|February 24, 2014|
Previously published on February 2014
The Environmental Protection Agency ("EPA") issued final guidance on when the use of diesel fuel in fluids for hydraulic fracturing, or fracking, is sufficient to trigger a requirement to obtain a permit for the well under the Safe Drinking Water Act. The guidance provides EPA's interpretation of two important issues: (i) what hydrocarbons are diesel fuel for purposes of the statutory exemption; and (ii) how wells that employ diesel fracking fluids will be regulated. Under the guidance issued on February 12, any amount of diesel fuel used in fracking fluids triggers a permit requirement because EPA expressly refused to include a de minimis exemption.
The guidance also tries to resolve any uncertainty about which hydrocarbons EPA will consider to be diesel fuel, defining it to include substances that are identified by five specific Chemical Abstract Service Registry Numbers. The numbers and the primary chemical names associated with them are 68334-30-5 (diesel fuel), 68476-34-6 (No. 2 diesel fuel), 68476-30-2 (No. 2 fuel oil), 68476-31-3 (No. 4 fuel oil), and 8008-20-6 (kerosene). Fracking well operators can work within the 2005 Energy Policy Act exemption from the Safe Drinking Water Act permit requirement by using materials that do not include any of the substances defined as "diesel fuels" in the guidance. It may not be hard for fracking well operators to take this approach to avoid the permit requirement. One source of information on the components of fracking fluids does not list any of the five Chemical Abstract Service Registry Numbers named in the guidance in its list of more than 50 frequently used fracking chemicals.
Underground injection of fluids through wells is regulated by the Safe Drinking Water Act. EPA has established six different categories of injection wells with varying permit and technical requirements depending on the use of the well. The 2005 Energy Policy Act exempts from this scheme "underground injection of fluids or propping agents (other than diesel fuels) pursuant to hydraulic fracturing operations related to oil, gas, or geothermal production activities." 42 U.S.C. § 300h(d)(l)(B). EPA believes that guidance on the scope of this exemption is appropriate because the 2005 Energy Policy Act did not provide a definition of "diesel fuels."
The new guidance takes the form of a memorandum to EPA regional administrators and administrators of state and tribal underground injection programs. It establishes the specific components of fracking fluid that EPA deems to be subject to the Safe Drinking Water Act permit requirements. The specific composition of fracking fluid is a closely guarded trade secret that varies from operator to operator and well to well depending on the conditions. More than 98 percent of the volume of any fracking fluid consists of water and sand with a dozen or so additives sometimes used in the remaining portion. It is generally understood that the remaining fraction of some fracking fluids can contain a small amount of hydrocarbons that serve as crosslinkers, friction reducers, or gelling agents.
Well operators that continue to use diesel fuels in fracking fluids will need a Safe Drinking Water Act permit for a Class II injection well. This classification is the primary one for injection wells associated with oil and gas operations. For example, injection wells used for enhanced recovery of oil or gas are Class II injection wells. The guidance specifically explains that diesel fuels used in well construction are not considered to be injected and consequently do not need a permit. Drilling muds or pipe joint compounds used in the well construction process are two examples of materials that are not subject to the permit requirements.
The guidance memo also included a technical document for permit writers that provides additional guidance on the specific conditions that may be included in permits for Class II injection wells with diesel fracking fluids. The technical document provides recommendations for permit duration and well closure, permit application and review, area of review, and well construction, including mechanical integrity testing, financial responsibility, and public notification. Although the recommendations are binding only when EPA writes permits for injection of diesel fracking fluids, EPA states that these recommendations generally represent best practices for fracking and hopes that they will be considered wherever fracking is practiced regardless of whether diesel fuel is a component of the fracking fluid.
The technical guidance emphasizes that a permit is required before commencing all injection-related activities, including well construction and retrofitting existing wells. During the application process, EPA evaluates information to establish the conditions needed to project underground sources of drinking water. One condition of a Safe Drinking Water Act injection well permit is that the operator has to establish financial responsibility for the costs of closing, plugging, and abandoning the well. The technical guidance suggests that special scrutiny should be given to applications that rely on a financial test rather than a third-party instrument such as a letter of credit for the required financial assurance. The permit process includes a 30-day public notice period with an opportunity for a hearing. The technical guidance suggests that direct notification of landowners within one-quarter mile of the proposed well may be appropriate earlier in the process.