What does ‘disclosure’ mean and what are the consequences of requiring it?

BY ERIC LIDJI FOR GREENING OF OIL 

One of the big debates in shale gas development is whether producers should be required to disclose the chemicals they use to hydraulically fracture wells. The chemicals are crucial for getting natural gas out of shale deposits. Hydraulic fracturing involves pumping water underground to create cracks in tight rocks. Sand is added to the mixture to prop open those cracks. The chemicals, though, change the composition of the fluid to match the unique characteristics of a particular well drilled into a particular deposit.

Critics of hydraulic fracturing believe these chemicals pose a health risk to people who live near drilling sites. They want citizens to have easy access to lists of these chemicals.

Disclosure seems simple enough — either those lists are public or they aren’t — but the debate quickly gets complicated because different stakeholders define “disclosure” differently. The “industry” includes both producers and service companies, while the “government” includes both state and federal agencies. And disclosure can happen in many different ways, from general lists of chemical to well-by-well breakdowns.

These complications came to light in three incidents over the month of July.

What’s on the list?

Early in the month, the Pennsylvania Department of Environmental Protection released a list of chemicals used at Marcellus Shale wells. The Associated Press said the list was “believed to be the first complete catalog of chemicals being used to drill in Pennsylvania's gas-rich Marcellus Shale.” The list included more than 80 chemicals, including naphthalene, toluene and xylene, compounds dangerous to human health. 

Within a week, though, the DEP revised the list, because “it included not just the chemicals pumped deep underground but also those stored or used on a well site, including fuel for vehicles and brake fluid,” according to the Scranton Times-Tribune.

According to the Times-Tribune, the original list included all chemicals reported by drilling companies. A DEP chemist revised the list based on how those chemicals were used at drilling sites. That second list did not include naphthalene, toluene or xylene.

Some challenged both lists. The Center for Healthy Environments and Communities at the University of Pittsburgh wanted details on the briny mixture that comes out of wells, not just the chemical mix pumped into wells. It also wanted disclosure on a well-by-well basis, so that citizens could know the exact chemicals being used near their homes.

Is voluntary disclosure good enough?

In the middle of the month, Range Resources, one of the most active companies in the Marcellus Shale, voluntarily decided to do just that. The Fort Worth company announced on July 14 that it would give the DEP “an accounting of the highly diluted additives used at each well site, along with their classifications, volumes, dilution factors, and specific and common purposes” and would also include that information on its own website. 

Range could set a precedent. Chesapeake, another major player in the Marcellus, has suggested it might be willing to disclose the chemicals its uses in hydraulic fracturing.

While the move received near-unanimous praise, it didn’t receive unconditional praise.

Public officials in other shale producing regions wanted to know why Range was only disclosing its chemicals in Pennsylvania. (Range says it plans to expand its reporting.)

Environmental groups said that despite the voluntary move, the federal government still needed to mandate disclosure to guarantee transparency and set a standard for disclosure.

Should the federal government mandate disclosure?

Such federal laws have been proposed for some time, but gathered additional momentum at the end of the month when Sen. Harry Reid introduced an oil spill accountability bill.

The “Clean Energy Jobs and Oil Company Accountability Act of 2010” includes a section requiring companies to disclose the chemicals they use in hydraulic fracturing.

The section, which appears on page 403 of the 409-page bill, was apparently added less than a day before the bill was introduced, setting off a partisan debate about its necessity. 

While the provisions on hydraulic fracturing were added after a sustained push from several environmental groups, the concept is not entirely new to the halls of Congress. 

Sen. Robert Casey, a Pennsylvania Democrat, introduced the Fracturing Responsibility and Awareness of Chemicals Act, or FRAC Act, last summer. It included not only mandatory disclosure, but also a related issue: repealing a regulatory exemption granted to hydraulic fracturing under the Safe Water Drinking Act. While critics of hydraulic fracturing champion the bill, it hasn’t moved in the year since Casey introduced it.

Proponents of disclosure argue that if the shale gas industry doesn’t have anything to hide, as it claims, then it shouldn’t worry about detailing the chemicals they use for drilling.

But Energy in Depth, an advocacy arm representing independent oil and gas companies, believes disclosure, as mandated in the Reid bill, would harm the shale gas industry.

The group challenged the disclosure section on numerous grounds, arguing in particular that federal regulation would undermine the authority of individual states that currently regulate hydraulic fracturing. (Some states, like Wyoming and Colorado, already require disclosure to some degree and others, like Pennsylvania, are considering it.)

Energy in Depth said the disclosure section would dampen innovation, including the push to make chemical mixes less toxic. The argument is that service companies won’t spend money crafting new blends if they know competitors are destined to see the formula.

The group believes voluntary disclosure, like the announcement by Range Resources, lets companies discuss their decision with their service companies before releasing detailed information to the public. They say the information is already given to state regulators.

That argument highlights the multifaceted nature of fossil fuel production.

Operators could decide or be forced to disclose chemicals, but operators don’t directly use chemicals. They contract service companies, like Schlumberger and Halliburton, to hydraulically fracture wells and those companies each concoct the unique fluids pumped underground to open up tight formations. Those service companies don’t make chemicals, though. They commission them from large chemical manufacturers like Dow Chemical, asking for chemicals to achieve certain goals, rather than asking for specific chemicals. (Completing the cycle: chemical companies also consume large amounts of natural gas.)

Energy in Depth believes the Senate bill doesn’t take this process into account, and forces companies at one end of the supply chain to account for companies at the other end.

Companies in the middle of the supply chain may opt to disclose, though. Schlumberger recently announced its OpenFRAC Fluid Additive Systems, comprising three solutions for different fracturing needs, and included formulas for each solution on its website.

Meanwhile, even those who support disclosure want the bill to go farther by regulating hydraulic fracturing under the Safe Water Drinking Act, like the FRAC Act would do.

Shale news in brief

Shale Report previously reported on mineral leasing in the Lawrenceville neighborhood of Pittsburgh. At a town meeting in Lawrenceville this past week, a representative from Chesapeake Energy said, “We have no plans to drill in the city at this time.” When asked why the company wanted leases, then, he added,  “I never said it would never happen.”

The Texas Commission on Environmental Quality is proposing new regulations on oil and gas facilities. The proposal “updates administrative and technical requirements, and includes enforceable monitoring, sampling, and record keeping requirements.” The TCEQ also added new air quality monitors in Dish and Eagle Mountain Lake.

The City of Fort Worth banned the disposal of wastewater from natural gas drilling inside the city limits four years ago, and the city council recently extended the ban through 2011, but that hasn’t solved the dilemma for the largest urban drilling center.

Following several emergencies at natural gas wells in Pennsylvania, Sen. Robert Casey, D-Pa., introduced legislation to improve emergency response at oil and gas well sites.

The Delaware River Basin Commission is allowing two natural gas exploration wells to go ahead in Wayne County, in northeast Pennsylvania. The instate agency that manages the four-state Delaware River Basin has been holding off on issuing permits for fracturing wells while it drafts new regulations. Those are expected at the end of summer.

The Pennsylvania Land Trust Association says it “identified a total of 1,435 violations accrued by 43 Pennsylvania Marcellus Shale drillers between Jan. 1, 2008, and July 25, 2010, using records obtained by the PA Department of Environmental Protection.”

The Marcellus Shale Coalition, an industry group, said the report shows that shale gas development is well regulated in Pennsylvania, while DEP Secretary John Hanger said the report doesn’t highlight the companies that have a good track record in the state, like Anadarko E&P Co. LP, EQT Corp, Range Resources and CNX Gas Corp.

Contact Eric Lidji at ericlidji@mac.com