ABOUTTHEREPORT

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TableofContents

AboutHBWResources .................................................................................................................... 1

ExecutiveSummary......................................................................................................................... 2

California,Colorado ........................................................................................................................ 3

Florida,NewMexico ....................................................................................................................... 4

Oklahoma,Pennsylvania ................................................................................................................. 5

WestVirginia .................................................................................................................................. 6

References ...................................................................................................................................... 7

AbouttheHBWFrackingReport

HBWResources’FrackingReportmonitorsshaleenergyactivitiesacrosstheU.S.,assessesthenon-technicalriskfactors,andqualifiesthethreatstoproductionaseitherhigh(RED),medium

(YELLOW),orlow(GREEN).Thereportisupdatedmonthly,reassessingeachstate’sthreatlevelandanalyzingnewdevelopments.Thereportandfurtherupdatesareavailableonlineat:hbwresources.com/intelligence.

AboutHBWResources

HBWResourcesisanintegratedstrategicconsultingandadvocacyfirm.Ourmultidisciplinaryapproachprovidesourclientswithinnovativethinkingandhands-on,seasonedexperience.Ourapproachcutsthroughpartisanviewstorepresentnationalandinternationalcompanies,trade

associations,laborunions,non-for-profitorganizations,Federal-andState-levelofficialsandagencies,academia,andnon-governmentalorganizations(NGOs).WithofficesinHouston,Washington,D.C.,Denver,Lexington,LittleRock,andCalgary,HBWResourceshasforgedasolid

reputationofworkingeffectivelyatthecross-sectionofthepublicpolicy,regulatory,technicalandpoliticalarenastoprovidehighvalue,strategiccounselneededtoachieveresultsforourclients.

FormoreinformationontheHBWFrackingReport,contactAndrewBrowning,Partner,atabrowning@hbwresources.comor303-228-9462.

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ExecutiveSummary2016beganwithaslowstartascrudepricesdroppedtonewlowsandrigcountscontinuedtoplummet.Thoughnotahigh-volume,producingstate,Floridahasbecomeaproxybattlegroundasactivistscontinue

theirtacticstopushforlocalfrackingbans.Currently,nearly70localgovernmentshavebannedfrackingwithintheirjurisdictions.Theseeffortsshouldfacesignificantchallenges,however,astheFloridaHouse

advancedlegislationinsupportofoilandgasdevelopmentstatewide.TheStateSenateisnowconsideringthebill.Meanwhile,stateofficialsinColoradohaveapprovedrulesthatwilllimitlocalcontrol

overoilandgasoperations.

Nationally,onshoreenergydevelopmentischallengedbygrowingeffortstohaltfrackingonfederallands.GroupshaveimplementingpetitiondrivesandprotestsareplannedatseveralBureauofLand

Managementofficesinthecomingmonth.Also,thefederalScientificAdvisoryBoardissuedastatementexpressingconcernovertheU.S.EnvironmentalProtectionAgency’sassessmentoftheimpactsof

hydraulicfracturingondrinkingwaterresources.TheBoarddisagreeswiththeagency’sconclusionthatthereareno“widespread”and“systemic”impactstowaterresourcesandwillbeholdingpublicmeetings

throughoutFebruaryandMarchtodiscussisanalysis.

State-by-StateThreatLevel

HighThreat ModerateThreat LoworNon-ExistentThreatCalifornia Delaware NewMexico Alabama Mississippi

Colorado Illinois NorthCarolina Alaska Missouri

Florida Kentucky Ohio Arizona Montana

Maryland Louisiana Oklahoma Arkansas NorthDakota

NewJersey Maine Oregon Connecticut SouthCarolina

NewYork Massachusetts RhodeIsland Georgia SouthDakota

Pennsylvania Michigan Texas Hawaii Tennessee

Vermont Minnesota Virginia Idaho Utah

Nebraska Washington Indiana Wyoming

Nevada WestVirginia Iowa

NewHampshire Wisconsin Kansas

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CALIFORNIA(HIGH)RegulatorsImposeMoratoriumonAlisoCanyonNaturalGas:OnJanuary28,CalifornialawmakersbeganmovingtoenactamoratoriumonwellsinAlisoCanyon.ThisnewscomesinthewakeofaleakataSouthernCaliforniaGasCo.’soperationthatforcedapproximately3,000residentsofPorterRanchtoleavetheirhomes.Theleakoccurredatanolderwellandthecompanyhassincedecidedtostopproductionat18othersimilarwellsfollowingfurtherinspection.TheDivisionofOil,Gas&GeothermalResourceswillconducttheinspectionsofthewellsandallowcontinuedoperationoncetheyaredeemedsafe.ThebillwillnextgototheAssemblybeforeitisputintoplace.1

