November 13, 2019

The Liquid Left Behind: Uncertainty about the Cleanup Costs and Liability for Water Used in Fracking

James T. O’Reilly

Natural gas extraction from the fracturing of shale rock (fracking) was once a rare and novel phenomenon. Today, its commercial value is very well communicated to global investors through financial and business sources. World energy markets have been impacted. Global investors have made very large financial commitments to the delivery of natural gas commodities from fracking “plays.” Some wells produce petroleum and gas liquids such as xylene in addition to, or instead of, methane gas. But what will the future of fracking leave behind for students to examine and landowners to pay for in future years?

A quiet but formidable intergenerational transfer of costs is underway. This brief review of surface well site conditions, liquid waste injection, and landfill acceptance of “hot” rocks, will offer insights into the three levels of uncertainties that lie ahead. As a scholar studying these phenomena, I recognize that investor-backed energy companies will have different perspectives, and the reader should certainly consider their views before making decisions about the policy choices involved.

A brief overview of the geology of shale rocks with trapped methane gas “bubbles” will summarize what other sources have so ably described. Deep wells drill down through layers of earth and penetrate the shale rock thousands of feet below the surface. The well driller then uses advanced techniques to turn the direction of that pipe away from the vertical drill pipe, and a lateral pipe begins to bore into shale for thousands of feet, in some cases a mile or more laterally deep underground. When all is ready, a mixture of chemicals, high pressure water, and very fine sand is pumped down into the L-shaped pipe. Fracking occurs when an explosive charge is sent down, which shatters the pipe and floods the broken shale. Then the mixture of gas bubbles, liquids, and shattered rock particles are sucked up to the surface. The powerful pumps that deliver the pressure down and suck the gas upward are used to separate the saleable methane gas and remaining residual liquids and slurry. Gas goes off to pipelines and is shipped toward end uses such as export or chemical manufacturing or gas heating. But that mechanical description is not the end of the story. That is where our tale begins.

Ingredients of the mixed residual materials include large amounts of water that made the round trip from being trucked to the site and sent down from pumps on the surface. This water was then drawn upward, and intermingled with other water produced from deep aquifers, fine sand, pieces of shattered shale rock, and a mix of water and chemical agents used for fracking. By-products of the fracking process are rocks, shale particles, chemicals, water and liquids, often containing measurable levels of radium 226/228 and thorium, varying with the geology at the shale level of depth from which the quantities of gas had been extracted. The liquid remains behind for disposal as the valuable methane gas has been piped away for treatment and sale into the interstate pipeline system.

Liability for Leaks from Wastewater Impoundments

Regulators will sometimes consider “life after death” issues. One issue may be what happens after a drilling location has an open waste impoundment that later leaks or collapses. Future scholars are invited to debate the property law “abandonment” concepts. In some instances, the site’s legal status is covered by a lease, typically drafted by an agent of the gas extraction operator, and that may allocate post-closure responsibilities. For example, a willful violation by an offshore oil and gas operator of produced water into the Breton Sound area of the Gulf of Mexico (instead of into disposal injection wells) led to a $3.1 million fine and three-year probation in a 2014 plea agreement with Xplor Energy SPV-1, an Oklahoma corporation residing in Southlake, Texas. Envtl. Prot. Agency (EPA), Envtl. Crimes Case Bulletin, EPA Pub. 310-N-14-011 (Nov. 2014). If the failure of pond liners or leakage of radioactive wastewater destroys adjacent fields of crops after a well is abandoned or closed, one question is what entity bears the state law “legacy liability” obligations to pay. A search of state abandonment precedent cases is suggested. In some states, statutes from decades ago dealt with “orphan well” closure by requiring operators to post bonds. Additionally, if the operating company goes bankrupt or disappears, the state remains responsible for closing the orphan wells. Sophie Quinton, Pew Trusts, Why “Orphan” Oil and Gas Wells Are a Growing Problem for States, Stateline Report, July 9, 2018, www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2018/07/09/why-orphan-oil-and-gas-wells-are-a-growing-problem-for-states. A related question is whether state property abandonment case law is robust enough to cover a multi-orphaned well site that was hurriedly abandoned by a now-dissolved company that left no forwarding address. Major energy companies will contractually craft their gas purchase supply agreements to avoid being tied to any of the practices of drilling site service companies whose output supplied gas to their pipelines.

