Fracking and Trade Secrets: An Introduction

Fracking.

If you've read the newspaper over the past year or so, fracking suddenly has become a household term. Hydraulic fracturing, or "fracking," involves the injection of highly pressurized fluids into rock layers to release petroleum or natural gas. Though fracking has been around for decades, it has received a great deal of press and legislative attention for two primary reasons.

First, some states - most prominently, North Dakota - have seen a rejuvenation of their economies and manufacturing base, spurred on by fracking and its correspondent increase in energy production. Some studies, in fact, show the United States may overtake Saudi Arabia as the world's leading oil producer by the end of this President's term.

Second, fracking has received scrutiny from conservationist and environmental groups that are concerned over the public health risks associated with fracking. In particular, these groups have expressed concerns over the depletion of water supplies attendant with fracking, as well as the release into local aquifers of the additives contained in fracturing fluids.

At this point, you may be asking: what on earth this post has to do with competition law?

The answer's fairly simple.

Oil and gas producers largely believe their fluid compositions (or hydraulic fracturing chemicals) are trade secrets.

But state laws require producers to disclose these compositions as part of the permitting process. If publicly filed, those fluid compositions then can be obtained through freedom of information laws.

Unless...they're trade secrets.

This tension between commerce and conservation has spawned recent litigation in Wyoming and Pennsylvania. The legal issues here and elsewhere involve a collision of many different public and private concerns, including:

• What oil and gas producers must show a state administrative agency to assert trade secret protection over fluid compositions;
• The ability of interest groups to challenge administrative decisions over trade secret protection;
• Provisions in some state laws that require oil and gas companies to provide chemical composition data (despite its trade secret protection) to third-party medical providers;
• Medical providers' objections on First Amendment grounds to being forced to sign confidentiality agreements as a condition of receiving this chemical composition data; and
• The omnipresent risk that a disaffected employee - that is, a "whistleblower" - might disclose such trade secret information to a government agency or in the course of a retaliatory discharge lawsuit.

In future posts, I'll be discussing all of these topics. Fracking law, as it affects trade secrets, is potentially an explosive area of litigation for the foreseeable future.