COLORADO(HIGH)ColoradoRegulatorsApproveLocalControlRules:OnJanuary25,regulatorsfromtheColoradoOilandGasConservationCommissionapprovedrules“dictatingwhenlocalgovernmentshaveasayinthestate’soilandgasdevelopments.”2Therewascontentionoverthespecificsoftherules,inparticularthat“largescale”facilitiesaredefinedaseightnewwellsor4,000barrelsofneworexistingstorage,notincludingwater.CountygroupswerenotappeasedbytherulesandmighttrytotakethisissuetotheNovemberballot.TheColoradoOilandGasAssociationisconcernedthattherulesgivelocalgovernmentstoomuchsay,whilelocalgovernmentsandotheropponentsarguethattherulesarenotstrongenough.Thenewrulemayonlyintensifytheconflict.TherulingcomesfromthefindingsofataskforcethatGov.Hickenlooperappointedtoeasetheconflictoverenergydevelopmentandhydraulicfracturinginparticular.3

AdamsCountyCommissionersRejectFrackingMoratorium:OnJanuary26,AdamsCountycommissionersrejectedaproposedmoratoriumtobannewoilandgasactivityinurbanpartsofthecounty.ThedecisiontonotimposeamoratoriumcomesfromtheeconomicopportunitiesthatoilandgasdevelopmenthasprovidedforAdamsCounty.Thedecisionalsocomesfromthecountywantingtoavoidgettingsuedbythestateorindustrylikeothercitiesthathaveplacedsimilarmoratoriums.Commissionersdidapproveamotiontoreviewhowthecountyshouldapproachfutureoilandgasdevelopment.4ThemajorconcernresidentsofAdamsCountyhavewithoilandgasdrillingistheproximitytoschoolsandhomes.Theyareworriedabouthealthconcernsaswellasnoiseandpropertyvalues.5

ReadmoreaboutfrackingdevelopmentsatthestateandlocallevelonHBWResources’IntelligenceBlog

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FLORIDA(HIGH)FloridaHouseApprovesFrackingBill:OnJanuary27,theFloridaHouseapproved,HB191,allowingthestatetoauthorizehydraulicfracturing.Thebillalsopreemptslocalgovernmentsfrombanningthepracticeintheircommunities.Thebillincludesamoratoriumonfracking,untilthecompletionofanenvironmentalstudytodetermineimpactsonthestate’sgeology,duein2017.6Uponcompletionoftheenvironmentalstudy,regulationswillbeproposedforlegislativeapproval.ThisisthethirdyearthattheHousehasapprovedthisbill.ItnowneedsapprovalbythestateSenate.LocalGovernmentsContinuetoOpposeFrackinginTheirCommunities:OnJanuary26,BrowardCountycommissionersvotedtooutlawfrackingwithinthecounty.ThisactionwaspromptedbyapplicationforaproposedwellonEvergladeslandwithinthecounty’sjurisdiction.ThisinterestalongwiththestateHouseandSenatebillstotakecontrolandregulationoverfrackinghasledthecountycommissionerstocometothedecisiontobanfrackinginBrowardaltogether.7OnJanuary5,LakeCountycommissioners,“unanimouslyvotedtoopposebillsmovingquicklythroughtheLegislaturethatwouldstripcountiesoftherighttoregulateorbanfracking.”8LakeCounty’sobjectionmarksthe33rdcountytoopposethestateintheirbilltocontrolfracking.Nowclosetohalfofthe67countiesinFloridaareopposingtheproposedrule.However,LakeCountyCommissionersdonotsupportastatebanonfrackingaltogether.TheirmainconcernisoverthehealthandsafetyofthecitizensofLakeCounty.Additionally,AlachuaCountyisseekingtodraftanordinancetobanfrackingasothercountiesandcitiesinFloridahavedone.TheproposedlegislationforthestatetocontrolfrackingintheFloridaHouseandSenatehascausedabacklashfromlocalgovernmentsinthestate.9

