Responding to Emergencies at Marcellus Shale Sites

Photo by Steve Partridge. Some rights reserved.

The Pennsylvania legislature recently passed a short but sweet bill (SB 995) requiring emergency response information to be posted at the entrance to each “unconventional” well site in the area.

In this case, “unconventional” is a roundabout way of saying “fracking”. Or, more technically, as explained by Buchanan Ingersoll & Rooney in a related alert last week:

The term “unconventional well” is defined to mean a natural gas well for production of gas from an unconventional formation. An “unconventional formation” is one below the base of the Elk Sandstone formation, or its equivalent, where natural gas cannot generally be produced economically except when the well bores are stimulated by hydraulic fracturing, use of multilateral well bores, or other techniques to expose more of the formation of the well bore.

The bill, which was signed by PA Governor Tom Corbett on February 2, requires such well sites to develop an emergency response plan, register the unique GPS coordinate address of the site with the Dept of Environmental Protection, and post a reflective sign at the entrance to each site with its address, emergency contact number and “other such information” deemed “necessary.”

Marcellus Connection quotes State Rep. Brandon Neuman as saying, “It’s very important for our local first responders to know where the drilling is going on […] a lot of the wells are in uncharted territory.”

The Ups and Downs of Fracking Disclosure

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Davis Polk wants you to be well informed when preparing environmental disclosures for upcoming 10-K and 20-F filings. In a recent client memorandum, the firm highlights key issues in this arena, including disclosure related to hydraulic fracturing.

The memo echoed the previous comments of Andrews Kurth, which suggested that the SEC was, perhaps, a little too enthusiastic in seeking fracking disclosure in late 2011.

The SEC came under fire during late summer 2011 for a perceived attempt to force the disclosure of information that was not otherwise legally required. In a September 2011 statement before the House Financial Services Committee on SEC Oversight, SEC Chairman Schapiro responded and assured lawmakers that the SEC is “not regulating fracking in any way,” it is not “in the business of regulating fracking” and that its “goal is not to vindicate any kind of environmental interest here.”

You can follow the heated dialogue between the SEC and public companies on Knowledge Mosaic’s recently renovated SEC Comment Letters search page. A search for the phrase “hydraulic fracturing” brings up more than 30 comment letters and responses since the beginning of 2011.

However, expect those numbers to decline. Davis Polk notes that “the SEC appears to have retreated from what was viewed as an attempted expansion of disclosure regarding the environmental impacts of hydraulic fracturing.”

But companies likely aren’t off the hook for long. Davis Polk’s memo goes on to point out:

[I]t appears interest by certain shareholders for greater hydraulic fracturing disclosure is increasing. In the 2011 shareholder proxy season, shareholder proposals requesting companies to report on the implications of their use of hydraulic fracturing went to vote at five oil and gas companies. The proposals averaged 40.7% support.

More on shareholder proposals relating to fracking here.

Youngstown, OH Shakes One More Quake Out of 2011

Photo by Mark Vitullo. Some rights reserved.

The tectonic plates below Youngstown, Ohio rang in the new year with a bit a of a scare, specifically a 4.0 magnitude earthquake thought to have originated at a nearby hydraulic fracturing operation. Though this was the largest of the bunch, the New Year’s Eve quake was actually the 11th to occur within a two mile radius of the well in the last nine months.

In fact, the day before this most recent quake, December 30th, operations at this and four other well in the area operated by D & L Energy were temporarily shut down by The Ohio Department of Natural Resources, who brought in scientists to determine that fracking was, indeed, the cause of the quakes, and that the most likely explanation lay with the waste liquids pumped into the 9,200 foot deep wells causing the fault lines underneath to slip apart. Andy Ware, the ODNR’s deputy director, stated that the wells would remain closed until officials are “able to take a closer look at the earthquake data that is available.”

Bloomberg reports that Rob Nichols, a spokesman for Ohio governor and fracking supporter John Kasich made clear that the state’s 177 other functional wells would remain open and functional while the investigation progresses, remarking that “we are not going to stand by and let someone drive a stake through the heart of what could be an economic revival in Eastern Ohio.”

Texas Fracking Rules Go Into Effect 2/1/2012

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It was June of this year when HB 3328 was sent to the Governor of Texas. In the six short months since, regulations implementing the legislation – requiring public disclosure of the composition of hydraultic fracturing fluid – have been both proposed and adopted.

