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State & Federal Regulation of Hydraulic Fracturing: A Comparative Analysis


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Presented at the 2011 SPE HFTC.

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State & Federal Regulation of Hydraulic Fracturing: A Comparative Analysis

  1. 1. STATE AND FEDERAL REGULATION OF HYDRAULIC FRACTURING: A COMPARATIVE ANALYSIS (SPE 140482) Society of Petroleum Engineers 2011 Hydraulic Fracturing Technology Conference The Woodlands, Texas January 24-26, 2011Authors:J. Daniel (Dan) Arthur, P.E., SPECBill HochheiserBobbi J. Coughlin, EIT
  2. 2. INTRODUCTION• How did this happen? – Environmental Issues and Concerns – ENGO Activism – BP Deepwater Horizon – Problem Occurrences• Current status – Regulatory developments• Federal regulation options• Thoughts for the future 2
  4. 4. GENERAL ENVIRONMENTAL ISSUES• Hydraulic Fracturing Quebec protester• Water Sourcing/ “Shale gas a moratorium now” Management 8/30/10• Shallow system methane• New Development Areas/Urban• Well Site Selection NY EPA Scoping Meeting 9/13/10• Traffic, Wildlife, Noise, NORM, Air Emissions Mark Raffalo & Pete Seeger address lawmakers at NYS capital regarding moratorium, July 2010 4
  5. 5. HVHF Environmental Issues• Groundwater protection• Fracturing fluid chemistry• Water sourcing• Water disposal and reuse 5
  6. 6. SOURCING CHALLENGES Barnett Shale Water Uses • Options vary Power Generation by location 3.70% Irrigation Livestock 6.30% Shale Gas 2.30% Wells Industrial and Mining 0.40% and operator • Competing 4.50% Public Supply 82.70% water users and availability must be Groundwater Use in Barnett shale counties ranges considered from 1.95 percent in Somervell County to 85 percent in Cooke County Water Well Well Produced Production Flowbacksourcing drilling Completion water Operations 6
  7. 7. WATER DISPOSAL• Underground Injection• Treatment and Discharge• Treatment and Reuse• Municipal/Commercial Treatment Plants• Commercial Disposal Facilities 7
  8. 8. GROUNDWATER PROTECTION Pipeline to • Risk probability of injectate reaching aChristmas Flow Tree Process and USDW Storage Surface Casing – 1 in 200,000 to Cement Intermediate 1 in 200,000,000 Casing Cement Production • Hydraulic fracturing Casing Tubing – Multiple casings – Short duration Cement – Vertical Oil or Gas Zone WellFluids Perforations separation 8
  9. 9. WELL SITE SELECTION • Larger surface disturbance • Increased time on location • Increased traffic • Sediment and erosion control • Ground compaction leading to increased storm water runoff 9
  10. 10. TRAFFIC ISSUES• Road damage• Traffic restrictions imposed by ordinances• Road repair bonds $50,000 to $100,000 per mile• Road use agreements 10
  12. 12. SHALE GAS AND E-NGOS• What are they? – Nongovernmental organization with a focus on environmental issues• Funding – Memberships – Sales – Grants – Donations – Governments ???• Who are they? – Large National and Multi-National Organizations, address issues that cross regional concerns and support local ENGOs – Local organizations 12
  13. 13. ENGO TACTICS Emotions 13
  14. 14. BP GULF SPILL VS. SHALE GAS GOM Spill Shale Gas • 35,050 feet deep • 1,000 to 13,500 feet • Leaked into gulf deep waters making • Onshore spills can cleanup and be contained and containment difficult cleaned up quickly and long • Impacts would be • Impacts are localized widespread; 6,500 – 180,000 km2 14
  15. 15. Hydraulic Fracturing Regulatory UpdateCURRENT STATUS 15
  16. 16. Federal Regulation…• There are multiple areas in which federal regulation could develop – Disclosure: EPCRA? – Full Regulation: SDWA/UIC – New Program…• Regardless of where, comparison to the federal Underground Injection Control (UIC) program is reasonable to explore what potential regulation “might” look like…• There are *many* complications! 16
  17. 17. NEW OIL AND GAS REGULATION• Many states are revising oil and gas regulations to consider HVHF and horizontal drilling. – Ex: New York, Colorado, Wyoming, and Pennsylvania now require some disclosure of fracturing chemicals• Proposed “Frac Act” would amend SDWA to: – Include hydraulic fracturing regulation as part of underground injection – Give the EPA authority over hydraulic fracturing – Require full disclosure of frac chemicals 17
