TABLE OF CONTENTS - HBW Resources · About the HBW Fracking Report HBW Resources’ Fracking Report monitors shale energy activities in 23 states, assesses the non-technical risk

TABLE OF CONTENTS

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Table of Contents

About HBW ...................................................................................................................................... 2

Executive Summary ......................................................................................................................... 3

California .......................................................................................................................................... 5

Colorado ........................................................................................................................................... 7

Maryland .......................................................................................................................................... 9

New York ....................................................................................................................................... 11

Ohio ................................................................................................................................................ 13

Pennsylvania ................................................................................................................................... 15

Illinois ............................................................................................................................................. 17

Louisiana ........................................................................................................................................ 19

Michigan ......................................................................................................................................... 21

Nevada ............................................................................................................................................ 23

New Mexico ................................................................................................................................... 24

North Carolina ................................................................................................................................ 26

Texas .............................................................................................................................................. 28

Virginia ........................................................................................................................................... 31

West Virginia ................................................................................................................................. 33

Alaska ............................................................................................................................................. 35

Arkansas ......................................................................................................................................... 37

Kansas ............................................................................................................................................ 39

Mississippi ...................................................................................................................................... 41

Montana .......................................................................................................................................... 42

North Dakota .................................................................................................................................. 44

Oklahoma ....................................................................................................................................... 46

Wyoming ........................................................................................................................................ 48

EXECUTIVE SUMMARY

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About the HBW Fracking Report

HBW Resources’ Fracking Report monitors shale energy activities in 23 states, assesses the non-

technical risk factors, and qualifies the threats to production as either high (RED), medium

(YELLOW), or low (GREEN). The report is updated monthly, reassessing each state’s threat

level and analyzing new developments. The report and further updates are available online at:

hbwresources.com/intelligence.

About HBW Resources

HBW Resources is an integrated strategic consulting and advocacy firm. Our multidisciplinary

approach provides our clients with innovative thinking and hands-on seasoned experience. Our

approach cuts through partisan views to represent national and international companies, trade

associations, labor unions, non-for-profit organizations, Federal- and State-level officials and

agencies, academia, and non-governmental organizations (NGOs). With offices in Houston,

Washington, D.C., Denver, Chicago and Calgary, HBW Resources has forged a solid reputation

of working effectively at the cross- section of the public policy, regulatory, technical and political

arenas to provide high value, strategic counsel needed to achieve results for our clients.

For more information on the Fracking report, contact Andrew Browning, Partner, at

[email protected] or 303-228-9462

http://hbwresources.com/intelligence/

mailto:[email protected]

EXECUTIVE SUMMARY

3

Elections have consequences. The elections next month could significantly affect the ability to

operate in several areas: California, Ohio and Texas each have local ballot measures that will

allow voters to decide whether to adopt a ban or limit on unconventional development. Moreover,

unconventional development is playing a key role in gubernatorial races in New York,

Pennsylvania, Maryland, and Colorado.

HBW Resources continues to find high levels on non-technical risk in California, Colorado,

Maryland, New York, Ohio and Pennsylvania. Again, much of this risk could shift with the

November 4th elections. The outcomes of these elections may determine whether moratoria

remain in effect in Maryland and New York. In Pennsylvania and Ohio, new severance taxes are

a topic of debate in each governor’s race.

Eighteen other states, categorized in yellow, are experiencing local opposition which is spreading

to other municipalities and counties in the state and has influenced the debate on state and local

regulation on fracking.

State-by-State Threat Levels

HBW Target States

High Threats Moderate Threats Low or Non-Existent Threats

California Illinois Alaska

Colorado Louisiana Arkansas

Maryland Michigan Kansas

New York Nevada Mississippi

Ohio New Mexico Montana

Pennsylvania North Carolina North Dakota

Texas Oklahoma

Virginia Wyoming

West Virginia

EXECUTIVE SUMMARY

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Recent notable activity in the states:

California: Three counties are set to vote on ballot measures relating to fracking bans this

November: Mendocino County, San Benito County and Santa Barbara County.

Meanwhile, the Department of Conservation has issued a revised draft of its new

unconventional development regulations for public review.

Colorado: The governor’s oil & gas task force has begun holding public meetings to

gather and share information about best practices and understand where the gaps in

information exist.

Maryland: State agencies have issued its risk assessment of shale gas development. While

the report finds low risk to local water resources, Gov. O’Malley is likely to pass the

controversial decision to his successor this January.

Ohio: As four localities go to the polls next month to vote on fracking bans, Gov. Kasich

– who is also up at the polls – is touting his resolve to push for a higher severance tax, if

he’s re-elected.

New Mexico: Ousted Mora County Commissioner Olivas spent much of late September

on the road in the Midwest, educating activists and local officials on how to pass an oil-

and-gas drilling ban similar to the one he championed in Mora County.

North Carolina: Regulators received more than 100,000 comments on its fracking

regulations last month. But, don’t expect this to delay North Carolina’s push to frack. The

agency will process and incorporate any edits by early November.

Texas: The City of Denton is set to vote next month on a fracking ban – a move that has

brought national attention to a state defined by its oil and gas resources.

Kansas: A commission tasked with investigating why Kansas has experienced an increase

in earthquakes has concluded that there’s no link between fracking and earthquakes – but

more study is still needed.

North Dakota: As flaring regulations go into effect, the state’s top oil and gas regulator

warns that the rule may cause a decrease in production.

CALIFORNIA (HIGH)

5

New News

Regulators Issue Updates on Proposed Rules: The California Department of Conservation

issued on October 9 an updated version of its proposed regulations for hydraulic fracturing and

other types of well stimulation for oil and gas production. The second version of the proposed

regulations will be open for a 15-day comment period that will end on October 24, 2014.1

Governor Signs Water Reporting Legislation: In late September, Democrat Governor Brown

signed S. 1281, which will now require oil and gas operators to report on a monthly basis the

source and volume of water utilized “to generate or make up the composition of any injected fluid

or gas.” In addition to these monthly reporting requirements, operators must submit on a quarterly

basis additional information, “including the treatment of water and the use of treated or recycled

water in oil and gas field activities.”2 Senator Pavley (D) sponsored the legislation. Pavley

previously authored S. 4, the “Oil and Gas Well Stimulation Act,” which laid out a series of

changes to regulations governing advanced stimulation practices for oil and gas development.

Santa Barbara Anti-Drilling Measure Divides County: Support and opposition to Measure P,

Santa Barbara County’s controversial ballot measure to ban all enhanced oil and gas recovery in

the county, is largely divided along regional lines. The northern part of the county is where the

majority of existing wells are located and residents in the area are concerned about the effect that

the ban would have on the local economy and home values. The key to the success or failure of

Measure P depends largely on voter turnout in northern Santa Maria and southern Santa Barbara.3

The ban initiative will be on the November 2014 ballot.

Overview

The Monterey Shale in the central-west part of the state has been estimated to hold two-thirds of

the nation’s shale oil. For a state with declining onshore and offshore oil production, the

Monterey has the promise of reversing California’s fortune and driving significant new economic

activity. Doubts do linger about the ability to extract resources. The U.S. Energy Information

Administration has lowered its estimate of recoverable oil in the Monterey Shale formation from

13.7 billion barrels of oil to 600 million.

Government officials are citing the unique geology found in Monterey Shale as an impediment to

recovery. According to Reuters Newswire, EIA Administrator Sieminski said, "Not all resources

are created equal…It turned out that it is harder to crack the reservoirs and get the oil flowing

from the Monterey" than from the Bakken or the south Texas formation of Eagle Ford. Anti-

development activists cheered the news as an affirmation that industry claims were exaggerated.4

State lawmakers have tepidly supported fracking. Democrat Governor Jerry Brown has supported

the practice, and he worked with industry in 2013 to pass legislation requiring California’s first

hydraulic fracturing regulations. The Department of Conservation issued in June its first draft

CALIFORNIA (HIGH)

6

proposed rules, and the law requires new regulations to be in place by January 2015. The

governor continues to be criticized but is maintaining his support for fracking because he believes

it is better for California to generate its own energy than to import it from overseas. Brown is up

for re-election in 2014. Recent polls show Brown leading against Republican candidate Neel

Kashkari by 20 points.5

Challenges to Development

Opposition groups in California are executing an aggressive campaign to combat fracking at the

state and local levels. Public opinion is leaning towards an outright ban. A poll commissioned by

the Sierra Club and Natural Resources Defense Council claims 68 percent of Californians would

support a fracking moratorium.6 Long-term drought and frequent wildfires, as well as earthquake

concerns, are galvanizing opposition.

Local opposition is increasing. County Supervisors in Santa Cruz County, CA voted unanimously

on May 19, 2014 to make their county the first in California to ban fracking. In May 2014,

Beverly Hills became the first municipality in California to ban fracking. 7 The Los Angeles City

Council decided in a 10-0 vote in February to direct City Attorney Mike Feuer to draft an

ordinance that would impose a moratorium on fracking.

Three counties will vote on November 4, 2014 on whether to institute fracking bans or amend

charters to allow greater control of fracking regulations at the local level. Mendocino County, San

Benito County and Santa Barbara County have each confirmed that fracking-related measures

will be on the November ballot. Supporters of a ban in Butte County had hoped to place an

initiative on the 2014 ballot, but a delay in the commissioners’ review process punted the vote to

the November 2016 ballot.

Not all attempts to ban fracking have proven successful. In April 2014, Carson, located just south

of Los Angeles, did not extend a temporary moratorium. In May 2014, the California Senate

failed to pass a moratorium on fracking in the state.8 Finally, the San Luis Obispo County Board

of Supervisors rejected attempts by Students Against Fracking to pass a moratorium.

COLORADO (HIGH)

7

New News

Oil & Gas Task Force Holds Meetings: The 21-member advisory panel organized by Governor

Hickenlooper began holding meetings in late September to work towards its goal of developing

recommendations that will help balance state and local control of oil and gas drilling. The task

force identified health, technology and legal issues that need further consideration, noting that

more information and clearer definition of the problems are also needed, according to the Denver

Post.9 The task force must agree on all recommendations by a two-thirds vote, and

recommendations are due by the end of February 2015.

Broomfield, CO Adds Neutral Members to Canvass Board: After a close vote in which a five-

year moratorium on fracking was approved by 20 votes, the City of Broomfield approved two

unaffiliated voters to the city canvass board, which is responsible for certifying votes and

initiating recounts. The Broomfield Enterprise reports that “Broomfield decided to expand the

board by adding two unaffiliated members in an effort to have more residents represented and

improve election transparency in the wake of the controversial 2013 election.”10

Overview

Colorado has a long history of energy and natural resource production. It boasts a rich mining

industry focused on gold, silver, gemstones and uranium. Until recently, the energy industry had

focused its production in the gas-heavy Piceance-Uinta Basin in the western half of the state,

much of which is federal land. However, low natural gas prices have reduced activity in the basin.

Encana, one of the state's largest producers, announced late in 2013 that it would not drill any

new wells in the basin in 2014.

Hydraulic fracturing and horizontal drilling have opened up production of the liquids-heavy

Niobrara shale located in the Denver-Julesberg basin, which is located in northeastern Colorado.

