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Wyoming Supreme Court Vacates on Procedural Grounds a Lower Court Decision Holding Ingredients in Fracking Fluid Formulas Qualify as “Trade Secrets”




by:
Carl J. Pernicone
Wilson Elser Moskowitz Edelman Dicker LLP - New York Office

 
March 31, 2014

Previously published on March 19, 2014

On March 12, 2014, in Powder River Basin Resource Council v. Wyoming Oil And Gas Conservation Commission, et al., the Wyoming Supreme Court, on procedural grounds, vacated a trial court decision upholding the decision of the Wyoming Public Records Commission (Commission) that the ingredients in hydraulic fracturing formulas constitute “trade secrets” and are thus exempt from public disclosure under the Wyoming Public Records Act (Act).

Background
In 2010, the Commission amended its disclosures rules to require drilling companies to disclose the content of chemicals used in the hydraulic fracturing process. The amendment was prompted by concerns expressed by hydrofracking opponents about the impact of hydrofracking ingredients on ground water. In 2011, relying on the Act, a group of fracking opponents submitted a public records request to the Commission seeking information not disclosed to the public about the ingredients in certain drilling companies’ hydraulic fracturing formulas. The Commission found that the ingredients qualified as “trade secrets” that were exempt from disclosure under the Act. A Wyoming trial court subsequently affirmed the Commission’s decision, reasoning that it had no obligation to engage in an independent review of the issue; rather, it interpreted its role as reviewing the Commission’s decision as an administrative determination.

Wyoming Supreme Court Decision
On appeal, the Wyoming Supreme Court reversed, holding that in determining the existence of a trade secret, the trial court erred in deferring to the findings and conclusion of the Commission. The Wyoming high court held that under the Act, the trial court was obligated to undertake an independent examination and exercise its own independent judgment as to whether the ingredients in the fracking formulas qualified as trade secrets. Accordingly, it reversed and remanded the matter to the trial court for further proceedings.

Nevertheless, the Powder River court did go on to define, for purposes of the Act, what would constitute a trade secret. It held that Wyoming embraces the definition of “trade secret” found in the federal Freedom of Information Act and the decisions interpreting that law. Applying those authorities here, the court ruled as follows: “[W]e hold that a trade secret under the [Act] is a secret, commercially valuable plan, formula, process, or device that is used for the making, preparing, compounding, or processing of trade commodities and that can be said to be the end product of either innovation or substantial effort, with a direct relationship between the trade secret and the productive process.”

Takeaways
Two takeaways from this decision are readily apparent. First, for good or for bad, the Powder River court appears to be eager to answer the substantive question of whether the ingredients in fracking formulas constitute “trade secrets.” Indeed, its opinion expressed disappointment about its inability to do so on this appeal: “We cannot resolve that issue in this appeal, unfortunately.” (Emphasis supplied.)

Second, Powder River confirms that, at least in Wyoming, the determination of whether fracking formula ingredients constitute trade secrets is not a question of law; to the contrary, given the “trade secret” definition endorsed by the court, it is an inherently fact-sensitive inquiry, requiring a full evidentiary hearing, that, in the court’s words, will be answered “on a case-by-case, record-by-record, or perhaps even on an operator-by-operator basis.”



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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