STATE AND FEDERAL REGULATION OFHYDRAULIC FRACTURING:

A COMPARATIVE ANALYSIS(SPE 140482)

Society of Petroleum Engineers2011 Hydraulic Fracturing Technology Conference

The Woodlands, TexasJanuary 24-26, 2011

Authors: J. Daniel (Dan) Arthur, P.E., SPECBill HochheiserBobbi J. Coughlin, EIT

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

ENVIRONMENTAL ISSUES AND CONCERNS

3

GENERAL ENVIRONMENTAL ISSUES

• Hydraulic Fracturing• Water Sourcing/

Management• Shallow system

methane• New Development

Areas/Urban• Well Site Selection• Traffic, Wildlife, Noise,

NORM, Air Emissions

NY EPA Scoping Meeting 9/13/10

Mark Raffalo & Pete Seeger address lawmakers at NYS capital regarding moratorium, July 2010

Quebec protester “Shale gas a moratorium now” 8/30/10

4

HVHF Environmental Issues

• Groundwater protection• Fracturing fluid chemistry• Water sourcing• Water disposal and reuse

5

SOURCING CHALLENGES

Public Supply82.70%

Industrial and Mining4.50%

Power Generation

3.70% Irrigation6.30%

Livestock2.30%

Shale Gas Wells0.40%

Barnett Shale Water Uses • Options vary by location and operator

• Competing water users and availability must be consideredGroundwater Use in Barnett shale counties ranges

from 1.95 percent in Somervell County to 85 percent in Cooke County

Watersourcing

WellCompletion FlowbackWell

drillingProduced

waterProductionOperations

6

WATER DISPOSAL

• Underground Injection• Treatment and Discharge• Treatment and Reuse• Municipal/Commercial Treatment Plants• Commercial Disposal Facilities

7

GROUNDWATER PROTECTION

•Risk probability of injectate reaching a USDW – 1 in 200,000 to

1 in 200,000,000•Hydraulic fracturing

– Multiple casings– Short duration– Vertical

separation

ChristmasTree

Pipeline to Flow

Process and Storage

Surface Casing

Intermediate Casing

Cement

Cement

WellFluids

Oil or Gas Zone

Perforations

Production Casing

Cement

Tubing

8

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

TRAFFIC ISSUES

• Road damage• Traffic

restrictions imposed by ordinances

• Road repair bonds $50,000 to $100,000 per mile

• Road use agreements

10

ENGO/PUBLIC ACTIVISM

11

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

ENGO TACTICS

13

Emotions

BP GULF SPILL VS. SHALE GAS

GOM Spill Shale Gas• 35,050 feet deep• Leaked into gulf

waters making cleanup and containment difficult and long

• Impacts are widespread; 6,500 –180,000 km2

14

• 1,000 to 13,500 feet deep

• Onshore spills can be contained and cleaned up quickly

• Impacts would be localized

CURRENT STATUSHydraulic Fracturing Regulatory Update

15

Federal Regulation…• There are multiple areas in which federal

regulation could develop– Disclosure: EPCRA?– Full Regulation: SDWA/UIC– New Program…

• Regardless of where, comparisonto the federal Underground Injection Control (UIC) program is reasonable to explore whatpotential regulation “might”look like…

• There are *many* complications!

16

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

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

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

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

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

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

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

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

Description

• The subsurface emplacement of fluids by well injection; and 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 creation of fractures within a reservoir that contains oil or natural gas to increase flow and maximize production.

• A hydraulic fracture is formed when a fluid is pumped down the well at pressures that exceed the rock strength, causing open fractures to form in the rock.

• The goal is typically to form complex fracture networks within the targeted production zone.

25

Hydraulic Fracturing• Underground Injection

REGULATORY PROGRAMS

• SDWA UIC Program– Established to protect usable

or potentially usable groundwater aquifers from underground injection activities (i.e., USDWs).

• Program Implementation– Direct Implementation (DI) –

The oversight of a UIC program by an EPA Regional office.

– State Primacy – Granted for all or part of the UIC program, e.g., for certain classes of injection wells.