With production from vertical wells decreasing, new activity from horizontal wells has led to a

surge in production, creating one of the top-producing plays in the nation with an estimated two

billion barrels of resource potential.

Colorado ranks sixth in the nation in total natural gas production and eighth in total oil. The state

recently broke a 60-year record for oil production with 63.2 million barrels produced in 2013, a

jump of 28 percent from 2012.

Once counted as a reliable red state for Republicans, Colorado has turned purple. Ideologically,

voters are split between rural values and urban-environmentalism, which focuses on preserving

scenic mountains and an outdoor lifestyle. The past two sessions of the state legislature have

drawn a sharp contrast between the rural and urban/suburban areas of the state, pitting one against

the other with energy policy playing a key role. Colorado’s Democrat Governor Hickenlooper is a

supporter of the energy industry but has seen his political influence on the subject wane as

COLORADO (HIGH)

8

opposition to hydraulic fracturing has gained popularity. Hickenlooper is in a difficult re-election

campaign. Polls show the race in a dead heat with Republican gubernatorial candidate Bob

Beauprez ahead of Governor Hickenlooper by less than one point in early October.11

Colorado officials boast that their state has the nation’s toughest rules on hydraulic fracturing and

unconventional development. Industry leaders and state regulators recently worked to promulgate

the nation’s first net-zero emissions standards for fugitive methane. Work also continues to

enhance the standards for baseline water testing and natural gas flaring. However, these measures

have done little to blunt criticism of industry standards and practices.


The characteristics and location of the Niobrara play make it a lightning rod for opposition to oil

and natural gas production. Located near a fast growing rural-urban interface region, production

is occurring within sight of many residential developments and within the borders of many small

towns and cities.

The oil and gas industry faces an uphill battle in Colorado. Since 2012, six communities in the

northern front-range have agreed to restrictions on hydraulic fracturing and oil and natural gas

production. The restrictions range from outright bans to lengthy moratoriums. Legal challenges to

the bans call into question the ability of localities to regulate an industry traditionally overseen at

the state level. On August, 8th Judicial District Judge Gregory Lammons overturned a voter-

supported fracking ban in Fort Collins, declaring the ban to be in violation of state law.12

Despite

ongoing legal uncertainty, the result has been to catalyze a strong coalition against shale

development.

Most notably in 2014, opposition groups had attempted to use the state’s citizen-ballot initiative

to place anti-fracking ballot measures on the November 2014 ballot. Democrats felt threatened

that the initiatives would galvanize Republican turnout at the elections. Hickenlooper sought a

legislative compromise, but after those attempts failed, he came to a compromise with U.S.

Representative Jared Polis (D), who had been financing signature collections for the anti-fracking

initiative. In early August, Representative Polis and Governor Hickenlooper came to an

agreement that has resulted in four of the fracking-related initiatives being dropped from the

November state-wide ballot. As part of the compromise, Hickenlooper proposed that “an 18-

person blue-ribbon task force will examine the issue of local control of drilling over the next six

to nine months and to come up with recommendations for the Legislature to pass.” Hickenlooper

announced in September that he has selected 19 community leaders, oil and gas representatives,

environmental group representatives and others to participate on the task force.13

The task force

has begun holding meetings and is expected to deliver its recommendations by the end of

February 2015.

MARYLAND (HIGH)

9

New News

Maryland Issues Draft Fracking Report, Opens Comment Period: The Maryland

Departments of Environment and Natural Resources issued a draft of their risk assessment of

unconventional gas development in early October. The report ranks the level of risk posed to the

environment, public health and public safety in eight different categories: air emissions; road

damage and traffic; drilling fluids and cuttings; hydraulic fracturing fluids and potential impacts

to surface and ground waters; noise and visual; wells and formations; water withdrawal; and

waste. According to the report’s executive summary, “One of the greatest concerns regarding

[unconventional gas well development] is the contamination of water supplies, both ground and

surface waters […] Risks associated with water rated most commonly as low and in some cases,

moderate, depending on the sensitivity of the receptor.”14

The draft is open for public comment

through November 3. The Marcellus Shale Safe Drilling Initiative will hold its next meetings on

November 5 and November 25 in western Maryland.

LNG Export Facility Receives Final Approvals: The Federal Energy Regulatory Commission

granted final approval for a permit by Dominion Resources to export liquefied natural gas (LNG)

from its existing Cove Point terminal in eastern Maryland. With the approval, Dominion

announced it would soon begin construction on the terminal, which is expected to begin exporting

LNG in 2017 to free-trade and non-free trade agreement countries.15

Overview

Maryland is an energy deficit state, consuming far more energy than it produces. With no active

oil production and no petroleum refineries, the state imports most of its petroleum demand

through an extensive pipeline network including the Colonial Pipeline. While no substantial

natural gas production is currently taking place, the state will soon be home to the Dominion

Cove Point natural gas export terminal, which in September received approval from federal

regulators to transform the facility for liquefaction and export.

Maryland’s western counties sit atop the gas-rich Marcellus Shale. In 2011, Governor O’Malley

formed the Marcellus Shale Safe Drilling Initiative to study all aspects of potential production in

the state. State policy makers in 2013 allocated $1.5 million to allow the Marcellus Shale

Advisory Commission (part of the Safe Drilling Initiative) to study the potential health, safety

and environmental impacts of fracking within the confines of the state. The health study was

released in June and a more extensive draft risk assessment on unconventional development was

issued in October. Legislators have voted against moratoria and fracking bans, but the state

remains under a de facto moratorium until the Marcellus Shale Advisory Commission completes

its mandated studies. The Advisory Commission is expected to issue its final recommendations

by the end of 2014.

MARYLAND (HIGH)

10

In cooperation with Towson University, the Marcellus Shale Safe Drilling Initiative released a

report on the potential economic impact of production of the Marcellus Shale in Allegany and

Garrett counties in western Maryland. The study finds that the region could easily support modest

production with minimal negative impacts to housing and transportation, while providing more

than 3,600 jobs and $440 million in economic output.16


Even with the release of the Advisory Commission’s studies, Governor O’Malley is unlikely to

act on lifting the de facto moratorium before he leaves office in January 2015. O’Malley is term-

limited to two consecutive four-year terms. Given his intentions to run for president, O’Malley

has been judicious as of late to avoid alienating moderate voters with an aggressive

environmental agenda. O’Malley notably resisted pressure from the environmental community to

use his influence to reject a state permit needed to facilitate construction of the Cove Point LNG

export facility.

The Democrat gubernatorial candidate and current Lieutenant Governor Anthony Brown has not

taken a definitive stance on fracking. In his environmental platform, Brown notes that “While the

energy potential of the Marcellus Shale represents an enticing economic opportunity, we will not

accept a process that jeopardizes our families or environment.”17

The state is home to several coal mines, but residents lack an understanding of energy production

and are suspicious of the current studies and activities being conducted by the Marcellus Shale

Safe Drilling Initiative.

Environmental and anti-energy activists have capitalized on this sentiment and have organized

extensive opposition to any new production. Environmental organizations, such as the

Chesapeake Climate Action Network that grew out of environmental concerns for the Chesapeake

Bay, remain very influential with state leaders. Any future production will face significant

opposition and will require extensive public engagement in order to win the social license to

operate.

NEW YORK (HIGH)

11

New News

Cuomo Accused of Altering Fracking Study: Capital New York released a report suggesting

that New York Governor Andrew Cuomo’s office “edited and delayed” a federal water study it

commissioned from the U.S. Geological Survey in order to downplay the potential health and

environmental risks of fracking. Capital points out the removal from an earlier draft of the report

of a reference to the possibility of introducing methane into water supplies during the drilling,

transportation, and storage of fracked natural gas. Language was later added that emphasized that

the “risk [of methane pollution] can be reduced if the casing and cementing of wells is properly

designed and constructed.”18

GOP Gubernatorial Candidate to Tour Fracking Sites: Less than one month before the

November elections, Republican gubernatorial candidate Rob Astorino announced that he has

accepted an invitation to tour a Cabot Oil & Gas Corporation gas-drilling operation in

Susquehanna County, Pennsylvania. Astorino, a drilling supporter, stated: “It’s unconscionable

for this governor to leave people suffering in this economy while we are blessed with natural

resources under our feet.”19

Overview

New York State, like Pennsylvania, sits atop the Marcellus Shale formation. Unlike its neighbor,

shale energy development is prohibited in New York. A moratorium put in place in 2008 keeps

the state ranked 22nd in the country for natural gas production. Pennsylvania is ranked third.

The Buffalo News has reported that there are “at least 177 communities and counties” in New

York which have banned hydraulic fracturing on top of the “temporary” statewide moratorium

put in place in 2008. 20

Joe Martens, head of New York’s Environmental Conservation

Department, has told state lawmakers his agency has no plans to finish its review of fracking

regulations until April 2015, at the earliest.21

Martens cited a lack of funding for such reviews as

the reason his agency will not act before Election Day 2014.

The race to be New York’s next Governor between Republican Rob Astorino, a Westchester

County executive, and incumbent Democrat Governor Andrew Cuomo has oftentimes focused on

the candidates’ positions on fracking. Astorinio has stated that he would authorize fracking “on

day one (of his administration), in an expedited fashion.”22

He frequently argues that fracking

“could bring thousands of jobs to struggling locales.”23

Cuomo is currently leading in the polls by

20 points or more over Astorinio amongst likely voters.24

In September, Governor Cuomo fought off a primary challenge from Zephyr Teachout, a law

professor who is an avowed opponent of fracking.25

Despite a late start and lackluster fundraising,

Teachout won 34 percent of the vote and a majority of New York counties. Analysts have noted

NEW YORK (HIGH)

12

that Teachout’s success, particularly in rural areas, is a “stunning showing underscoring the

importance of fracking in these outstate areas.”26


As Cuomo continues to contemplate a future lifting of the moratorium, many localities have

already moved forward with bans – actions that now have the legal upper hand. In June 2014, a

New York appeals court ruled 5-2 in favor of “home rule,” allowing cities and counties to pursue

ordinances on fracking, including outright bans.

In February 2014, a coalition claiming to have the backing of 70,000 landowners filed a lawsuit

in New York Supreme Court against Gov. Andrew Cuomo, N.Y. Dept. of Environmental

Conservation and the N.Y. Dept. of Health, asking to set an end date for the current review of

fracking regulations which has led to the statewide moratorium. In July, a judge dismissed that

lawsuit. Within a few weeks, the Joint Landowners Coalition of New York filed an appeal with

the state Appellate Division of the Supreme Court.”27

OHIO (HIGH)

13

New News

Governor to Pursue Severance Tax if Re-elected: In an interview with the Columbus Dispatch,

Governor Kasich, who is running for re-election in November, stated that he will take greater

actions to push for a new severance tax structure on oil and gas drilling. The paper stated that “the

governor says he’s only going to push harder if he wins re-election.”28

The Ohio House passed

legislation to enact a new severance tax in May, but the legislation stalled in the Senate. Kasich

has proposed a 2.75 percent tax.

Kent Residents to Hold Anti-Frack Rally: The Kent Environmental Rights Group and Global

Frackdown held a rally on October 11 in Kent to promote support for Issue 21, a proposed Kent

community bill of rights, which will appear on the November 4 ballot.29

Speakers included

representatives from the Community Environmental Legal Defense Fund and the Concerned

Citizens of Ohio.

