American Oil and Gas Reporter - June 2014 - 173

will impact the oil and gas industry also,
including a proposed rule governing acceptable exposure limits for silica dust.
No final rule has been issued yet, but industry experts have warned that any such
rule could be particularly costly to drillers
using fracturing techniques that depend
on using silica sand.
In July last year, the Federal Railroad
Administration announced it would be
investigating the safety of transporting
crude oil by rail, citing potential safety
issues related to improper classification
and packaging of crude oil, as well as
overloading of tank cars. The investigation
came in the wake of a large train crash in
Canada involving a 72-car train carrying
crude oil. The train transporting oil out
of North Dakota's Bakken Shale derailed
and exploded in the town of Lac-Megantic,
Quebec, killing 47 people.
As for the Environmental Protection
Agency's long-awaited study on the effects
of hydraulic fracturing on the nation's
drinking water, the agency showed little
progress in 2013. While it continued to
gather data and assess potential impacts
throughout the past year, EPA has indicated
the first draft of the report will not be
available until later this year.
State Government
State and local governments continued
to take the lead in regulating shale oil
and gas development in 2013. Pennsylvania, California, Illinois and Michigan
all passed or proposed new rules regulating
hydraulic fracturing, while several other
states and local governments amended
or expanded existing rules.
In August, the Pennsylvania Department of Environmental Protection proposed regulations governing:
* Protection of public lands and resources;
* Orphan and abandoned well identification;
* Pollution containment practices;
and
* Protection of water resources.
The regulations, which likely will impose additional requirements on drillers
in the Marcellus Shale formations in
western Pennsylvania, were approved by
the state's Environmental Quality Board
in August and must be approved by the
state's attorney general.
California's legislation marks the most
comprehensive regulatory overhaul of the
past year. In September, Governor Jerry
Brown signed SB 4: California's first
comprehensive regulation of fracturing
activity in the state's Monterey Shale,
which has been estimated to hold as
much as 15.4 billion barrels of oil. Among

other things, SB 4, which took effect
under temporary rules this year, requires:
* Permits for well stimulation activities, including acidizing;
* Notification of neighboring communities of hydraulic fracturing;
* Public disclosure of chemicals used
in well stimulation activities;
* Groundwater and air quality monitoring; and
* An independent scientific study of
the impact of well stimulation activities
on the environment.
Notably, the law did not include a
proposed moratorium on fracturing, which
some environmentalists and lawmakers
had advocated.
The Illinois Legislature also passed
new regulations to cover hydraulic fracturing in 2013, with Governor Pat Quinn
claiming the law represented "the nation's
strongest environmental protections."
Subsequent rule-making by the Illinois
Department of Natural Resources, which
published a first draft of rules for highvolume oil and gas drilling in mid-November, appear to have relaxed some of
the more strict environmental controls
that many had envisioned when Governor
Quinn announced the new law. For example, while the law requires drillers to
store fracturing wastewater in covered
tanks rather than open pits, the rules
allow for emergency overflow into reserve
pits, which need only be removed seven
days after drilling is complete, rather
than seven days after discharge.
Local Developments
In Texas, the city of Dallas made news
in December after the city council passed
strict drilling requirements banning hydraulic fracturing within 1,500 feet of
any home, school, church, or other protected area, effectively eliminating all
hydraulic fracturing within city limits.
Local hydraulic fracturing bans also
were big news in Colorado, where voters
weighed in on several ballot initiatives
proposing local bans. Four Colorado cities
approved hydraulic fracturing bans during
the 2013 election cycle.
Colorado also made significant news
when its Department of Public Health
and Environment adopted regulations requiring the oil and gas industry to significantly reduce volatile organic compound
(including methane) emissions. By doing
so, Colorado became one of the first
states to go substantially beyond the requirements set forth in federal regulations.
Many believe Colorado now has the most
stringent air quality requirements for the
oil and gas industry in the United States.
Ohio, likewise, faced several ballot

initiatives aimed at creating local fracturing
bans. Voters twice defeated the same antifracturing initiative in Youngstown, Oh.-
once in May and again in November-by
margins of 57-43 and 55-45 percent, respectively. (Editor's Note: Youngstown
voters defeated an anti-fracturing ban a
third time in early May. See story page
20).
Voters in Bowling Green, Oh., also
rejected such a measure, this one by a
75-25 margin. However, a ballot initiative
in the small college town of Oberlin,
Oh., did manage to pass.
To the dismay of landowners and industry alike, the country's largest-and
longest-ban on hydraulic fracturing held
steady in 2013, as New York continued
to "review" the environmental impact of
fracturing. Some groups have resorted to
lawsuits questioning the legality of the
moratorium, or more precisely, Governor
Andrew Cuomo's failure to act on the
moratorium one way or the other. Most
observers believe Governor Cuomo will
attempt to straddle the political divide
until after his 2014 re-election campaign.
Fracture-Related Litigation
A number of important issues are beginning to reach the states' highest courts,
including several cases dealing with the
balance between state and local authority
to regulate oil and gas exploration.
This issue was highlighted by the
Pennsylvania Supreme Court's decision
striking down Pennsylvania's Act 13,
which, among other things, pre-empted
local zoning rules in favor of statewide
regulation, and required local governments
to allow oil and gas development in all
zoning areas.
In a 4-2 decision handed down in December, the Pennsylvania Supreme Court
ruled Act 13 violated the state's Environmental Rights Amendment, thus invalidating the statute's pre-emption provisions.
Companies operating in Pennsylvania
now face the prospect of complying with
multilayered regulation-first at the state
level, and again at the local level.
In another case involving the power
of local governments to regulate drilling
through zoning codes, the Ohio Supreme
Court agreed to consider the scope of
that state's constitutional home rule protections in light of a statute granting the
Ohio Department of Natural Resources
"sole and exclusive authority" over drilling
activities, including the "location" of oil
and gas wells.
An Ohio town subsequently sued an
oil and gas company for failure to comply
with local zoning codes, arguing the
statute effectively pre-empted local zoning
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American Oil and Gas Reporter - June 2014

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