California Oil and Gas Report

By Dennis R. Luna, P.E., J.D.

A recent study prepared by scientists affiliated with Duke University, the University of Rochester, and Cal Poly Pomona titled “Increased Stray Gas Abundance in a Subset of Drinking Water Wells Near Marcellus Shale Gas Extraction” was published in the Proceedings of the National Academy of Sciences last month.

This study found higher methane and ethane concentrations in water wells located less than one kilometer away from the shale gas wells. However, it also corroborated the researchers’ prior peer-reviewed studies showing that there is no evidence of increased concentrations of salts, metals, or radioactivity in drinking water wells accompanying shale gas extraction in the Marcellus region.

Researchers explored various possible causes for this increased concentration of gases in the water wells within the one kilometer range. Importantly, they dismissed the possibility that fluids used in the fracking process were contaminants, because none of these chemicals were found in the 141 water wells tested. Continue reading →

By Dennis R. Luna and Michael Newman

Part 2 of a 4-part series

Oil and gas operations by their nature involve some environmental risks, which are well known and typically well managed. But shale gas fracking operations are associated with additional risks for which the industry is still developing mitigation techniques.

One of the unique aspects of fracking operations is the transportation, storage, and use of millions of gallons of water.

This intensive use of water resources can create a conflict of priorities and risks to local area residences. Can the municipal system support such an intense use of water? What will be the impact of withdrawing water from the shallow aquifers? Is there a potential to impact other groundwater users in the area by lowering the water table? The effects of this heavy use of a resource need to be carefully considered and managed so as to minimize the potential impacts to the surrounding areas. Continue reading →

By Dennis R. Luna and Michael Newman

Part 4 of a 4-part series

Traditionally, operators carry several types of insurance policies that have the potential to provide environmental coverage in the event of a loss at a site.

These include: (1) Casualty Insurance Programs (i.e., General Liability and Umbrella Policies); (2) Operators Extra Expense (OEE) Policy (often referred to as “Control of Well”); and (3) Environmental Site Liability (ESL coverage). Nearly all operators carry the first two lines of coverage, but ESL coverage is far less common.

While casualty and OEE programs provide important protection, there are significant potential gaps between the risk and the coverage these policies provide. For example, the casualty coverage within an energy package program commonly provides third-party liability coverage from sudden and accidental pollution releases. But some policies include a total or absolute exclusion on pollution claims.

A policy may cover pollution claims that result from a “named peril” covered by the policy, such as fire. This is better than nothing, but it can still result in significant coverage gaps if the pollution does not happen to relate to the specific named peril. Continue reading →