Fracking regulations in Texas

Fracking regulations in Texas

Barnett ShaleWhile reviewing state regulatory frameworks for oil & gas drilling (especially legislative updates that address fracking operations), it became immediately apparent that Texas is the exemplar, the model state.  Texas illustrates that to create and modernize a regulatory process with appeal for environmentalists and industry officials alike is possible. Indeed, the Lone Star State was the first state to require well-by-well disclosure of fracking fluid chemicals in 2011, enshrined in House Bill 3328. Knowing what agencies to scope out in terms of oil & gas regulatory authority is also fairly straightforward. At the state level, the Railroad Commission of Texas (or RRC) is charged with creating the vast majority of rules with direct bearing on drilling, well spacing and design, groundwater protection, and operational safety at large. The TCEQ – or Texas Commission of Environmental Quality – plays a supporting role, controlling rules on air quality & emissions, off-site impacts, and depth of steel casing and cement drilling for wells. Local municipalities can add additional rules and enjoy their own authority (sanctioned by Texas state law) to manage the use of regional groundwater supplies through established conservation authorities.

“Through the Railroad Commission’s leadership, Texas is once again setting the national standard in crafting energy policy for the 21st century.” (Deb Hastings, CEO of Texas Oil & Gas Association)

crude oil and gas trendsThe RRC is widely recognized as a leader for statewide regulations for drilling, and has recently updated well integrity rules, too. It’s regulatory dexterity should come as no surprise, considering the state government’s long-standing and extensive experience with oil & gas drilling. Today, Texas is responsible for 30% of all U.S natural gas and oil production, and has seen as 77% increase in oil production over the last year in the Eagle Ford shale play alone, a fresh deposit uncovered in 2008. Its large shale plays seem to encompass the entire state: the Barnett Shale (north), Haynesville Shale (east), the Eagle Ford Shale (south), and the Cline and Wolfcamp Shales in the west. In 2011, 2,876 permits for drilling were issued in the Eagle Ford shale play, and the commission estimates that it will surely issue well over 4,000 permits in 2012. This particular shale play spans 23 counties in southern Texas – or 6 million acres. In truth, there are few counties not host to any drilling activities. The Barnett Shale enjoys the most widespread notoriety; it’s the second largest source of natural gas in the U.S, whereas the Eagle Ford Shale is a hotspot for oil. What did the industry look like before the recent shale boom?

History of oil & gas in Texas

Like many other energy-rich states, the interest in oil preceded the more contemporary rush for natural gas.

The Texas oil boom, which spurred commercial production shortly thereafter, occurred at the turn of the 20th century. Among these earliest discoveries was the remarkable Spindletop oil field, which boasted a production rate of 17 million barrels in 1902. Numerous discoveries were made later between 1910 and the mid 1920s, beginning in the Gulf Coast region and soon spreading across the state. Production peaked in 1951 and again in 1972, even as all major on-shore oil fields were thought to be uncovered by the early 1950s. Clearly, this durable, consistent boom afforded state government authorities a significant source of public revenue. Even after the first national withering in production transpired between 1951 and 1969, where imported crude oil forced independent, domestic producers out of business, Texas refineries remained the most active in the nation. The 1980s and 1990s were also unkind; this era saw a major national decline in production -  one-third of the jobs in oil & gas across Texas were lost. Yet 17.16% of Texas government revenue still trickled in from oil & gas taxes, lease fees, and royalties in 1983.

When oil production in Texas declined, natural gas became essential not only as an energy source and to maintain a steady in-flow of state revenue, but for the state’s expanding petrochemical industry. Between the 1980s and the 1990s, hydraulic fracturing was combined with horizontal drilling for the first time in North Texas, drilled in the distinguished Barnett Shale. Moreover, the current, leading form of fracking (involving higher pressures than previous experiments with the technology) was also first used in Texas.

Early days of Texas’ oil & gas regulations

texas oil historyThe Texas Constitution is the bedrock for much of the regulatory infrastructure for oil & gas. First, it created the Texas Railroad Commission in 1890, though its powers over operations, rates, and companies was curtailed by the U.S Supreme Court. However, the RRC was later reinstalled when oil-rich states were again delegated regulatory authority by the federal government. The RRC was and remains the most well-developed administrative agency in Texas. Second, in 1917 the state’s constitution was amended to introduce laws to reduce overproduction and waste from drilling activities. The RRC then developed the first well-spacing rules in the nation, and remained the principle authority creating and amending regulations for the industry throughout the 20th century.

Rule of capture, “reasonable use”, and the Accommodation Doctrine

Like other western states, Texas has a split-estate system – meaning it’s not uncommon for one party to own the surface rights and another to own the mineral rights to a single parcel of land. A series of laws pertaining to oil & gas drillers on split-estate lands prioritize the drillers’ right to “capture” energy reserves beneath the land. That is, the “rule of capture” is common law and stipulates that mineral rights owners (or drilling operators) can use groundwater and some surface area for drilling, regardless of whether or not consent is obtained from the surface owner. Minor tweaking and restraints placed on the “rule of capture” throughout the 20th century to better protect homeowners (such as surface damage acts), but mineral rights owners reamain dominant.

Water laws in Texas

In Texas, these tweakings finally culminated in the 1997 Senate Bill 1, an act that gave more authority to groundwater conservation authorities to manage the water supply. Like California, Texas has long seen a sustained rush for its oil and gas apace a newly renewed interest in its shale reserves, which lie in arid, drought-ridden regions where water supply for all activities is scarce. Texas suffered a severe drought merely 2 years ago, hence much of the regulatory concern is water-related. Texas is unique in that groundwater is owned privately by landowners and subject to whatever local restrictions exist, as put forth by the groundwater conservation districts instead of any state-wide parameters (which do not yet exist). This is important, because it means that counties across Texas may differ ostensibly on water management policies. Concerns with surface-level water sources (e.g. streams, rivers, lakes), however, can be addressed to the RRC, as the state government does control those sources.