NEWMEXICO(HIGH)SandovalCountyPlanningandZoningBoardRecommendsAgainstFrackingPermit:TheSandovalCountyPlanningandZoningBoardvotedThursday,January28,torecommendcountycommissionersdenyafrackingpermit.Therewassignificantpublicsupportatthemeetingtodenythepermit.Citizenswereconcernedaboutthegroundwaterprotectionrules.TheSandovalCountyCommissionwillvoteanddecidethefinaloutcomeofthepermitattheirnextmeetingonFebruary18.10

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OKLAHOMA(HIGH)OklahomaCorporationCommissionOrdersReducedInjectionWellVolumes:TherecentincreaseinseismicityhasforcedtheOklahomaCorporationCommissioncameupwithaplantopreventmoreearthquakesfromhappening.ThisplanwillincludereducingthevolumeofwastewaterbeingdisposedinnorthwestOklahomabyabout18percent.Theremaybemorechangesaddedtothisplan.“TheOklahomaGeologicalSurveyhassaiditis‘verylikely’thatmostoftheearthquakesweretriggeredbythesubsurfaceinjectionofwastewaterfromthedrillingoperations.”11GovernorFallinFundsSeismicResearch:OklahomaGovernorMaryFallindedicatedasumof“$1.4millionfromanemergencyfundtopayformoreseismicresearch.”12TherateofearthquakesinOklahomahasincreasedsubstantiallysince2009andhassincegarneredpublicanger.Fallinisbeingcriticizedforherslowresponsetoaddressthisissue.Somehaveattributedtheincreasednumberofearthquakestohydraulicfracturingandnaturalgasproduction.ThemoneywillgototheOklahomaCorporationCommissionandthestate’sgeologicalsurvey.

PENNSYLVANIA(HIGH)GovernorWolfAnnouncesPlantoReduceMethaneEmissionsfromOilandGas:GovernorWolfofPennsylvaniaissuedanewrulingthatwillputmoreregulationsonnaturalgasproducers,specificallyinregardstomethaneemissions.Thesenewruleswillcoverbothnewandexistingwells.Industrywillberequiredtocheckformethaneleakseverythreemonthsaspartofthenewregulation.Industryrepresentativessaytherulesareredundantbecausetheyalreadyhavesystemstopreventmethaneleaks.GovernorWolf’sruleswillexceedthemethanerulessetbytheEPA.Thisisaresponsetoenvironmentalistswhowere,“concernedthatpendingfederalrulescoveronlynewwellsandfacilities.”13Thenewpermitswillgointoeffecteitherlaterthisyearorin18monthsfornewandexistingwellsrespectively.14

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WESTVIRGINIA(MEDIUM)FayetteCountyApprovesBanonWasteInjection:OnJanuary12,FayetteCounty,commissionersapprovedanordinancebanning“thestorage,disposaloruseofoilandnaturalgaswastecountywide.”15ThisvotecomesafterpublicoutcryfromastudyDukeUniversitythatidentifiedfrackingwasteinthedrinkingwaterfromWolfCreek.Industrywilllikelychallengetheordinanceincourt.Countyleadersincludedaseverabilityclausetokeeptherestoftheordinanceintactevenifonepartofitischallenged.

StateBoastsImpressiveNaturalGasProductionNumbers:Reportsfor2014fromtheWestVirginiaGeological&EconomicSurveyshowthatWestVirginiaexceededexpectationsandproducedfarmoreoilandnaturalgasthanexpected.“OilproductioninWestVirginiahasincreasedfromabout27,000barrelsin2009tothe5.2millionbarrelsproducedin2014.”16AlackofpipelinesinWestVirginiaiskeepingcompaniesfrommaximizingprofitsfromthisboom.TherearemultiplepipelinesbeingconsideredthatwouldaidWestVirginiaandOhioinreachingfullproducingpotential.Inthelong-term,theindustryispreparingforevengreaterproduction.

