The Problem with Fracking Trade Secrets

Environmentalists seeking greater disclosure of the chemicals used during hydraulic fracturing or “fracking” were dealt a blow last month when a Wyoming district court judge ruled that Wyoming’s Oil and Gas Conservation Commission did not have to disclose the identity of fracking compounds considered as trade secrets under Wyoming’s disclosure rules. The court’s decision serves to highlight the continued debate between environmentalists and oil and gas service companies over the sufficiency of state disclosure rules.

Fracking” is a process used by oil and natural gas producers to substantially increase production of oil or natural gas from new or existing wells. Fracking involves pumping massive amounts of fracturing fluids (composed of water and chemical additives) deep underground to create cracks in rock formations to allow the release of trapped oil and natural gas. Although chemical additives generally make up only 0.5 to 2.0 percent of fracturing fluids, hundreds of tons of chemical additives may be used during a single project. One project in Ohio was found to have involved the use of 10.5 million gallons of water, 5,066 tons of sand, and 484.5 tons of chemical additives. A report released by the Democrats of the Congressional Committee on Energy and Commerce revealed that between 2005 and 2009, the fourteen largest oil and natural gas service companies used a combined total of 780 million gallons of fracking compounds, not including water, and at least 750 different chemicals were used. Twenty-nine of those chemicals “are (1) known or possible human carcinogens, (2) regulated under the Safe Drinking Water Act for their risks to human health, or (3) listed as hazardous air pollutants under the Clean Air Act.” Many of these chemicals have not been evaluated for their long-term impacts on human health.

Environmentalists and public health officials have grown concerned that fracking may result in air and ground water contamination and pose a serious health risk to communities that rely on underground aquifers as a source of drinking water. However, concerned parties have been stymied in their efforts to determine the health risk of fracking due to a general lack of information regarding the chemicals used at individual sites. Under current federal law, oil and gas service companies engaged in fracking are not required to disclose the identity of the chemicals in their fracking fluids. Although a handful of states have passed laws requiring some level of disclosure for fracking activities within their borders, the requirements for disclosure vary greatly from state to stateIn 2012, a study reported that of the 29 states with fracking activity, only 14 had enacted disclosure laws, and the regulations implementing these laws effectively exempt from public disclosure chemical compounds that oil and gas service companies identify as trade secrets.  Only two states require a justification for withholding the identity of the trade secret compounds. Oil and gas service companies appear to have widely exploited the trade secret exemptions to avoid full disclosure of the chemical additives used in each fracking project. A Business Week article reported that in 2012, oil and gas service companies in Texas claimed trade secret exemptions 19,000 times, which allowed them to withhold information on one out of every seven ingredients used. Scientists and environmentalists argue that without knowing precisely what is going into the ground, they cannot assess the long term impacts of fracking.

Six states do require the disclosure of chemical compounds otherwise protected as trade secrets to medical and emergency personnel under certain circumstances; however, physicians may be required to sign confidentiality agreements before receiving access to the information. Some physicians have complained that these regulations could slow the flow of information in emergency situations. They have also expressed concerns that the confidentiality agreements may act as gag orders that would prevent physicians from sharing information about the treatment of their patients with other medical professionals. Although disclosure of fracking trade secrets to medical professionals may facilitate the treatment of affected individuals, physicians and nurses treating isolated patients do not have the resources to perform the long term studies required to adequately assess the safety of trade secret compounds. Rules requiring disclosure to medical and emergency personnel, therefore, do little to address the serious safety concerns that fracking presents to public health and the environment.

Although environmentalists and health professionals continue to call for greater disclosure of the chemicals used during fracking, oil and gas service companies have vigorously argued that that disclosure of their trade secrets, even to prevent a potential environmental and public health catastrophe, would undermine their ability to effectively compete in the market. Despite the potential risks, states appear reluctant to press oil and gas service companies for broader disclosure. Currently, new disclosure rules are being considered in California, North Carolina, Florida, Illinois, and Alaska.  Of these, Alaska is the only state that has not proposed exemptions for trade secret compounds. Alaska’s proposed regulations still have a ways to go before becoming law, however, and it is likely that oil and gas service companies will push for changes. Unfortunately, it appears as though environmentalists and public health professionals may be in for a long wait before states begin to require full disclosure of fracking compounds.

Written by Michael Anderson, GIELR Staff

One response to “The Problem with Fracking Trade Secrets

  1. This is a nice summary of the issue, but when will we see a law review article which tackles the heart of the matter? Is trade secret law so undeveloped that applying the facts of the industries’ claim to trade secret protection is somehow not possible? I can understand such a claim if a single company had a “proprietary formula” worthy of protection (the most commonly used example being the recipe for Coca-Cola). But this is a case of an entire industry making the claim, which by definition undermines any assertion of the alleged secrets needing to be guarded from competitors. It seems much more similar to an act of collusion — which may well be anti-competitive, but not between the competitors themselves so much as between the industry and the consuming public. The public has a clear interest in its own health and welfare, and the public suffers the potentially catastrophic adverse consequences of the industries’ collusive acts and omissions.

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