According to the Railroad Commission of Texas Press Release announcing the big news (the rules were adopted earlier this month), “[a] listing of chemical ingredients used to hydraulically fracture a well that has been permitted by the RRC on or after Feb. 1, 2012, must be uploaded to the public national chemical disclosure registry, FracFocus.org.”

Of course one big caveat remains: “A supplier, service company or operator is not required to disclose trade secret information unless the Attorney General or court determines the information is not entitled to trade secret protection.”

I was glad to hear, however – via a Jackson Walker e-Alert – that “[t]he Commission kept the trade secret exception narrow in the rulemaking process. While commenters requested that the Commission revise the meaning of trade secret information to include proprietary or confidential business information, the Commission found that the addition of those terms would make the scope of the definition broader than was intended by HB 3328.”

The law firms Fulbright & Jaworski and Pillsbury also have more details.

EPA Initiates Proposed Rulemaking Process to Obtain Fracking Fluid Data

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On November 23, 2011 the EPA issued a letter partially granting a petition from the environmental group Earthjustice requesting disclosure and evaluation of the fluids and chemicals used in hydraulic fracturing under the Toxic Substances Control Act (TSCA).

Earthjustice had submitted the petition in August 2011 on behalf of more than 100 public health, environmental, and “good government” groups requesting that the EPA “adopt a rule under TSCA section 4 [15 USC 2603], requiring that manufacturers and processors of E&P Chemicals (defined in the petition as “chemical substances and mixtures used in oil and gas exploration or production” – ed.) conduct toxicity testing of all E&P Chemicals and identify all chemical substances and mixtures tested.” The petition also asked for the “promulgation of a rule under TSCA section 8 [15 USC 2607], requiring maintenance and submission of various records related to E&P Chemicals, calling in records of allegations of significant adverse reactions to E&P Chemicals, and requiring submission of all existing health and safety studies related to E&P Chemicals.”

Earlier in November, the EPA provided an initial response to the petition in which they denied the TSCA section 4 request, as the petition did not “set forth sufficient facts to support the assertion that it is ‘necessary to issue’ the requested TSCA section 4 rule, as required by TSCA section 21(b)(1).”

However, as stated in the November 24 letter, the EPA “has now decided to partially grant the TSCA section 8(a) and section 8(d) requests in the petition,” because they “believe there is value in initiating a proposed rulemaking process using TSCA authorities to obtain data on chemical substances and mixtures used in hydraulic fracturing.”

Hogan Lovells and K&L Gates have more.

One Shale Gas Report, Two Different Takes

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On November 10^th, the Secretary of Energy Advisory Board Natural Gas Subcommittee released its second and final report on the steps that can be taken to improve the safety and reduce the environmental impact of shale gas development.

The report lays out 20 recommendations that it believes “would assure that the nation’s considerable shale gas resources are being developed responsibly, in a way that protects human health and the environment and is most beneficial to the nation,” which are being handed over to the Secretary of Energy Advisory Board (the duties of which include providing “advice and recommendations to the Secretary of Energy” – quite the chain of recommendations!).

The recommendations range from “improve public information about shale gas operations” to “elimination of diesel use in fracturing fluids,” but one of the most striking parts of the entire report comes in the concluding remarks (which are also called out in the Subcommittee’s related press release):

The Subcommittee believes that if action is not taken to reduce the environmental impact accompanying the very considerable expansion of shale gas production expected across the country – perhaps as many as 100,000 wells over the next several decades – there is a real risk of serious environmental consequences causing a loss of public confidence that could delay or stop this activity.

The Subcommittee cautions that whether its approach is followed or not, some concerted and sustained action is needed to avoid excessive environmental impacts of shale gas production and the consequent risk of public opposition to its continuation and expansion. (emphasis added)

How this report was interpreted, of course, is another point of interest. Investigative journalists at ProPublica covered the report with the gloomy headline Energy Dept. Panel Warns of Environmental Toll of Current Gas Drilling Practices, whereas Energy Secretary Steven Chu glossed over the serious environmental consequences, putting his own positive spin on things:

As the President has said, natural gas will continue to play an important role in our nation’s energy portfolio, helping create jobs, stimulate the economy, and reduce our dependence on imported oil.

I will be working closely with my colleagues in the Administration to review the recommendations and to chart a path for continued development of this vital energy resource in a safe manner.

