Hydraulic Fracturing: Trade Secrets and the Mandatory Disclosure of Fracturing Water Composition

Abstract

Hydraulic fracturing is a process that uses a high-pressure fluid to create fractures in underground rock formations, thereby facilitating the production of oil and gas from formations that have low permeability. The fluid used in hydraulic fracturing typically consists of water, sand, and various additives.

Historically, the companies that perform hydraulic fracturing kept the composition of their fracturing fluids confidential, treating the compositions as trade secrets. But in recent years, many people expressed fears that hydraulic fracturing might be harmful to the environment, and they began pushing for regulations that would require companies to publicly disclose the composition of fracturing fluids. The push has been effective. Since mid-2010, about 16 states have enacted mandatory disclosure regulations, and this count includes most of the states that have a significant amount of hydraulic fracturing activity. In addition, other states seem poised to adopt similar rules.

Thus, in a relatively short time, a near-consensus has developed that mandatory disclosure is appropriate. But the various states’ disclosure regulations differ from one another in significant ways. There are a number of reasons why states adopt different rules regarding the same subject, including the facts that states sometimes face different circumstances and that states sometimes will make different policy choices even when they face very similar circumstances.

But in this case, an additional reason for the differences in state rules is that so many states have adopted mandatory disclosure regulations within a relatively short period, leaving little time to develop a consensus regarding what rules seem likely to work best, much less time to develop experience working with the regulations.

This Article begins with background discussion of hydraulic fracturing and the movement toward mandatory disclosure. The Article then examines ways in which the states’ regulations differ, analyzes which of the differences are most important, and offers conclusions regarding which of the different regulatory approaches are best. Finally, the Article discusses several other issues that have arisen with respect to mandatory disclosure.

Keywords: Hydraulic fracturing, fracing, fracking, mandatory disclosure, oil and gas, trade secrets, hydrofracturing