The Current State of Hydrofracking: An Assessment of Existing Laws, Regulations, and Proposals

Paul McCarthy

Professor Tarlock

Chicago-Kent College of Law

1

Table of Contents

I. Introduction……………………………………………………….3II. History and Explanation…………………………………………..4III. Benefits of Hydrofracking……………...…………………………6IV. Risks of Hydrofracking………………………………………..…10V. Current Regulations………………………………………………14VI. Conclusions and Moving Forward………………………………..16

2

Introduction

Hydraulic Fracturing, otherwise known as “hydrofracking” or simply “fracking,” is a

highly controversial topic right now in the United States. On the one hand, gas industry groups

contend that the practice can lead to the exploitation of previously untapped and inaccessible gas

reserves. The benefits of domestically-available fossil fuels range from boosts to local economies

all the way to lofty national security considerations. However, despite the potential benefits of

hydrofracking, many environmental groups have raised concerns about the practice. These

groups are alarmed at the use of chemicals in the practice, the potential for hydrofracking to

pollute groundwater and drinking water supplies, and challenges that might result from the water

use ramifications.

Because of the relative infancy of the use of hydrofracking on a large scale, the debate

about its use is becoming more intense as the practice expands. The federal government, states,

and non-governmental organizations have begun to study the practice and its potential

ramifications. Governments at various levels have begun exploring regulations in an attempt to

provide safeguards around the process.

This analysis will provide a brief history and explanation of the hydraulic fracturing

process, outline existing laws and regulations that target the practice, look at the potential

benefits, and explore potential challenges, risks, etc. and how to mitigate the potential drawbacks

of fracking.

3

History and Explanation

Hydraulic fracturing is a process that allows gas companies to extract gas or oil that has

been previously trapped in rock formations. Wells typically extend deep into the ground, by

hundreds or thousands of feet, and can also reach horizontally once at target depth. Once the well

is drilled, large quantities of fluid (water, proppant, and chemical additives) are pumped into the

well. These fluids open fractures in the rock and hold these fractures open so that hydrocarbons

can flow from the well. Following the injection process, the injected fluids are forced back up to

the surface along with “brines, metals, [and] radionuclides” by the pressure of the rock

formation. These fluids are termed “produced water” and are collected by the driller.1 Some of

the fluid remains underground.2

While the debate about hydrofracking has intensified as new technology has helped to

expand its usefulness as a production technique for natural gas, the process itself is not new.

Hydraulic fracturing was used as early as the 1860s when nitroglycerin was used to increase

production from oil wells in several states. By 1903, the process was being utilized by mining

companies. By the late 1940s, Stanolind Oil and Gas Corporation and Haliburton (natural gas

companies) were experimenting with the process and obtaining patents on it. As a result of the

evolution of the fluids utilized in the fracking process, and advances in fracking technology,

some modern estimates indicate that a producer can obtain 90% more natural gas from a well

utilizing fracking as opposed to one that does not use the practice.3

1United States Environmental Protection Agency, "The Process of Hydraulic Fracturing." Last modified MAY 21, 2013. Accessed December 10, 2013. http://www2.epa.gov/hydraulicfracturing/process-hydraulic-fracturing.2National Geographic, "Breaking Fuel from the Rock." Last modified 2014. Accessed December 10, 2013. http://news.nationalgeographic.com/news/2010/10/101022-breaking-fuel-from-the-rock/.3The Institute for Energy & Environmental Research for Northeastern Pennsylvania, "Marcellus Shale Information Clearinghouse." Last modified JANUARY 14, 2011. Accessed January 10, 2014. http://energy.wilkes.edu/pages/156.asp.

4

But despite the existence of hydrofracking for several decades, the modern debate about

the practice did not begin growing until January 17, 2008. Shortly before that day, Terry

Engelder, a geology professor at Penn State University, was asked to estimate the volume of

natural gas trapped inside the Marcellus Shale. His estimates concluded that the number was

approximately 500 trillion cubic feet of natural gas, or 50 trillion feet of recoverable natural gas.