• Hydraulic Fracturing is most commonly managed by state O&G regulatory agencies

• State O&G regulatory agencies have existing regulations designed to protect groundwater supplies from possible impacts due to O&G activities.

• State environmental agencies may also have a role in regulating activities related to hydraulic fracturing– For example, in Arkansas, the

AOGC and ADEQ both have roles for gas development and HF.

26

Hydraulic Fracturing• Underground Injection

UIC PROGRAM REGULATORS

• EPA has delegated 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

The UIC Program requirements were developed by EPA and designed to be adopted by states, territories, and tribes.

27

STATE OIL & GAS PROGRAMS

• In 2008 there were 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

There are 27 states that account for 99.9 percent of the oil and natural gas production in the United States.

28

Program Protection Targets

• Defined by Regulation, Underground Source of Drinking Water (USDW) –– An aquifer that supplies or

contains a sufficient quantity of ground water to supply a public water system

– fewer than 10,000 mg/l total dissolved solids

• Not an exempted aquifer

• Hydraulic fracturing is managed within state oil & gas programs

• It is generally common that states have statute(s) relative to providing a clean and healthful environment within the state

• Protection of water resources (groundwater and surface water) is a priority within every state and a priority of every oil & gas regulatory program

29

• Underground Injection Hydraulic Fracturing

Applicable Well Types

• Hazardous Waste Injection• Industrial Waste Injection• Municipal Waste Injection• Enhanced Oil Recovery• Brine Disposal• Solution Mining• Aquifer Storage/Recovery• Aquifer Recharge• Other

• Conventional Oil & Gas• Unconventional Gas• Unconventional Oil• CO2 Sequestration• Water Supply Wells• Injection Wells

– Classes I - V

30

• Underground Injection Hydraulic Fracturing

Permitting

• Owner/Location/Operator• Area of Review• Facility description• Geological data• Surrounding land owners• Plugging & Abandonment Plan• Specification and source of

disposal fluids• Public records – all other

wells/surface water/surface facilities /known faults

• Performance bond/corrective action proposal/contingency & monitoring plans

• Operating plan

• Owner/Location/Operator• Residential/Municipal well review• Well site construction/chemical

storage• Geological data/target formation• Drilling/proposed depth• Proposed well completion data• Well construction details• Proposed fracture schema• Pits and tanks proposed• Traffic Plans/Road Use Agreements• Source water withdrawal permits

31

Underground Injection Hydraulic Fracturing

Area Considerations

• Area of Review Analysis – ZOEI– Presence of artificial

penetration– Springs– Water wells– Wells penetrating the

injection zone• USDW identification• Confining interval• Geological

considerations

• Pre-Site Assessment– Geological considerations– Potential interfering wells– Area water supply wells– Surface and topographical

challenges– Water sourcing

• Other active production• Abandoned wells

32

Underground Injection Hydraulic Fracturing

Casing and Cementing

• Surface casing set below lowermost USDW and cemented to surface (generally)

• Well casing and cementing program must prevent fluid movement into or between USDWs

• Injectate confined to permitted injection interval

• Surface casing setting depth typically established by state for purposes of protecting usable quality groundwater from oil and/or gas development activities

• Some states include well casing and cementing programs in permits

33

Underground Injection Hydraulic Fracturing

Groundwater Protection

• Primary goal of the UIC program is the protection of USDWs

• Program is applicable from the wellhead down

• Performance and risk-based measures utilized– Prevention of fluid movement

into or between USDWs– No-migration petition for

hazardous waste wells– Re-occurring mechanical

integrity testing

• The protection of water resources is a primary objective of every state

• State oil and gas regulations – Permitting of wells– Surface casing requirements– Rules adapted based on risk and

historical industry performance– Orphan well programs– SI, TA and abandoned wells– Use of tanks and pits– Waste handling and spills– Etc.

