EPA Report Points to Fracking as Possible Source of Groundwater Contamination

Paul M. Hauge — Wed, 14 Dec 2011 11:23:45 -0500

A draft report from United States Environmental Protection Agency’s (EPA) Office of Research and Development has tentatively pointed a finger at hydraulic fracturing (“fracking”) as a cause of groundwater contamination detected in a number of wells near the town of Pavillion, Wyoming. The report, which has not yet undergone outside peer review, is likely to set off alarm bells among both proponents and opponents of fracking, including those in eastern states like New York, New Jersey, and Pennsylvania.

Fracking involves the pumping of pressurized water, sand, and chemicals into underground rock formation (such as the Marcellus Shale formation in Pennsylvania and New York) that contains natural gas. The high-pressure fluid creates cracks, or fractures, in the rock, allowing the trapped gas to escape, flow into the well and up to the surface. Eastern states have adopted a variety of policies toward fracking, ranging from Pennsylvania’s enthusiastic promotion to New York’s temporary moratorium and ongoing effort to promulgate protective regulations to New Jersey’s attempted legislative prohibition that was vetoed in favor of a temporary ban.

Whether fracking may contaminate groundwater is a critical question facing policy makers across the country. The EPA study, conducted in response to complaints from residents about objectionable taste and odor problems in water drawn from the drinking water wells after fracking in nearby gas production wells, concludes, based upon both data and complex scientific reasoning, that fracking has caused impacts to ground water in the Pavillion area. EPA also noted certain limitations of the study: its purpose was “to determine the presence, not the extent, of ground water contamination in the formation,” and the results are specific to the Pavillion area, where fracking occurs in and below a drinking water aquifer and near drinking water wells, unlike production practices in many other parts of the country.

]]>The EPA report drew sharp criticism from the company that is conducting fracking in the area, and praise from opponents of fracking. It is certain to cause additional controversy in the months ahead. As we noted in a recent post, fracking also raises complex legal issues.

Paul M. Hauge is an Associate in the Gibbons Real Property & Environmental Department.

Pennsylvania Appellate Court Injects Uncertainty Into Fracking Industry

Paul M. Hauge — Thu, 08 Dec 2011 09:17:02 -0500

An 1881 deed and an 1882 Supreme Court decision formed the background for a very modern controversy recently addressed by the Pennsylvania Superior Court. The decision, Butler v. Estate of Powers, casts a shadow over ownership rights in natural gas contained in the Marcellus Shale formation, and has left many companies in the “fracking” industry uncertain about what they own.

The deed in question conveyed a 244-acre parcel to the appellees’ alleged predecessors in title, but reserved “one half the minerals and Petroleum Oils” to the grantor. The appellees claimed to own the surface and 100% of the minerals and petroleum -- including, specifically, natural gas contained in the Marcellus Shale formation under the parcel -- based on adverse possession. The appellants, heirs to the estate of the grantor, claimed that the reservation in the deed gave them, and not the appellees, half of the shale gas.

The issue: what legal rule should the court apply? Most observers thought that the Pennsylvania Supreme Court’s 1882 decision in Dunham v. Kirkpatrick, as extended by its 1960 decision in Highland v. Commonwealth controlled. Those cases held that a conveyance of “mineral rights” is presumed not to include the right to extract oil and gas. The Supreme Court later carved out an exception to Dunham in U.S. Steel Corp. v. Hoge, which held that coalbed methane belongs to the owner of the coal. The Hoge rule was thought to apply only to coal and the gas contained within it.

]]>Rather than simply applying the Dunham rule (as the trial court had), under which shale gas would have been excluded from the reservation in the deed and thus conveyed to the grantee, the Superior Court decided that expert testimony was needed before it could make a determination as to exactly what shale gas constituted. Is it a “mineral” under the rule in Dunham and Highland? Is it natural gas under the same rule? Or is it more like coalbed methane, and thus subject to the “whoever owns the rock owns the gas” rule in Hoge? The court thus remanded the case to the trial court, which will hear from the parties’ experts before deciding, for the second time, which rule applies to shale gas. In the meantime, the appellees have appealed to the Pennsylvania Supreme Court.

With the remand and likely appeals, the issues raised by Butler may not be resolved for years. For now, anyone with a stake in the Marcellus Shale or the gas it contains -- or in the Bakken Shale formation in Montana and North Dakota, which also contains natural gas -- should review the relevant documents (deeds, leases, etc.) to determine whether the uncertainty created by Butler affects any of their legal interests.

Paul M. Hauge is an Associate in the Gibbons Real Property & Environmental Department. John H. Klock, a Director in the Gibbons Real Property & Environmental Department, co-authored this post.

Marcellus Shale - Real Property & Environmental Law Alert

EPA Report Points to Fracking as Possible Source of Groundwater Contamination

Pennsylvania Appellate Court Injects Uncertainty Into Fracking Industry