Jones Day via Mondaq | 23 August 2016

US Congress Reauthorizes Pipeline Safety Agency and Mandates New Pipeline Safety Requirements

On 22 June 22 2016, President Obama signed the PIPES Act of 2016 into law. The act reauthorizes the US Department of Transportation’s (DOT) Pipeline and Hazardous Materials Safety Administration through fiscal year 2019. The act makes dozens of changes to the federal pipeline safety laws, including:

  • Requiring that DOT adopt, for the first time, federal minimum safety standards for underground natural gas storage facilities
  • Authorizing DOT to issue emergency orders to address imminent hazards posed by gas pipelines or hazardous liquids
  • Allowing a certified state authority to participate in a DOT inspection of an interstate pipeline facility
  • Increasing inspection requirements for certain hazardous liquid pipeline facilities located underwater
  • Imposing on DOT the duty to submit, on an ongoing and periodic basis, reports to Congress addressing the status of DOT’s yet-to-be completed actions implementing the 2011 Pipeline Safety Act

Go Skagit | 16 August 2016

Federal Agency Critical of Oil Refinery Safety Measures

A federal agency issued new oil refinery safety recommendations on 11 August that it says, if not followed, would leave the industry vulnerable to more incidents such as the explosion that killed seven workers in 2010 at Tesoro Anacortes Refinery.

The safety recommendations by the US Chemical Safety Board stem from a board investigation into the Anacortes explosion. In that incident, a device called a heat exchanger cracked and weakened over time even though safety measures aligned with industry standards, according to the board’s report.

The heat exchanger, the agency said, weakened because of what is called high-temperature hydrogen attack, which cracks and damages the equipment.

A statement from Tesoro issued on 12 August stated the refinery would “continue to review and evaluate the recommendations and guidance” in order to have “high safety standards for our employees and the communities in which we operate.”

JPT | 11 August 2016

European Commission Strives Toward Reasonable Shale-Gas Regulation

Following years of deliberation, the European Union (EU) released a recommendation on unconventional hydrocarbons and a related communication in 2014. Although these documents are not legally binding on member states, they are nevertheless of great significance because they indicate, for the first time, the current and likely future stance of EU institutions on the regulation of unconventional hydrocarbons. This paper traces the origins and development of these documents, which provide vital clues for the road ahead in European shale-gas regulation.

The potential threats of groundwater contamination, irresponsible disposal of flowback, the repercussions of significant land use, and increased emission of greenhouse gases have been named in recent scientific studies as main potential threats of shale-gas extraction. The current European law framework on environmental protection, mainly consisting of directives and regulations, entails some gaps and does not cover these issues comprehensively. Thus, the EU took recent action to develop shale-gas-specific regulation in order to close the identified gaps in the existing general framework.

Because the existing secondary law norms were elaborated at a time when shale gas extraction was virtually unknown in Europe, one would suspect that they entail provisions that do not sufficiently cover the specific potential threats of this technique. Indeed, there are a number of issues. Probably the most important one is that environmental impact assessments (EIAs) are not compulsory for shale-gas projects. Although member states have the right to require an EIA for specific, individual shale-gas projects, this discretion does not appropriately match the level of potential environmental hazards of shale-gas extraction.

The paper does not engage in an analy­sis of the pre-existing EU regulatory framework but focuses on the EU’s efforts to close the gaps in the framework that have been discovered previously. The EU introduced nonbinding, soft-law measures in this regard to create a level playing field among all member states in the form of the 2014 Shale Gas Recommendation and the 2014 Shale Gas Communication.

The paper highlights the main features of the recommendation and the communication and considers whether they are sufficient to close the gaps in the EU secondary law framework. Overall, the ­author concludes that these measures go a long way in addressing the perceived gaps, although they do not succeed in closing all of them.

Despite that rather favorable assessment, the recommendation and the communication have been criticized because of their legal guise as nonbinding soft-law norms. The fear that individual states could simply ignore the recommended measures if they do not fit in with their respective agendas on shale-gas extraction was expressed by some scholars. This peculiarity, they argued, could lead to a “race to the bottom” of environmental standards, as one member state may try to undercut the others  on environmental standards in order to attract investors.

