Shale Law Weekly Review - March 5, 2018

Written by:

Jacqueline Schweichler - Education Programs Coordinator

The following information is an update of recent local, state, national, and international legal developments relevant to shale gas.

Induced Seismicity: Oklahoma Changes Drilling Protocol to Address Seismicity

On February 27, 2018, the Oklahoma Corporation Commission (OCC) issued a new protocol in order to address induced seismicity resulting from oil and gas development. OCC protocol now requires that all operators conducting hydraulic fracturing activities must use a seismic array to see real-time seismicity readings. The protocol decreases the earthquake magnitude (ML) levels where operators must take action from 2.5ML to 2.0ML. In addition, operators will be required to pause activities for 6 hours when seismicity reaches 2.5ML, instead of the previously required 3.0ML.

Pipelines: Virginia District Court Grants Atlantic Coast Pipeline Access to Land for Tree Felling

On February 28, 2018, the U.S. District Court for the Western District of Virginia granted the Atlantic Coast Pipeline, LLC’s (ACP) motions for summary judgment in several cases involving landowner disputes over easements. Defendants in the case are landowners of properties in Virginia where construction of the Atlantic Coast Pipeline is planned. APC filed motions for summary judgment after failing to obtain easements with these landowners. ACP argues that they need immediate possession of the parcels so that tree felling will be completed by mid-March in order to comply with the Migratory Bird Act. The court is allowing ACP immediate access to the properties but is requiring ACP to post a security bond so that landowners will be fully compensated subject to a final determination of value.

Pipelines: Court Orders Construction of Bayou Bridge Pipeline Expansion to Cease

On February 27, 2018, the U.S. District Court for the Middle District of Louisiana granted a motion for preliminary injunction, effectively halting construction of the Bayou Bridge Pipeline project (Atchafalaya Basinkeeper, et al., v. U.S. Army Corps of Engineers, 18-23-SDD-EWD). The project is a 163 mile expansion of existing pipeline that will run from Lake Charles, Louisiana, to St. James, Louisiana. The project will consist of a 24-inch pipe and transport crude oil. Opponents to the project argue that construction of the pipeline will damage century old trees and valuable cypress forest swamp as well as the overall ecology of the Basin. The court granted the order to prevent “further irreparable harm until this matter can be tried on the merits.”

Frac Sand: USGS Announces Study Suggesting That River Sediment May Be Used as Frac Sand

On February 27, 2018, the U.S. Geological Survey (USGS) issued a press release on a recent study suggesting that sediment from the Missouri River Basin could be used a proppant in hydraulic fracturing. The researchers removed samples of sediment from the Missouri River and analyzed them using protocols from the American Petroleum Institute. They found that sand coming from the Nebraska Sand Hills and flowing into the Missouri River could potentially be used as suitable proppant or “frac sand.” The researchers also suggest that use of river sediment for hydraulic fracturing could help mitigate the cost of removing excess sediment from river basins. The study is entitled, Suitability of River Delta Sediment as Proppant, Missouri and Nibrara Rivers, Nebraska and South Dakota.

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"Shell: LNG outlook points to potential global supply shortage" - OGJ online

"Murrysville council places additional conditions on Huntley & Huntley pipeline construction" - TribLive

"This Just In: LNGFrom Cove Point Is Soon Heading Out" - Oil and Gas Investor

"Rover Pipeline donating $270,000 to emergency responders in 4 states" - MLive

"Interaction between wells can boost production" - MRT

"IEA: US To Overtake Russia As Top Oil Producer By 2019 At Latest" - Rigzone

"OPEC to meet with U.S. shale firms in Houston on Monday - sources" -  Reuters

"Eclipse closes $92.2M deal for Utica shale acreage" -Shale Gas Reporter

"US Congressional committees request FERC for Rover gas line briefing" - OGJonline

"NEXUS pipeline expected to generate millions in tax revenue" -Shale Gas Reporter

"Chevron board member questions oil industry's future" - EENews

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See our Global Shale Law Compendium and this week’s article, Shale Governance in Michigan

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Shale Law in the Spotlight: Overview of Frac Sand Mining in the United States

Written by Chloe Marie – Research Fellow

Sand mining has become a rapidly developing activity in the United States as it is used as a proppant during the process of hydraulic fracturing in order to optimize unconventional oil and natural gas production. Earlier this year, U.S. Silica Holdings Inc.’s CEO Bryan Shinn declared that the demand for industrial sand “is forecast to rise from about 75 million tons this year to more than 100 million tons in 2018, but some estimates are as high as 147 million tons.”

The U.S. Geological Survey (USGS) defines frac sand as ”naturally occurring, highly pure silica sand with rigorous physical specifications” extracted from open-pit mines in sandstone formations. The states of Wisconsin and Minnesota are home to abundant sand resources and, over the past several years, became the largest producers of frac sand in the country. The states of Illinois, Michigan, Arizona, Arkansas, Nebraska, Oklahoma and Texas are also known to operate frac sand mining facilities. This article will address the legal framework for sand mining activities and provide information on the status of U.S. sand mining operations with a focus on Wisconsin and Minnesota.