34

Underground Injection Hydraulic Fracturing

Well Integrity

• Most injection wells must demonstrate internal and external mechanical integrity

• For Class II wells, typical internal integrity tests are required once every 5 years

• Some injection wells may be required to have continuous monitoring equipment to assure integrity is maintained

• Operators commonly test wells before perforating to assure the well’s integrity is ready for fracturing activities

• Surface equipment and piping is routinely tested

• Testing may not be required, but is done as a best practice

• Continuous monitoring is employed during fracturing

35

Underground Injection Hydraulic Fracturing

Pressure Management

• Injection permits are generally granted with a maximum allowable injection pressure

• It is common for wells to have a PMax determined by the fracture gradient of the top of the injection zone

• Pressures exceeding the injection zone fracture gradient are allowed by rule

• Wells may inject up to the PMax throughout the life of the well

• Surface pressures sufficient to overcome friction and initiate fractures in the production zone are utilized

• High friction factors are common due to fracture fluid make-up (e.g., slurry)

• Pressures maintained below pressure ratings of well tubulars and surface equipment (e.g., wellhead)

• Pressures are maintain for duration of fracturing job (e.g., a few hours per stage)

36

Underground Injection Hydraulic Fracturing

Operating Procedures

• Permanent facility typical• Designed for continuous or

batch process• Continuous monitoring

optional for Class II wells (many wells inject on a vacuum)

• Detailed operations depend on well type (e.g., waterflooding vs. SWD)

• Temporary equipment brought on-site for each fracturing

• Fracturing typically done on a stage-by-stage basis

• Number of stages does not necessarily influence the total volume used for a single well– Increased number of stages

typically means less overall volume per stage

• Continuous monitoring of pressures, rate, density, etc.

37

Underground Injection Hydraulic Fracturing

Fluid Characterization

• Injection characterization is part of the permitting process

• The extent of characterization is generally dependant on the well class and fluid proposed for injection

• The UIC program allows for some characterization details to be maintained as confidential information

• Primary fluids are disclosed as part of the completion report

• MSD Sheets are made available upon request

• Historically, the make-up of some products are maintained as proprietary and have not been reported

• Recently, multiple states are modifying rules to require full disclosure of fracturing additives

38

Underground Injection Hydraulic Fracturing

Volume Variations

• Injection rates/volumes depend on well, formation, and operational objectives

• Common for wells to inject 1,000 to over 20,000 barrels of fluid per day

• Injection and disposal wells may or may not be continuous, but typically operate year-round for multiple years

• Not uncommon for wells to be used for injection for 20+ years

• Fluid volumes depend on the type of HF technique utilized

• HV slickwater fracturing on horizontal wells commonly use 2-5 million gallons of water per well over 10 – 20 stages

• The number of stages is dependant upon the interval to be fractured (a vertical well may use only one stage), thickness of the target zone, lithology of the formation, and other factors

39

Underground Injection Hydraulic Fracturing

THOUGHTS ON THE FUTUREFuture Regulation of Hydraulic Fracturing

40

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

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.

42Photo courtesy of Range Resources

Contact InformationJ. Daniel Arthur, P.E., SPEC

ALL Consulting1718 S. Cheyenne Avenue

Tulsa, Oklahoma 74119www.ALL-LLC.com

Citation InformationArthur, 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 ConferenceThe Woodlands, Texas, January 24-26, 2011

43

EXTRA SLIDES

Additional information available for review, but not presented due to time constraints

44

AbstractWhile hydraulic fracturing is a well-developed technology that has been used for more than 40 years, its wide-spread use for coal-bed natural gas and shale gas development has raised questions about the appropriate regulatory approach to ensure that groundwater resources are protected. In response to recent public concerns about hydraulic fracturing, Congress introduced the Fracturing Responsibility and Awareness of Chemicals Act (FRAC Act). The FRAC Act would amend the Safe Drinking Water Act (SDWA) to regulate hydraulic fracturing under the same laws and regulations that are used for the Underground Injection Control (UIC) program. Proponents of the FRAC Act assert that federal regulation is necessary to ensure protection of groundwater resources. Opponents argue that federal regulation creates a one-size-fits-all approach that is inefficient and protects poorly. In addition, they argue that states are best suited to regulate hydraulic fracturing given their ability to tailor regulatory requirements to local conditions. This paper will provide an overview of state regulation of hydraulic fracturing including some of the various approaches taken, different levels of regulatory detail, and recently adopted changes as well as changes that have been proposed, but not yet adopted. The paper will also examine how hydraulic fracturing would likely be regulated under the SDWA and discuss the pros and cons of federal regulation of hydraulic fracturing from the stand point of both regulatory burden to the industry and the potential for improved environmental protection.