And finally, “Does site abandonment mean the landowner is fully accountable for the post-departure conditions?” Sometimes a hostile landowner was forced into the “taking” of its surface land for drilling, by threat of a state gas “pooling” order (a form of eminent domain that once was premised upon efficient use of a single liquid “pool” of petroleum that most nearby landowners wished to tap). James T. O’Reilly, Free to be Fracked: The Curious Constitutional Consequences of Ohio Gas Law, 41 Capital L. Rev. 675 (2013); M. Baca, Forced Pooling: When Landowners Can’t Say No to Drilling, ProPublica News, May 18, 2011, www.propublica.org/article/forced-pooling-when-landowners-cant-say-no-to-drilling. Today, shale fracturing is different from extraction out of a liquid petroleum pool, but the controversies continue, including conflicts between operators for drainage of oil and gas on adjacent or adjoining leaseholds. Heidi Gorovitz Robertson, Get Out from Under My Land! Hydraulic Fracturing, Forced Pooling or Unitization, and the Role of the Dissenting Landowner, 30 Geo. Envtl. L. Rev. 633 (2018) (concluding that the best approach for addressing draining oil and gas between operators should be legislative). Future courts may have to decide if that objector now must pay a share of damages for the losses of neighbors’ use of land or of drinking water wells, around that formerly “pooled” wellhead, resulting from leaks or spills detected after the actual drillers’ companies have dissolved. Benjamin Robertson, Top Lease Vultures: Title Failure, Bad Faith Pooling, and the Validity of Top Leases in Texas Shale Plays, 44 Texas Tech. L. Rev. 463 (2012). Other questions arise. For example, must the landowner who later sells the land disclose to future purchasers that the waste pond on 10 acres of the 200 acres being sold contains radioactive levels of thorium? James T. O’Reilly, Superfund and Brownfields Cleanup § 12:14 (2018). And will there be a novel state constitutional precedent when such a legacy of liability is asserted against the unwilling landowner, who never wished to drill into shale beneath its lands?

For key answers to the complex waste issues, we look to the Clean Water Act’s National Pollutant Discharge Elimination System (NPDES) permits, 33 U.S.C. § 1342, and to the Resource Conservation and Recovery Act (RCRA) gas and oil exclusions, James T. O’Reilly, RCRA and Superfund: A Practice Guide (2018), and, among state laws, at lessee and lessor legal obligations over land. The impoundment outflow of liquid and sludge is very likely deemed a hazardous liquid, and wastewater with detectable radium or toxic chemical contents cannot simply be released from waste pipes into a stream, or dumped out of tanks into the creek, or delivered by tank trucks to the typical county wastewater plant. 80 Fed. Reg. 18,557, 19,579 (Apr, 7, 2015) (EPA’s proposed effluent limitations guidelines and standards for the oil and gas extraction point source category to prevent discharge of produced water to publicly owned treatment works (POTWs)); see, e.g., Press Release, U.S. Dep’t of Justice, Saltwater Disposal Well Operator Pleads Guilty to Multiple Felony Charges (Apr. 12, 2017) (operator pleaded guilty to violating the Safe Drinking Water Act by injecting produced water into a saltwater disposal well without first meeting the state’s requirement to test the well’s integrity, and also for injecting fluids in the wrong location in the well in violation of the well’s permit); Ben Lupo Sentenced to 28 Months in Prison, Fined $25K, Youngstown Vindicator, Aug. 5, 2014, (former oil and gas company owner sentenced for violating the Clean Water Act for directing his employees to dump tens of thousands of gallons of oilfield waste down a storm drain that emptied into a major river).

The legal liability for the fracking waste impoundment also may be impacted by the anticipated 2019 decision of the U.S. Supreme Court in a water pollution case with a scenario that seems to be made for waste impoundment leak disputes: “Whether the [Clean Water Act] requires a permit when pollutants originate from a point source but are conveyed to navigable waters by a nonpoint source, such as groundwater.” County of Maui v. Hawaii Wildlife Fund, 886 F.3d 737 (9th Cir. 2018), cert. granted, 139 S. Ct. 1164 (U.S. Feb. 19, 2019) (No. 18-260) (set for argument on Nov. 6, 2019). The situation seems to track the case for fracking liquids. Because radium and thorium can be traced into and out of shale waste liquids, the regulatory agency responsible for the nearby river could seek injunctive relief to halt the pond owner from allowing its leaking waste liquids to run through subsurface cracks or fissures into that protected river. The pond owner or the operator would then be liable for unpermitted releases.