On January 17, Penn State put out a press release containing the information, and the gas

industry turned its attention to the Marcellus Shale as a virtually untapped new source of natural

resources.4 Since then the Marcellus Shale, which stretches from Ohio and West Virginia to

Pennsylvania and into New York,5 has acted as both an example of the mass potential offered by

hydrofracking, as well as a lightning rod for controversy surrounding the practice.

Benefits of Hydrofracking

There are several potential benefits of fracking that make the practice attractive from

different perspectives; these benefits range from economic to environmental. The natural gas

industry has aggressively cited these benefits in public relations campaigns in an effort to bolster

4 MMXIII WHYY, "History of the Shale." Last modified SEPTEMBER 29, 2010. Accessed January 11, 2014. http://whyy.org/cms/news/health-science/2010/09/29/history-of-the-shale/46987.5 DemocracyWise, "Hydrofracking’s Cost & Benefits Weighed." Last modified MAY 02, 2013. Accessed January 11, 2014. http://democracywise.syr.edu/?p=7024.

5

support for the practice amidst ardent opposition from environmental organizations and citizen

protection groups.

The most visible benefit of the practice is money. Landowners in areas where

hydrofracking occurs, especially in the Marcellus Shale areas in Pennsylvania, are often offered

lucrative proposals to make available their land to natural gas drillers for hydrofracking the

shale. These contracts offer a mineral lease to the gas companies in return for an upfront price

paid per acre as well as a profit-sharing agreement if the property yields natural gas through

fracking. One such lease offered $1,909 upfront and royalty payments of 12.5 percent for 35

acres of wildflower fields near Ithaca, New York. This is a price-paid per acre of about $54.50,

but some estimates indicate that gas companies are paying as low as $3 per acre. Some

landowners, upset with the current prices, have sued over the agreements, now seeking $5,000 to

$6,000 per acre and up to 20 percent royalties.6

But despite these lawsuits and regrets from some landowners, it cannot be denied that at

least in the short term (disregarding long-term costs and considerations), hydrofracking

agreements can be a boon to local landowners who may not have significant economic means.

Many of these landowners are farmers from rural areas that are struggling to compete in today’s

economy. A lease offers them the potential for a new source of income as well as an immediate

lump sum payment. According to tax records held by the Pennsylvania Department of Revenue,

in one fracking hub, Susquehanna County, Pennsylvania, residents received nearly $400 million

in rents and royalties for allowing natural gas companies to utilize their properties for

hydrofracking. This is an average of $46,000 per year for each resident reporting fracking lease

6 Navarro, Mireya. New York Times, "Signing Drilling Leases, and Now Having Regrets." Last modified SEPTEMBER 22, 2011. Accessed January 14, 2014. http://www.nytimes.com/2011/09/23/nyregion/hydrofracking-leases-subject-of-regrets-in-new-york.html?_r=0.

6

income. The difference between 2006 and present for rents and royalties in this county alone is

about $392 million.7 Numbers like this are compelling, or perhaps in many cases irresistible for

landowners and farmers who may have relatively lows sources of income.

The general benefits of this rent revenue stretch beyond the pockets of lessor landowners,

as tax revenues are also by extension increased in areas where the practice occurs. These

revenues can be utilized for various public interests such as the improvement of schools and

parks, or the bolstering of funding for social welfare programs, etc. There are various taxes and

fees which allow the collection of revenues from hydrofracking production, from well to

consumer. One such example is the “impact fee” instituted by the State of Pennsylvania on

February 8, 2012 via Act 13. The fee imposes a levy on natural gas wells based on the natural

gas prices and Consumer Price Index. This fee resulted in revenues of $45,000 per horizontal

well, or $9,000 for small vertical wells. The fee produced $204 million in revenue in

Pennsylvania during 2011. 60% of the fee’s revenues stays at the local level, funneling into the

public coffers of counties and municipalities. The rest goes to the state, and much of it is spread

among environmental and infrastructure projects via the Marcellus Legacy Fund.8

The practice also necessitates the creation of jobs in areas where it occurs, although the

numbers are as yet unclear as to how many jobs are created locally and how many workers are

imported by natural gas producers.

