EPA's New "Draft Guidance" for Fracking: Oil/Gas Industry Generally Pleased, But Caution Is Advised

In the Federal Register of May 10, 2012, U.S. EPA issued long-awaited “Draft Guidance” for regulating the highly controversial and rapidly-growing practice known as hydraulic fracturing — or “fracking” — for natural gas and oil. See 77 FR 27451. EPA is requesting written public comments on the draft guidance (with a deadline of July 9, 2012). 

The practice of fracking is credited for greatly expanding the volumes of natural gas produced in the U.S. — and driving down the price to near-record low levels. But many concerns about health and environmental impacts (such as groundwater contamination and air emissions) have been raised. 

While EPA has begun regulating various aspects of fracking (such as air emissions under the Clean Air Act), by far the most closely watched effort is the prospect of EPA regulation under the Safe Drinking Water Act (SDWA). If fracking operations become subject to the permitting process of the SDWA’s “underground injection control” (UIC) program, each new proposed project could suffer great delays (and potential rejection). This is because such permits can only be issued after a public notice and comment process, and issued permits are subject to judicial review. Thus opponents of a proposed fracking project (and many projects are vigorously opposed) could use the legal process produce great delays or even kill a project.

Not surprisingly, EPA’s SDWA guidance development process has involved plenty of lobbying from industry and environmental interest groups. Probably the most contentious issue is how EPA would define “diesel.”

Why is EPA’s definition of “diesel” so critical? In the fracking process, fluids are injected at high pressure to fracture underground rock and shale formations and help extract gas or oil that would otherwise be unobtainable. In 2005, Congress amended the SWDA to provide that EPA could not regulate fracking under the SDWA UIC program except for projects where “diesel” is the fluid used in the injection process. Thus fracking with “diesel” can be regulated under the SDWA; fracking without “diesel” cannot.

Since 2005, industry groups have reported that very few (if any) fracking projects utilize diesel as it is commonly defined (such as No.2 fuel oil). Thus, if EPA were to define “diesel” with the word’s common usage, very little fracking would be subject to the SDWA UIC program.

Recognizing this, environmental interest groups and their Democrat allies in Congress had been urging EPA to issue a very broad definition of diesel. They argued that since diesel contains the “BTEX compounds” (i.e., benzene, toluene, ethylbenzene, and xylenes), any fracking activity with fluids that contain any of those compounds should be regulated. In other words, they argued that any fluid that contained any compound that diesel contained should be defined as “diesel” for purposes of the SDWA. If this extremely broad definition were to prevail, a great majority of the fracking projects in the U.S. would apparently be regulated under the SDWA UIC program.

At various stages in the guidance development project, key EPA staffers had made statements indicating sympathy with the broad definition favored by environmental groups and certain Democrats in Congress. In the newly issued draft guidance, however, EPA has chosen to stick with a more traditional definition of “diesel,” thus pleasing the industry groups. EPA in fact notes that its data shows that probably less than 2% of fracking undertaken as of 2011 used “diesel” as EPA’s new draft guidance defines it.

This limited coverage does not diminish the significance of the draft guidance, however. For one thing, guidance is only “draft” and EPA specifically requests comments (due July 9 as noted above) on whether the definition of “diesel” should be broadened. Moreover, the new draft guidance contains many recommendations for procedures and practices to be followed for fracking operations. Many states are moving in the direction of regulating fracking, and they can be expected to look to the EPA “guidance” in developing their own practices and procedures. Thus interested parties on all sides of the issue would be well advised to study the draft guidance and submit comments.