Halliburton Warns of 'Chilling Effect' from Chemical Disclosure Without Safeguards
Oil field services heavyweight Halliburton Co. is urging federal judges to uphold a Pennsylvania law that governs doctors' access to information about chemicals used in hydraulic fracturing.
Subsidiary Halliburton Energy Services Inc. (HESI) filed an amicus brief Monday in the 3rd U.S. Circuit Court of Appeals pressing the judges to recognize the value of the company's intellectual property.
"If HESI's trade secrets are made public, then HESI will be unable to recoup the investment in dollars, time, and human resources it has made," the brief said, "and it will lose any incentive to continue to make such investments in research and development."
The case centers on a provision of Pennsylvania's oil and gas law that allows health professionals to obtain a list of fracking chemicals, including trade secrets, by signing a confidentiality contract with the driller. The provision was included in sweeping revisions, known as Act 13, to the state's oil and gas law in 2012.
Critics deride the measure as a "medical gag rule," preventing doctors from consulting with colleagues to address ailments potentially caused by exposure to fracking chemicals. Luzerne County physician Alfonso Rodriguez filed suit against the state Department of Environmental Protection, alleging that the rule prevents him from meeting his ethical duties to gather and exchange all relevant information before making medical decisions.
A judge for U.S. District Court for the Middle District of Pennsylvania last year found that Rodriguez lacked standing because he had not actually been injured by the law (EnergyWire, July 2, 2014). He appealed to the 3rd Circuit.
Halliburton was the only company to file an amicus brief at the district court level and is the only company so far to file one with the circuit court. The company argues that Act 13's confidentiality agreement represents a "well accepted and balanced approach" to provide information to health professionals without jeopardizing trade secrets that contribute to technological advances.
"Failure to protect proprietary information would create substantial disincentives for a company like HESI to offer these types of innovative products for use in a particular jurisdiction," attorney Michael Meloy wrote in this week's brief. "Moreover, these disincentives could have a chilling effect on future research and development, meaning that innovative, more effective and environmentally-friendly products would never be developed, resulting in lost opportunities to further the responsible and efficient development of oil and gas resources."
Halliburton further argues that confidentiality agreements as described in Act 13 are similar to information-protection provisions in federal laws, including the Emergency Planning and Community Right-to-Know Act and the Occupational Safety and Health Act.
Finally, the company contends that the absence of a confidentiality agreement would render the medical disclosure provision a regulatory taking of the company's intellectual property -- warranting compensation from the state government.
A separate challenge of the medical disclosure rule is under review by the state Supreme Court.
Trade secrets after takeover
Halliburton's stiff opposition to medical disclosure without a guarantee of confidentiality comes two months after the announcement that the company will buy rival oil field services firm Baker Hughes Inc., which has taken a different approach to disclosure.
Baker Hughes announced in April that it would phase out trade secret claims in fracking chemical disclosures to the website FracFocus.org (EnergyWire, April 26, 2014). The Obama administration praised the decision as a opportunity to build trust between the public and the oil and gas industry, while competitor Schlumberger Ltd. noted that it rarely claims trade secrets anymore.
Executives of both Halliburton and Baker Hughes declined to say last year whether Baker Hughes' disclosure policy would continue after the companies merged. But some environmentalists see Halliburton's past and continued effort to protect trade secrets as a signal of what is to come.
"For us, this is certainly a poor signal," said Natural Resources Defense Council attorney Matthew McFeeley. "Baker Hughes rightly recognized that it's good business to disclose the full content of their fracking fluid, and if it made business sense for them, there’s no reason Halliburton can’t do the same."
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