However, this paper concludes that the described race to the bottom would be a rather short one and would not put the environmental standard in the EU into any real danger. The existing environmental directives and regulations of the EU constitute the ultimate bottom line, below which member states are not allowed to operate. Because of the high standard and elaborated nature of this bottom line, there currently is no real danger for environmental standards in Europe to be lowered to any significant extent. Moreover, member states would be ill-advised to take a chance and simply ignore these recommendations. A considerable number of legally binding EU directives started their existence as recommendations in the past. In line with this history, the 2014 Shale Gas Recommendation explicitly threatens member states with the introduction of legally binding norms if the EU is not satisfied with the domestic implementation of the recommendation. Thus, it is not unlikely that the recommendation could turn into an EU directive or regulation.

Although the 2014 Shale Gas Recommendation and the 2014 Shale Gas Communication go to some length in addressing current gaps, they do not cover all of them. Even more importantly, the 2014 measures are not legally binding on member states. However, this paper concludes that the nonbinding legal character could be an advantage because it provides member states with the greatest possible leeway to implement shale-gas regulation that is tailored to their individual needs.

Both documents recommend to member states that wish to engage in shale-gas extraction a set of measures and ­operating standards in order to create a level playing field among those states. The measures indeed go some way in closing some of the pre-existing gaps. The framework urges member states to carry out a strategic environmental assessment before issuing licenses that may lead to shale-gas extraction. The 2014 Shale Gas Communication entails a pledge of the EU to look into the issue of a specific best-available-technique reference document for shale-gas extraction under the Mining Waste Directive. This action is designed to ensure that waste is appropriately handled and treated and that the risk of water, air, and soil pollution is minimized.

Moreover, the framework ­reinforces the monitoring requirements under the Water Framework Directive and the Groundwater Directive. Baseline studies of shale-gas sites with regard to water, soil, and air quality, and other issues, should be conducted; their results should be benchmarked against future results of comprehensive monitoring exercises. Furthermore, the framework calls upon member states to apply the provisions on environmental liability to all activities taking place at a shale-gas-extraction site. This request shall be understood explicitly as including strict liability for greenhouse-gas emissions and overbearing use of land, which currently do not fall under the scope of the Environmental Liability Directive.

However, the European Commission failed to close some other gaps. Most notably, it called upon member states to ensure that an EIA is carried out for each shale-gas project but took no action to insert shale-gas projects into Annex I of the EIA Directive. This move would have made EIAs obligatory for all shale-gas projects, already at EU level. By simply passing the ball back to member states, the EU did not adequately address the main gap in EU EIA legislation.

However, the 2014 framework on shale-gas extraction does not actually implement the described measures but merely recommends to member states to take these measures into account. The framework has been molded into a recommendation and a communication, secondary EU law measures with no direct binding force.

The nonbinding nature of these EU regulations on shale-gas extraction became the main point of criticism. It was argued that nonbinding legislation is an ineffective way to create a level playing field for shale-gas extraction for all member states because individual states are allowed to ignore the measures outlined in the recommendation if the measures do not fit in with their respective agendas. This could lead to a race to the bottom of environmental standards, because one member state could try to undercut another on environmental-compliance costs for foreign investors. However, this race to the bottom could not last indefinitely because the existing ­environmental-law framework of the EU constitutes the bottom line for member states.

A review of the effectiveness of the framework shall be conducted within 18 months of its coming into force. Depending on the outcome of this review, the commission is going to determine if further, more-stringent, regulatory action on shale-gas extraction is required. In fact, this is the way in which a considerable number of directives came into force in the past.

Ultimately, the nonbinding character of the 2014 Shale Gas Recommendation is in some respects an advantage. The principle of subsidiarity, under which member states should take responsibility for matters that can be decided at their level, is honored. Subsidiarity must also be viewed in the context of proportionality. The principle of proportionality requires the use of nonbinding instruments (e.g., recommendations) in EU environmental legislation, wherever possible.

The Hill | 25 July 2016

GAO Says Feds Should Strengthen Federal-Land Methane Accounting

The Interior Department needs to take numerous steps to improve the way it measures methane emissions from oil and natural gas wells on federal land, a watchdog report found.

The Government Accountability Office (GAO) found numerous problems and inconsistencies in the instructions the Bureau of Land Management (BLM) gives to companies to report their methane emissions.