At the federal level, silica sand mining is regulated pursuant to the Clean Air Act, Clean Water Act, Safe Drinking Water Act, and the Endangered and Threatened Species Act. More precisely, the Clean Air Act regulates air pollutants and requires EPA to set and maintain National Ambient Air Quality Standards (NAAQS) for six pollutants, including carbon monoxide, lead, nitrogen dioxide, ozone, particle pollution, and sulfur dioxide. EPA describes article pollution – also referred as particulate matter (PM) – as microscopic airborne material measuring from 10 (PM10) to 2.5 (PM2.5) micrometers in diameter which can cause significant health and environmental issues. Silica sand usually measures around 4 micrometers in diameter and thus poses an important health threat if inhaled, especially among workers. Consequently, and in order to reduce the mortality of cancer within the worker milieu, the U.S. Department of Labor’s Occupational and Health Administration (OSHA) published on March 25, 2016, in the Federal Register a final rule establishing new permissible exposure limits to respirable crystalline silica. The final rule is to become effective on June 23, 2018.

At the state level, the Wisconsin Department of Natural Resources (DNR) is primarily responsible for setting out statewide permit requirements relating to air, water and environment relating to sand mining activities (Wisconsin Statutes, Chapter 295) as well as establishing standards for particulate matter emissions in sand mining extraction operations (NR 415.075 Wis. Adm. Code), for stone, gravel and sand segment of mineral mining and processing (NR 269 Wis. Adm. Code), and for nonmetallic mining and reclamation associated with navigable waterways and adjacent areas (NR 340 Wis. Adm. Code). The Wisconsin DNR is also the authority responsible for overseeing counties’ mining site reclamation programs.

At the local level, the Wisconsin Local Government Units (LGUs) have authority to regulate silica sand mining through reclamation, zoning ordinances and ordinances enacted pursuant to general police powers.

In Minnesota, the Minnesota Department of Natural Resources (MDNR) and Minnesota Pollution Control Agency (MPCA) are responsible for issuing water, air and wetland impact permits and for regulating sand mining operations. In 2013, the Minnesota legislature passed a package of laws governing industrial sand mining, which are referred as the 2013 laws. There are a number of provisions addressing frac sand mining, including section 103G.217 requiring a setback permit for silica sand excavation or mining operations in Minnesota’s driftless area; section 116C.99 requiring the Environmental Quality Board (EQB) to establish silica sand mining model standards; section 116C.991 requiring environmental reviews for silica sand projects; and section 116C.992 requiring the EQB to record local government ordinances and permits relating to silica sand projects.

In addition, the MPCA is in charge of controlling particulate emissions into the air from silica sand projects and the MDNR must put in place rules and regulations for reclamation of sand mine sites (see 2013 Minn. Laws ch. 114, art. 4 § 105). At the local level, just like in Wisconsin, the Minnesota LGUs, together with the Minnesota EQB, also have authority to regulate and approve sand mining activities as well as reclamation sites using state technical assistance.

Wisconsin currently boasts a total of 128 industrial sand mining facilities of which 92 are active, mainly concentrated in the western portion of the state. Sand mining operations in Wisconsin remain largely criticized by some segments of the local population complaining about loss in property values, transportation noise, and safety and environmental issues. As an illustration of this conflict, on June 19, 2017, Clean Wisconsin, a non-profit organization, initiated a legal action challenging a wetland fill permit allowing a sand mining company to alter the ecological character of a wetland forest in northern Monroe County.

As for Minnesota, there are at least five sand mines actively producing silica sand for industrial purposes in the southeastern part of the state. Interestingly though, the Winona County Board of Commissioners adopted a ban on November 22, 2016, prohibiting mining, processing, or loading of frac sand for hydraulic fracturing purposes in the county’s rural areas. In response to this ban, the Southeast Minnesota Property Owners brought a challenge before Minnesota’s Third Judicial District claiming a violation of equal protection, due process and private property rights. In addition to this action, Minnesota Sands, LLC, filed another lawsuit on April 29, 2017, arguing that “banning this type of mining based on the end use of this resource is not only unconstitutional, it takes away the rights of landowners and defies common sense.”

The sand mining industry is gradually growing outside of the Wisconsin-Minnesota region as the needs for frac sand continues to expand for hydraulic fracturing operations. In Illinois, state authorities authorized sand mining companies in late 2012 to extract sands along the Starved Rock State Park in Ottawa. In December 2012, however, three environmental organizations, including the Sierra Club, Prairie Rivers Network and Openlands filed a lawsuit against the Illinois Department of Natural Resources challenging the agency’s issuance of a surface mining permit allowing Mississippi Sand, LLC, to exploit sand on farmland directly adjacent to the state park. The lawsuit is still pending in Circuit Court in Springfield.

The sand mining sector in Texas is particularly active in the West Permian region and about a dozen facilities are currently operating and producing sand to serve the hydraulic fracturing needs of oil and gas companies. The state of Oklahoma and Arkansas primarily produce silica sands, whose mining activities are respectively located in the Arbuckle Mountain region of south-central Oklahoma and in Izard County, Arkansas. As for the sand mining activities in Nebraska, they are located along the Loup River in Genoa where sand is considered in excess. Finally, sand resources in Arizona are located in northern Arizona though those resources do not always suit the hydraulic fracturing needs of the oil and gas industry due to its geological properties.