Get the Facts: Virginia’s Fracking ‘Trade Secret’ Bill
When it comes to chemical disclosure — or more specifically how oil and gas companies report the additives used during the hydraulic fracturing process and what exactly is required to be reported — anti-fracking activists have tried (and failed) for years to prevent companies from having the same protections as any other industry for the ingredients used in their specific formulas. And Virginia is no exception.
A bill is making its way through Virginia’s House of Delegates that would clarify the information that must be shared under the Commonwealth’s Freedom of Information Act (FOIA). The bill, HB 1678 Virginia Freedom of Information Act (FOIA); trade secrets submitted to the Department of Mines, which would protect companies from sharing proprietary information that could harm their ability to be competitive, passed the General Laws subcommittee last week and could go before the full General Laws committee as soon as this week.
Before we go any further, it needs to be said that this bill will not prevent the Virginia Department of Mines, Minerals, and Energy (DMME) from receiving the entire solution used during the completion of wells — as the state’s regulator they receive this information regardless of whether or not the bill passes. Nor would it prevent this information from being shared with first responders or medical professionals in the event of an emergency, contrary to what Megan Ryhne, Executive Director of the Virginia Coalition for Open Government, told Inside Business Times last week (More on this claim in a minute).
So here’s a little background on why this bill is circulating now:
The Commonwealth of Virginia has been reviewing and updating its oil and gas regulations since the fall of 2013. As part of this process, the regulations that were implemented in December 2016 require the disclosure of chemicals used during the hydraulic fracturing process onto the national registry Fracfocus.org, as well as a full disclosure to DMME.
While a company does not currently have to report trade secrets on the site, if a person or competing company were to FOIA those ingredients from DMME, then the regulatory agency would have to comply. To understand why this is an issue, one first has to understand what exactly a trade secret is.
Under the Code of Virginia Uniform Trade Secrets Act:
“’Trade secret’ means information, including but not limited to, a formula, pattern, compilation, program, device, method, technique, or process, that:
- Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and
- Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”
Each fracking company may use similar ingredients to complete a job, but each also finds its niche — the perfect additive ratio — that sets it apart from its competition, and allows that competition to exist. Having a competitive marketplace also encourages companies to bring their A-game, so to speak, to each job they undertake, ensuring companies use their most advanced technology for safety and efficiency.
That’s why oil and gas producers use certain companies over others on different locations or in different plays.
Exemptions to a FOIA request WILL NOT hinder emergency responders or medical professionals.
The loudest argument against trade secret protections in the oil and gas industry is, by and large, that allowing these to exist will hinder the ability for emergency responders or medical professionals to perform their duties in the event of an environmental or medical emergency. For instance, in a November 2016 press release, the Southern Environmental Law Center, said,
“A FOIA exemption would allow oil and gas companies to keep this information secret at the expense of public health. As the new regulations confirm, information about these chemicals is especially important to communities and emergency responders charged with protecting public health and the environment,” said Davis. “The General Assembly should not roll back this essential new protection. We will continue working with Virginia communities to build on these fracking protections, not weaken them.”
And as stated earlier, Inside Business Times reported that the current bill making its way through the Virginia House “would keep citizens and first responders to chemical and oil leaks from knowing which potentially dangerous substances could present in the state’s ground water.”
While that would certainly be alarming if it were true, it is not an accurate portrayal of what trade secret provisions mean in the event of an environmental or medical incident. In fact, right in the summary for the bill it clearly says,
“The bill authorizes the Director of the Department of Mines, Minerals and Energy (Director) to disclose such information to additional Department staff or state or local officials to assist the Department in responding to an emergency.”
DMME will still receive a complete list of every chemical used in the completions process — that goes without question as they have complete Material Data Sheets (MSDS) for any chemical brought on site, whether it’s to clean windows or actually used in the development of the well. And with this bill, it would still be the department’s discretion as to what constitutes an emergency and who needs to be informed when one occurs, including releasing the full list of additives.
But this shouldn’t come as a surprise to a legal firm, especially, given that oil and gas operations, and many other industries, fall under the Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA). That’s right — federal protections have been in place since 1986 to ensure that emergency responders are not hindered in the event of emergencies involving chemicals. According to the U.S. Environmental Protection Agency (EPA),
“The Emergency Planning and Community Right-to-Know Act (EPCRA) of 1986 was created to help communities plan for chemical emergencies. It also requires industry to report on the storage, use and releases of hazardous substances to federal, state, and local governments. EPCRA requires state and local governments, and Indian tribes to use this information to prepare their community from potential risks.”
And even under EPCRA, industries, including oil and gas, are still able to protect proprietary information:
“Section 322. Trade Secrets – Facilities are allowed to withhold the specific chemical identity from the reports filed under sections 303, 311, 312 and 313 of EPCRA if the facilities submit a claim with substantiation to EPA.”
So no, under no circumstances will emergency personnel be excluded from information needed to perform their duties under this or any other bill. What this bill will do, though, is prevent those individuals from then sharing that proprietary information with outside parties who do not need it to perform their duties. And, perhaps more importantly, it protects the companies and DMME from being required to share this proprietary information in the event of a FOIA request that could come from a competitor or individuals that could then make the information available to competitors.
Virginia’s FOIA Exemption Wouldn’t Be New
The Virginia Petroleum Council and the Virginia Oil and Gas Association recently conducted a survey to evaluate how trade secrets are disclosed and protected in top oil and gas producing states across the country. The results are as follows:
As the chart shows, the results confirmed that with the exception of California, every state with substantial oil and gas development has provisions that protect trade secrets. And actually, Virginia’s regulations even if the bill passes, would still be more stringent than most other states by requiring full disclosure to the DMME.
It is absolutely important for regulators, emergency responders and medical professionals to have the information needed to respond quickly and safely in the event of an emergency. It’s so important, in fact, that it’s required by federal law under EPCRA. But that does not mean that in order to do so, companies should be forced to give up the competitive edge that fuels technological advancements and allows for multiple companies to participate in a competitive marketplace. These are not mutually exclusive —communities have been protected for decades without jeopardizing proprietary information. And that’s exactly what this bill — and, quite frankly, most provisions for trade secrets — ensures.