  18. 18. Wyoming Regulations• Rules were modified in response to direction from 2008 State Legislature to promulgate a carbon sequestration unitization rule and became effective September 15, 2010.• Additional amendments to Title 30, Chapter 5 of the Wyoming Code were made: – Clarification of cementing requirement for plugging and abandonment of coal bed methane wells – Requirements for directional drilling reporting and certification – Expansion of existing requirements for well stimulation• Wyoming was first state to require chemical disclosure of hydraulic fracturing fluids.• Key requirements of the new regulations include: – Identification of all water supply wells within ¼ mil of drilling and spacing unit – Proposed Casing and Cementing Program with Well Application – Stimulation Plan and Post Stimulation Reporting Requirements – CBL Logs/Casing Pressure Tests – Sundry Required with proposed stimulation plan required for approval – Stimulation Record Requirements 18
  19. 19. Pennsylvania Regulations• PA DEP promulgated revisions to Chapter 78 of 25 Pa. Code to address issues related to Marcellus Shale development and hydraulic fracturing• Some key concerns that prompted the rules were: – Potential groundwater contamination from fracturing – Groundwater contamination caused by methane intrusion – Chemical Disclosure of fracturing additives• Key changes to the rules include – Casing and cementing plan required with permit application – Pressure testing prior to completions – Control and disposal plan with application – Pre-drilling and pre-alternation – Quarterly mechanical integrity tests – Stimulation Record requirements – Maintenance of chemical records 19
  20. 20. Ohio Proposed Regulations• Substitute Senate Bill 165 became effective June 30, 2010.• First major revision of oil and gas rules in 25 years.• Key drivers for new regulations: – Address present day health, safety and social issues related to oil and gas development – Provide funding to administrate the regulatory program – Ensure to rational citizen public faith and trust in the state regulatory program• Key changes to Chapter 1501 of the revised Ohio Code include: – Site Review prior to approval – Opportunity for noise mitigation requirements – Setbacks from occupied dwellings and other wells without approval – Mandatory pooling requirements – MSDS Reports Required – Temporary Inactive Well Status Requirements – Stimulation Record Requirements 20
  21. 21. New York Regulations• Draft Supplement to the Generic Environmental Impact Statement for Oil and Gas released by DEP on September 30, 2009 to satisfy the State Environmental Quality Review Act. – High volume hydraulic fracturing – Horizontal drilling• Some Key components of draft sGEIS: – Environmental Assessment Form – Visual Impacts Mitigation Plan – Noise Impacts Mitigation Plan – Greenhouse Gas Emissions Mitigation Plan – Invasive Species Mitigation Plan – Road use Agreements – Local Floodplain Development Permit – Pre-drilling water well surveys – Post-Drilling Monitoring of water wells – Stimulation Reporting Requirements – Flowback water must be tested for NORM – Drilling and Production Waste Tracking Form 21
  22. 22. West Virginia Regulations• Two sets of proposed regulation changes have been drafted for West Virginia: – West Virginia Department of Environmental Protection (DEP) • Revises existing Chapter 22 of West Virginia Code. – Subcommittee A of the Joint Judiciary Committee of the 2011 Legislature. • “Hydraulic Fracturing and Horizontal Drilling Gas Act” proposes a new article, designated as §22-6A of West Virginia Code. • Applies to wells drilled with horizontal drilling or fracturing with a minimum of 5,000 bbls.• Key changes proposed in drafts: – Water Pollution Control Permit – Department of Highways approval of well access – Erosion and Sediment Control Plan – Predrilling or Prealteration Surveys – Water management plan – Water Resources Protection Plan – Stimulation Record and Completion Report Requirements 22
  23. 23. HF Chemical Disclosure Registry• The GWPC has led the development of a HF Chemical Disclosure Registry.• The Registry is currently a voluntary system to facilitate disclosure of details (including additives) used in fracturing.• The system provides a common template for data to be submitted by industry.• GWPC is currently working with states and industry to get companies registered and to start populated the system.• The registry will facilitate public data searches and queries of data submitted by industry. 23