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REFERENCES1McGreevy,Patrick,“MoratoriumonAlisoCanyonnaturalgasoperationsgetsSenateapproval,”LosAngelesTimes,January28,2016,accessedFebruary3,2016,http://www.latimes.com/politics/la-pol-sac-moratorium-on-aliso-canyon-natural-gas-operations-20160128-story.html2Beck,Madelyn,“Colo.CommissionOksruleonlocalcontrol,”Energywire,January27,2016,accessedFebruary3,2016,http://www.eenews.net/energywire/2016/01/27/stories/10600311883Elliott,Dan,“ColoradoOksoil-gasrulesgivingcities,countieslimitedsay,”Bakken.com,January28,2016,accessedFebruary3,2016,https://bakken.com/news/id/250989/colorado-oks-oil-gas-rules-giving-cities-counties-limited-say/4Aguilar,John,“AdamsCountycommissionersnotinfavorofdrillingmoratorium,”TheDenverPost,January27,2016,accessedFebruary3,2016,http://www.denverpost.com/news/ci_29436572/adams-county-mulls-10-month-ban-new-oil5Gelardi,Liz,“HeateddebateaboutoilandgasdrillinginAdamsCounty,”DenverSevenNews,January27,2016,accessedFebruary3,2016,http://www.thedenverchannel.com/news/local-news/heated-debate-about-oil-and-gas-drilling-in-adams-county6Klas,MaryEllen,“FloridaHouseapprovesbilltoauthorize,regulatefracking,”MiamiHearld,January27,2016,accessedFebruary3,2016,http://www.miamiherald.com/news/politics-government/state-politics/article56938703.html7Sweeney,Dan,&Wallman,Brittany,“Browardoutlawsfracking,”SunSentinel,January27,2016,accessedFebruary3,2016,http://www.sun-sentinel.com/local/broward/fl-broward-anti-fracking-20160125-story.html8“Lakecommissionersdemandhomeruleinfrackingcontroversy,”OrlandoSentinel,January5,2016,accessedFebruary3,2016,http://www.orlandosentinel.com/news/lake/os-lk-fracking-lake-commission-20160105-story.html9Warren,April,“Countyasksattorneyforfrackingordinance,”Gainesville.com,January5,2016,accessedFebruary3,2016,http://www.gainesville.com/article/20160105/ARTICLES/16010986310Gregorczyk,Kasia,“SandovalCountyboardrecommendsdenyingfrackingsiteapplication,”KOB4,January28,2016,accessedFebruary3,2016,http://www.kob.com/article/stories/s4031958.shtml#.VrJ3rLIrKCj11“Oklahomaregulatorsorderreducedinjectionwellvolumesafterquakes,”Fuelfix.com,January13,

2016,accessedFebruary3,2016,http://fuelfix.com/blog/2016/01/13/oklahoma-regulators-order-

reduced-injection-well-volumes-after-quakes/12Soraghan,Mike,“Fallinputs$1.4MtowardseismicresearchinOkla.”Energywire,January29,2016,accessedFebruary3,2016,http://www.eenews.net/energywire/2016/01/29/stories/106003136413Conti,David,“Pa.Gov.Wolftargetsmethaneemissionsfromoilandgas,”TribLive,January19,2016,accessedFebruary3,2016,http://triblive.com/business/businessprojects/onthegrid/gas/9820927-74/gas-wells-methane#axzz3xmXJDfZt14Harball,Elizabeth,“Pa.planstoregulatemethanefromdrillingindustry,”Energywire,January20,2016,accessedFebruary4,2016,http://www.eenews.net/energywire/2016/01/20/stories/106003085715Plummer,Sarah,“Commissionapprovesfirstcounty-widebanonwasteinjection,”TheFayetteTribune,January14,2016,accessedFebruary4,2016,http://www.fayettetribune.com/news/commission-approves-first-county-wide-ban-on-waste-injection/article_b2440196-ba2a-11e5-b9ed-3f82b6d3ba3b.html

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16Junkins,Casey,“W.Va.ProductionNumbers‘Shocking’,”TheIntelligencer,January17,2016,accessedFebruary4,2016,http://theintelligencer.net/page/content.detail/id/651654/W-Va--Production-Numbers--Shocki---.html