The Benefit of Patents, Trade Secrets and Contracts in Oil and Gas Fracking
Hydraulic fracturing, or fracking, is the process of drilling down into the earth and releasing a high-pressure water mixture into the rock to unearth natural gas. Water, sand and chemicals are injected into the rock at high pressure which allows the gas to flow out to the head of the well.
Oil and gas companies have patented their procedures for well completion and horizontal drilling and, more commonly, the fracking fluids used. The patent right allows its owner to exclude another from making, using, selling or importing the invention for essentially any reason.
Over the last twenty years, there has been a shift in the perceived importance of patents to asserting them as information controlling mechanisms. Since patents are used to disclose an invention and not its resulting impact, patenting the fracking process also serves to prevent disclosure of all of the chemicals used. The fracking fluids are many times considered a trade secret by the chemical supplier, thus are withheld from public information. In addition, OSHA does not have health data on many chemicals used in the process; therefore, companies are not obligated to use material safety data sheets for every fluid. As a result, oil companies are not required to disclose all chemicals used in the patent.
As well, a third party interested in investigating the impact of fracturing fluids on the environment will need to make use of the patented materials, but cannot do so without being granted a license by the patentee. A patent holder can restrict licensing terms and assert its rights to control testing and experimentation.
After much environmentalist pressure, a website was created, FracFocus, that discloses the chemicals used in fracking fluids at each well. Yet, much uncertainty still remains about the disclosure of every single chemical, specifically, the trade secret protected chemicals which are exempt. There is still much litigation surrounding fracking's effects on well water, specifically the resulting increase in presence of natural gas, and the health of residents residing on oil and gas leases.
In Sierra Club v. The Bureau of Land Management, the EPA stated that fracking liquid contains chemicals that are known to be possible carcinogens, possible human health risks and hazardous air pollutants. The Bureau of Land Management in this case chose to summarize their general findings about fracking in all regions instead of collecting data about each particular well region, and dismissed the issue as outside its jurisdiction. The BLM chose not to collect any data about the particular well region involved in the case or the composition of the fracking chemicals and the court agreed with the BLM that the effect of fracking on the parcels at issue are largely unknown. As a result, the chemicals involved in fracking were never discussed. Yet, in many instances, environmentalists attempt to uncover the chemicals involved in fracking. In addition, the SEC has taken an elevated interest in the chemical makeup of fracking fluids. Having patents on the drilling process, trade secrets on the chemical composition and the proper contracts in place is a wise choice.
Hendershot, Cowart & Hisey, P.C. handles patent and trade secret litigation on behalf of oil and gas and other clients in Texas and throughout the nation. An aggressive, well-seasoned litigation strategy from day one can resolve a disagreement that would otherwise require the parties to spend unwanted time, money and other resources.