Overview

Ohio has a long history with energy production, mostly coal mining. The advent of horizontal

drilling and hydraulic fracturing created opportunities to develop Utica and Marcellus shale

resources. The two basins are located in eastern Ohio, a region which historically was part of the

manufacturing-heavy “rust belt,” but has since lost that moniker with the departure of some of the

nation’s top manufacturers. High unemployment and urban flight plague many small towns in

Appalachian Ohio, many of which hope shale production will spur economic revitalization.

Shale production has not ramped up significantly as companies continue to test the plays’

viability. The Ohio Department of Natural Resources reports that as of September 2014

companies have drilled 27 horizontal wells in the Ohio Marcellus and 1,076 in the Ohio Utica,

which is cumulatively less than 12 percent of the unconventional wells drilled in Pennsylvania.

30,31 Experts project that production could expand, particularly if further legal challenges or

proposed tax increases create disincentives for producers in Pennsylvania. Ohio estimates that the

Utica holds 1.3 to 5.5 billion barrels of oil and 3.8 to 15.7 trillion cubic feet of natural gas.32

Republican Governor John Kasich and the Republican-majority House and Senate remain

supportive of shale development. However, the governor and his GOP colleagues in the

legislature have disagreed over oil and gas severance taxes, with the legislature rejecting Gov.

Kasich’s proposals to increase taxes on the industry in order to cut income tax rates. A severance

tax on horizontal wells passed the Ohio House in June, but failed to move out of the Senate

before the legislature adjourned for summer recess.

OHIO (HIGH)

14


Politically, statewide officials have embraced development, but local impact problems –

including truck traffic and induced seismicity – have agitated local opposition and raised the

specter of local bans and municipal regulation over oil and gas operation. Food and Water Watch

reports that at least 37 cities and counties have passed resolutions or ordinances that seek to ban

or limit on fracking.33

While most of these are non-binding resolutions, activists have recently

moved to push citizen-driven “community bill of rights” ballot initiatives.

The city of Youngstown has been the epicenter of local fracking opposition where residents have

voted three times since May 2013 on a ballot measure to ban fracking and will vote on a similar

measure in November. The measure has failed all previous three times, however by decreasing

margins. Activists’ strategy of utilizing local ballot measure to ban fracking has migrated to other

cities: In November, the cities of Athens, Niles, Kent and Gates Mill will join Youngstown to

vote on ballot measures that could affect the ability of operators to drill within these local

jurisdictions.

In February 2014, the Ohio Supreme Court heard arguments in Munroe Falls v. Beck Energy in

which the city of Munroe Falls argues that it retains the right under the state’s constitution to

regulate oil and gas activities. Several cities submitted amicus briefs in support of Munroe Falls’

position. Conversely, litigation filed by two energy companies has challenged that only the state

can regulate oil and gas development and, as such, local ordinances are prohibited under state

law. The outcome of these lawsuits could dramatically affect the amount and severity of local

ordinances.

PENNSYLVANIA (HIGH)

15

New News

Former Governor Believes Severance Tax is Inevitable: Speaking at the Shale Insight

Conference, former Pennsylvania Governor Tom Ridge stated, “I think there will wind up being a

severance tax in this state […] Just my feeling,” noting that he believes movement on a tax will

occur after the November elections.34

Governor Corbett, who is up for reelection this November,

has been opposed to a severance tax out of fears that it will hurt the shale industry. Corbett is

currently down in the polls to Democrat Tom Wolf by an average of 16 points, according to Real

Clear Politics.35

Overview

The Marcellus Shale that underlies much of the western and northern part of Pennsylvania is the

largest source of natural gas in the United States. Shale gas development in Pennsylvania has

skyrocketed, growing from 1.3 trillion cubic feet of production in 2011 to 3.1 trillion cubic feet

last year.36

Republican Governor Tom Corbett and the Republican-controlled legislature remain supportive

of Marcellus development. Governor Corbett is facing a tough re-election against Democrat Tom

Wolf who currently leads most polls by double digits. Wolf supports environmentally friendly

development of the Marcellus shale and has vowed to pursue a 5 percent severance tax.37

In June 2013 the Democratic state committee passed a resolution by a vote of 115-81 calling for a

moratorium on fracking until health and environmental concerns are addressed. The resolution

ignited fissures in the party with pro-union, pro-development Democrats in the western part of the

commonwealth vocally opposing the resolution.38


Industry faces legal, political, regulatory, environmental and local opposition to shale

development in Pennsylvania on a level that threatens the viability of development.

Most notably, the Pennsylvania Supreme Court in December 2013 struck down several provisions

of a state law, Act 13, which governs hydraulic fracturing.39

In its 4-2 decision, the Court

declared portions of the law unconstitutional.40

The ruling puts shale gas development zoning

rights back in the hands of municipalities and counties. 41

As the basis for its ruling, the Court

cited Article 1, Section 27 of the Commonwealth’s Constitution, which guarantees its citizens

access to “clean air, pure water” and other environmental preservation rights.42

Pennsylvania

Commonwealth Court held the first hearing since the Supreme Court struck down portions of the

law in May 2014. The Pittsburgh Post-Gazette account noted attorneys from both sides agree that

much of the law is susceptible to lawsuit and will only be reconciled by new legislation.43

PENNSYLVANIA (HIGH)

16

The Supreme Court ruling could stifle development of the Marcellus Shale to the detriment of the

state’s economy. At the local level, Food and Water Watch reports that 17 townships and cities

have passed resolutions banning or limiting the practice, including a citywide ban in Pittsburgh.

Given the ruling out of the Supreme Court, local ordinances could significantly hinder

production, particularly if these small townships – there are 1,454 townships in the state - utilize

their ability for home rule to limit fracking or associated practices, such as treating fracking

wastewater.

Tax issues will also present challengers to producers. Act 13 authorized municipalities to adopt

impact fees that have generated $400 million in revenue44

in 2012 and 2013 – on top of the $1.8

billion in state taxes that the natural gas industry has paid since 2008.45

However, some policy

makers are pushing for tax increases to address budget shortfalls. In June, Pennsylvania Governor

Tom Corbett announced that he “favored a locally directed, per-well ‘impact’ fee” as a way to

address Pennsylvania’s $1 billion budget shortfall.46

Despite discussion of a severance tax as part

of the FY2015 budget, the budget was signed without new tax measures on the natural gas

industry. Gubernatorial candidate Wolf has pledged to enact a 5 percent severance tax on natural

gas production.47

ILLINOIS (MEDIUM)

17

New News

Legislative Committee to Review Fracking Regulations: The Joint Committee on

Administrative Rules is set to review the Department of Natural Resources’ proposed fracking

regulations during a hearing on October 14, reports the Associated Press.48

Initially, the

Committee had asked for additional time to review the regulations before meeting to discuss

whether the proposed rules comply with the intent of the statute. The Committee is expected to

decide on the fate of the rules by November 15.

Overview

While Illinois is well known for its abundant refining capacity and large nuclear power fleet,

Illinois has not been a significant oil and natural gas producer for many decades. Conventional oil

production in the Illinois Basin began declining in the mid-20th century and never returned.

However, exploitation of the New Albany Shale, part of the Illinois Basin, could revive a long-

dormant oil and natural gas industry in the state.

The New Albany shale gas play traverses Illinois, Indiana and Kentucky. Some experts have

compared the New Albany to the Bakken formation in North Dakota and Montana, noting that the

two formations appear to be similar in size, age and resource composition.49

Exploration has not

yet ramped up significantly, mostly because the state has yet to finalize a regulatory regime for

horizontal drilling and hydraulic fracturing. Some proponents of drilling have called the long

delay a de facto moratorium on drilling.

After mounting pressure from environmentalists and industry, Democrat Governor Pat Quinn

signed in June 2013 legislation to regulate horizontal drilling and hydraulic fracturing.

Environmental organizations had argued for a permanent moratorium but continued to work with

state agencies, lawmakers and industry to craft the legislation – an effort that at the time was

billed a compromise between the disparate groups.50

The Department of Natural Resources was

then tasked to adopt rules to reflect the law. This process – which has taken longer than a year to

date – has caused friction amongst industry and environmentalists with the two sides split on

issues such as public notification of permits, wastewater disposal and disclosure of fracking

formulas to health workers.51

In August 2014, the Department of Natural Resources issued a new

draft of rules, which is now under consideration with the legislative Joint Committee on

Administrative Rules. The committee will determine if the rules adopted by the agency adhere to

the standards outlined in the statute.

Democrats hold strong majorities in both the state Senate and House of Representatives.

However, Democrats may not maintain control of the executive past 2014: Democrat Governor

Pat Quinn faces a difficult re-election campaign against Republican businessman Bruce Rauner.

Polls have Quinn leading the race by three points or fewer.52

Rauner has received significant

support from the oil and natural gas industry.

ILLINOIS (MEDIUM)

18


The debate to begin fracking in Illinois has ignited in-state and out-of-state activists to oppose the

practice. Large national organizations, particularly the Natural Resources Defense Council, have

played significant roles in the state, seeking a seat at the table to try and influence stricter

regulations.

However, localized groups such as the Southern Illinoisans Against Fracking Our Environment

(SAFE) have sought a permanent moratorium in the state and have pursued local measures to halt

fracking. Food and Water Watch reports that seven ordinances, resolutions and supporting actions

have taken place at the local-level in Illinois. Of note, Alto Pass, Illinois has passed an ordinance

banning fracking.53

Not all attempts to ban fracking at the local level have been successful. In March 2014, fracking

supporters defeated a fracking ban voter referendum in Johnson County by a vote of 58-41.

Commissioner Ernie Henshaw called the vote “a strong indication that the people of Johnson

County are in favor of fracking and the jobs generated by the oil and gas industry.”54

LOUISIANA (MEDIUM)

19

New News

Court Refuses to Expedite St. Tammany Suit on Fracking: Judge William Norvant of the 19th

Judicial District has refused to expedite a lawsuit filed by St. Tammany Parish. The lawsuit seeks

an injunction to block the state from issuing drilling permits to Helis, an operator which has faced

significant local opposition for its proposed plans to use horizontal drilling techniques. The

hearing is set for October 27.55

Overview

Louisiana may be second only to Texas in terms of its importance to U.S. energy. The state is

home to the Henry Hub interconnect, is second to Texas in refining capacity, and is the third

largest energy producer in the nation. The Haynesville Shale located in the northwest part of the

state has been the focus of most of the unconventional development in the state. Two new shale

discoveries – the Brown Dense in the northern part of the state and the Tuscaloosa Marine Shale

in the central part of the state – could soon experience increases in activity.

A few years ago the Haynesville Shale was a national success story, prompting a popular

documentary Haynesville that trumpeted shale’s role in reversing the economic fortune of

northern Louisiana. However, when natural gas prices dropped and rig counts fell many

questioned the viability of the play. In recent months the rig count has trended upwards, and

experts project that the Haynesville could see significant activity if prices were to rise above

$5.00.56

The state’s long history with energy production has engendered support for industry amongst

most elected officials. State regulators updated policies and rules in the late 2000s in response to

increased activity in the Haynesville, and the Republican-controlled state legislature has recently

been mostly concerned with tax issues as opposed to new regulations.


