Regulations
The Wichita Eagle | 17 March 2015

Court: Chemical Safety Board Can Investigate Offshore Spills

In a case with potentially far-reaching consequences, a federal appeals court has again found that the US Chemical Safety Board has the authority to investigate the causes of offshore oil spills.

The board has been looking into the catastrophic blowout of a BP well 5 years ago in the Gulf of Mexico that killed 11 people and caused the nation’s worst offshore oil spill. The ruling—unless it is overturned by the US Supreme Court—means that the Chemical Safety Board may also investigate other types of chemical spills in offshore waters in the future.

The drilling company, Transocean Deepwater Drilling, contends the safety board does not have the authority to investigate.

Last September, a three-judge panel of the 5th US Circuit of Appeals disagreed. On 12 March, the full court rejected by a vote of 9-6 Transocean’s request to reconsider the panel’s finding.

“It has some significant ramifications for offshore operators,” said David Baay, a lawyer for Transocean. He said the board “will now be emboldened” to investigate offshore rig spills and “that means that any offshore incident of significance is likely to face one more federal agency among an already crowded field.”

The ruling could increase costs for drilling companies and add confusion about which agency has the authority to investigate spills, he said.

Reuters | 16 March 2015

Regulator Says Oil Industry Must Join US Railroads To Boost Train Safety

Rail operators are going to great lengths to prevent oil train derailments but the energy sector must do more to prevent accidents from becoming fiery disasters, the leading US rail regulator said on 13 March.

Oil train tankers have jumped the tracks in a string of mishaps in recent months that resulted in explosions and fires.

Several of those shipments originated from North Dakota’s Bakken energy fields. Officials have warned that fuel from the region is particularly light and volatile.

Sarah Feinberg, acting head of the Federal Railroad Administration, said the energy industry must do more to control the volatility of its cargo.

“(We) are running out of things that we can put on the railroads to do,” she said. “There have to be other industries that have skin in the game.”

Read the full story here.

Fuel Fix | 10 March 2015

Derailment Set To Fuel Push for Crude Volatility Mandates

The fiery derailment of an oil train in Illinois on 5 March is likely to bolster a campaign for energy companies to strip combustible gases out of the crude they ship by rail.

Emergency workers were still working on 6 March to contain the blaze at the latest accident near Galena, Ill.— the third derailment of oil cars in as many weeks. BNSF Railway said 21 of the 105 cars on the train (all but two carrying oil) left the tracks.

Like a 16 February derailment in West Virginia, this accident involved newer-model tank cars designed to be more resilient in crashes.

It also was carrying the same kind of crude: oil extracted from the Bakken formation in North Dakota, that is believed to contain a relatively high amount of volatile gases. Federal regulators in 2014 called Bakken oil “more volatile than most other types of crude.”

North Dakota regulations, adopted in December and set to go into effect next month, would require oil producers to stabilize their crude, heating it to remove some of that excess gas and lower its vapor pressure to 13.7 psi.

But there is no national standard—and some lawmakers have questioned whether North Dakota’s 13.7 psi threshold is too high. It exceeds the top vapor pressure of gasoline (13.5 psi) as well as that of the crude involved in the lethal Lac-Megantic explosion in Quebec 2 years ago.

“Given the oil industry’s influence in North Dakota, their standard may not be good enough,” Sen. Chuck Schumer, D-N.Y., told reporters this week.

Schumer has called on the Energy and Transportation departments to collaborate on “new regulations that would require the stabilization of crude oil prior to shipment.”

Dentons via Mondaq | 25 February 2015

Hydraulic Fracturing in the UK: The Pursuit of Safety

Further changes to the Infrastructure Bill have now addressed the potential problems for the UK unconventionals industry introduced by a Labour amendment, but the approach of Scottish and possibly Welsh ministers is less encouraging for would-be shale developers.