You can read more about the report and the Subcommittee here.

On Shareholder Proposals Requesting Greater Fracking Disclosure

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We’ve posted before on the topic of public company disclosure about fracking activities – compelled by either the SEC or state legislatures. A recent Bracewell & Giuliani legal advisory, however, covers another force behind disclosure: shareholders.

Institutional Shareholder Services (ISS), a “leading provider of corporate governance solutions to the global financial community” that formulates proxy voting policies earlier this year put out a call for comments on its 2012 draft policies. This year, ISS proposed a new policy concerning hydraulic fracturing disclosure.

ISS’s proposed policy is as follows:

Generally vote FOR proposals requesting greater disclosure of a company’s (natural gas) hydraulic fracturing operations, including measures the company has taken to manage and mitigate the potential community and environmental impacts of those operations, considering:

• The company’s current level of disclosure of relevant policies and oversight mechanisms;
• The company’s current level of such disclosure relative to its industry peers;
• Potential relevant local, state, or national regulatory developments; and
• Controversies, fines, or litigation related to the company’s hydraulic fracturing operations.

The decision to support such proposals is based on “increasing media and public policy attention given to hydraulic fracturing, shareholder proposals requesting information on fracking policies and practices have received notable levels of support.” Current ISS policy does not specifically address hydraulic fracturing-related shareholder proposals.

Bracewell & Giuliani doesn’t sound completely sold:

“It is unclear from ISS’s proposal why it believes that hydraulic fracturing proposals should not continue to be considered on a case-by-case basis as other environmental issues are, especially in light of the fact that hydraulic fracturing has had no proven impact on drinking water sources.”

And even goes so far as to all-but-recommend that commenters and companies tell ISS that they oppose the policy:

“Commenters may wish to urge ISS to revise its policy to consider these proposals on a case-by-case basis and to recommend “no” votes where companies make reasonable levels of disclosure of information that is material to investors. Concerned companies should also contact ISS with ideas on how to maintain transparency related to hydraulic fracturing operations without creating duplicative and immaterial disclosure, ceding board discretion to conduct operations and inviting shareholder challenges to the day-to-day operations of exploration and production and oilfield service companies.”

What do you think? Comments on the proposed policy will be accepted via email (policy@issgovernance.com) until November 7, 2011.

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To see proxy statements filed with the SEC that include shareholder proposals regarding hydraulic fracturing, check out this search on knowledgemosaic.

Here’s one to whet your appetite:

EXXON MOBIL CORP | Form DEF 14A | 4/13/2011

 “Whereas:

ExxonMobil is the largest natural gas company in the country.

Onshore ‘unconventional’ natural gas production often requires hydraulic fracturing, which typically injects a mix of millions of gallons of water, thousands of gallons of chemicals, and particles deep underground to create fractures through which gas can flow for collection. According to the American Petroleum Institute, ‘up to 80 percent of natural gas wells drilled in the next decade will require hydraulic fracturing.’

The potential impacts of those fracturing operations stem from activities above and below the earth’s surface – including actions that are necessarily part of the life cycle of fracturing and extraction, such as assuring the integrity of well construction, and moving, storing, and disposing of significant quantities of water and toxic chemicals.

High profile contamination incidents, especially in Pennsylvania, have fueled public controversy. Pennsylvania’s Times-Shamrock Newspapers report ‘many of the largest operators in the Marcellus Shale have been issued violations for spills that reached waterways, leaking pits that harmed drinking water, or failed pipes that drained into farmers’ fields, killing shrubs and trees.’

Pittsburgh banned natural gas drilling and public officials in Philadelphia and New York City have called for delays or bans on fracturing. The New York State Assembly approved a temporary moratorium on natural gas drilling and Pennsylvania, West Virginia, Colorado, and Wyoming all tightened or are considering tightening regulations and permitting requirements, though state regulations remain uneven. The federal Environmental Protection Agency is studying the potential adverse impact that hydraulic fracturing may have on water quality and public health.

A multi-sectoral assessment for investors, ‘Water Disclosure 2010 Global Report,’ noted the existence of reputational risks from water management for the oil and gas sector.

