On June 9, 2009, US Senator Bob Casey (D-Pa.) and Representative Diana DeGette (D-Colo.) introduced matching Senate and House bills (S. 1215 and H.R. 2766) that would regulate hydraulic fracturing in the oil and gas industry. Those bills, each of which is being called the Fracturing Responsibility and Awareness of Chemicals Act (or FRAC Act), would do two things: (i) make hydraulic fracturing for oil and gas subject to the Safe Drinking Water Act (SDWA), and (ii) require disclosure of the chemical constituents used in hydraulic fracturing.

In hydraulic fracturing, or “fracking,” a mixture of water, proppant (sand or other granular material), and chemicals such as surfactants, lubricants, and biocides is injected under pressure into rock. The exact mixture, often regarded as proprietary, is selected based on geologic conditions. The pressure causes and opens cracks, the proppant holds them open, and oil or gas can then flow up the well. Used in approximately 70% of all onshore wells in the 48 contiguous US states, the technique is particularly important in extracting gas from shale.

A provision of the 2005 Energy Policy Act had exempted fracking for oil and gas production activities from the SDWA, which regulates underground injection. Since then, hydraulic fracturing has been alleged to be responsible for groundwater contamination, illnesses, and water well explosions.

Subjecting oil and gas fracking to the SDWA could add costs of about $110,000 per non-shale well and $47,000 for each shale well, according to a study for the American Petroleum Institute. The bills also come at a time when some state and local governments have been moving to impose their own new requirements (such as noise limitations) on drilling.

With gas prices currently low, increased regulation can only slow exploration and production activity. Moreover, if enacted, the FRAC bills may open the door to additional controls, tort suits, and disclosure of chemical constituents in products.

For more information about the topics raised in this Client Alert, please contact Robert Gray, John Hahn, Roger Patrick or anyone in our Energy practice.

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