Lawsuits, Drilling Bans, and Other Issues Shaping the Future of Fracking in the US

“Lawmakers are heavily divided when it comes to the regulation of hydraulic fracturing. Currently, there are twelve bills in Congress that address the regulation of oil and natural gas operations.” (Peter Whitfield at BakerHostetler)

Although the hydraulic fracturing process has been around since the late 1940s, it’s only been in the last 15 years or so that fracking has become economically viable for exploiting the vast natural gas reserves trapped in shale fields across the country.

But the future of fracking in the US is still being written. For your reference, here’s a look a five legal and regulatory issues shaping that future:

1.       All-out bans on drilling:

“The decision [by New York’s Court of Appeals to uphold the Town of Dryden’s ban on fracking] severely limits any incentive energy companies have to invest resources into development of the New York portion of the Marcellus Shale, where 55 municipalities have bans on fracking in place, 102 municipalities have existing moratoria, and 92 municipalities are currently moving to put some level of prohibition in place.” (Luke Cantrell at Baker Donelson)

2.       Lawsuits from environmental and other groups:

“On October 3, the Center for Biological Diversity notified [the Bureau of Safety and Environmental Enforcement] and [the Bureau of Ocean Energy Management] that it intended to take legal action against the agencies to suspend fracking operations off the Santa Barbara coastline, right on the heels of the passage of [California’s new law that establishes a permitting system for new fracking wells].” (Chelsea Huffman and Michael Mills at Stoel Rives)

3.       Uneven application of state trade secret protections:

“In the approximately 31 states with known reserves amenable to hydraulic fracturing, or “fracking,” a tug of war is being waged between an oil and gas industry seeking to protect its proprietary processes and environmental groups that want to know the secret sauce.  Because fracking was carved out of federal oversight in 2005, determining where the balance lies has been left to the states.  Not surprisingly, consensus is not the order of the day.” (Elizabeth Howard and Derek Knerr of Orrick)

4.       Taxation of fracking operations:

“State taxation of shale development also is an issue gathering steam in key shale states, as state governments attempt to strike a balance between encouraging much-needed economic development and achieving needed influxes of revenue — chiefly to fund state regulation of hydraulic fracturing and/or to offset proposed tax cuts in other areas.” (Martin Booher and Cassie Dallas at BakerHostetler)

5.       Federal regulation:

“The American Petroleum Institute estimates that the proposed rules [for fracking on federal lands] could cost the fracking industry between $30 million and $2.7 billion per year. Other industry estimates predict $354 million per year in added costs. The Bureau of Land Management, however, has downplayed cost concerns, publishing estimates closer to $20 million per year in added expenses.” (Daniel Kavouras at BakerHostetler)

The updates:

Related reading:

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