Fracking fluid disclosures on file

Editor’s note: Roby Brock, with our content partner Talk Business, wrote this report. He can be reached at [email protected]

"What’s in the water?"

That was the impetus for a consensus rule adopted by the Arkansas Oil and Gas Commission to regulate natural gas drilling in the lucrative Fayetteville Shale play earlier this year.

The commission initiated rules for gas drillers that require registrations, requests for trade secret exemptions, and disclosure of the chemicals used in a process known as "fracking," which pushes the gas from the shale formation through high-pressure treated water. The water from fracking is contained and hauled off for disposal, but concerns persist about its ability to affect the environment.

A QUICK HISTORY
Rule B-19 was adopted by the Arkansas Oil and Gas Commission on Jan. 15, 2011. It required all drilling permits for new wells to comply.

The effort spawned from local residents who complained about water catching fire or turning different colors in the vicinity of gas drilling. State regulators have not found a correlation between the drilling and the water quality issues to date, although an EPA study is still underway.

Industry officials were supportive of Rule B-19, although they did ask for license to apply for trade secret exemptions to prevent competitors from, in effect, stealing their fracking formulas and proprietary ingredient combinations.

Some environmental groups applauded the agency’s disclosure effort, but called for more transparency in the process by not allowing for exemptions for trade secrets. Other environmental leaders said the rule was an industry PR stunt.

A number of bills were filed in the recent legislative session to further regulate the natural gas industry; however, no bills introduced were passed. As a matter of fact, only a handful were given a hearing due to a lack of legislative support and many were steered to interim study for future debate.

SO WHAT IS IN THE WATER?
If the goal was to discover what is in the water, we now know to a much greater extent.

Less than 6 months after Rule B-19’s adoption, 7 companies have filed documentation to disclose their well fracture information with the state oil and gas agency. The 7 applications were filed between Jan. 18 and April 13, 2011.

Six of those 7 (Schlumberger was the exception) asked for a trade secret exemption to keep some of the chemicals confidential. Since it was not required, none provided the percentage of the chemicals used in the process.

A typical chemicals disclosure form outlines unaltered chemicals used in the process, such as formaldehyde, zircon, methanol, formic acid and more. The forms disclose additives to the process with a description of why they are added, such as "friction reducer" or "clay control."

Some chemicals are described as "trade secrets," which requires a company to complete an additional report – Form 37 – on which the commission must act. The "trade secret" request must also provide the chemical family with which it is associated.

Several drilling companies — in Arkansas and out — have even disclosed their chemical inputs for all of their existing wells. The website Frac Focus allows anyone to trace drilling chemicals used on a state, county-by-county, and well-by-well basis. The web site, a joint project of the Ground Water Protection Council and the Interstate Oil and Gas Compact Commission, goes as far, if not further, than Rule B-19.

OTHER STATES
Arkansas’ B-19 rule is also being reviewed by other states, and for some, there is an effort to incorporate the standard into law.

Just last week, Texas lawmakers passed competing measures aimed at chemical disclosure in hydraulic fracking, which has been prevalent with the activity in the Barnett Shale play.

“It’s clearly still a work in progress, but I think it’s a bill that needs to pass and I think it will pass,” James Tramuto, VP of government and regulatory strategies for Houston-based Southwestern Energy, told a Texas business journal. “Any time we can have statutory language that mandates complete disclosure on a well-by-well basis, it addresses the issue that what we’re doing is transparent. We don’t need Washington to tell us what to do. We know how to do it ourselves.”

Wyoming and Pennsylvania have also been aggressive in implementing new rules and laws to regulate fracking.

WHAT’S NEXT?
Bill Kopsky, executive director of the Arkansas Public Policy Panel, said the disclosure rule was important, but more is needed.

"This is a good step forward," said Kopsky, noting that for those monitoring water quality, they now know what to look for. "But we are interested in details on where the waste ended up, how much water they used, and where that water wound up."

Kopsky’s group was instrumental in several of the natural gas regulation bills filed in the Arkansas legislature last session.

Industry leaders are vigilant to balance their financial interests with good environmental stewardship, despite the criticism they may receive.

Kelly Robbins, executive director of the Arkansas Independent Producers & Royalty Owners, said the B-19 rule shows that Arkansas has a strong enough regulatory structure to provide appropriate industry guidelines.

He also says the interim study process for the myriad of bills filed in the 88th General Assembly will allow for two-way dialogue between industry and environmental groups.

"We plan to participate in the interim industry and make sure there is a balance," Robbins said. "We will be present and active in that process in not only telling our story, but listening. We want to be good neighbors. We care about our employees’ communities because that’s where they live and work."