Swift and significant public resistance to fracking in St. Tammany Parish in the eastern part of the

state in the Tuscaloosa Shale has caused the operator, Helis Oil & Gas, LLC, to forego horizontal

operations and purse a conventional vertical well. Residents, local officials and the federal Army

Corps of Engineers and the U.S. Environmental Protection Agency have expressed concern that

the operations would contaminate the Southern Hills aquifer, which is the main source of

drinking water for the parish. The Abita Springs Board, Slidell City Council, mayors and other

officials have now publically opposed fracking. The Tammany City Council passed a resolution

to seek and fund legal counsel on potentially blocking the issuance of all drilling permits and

instituting a ban on fracking in the area. The parish is currently pursuing litigation against the

state. The lawsuit seeks to determine whether the parish’s responsibility to protect health and

LOUISIANA (MEDIUM)

20

safety can override state laws that prevent municipalities and parishes from regulating or

prohibiting fracking.57

Similar opposition has migrated to nearby counties that also depend on the Southern Hills aquifer.

In the neighboring city of Mandeville, residents proposed a resolution that would support a

fracking ban in St. Tammany. This resolution, which would not prohibit any proposed wells, was

deferred by the council to allow for more time to study the potential effects of fracking.

MICHIGAN (MEDIUM)

21

New News

Tribal Court Dismisses Fracking Suit: Tribal judge Allie Maldonado has dismissed a lawsuit

that had sought an injunction against the use of freshwater in hydraulic fracturing operations. The

suit was filed by Phil Bellfy, democratic candidate for the 37th State Senate District and Tim

LaCroix, candidate for the Charlevoix County Commissioner District 3. Bellfy, a former

Michigan State University professor, stated to Petoskey News-Review that he believes current

state and tribal law prohibits use of freshwater in fracking operations: “I can’t see anywhere in the

law where they can take water our, contaminate it and put it back in the ground. I just can’t see

where it would be legal.”58

Judge Maldonado cited a lack of subject matter jurisdiction as well as

various other statutes as cause for dismissal.

Overview

Michigan does not currently host significant oil and natural gas development, but the Antrim

Shale Gas play in the northern part of the Lower Peninsula holds tremendous potential. The

Energy Information Administration estimates that the Michigan Basin Antrim play holds 18.4

trillion cubic feet of technically recoverable natural gas.59

The Michigan Department of

Environmental Quality, the primary state regulator of hydraulic fracturing, estimates that 12,000

wells have been fractured in the state in the past 50 years.60

Michigan’s Republican-majority House and Senate and Republican Governor Rick Snyder

generally support development of the state’s resources. As part of his energy plan, Governor

Snyder has called on the state to decrease its use of coal and increase its use of natural gas,

renewable energy and energy efficient technologies in order to promote better prices for

consumers and greater environmental protection.61

In April 2014, Governor Snyder signed

legislation that lowered the severance tax for natural gas production from 6 percent to 4 percent.62

Snyder faces a difficult re-election in November 2014. Current polling shows Snyder leading his

opponent, Democrat state lawmaker Mark Schauer, by fewer than four points.63

Regulators responded to public concerns about fracking by issuing a series of proposed changes

in July 2014. The proposed changes would require companies to complete baseline water

sampling from up to 10 water-supply wells and to submit disclosure records to FracFocus, among

several other items.64


Several national and local activist groups have sought to ban fracking in the state. In 2013, the

Committee to Ban Fracking in Michigan claimed it had gathered 70,000 signatures on a proposed

ballot measure to institute a statewide ban on fracking. The measure fell far short of the 320,000

signatures required to be on a statewide ballot. However, proponents of a ban have stated they

will try again to get a measure on the 2016 ballot.65

MICHIGAN (MEDIUM)

22

Following outcry over news in summer 2014 that radioactive fracking waste had been disposed of

in Michigan landfills, the Department of Environmental Quality formed a panel of experts to

evaluate rules and recommendations for addressing the issue.66

Moreover, two Republican

senators have introduced legislation that would ban the disposal of radioactive fracking waste in

the state.67

Environmentalists and concerned citizens, however, have called for stronger measures.

Anti-oil and gas activists gathered outside of the Michigan legislature recently calling for a halt

on drilling activities in cities with more than 70,000 residents, citing the issue of radioactive

waste as a rallying call against the industry.

NEVADA (MEDIUM)

23

New News

Federal Judge Will Not Halt Leases: U.S. District Judge Miranda Du ruled in September that

she does not have the authority to halt federal oil and gas leases because the U.S. Bureau of Land

Management (BLM) has not completed its decision-making process. Once the BLM completes its

environmental review, the decision can be subject to judicial review. The Reese River Basin

Citizens Against Fracking had petitioned the federal judge to issue an emergency order

prohibiting the BLM from issuing oil and gas drilling permits resulting from leases sold in July.

The Associated Press reports that the “coalition of ranchers, farmers and others says the BLM has

abused its authority by limiting public comment and failing to conduct an adequate review of the

potential impacts of fracking.”68

Overview

Nevada contains a portion of the Chainman Shale, a play that has not experienced extensive oil

and gas production. This is in part because of the Bureau of Land Management’s ownership of

over 70 percent of the mineral leases in the area, which has limited leasing opportunities and

increased environmental restrictions in order to protect local wildlife.69

In 2005, the U.S. Geological Survey estimated that the Chainman Shale could contain up to 1.6

billion barrels of oil and 1.8 trillion cubic feet of natural gas.70

Noble Energy Inc. acquired

300,000 acres of public and private land in northern Nevada.71

In 2014, Noble’s two test wells in

Elko County marked the first use of fracking technology in the state.72

In March 2013, in response to renewed interest in drilling in places like Elko County,73

the

Nevada State Legislature passed SB 390, establishing a regulatory framework for fracking

practices in the state.74

In August 2014, the Nevada Commission on Mineral Resources finalized

new regulations.75

Currently, there are no significant state- or local-level initiatives that seek to

limit or ban fracking.


A sizable portion of the land that covers the Chainman Shale formation is federal land and

concerns about the ecological implications of drilling have slowed the sale of mineral leases.76

Of

note, the pending review to list the sage grouse under the Endangered Species Act has stalled

development efforts across much of northern and central Nevada. A potential listing of the

species as either “threatened” or “endangered” would severely limit the ability to execute

efficient drilling programs. BLM representatives have stated, “The BLM will do our part to avoid

a listing of the sage-grouse under the Endangered Species Act. Deferring parcels from oil and gas

lease sales is just one step we are taking as we look closely at the many activities that can affect

habitat important to sage-grouse.”77

NEW MEXICO (MEDIUM)

24

New News

Ousted Mora Commissioner Tours Midwest to Discuss Drilling Ban: Mora County

Commissioner John Olivas traveled to Iowa, Minnesota and Wisconsin in September to discuss

how Mora County passed its ban on oil and gas drilling. According to the LaCrosse Tribune,

Olivas was scheduled to speak at events in Trempeleau, Vernon and Chippewa counties in

Wisconsin, Winnishiek and Allamakee counties in Iowa and Hennepin County in Minnesota.78

The newspaper reported that the Community Rights Alliance of Vernon County sponsored the

event in Vernon. In June, Olivas lost the Democratic primary to George Trujillo by more than 25

points. Olivas believed that the vote “was a referendum on oil and gas” and postulated that “70 or

80 percent of the people that live here are against oil and gas, but they didn’t vote.”79

Methane Emissions Not Associated with Fracking: The American Geophysical Union

published a study in its Geophysical Research Letters that finds a “hot spot” in the southwestern

United States produced the largest concentration of methane emissions in the country. The area –

near the Four-Corners intersection of Utah, Colorado, New Mexico and Arizona – emitted 0.59

million metric tons of methane between 2003 and 2009.80

The study’s lead author, Eric Kort of

the University of Michigan, noted “the study period predates the widespread use of hydraulic

fracturing, known as fracking, near the hot spot. This indicates the methane emissions should not

be attributed to fracking but instead to leaks in natural gas production and processing equipment

in New Mexico’s San Juan Basin, which is the most active coalbed methane production area in

the country.”81

Overview

New Mexico remains a quiet, but influential player in the American shale revolution. While the

national dialogue on shale may focus on Colorado or Pennsylvania, few recognize the strategic

importance of New Mexico. The state is the nation’s sixth largest oil producer pumping more

than 300,000 barrels of oil a day, and is one of the top-ten onshore natural gas producers.

Although conventional development has declined, a rapid increase in advanced drilling of shale

resources in the Permian, San Juan and Mancos basins has boosted the state’s production.

Cumulatively, New Mexico is the third largest net supplier of energy to the United States.

A March 2014 report from the New Mexico Tax Research Institute concluded that oil and natural

gas tax revenues provide 31.5 percent of the state’s general fund and exceed the revenues the

state collects from personal income tax. Furthermore, the U.S. Bureau of Labor Statistics reports

that employment in the mining, oil and natural gas sector has nearly doubled between 2003 and

2014, rising to 27,000 employees.

The state’s political leadership remains mostly supportive of the industry. Republican Governor

Susana Martinez – who is also a rising GOP figure nationally – has publically stated that she

supports expansion of the energy sector in New Mexico. The Democrat- controlled House and

NEW MEXICO (MEDIUM)

25

Senate have not moved on legislation that would severely restrict production. Last year Senator

Soules (D) introduced a bill, S. 547, to ban horizontal drilling and hydraulic fracturing. The bill

was never considered. A Fiscal Impact Report from the Legislative Finance Committee

concluded that a ban would result in a recurring annual loss of at least $98 million in revenues to

the state.


The swift expansion of fracking has ignited problems for the small, mostly rural communities that

host development. In southeast New Mexico, oil production in the Permian has transformed once-

quiet towns like Carlsbad into boom towns. Local officials have cited challenges with increased

truck traffic, strains on housing and social services and increased crime rates that have come with

the influx of workers. Despite the challenges, residents and local officials have generally

embraced the expansion of production in the Permian and appear willing to work with industry to

mitigate impacts.

Farther north, however, is a different story. Producers in the north-central and northeastern part of

New Mexico increasingly face opposition from environmentalists and landowners. In 2013, Mora

County, an hour and a half from Santa Fe, became the first county in the United States to ban oil

and gas drilling, though its future remains uncertain given current politics and ongoing litigation.

Similar local measures have been passed or introduced in Santa Fe County and San Miguel

County, with opposition groups mostly expressing concern over water quality issues.

In addition to local ordinances, potential federal Endangered Species Act (ESA) habitat

protections and Bureau of Land Management proposed regulations on hydraulic fracturing could

affect producers, the latter specifically for those operating on federal lands.

NORTH CAROLINA (MEDIUM)

26

New News

Tens of Thousands Comment on Regulations: The North Carolina Mining and Energy

Commission estimates that it has received more than 100,000 comments – and possibly as many

as 200,000 comments – during its public comment period on draft proposed regulations for

unconventional drilling, which ended on September 30.82

According to the Triad Business

Journal, concern about wastewater storage in open pits was a common theme, according to

Commission Chair Vikram Rao.83

The Commission will now review the comments and make

recommendations by October 30. The Commission will then incorporate any changes to the

proposed rule during its meetings on November 6 and 7.