7 Brian, Nearing. Times Union, "Special report on hydrofracking: Benefits, unease follow boom." Last modified DECEMBER 03, 2012. Accessed January 14, 2014. http://www.timesunion.com/local/article/Benefits-unease-follow-boom-4084216.php8 StateImpact, "The oil and gas law of the land: your guide to Act 13." Accessed January 20, 2014. http://stateimpact.npr.org/pennsylvania/tag/impact-fee/.

7

So for landowners, municipalities, and states, the potential immediate economic returns

are compelling. Hydrofracking offers a previously untapped and potentially highly lucrative

source of new income both for private landowners and public entities.

The benefits concerning natural gas production itself are tremendous. According to the

American Petroleum Institute, while fracking typically takes about 70 to 100 days to complete, a

well produced through the process can yield natural gas for 20 to 40 years. This results in new

energy for consumers and public entities for decades.9

There are also potential environmental benefits. As far as fossil fuels are concerned,

natural gas is cleaner than other alternatives. For example, natural gas vehicles emit 30% less

greenhouse gas than gasoline or diesel vehicles.10 In power plants, natural gas produces nitrogen

oxides and carbon dioxide, but importantly, less than coal or oil burning plants (about half as

much carbon dioxide, less than a third nitrogen oxides, and only one percent of the amount of

sulfur oxides). Very little water is required in natural gas combustion turbines, although these

plants do require water for cooling purposes. Further, natural gas plants do not produce

significant levels of solid wastes.11

The economic and relatively clean energy benefits of natural gas produced by

hydrofracking might pale in comparison to the national security considerations. Because shale

gas in the United States is estimated at approximately 6,600 trillion cubic tons, hydrofracking

offers an extremely significant source of domestic energy production. Utilizing natural gas on a

large scale has the potential to move the United States away from foreign-produced sources of 9 American Petroleum Institute, "EnergyFromShale." Accessed January 20, 2014. http://www.energyfromshale.org/hydraulic-fracturing/shale-natural-gas.10 Clean Energy Fuels, "About Natural Gas." Last modified 2013. Accessed January 20, 2014. http://www.cleanenergyfuels.com/why/aboutng.html.11 United States Environmental Protection Agency, "Clean Energy: Natural Gas." Last modified SEPTEMBER 25, 2013. Accessed January 20, 2014. http://www.epa.gov/cleanenergy/energy-and-you/affect/natural-gas.html.

8

fossil fuels such as oil from unstable states in the Mid-East. Having a potent domestic source of

fossil fuels offers energy independence to the United States and by extension, loosens

dependence on foreign producers, strengthening national security and the United States’ ability

to ensure energy-availability. Recognizing the importance of reducing foreign reliance, the

Obama Administration has set a goal of reducing oil imports by 33% by 2025.12

Risks of Hydrofracking

In a void, all other considerations aside, hydrofracking offers clear economic benefits to

landowners as well as massive tax revenues to states. It also offers the potential to produce

cleaner-burning natural gas at levels before unseen in the United States. Domestic natural gas has

12 Edwards Wildman, "Hydrofracking: What the Insurance and Reinsurance World Needs to Know." Last modified SEPTEMBER 2011. Accessed January 26, 2014. http://www.edwardswildman.com/insights/PublicationDetail.aspx?publication=1663.

9

the potential to boost local economies while strengthening United States energy independence

and national security.

However, no issue that concerns public welfare can be assessed in a void. While there are

clear benefits to hydrofracking in the short-term, public safety, consumer protection, and

environmental impacts must be fully considered and assessed before the practice can be

adequately and efficiently regulated for the sake of private and public benefit and protection. To

be sure, hydrofracking has potent risks and tangible drawbacks that should sound alarm bells for

regulatory agencies and environmental protection groups.