  24. 24. Inject vs. Fracturing• The Underground Injection Control (UIC) Program is managed under the SDWA.• There are many similarities between fracturing and injection.• There are also MANY differences!• Current regulation between injection and fracturing is similar. 24
  25. 25. Description• Underground Injection Hydraulic Fracturing• The subsurface • The creation of fractures within emplacement of fluids by a reservoir that contains oil or well injection; and excludes natural gas to increase flow and maximize production. – (i) the underground • A hydraulic fracture is formed injection of natural gas for when a fluid is pumped down purposes of storage; and the well at pressures that – (ii) the underground exceed the rock strength, injection of fluids or causing open fractures to form propping agents (other than diesel fuels) pursuant in the rock. to hydraulic fracturing • The goal is typically to form operations related to oil, complex fracture networks gas, or geothermal within the targeted production production activities. zone. 25
  26. 26. REGULATORY PROGRAMS• Underground Injection Hydraulic Fracturing• SDWA UIC Program • Hydraulic Fracturing is most commonly managed by state – Established to protect usable O&G regulatory agencies or potentially usable • State O&G regulatory groundwater aquifers from agencies have existing underground injection regulations designed to activities (i.e., USDWs). protect groundwater supplies• Program Implementation from possible impacts due to O&G activities. – Direct Implementation (DI) – • State environmental agencies The oversight of a UIC may also have a role in program by an EPA Regional regulating activities related to office. hydraulic fracturing – State Primacy – Granted for – For example, in Arkansas, the all or part of the UIC AOGC and ADEQ both have roles for gas development program, e.g., for certain and HF. classes of injection wells. 26
  27. 27. UIC PROGRAM REGULATORSThe UIC Program requirements were developed by EPA and • EPA has delegateddesigned to be adopted by states, territories, and tribes. primacy for the UIC program for all well classes to 33 states and 3 territories • EPA shares UIC program responsibilities in 7 states • 10 states, 2 territories, and all Tribal Nations have the UIC program implemented by EPA 27
  28. 28. STATE OIL & GAS PROGRAMSThere are 27 states that account for 99.9 percent of the • In 2008 there wereoil and natural gas production in the United States. 33 states that reported oil or natural gas production  State O&G Programs  Prevent waste of oil & gas resources  Conserve oil & gas - efficient recovery of the resource  Protect the correlative rights of mineral owners 28
  29. 29. Program Protection Targets• Underground Injection Hydraulic Fracturing• Defined by Regulation, • Hydraulic fracturing is Underground Source of managed within state oil & gas programs Drinking Water (USDW) – • It is generally common that – An aquifer that supplies or states have statute(s) contains a sufficient relative to providing a clean quantity of ground water to and healthful environment supply a public water within the state system • Protection of water – fewer than 10,000 mg/l resources (groundwater and surface water) is a priority total dissolved solids within every state and a• Not an exempted aquifer priority of every oil & gas regulatory program 29
  30. 30. Applicable Well Types• Underground Injection Hydraulic Fracturing• Hazardous Waste Injection • Conventional Oil & Gas• Industrial Waste Injection • Unconventional Gas• Municipal Waste Injection • Unconventional Oil• Enhanced Oil Recovery • CO2 Sequestration• Brine Disposal • Water Supply Wells• Solution Mining • Injection Wells• Aquifer Storage/Recovery – Classes I - V• Aquifer Recharge• Other 30
  31. 31. Permitting Underground Injection Hydraulic Fracturing• Owner/Location/Operator • Owner/Location/Operator• Area of Review • Residential/Municipal well review• Facility description • Well site construction/chemical• Geological data storage• Surrounding land owners • Geological data/target formation• Plugging & Abandonment Plan • Drilling/proposed depth• Specification and source of disposal fluids • Proposed well completion data• Public records – all other • Well construction details wells/surface water/surface facilities /known faults • Proposed fracture schema• Performance bond/corrective • Pits and tanks proposed action proposal/contingency & • Traffic Plans/Road Use Agreements monitoring plans• Operating plan • Source water withdrawal permits 31