Infrastructure Bill

At the last substantive debate on the Infrastructure Bill in the Commons, an amendment was inserted providing that “any hydraulic fracturing can not take place” unless 13 conditions are fulfilled. The drafting of this “safeguarding” provision left considerable scope for doubt as to when some of these conditions would be satisfied. Such uncertainty inevitably assists those who want to delay or obstruct hydraulic fracturing operations.

The House of Lords has now replaced the Commons’ amendment with drafted provisions that provide a clear and practicable route to satisfying each of the safeguarding requirements proposed by the Commons. Although the Labour spokesman, Lord Tunnicliffe, raised a number of points of detail that he suggested had been lost in translation from the Commons’ amendment to the Government’s version, it seems possible that there will be no further changes when the Bill returns to the Commons for the next stage of the so-called ping-pong process.

BakerHostetler via Mondaq | 25 February 2015

What To Expect From Recent Crude Oil Derailments

These are uncertain and stressful times for all involved in the transportation of crude oil by rail. Since 14 February, fiery derailments in West Virginia and Ontario have refocused an unwelcome spotlight on the necessity of transporting crude oil by railroad in areas without adequate access to pipelines.

The attention comes at a politically sensitive juncture as the Pipeline and Hazardous Materials Safety Administration’s and the Federal Railroad Administration’s comprehensive crude-by-rail safety rule awaits review with the White House’s Office of Management and Budget, a process that will likely produce a final rule by mid-May.

But can companies involved in crude-by-rail expect other repercussions from the two recent derailments? Without a doubt they can.

Platts | 23 February 2015

US Interior Unveils Arctic Oil, Gas Drilling Regulations

The Obama administration on 20 February issued proposed Arctic-specific drilling regulations that will apply to potential exploration operations in the Beaufort and Chukchi seas.

The regulations include new requirements for operators to submit “region-specific” response plans for oil spills, have “prompt access” to source control and containment equipment, and have a separate relief rig available in case well control is lost, the Department of Interior said.

“If there were to be an uncontrolled well event, we want to make sure that the well can be secured within the drilling season,” Brian Salerno, director of Interior’s Bureau of Safety and Environmental Enforcement, said during a conference call.

That requirement was quickly criticized by industry.

Fuel Fix | 17 February 2015

Congressional Democrats Seek To Step Up Fracturing Oversight

Democrats on a congressional oversight panel are stepping up their investigation into how well states are regulating the disposal of oil and gas waste, citing continuing public concern about the potential environmental and health risks of hydraulic fracturing.

Rep. Matt Cartwright (D-Pa.), the lead Democrat on a health subcommittee of the House Committee on Oversight and Government Reform, says he will be pressing environmental agencies in Pennsylvania, Ohio, and West Virginia for fuller answers to his panel’s questions on their level of inspections and enforcement actions. Republicans on the committee, including subcommittee chairman Jim Jordan of Ohio, have not yet taken a position on whether to join the investigation, citing in part jurisdictional questions.

Of particular concern is making sure their waterways are not contaminated by waste from hydraulic fracturing, which uses millions of gallons of high-pressure water mixed with sand and chemicals to break apart rocks rich in oil and gas. That process leaves behind a host of chemicals, sludge, and other potentially toxic fluids.

Cartwright is also asking for a state accounting of how complaints from local residents about health effects are handled.

Winston & Strawn | 13 February 2015

EPA Releases Memo on Next Generation Compliance in Civil Enforcement Settlements

On 7 January 7 2015, the EPA’s Office of Enforcement and Compliance Assurance issued a memorandum to EPA enforcement personnel directing them to use next-generation compliance tools in civil judicial and administrative enforcement settlements whenever appropriate. These tools include:

  • Advanced monitoring of pollutants on a real-time basis using emerging technology, such as fence-line monitoring of air quality at the border of a facility
  • Independent third-party verification of compliance with settlement obligations, particularly where settlement agreements call for long-term injunctive relief
  • Electronic reporting of data in a searchable format
  • Public accountability through data transparency and accessibility

Read the memorandum here (PDF).