Overview

The U.S. Geological Survey estimates that shale gas reserves in the Deep River basin, a 150-mile

long area under central North Carolina that extends into South Carolina, could supply the state's

natural gas demands for more than five years. North Carolina's shale reserves are predominantly

located in two Triassic Period river basins: the aforementioned Deep River Basin, in the central

and southern portions of the North Carolina Piedmont, and the Dan River Basin, in the

northwestern corner of the North Carolina Piedmont and in southwestern Virginia. These rift

basins formed between 200 and 235 million years ago, when the continents of North America and

Africa began to separate.84

There is currently little oil and gas production in North Carolina. However, the state has moved

swiftly since Republican Governor Pat McCrory was elected to institute a regulatory framework

for development and to encourage exploration of shale resources. In 2013, McCrory signed the

Domestic Energy and Jobs Act that authorizes the issuance of permits for oil and gas

development once the Mining and Energy Commission adopts a coordinated, modern permitting

program. The draft 120 rules and regulations that the Commission drafted were approved by the

legislature and signed by Governor MrCrory in June. The rules mandate chemical disclosure on

FracFocus, modest setback requirements and private testing of water quality after production. A

public comment period on the draft rules closed on September 30, 2014. The agency received

more than 100,000 comments and is currently reviewing and incorporating changes, a process

that will be completed by mid-November.

Political pundits have categorized North Carolina as a “swing state,” noting the state’s shift to

President Obama in 2008 and then Governor Romney in 2012. The state government is controlled

by a strong Republican majority. Still, there are Democratic, urban strongholds (Research

Triangle, Charlotte, and Asheville) which continue to grow stronger and would most likely

provide opposition to production in North Carolina. Republicans are generally more supportive

than Democrats of oil and natural gas production. While Senate Democrats split evenly on their

support for the Domestic Energy and Jobs Act, Democrats in the more partisan House voted

overwhelmingly against the legislation.

NORTH CAROLINA (MEDIUM)

27


The tone of the hydraulic fracturing discussion is already quite caustic with supporters and

detractors splitting mostly along party lines. A 2013 poll by the Natural Resources Defense

Council found that 55 percent of North Carolina residents oppose fracking in the state and 75

percent believed the state’s regulatory regime was “about right” or “too weak,” although the poll

was conducted prior to the enactment of the Domestic Energy and Jobs Act.85

Moreover, Food and Water Watch reports no fewer than 28 local measures, both binding and

nonbinding, seek to limit development in North Carolina. The 2014 Energy Modernization Act

invalidates local ordinances that prohibit or restrict oil and gas development, specifically those

“imposing taxes, fees, or charges or regulating health, environment, or land use.”86

The bill’s

passage has fostered opposition amongst those who strongly oppose the bill’s provision to make

it illegal to disclose proprietary chemical formulas used in hydraulic fracturing and the provision

that prohibits local-level regulation of fracking.

Nine national and state-based environmental groups assisted by significant funding from NRDC

and billionaire environmentalist Tom Steyer have formed the N.C. Environmental Partnership to

increase public opposition to fracking in North Carolina. Prior to the passage into law of the

Energy Modernization Act, the coalition launched a series of TV ads, internet advertisements and

mailers targeting individual Republican legislators for their support of fracking. With the bill’s

passage into law, NRDC projects its advertisement activity to continue. Rob Perks who serves a

campaign manager with NRDC said that NRDC has paid for advertising and grass-roots

campaigns in other states, but never to the extent it has in North Carolina.87

Public hearings on the draft regulations in August and September 2014 drew hundreds of

protestors. Although the Energy and Mining Commission has yet to release an assessment of the

more than 100,000 comments that it received on the regulations, it is likely that a vast majority of

them are form letters generated by anti-fracking organizations, including the N.C. Environmental

Partnership.

TEXAS (MEDIUM)

28

New News

Report Finds with Fracking Boom Come Increases in Traffic Deaths: An investigation by the

Houston Chronicle finds that traffic fatalities climbed 8 percent between 2009 and 2014, after

decades of decline. The newspaper cannot confirm a causal link between the increase in fracking

activity and traffic deaths, due to limited information about accidents from authorities. However,

it did find that in counties in or near the Eagle Ford and Permian Basin shale plays traffic

fatalities have increased. Additionally, the report found that traffic deaths related to commercial

vehicle crashes in the state rose 51 percent during the same period.88

Overview

Texas has benefited immensely from the recent boom of unconventional oil and gas development.

Discoveries of massive formations like the Eagle Ford Shale, Permian Shale and the Barnett

Shale have revitalized the state’s declining oil and gas industry. An October 2013 report released

by the U.S. Chamber of Commerce estimates that fracking operations have created more than

500,000 jobs in Texas.

Governor Rick Perry is a vocal supporter of a comprehensive energy policy that encourages

energy development. In June 2013, Perry announced that he would not run for re-election. Texas

Attorney General Greg Abbott won the Republican gubernatorial nomination. Abbott expressed

support for fracking before his run for governor, saying it “is great for our energy independence

and great for the Texas budget.”89

Democratic gubernatorial candidate Senator Wendy Davis has not supported measures that would

prohibit fracking and received support from the industry when she authored legislation that

encourages the disposal of fracking wastewater through pipelines instead of by truck.90

In 2011

Davis authored amendments91

that would have increased fracking oversight, including an

amendment that would require fracking fluid used by drilling companies to include “tracer”

chemicals.92

The Texas Legislature has taken steps to improve the quality of roads in the Eagle Ford Shale that

have deteriorated under increased use from oilfield traffic. In 2013, legislators set aside $225

million for a “Transportation Infrastructure” fund aimed at fixing roads in west and south Texas.93


Texas officials are unlikely to pass any state-wide measures that would prohibit or limit fracking.

State officials have been proactive in advancing sensible regulation on the industry, and many

states have instituted disclosure requirements modeled on Texas legislation passed in June 2011

that requires fracking operations to disclose the chemicals used to extract oil and gas. The law

also requires that drilling operators report on how much water was used to develop a well.94

TEXAS (MEDIUM)

29

At the local level, anti-fracking groups have been pushing for stricter limits or prohibitions on

fracking. Since many Texas cities operate under “home rule,”95

courts are more likely to uphold

laws enacted by the local governments rather than recognize the authority of state mineral rights

laws that could allow fracking in the face of a municipal ban. 96

The Barnett Shale:

A high-profile push for permanent restrictions on fracking is currently underway in the north

Texas City of Denton. In early May 2014, the Denton City Council voted to reinstate a temporary

ban on fracking within the city limits that was to last until September 9.97

In the days following

the vote, the Denton Drilling Awareness group filed a petition with at least 1,871 signatures to

institute a permanent moratorium on fracking in the city. The signatures were accepted by the

Denton City Council on June 4. The City Council rejected a city-wide hydraulic fracturing ban in

a 5-2 vote held on July 16 after more than eight hours of public testimony. The question will now

be posed to voters on the November 2014 ballot. The City Council has since extended the

temporary moratorium through January 20, 2015. If voters approve a ban, the city can expect

immediate legal challenges from mineral rights holders who would lose out on drilling royalties if

fracking was prohibited.98

In December 2013, Dallas introduced a “de facto ban” on drilling that dictates any well must be at

least 1,500 feet from a residence.99

In such a densely populated urban area, this setback

requirement essentially puts a moratorium on drilling within the city limits.

Residents in Dish, Texas have been working to find a definitive link between emissions from

nearby fracking facilities and negative health effects. Toxicology reports conducted by state

officials have found “no cause for concern”, and the Texas Department of State Health Services

maintains that air pollutants are within safe levels.100

The Eagle Ford Shale:

Transportation issues have become a concern in the Eagle Ford Shale as roads have worsened

under conditions of heavy use.101

Although the Texas Legislature has appropriated funds to

improve oilfield infrastructure, questions remain about whether it is the responsibility of local

governments or the state to improve the roads.102

Eagle Ford developers and regulators will also need to address increasing concerns over air

pollution. In 2014, the state of Texas commissioned a report that predicted that air quality would

rapidly worsen in the area over the next few years.103

Bryan Shaw, the Chairman of the Texas

Commission on Environmental Quality (TCEQ), has stated that “the data from the San Antonio

area shows us that we don’t see an impact at this point from the Eagle Ford Shale activity on

ozone requirements.”104

TCEQ has contracted with the University of Texas at Austin to

implement mobile monitoring in areas adjacent to the Eagle Ford Shale.

TEXAS (MEDIUM)

30

The Permian Basin:

According to the Texas Department of Transportation (TxDOT), increased traffic due to oil and

gas production in the Permian Basin has contributed to a 13 percent increase in roadway fatalities

between 2012 and 2013.105

In response to the rise in fatal crashes, TxDOT launched the “Be Safe.

Drive Smart” campaign aimed at increasing safe driving practices in the region. 106

VIRGINIA (MEDIUM)

31

New News

Virginia Energy Plan Doesn’t Address Fracking: The Virginia Department of Mines, Minerals

and Energy issued on October 1 its Virginia Energy Plan, which is “intended to provide a

strategic vision for energy policy in the Commonwealth.” The twelve-part plan reviews the

commonwealth’s energy consumption and production and recommends four key policies: growth

in the energy sector; expansion of energy infrastructure; increased utilization of advanced

vehicles and alternative fuels; and greater workforce development. However, in its

recommendation to expand energy production, shale production is not extensively discussed nor

recommended as a strategic asset.107

Overview

The prolific Marcellus and Utica Shale formations extend into western Virginia. Nearly all of the

limited oil and gas production in Virginia has occurred in the Marcellus region of southwest

Virginia where 2,100 producing wells exist. Additionally, more than 6,000 coal bed methane

wells have been fractured in the region.108

In 2013, Virginia produced a meager 9,000 barrels of

oil and 146 billion cubic feet of natural gas.109

The Virginia Department of Mines, Minerals and Energy (DMME) reports that the Marcellus

Shale formation within the state is “thermally overmature,” which means that “the shale was most

likely heated to too high a temperature in the past to preserve economic quantities of gas or oil.”

As such, the significance of future production remains uncertain. The Taylorsville Basin under

Virginia’s Coastal Plain may present new opportunities. Drilling in the Taylorsville between 1917

and 1992 yielded small quantities of natural gas, and a fractured well in 1968 similarly produced

underwhelming results. However, with new technologies available, some companies are

reevaluating the basin’s potential.110

Although Virginia has a long and supportive history of coal mining, public support for fracking

will likely not be as straightforward. Democrat Governor McAuliffe supported local control of

fracking during his 2013 campaign, noting that he will “protect localities’ rights to make their

own decisions about land use activities within their jurisdictions.” Governor McAuliffe has

further committed to opposing fracking in the George Washington National Forest and protecting

the mineral rights of landowners.111

McAuliffe’s campaign received a reported $8 million from

billionaire environmental donor Tom Steyer, who is also an avowed opponent of fracking.112

The Virginia Senate – which at the time was split evenly between parties – voted 28-12 to pass a

bill sponsored by Republican Senator Stuart that would prohibit drilling in the Eastern Virginia

Groundwater Management Area until certain environmental studies and measures were met. The

Republican-controlled House tabled the bill in committee prior to the session’s adjournment.113

VIRGINIA (MEDIUM)

32

Rising out of increasing local concerns about potential fracking, the DMME has assembled a

panel of state officials, private industry and other experts to review the state’s existing laws

governing unconventional development and make recommendations on executive and legislative

remedies to strengthen the law. The commission held public hearings in June to solicit input, and

a report is due sometime this fall.


