On May 31, 2011, the Texas Legislature adopted HB 3328, requiring hydraulic fracturing operators to disclose the chemical constituents of fluids used in the fracturing process on a well-by-well basis.[1] The bill passed by a majority of 137-8 in the Texas House and 31-0 in the Texas Senate, and it is expected to be signed into law by Governor Rick Perry. By enacting HB 3328, Texas becomes the latest state to mandate the disclosure of chemicals used in hydraulic fracturing, although each state has taken its own approach to regulating the burgeoning development of natural gas resources.[2] Many of the state regulations have differing provisions and require disclosure in slightly differing manners. The Texas bill instructs the Railroad Commission of Texas, which regulates oil and gas production, to draft hydraulic fracturing disclosure regulations pursuant to the provisions in the bill.

HB 3328 imposes different disclosure requirements for varying categories of chemicals. For fracturing chemicals that are subject to the Occupational Safety and Health Administration’s requirements for Material Safety Data Sheets (“MSDS”), the well operator must disclose those chemicals to the Railroad Commission and post a list of the chemicals on the website hosted by the Interstate Oil and Gas Commission, which is currently found at FracFocus.org. Pursuant to existing OSHA regulations, an MSDS must be made available to any employees that might handle potentially harmful substances in their work duties.[3] The Texas bill makes public this information about OSHA-regulated chemicals that, by law, was already available to well-operator employees.

If a chemical is not required to be disclosed on an MSDS, but was nevertheless intentionally included in the fracturing fluid to assist with the fracturing process, the chemical must be disclosed to the Railroad Commission and noted on FracFocus.org or another publicly accessible website. Chemical constituents that were not purposely added, but occur only incidentally in the fracturing fluid, are not required to be disclosed.

Notably, HB 3328 does not mandate disclosure of the actual quantities of the chemicals used or the techniques utilized by well operators to implement the fracturing process. Rather, the bill only requires disclosure of specific chemical identifying information, such as names and physical characteristics.

In addition, the legislation allows well operators to claim trade secret protection for certain fracturing chemicals or compositions.[4] If granted, a fracturing fluid with trade secret status would be exempt from the disclosure obligations described above, subject to existing information disclosure laws promulgated by the Public Information Act. Only certain parties will have standing to challenge the trade secret status of a fracturing chemical or composition: landowners where the well is located, landowners of adjacent property, and state agencies with jurisdiction. Regardless of these trade secret protections, HB 3328 also requires that chemical information be disclosed to any health professional or emergency responder who needs the information for medical treatment.

Unless vetoed by Governor Perry, HB 3328 will become law on September 1, 2011. The law would only affect wells that receive drilling permits after the effective date of the Railroad Commission’s forthcoming regulations. The Railroad Commission will have until July 1, 2012 to adopt regulations affecting the disclosure of MSDS chemicals, and until July 1, 2013 to adopt regulations relating to the non-MSDS ingredients and the trade secret exemption process. In spite of these deadlines, Texas Railroad Commissioner David Porter has stated that the Railroad Commission intends to finalize all of the rules – not just those relating to the MSDS chemicals – by July 1, 2012. According to Commissioner Porter, the Railroad Commission will host public forums throughout the state in the coming months to gather public comment on the new legislation.

For more information about hydraulic fracturing, please contact Stephen C. Dillard (sdillard@fulbright.com or 713 651 5507), Kenneth S. Komoroski (kkomoroski@fulbright.com or 724 416 0420) and Barclay R. Nicholson (bnicholson@fulbright.com or 713 651 3662) from Fulbright's Shale and Hydraulic Fracturing Task Force. Steve serves as Chair of Fulbright’s Global Litigation Department, Ken heads Fulbright’s Marcellus Shale practice group in the firm’s new Pennsylvania office, and Barclay is a partner in the firm’s Energy Litigation Practice Group.

Learn more about Fulbright’s Shale and Hydraulic Fracturing Task Force at www.fulbright.com/fracking.

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[1] HB 3328, 2011 Leg., 82 Sess. (TX 2011), available at http://www.capitol.state.tx.us/tlodocs/82R/billtext/pdf/HB03328F.pdf#navpanes=0.
[2] See, e.g., 25 Pa. Code §78.55 (as part of the permitting process, drilling companies must disclose the names of all chemicals to be stored and used at a drilling site in the Pollution Prevention and Contingency Plan submitted to the Department of Environmental Protection); Wy. Oil & Gas Comm’n § 3-8(c) (operators must disclose chemical additives and proposed concentrations in the Application for Permit to Drill or Deepen).
[3] See 29 C.F.R. § 1910.1200(g)(2), available at http://www.osha.gov/pls/oshaweb/owadisp.show_document?p_table=STANDARDS&p_id=10099.
[4] The process for claiming trade secret status is not set forth in HB 3328, but will be designed and enacted by the Railroad Commission over the next two years.