Ohio Considers Rules That Opponents Say Favor Frackers

The Ohio House is preparing to vote on rules for natural-gas drillers that Republican Governor John Kasich calls among the nation’s toughest, even as environmentalists say they let companies decide which industrial chemicals stay secret.

The House Public Utilities Committee plans to vote today on a bill Kasich sought governing hydraulic fracturing, or fracking, said Representative Peter Stautberg, the Republican chairman of the committee. The measure, which could get a full House vote tomorrow, would require disclosure of chemicals, water sampling before drilling and tracking wastewater into disposal wells. The Senate passed the bill May 15.

Kasich, 60, said the rules will help Ohio profit from a boom in fracking -- which involves injecting chemicals, water and sand underground to free gas reserves -- while protecting drinking water and the environment. Ohio has 72 horizontally drilled fracking wells, and the state Natural Resources Department projects that 2,250 will be drilled by the end of 2015.

“It sets up the most important, strongest, clearest and fairest regulations for hydraulic fracturing,” Kasich told reporters in Columbus on May 17.

States including Ohio, Pennsylvania and North Dakota are confronting the costs and benefits of fracking and how to regulate it. The industry says fracking is safe and allows increased production; environmental groups say it can lead to contamination.

While groups including the Columbus-based Ohio Environmental Council praised Kasich for seeking the law, they said the provisions don’t go far enough and are calling for changes.

‘Gag Order’

The bill allows companies to shield chemicals as trade secrets, allows them to delay disclosure for 60 days after a well has been drilled, and places a “gag order” on doctors against disclosing information about chemicals that may have affected patients, said Thom Cmar, an attorney for the Natural Resources Defense Council in Chicago.

The measure also ensures that while companies can appeal the denial of a state permit to drill for oil and gas, residents can’t appeal permit approvals, according to the Ohio Environmental Council in Columbus.

“Credit Governor Kasich for the many good improvements to Ohio’s oil and gas law,” a lawyer for the council, Trent Dougherty, said in a statement. “But those good provisions will struggle to buffer the toxic loopholes, lapses and left-outs that the oil and gas industry has succeeded in elbowing into the bill.”

$4.9 Billion

Chesapeake Energy Corp. (CHK), Devon Energy Corp. (DVN) and Exxon Mobil Corp. (XOM) are among companies drilling in Ohio’s Utica Shale rock formation. Its development will support 65,680 jobs and add $4.9 billion to the state’s economic output in 2014, according to a study released Feb. 28 by the Ohio Shale Coalition.

State law currently doesn’t allow an appeal of a drilling permit, and the bill merely clarifies that, Carlo LoParo, a Natural Resources Department spokesman, said in a telephone interview. A permit may be challenged in court, he said.

Drilling companies will be required to disclose fracking chemicals unless they are considered trade secrets under existing law, LoParo said. Colorado has the most stringent rules, and the Ohio law does more by requiring disclosure of fluids used in well construction and initial drilling as well as chemicals used in fracking, said Christina Polesovsky, associate director of the Ohio Petroleum Council.

“Ohioans are going to get more information and hopefully more peace of mind about what we are doing and what we are putting into the ground,” Polesovsky testified yesterday at a House Public Utilities committee hearing.

Access to Information

The panel will add an amendment today clarifying that doctors have access to information about trade-secret chemicals and can use it as they deem necessary to treat patients, Stautberg, the committee chairman, told reporters after the hearing.

Even so, the state should have the authority to determine whether a chemical is proprietary, Cmar of the Natural Resources Defense Council said.

The bill requires adequate disclosure while also protecting critical competitive information, Kasich said.

The governor said he still hopes to enact a measure requiring that drillers pay a tax as high as 4 percent on the market value of what they extract to fund an income-tax cut. Legislative leaders from Kasich’s party removed that provision from the bill for further study.

To contact the reporter on this story: Mark Niquette in Columbus at mniquette@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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