Proponents believe these potential environmental impacts and increasing regulatory scrutiny could pose threats to ExxonMobil’s license to operate and enhance vulnerability to litigation. Proponents believe our company is not providing sufficient information on key business risks associated with hydraulic fracturing operations. Proponents believe ExxonMobil should protect its long-term financial interests by taking measures beyond the existing, inconsistent regulatory requirements to reduce environmental hazards and associated business risks.

Therefore be it resolved:

Shareholders request that the Board of Directors prepare a report by October 2011, at reasonable cost and omitting confidential information such as proprietary or legally prejudicial data, summarizing: 1) Known and potential environmental impacts of ExxonMobil’s fracturing operations; and 2) Policy options for our company to adopt, above and beyond regulatory requirements and our company’s existing efforts, to reduce or eliminate hazards to air, water, and soil quality from fracturing operations.

To see annual reports of proxy voting records that include such proposals, check out this search. Not surprisingly, the votes tend to go with management.

This Week in Fracking Disclosure

Public companies have plenty to say about fracking. This week, many mentions of hydraulic fracturing in SEC filings took the form of risk disclosure regarding the potential business impacts of regulatory actions on the fracking front.

Want to keep your finger on the fracking disclosure pulse? knowledgemosaic users should consider setting up a knowledgemosaic Watchlist Alert. Or simply check back on our SEC Filings search page. To get results like those below, try the following text search: (EPA or environmental) near (fracking or “hydraulic fracturing”)

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• Mid-Con Energy Partners, LP | Form S-1/A | 10/6/2011

The U.S. Congress is considering legislation to amend the federal Safe Drinking Water Act to require the disclosure of chemicals used by the oil and natural gas industry in the hydraulic fracturing process. Hydraulic fracturing is a commonly used process in the completion of unconventional wells in shale formations, as well as tight conventional formations including many of those that we complete and produce. This process involves the injection of water, sand and chemicals under pressure into rock formations to stimulate oil and natural gas production. If adopted, this legislation could establish an additional level of regulation and permitting at the federal level, and could make it easier for third parties to initiate legal proceedings based on allegations that chemicals used in the fracturing process could adversely affect the environment, including groundwater, soil and surface water. In addition, the EPA has recently asserted regulatory authority over certain hydraulic fracturing activities involving diesel fuel under the Safe Drinking Water Act’s Underground Injection Program and has begun the process of drafting guidance documents on regulatory requirements for companies that plan to conduct hydraulic fracturing using diesel fuel. In addition, a number of other federal agencies are also analyzing a variety of environmental issues associated with hydraulic fracturing and could potentially take regulatory actions that impair our ability to conduct hydraulic fracturing operations. Some states, including Texas, and various local governments have adopted, and others are considering, regulations to restrict and regulate hydraulic fracturing. Any additional level of regulation could lead to operational delays or increased operating costs which could result in additional regulatory burdens that could make it more difficult to perform hydraulic fracturing and would increase our costs of compliance and doing business, resulting in a decrease of cash available for distribution to our unitholders.

• Sanchez Energy Corp | Form S-1/A | 10/6/2011

Hydraulic fracturing has recently become subject to increased public scrutiny and recent changes in federal and state law, as well as proposed legislative changes, could significantly restrict the use of hydraulic fracturing. Such laws could make it more difficult or costly for us to perform fracturing to stimulate production from dense subsurface rock formations and, in the event of local prohibitions against commercial production of natural gas, may preclude our ability to drill wells. In addition, such laws could make it easier for third parties opposing the hydraulic fracturing process to initiate legal proceedings based on allegations that specific chemicals used in the fracturing process could adversely affect groundwater. If hydraulic fracturing becomes regulated at the federal level as a result of federal legislation or regulatory initiatives by the U.S. Environmental Protection Agency, or the EPA, or other federal agencies, our fracturing activities could become subject to additional permitting requirements and result in permitting delays, financial assurance requirements, more stringent construction specifications, increased monitoring, reporting and recordkeeping obligations, plugging and abandonment requirements, as well as potential increases in costs. Additionally, on August 23, 2011, the EPA published a proposed rule in the Federal Register that would establish new air emission controls for oil and natural gas production and natural gas processing operations. The EPA is currently receiving public comment and recently conducted public hearings regarding the proposed rules and must take final action on them by February 28, 2012. Compliance with such rules could result in significant costs, including increased capital expenditures and operating costs, and could adversely impact our business.

