POLICY:

Fracking fluid suppliers defend trade secrets on West Coast

Makers of the specialty cocktails used to crack open the Earth and set loose gobs of oil and gas are sparring once again on behalf of their corner of the energy industry.

On the West Coast, oil field services companies are getting a head start pressing state officials to back away from what the industry considers an overreach in chemical disclosure requirements. As California and Alaska consider hydraulic fracturing rules, fracking fluid suppliers Halliburton Co. and Schlumberger Ltd. have come out ahead of their industry associations with objections to the proposals.

The industry has plenty of practice in this debate, having been active in disclosure considerations in other states, which include drilling heavyweights like Texas, North Dakota and Oklahoma, along with nouveau gas-riche states like Ohio and Pennsylvania.

California's proposed rules, floated in December, are a bit stricter than those in other states. Though they conform with drillers' preference by calling for the use of the industry-supported website FracFocus.org for disclosure, they take a new approach to the conflict of emergency need-to-know and trade secret protection. Companies would have to designate someone as the holder of the proprietary information; that person would be required to give the information to state officials or health professionals in an emergency.

Though the official rulemaking process has not yet begun, Halliburton submitted comments late last month red-lining much of the state Department of Conservation's "discussion draft" language on trade secret protection. These comments, provided to EnergyWire by the department's Division of Oil, Gas and Geothermal Resources, come before any official position from other industry representatives.

Halliburton suggests numerous changes to the draft, recommending, for example, that companies not be required to provide general descriptors, such as the chemical family, of proprietary ingredients. It also recommends that companies not be required to reveal proprietary information during an emergency until the state agency enters into a written confidentiality agreement.

Halliburton also suggests a streamlining process, under which a company can get multiple trade secret protections approved with one application. Further, the red-lined version of the rules removes a requirement that companies ensure that ingredients with a trade secret claim are not otherwise required by federal or state law to be revealed.

California regulators are working through a series of public meetings to gain more input on the discussion draft and will launch a formal rulemaking process later this year. The next public meeting is tomorrow in Bakersfield.

Last Frontier breaks pattern

In Alaska, the industry has a steeper hill of changes it wants to make to proposed fracking rules. The state Oil and Gas Conservation Commission released rules late last year that include no protection of trade secrets.

If finalized in that form, Alaska would be the only state to eliminate trade secret protection. But industry lobbyists are likely to keep that from happening.

Though environmentalists characterize the notion of any legal protection of trade secrets as a loophole allowing industry to blast unknown chemicals into the ground, operators say protecting trade secrets is essential to maintaining a competitive edge on other companies -- keeping their equivalent of a "secret sauce" under wraps. Companies like Halliburton and Schlumberger make big money by selling their own specialized frack fluid mixtures to drillers in the field.

Fracking fluid supplier Schlumberger Technology Corp., a subsidiary, sent a letter to commission officials last month requesting a later deadline for chemical disclosure and an added provision exempting trade secrets.

The company also used the letter as an opportunity to emphasize how much work goes into its development of fracking fluid and other technologies.

"Schlumberger consistently spends more on research and development ... than all other oilfield services companies combined," the letter said, adding that the company allows producers to maximize oil and gas recovery in an environmentally sound manner.

The push-back will come as no surprise to Cathy Foerster. One of three commissioners on the state oil and gas board, Foerster told EnergyWire earlier this year that trade secret protection was left out of the proposed rules intentionally but that she fully expected industry to advocate for itself on the issue (EnergyWire, Jan. 3). Schlumberger is first out of the gate, but others, including the Alaska Oil and Gas Association, are likely to follow closer to the early April deadline for comments.

Heavy influence

Heavy industry influence on disclosure requirements is not uncommon. Most oil and gas states require some level of chemical disclosure, and in all of those states, industry has successfully lobbied for trade secret exemptions. Other negotiating points have been the timing of disclosure (before or after the frack job) and whether trade secret status can be challenged by members of the public.

In Ohio, for example, Gov. John Kasich (R) supported a spring 2012 proposal that required chemical disclosure throughout the life of a well -- not just for the specific phase of stimulation -- and would allow anyone to challenge a trade secret claim. Industry-led haggling with the state Legislature eventually narrowed the disclosure requirement to apply only to the fracking process, and it limited those eligible to challenge trade secrets to emergency personnel and landowners.

A 2011 Texas chemical disclosure law pleased the industry so much that the American Legislative Exchange Council, a conservative think tank better known as ALEC, adopted the Texas language as a model bill for other states to follow. ALEC peddled the language in several states, resulting in almost verbatim language in an Illinois bill (EnergyWire, May 2).

Environmentalists' objections to the bill were amplified when they learned it was taken from an ALEC model -- the group was under increased scrutiny at the time after it was found to be a key player in pushing state "Stand Your Ground" laws, the statute at play in the controversial killing of Florida teenager Trayvon Martin.

The Illinois bill failed, replaced this year by legislation that is tougher on the industry. The new bill would avoid FracFocus, require that trade secrets be reported to the state to then be held as confidential and allow anyone to challenge the justification for a trade secret exemption. The bill has a broad coalition of support, including environmentalists, labor groups, and oil and gas industry associations.

Want to read more stories like this?

E&E is the leading source for comprehensive, daily coverage of environmental and energy politics and policy.

Click here to start a free trial to E&E -- the best way to track policy and markets.