California Oil and Gas Report

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 →

By Dennis Luna, J.D., P.E. 

The U.S. Bureau of Land Management (BLM) violated the National Environmental Policy Act (NEPA) by failing to include No Surface Occupancy (NSO) clauses when it sold oil and gas leases in California, a federal judge has ruled.

U.S. Magistrate Judge Paul Grewal in San Jose, California, said the BLM violated the environmental law when it sold four leases for 2,700 acres of federal land in Monterey and Fresno counties. In a ruling filed March 31, the judge said the agency should not have relied on outdated reviews which were conducted before hydraulic fracturing, or ‘fracking,’ accelerated development of energy deposits. (Click here for a copy of the ruling.)

“BLM’s dismissal of any development scenario involving fracking as ‘outside of its jurisdiction’ simply did not provide the ‘hard look’ at the issue that NEPA requires,” Judge Grewal said in his ruling. Continue reading →