• RAAM Global Energy Co | Form S-4 | 10/6/2011

Hydraulic fracturing is an important and common practice that is used to stimulate production of hydrocarbons, particularly natural gas, from tight formations. The process involves the injection of water, sand and chemicals under pressure into the formation to fracture the surrounding rock and stimulate production. The process is typically regulated by state oil and gas commissions or other similar state agencies. However, the EPA recently asserted federal regulatory authority over hydraulic fracturing involving diesel under the Safe Drinking Water Act’s Underground Injection Control Program and has begun the process of drafting guidance documents on regulating requirements for companies that plan to conduct hydraulic fracturing using diesel. The White House Council on Environmental Quality is coordinating an administration-wide review of hydraulic fracturing practices, and a number of federal agencies are analyzing a number of environmental issues associated with hydraulic fracturing. The EPA has commenced a study of the potential environmental effects of hydraulic fracturing activities, with initial results expected to be available by late 2012 and final results by 2014. In addition, the U.S. Department of Energy and the U.S. Government Accountability Office are studying different aspects of how hydraulic fracturing might adversely affect the environment, and the U.S. Department of the Interior is considering disclosure requirements or other mandates for hydraulic fracturing on federal lands. A committee of the United States House of Representatives also has conducted an investigation of hydraulic fracturing practices. These studies, depending on their results, could spur initiatives to regulate hydraulic fracturing under the Safe Drinking Water Act or under newly established legislation. Legislation has been introduced before Congress to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the fracturing process. In addition, some states, including Texas, have adopted, and other states are considering adopting, regulations that could restrict hydraulic fracturing in certain circumstances. Texas passed a law that requires, subject to certain trade secret protections, disclosure of information regarding the substances used in the hydraulic fracturing process to the Railroad Commission of Texas and the public. Louisiana is considering adoption of a regulation that would impose similar disclosure requirements. If new laws or regulations that significantly restrict hydraulic fracturing are adopted, such laws could make it more difficult or costly for us to perform fracturing to stimulate production from tight formations. In addition, if hydraulic fracturing is regulated at the federal level, our fracturing activities could become subject to additional permitting requirements, and also to attendant permitting delays and potential increases in costs. Restrictions on hydraulic fracturing could also reduce the amount of oil and natural gas that we are ultimately able to produce from our reserves. In addition, disclosure requirements could make it easier for third parties opposing hydraulic fracturing to initiate legal proceedings based on allegations that specific chemicals used in the process could adversely affect ground water.

• Glori Energy Inc. | Form S-1 | 10/5/2011

The Environmental Protection Agency, or EPA, has recently focused on concerns about the risk of water contamination and public health problems from drilling and hydraulic fracturing activities. The EPA is conducting a comprehensive research study on the potential adverse effects that hydraulic fracturing may have on water quality and public health. While our technology is unrelated to hydraulic fracturing, it is possible that any federal, state and local laws and regulations that might be imposed on fracturing activities could also apply to oil recovery operations. Although it is not possible to predict the outcome of EPA’s study or whether any new legislation or regulations would impact our business, such future laws and regulations could result in increased compliance costs or additional operating restrictions, which, in turn, could materially harm our financial position, results of operations and cash flows.

Marcellus Minerals: Is Marcellus Shale Gas a “Mineral” for the Purposes of Pennsylvania’s Dunham Rule?

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Two recent law firm memos (from Fulbright & Jaworski and Pepper Hamilton) tackled the subject when they covered a September 7^th decision from the Pennsylvania Superior Court in Butler v. Powers.

The “Dunham Rule” refers to an assumption in Pennsylvania law, wherein a reservation or exception for “minerals” in a deed or lease that does not specifically mention natural gas or oil creates a “presumption that the grantor did not intend for ‘minerals’ to include natural gas or oil.” The Dunham Rule has been around since its namesake case – Dunham v. Kirkpatrick – was decided in 1882.

In Butler v. Powers, a trial court in Susquehanna County had previously found that, based on the application of the Dunham rule, the disputed deed in the case did not include Marcellus Shale gas. However, the Superior Court – without actually deciding on the Dunham Rule’s applicability – remanded the case back to the trial court for determination of the following three things:

(1) whether Marcellus shale constitutes a “mineral”; (2) whether Marcellus shale gas constitutes the type of conventional natural gas contemplated in Dunham and Highland; and (3) whether Marcellus shale is similar to coal to the extent that whoever owns the shale, owns the shale gas.