As mentioned before, the hydrofracking process pumps millions of gallons of water,

sand, and chemicals into the ground in order to cause fracturing in rock formations. Known

toxins contained in some of these mixtures are “acetaldehyde, benzene, cumene, diethanolamine,

ethylene glycol, hydrochloric acid, methanol, p-Xylene, proplylene oxide, toluene,

acetophenone, benzyl chloride, Di (2-ethylhexyl) phthalate, dimethyl formamide, ethylene oxide,

hydrofluoric acid, naphthalene, phenol, sulfuric acid, xylene, acrylamide, copper, diesel,

ethylbenzene, formaldehyde, lead, nitrolotriacetic acid, phtalic anhydride, and thiourea.”13

While a complete inventory of the human health risks of the above listed toxic chemicals

is beyond the scope of this paper, the Committee on Energy and Commerce Minority Staff

Report which detailed the use of these chemicals in hydrofracking notes that some of these

chemicals fall within the following categories: a) regulated under the Safe Drinking Water Act

due to risks to human health, b) hazardous air pollutants falling within the Clean Air Act, and c)

known or possible human carcinogens. From 2005 to 2009, energy companies utilized products

13 US National Library of Medicine, "Learn about toxic chemicals used in hydraulic fracturing." Last modified FEBRUARY 2013. Accessed January 26, 2014. http://toxmap.nlm.nih.gov/toxmap/news/2011/11/learn-about-toxic-chemicals-used-in-hydraulic-fracturing.html.

10

containing 13 different carcinogens, among them benzene, a known human carcinogen.14 The

Committee on Energy and Commerce report contains perhaps the most exhaustive list of

chemicals utilized in the fracking process to date.

According to a report by On the Cutting Edge, an organization focused on professional

development for geoscience faculty, the environmental risks of hydrofracking are wide-ranging.

In its section on air pollution, the organization notes that information from the National Oceanic

and Atmospheric Administration (NOAA) indicates that 4 percent of methane produced by

hydrofracking wells escapes into the atmosphere. Methane is 25 times more potent than cartbon

dioxide at trapping heat inside the atmosphere, and the NOAA reports that wells in Weld County

produced gas emissions equivalent to 1-3 million motor vehicles. During drilling, air pollutants,

some mentioned in the previous paragraph on the fracking fluids, are released into the air. These

pollutants, an exhaustive list of which are contained in the report, are known to cause “short-term

illness, cancer, organ damage, nervous system disorders and birth defects or even death.”15

The noted air pollutant chemicals from the process are not the only relevant factor.

Measured ozone levels in some areas surrounding natural gas wells are alarming. In a report

from 2011, the Associated Press noted that in the Upper Green River Basin of Cheyenne,

Wyoming, ozone levels spiked as high as 124 parts per billion; that level is “two-thirds higher

than the Environmental Protection Agency’s maximum healthy limit of 75 parts per billion and

above the worst day in Los Angeles all last year, 114 parts per billion…” Local residents

14 UNITED STATES HOUSE OF REPRESENTATIVES COMMITTEE ON ENERGY AND COMMERCE MINORITY STAFF, "CHEMICALS USED IN HYDRAULIC FRACTURING ." Last modified APRIL 2011. Accessed January 26, 2014. http://democrats.energycommerce.house.gov/sites/default/files/documents/Hydraulic-Fracturing-Chemicals-2011-4-18.pdf.15 Joe, Hoffman. On the Cutting Edge, "Potential Health and Environmental Effects of Hydrofracking in the Williston Basin, Montana." Last modified SEPTEMBER 16, 2013. Accessed January 26, 2014. http://serc.carleton.edu/NAGTWorkshops/health/case_studies/hydrofracking_w.html.

11

complain during high-ozone periods of nosebleeds and inability to breathe normally, while the

Wyoming Department of Environmental Quality urges residents to remain indoors during

periods of elevated levels.16

Water usage concerns are particularly important, especially in states that face seasonal

water shortages or a general lower level of accessibility than others. Hydrofracking requires an

extremely large amount of water for a few days during the process, utilizing one to five million

gallons of water. In 2011 in Tarrant County, Texas, 2.9 billion gallons of water were utilized for

the process. In Webb County, Texas, researchers estimate that the amount of water used for

hydrofracking “represents as much as one-third of the area’s annual groundwater recharge, the

amount of surface water that percolates back to the underground aquifer supplying the region.”

