The EPA continues to closely examine hydraulic fracturing practices and, therefore, the industry will soon be forced to come to terms with a yet- to-be-defined national standard for the management and treatment of wastewater flowback. The liability will likely be retroactive. Companies that actively engage the government while it is developing these laws and regulations will be ahead of the curve and profit by establishing themselves as industry leaders.
In a hearing before the Senate Subcommittee on Water and Power on October 20, 2012, Cynthia Dougherty, the EPA’s Director of Ground Water and Drinking Water Office, signaled that the EPA should be expected to extend its reach in regulating wastewater produced by hydraulic fracturing. Currently, the natural gas industry conducts exploration and production under the assumption that they are protected from liability by an exemption to the Safe Drinking Water Act (SDWA). However, fracking has not been exempted from the federal standards stipulated by Sections 301(b) and 402(a) of the Clean Water Act (CWA) nor from the SDWA’s Underground Injection Control (UIC) program.
Shale gas and the practice of hydraulic fracturing used to harvest it has been identified as a necessary resource for the U.S. to become energy independent. It is also promoted heavily in halls of Washington, D.C., as a clean and environmentally sound energy resource that will develop hundreds of thousands of new jobs. However, an in depth analysis has yet to be completed by the federal government on the environmental impact of fracking wastewater or the impact that such heavy loads place on publicly owned treatment works (POTWs), or, more importantly, on the watersheds where they discharge. The EPA is set to release its congressionally mandated study on the effects of hydraulic fracturing in late 2012 with another report detailing “case studies and toxicological analysis” to be completed in 2014. The fundamental research questions posed in this study revolve around fracking’s effects on water at all stages in the operational cycle of harvesting natural gas and will form the basis for a comprehensive regulatory effort.
While President Obama outlined in his 2012 State of the Union address that his Administration will promote the development of the shale gas as a key principle of his “Blueprint for an America Built to Last,” it is no secret in Washington that his energy policies are guided first and foremost by his environmental interests. A quick look at the recent Bureau of Land Management (BLM) proposed rule for fracking on public lands and the current hold on XL pipeline illustrate where this Administration really stands on energy independence and job creation. Natural gas may be clean burning, but it is still a fossil fuel and fodder for environmental groups and news outlets to generate highly emotional arguments based on few facts.
The resulting feelings in Congress are mixed. The need for energy independence and the desire for clean energy continue, but environmental safety and public safety have become chief concerns. On one hand, they hear the American Petroleum Institute Vice President Kyle Isakower say that in light of the states various regulatory authorities “adding potentially redundant and duplicative federal regulation would be unnecessary, costly, and could stifle investment.” On the other hand, they hear about environmental liability and public safety. Industry leaders and even some public officials have citied the fact that there is no proven case that fracking has contaminated a water supply as evidence that current regulations are sufficient. But the political reality is that regulatory changes can alter the entire liability landscape – even for operational practices that have been commonly accepted for a long time. Case in point: EPA’s recent pursuit of a hazardous waste classification for coal ash. Safety record or not, fracking companies have ultimate responsibility for the disposal of their wastewater and they will be held liable for any pollution or damages caused by that wastewater in perpetuity.
The growth of the industry and expansion of operations across state lines guarantee that federal regulations are all but certain. On March 6, 2012, BLM Director Bob Abbey testified before the House Appropriations Interior-Environment Subcommittee about pending regulations focused on wastewater from fracking on public lands and its management. Members of Congress in the hearing called for “one set of rules” for public and private lands. Thus, industry can expect to see every agency in the federal arsenal to be used to push regulations designed for public lands onto private lands as well. Enter the EPA’s Clean Water Act.
Natural gas hydraulic fracturing in the Marcellus Shale generally require between three to eight million gallons of water with approximately ten percent of that water returning to the surface, which creates a need for disposal of 300,000 to 800,000 gallons of wastewater in a month.  Much of this wastewater was being disposed of in Pennsylvania through publicly owned treatment works (POTWs). Last summer, rising levels of harmful chemicals, salinity, total dissolved solids and concern over a potential impact on the environment and drinking water led the Pennsylvania Department of Environmental Protection (DEP) to push for a voluntary end of the disposal of flowback through POTWs.
Now, fracking wastewater from Pennsylvania is being trucked across state lines to Ohio, where the geology accommodates disposal by deep well injection (Class II wells). Although deep injection wells have historically proven an effective means of disposal for wastewater, the large growth in the industry may continue to make this option less viable for companies operating in the Marcellus Shale. In addition, Class II wells are expected to face greater regulatory barriers due to safety concerns surrounding seismic events, public objection to the importing of wastewater from out of state, and questions on the effect of removing an increasingly large amount of water from the natural hydrological cycle. In fact, The Ohio Department of Natural Resources (ODNR) has stated that its “new regulatory framework makes Ohio’s rules for brine monitoring and disposal among the nation’s toughest.” Reforms such as Ohio’s are likely to be observed and even adopted by other state regulatory bodies and the EPA, which will make disposal of fracking wastewater via deep well injection slower, more expensive, and increasingly impractical.
This will force companies fracking the Marcellus Shale to return to POTWs and Centralized Waste Treatment Facilities for wastewater disposal. If they do not engage the federal agencies that regulate this space, they will soon find themselves facing new pretreatment standards and regulations on the management and transportation of wastewater, including effluent guidelines.
By playing an active role in shaping the legislative and regulatory outcomes, local treatment of wastewater by centralized waste treatment facilities or POTWs has the potential to provide a cheaper and more effective solution. Companies could proactively anticipate pending regulations and develop internal practices that protect them from liability. They could also work with federal agencies to encourage self-regulation and other practices that limit the need to disclose proprietary information that could make the company vulnerable to frivolous environmental claims.
As Congress, the EPA, BLM, and other agencies take part in the evaluation and analysis of fracking’s environmental footprint, greater regulation is inevitable. Industry must not only keep watch for these coming changes to their operations, but seek to engage and shape any pending legislation and regulations regarding wastewater management. By acting as a partner with government in anticipation of these regulations, changes will not necessarily mean a hurdle to growth. If the right steps are taken, it could lead to more efficient, effective, and sustainable operation in Marcellus Shale long into the future.