  32. 32. Area Considerations Underground Injection Hydraulic Fracturing• Area of Review • Pre-Site Assessment Analysis – Geological considerations – ZOEI – Potential interfering wells – Presence of artificial penetration – Area water supply wells – Springs – Surface and topographical – Water wells challenges – Wells penetrating the – Water sourcing injection zone• USDW identification • Other active production• Confining interval • Abandoned wells• Geological considerations 32
  33. 33. Casing and Cementing Underground Injection Hydraulic Fracturing• Surface casing set below • Surface casing setting lowermost USDW and depth typically cemented to surface established by state for (generally) purposes of protecting• Well casing and usable quality cementing program must groundwater from oil prevent fluid movement and/or gas development into or between USDWs activities• Injectate confined to • Some states include well permitted injection casing and cementing interval programs in permits 33
  34. 34. Groundwater Protection Underground Injection Hydraulic Fracturing• Primary goal of the UIC • The protection of water program is the protection of resources is a primary USDWs objective of every state• Program is applicable from • State oil and gas regulations the wellhead down – Permitting of wells• Performance and risk-based – Surface casing requirements measures utilized – Rules adapted based on risk and historical industry performance – Prevention of fluid movement into or between USDWs – Orphan well programs – No-migration petition for – SI, TA and abandoned wells hazardous waste wells – Use of tanks and pits – Re-occurring mechanical – Waste handling and spills integrity testing – Etc. 34
  35. 35. Well Integrity Underground Injection Hydraulic Fracturing• Most injection wells must • Operators commonly test demonstrate internal and wells before perforating to external mechanical assure the well’s integrity is integrity ready for fracturing• For Class II wells, typical activities internal integrity tests are required once every 5 • Surface equipment and years piping is routinely tested• Some injection wells may • Testing may not be be required to have required, but is done as a continuous monitoring best practice equipment to assure integrity is maintained • Continuous monitoring is employed during fracturing 35
  36. 36. Pressure Management Underground Injection Hydraulic Fracturing• Injection permits are • Surface pressures sufficient generally granted with a to overcome friction and maximum allowable injection initiate fractures in the pressure production zone are utilized• It is common for wells to • High friction factors are have a PMax determined by the common due to fracture fluid fracture gradient of the top make-up (e.g., slurry) of the injection zone • Pressures maintained below• Pressures exceeding the pressure ratings of well tubulars and surface injection zone fracture equipment (e.g., wellhead) gradient are allowed by rule • Pressures are maintain for• Wells may inject up to the duration of fracturing job PMax throughout the life of the (e.g., a few hours per stage) well 36
  37. 37. Operating Procedures Underground Injection Hydraulic Fracturing• Permanent facility typical • Temporary equipment brought on-site for each• Designed for continuous or fracturing batch process • Fracturing typically done on• Continuous monitoring a stage-by-stage basis optional for Class II wells • Number of stages does not (many wells inject on a necessarily influence the total volume used for a vacuum) single well• Detailed operations depend – Increased number of stages on well type (e.g., typically means less overall volume per stage waterflooding vs. SWD) • Continuous monitoring of pressures, rate, density, etc. 37
  38. 38. Fluid Characterization Underground Injection Hydraulic Fracturing• Injection characterization is • Primary fluids are disclosed part of the permitting as part of the completion process report• The extent of • MSD Sheets are made available upon request characterization is generally dependant on the well class • Historically, the make-up of some products are and fluid proposed for maintained as proprietary injection and have not been reported• The UIC program allows for • Recently, multiple states are some characterization modifying rules to require details to be maintained as full disclosure of fracturing confidential information additives 38