“As a result of these limitations, Interior may not have a consistent accounting of natural gas emissions from onshore federal leases and does not have the information it needs to reasonably ensure it is minimizing waste on these leases,” the report said. For example, around 90% of the requests that companies submitted to deliberately vent or flare gas did not meet the agency’s standards for documentation, though most were approved.

Furthermore, the BLM offices have inconsistent policies regarding whether companies should pay royalties for the vented or flared gas.

Methane is the main component in natural gas, and is a potent greenhouse gas. Interior is legally required to waste to a minimum, in order to ensure the maximum taxpayer return.

The BLM is working on a new regulation to reduce methane emissions, which it expects to clear up many of the problems the GAO report found.

Washington Examiner | 19 July 2016

North Dakota Sues EPA Over Methane Rules

North Dakota is the first state to sue the Environmental Protection Agency over new methane emission rules for the oil and gas industry.

The state, which will be significantly affected by the new rules because of its large shale oil operations, filed its lawsuit on 18 July in the DC Circuit Court of Appeals, arguing that the new rule is “arbitrary, capricious, an abuse of discretion, and not in accordance with law.”

The methane rule was made in May, requiring shale oil and gas producers to reduce methane leaks at new and modified drilling sites. The rule is part of President Obama’s climate change agenda, which seeks to reduce methane emissions 40–45% by 2025.

OPITO | 12 July 2016

OPITO Updates Standard To Reflect Global Scale

As a result of Civil Aviation Report recommendations, the UK Basic Offshore Safety Induction and Emergency Training/Further Offshore Emergency Training/Helicopter Underwater Escape Training (BOSIET/FOET/HUET) with Compressed Air Emergency Breathing System (CA-EBS) training standard was introduced in February 2016.

Since the launch of this standard, OPITO has continued to engage with various stakeholders to ensure that the UK BOSIET/FOET/HUET (with CA-EBS) standard meets industry’s current requirements.

There has been a growing demand for CA-EBS training globally.  This demand means that there is now a requirement for CA-EBS training on an international scale, and not only within the UK.  Various multinational operating companies have an aim to introduce CA-EBS on their flights globally and require a standard that can be recognized readily from a global perspective.  As a result, the UK reference from the formally known UK BOSIET/FOET/HUET (with CA-EBS) has been removed.  The standard will be known as the BOSIET/FOET/HUET (with CA-EBS) from Monday, 20 June, 2016.

Offshore Energy Today | 12 July 2016

US Government Issues Final Rule for Arctic Offshore Drilling

The US Department of the Interior, acting through the Bureau of Ocean Energy Management and the Bureau of Safety and Environmental Enforcement, on 7 July issued the final rule regarding offshore drilling in Alaska, requiring operators to have containment equipment and a relief well rig ready in case of a blowout.

The rule, focused on the offshore continental shelf within the Beaufort Sea and Chukchi Sea Planning Areas—Arctic OCS—aims to “help ensure the safe, effective, and responsible exploration of Arctic OCS oil and gas resources, while protecting the marine, coastal, and human environments and Alaska Natives’ cultural traditions and access to subsistence resources.”

The Arctic-specific regulations focus solely on OCS exploratory drilling operations from floating vessels within the US Beaufort and Chukchi Seas.

These rules require oil companies to ensure proper internal controls and planning for oil-spill prevention, containment, and responses—all issues identified by previous Interior reports regarding Shell’s 2012 exploration activities in the Arctic.

NPR | 22 June 2016

Federal Judge Strikes Down Obama Administration’s Hydraulic Fracturing Rules

A federal judge in Wyoming has struck down the Obama administration’s regulations on hydraulic fracturing, ruling that the US Bureau of Land Management (BLM) does not have the authority to establish rules over hydraulic fracturing on federal and Indian lands.

A hydraulic fracturing site is situated on the outskirts of Midland, Texas, in the Permian Basin. Credit: Spencer Platt, Getty Images.

In the ruling on 21 June, US District Judge Scott Skavdahl said Congress had not granted the BLM that power and had instead chosen to specifically exclude hydraulic fracturing from federal oversight.

Skavdahl made it clear what he was—and was not—considering in his ruling.