It’s important to note that this water must be treated to be reused, an expensive process

necessitated by the fact that produced water contains toxic chemicals as well as sometimes even

radioactivity.17

The most prominent concern regarding human health addressed in the media and featured

in various conflicting documentaries such as “GasLand” and “FrackNation” is the potential for

hydrofracking wells to contaminate groundwater and drinking water supplies. Multiple studies

by Duke University have linked the practice with contamination of groundwater. Its most recent

study analyzed 141 drinking water samples from private water wells in Pennsylvania’s Marcellus

16 Associated Press, "Wyoming's Natural Gas Boom Comes with Smog Attached." Last modified SEPTEMBER 03, 2011. Accessed January 26, 2014. http://www.nbcnews.com/id/41971686/ns/us_news-environment/ "17 Felicity, Barringer. The New York Times, "Spread of Hydrofracking Could Strain Water Resources in West, Study Finds." Last modified MAY 02, 2013. Accessed January 26, 2014. http://www.nytimes.com/2013/05/02/science/earth/hydrofracking-could-strain-western-water-resources-study-finds.html.

12

Shale basin. The study determined that those living in homes near hydrofracking shale wells are

more likely to have drinking water supplies contaminated by stray gases.18

Carcinogens and other toxic chemicals in produced water are not the only concern of

environmental activists and watchdog groups. Radioactivity is also a problem in the produced

during the fracking process. Studies conducted by the E.P.A. and one confidential study by the

drilling industry itself indicate that radioactivity in drilling waste “cannot be fully diluted in

rivers and other waterways.” Further, in many cases, the waste water is being transferred to

sewage treatment plants that are incapable of treating the water for radioactivity to render it safe

for the environment or human consumption before it is put back into circulation in rivers and

other bodies of water.19

Current Regulations

Hydrofracking is regulated through a patchwork system of laws and regulations instituted

at the federal and state levels. A company’s ability to engage in the process in any given state is

likely to depend on that state’s policy toward hydrofracking, as the federal government has a

mostly lax stance on the issue due to regulatory loopholes crafted for the industry.

18 Dave, Lucas. WAMC Northeast Public Radio, "Duke Study Links Hydrofracking To Water Contamination." Accessed January 29, 2014. http://wamc.org/post/duke-study-links-hydrofracking-water-contamination.19 Urbina, Ian. New York Times, "Drilling Down: Regulation Lax as Gas Wells’ Tainted Water Hits Rivers." Last modified FEBRUARY 26, 2011. Accessed January 29, 2014. http://www.bctwa.org/FrkBC-DrillingDown-NewYorkTimes.pdf.

13

The most prominent loophole is known as the “The Halliburton Loophole,” a term that

refers to provisions inserted into the Energy Policy Act of 2005 at the direction of Vice President

Dick Cheney. The provisions prevent the Environmental Protection Agency from regulating

hydrofracking insofar as it concerns the Safe Drinking Water Act. Hydrofracking is explicitly

excluded from the purview of the act by §322, which contains the following language:

SEC. 322. HYDRAULIC FRACTURING.

Paragraph (1) of section 1421(d) of the Safe Drinking Water Act (42 U.S.C. 300h(d)) is amended to read as follows:

‘‘(1) UNDERGROUND INJECTION.—The term ‘underground injection’—

‘‘(A) means the subsurface emplacement of fluids by well injection; and

‘‘(B) EXCLUDES—

‘‘(i) the underground injection of natural gas for purposes of storage; and

‘‘(ii) the underground injection of fluids or propping agents (other than diesel fuels) pursuant to hydraulic fracturing operations related to oil, gas, or geothermal production activities.’’

The act also changes the definition of a pollutant so that fluids injected during the process may

not be considered pollutants.20

Governmental positions on whether to even allow hydrofracking vary widely. Moratoria

on the practice exist at the national level, state level, and even municipal level. Nations with

moratoria on the practice include France, Bulgaria, and Germany, as well as many others. The

state of Vermont has banned the practice, and New York has an effective moratorium on

hydrofracking permits while the state government investigates the potential effects on the

environment and human health.21 Cities and municipalities have engaged in regulation when they

feel that the states and federal government have not done enough to regulate the practice. In New

20 Independent Water Testing LLC, "Education Center." Last modified 2011. Accessed January 29, 2014. http://www.independentwatertesting.com/education-center/148-what-is-the-halliburton-loophole.html.21 Keep Tap Water Safe, "List of Bans Worldwide." Last modified JANUARY 07, 2014. Accessed January 30, 2014. http://keeptapwatersafe.org/global-bans-on-fracking/.