  39. 39. Volume Variations Underground Injection Hydraulic Fracturing• Injection rates/volumes • Fluid volumes depend on the depend on well, formation, and type of HF technique utilized operational objectives • HV slickwater fracturing on• Common for wells to inject horizontal wells commonly use 1,000 to over 20,000 barrels of 2-5 million gallons of water fluid per day per well over 10 – 20 stages• Injection and disposal wells • The number of stages is may or may not be continuous, dependant upon the interval to but typically operate year- be fractured (a vertical well round for multiple years may use only one stage), thickness of the target zone,• Not uncommon for wells to be lithology of the formation, and used for injection for 20+ other factors years 39
  40. 40. Future Regulation of Hydraulic FracturingTHOUGHTS ON THE FUTURE 40
  41. 41. Anticipating the Future• State’s continue to evaluate and pursue changes to existing regulations.• EPA’s study on Hydraulic Fracturing continues moving forward.• Many cities and urban areas are involved and have and/or are developing local ordinances/restrictions.• A variety of other federal and state agencies are now involved: – U.S. Army Corps of Engineers – State DOTs – U.S. FWS – Bureau of Land Management – Others• Many issues are gaining momentum• Understanding the issues will be key. 41
  42. 42. Recommendations• Pre-site assessments is imperative• Developing baseline information is critical• The process of completing a well must include similar levels of detail and planning for the shallow portion of the well as for the production zone.• Incorporate environmental considerations into planning at the well and regional levels. Photo courtesy of Range Resources 42
  43. 43. Contact Information J. Daniel Arthur, P.E., SPEC ALL Consulting 1718 S. Cheyenne Avenue Tulsa, Oklahoma 74119 Citation Information Arthur, J. Daniel, Hochheiser, B., Coughlin, B. (ALL Consulting).“STATE AND FEDERAL REGULATION OF HYDRAULIC FRACTURING: A COMPARATIVE ANALYSIS” (SPE 140482) Society of Petroleum Engineer’s 2011 Hydraulic Fracturing Technical Conference The Woodlands, Texas, January 24-26, 2011 43
  44. 44. Additional information available for review, but notpresented due to time constraintsEXTRA SLIDES 44
  45. 45. AbstractWhile hydraulic fracturing is a well-developed technology that has been used for morethan 40 years, its wide-spread use for coal-bed natural gas and shale gasdevelopment has raised questions about the appropriate regulatory approach toensure that groundwater resources are protected. In response to recent publicconcerns about hydraulic fracturing, Congress introduced the FracturingResponsibility and Awareness of Chemicals Act (FRAC Act). The FRAC Act wouldamend the Safe Drinking Water Act (SDWA) to regulate hydraulic fracturing under thesame laws and regulations that are used for the Underground Injection Control (UIC)program. Proponents of the FRAC Act assert that federal regulation is necessary toensure protection of groundwater resources. Opponents argue that federal regulationcreates a one-size-fits-all approach that is inefficient and protects poorly. Inaddition, they argue that states are best suited to regulate hydraulic fracturing giventheir ability to tailor regulatory requirements to local conditions. This paper willprovide an overview of state regulation of hydraulic fracturing including some of thevarious approaches taken, different levels of regulatory detail, and recently adoptedchanges as well as changes that have been proposed, but not yet adopted. The paperwill also examine how hydraulic fracturing would likely be regulated under the SDWAand discuss the pros and cons of federal regulation of hydraulic fracturing from thestand point of both regulatory burden to the industry and the potential for improvedenvironmental protection. 45
  46. 46. NEW AREA DEVELOPMENT• General feeling of • Fear and lack of distrust of “BIG knowledge creates OIL” trepidation among mineral and non- mineral owners • Education of public takes time • Lack of infrastructure • Misinformation abounds 46
  47. 47. URBAN DEVELOPMENT• Scrutiny and greater concern because of proximity to populous• Local government ordinances: – Restrict operation times – Reduced noise levels – Lighting restrictions – New setbacks – Restrict truck traffic 47