Local opposition to fracking is on the rise in Virginia, which could pose a significant problem for

producers should the McAuliffe Administration continue to support local control of fracking

regulation. Food and Water Watch lists nine local resolutions and measures in support of banning

or limiting fracking, and county commissions, city councils, and citizens groups from the

southwest corner to the eastern part of the commonwealth have held meetings specifically to

address local concerns on water quality, induced seismicity, truck traffic, mineral rights, and air

quality. Reports that Shore Exploration acquired more than 80,000 acres for drilling in eastern

Virginia have stirred local concerns about groundwater protection and influenced the McAuliffe

Administration to form the DMME task force.114

Many in northern Virginia have strongly opposed potential plans to develop shale resources in the

George Washington National Forest. Most opposed drilling due to concerns about the safety of

the Potomac River, which supplies drinking water for four million residents in the Maryland-

Virginia-DC area.115

Opposition to infrastructure may also pose a problem to producers in Virginia and in neighboring

regions. Pipeline proposals to transport Marcellus gas from Pennsylvania through Virginia and

terminating in or near North Carolina have caught the interest of environmentalists and

landowners. While Governor McAuliffe has come out strongly in support of these infrastructure

projects, his pitch may be a hard sell to environmentalists and local landowners who have voiced

concerns about the impact of pipeline projects to the environment.

WEST VIRGINIA (MEDIUM)

33

New News

Plans to Frack under River stir Environmentalists: The West Virginia Commerce Department

is accepting bids for leases to drill under the Ohio River – a move that has irked anti-drilling

advocates. Eight environmental groups wrote Governor Tomblin last month arguing that “We

need not remind you that another large-scale water contamination issue in our state and region

could be devastating for West Virginia’s economy and reputation, not to mention the human

health costs.”116

Triad Hunter, Noble Energy, Gastar Exploration and Statoil each submitted bids.

Overview

According to the WV Geological and Economic Survey, there were 631 horizontal wells and

1,458 vertical wells in the Marcellus region (2013 data). Nearly all of this production has

occurred since 2005. Total 2012 liquids production in the Marcellus was 715,639 barrels and total

natural gas production reached 301.7 bcf in 2012. The top five gas counties are: Harrison, Wetzel,

Doddridge, Marshall, Upshur and the top five oil producing counties are: Wetzel, Ohio,

Doddridge, Marshall and Tyler.

From 2001-2009, jobs in the industry increased 34 percent due to growing production in the

Marcellus Shale and in 2009 alone production helped create 7,600 jobs, according to a West

Virginia University study. From 2011 to 2012, oil and gas employment increased by 2,123 jobs,

for 12,666 total jobs with average wages of $75,580 per year, according to a legislative report

issued to the state Joint Committee on Government and Finance. The same 2013 study found that

support jobs related to the oil and gas industry grew to nearly 4,000 total jobs and growth was

105 percent in the sector from 2011 to 2012. Oil and gas severance taxes brought in $103.5

million to the state treasury in FY 2013.

Democrat Governor Earl Ray Tomblin gained national attention for supporting comprehensive

new fracking regulations in 2011 that covered chemical disclosure, waste disposal, water use,

casing and well integrity requirements and enhanced public notification that provided

municipalities with a 30-day notice before the issuance of a permit to drill for any well within its

boundaries.

In April 2014, Governor Tomblin signed legislation that requires landfills to maintain radiation

monitors and directs the construction of separate storage areas lined specifically for drilling waste

and debris.117

According to an April 2014 Bloomberg article highlighting a large increase of

radiation in drilling waste, the state accepted 721,000 tons of drilling debris in 2013.118


Perhaps the most pressing challenge facing industry is public perception and trust issues

concerning the state’s regulatory agencies in the wake of a large chemical spill into the Elk River,

WEST VIRGINIA (MEDIUM)

34

upstream of Charleston, in January 2014. For days, local residents could not drink or bathe with

the tap water in the state’s largest municipality. Significant national media attention was placed

on the state’s “cozy” relationship with the chemical and extraction industry. Some have cited

perceived lax oversight and a lack of public awareness to have contributed substantially to the

impact of the spill from an above ground storage tank that seeped in the local water supply.

Food and Water Watch has confirmed only one successful local resolution by the Lewisburg City

Council. The 2011 resolution calls on the state legislature to address water quality protection with

hydraulic fracturing.

ALASKA (LOW)

35

New News

Alaska Lawmakers Press for LNG Project: The Alaska Congressional Delegation wrote to the

U.S. Department of Energy in late September urging the agency to expeditiously approve the

application by Alaskan LNG Project, LLC to export liquefied natural gas to both free trade and

non-free trade agreement countries. U.S. Senators Murkowski and Begich and U.S.

Representative Young write, “The requested authorization in the amount of 20 million metric tons

per year of LNG for a term of 30 years is necessary to support a project of this size and scope.”119

The Members further argue that export of Alaskan LNG will not affect markets in the lower-48

given their geographic separation. As such, the application should be exempt from the DOE’s

Order of Precedence for Processing Non-FTA LNG Export Applications.

Energy Issues at the Forefront of Senate Race: Alaska’s oil and gas industry is the largest

contributor to the state’s economy, and the decline of energy production in the face of reduced

global oil demand has raised questions about Alaska’s economic future. Economic anxieties have

taken center stage in the competitive senatorial race between Democratic Senator Mark Begich

and challenger Dan Sullivan, a race in which Begich is widely regarded as an underdog. The New

York Times reports that Begich has invoked the legacy of Ted Stevens, arguing that “Senate

seniority and carefully built relationships will enable him to work across partisan barricades to

ensure the state gets its fair share of federal spending” while Sullivan has vowed to “protect the

next wave of resource development in oil, gas or minerals from meddlesome regulators, the

Obama administration and the Democratic leadership in the Senate that he says Mr. Begich is

beholden to.”120

Sullivan also opposes the repeal of a newly implemented tax regime intended to

boost energy production, while Begich thinks that the decision should be left up to voters.

Overview

Fracking in Alaska has the potential to expand the life of North Slope fields and reverse the

decline in Alaskan energy production. According to a 2012 U.S. Geological Survey assessment,

the Alaskan North Slope could hold up to two billion barrels of potential, technically recoverable

shale oil and up to 80 trillion cubic feet of potential, technically recoverable shale gas.121

This

volume of shale oil may the second largest resource in the United States, second only to the

prolific Bakken field in North Dakota and Montana. Much of this shale is located beneath state

lands in the Prudhoe Bay area and under the federal National Petroleum Reserve–Alaska, an area

that has been statutorily designated for oil and natural gas development.

While unconventional development has not progressed significantly in Alaska, operators already

use fracking to stimulate about 20 percent of conventional wells.122

To address the increasing use

of fracking in the state, regulators adopted earlier this year more stringent rules to ensure its

environmental safety. The new regulations will require testing of all water wells within a half-

ALASKA (LOW)

36

mile radius of a well to be fractured, testing of water wells after completion, and disclosure of

chemicals used in fracking to FracFocus and to state regulators.123

State leadership supports increased oil and natural gas development to buttress declining volumes

of energy development and ensure the longevity of the Trans-Alaskan Pipeline System. Since

1988, oil production in Alaska has declined from more than 2 million barrels a day to 515,000

barrels a day in 2013.124


Alaskan operators will not face opposition similar to operators in the lower-48. The sparsely

populated region has already hosted significant development in the Prudhoe Bay area since the

1980s.

Rather, the greatest development challenge will hinge on the availability of a pipeline to

efficiently transport the product. In May 2014, Governor Parnell signed SB 138 to advance a

large-diameter Alaska natural gas pipeline and allow the State of Alaska to become an owner in

the Alaska LNG Project.125

In July, Parnell announced the formation of a formal commercial

agreement between the state-owned Alaska Gasline Development Corporation and BP,

ExxonMobil, ConocoPhillips and TransCanada to advance the project. The project soon

thereafter filed applications with the Department of Energy to export liquefied natural gas from

its terminal on the Kenai Peninsula to non-Free Trade Agreement countries.

ARKANSAS (LOW)

37

New News

Severance Tax Collection Up 50%: Higher, stable natural gas prices and widespread use of

fracking are in part responsible for the collection of $77.3 million in severance taxes in fiscal year

2014, a record for Arkansas. The City Wire reports that wells drilled early on in the development

of the Fayetteville Shale “are now being taxed at the maximum five percent rate” as required by

legislation passed by the Arkansas Legislature in 2009.126

Severance tax revenue is expected to

increase to $100 million in FY2015.

Overview

Throughout much of the early 20th Century, southeast Arkansas hosted significant conventional

oil production before the fields declined dramatically in the latter half of the century. Now, the

Fayetteville shale – a mostly dry gas play in the west and northwest part of the state – has helped

reverse the state’s fortune. Since 2007, natural gas production in the state has risen fourfold from

270 billion cubic feet annually to 1.146 trillion cubic feet in 2012.127

Arkansas ranks eighth in in

the nation in natural gas production and produces more natural gas than it consumes, which is

quite an accomplishment for a state that consumes significant volumes of natural gas for its

agriculture and utility sectors.128

The Arkansas Oil and Gas Commission, one of the principal regulators for fracking activities,

volunteered in 2011 to participate in a State Review of Oil and Natural Gas Environmental

Regulations (STRONGER) audit of its fracking regulatory regime. The 2012 report concluded

that the state’s regulations have been updated sufficiently and in a timely manner to address new

concerns with unconventional development, including establishing a system for public disclosure

of chemicals.129

In 2011, the commission voted to ban injection wells for wastewater disposal

within a 1,150-square-mile area and ordered one disposal well plugged following a string of

earthquakes.130

STRONGER concluded that Arkansas has successfully reduced and managed

induced seismicity risks.

State leaders have generally supported the industry and promoted strong, state-based oversight.

Throughout the last decade, the state has politically shifted toward Republicans after a multi-

generation streak of moderate Democrats. Recently, Democrat Governor Mike Beebe used his

line-item veto authority in March 2014 to remove a sales tax break for sand used in fracking

operations, citing the $5 million loss to the state. The Republican-controlled House and Senate

overrode the veto and the matter remains in litigation.131

No further legislative or executive

activity to limit or ban fracking has advanced at the state level.

ARKANSAS (LOW)

38


Although public opinion of fracking eroded with the 2011 earthquakes, no binding state or

municipal effort to ban fracking has advanced. However, with a ban on disposal wells companies

now truck wastewater for treatment or disposal elsewhere – a process that has added trucks to

rural roads, exacerbating traffic and road deterioration.

Food and Water Watch as well as other national environmental groups have a limited presence in

Arkansas. Furthermore, there are very few local, organic organizations against fracking in the

state.

