission and the Technical Advisory Council to include more true public representation to balance industry representatives.
  2. Require ODNR to maintain a website data base accessible to the public of all applications, proposed well locations, granted permits, and actual well locations with contact information for each applicant or permit holder. This allows residents to monitor leasing activity in their neighborhoods.
  3. Require full disclosure of violations from drillers.  Post all the violations and fines. Requirement for landmen and/or operators to disclose all of their violations on the contracts with landowners.
  4. Make granting (or denying) a permit an appealable action.  Currently, adversely affected landowners cannot appeal.
  5. Any drilling unit pool with public property in it would have to have a public hearing in that jurisdiction.
  6. Increase public notification and participation of drilling operations, increase notification to, and consultation with, local jurisdictions

Financial Liability

  1. Increase penalties for violations of ORC Chapter 1509 as suggested by Attorney General Mike DeWine.  Also, allow for the fines to increase to double the economic benefit received by the operator for violating 1509.
  2. SB 165 increases liability coverage to $3 million in urban areas and $1 million elsewhere.  In light of deepshale drilling and incidents of explosions, spills, and other risks, we feel that the liability should be increased substantially for these types of operations.   With the industrial scale drilling upon us, we support increased liability insurance requirements to $5 million bodily injury, $10 million property damage.  Further SB 165 only requires general liability insurance. General liability insurance usually EXCLUDES pollution / environmental insurance.
  3. SB 165 allows for surety bond in an amount determined by the chief.  With the vast amount of land disturbance involved in deep shale drilling Ohio needs to require a full cost bond to cover entire cost of reclamation.  Lessons need to be learned from the coal regulatory program which uses less than a full cost bond, and the legacy of unreclaimed sites that continue to blight eastern Ohio.

Disposal

  1.  Require operators to recycle waste water or otherwise treat wastewater from drilling operations.
  2. Increase oversight of landfilling drill cuttings or other materials that may contain Radioactive material in landfills;
  3. Increase testing of wastewater injected into Ohio’s Class II injection wells; require chain of custody
  4. Increase public notification and participation of injection well operations, increase notification to, and consultation with, local jurisdictions
  5. Require seismic activity studies before permitting injection wells, and require monitors for seismic testing at well sites
  6. Increase budget and staffing of ODNR DIVISION OF GEOLOGICAL SURVEY
  7. Repeal current Ohio law that restricts ODNR from adopting any standard more stringent than federal standards for Class II injection wells
  8. Encourage alternative/beneficial uses of wastewater

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