  48. 48. WATER SOURCING• Options available to meet water needs for drilling and fracturing• Surface Water• Groundwater 4,000,000 Fracturing Water Drilling Water• Municipal Water 3,500,000 3,000,000• Industrial Water 2,500,000• Recycled 2,000,000 1,500,000 Produced Water 1,000,000• Collected Water 500,000 0• Private Water Barnett Fayetteville Haynesville Marcellus Purchases Total Water in Gallons to Drill and Fracture 1,000,000 gallons = ~3,785 m3 48
  49. 49. GAS LAND – THE MOVIE “[Hydraulic fracturing] blasts a mix of water and chemicals 8,000 feet into the ground.The fracking itself islike a mini-earthquake.… In order to frack,you need somefracking fluid – a mixof over 596 chemicals.” 49
  50. 50. Wildlife Issues • Habitat Loss • Habitat Fragmentation • Disrupted wildlife Mountain Plover Charadrius montanus patterns from Woodland Caribou increased traffic and noise Rangifer tarandus dawsoni • Utility corridors invite unwanted off-road traffic Blue heartWolverine Gulo gulo Buchnera americana 50
  51. 51. NOISENoise restrictions may berequired by local ordinancesor because of wildlife issues.Sound blankets and barriersare often used to mitigateissues in sensitive areas. 51
  52. 52. CLASS II INJECTION WELLS• Inject fluids associated with oil and natural gas production. Most of the injected fluid is salt water (brine), which is brought to the surface in the process of producing (extracting) oil and gas.• Inject Beneath the lowermost USDW.• EPA Inventory lists 143,951 Class II wells in operation in the United States, injecting over 2 billion gallons of brine every day.• Most oil and gas injection wells are in Texas, California, Oklahoma, and Kansas. 52
  53. 53. Fluids Disposition Underground Injection Hydraulic Fracturing• Injectate varies • Water and proppant depending on well type – Water typically fresh to and permit conditions brackish• Class II Fluids – Proppant is typically sand, but may be resin-coated or – Fluids brought to surface in conjunction with O&G production ceramic – Fresh water • Multiple types of fracs – Exempt waste fluids: Produced fluids, drilling fluids, drill cuttings, – Slickwater, foam, etc. rig wash, well completion fluids, workover waste, gas plant • Chemical additives dehydration waste, gas plan – Additives vary sweetening waste, spent filters and backwash, packing fluids, produced – Biocides, corrosion inhibitors, sand, production tank bottoms, scale inhibitors, clay etc. stabilizers, friction reducer, oxygen scavenger, gel, iron control… 53
  54. 54. Financial Responsibility Underground Injection Hydraulic Fracturing• Financial responsibility is a • States require bonding for O&G requirement of the UIC producing wells program • Bonding requirements vary by• Financial responsibility is state, but are generally tied to typically tied to plugging costs plugging liability of the well • State agencies have a variety of• A plugging plan and cost tools relative to enforcement estimate may be required for should problems arise permitting• Blanket bonds are acceptable• Some individual well bonds 54
  55. 55. Reporting Underground Injection Hydraulic Fracturing• Reporting varies depending on • Summation of hydraulic well type fracturing activities have• For Class II wells, annual historically be reported on the reporting of monthly average well completion report and maximum rate and • Some states require service pressure data is most common tickets (e.g., Arkansas)• Depending on permit • Several states have been conditions/requirements, water modifying reporting rules, source information or water including requiring summary analysis may also be required details by fracturing stage 55
  56. 56. Risk Probability Underground Injection Hydraulic Fracturing• Per a 1989 API and DOE study • HF events for most well types for basins with “reasonable” (including shale gas wells) occur likelihood of corrosion, risk through multiple installed probability of injectate concentric casings over a short duration with considerable reaching a USDW ranged from vertical separation (thousands of one in 200,000 to one in 200 feet) of confining type zones million for wells injecting on a between the production zone and continuous basis the lowermost USDWs• Many states implement the • Using the same technique as Risk Based Data Management implemented for the 1989 System and are able to assess API/DOE study, risks of fracturing risk probability on an ongoing fluids reaching a USDW would generally be far less probable basis than for injection wells 56