KANSAS (LOW)

39

New News

Gov. Taskforce: Not Enough Evidence to Link Quakes to Fracking: At least eight

earthquakes occurred in Kansas at the beginning of October, with the most intense quake

registering at 4.4 magnitude. The state typically experiences only three to four earthquakes a year,

but a task force assembled by Governor Sam Brownback recently found that there is not enough

evidence to attribute this dramatic increase to fracking. The Associated Press reports that

Brownback will review recommendations from the panel, which include additional study by

“installing a permanent monitoring network that will allow all earthquakes in Kansas of a

magnitude greater than 1.5 to be detected and located.”132

Overview

Kansas is a quiet member of the nation’s top energy-producing states. Known more for its

agricultural and renewable energy resources (its wind resources rank second only to Texas),

Kansas maintains a large volume of legacy oil and natural gas production across much of the

state, leftover from previous booms. This makes Kansas the nation’s tenth largest oil producer

and twelfth largest natural gas producer. Kansas currently produces 3.8 million barrels of oil per

month and 24 million cubic feet of natural gas. Kansas is home to the Mid-Continent Center, a

large interstate natural gas hub that gathers supply from several states before transiting east.

New development is occurring in the Mississippian Lime play (MLP) along the state’s southern

border. The play is a porous lime that produces mainly oil, but significant natural gas resources

can be tapped within the play and the broader Hugoton Natural Gas Area. The Kansas

Corporation Commission recently promulgated rules requiring disclosure of hydraulic fracturing

chemicals on the FracFocus system, and has also issued guidance on baseline water testing.

While production of the MLP has centered predominantly in neighboring Oklahoma, the Kansas

Corporation Commission has seen and approved a large increase in Notices of Intent to Drill in

recent months. Currently, the industry provides 67,000 jobs and $5 billion in wages, according to

the Kansas Independent Oil and Gas Association.

Kansas has long been a politically conservative state that is friendly to natural resources

production. However, the recent expansion of production in the MLP coupled with the national

awareness of hydraulic fracturing and induced seismicity has raised the issue in voters’ minds and

in the media. Republican Governor Brownback – a longtime supporter of the industry – faces a

tough re-election against House Minority Leader Paul Davis, who has not demonstrated a strong

level of support for the industry.

KANSAS (LOW)

40


Activity in the MLP is in its early stages. As such, the state has yet to see challenges associated

with development in the way other states, like Texas and Colorado, have. To assess the

opportunity, address issues, and answer questions from stakeholders on shale development, the

state has formed the Inter-Agency Working Group (IAWG) that includes representatives from the

Departments of Agriculture, Transportation, Revenue, and Health and Environment; the Kansas

Corporation Commission (KCC); the Kansas Water Office; the Attorney General’s Office; and

the Kansas Housing Resources Corporation. An industry led Advisory Group and Community

Advisory group have also been formed. The groups plan to assess workforce development,

housing, environmental impact, infrastructure, and other related issues to ensure the state is well

positioned to capitalize on the current and future activity.

The state has responded to questions regarding induced seismicity related to hydraulic fracturing

and Class II injection wells. In response to a string of recorded earthquakes, Governor Brownback

appointed a three-member commission in February to investigate the issue. Brownback’s

commission announced in October that there is insufficient evidence linking fracking to the rise

in earthquakes, and urged additional study on the matter. Brownback will review

recommendations from the commission, including the installation a permanent monitoring

network to record earthquakes with a magnitude greater than 1.5. The commission also developed

a formula to prompt investigation of future seismic activity that includes the magnitude and

frequency of earthquakes.133

MISSISSIPPI (LOW)

41

New News

Governors Perry and Bryant Speak at Energy Summit: Texas Governor Rick Perry delivered

the keynote address at Governor Bryant’s annual Energy Summit in Jackson, MS in early

October. In his speech, Perry called for an increase in Mississippi oil and gas development and

advocated for unlimited natural gas and oil exports in order “to build an energy shield to protect

our strategic allies” and “restore balance in Europe,” where politicians have become wary of

purchasing gas from Russia after its annexation of Crimea. The Associated Press reports that

Mississippi Governor Phil Bryant “ridiculed the U.S. Environmental Protection Agency, saying it

was blocking a future where abundant oil, gas and coal production would be the ‘lifeblood of our

country and the soul of our economic development.’”134

Overview

The Tuscaloosa Marine Shale (TMS) covers part of southwestern Mississippi and central

Louisiana and is estimated to hold around 7 billion barrels of recoverable oil.135

As of now,

Mississippi’s oil production is no match for powerhouse states like North Dakota and Texas.

Drilling has been slow going: in 2013 oil production was fewer than 100 barrels per day.136

However, oil and gas companies that have acquired land in the area are optimistic that in the next

few years drilling costs in the TMS will go down and production will ramp up.137

Residents in

towns like southeast Gillsburg have already profited from water and land leases acquired for

exploration efforts.138

Republican Governor Phil Bryant’s “Energy Works: Mississippi’s Energy Roadmap”

recommends that Mississippi maintain its “competitive” regulatory reputation and keep

“aggressively working to bring economic opportunities related to the TMS activity to the

state.”139

Enabling development of the TMS has also been a priority of the Republican-controlled

state legislature. Last year, Governor Bryant signed a bill that will reduce the severance tax for oil

and natural gas development from 6 percent to 1.3 percent for a period of 30 months or until the

payout of the well.140


There are currently no state or local initiatives to ban or prohibit fracking in Mississippi.

Exploratory drilling in the TMS has been difficult because fracking techniques used in other areas

of the country do not work with the shale’s geology.141

However, companies have been investing

in the area. Goodrich Petroleum announced in July that its first completed well in the TMS is

producing 672 barrels of oil and 412,000 cubic feet of natural gas per day.142

The company

currently has three rigs running in the play.143

Across the border in Louisiana, local residents in

St. Tammany Parish have raised concerns about fracking operations on the TMS (See Louisiana

section). Potential opposition in the Louisiana TMS may incentivize producers to look at areas in

Mississippi with greater local support.

MONTANA (LOW)

42

New News

Study: Public Lands Generate $1 Billion a year to Support Recreation: A study conducted by

ECONorthwest estimates that Montana’s sagebrush habitat brings in more than $151 million a

year in recreation revenue, with over $38 million going toward personal income. In total, the 11-

state western region benefits from visitors to the sagebrush lands by the tune of $1 billion a year.

The study examined BLM-owned sagebrush land in Montana because “its relative ease of

management and ability to attract visitors.”144

The report was co-commissioned by the Western

Values Project, an oil and gas industry watchdog group.145

The report comes less than one month

after Montana Governor Bullock issued an executive order establishing the Sage Grouse Habitat

Conservation Program.

Montana Pipelines More Up-to-Date Than Northeast: Much of the U.S. natural gas pipeline

infrastructure is out-of-date, with aged cast-iron and bare-steel pipelines particularly at risk for

damaging leaks. However, the Great Falls Tribune reports that “Montana officials said that's not

the case here as virtually no cast-iron gas lines exist in the state, and around 30 percent of the

state's existing gas-line infrastructure was built prior to 1970.”146

Montana is at a lower risk for

damage and injuries caused by faulty pipelines when compared to the northeast U.S., where the

majority of older gas lines are concentrated. However, Montana has still experienced pipeline

accidents, like the Bozeman gas-line explosion in 2009 that killed one resident and caused $2.5

million in property damage.

Overview

The Bakken Shale formation is a rich oil and natural gas play located within the Williston Basin

that extends for 200,000 square miles, covering parts of Montana, North Dakota, and the

Canadian province of Saskatchewan. According to the United States Geological Survey (USGS),

as of 2008 the Bakken Shale was estimated to hold 3 to 4.3 billion barrels of undiscovered,

technically recoverable oil. This estimate is larger than all other current USGS oil assessments of

the lower 48 states and is the largest "continuous" oil accumulation ever assessed by the USGS.

Further, the Bakken Shale is estimated to hold approximately 1.8 trillion cubic feet of natural gas

Montana's Elm Coulee Oil Field, located in Richland County, is the site of the most significant

Bakken Shale oil production. Production in this field began in 2000 and averaged 53,000 barrels

per day in 2007. The most recent find in Bakken Shale region is the Three Forks Formation,

which underlies the Bakken and is separated by the Sanish Formation. The U.S. Department of

Energy estimates the production from the Bakken/Three Forks formations could grow from

350,000 barrels per day to 700,000 barrels per day in the next four to seven years.147

MONTANA (LOW)

43

Politically, Montana is a historically Republican state. However, there has been a steady influx of

Californians, Oregonians and others who tend to lean Democrat, settling mostly in the western,

more mountainous region. Simultaneously, most of the plains counties in eastern Montana,

traditionally the most conservative, have been losing population for years.148

The state legislature

– both chambers of which are controlled by Republicans – has not recently moved on any

legislation that would limit or prohibit fracking or associated activities.


There is little opposition to energy development in Montana. Rather, the greater development

challenge is looming federal regulations. Thirty percent of Montana is made up of public lands;

federal rules on production from the Bureau of Land Management and the U.S. Forest Service,

among others, could be particularly consequential for the state.149

As in Nevada, the classification

of sage grouse as either “threatened” or “endangered” would severely limit the ability to execute

efficient drilling programs in areas of the Montana where the species is located. In September,

Governor Steve Bullock signed an executive order that created a habitat conservation plan for the

sage grouse in an effort to head off the BLM’s potential “endangered” or “threatened”

designation.150

NORTH DAKOTA (LOW)

44

New News

Helms: Flaring Regulations Could Hurt Production: New flaring regulation could lead to

lower levels in production, according to Department of Mineral Resources director Lynn Helms.

Forum News Service reports that “New rules approved by the North Dakota Industrial

Commission earlier this year set benchmarks for reducing flaring as a percentage. By Oct. 1st

statewide flaring is supposed to be down to 26 percent, the first benchmark set in the new

regulations. Helms said a total of 24 operators were below the benchmark target in July. He said

at the current levels it could lead to a negative impact of approximately 90,000 barrels of daily oil

production if the benchmark isn't maintained after Oct. 1.”151

Overview

Thanks to new production of the Bakken shale, North Dakota is second only to Texas in oil

production, with crude oil from the Bakken formation expected to increase to 1.5 million barrels

per day by the end of 2014.152

The growth of the state’s energy industry has allowed North

Dakota to maintain the lowest unemployment rate in the nation, 2.6 percent as of March 2014,

according to the Bureau of Labor Statistics.153

Republican Governor Dalrymple supports measures that would facilitate North Dakota’s oil and

gas production, such as the construction of the Keystone XL Pipeline.154

Dalrymple supports a

comprehensive energy plan in which “all forms of energy have a future.”155

The North Dakota

legislature remains similarly supportive of increased production and has called for measures that

would make states entirely responsible for the regulation of development. There are no significant

initiatives at the state or local level that would ban fracking.

