Shale gas exploitation and public interest in Texas

(BY HUGO)

Disputes related to shale gas exploitation have arrived before the courts in the U.S.A. In RailRoad Commission of Texas v. Texas Citizens for a Safe Future and Clean Water, the issue relates to the re-injection of drilling fluids underground after their use for hydraulic fracturing. The Court thus describes the factual background:

«Fracing a well entails pumping large volumes of water and sand into reservoir rock, which then mixes with saline formation water and must be flowed back out of the well before production can begin. A company fracing a well must dispose of the resulting waste. Most companies do so by injecting the waste into subsurface zones which are naturally saline environments, usually in old wells converted to injection wells. A company seeking to convert a well to an injection well for oil and gas waste must apply to the Commission for a permit.»

The Commission can grant an injection permit when, inter alia, the use or installation of the injection well «is in the public interest». In this instance, the Commission granted a permit to a fracking company notably because the «production of hydrocarbons for use by the people of Texas and industry serves the public interest».

This determination is contested before the Court, and the crux of the matter turns on the degree of discretion that the Commission has in interpreting the notion of public interest.

The Court finds that «the phrase “public interest” is anything but clear and unambiguous». As a result, the Court must defer to the Commission's interpretation of the notion of public interest, and the Commission's decision to grant an injection permit stands. A more substantial study of the courts decision by Stephen Dillard, Barclay Nicholson and Kadian Blanson from Fulbright & Jaworski LLP can be found here.

This case is not relevant in the context of both the regulatory regime for natural resources management and the administrative law applicable in Québec. Nevertheless, this case illustrates the risk related to the interpretation of legal notions like public interest when they are tied to authorisation regimes relying on administrative discretion. As argued in a previous post, the notion of public interest found in the new Québec water withdrawal authorisation regime should be further defined to avoid an excessive degree of discretion.

Meanwhile, an article by Robert Howarth et al., «Methane and greenhouse-gas footprint of natural gas from shale formations», has just been published in Climatic Change Letters. Excerpts from the article's summary read as follows:

«[A n]ew study demonstrates that shale gas is not the planet-friendly gas it is thought to be. Natural gas extracted from shale formations has a greater greenhouse gas footprint - in the form of methane emissions - than conventional gas, oil and coal over a 20 year period. This calls into question the logic of its use as a climate-friendly alternative to fossil fuels[...]

[O]verall, during the life cycle of an average shale-gas well, between four to eight percent of the total production of the well is emitted to the atmosphere as methane, via routine venting and equipment leaks, as well as with flow-back return fluids during drill out following the fracturing of the shale formations. Routine production and downstream methane emissions are also large, but comparable to those of conventional gas.»

In light of the Texan case above, one may wonder whether climate change and its potentially catastrophic consequences that are brought about by fossil fuels such as shale gas are in the public interest.

Finally, another excellent article by Louis-Gilles Francoeur in Le Devoir (here - in French) provides a great perspective on the management of energy resources in Québec.