Reed Smith via JD Supra

Is Wastewater Migration From Disposal Wells a Trespass? Texas Supreme Court Declines To Answer

In Environmental Processing Systems L.C. v. FPL Farming Ltd., a landowner sued the operator of a neighboring wastewater disposal facility on the theory that deep subsurface wastewater trespassed beneath the landowner’s property. On 6 February 2015, after a series of appeals, the Texas Supreme Court ultimately reversed the court of appeals and reinstated the trial court’s take-nothing judgment against the landowner. The Court held that lack of consent is an element of a trespass cause of action that the landowner failed to prove. In doing so, the Court declined to answer whether deep subsurface wastewater migration is actionable as a common law trespass under Texas law.

Read the court’s opinion here (PDF).

Lawson Lundell via Mondaq

British Columbia: Recurrent Short-Term Water Use Approvals Are Lawful

In yet another indication of the increasing prominence of water use issues in British Columbia, the Supreme Court of British Columbia recently upheld the practice of the BC Oil and Gas Commission to grant recurrent short-term water approvals for oil and gas activities under the Water Act.

In Western Canada Wilderness Committee v. British Columbia (Oil and Gas Commission), 2014 BCSC 1919, the petitioners, Western Canada Wilderness Committee and Sierra Club of British Columbia Foundation, alleged that the Commission’s practice of granting recurrent short-term water use approvals to the same oil and gas companies for the same location was in violation of the Water Act. The Court disagreed, holding that there was nothing illegal about the Commission’s practice of evaluating each successive application for an approval on a fresh basis and according to established criteria.

Eco Magazine | 10 February 2015

EPA Seeks Comments on Published Rule Changes for Oil Dispersants

The Environmental Protection Agency has published changes to National Oil and Hazardous Substances Pollution Contingency Plan requirements in an effort to improve oil-spill planning and response. Comments are due by 22 April 2015. Entities potentially affected by this proposed rule include, among others, oil and gas extraction industries.

Among other things, the proposed changes include new and revised product toxicity and efficacy test methodologies for dispersants and other chemical/biological agents, new toxicity and efficacy criteria for listing agents, new human health and safety information requirements from manufacturers, revised area planning requirements for use authorization of chemical/biological agents, and new dispersant monitoring requirements when used on certain oil discharges. The Council on Environmental Quality first published the National Oil and Hazardous Materials Pollution Contingency Plan in 1970.

Morgan Lewis | 28 January 2015

Oil and Gas Regulatory Outlook for 2015

Twice per year, the US government lists its regulatory plans. At the end of 2014, it announced its plans for the following regulatory initiatives affecting the oil and gas industry.

The following lists the regulatory area, followed by the federal agency involved and the status of the regulation:

  1. Volatile organic compound and methane emission regulation
    Environmental Protection Agency (EPA), prerulemaking
    Department of the Interior (DOI)/Bureau of Land Management (BLM), prerulemaking
  2. Hydraulic Fracturing
    DOI/BLM, proposed rule
  3. Royalty rates for onshore leases
    DOI/BLM, prerulemaking
  4. Blowout preventers
    DOI/Bureau of Safety and Environmental Enforcement (BSEE), prerulemaking
  5. Arctic drilling
    DOI/BSEE/Bureau of Ocean Energy Management (BOEM), prerulemaking
  6. Transportation of crude oil by rail
    Department of Transportation (DOT), proposed rule
  7. Renewable fuel standards
    EPA, proposed rule

This collection of initiatives serves as a preview of the Obama administration’s agenda for the oil and gas industry. As a result of the November 2014 election, in which several Senate Democrats from energy-producing states either retired or were defeated, these initiatives may become more prominent, allowing the Obama administration to pursue a regulatory agenda without necessarily having to consider the political fallout in those states.