New Ohio Energy Bill Includes Horizontal Drilling Provisions

Shale Energy Update

Date: June 12, 2012

Overview

On June 11, 2012, Ohio Governor John Kasich signed Senate Bill 315, which requires operators to provide detailed disclosures regarding horizontal drilling operations in the Utica shale.

The Ohio Department of Natural Resources (ODNR) describes this landmark bill as one of the nation's toughest regulatory frameworks for overseeing the new technologies that allow for the exploration of natural gas and liquids in deep shale rock formations. The ODNR touts this legislation as the nation's first combined well construction and hydraulic fracturing chemical disclosure requirement.

Among other requirements, the bill mandates that oil and gas drillers identify the source of the water used in the fracturing of wells, provide the rate and volume at which they will withdraw the water and disclose the chemicals used in the fracturing process to the ODNR's Division of Oil and Gas Resources Management. As part of this disclosure, well operators must provide a well completion record and, if applicable, the trade name and total volume of all product fluids and substances used to facilitate the drilling of any portion of a well. The bill includes protections for trade secrets.

For new horizontal wells, the bill requires well operators to take pre-drilling well water samples for all wells within 1,500 feet of a proposed horizontal well and disclose the results in their permit applications.

Additionally, the bill directs owners of horizontal wells to obtain liability insurance coverage of at least $5 million to pay for injuries or property damage caused by production operations in Ohio. This increases the typical required coverage for horizontal wells by five times in rural areas and nearly doubles the requirement in urban areas. A "reasonable level of coverage" must be available for environmental liability, including pollution and contamination occurring as a result of the drilling, operation or plugging of the owner's wells.