45

NEW AREA DEVELOPMENT

• Fear and lack of knowledge creates trepidation among mineral and non-mineral owners

• Education of public takes time

• Lack of infrastructure• Misinformation

abounds

• General feeling of distrust of “BIG OIL”

46

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

WATER SOURCING

• Options available to meet water needs for drilling and fracturing

• Surface Water• Groundwater• Municipal Water• Industrial Water• Recycled

Produced Water• Collected Water• Private Water

Purchases

48

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

Barnett Fayetteville Haynesville Marcellus

Fracturing Water

Drilling Water

Total Water in Gallons to Drill and Fracture

1,000,000 gallons = ~3,785 m3

GAS LAND – THE MOVIE

“[Hydraulic fracturing] blasts a mix of water and chemicals 8,000 feet into the ground.

The fracking itself is like a mini-earthquake. … In order to frack, you need some fracking fluid – a mix of over 596 chemicals.”

49

Wildlife Issues• Habitat Loss• Habitat

Fragmentation• Disrupted wildlife

patterns from increased traffic and noise

• Utility corridors invite unwanted off-road traffic

Woodland Caribou Rangifer tarandus dawsoni

Wolverine Gulo gulo Blue heart Buchnera americana

Mountain Plover Charadrius montanus

50

NOISE

Sound blankets and barriers are often used to mitigate issues in sensitive areas.

51

Noise restrictions may be required by local ordinances or because of wildlife issues.

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

Fluids Disposition

• Injectate varies depending on well type and permit conditions

• Class II Fluids– Fluids brought to surface in

conjunction with O&G production– Fresh water– Exempt waste fluids: Produced

fluids, drilling fluids, drill cuttings, rig wash, well completion fluids, workover waste, gas plant dehydration waste, gas plan sweetening waste, spent filters and backwash, packing fluids, produced sand, production tank bottoms, etc.

• Water and proppant– Water typically fresh to

brackish– Proppant is typically sand, but

may be resin-coated or ceramic

• Multiple types of fracs– Slickwater, foam, etc.

• Chemical additives– Additives vary– Biocides, corrosion inhibitors,

scale inhibitors, clay stabilizers, friction reducer, oxygen scavenger, gel, iron control…

53

Underground Injection Hydraulic Fracturing

Financial Responsibility

• Financial responsibility is a requirement of the UIC program

• Financial responsibility is typically tied to plugging costs of the well

• A plugging plan and cost estimate may be required for permitting

• Blanket bonds are acceptable• Some individual well bonds

• States require bonding for O&G producing wells

• Bonding requirements vary by state, but are generally tied to plugging liability

• State agencies have a variety of tools relative to enforcement should problems arise

54

Underground Injection Hydraulic Fracturing

Reporting

• Reporting varies depending on well type

• For Class II wells, annual reporting of monthly average and maximum rate and pressure data is most common

• Depending on permit conditions/requirements, water source information or water analysis may also be required

• Summation of hydraulic fracturing activities have historically be reported on the well completion report

• Some states require service tickets (e.g., Arkansas)

• Several states have been modifying reporting rules, including requiring summary details by fracturing stage

55

Underground Injection Hydraulic Fracturing

Risk Probability

• Per a 1989 API and DOE study for basins with “reasonable” likelihood of corrosion, risk probability of injectate reaching a USDW ranged from one in 200,000 to one in 200 million for wells injecting on a continuous basis

• Many states implement the Risk Based Data Management System and are able to assess risk probability on an ongoing basis

• HF events for most well types (including shale gas wells) occur through multiple installed concentric casings over a short duration with considerable vertical separation (thousands of feet) of confining type zones between the production zone and the lowermost USDWs

• Using the same technique as implemented for the 1989 API/DOE study, risks of fracturing fluids reaching a USDW would generally be far less probable than for injection wells

56

Underground Injection Hydraulic Fracturing