Likewise, will the state-issued solid waste landfill regulatory permit allow the local landfill to accept rock and shale sludges from deep drilling, without first measuring and reporting the thorium or radium levels of the rock being disposed? And if the landfill’s permit to expand is conditional upon a years-long pattern of taking mixed municipal waste, where the organic garbage that would degrade and shrink to allow more tons of garbage to be piled on top (see James T. O’Reilly, State & Local Government Solid Waste Management (2d ed. 2004)), then would the addition of thousands of cubic yards of rock violate that landfill operator’s state permit because filling its limited space with rock wastes, instead of degradable garbage, inevitably lessens the useful life of the landfill? State law will govern.

Consider also the wide disparity of knowledge between the parties to a fracking lease on a ranch or farm. If the lease had been signed by a soybean farmer to allow access to subsurface mineral rights, is that same landowner/lessor responsible, after abandonment of the well site, for the impoundment pond’s chemical and radiological “legacy” costs? Is the unsophisticated landowner/lessor responsible for the impoundment’s groundwater effects on aquifer/neighbor well water quality? How many lease payments of what amounts would it take to cover the remedial costs that eventually must be borne by the less-sophisticated lessor of the wellhead acres? State laws may produce divergent results.

Wastewater Injection and Seismic Activity

Let’s also shake things up. Before natural gas extraction introduced a new vocabulary for terms like “fracking,” virtually no one outside academia knew of the word “seismicity.” Thea Hincks et al., Oklahoma’s Induced Seismicity Strongly Linked to Wastewater Injection Depth, Sci., Mar. 16, 2018, at 1251–55. Trends for liquid waste disposal from fracking wells have expanded the use of diesel-powered injection of waste liquid “brine” into deep wells. The benefit to the gas extraction process from having slick chemical additives in the well has a corresponding downside (literally) as the waste liquids are pumped back into the earth, lubricate the deep layers of rock, and potentially cause them to slip and slide under some conditions. Litigation is very likely to increase. See, e.g., Ladra v. New Dominion, 353 P.3d 529 (Okla. 2015) (holding that the district court, rather than the Oklahoma Corporation Commission, had exclusive jurisdiction over private tort action property owner brought against operators of wastewater injection wells, alleging that wells caused earthquake causing injury to property owner). Again, proof standards under state laws will vary.

Public response to perceptions of the gas industry causing small earthquakes has had a backlash against the industry’s disposal practices. Increasingly, local governments have sought to regulate the siting of injection wells, or to constrain the well operators’ acceptance of fracking chemicals. The goal of the local laws is to prevent deep subsurface tremors, with occasional manifestations in earthquakes. Cincinnati and other cities have banned injection wells to avoid this risk.

Parallel to liquid disposal is the growing concern among neighbors of municipal waste landfills that radium levels in the drillers’ rock shipments need to be tested, and higher-level equipment for measurement of radioactivity should be used to screen drilling company deliveries at the landfill gate. Trends for future municipal solid waste landfill acceptance of deep rock with radioactivity are likely to parallel the tremor-avoidance constraints on liquid waste injection. But without lawful access to a nearby landfill, it is not clear where thousands of feet of rock wastes should be sent for off-site disposal.

Ultimately this is best seen as a significant cross-generational tradeoff. One could say: “drill now, pay later.” But who will pay later? The value of a large but finite flow of shale gas is contrasted to the extraction costs, the radium or thorium contents of residues, and the uncertainties of contract liabilities after “abandonment” of the fracking wellhead. Each will make this a multifactor puzzle for the next generation of environmental lawyers. I and others of the “baby boomer” generation wish future generations good luck in discerning the proper legal outcome of the era of “fracking boom” cleanups. Stay tuned for the future cost allocation decisions still to come.

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James T. O’Reilly

Mr. O’Reilly teaches public health in the College of Medicine, University of Cincinnati, Ohio. He may be reached at oreilljt@ucmail.uc.edu.