Some Native American tribes, including the Turtle Mountain Band of Chippewa in north-central

North Dakota, have instituted a ban on fracking within the limits of their reservation.156

However,

many tribes have welcomed oil production. Altogether, the Native population of North Dakota

has received $31 million in oil tax revenue and at least $182 million in lease payments from

operations on tribal land.157


The boom in oil and gas development has strained the state’s infrastructure as workers flood the

area to fill newly created jobs.158

Housing accommodations for workers looking to live in the area

remain limited and many choose to live in company accommodations rather than pay increased

rental costs.159

Local officials have complained that the enormous increase in population has co-

opted local resources.160

The dramatic rise in population has contributed to an increase in arrests for violent crime,161

sex

trafficking162

and drug use163

in the Bakken fields. The FBI, Drug Enforcement Administration,

NORTH DAKOTA (LOW)

45

and Alcohol Tobacco and Firearms officials have reported the presence of Mexican drug cartels

in the area that are suspected of distributing methamphetamine and other narcotics.164

Local law

enforcement officials are seeking increased funding from federal sources to combat the rise of

crime in the area.165

In April 2014, the U.S. Justice Department created a $3 million initiative

aimed at reducing crimes against women in the Bakken oil field area in North Dakota and

Montana.166

New measures, which the state will begin enforcing on September 30, to address flaring could

also affect production levels. Production levels grew slower than expected in July, a phenomenon

that Lynn Helms, the director of the Department of Mineral Resources, attributes to a new focus

on flaring and gas capture on the part of producers.167

Mineral owners are suing drilling companies seeking compensation for lost revenues on flared

natural gas. U.S. District Judge Hovland dismissed 13 of the cases that had been moved from

state to federal court, while another suit against Marathon Oil is pending.168

At the federal level,

potential regulations to limit methane emissions due to climate change concerns may spur swift

development of infrastructure to capture and sell excess natural gas. The U.S. Environmental

Protection Agency has stated that it will review the need to regulate methane emissions and

potentially take action by 2016.

OKLAHOMA (LOW)

46

New News

Fallin Fields Fracking Question at Gov. Debate: During a candidate debate on October 2,

Governor Mary Fallin would not state whether she believed that a rise in the number of

earthquakes is a result of fracking, but instead stated that she formed a panel to coordinate studies

on the topic. Her challenger, state Representative Joe Dorman, holds a much more definitive

opinion on the relationship between fracking and earthquakes: “We have seen an increase in

earthquakes in our state with no reason. The science has been done. We just need to take action,”

said Dorman according to World Capitol Bureau.169

Fallin currently leads Doman in the polls by

an average margin of 12.5.170

Overview

With a rich energy history, Oklahoma is retaining its position as one of the country’s top oil and

gas producing states, following Texas and North Dakota with the third fastest growth rate of shale

development.171

Oklahoma is home to two major plays: the Woodford Shale, which covers most

of the state, and the Mississippian Lime Shale, which lies on the Oklahoma-Kansas border.

Though still relatively underdeveloped, the Woodford Shale produced 77 million barrels of oil in

2011 with the potential to recover 400 million barrels.172

The oil and gas industry is the largest

source of tax revenue for Oklahoma, bringing in $1.96 billion in state taxes in 2012 alone.173

About 22 percent of oil production in Oklahoma is from the Mississippian Lime.174

Republican Governor Mary Fallin is a supporter of fracking and has admonished the Obama

Administration for not taking steps to implement “uniformity” in disclosure policies.175

The

legislature remains similarly supportive of shale development. This year, the Oklahoma House

and Senate passed S. 648, which would reduce the tax rate for all new production from wells,

spudded on or after July 1, 2015, to 2 percent for the first 48 months, and would extend

production initiatives, including the enhanced recovery initiative, until July 2020.


The United States Geological Survey reported an atypical number of earthquakes in Oklahoma

since 2009 that “do not seem to be due to typical, random fluctuations in natural seismicity rates”

and that “a contributing factor to the increase in earthquakes triggers may be from activities such

as wastewater disposal -- a phenomenon known as injection-induced seismicity.”176

While some

studies have linked fracking to minor earthquakes, there is no definitive proof that fracking is

responsible for the more damaging earthquakes that the state has experienced.177

Rather, scientists

believe that the influx in Oklahoma earthquakes is attributable to a small number of wastewater

injection wells. A study released by Cornell University researched in the journal Science finds

that these disposal wells “create substantial anthropogenic seismic hazard.”178

OKLAHOMA (LOW)

47

In response to concerns about the increased number of earthquakes in the state and other potential

ecological impacts, Oklahoma legislators have instituted measured regulations to ensure that

fracking is conducted responsibly in the state. In March 2014, the Oklahoma Corporation

Commission voted to require well operators to record daily injection pressure and volume

measurements.179

When asked if she would support a ban on fracking because of the rise in earthquakes, Governor

Fallin said, “I think we need to leave that up to the experts...It’s something the experts need to

give us their advice on, and let them make that decision and give us the information before we

decide anything.”180

Fallin, along with other regulators from Texas, Kansas, and Oklahoma have

taken steps to examine the connection between the pressure and volume of injection wells and the

rise in earthquakes in those states.181

In September at the Oklahoma Governor’s Energy

Conference, Fallin announced that she will create the Coordinating Council on Seismic Activity,

a council of “scientists and energy experts” who will examine the rise in quakes and coordinate

studies on the topic.182

The council will be led by Michael Teague, the state’s secretary of energy

and environment.

WYOMING (LOW)

48

New News

Pavillion Water Contamination Source Harder to Pinpoint than TX, PA: A report published

in the Proceedings of the National Academy of Sciences determined that it was faulty well

construction, not fracking, which caused contamination in water wells in Pennsylvania and Texas.

However, Robert Jackson, a lead researcher on the study, contends that it is difficult to draw

similar conclusions about contamination found near Pavillion, Wyoming. "Pavillion is a much

more complicated place than where we looked at," said Jackson to the Casper Star Tribune.183

"The biggest difference is how near the surface the fracking occurred and how close to peoples'

water was it." Jackson argued that waste pits could also have a role to play in the contamination,

but other experts contend that well integrity could still be responsible.

Overview

Wyoming holds the title of the nation’s least populous state, but it punches above its weight when

it comes to energy production. Wyoming is the largest net energy producer in the country,

sending much of the energy it produces outside the state. As the country’s largest coal producer,

the state’s mining industry is central to its economy and future growth. Federal lands make up

most of the land area and, as a result, Wyoming boasts the highest number of producing federal

oil and gas leases of any state.

The state only produces about three percent of total U.S. oil production, but it ranks fifth in the

production of natural gas – two-thirds of which is produced from federal land. Both the Pinedale

and Jonah natural gas fields rank within the nation’s top-ten largest fields, and production of these

plays has grown despite the fact that the state's natural gas production is in decline. Oil

production increased 5 percent from 2011 to 2012 due mainly to the application of new drilling

technology, with most of the new production centered on the Powder River Basin.

Wyoming has only three electoral votes and has the second lowest population density per square

mile, behind Alaska. Cheyenne, the state capital, is home to only 60,000 residents. Politically,

many of the state’s voters are deeply conservative; residents believe in energy production and the

state’s ability to regulate it. State officials and regulators worked closely with the U.S. EPA to

revise its flawed water testing report in the town of Pavillion and have taken steps to insulate the

state from further incursion from the agency. Led by state regulators, an ongoing study into

potential groundwater contamination in the Pavillion area will continue without EPA

involvement.

Additionally, Wyoming was the first state in the nation to require baseline water sampling within

a half-mile of drilling sites before and after drilling operations. Those rules went into effect in

March 2014. In 2010, Wyoming became the first state to require disclosure of hydraulic

fracturing chemicals. Recently, the state Supreme Court remanded a decision by a lower court

that upheld full disclosure of tracking fluid recipes under a trade-secret exemption.

WYOMING (LOW)

49


A vast majority of Wyoming residents strongly support natural resource extraction. Opposition to

industry within the state comes mainly from outside interests, national anti-energy organizations,

and federal regulatory agencies.

The groundwater testing incident in Pavillion became a national lightning rod for anti-energy

groups to use in their efforts to ban oil and natural gas production. The state is also heavily reliant

on access to federal lands for much of its production. Proposed U.S. Bureau of Land Management

rules on hydraulic fracturing, EPA rules on water quality through the Clean Water Act, and other

federal measures all present challenges to Wyoming producers. Additionally, questions remain

about what the regulatory and legal consequences would be in Wyoming should pre- and post-

drilling water testing were to show a change in water quality, despite assurances from the state

that drillers would not be held liable for any discrepancies.

Due to concerns about the proximity of some future operations to residential zones, the Wyoming

Oil and Gas Conservation Commission is reviewing a proposal that would increase drilling

setback requirements, according to the Wyoming Business Report.184

The initial proposal sought

to increase the minimum distance between rigs and dwellings from 350 feet to 500 feet for

vertical rigs and 750 feet for horizontal wells. However, following the September 9th meeting, the

commission decided that it would spend another month examining and drafting the rules that

could increase setback requirements. The commission will also determine if the rules will proceed

through the normal regulatory approval process, including a public comment period and adoption

of final language by the commission.

REFERENCES

50

1 California Department of Conservation, “Well Stimulation: 2

nd Revision of Proposed Regulations

Released,” October 9, 2014. http://www.conservation.ca.gov/Index/Pages/Index.aspx. 2 California Legislative Information, “Senate Bill No. 1281.”

http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201320140SB1281 (accessed October 9,

2014). 3 Keith Carls, “Measure P – Tale of Two Campaign War Chests,” KEYT.

http://www.keyt.com/news/measure-p-tale-of-two-campaign-war-chests/28198586. September 22, 2014. 4 Thomson Reuters. "UPDATE 2-U.S. EIA cuts recoverable Monterey shale oil estimate by 96 pct."

Reuters. http://www.reuters.com/article/2014/05/21/eia-monterey-shale-idUSL1N0O713N20140521

(accessed May 29, 2014). 5 Real Clear Politics, “California Governors – Kashkari vs. Brown,”

http://www.realclearpolitics.com/epolls/2014/governor/ca/california_governor_kashkari_vs_brown-

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Ibid 78

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Ibid.

http://www.michigan.gov/documents/deq/deq-FINAL-frack-QA_384089_7_452648_7.pdf

http://www.mlive.com/business/index.ssf/2013/12/michigan_snyder_renewable_ener.html

http://www.legislature.mi.gov/documents/2013-2014/publicact/htm/2014-PA-0082.htm

http://www.legislature.mi.gov/documents/2013-2014/publicact/htm/2014-PA-0082.htm

http://www.realclearpolitics.com/epolls/2014/governor/mi/michigan_governor_snyder_vs_schauer-3506.html

http://www.realclearpolitics.com/epolls/2014/governor/mi/michigan_governor_snyder_vs_schauer-3506.html

http://www.midwestenergynews.com/2014/07/31/groups-say-michigans-proposed-fracking-rules-fall-short/

http://www.midwestenergynews.com/2014/07/31/groups-say-michigans-proposed-fracking-rules-fall-short/

http://ballotpedia.org/Michigan_Fracking_Ban_Initiative_%282014%29

http://detroit.cbslocal.com/2014/08/25/gov-snyder-wants-review-of-state-radioactive-waste-standards/

http://detroit.cbslocal.com/2014/08/25/gov-snyder-wants-review-of-state-radioactive-waste-standards/

http://www.legislature.mi.gov/documents/2013-2014/billintroduced/Senate/pdf/2014-SIB-1034.pdf

http://www.legislature.mi.gov/documents/2013-2014/billintroduced/Senate/pdf/2014-SIB-1034.pdf

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