Potential Sources of Litigation Surrounding Hydraulic Fracturing Throughout Haynesville Shale

The Haynesville Shale is an informal name for a rock formation that underlies large parts of southwest Arkansas, northwest Louisiana, and east Texas. It is part of a large rock formation known as the Haynesville Formation. The Haynesville Shale underlies an area of about 9,000 square miles and averages about 200 to 300 feet thick. It contains vast quantities of recoverable natural gas, often referred to as “shale gas.” Haynesville Shale is an important shale gas resource in East Texas and Louisiana. It has recently been estimated to be the largest natural gas field in the contiguous 48 states with an estimated 250 trillion cubic feet of recoverable gas. It came into prominence in 2008 as a potential major shale gas resource. Though it was known to contain large quantities of natural gas prior to 2008, it was uneconomic to extract the natural gas at that time. However, as a result of rising gas prices and improved technology, i.e., hydraulic fracturing and horizontal drilling, it has become possible to extract gas from the Haynesville Shale in a cost-effective manner.

Hydraulic fracturing, commonly referred to as “fracing” or “fracking,” is the now widely publicized process whereby natural gas and oil producers are able to recover natural gas and oil from deep shale formations. It typically involves millions of gallons of fluid that are pumped into an oil or gas well at high pressure to create fractures in the rock formation that allow oil or gas to flow from the fractures to the wellbore. Fracturing fluid is roughly 99% water but also contains numerous chemical additives as well as “propping” agents, such as sands, that are used to keep fractures open once they are produced under pressure. The chemicals added to fracturing fluid include substances referred to as friction reducers, surfactants, gelling agents, scale inhibitors, acids, corrosion inhibitors, antibacterial agents, and clay stabilizers. Depending on the site, 15-80% of the fracturing fluid injected is recovered as “flowback” water at the well head. In addition, a considerable amount of water that comes to the surface, often called “produced” water, over the lifetime of the well is highly saline water that originates deep underground in the shale formation.

Although significant risks are commonly associated with hydraulic fracturing, the process has substantially increased the extraction of natural gas from unconventional sources. The Interstate Oil and Gas Compact Commission (IOGCC) estimates that hydraulic fracturing is used to stimulate production in 90% of domestic oil and gas wells, though shale and other unconventional gas recovery utilizes hydraulic fracturing to a much greater extent than conventional gas development does. Furthermore, horizontal wells, which may extend two miles from the well pad, are estimated to be 2-3 times more productive than conventional vertical wells, and see an even greater increase in production from hydraulic fracturing. The alternative to hydraulic fracturing is to drill more vertical wells in an area, a solution that is often economically or geographically prohibitive. Nevertheless, despite its efficiency, the sudden increase in the utilization of hydraulic fracturing is beginning to face intense scrutiny from state and federal lawmakers, environmental agencies, and public interest groups. This scrutiny has led to multiple sources of litigation throughout areas near the Haynesville and Marcellus shale formations.

The most widely publicized potential litigation associated with hydraulic fracturing is that of contamination to local drinking water sources. Approximately 44 million Americans rely on private water supplies for household and agricultural use, typically sourced from shallow aquifers. In areas of extensive shale gas drilling, some homeowners have claimed that hydraulic fracturing has contaminated their drinking-water wells with methane and waste waters. Shale gas is typically comprised of over 90% methane. The migration of methane gas to nearby private drinking water wells is a concern with hydraulic fracturing and natural gas in general. In Susquehanna, Pennsylvania, for example, a group of residents recently brought an action against a Texas company conducting hydraulic fracturing and horizontal drilling near their property along the Marcellus Shale. According to their complaint, pollutants and other industrial waste, including fracturing fluid and other hazardous chemicals, were negligently discharged into the ground as a result of insufficient casings on one or more of the wells, resulting in contamination of the local water supply. Though the court has yet to issue a ruling directly on liability, the case demonstrates water contamination as a clear potential source of litigation.

The risks of water contamination have also led to a clash between oil and natural gas companies and state and federal regulators regarding public disclosure of the chemicals and additives found in fracturing fluid. This has catalyzed a second related potential source of litigation concerning the applicability of trade secret protection. On June 23, 2001, the Environmental Protection Agency (EPA) announced seven case studies to help inform the assessment of potential impacts of hydraulic fracturing on drinking water resources. Two of the case study sites are in Louisiana and Texas. In the Haynesville Shale area, the EPA plans to monitor the hydraulic fracturing process before construction and throughout the process of drilling in order to assess existing sites for possible drinking water contamination and attempt to determine possible pathways for contamination to reach water resources. It should be noted that before this study, drinking water aquifers in cases like the one mentioned above, from Susquehanna, Pennsylvania, were not tested for contamination prior to hydraulic fracturing taking place near the aquifer.

This study coincides with regulations recently passed in Texas and Louisiana under which companies performing hydraulic fracturing must report to state agencies and/or publicly accessible registries the composition and volumes of fracturing fluid. Louisiana regulations, officially adopted on October 20, 2011, require companies to report a list of chemical ingredients contained in hydraulic fracturing fluid, unless the specific identity of a chemical ingredient is determined to be entitled to protection as a trade secret under Occupational Safety and Health Administration (OSHA) standards. This regulatory scheme only requires disclosure of fracturing fluid composition after its initial use. This could become a source of litigation expense for oil and natural gas companies operating in the Haynesville Shale region. As it currently reads, the recently promulgated regulations invite litigation over the classification of fracturing fluid components as chemical ingredients entitled to trade secret protection under Title 29 Section 1910.1200(i) of the Code of Federal Regulations.

Lastly, a third and arguably the most pervasive source of litigation associated with the sudden increase in the utilization of hydraulic fracturing throughout the Haynesville Shale concerns the sustainability of aquifers in the region. As noted above, the fracturing process involves pumping millions of gallons of water into a well. Despite drawing unprecedented amounts of natural gas to the surface, withdrawing millions of gallons of groundwater out of aquifers for each of several hundred, and eventually several thousand, natural gas wells located in a handful of parishes in northwestern Louisiana has allegedly put a worrisome strain on the aquifers in the region. Many of the groundwater aquifers in the Haynesville Shale area, especially those surrounding Shreveport, the largest city in the region and the hub of oil and gas activity, have been facing uncertain or decreasing water levels for years. From the moment the first few wells were drilled, various parties in Louisiana began to anticipate the inevitable clash between the enormous water use requirements of fracturing operations and the communities relying on the already fragile aquifers. Unlike the first two potential sources of litigation, however, the sustainability of aquifers in the regions surrounding hydraulic fracturing is an issue without significant legal precedent. Thus, the costs of potential litigation become difficult to ascertain.

It is important to note that the above mentioned potential sources of litigation are by no means exhaustive. They simply represent some of the key issues surrounding hydraulic fracturing that have risen to the forefront of the debate surrounding the potential costs and benefits of an increasingly publicized and ever-growing source of energy production throughout the United States. When you consider the potential of such enormous yields of oil and natural gas from the Haynesville Shale, these issues become glaringly prevalent. As such, they provide a window into the future for not only oil and natural gas companies within the region, but their defense counsel as well.