Natural Resources Journal

Spring 2014, Vol. 54 No. 2

Numerous state, provincial, and federal governments in the United States, Canada, and Australia have created guidelines, legislation, and/or regulations (or are in the process of doing so) in response to public concerns about water contamination from hydraulic fracturing. This article will compare and analyze three national regimes in the leading states and provinces in which laws have been amended, proposed, or adopted to address public concerns about the chemicals and additives in hydraulic fracturing fluids used to produce unconventional hydrocarbons. New regulations, recent legislative amendments, and, in some cases, new statutes have been proposed or adopted in the past few years. Most of the state and provincial laws require public disclosure of some information about the contents of hydraulic fracturing fluids. At the same time, governments interested in attracting investment capital to develop their shale oil and gas resources recognize the importance of protecting the intellectual property rights (trade secrets) of those parties that have developed hydraulic fracturing fluids.

In the midst of the hydraulic fracturing revolution, elected officials in Mora County, New Mexico recently banned all oil and gas production within the county. But the officials went even further, stripping corporations of constitutional rights and declaring the constitutions of the United States and the state of New Mexico illegal if interpreted as inconsistent with the ordinance. Why would a small rural county like Mora with no oil and gas operations to speak of adopt such an extreme ordinance? This article applies economics, political choice, and localism theories to argue that Mora County’s decision may be at least partly explained by special interest group influence. The severance of land into separate surface and mineral estates exacerbates the influence disparity by concentrating votes in residents with little to no participation in the proceeds of production. Reasonable, traditional land use restrictions certainly have a place to protect truly local interests. This article maintains, however, that outright bans and extreme restrictions improperly infringe upon state interests.

States have acted quickly to respond to the public’s demand for information on the chemicals used in hydraulic fracturing. Proponents of these disclosure requirements have relied on a number of policy rationales. However, the resulting disclosure systems may not be achieving stated goals. Ineffective disclosure requirements risk undermining public confidence in the disclosure process and waste an important opportunity to put these disclosures to work. This article suggests using a Goal-Oriented Disclosure Design approach to HFC disclosure, built around the goals for disclosure, the information end users need to target in pursuit of each goal, and the feedback loops those end users can trigger. The article then walks through the design steps for a disclosure regime intended to fully inform first responders and medical professionals, so that they may timely treat and diagnose patients who may have been exposed to hydraulic fracturing chemicals.

The law recognizes trespass liability for subsurface intrusions, at least in some circumstances. Further, courts sometimes have stated that ownership of land extends to the earth’s center. But such statements are dicta. Few courts have carefully considered the maximum extent of subsurface ownership or subsurface trespass liability. Courts in two jurisdictions have recently addressed whether a person incurs liability when he causes hydraulic fracturing fluid to intrude into the subsurface of a neighbor’s land, but the courts reached opposite conclusions, with each suggesting that public policy supported its position. Neither adequately examined the legal issues. Careful consideration of trespass concepts demonstrates that a person should not incur liability for such intrusions unless he designed the fractures to extend beneath the neighbor’s land or the fractures extended further beneath the neighbor’s subsurface than the maximum typical discrepancy between planned and actual fracture lengths. This result serves the public policy concerns addressed by each court that recently considered this issue.

As the United States continues its roaring ramp up as the world’s leading natural gas producer, the environmental community is trying to force the federal government to account for the aggregate impact of domestic natural gas production from shale, especially in the context of climate change. To achieve this goal, environmental organizations have sought to employ the National Environmental Policy Act (NEPA), a law aimed at increasing government awareness of the broader environmental consequences of federal action.

This article explores the two ways in which environmental organizations have tried to expand federal environmental reviews to include climate change considerations under NEPA: litigation and federal agency guidance. Environmental organizations are concurrently pursuing a regulatory option, arguing that the White House Council on Environmental Quality (CEQ), responsible for implementing NEPA, should issue guidance requiring federal agencies to consider the climate change effects of proposed actions. This article also considers how an expanded federal environmental review could affect industry in the United States if environmental organizations achieve their goal of expanding NEPA requirements either through litigation or federal agency guidance.

This article examines the cross-section between energy, environmental, and international law while exploring the recent developments of liquefied natural gas (LNG) exports to non-free trade agreement countries, and considers how international free trade agreements affect efforts to restrict or limit exports of LNG. The article discusses the environmental and economic impacts of large-scale exports of LNG, but argues that efforts to stifle LNG exports will ultimately fail regardless of potential negative impacts due to conflict with existing international trade agreements, including the General Agreement on Tariffs and Trade and the North American Free Trade Agreement. Since approval of export licenses for LNG is inevitable, the article offers proposals to achieve safe natural gas production and considers factors that are important in understanding the greater impacts of the United States becoming a major exporter of LNG.