“The issue before this court is not whether hydraulic fracturing is good or bad for the environment or the citizens of the United States,” he wrote. The question, instead, is “whether Congress has delegated to the Department of Interior legal authority to regulate hydraulic fracturing. It has not.”

The BLM rules in question include a requirement that companies drilling for oil and natural gas disclose the chemicals they use in the fracturing process. They also mandate storage protocols for recovered waste water, cement barriers between wells and water zones, and detailed disclosure of the locations of existing wells.

Reuters | 21 June 2106

German Government Agrees To Ban Hydraulic Fracturing Indefinitely

Germany’s coalition government agreed to ban hydraulic fracturing for shale gas indefinitely on 21 June after years of fractious talks over the issue, but environmental groups said the ban did not go far enough and vowed to fight the deal.

Test drilling will be allowed but only with the permission of the respective state government, officials said.

German industry is keen to keep the door open to fracturing, arguing it could help lower energy costs, but opposition is strong in the country, where a powerful green lobby has warned about possible risks to drinking water.

If the law is approved by parliament, Germany will follow France, which has banned the practice, whereas Britain allows it subject to strict environmental and safety guidelines.

Holland & Knight via Mondaq

US House Passes Pipeline Safety Bill; Senate Expected To Pass Soon

The US House of Representatives passed the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (PIPES Act of 2016) unanimously on 8 June 2016. The Senate is expected to pass the bill very soon. The bill is a collaboration between the House and Senate and is an amendment to a bill passed by the Senate in March.

The PIPES Act of 2016 would reauthorize the Pipeline and Hazardous Materials Safety Administration (PHMSA) from fiscal year (FY) 2016 to FY 2019. PHMSA still has not issued 16 of the 42 congressional mandates from the 2011 reauthorization bill (the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011), and stakeholders have advocated for completion of those mandates rather than extensive new requirements.

State Impact | 15 June 2016

EPA Bans Disposal of Fracturing Waste Water at Public Treatment Plants

The US Environmental Protection Agency (EPA) has banned the disposal of hydraulic fracturing waste water at public sewage plants, formalizing a voluntary practice that removed most fracturing waste from Pennsylvania plants starting in 2011.

Waste Treatment Corporation in Warren, Pa. The EPA has banned oil and gas producers from using publicly owned treatment facilities to dispose of hydraulic fracturing waste. Photo courtesy of Clean Water Action.

The EPA on 13 June finalized a rule that prevents operators from disposing of waste from unconventional oil and gas operations at publicly owned treatment works.

The rule is designed to prevent the entry into public water systems of contaminants such as heavy metals, chemical additives, and high concentrations of salt that are associated with hydraulic fracturing and which public water systems are typically not equipped to treat.

Most energy companies stopped sending hydraulic fracturing waste water to public treatment plants starting in 2011 when the administration of former Pennsylvania Gov. Tom Corbett called on the industry to end the practice.

Myron Arnowitt, Pennsylvania director for the environmental group Clean Water Action, said compliance with the Corbett administration’s request was “not 100%” but that most energy companies have since then found other ways of disposing of or treating the water, including industrial treatment plants, underground injection wells, and recycling.

“It’s not going to affect tons of sources right this second,” Arnowitt said.

Norton Rose Fulbright via Mondaq | 15 June 2016

Newfoundland and Labrador Hydraulic Fracturing Review Panel Releases Report

The Canadian province of Newfoundland and Labrador mandated an independent panel to conduct a public review and advise the minister of natural resources on the socioeconomic and environmental implications of hydraulic fracturing in Western Newfoundland. The panel has now issued its report.

In November 2013, the province imposed a pause in processing approvals of hydraulic fracturing of onshore and onshore-to-offshore wells in Western Newfoundland. The pause was to allow for a review of regulations in other jurisdictions, technical work to assess the local geology, and to allow for public consultation.

The Port au Port Bay area in Western Newfoundland contains the Green Point shale, which is thought to contain an estimated 150 million bbl of recoverable oil and 75 Bcf of gas. Industry had proposed seismic in the area.

The panel’s report does not provide a simple yes or no recommendation as to whether hydraulic fracturing should be allowed. Instead, it identified a number of gaps and deficiencies that need to be addressed and recommended some supplementary measures be implemented and that the regulatory pause continue.