American Law and Jurisprudence on Fracing—2012 by Thomas E. Kurth, Michael J. Mazzone, Mary S. Mendoza and Chris S. Kulander The original version of this paper was published by the Rocky Mountain Mineral Law Foundation in the Rocky Mountain Mineral Law Foundation Journal, Vol. 47, No. 2 (2010). This 2012 version represents extensive updates and revisions reflecting new and revised regulations, statutes, and field development nationwide over the last year and a half. (©2012 Haynes and Boone, LLP). i Table of Contents Table of Contents ............................................................................................................................ ii Acknowledgements ......................................................................................................................... 1 Introduction ..................................................................................................................................... 1 Hydraulic Fracturing—an Overview .............................................................................................. 2 Drilling and Groundwater Protection .............................................................................................. 3 Fracing Fluids and Operations ........................................................................................................ 6 Fracing Operations Nationwide ...................................................................................................... 8 Marcellus and Utica Shale .......................................................................................................... 8 Barnett Shale ............................................................................................................................. 10 Woodford Shale ........................................................................................................................ 11 Fayetteville Shale ...................................................................................................................... 11 Haynesville Shale...................................................................................................................... 12 Eagle Ford Shale ....................................................................................................................... 12 New Albany Shale .................................................................................................................... 13 Bakken Shale ............................................................................................................................ 13 Effect on Domestic Production ..................................................................................................... 14 Oil and Gas Jurisprudence in the Realm of Fracing ..................................................................... 18 Neighboring Mineral Owners ................................................................................................... 18 The Aftermath of Coastal.......................................................................................................... 22 Current Fracing Litigation ........................................................................................................ 24 State Regulation of Hydraulic Fracturing ..................................................................................... 25 Arkansas .................................................................................................................................... 25 Kansas ....................................................................................................................................... 27 Louisiana ................................................................................................................................... 27 Maryland ................................................................................................................................... 29 Michigan ................................................................................................................................... 31 Montana .................................................................................................................................... 34 New Mexico .............................................................................................................................. 36 New York .................................................................................................................................. 38 North Dakota ............................................................................................................................. 42 Ohio........................................................................................................................................... 46 Oklahoma .................................................................................................................................. 51 Pennsylvania ............................................................................................................................. 52 Texas ......................................................................................................................................... 54 Utah ........................................................................................................................................... 61 West Virginia ............................................................................................................................ 61 ii Wyoming................................................................................................................................... 67 Fracing in Indian Country ............................................................................................................. 71 Fracing in Canada ......................................................................................................................... 73 Federal Regulation of Fracing ...................................................................................................... 72 Bureau of Land Management.................................................................................................... 72 Environmental Protection Agency ............................................................................................ 72 Securities Exchange Commission ............................................................................................. 77 Air Quality Permitting and Controls ............................................................................................. 80 Permitting .................................................................................................................................. 80 Control of Emissions................................................................................................................. 81 Emissions Impact Analysis ....................................................................................................... 81 Future Developments ................................................................................................................ 82 Conservancy .................................................................................................................................. 83 Conclusions ................................................................................................................................... 83 iii American Law and Jurisprudence on Fracing Acknowledgements The primary authors wish to thank the following people at Haynes and Boone, LLP who conducted research, provided comments, and contributed to this report: Ben Allen, Megan Bibb, Jim Braddock, Jeff Civins, Buddy Clark, Austin Elam, Austin Frost, Kraig Grahmann, Kendall Hollrah, Liz Klingensmith, Wolf McGavran, Jason Payne, Chris Perez, Mike Raab, Adam Sencenbaugh and Alan Wright. Introduction The substantial growth of domestic unconventional shale resources in recent years has largely been a result of the increase in the use of hydraulic fracturing. The concept and practice of fracing was in existence in the 1940s in West Texas in vertical well bores, designed to create artificial permeability in an oil-bearing formation consisting of a thick geological deposit with little or no permeability. In the past decade, hydraulic fracturing has unlocked oil and natural gas deposits in deep shale formations around the country. Hydraulic fracturing is generally viewed as a completion technique that is a practical necessity to promote development of unconventional “tight” shale reservoirs, particularly gas- shale. Hydraulic fracturing entails treating water, oil, or gas wells to stimulate more production than otherwise would have been achieved using standard drilling and production techniques. This report deals with hydraulic fracturing and the legal and technical issues associated with it. This report first covers what hydraulic fracturing is and why it is done. It identifies the current location of the largest shale fields where hydraulic fracturing is common and the effect of hydraulic fracturing on domestic production. It then covers the environmental issues, focusing on the anecdotal and evidentiary call and response among environmental groups, regulators, landowners, and producers. It then discusses how traditional oil and gas jurisprudence impacts hydraulic fracturing, emphasizing both surface versus mineral estate issues and disputes that arise between two adjoining mineral owners. Finally, it addresses developments in technology