“Consequently,” the opinion goes on to say, “the parties should have the opportunity to obtain appropriate experts on whether Marcellus shale constitutes a type of mineral such that the gas in it falls within the deed’s reservation.”

But the decision made Pepper Hamilton nervous:

 “Potentially more troubling is the fact that although the dispute between the parties in Butler does not directly involve a deed that explicitly conveys or reserves natural gas rights (since the deed in question used only the terms “minerals” and “petroleum oils,”), the outcome of the case could establish precedent regarding whether a conveyance or lease of oil and gas rights, reserving all other minerals, reserves the unconventional gas trapped in the Marcellus Shale to the mineral title holder.”

Both Pepper Hamilton and Fulbright & Jaworski have pledged to keep a close eye on the case.

Public Company Disclosure of Fracking Activities

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A recent article from Andrews Kurth suggests that the SEC may be paying extra special attention to disclosure relating to hydraulic fracturing in EDGAR filings.

According to Andrews Kurth, the SEC staff has recently issued comment letters “seeking detailed disclosures regarding hydraulic fracturing and shale industry risks and the amount and specific nature of the hydraulic fracturing chemicals used.”

Aside from the usual environmental risk disclosures, of particular interest to the SEC is the companies’ reported performance of their shale gas wells, and whether or not projected performance (and profitability) is overstated to investors. (These purported discrepancies also prompted NY Attorney General to subpoena several energy companies looking for similar disclosure – the topic of a Green Mien post late last month.)

While recent SEC comments cited by the article may not yet be publicly available (the full set of comments and responses is not typically released until the review of the target filings is complete), you can view similar correspondences between the SEC and public companies that have been released on knowledgemosaic’s SEC Filings search page.

Here is an example of an SEC-Company correspondence regarding reported reserves. (Note that SEC comments are filed in EDGAR under the form type “Upload” and company responses are filed under the form type “Corresp.”)

SWIFT ENERGY CO | Form UPLOAD | 2/16/2011

In your February 3, 2011 response to our January 6, 2011 comment, you stated that the shortage of hydraulic fracturing services was a primary cause of the delay in drilling proved undeveloped locations in your AWP field. Your statement, “During 2009 and throughout 2010, as the Company conducted vertical and horizontal drilling operations in this field, there was limited access to hydraulic fracturing equipment and other completion services, requiring the Company to delay and defer some development drilling.” seems to indicate that these shortages were a known factor and should have led to the removal from the proved category of those undeveloped AWP locations that were not scheduled to be drilled within five years of booking. Please remove such locations from your PUD reserves in future Exchange Act filings.

 

SWIFT ENERGY CO | Form CORRESP | 2/22/2011

Company Response:

As requested, in future Exchange Act filings with the Commission, the Company will not include in its proved reserves any undeveloped AWP locations that are not scheduled to be drilled within five years of booking. This necessarily means that those PUD reserves in the AWP field booked more than five years prior to year-end 2009 which were included in the Company’s proved reserves at year-end 2009, as reported in Swift Energy’s prior Form 10-K, which PUD reserves are the subject of this comment, have been removed from the Company’s proved reserves at year-end 2010.

So what’s a law-abiding company to do? Andrews Kurth offers this advice:

We recommend that public oil and gas companies and public oilfield services companies that provide hydraulic fracturing services review their current environmental disclosures as well as risk factors in light of the Staff’s comments and recent legislative and regulatory developments in the oil and gas and oilfield services industries to see if their disclosures could be enhanced to add more specificity about their hydraulic fracturing operations. Oil and gas companies should also review their reserve estimates and related public disclosures (including disclosures in investor presentations) to ensure that they are accurate and consistent with the SEC’s oil and gas reporting rules.

By revisiting the disclosure matters identified by the Staff during the comment letter process, including disclosures about the uncertainty of reserve estimates, companies may be able to identify and address hydraulic fracturing and reserve disclosure issues proactively in future filings and therefore potentially avoid Staff comments and subpoenas, possible future amendments to their SEC filings and the potential for successful stockholder claims of material misstatements or omissions relating to hydraulic fracturing or reserve estimates.

Be sure to read the whole Andrews Kurth article, which covers the full spectrum of hydraulic fracturing disclosure issues (including disclosures mandated by the EPA, under the Energy Policy Act of 2005, under local and state laws, and more).