Rock Products Logo

State, Not Federal Legislation Likely to Impact Frac Sand Market

The Washington D.C.-based law firm of Patton Boggs notes in its just-published U.S. post-election analysis that one issue likely to garner much more attention during the next four years will be hydraulic fracturing.

“In the next few years, we continue to anticipate that the bulk of hydraulic fracturing legislative and regulatory issues will arise at the state level rather than in Washington, D.C.,” the analysis states. “With concerns growing about whether water shortages are being exacerbated by the volume of water consumed in hydraulic fracturing operations, the industry faces additional regulatory and legislative risks at the state level that go beyond chemical disclosure. In addition, 12 states have already proposed or are implementing new oil and gas tax or fee production policies to help close state budget gaps and incentivize energy development in sometimes hesitant communities. The industry is likely to continue to face increased taxes and fees as states continue to look for ways to address the infrastructure costs of large-scale energy development, including road repair in particular.

“With the support of the industry, bills were introduced in the 112th Congress in both the Senate and the House to confirm that states have the sole authority to regulate hydraulic fracturing operations on federal lands within their borders. The so-called FRESH Act (Fracturing Regulations are Effective in State Hands Act) will not become law in the lame duck session. Similarly, we do not anticipate any legislative action by Congress on the FRAC Act. Barring some fundamental galvanizing event, we doubt either bill will go anywhere next year either. In the near term, to the extent the federal government has any direct impact on hydraulic operations, it will be driven by regulatory action and potentially oversight hearings in the House.

“Late last year, EPA finally released its ‘study plan’ for the major study Congress asked it to undertake in 2009. EPA is evaluating the full lifecycle of water used in hydraulic fracturing operations, from water acquisition through to the mixing of chemicals to conducting fracturing and post-fracturing activities, including the management, treatment, and disposal of flow-back water. Initial research results and study findings are projected to be released to the public later this year; the final report will not be issued until at least 2014. Until the final report is issued, we do not expect any federal legislation to emerge that could clear the House and the Senate.

“Separately, the Department of Interior through the Bureau of Land Management has been engaged in a lengthy rulemaking to govern hydraulic fracturing operations on federal and tribal lands. Public comments were accepted by BLM through September 10 in order “to facilitate greater input from the public and key stakeholders, including industry and public health groups.” Some tribal leaders and Wyoming Governor Matt Mead (R) had questioned BLM’s procedural transparency and policy substance, the latter noting his concern that ‘the proposed rules will duplicate and possibly be sequential to Wyoming’s rules.’

“The rule includes requirements that companies disclose non-proprietary chemicals used in hydraulic fracturing activities, implement new well design standards, and require new safety certification standards ­– including a requirement that producers ‘certify’ that they are not endangering local water supplies through their hydraulic fracturing operations. The rule ‘would require operators to certify in writing that they have complied with all applicable Federal, tribal, state, and local laws, rules, and regulations pertaining to proposed stimulation fluids’ and would further ‘require the operator to certify that it has complied with all necessary permit and notice requirements.’”