On November 3, 2011, the U.S. Environmental Protection Agency (EPA) released a plan to study potential impacts of hydraulic fracturing on drinking water resources.  The study, which is being conducted pursuant to Congress’s request, will focus on the effect of hydraulic fracturing in shale formations on drinking water sources during the five stages of the hydraulic fracturing water lifecycle:

(1)  water acquisition;
(2)  chemical mixing;
(3)  well injection;
(4)  flowback and produced water; and
(5)  wastewater treatment and waste disposal.

The primary focus of the study is on the use of hydraulic fracturing in shale formations, but it is expected that information relevant to hydraulic fracturing in other types of unconventional oil and gas reservoirs (i.e., coal-beds and tight sands) will be included.

While it is impossible to predict the outcome of the EPA’s study, oil and gas production companies should monitor the EPA’s progress on this subject. If the EPA concludes that hydraulic fracturing has an adverse impact on drinking water resources, the consequences could be severe.  In that scenario, new rules and regulations certainly could be imposed and, depending on the extent of any such regulations, could impact the costs of production.  Additionally, the findings could implicate existing rules and regulations, such as those set forth in the Safe Drinking Water Act and the Clean Water Act, and subject production companies to penalties.

Considering the existence of studies estimating that 80 percent of natural gas wells drilled in the next decade will require the use of hydraulic fracturing, the cost of bringing hydraulic fracturing operations into compliance with new or existing regulations could be considerable.  Also, if the EPA’s findings are substantial and garner public attention, a knee-jerk reaction imposing a temporary moratorium on hydraulic fracturing is not beyond the realm of possibility.  Clearly, that is the worst case scenario from the viewpoint of production companies and their employees, but it is a possibility in light of recent governmental actions taken in connection with the Deepwater Horizon matter.

On the other hand, production companies may have little with which to be concerned.  In 2004, the EPA concluded that the injection of hydraulic fracturing fluids into coal-bed methane wells produces little or no threat to underground sources of drinking water.  While the 2004 study is entirely different than the EPA’s current study and is not indicative of the results that will be reached in this instance, it does show that a negative finding – hydraulic fracturing has no adverse affect on drinking water resources – cannot be ruled out.

The EPA has announced that its initial research results and study findings will be released to the public in 2012. The final report will be delivered in 2014.