The “rule of capture” is still firmly installed unless the offending party shows excessive negligence or waste of water – or unless dictated otherwise by groundwater conservation districts. Under competing, slightly updated policies such as the “accommodation doctrine”, the surface owner may compel a fracking operator to alter drilling and well stimulation techniques to better accommodate existing surface uses (such as farming or livestock). Landowners appealing to this doctrine will have their claims addressed on a case-by-case basis.

Local autonomy on water rights

Oil and gas drilling was previously exempt from local water conservation regulations, but now municipalities can decide on a case-by-case basis if they want fracking to be exempt or not. Some Texas municipalities have imposed water regulations on gas drilling, sometimes banning the use of city water (as Grand Prairie did recently). Other districts can now choose to add rules to the permitting process for fracking projects, and place caps on water usage.  For example, the Evergreen Underground Water Conservation District installed water usage restrictions on fracking operators in 2008,  restrictions that cover 3,800 square miles in the oil-rich Eagle Ford region. As you might imagine, controls are weaker in some parts of the state and stronger in others.  And because Texas has yet to “unitize” its water production to enforce proportional sharing amongst rights owners, which would otherwise prevent a race to extract or overuse it, many homeowners have begun to sell groundwater to fracking operators for 10-80 cents/barrel, a practice called “water wild-catting.” There are worries that this unique convention, a consequence of privatized under-gound water supplies, could jeopardize fresh water sources in the future.

Current statewide fracking regulations

Water use, contamination, & fracking

water law texasThe Texas Water Development Board estimates that if current withdrawals remain the same, the aquifer in the Eagle Ford shale play will drop by over 30 feet by 2060. Little water is used for fracking compared to agriculture, though the total number of wells drilled for oil & gas may well top 20,000 over the next few years. Nevertheless, the Railroad Commission is not only drafting more rules for well construction and stimulation, but is also drafting incentives that would make it easier for companies to recycle & reuse fracked/treated water via mobile recycling units. Another initiative has been launched that would devote city sewage water for oil fracking; Alpha Reclaim Technology is already buying sewage water from a city government for just that purpose. Because other Texan oil and gas operators often use “disposed wells” instead of open-aired, lined pits to dispose of water, nearby residents are fearful of water contamination. Operators vary in their recycling and reuse practices, partly because reusing treated water for future fracking operations is not very cost-effective. State law remains hazy about the permitting requirements for water use and water wells drilled for fracking, and water contamination violations recorded over the past few years speak to this shortfall. But the Commission is generally savvy and clear-cut with regards to other regulatory issues.

Regulations on well integrity

Besides requiring operators to disclose chemicals used in fracking via the Groundwater Protection Council and Interstate Oil and Gas Compact Commission’s website, the RRC has also enacted rules this May (2013) to enforce higher standards for oil and gas well construction across the state. These standards have received no updates since the 1970s. Known as the “well-integrity” rule, it will take full effect next January and will clarify and update existing requirements regarding cementing, well casing, steel piping, and specifications for fracking at large. At-risk sites and formations will require extra rules for noncemented wells, which cannot be fracked if they come within 1,000 vertical feet of a water aquifer. Rules will be more stringent, depending on local, site-specific conditions.

The RRC also monitors the entire process of well completion and construction, requiring several layers of steel casing and cement in its standards. The Commission requires that operators supply data on productions results, amount of fluid and sand used in each treatment, and compels companies to install gauges at the surface of wellbore casings to monitor and identify downhole problems. Other regulatory safeguards are described below:

…Before operators or service companies perform a hydraulic fracturing treatment of a well, a series of tests are performed to ensure that the well, well equipment and hydraulic fracturing equipment is in proper working order and will safely withstand the application of the fracture treatment pressures and pump flow rates.  Hydraulic fracturing operations are monitored to ensure that fractures created by the process are limited to the targeted formation. (Groundwork)

See the full Texas Administrative Code, procured by the Railroad Commission for rules applying to oil and gas.

The “well integrity” rules passed in Texas this year are hugely significant. If you’ve read our earlier posts about fracking and water contamination, you’ll remember that most contamination issues result from faulty well casing. Between 1993 and 2008, faulty well construction was responsible for 10 groundwater contamination violations in Texas, one case involving Range Resources that was dropped abruptly by the EPA. A 2007 report found no contamination incidences from the 354 cases under the RRC’s jurisdiction, but no follow-up investigations were made publicly available for the rest of the 5,267 total cases. That said, the 4 new requirements added to mitigate the increased risk to groundwater posed by fracking technologies are related to well integrity and will hopefully result in a decline of water contamination cases.

Future of fracking regulations in Texasdrilling rig TX

Updated statewide requirements for fracking and drilling operators will serve to better protect groundwater, though local jurisdictions still vary on their own additional rules to permitting and water usage limits. Just as Texas was ranked first in the U.S for drilling and producing the most oil & gas throughout the 20th century, Texas has also been praised for its succinct regulatory framework for the industry. Enforcement is another issue altogether – to better access the data and discussion on Texas’ oil and gas enforcement actions, violations, inspections, and public participation issues, check it out on Earthworks.

1 comment… add one

  • Keenan July 9, 2013, 8:30 pm

    Thanks, Hannah, for this well-researched and well-written article. Also, frackwire, way to go with the “Our Position” page. Remarkably refreshing. I’ll start following regularly.

    Reply

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