14

York alone, municipalities have enacted “71 bans, 106 moratoria” and there has been to date 87

movements for prohibitions. FracTracker provides an exhaustive list and map of the bans,

moratoria, and movements concerning the practice.22

One major concern for environmental advocates concerns the disclosure of chemicals

utilized in the fracking fluid. While laborious research by some Congressional committees and

nongovernmental organizations has provided some insight into what chemicals are utilized in the

fluid, in many areas, the contents are considered “proprietary trade secrets.” Of 31 states where

fracking takes place, only four have “significant drilling rules.” Only five states have disclosure

rules, and these rules still contain exemptions for trade secrets.23

Conclusions and Moving Forward

It is apparent from analysis of the various sources of information on hydrofracking, its

economic benefits, and its potential effects on the environment and human health, that this is an

issue that will remain extremely polarizing for at least the next several years. However, in the

meantime, rational steps can be taken to mitigate potential negative effects of the practice while

taking advantage of the benefits of abundant domestically-produced natural gas.

22 FracTracker, "Current High Volume Horizontal Hydraulic Fracturing Drilling Bans and Moratoria in NY State." Last modified DECEMBER 20, 2013. Accessed January 30, 2014. http://www.fractracker.org/map/ny-moratoria/.23 The Center for Media and Democracy, "Fracking." Last modified OCTOBER 29, 2013. Accessed January 30, 2014. http://www.sourcewatch.org/index.php/Fracking.

15

Many areas have exercised the use of moratoria. This is a route that is well-advised given

the novel nature of widespread hydrofracking. While the practice has been around for decades, it

has not been utilized at a level on a scale with the potential to affect the environment or human

health in real, tangible ways. This changed however, with the discovery of massive amounts of

trapped natural gas in the Marcellus Shale and the advent of new, more efficient hydrofracking

techniques. More studies on the safety of the practice and its potential to pollute air and

groundwater/drinking water supplies are needed before it can be utilized on a widespread,

national scale. In certain areas, such as those in Pennsylvania, due to a moratorium on

hydrofracking pending further study, the local residents have essentially been turned into guinea

pigs in a grand experiment on the human health effects of fracking. Dimock, Pennsylvania, is

one example of this problem. The human health effects of those exposed in areas like Dimock

may not be known for years or decades, when it’s too late to mitigate any potential damage from

human carcinogens, water radioactivity, etc.

There is no logical reason for hydrofracking being exempted from the Safe Drinking

Water Act other than to facilitate the practice and make it easier to frack. The exemption should

be abolished so that water supplies are protected from toxic chemicals injected via hydrofracking

just as they are protected from other industrial practices. Short-term gains in natural gas

production are not worth the potential human health effects moving into the future. Unless

researchers can definitively determine that the injection of these fluids cannot in any way reach

human drinking water supplies, the exemption needs to be revoked.

Analyzing and limiting levels of toxic chemicals in fracking fluid before it is injected into

the ground should be a priority for the federal government. Due to the interconnected nature of

waterways, federal agencies such as the EPA should be granted the ability to control the levels of

16

toxins injected into the ground. But to do so, exemptions for trade secrets concerning the

fracking fluid should be eliminated. Residents should be empowered with the knowledge of

exactly what chemicals, and at what levels, are being injected into the ground near their property.

Without this information, it’s impossible for landowners and government agencies to make

informed, knowing decisions about how to regulate and handle the fracking process.

In summation, more information is needed about the practice, the levels of pollutants that

escape into the environment, and the human health effects of these pollutants. Until this

information is available via extensive research, the federal government, state governments, and

municipalities should err in the direction of caution rather than enabling without concern; after

all, the natural gas isn’t going anywhere until we frack it.

17