Propping Open Cracks in Secret Depths of Fracking Chemicals: How the Wyoming Supreme Court Is Demanding More of Companies Seeking Trade Secret Protection
In Powder River Basin Resource Council v. Wyoming Oil and Gas Conservation Commission, 2014 WY 37 (2014), the Wyoming Supreme Court recently held that state district courts receiving appeals of denied record requests must independently determine whether the information must be disclosed or not, rather than merely reviewing the determination of the Commission as an administrative decision. Further, when determining whether the disclosed chemicals qualify as trade secrets protected under the Wyoming Public Records Act (WPRA), Wyo. Stat. Ann. § 16-4-203, the Wyoming high court held that district courts must apply the more narrow definition of what constitutes a trade secret under the Freedom of Information Act (FOIA) as developed through federal case law when determining if the chemical formulations used in fracking qualify as trade secrets protected under the Wyoming Public Records Act (WPRA), Wyo. Stat. Ann. § 16-4-203.
Wyoming has handily maintained its status as a top energy producing state (Wyoming produced more coal than the next six states combined in 2012) and, over the past three years, oil production in Wyoming has slowly increased due to the application of new technologies, including directional and horizontal drilling and hydraulic fracturing. Fracking companies rely on comprehensive intellectual property law, from patents to trade secrets, to protect their confidential business information about the processes by which companies develop these resources. Hydraulic fracturing throughout the nation, however, has drawn criticism for the use of potent chemicals in those processes and companies’ waste water disposal methods (the recent criminal charges brought against Benedict Lupo under the Clean Water Act for dumping saltwater brine and drilling mud containing benzene and toluene into the Mahoning River is just one example).
With these developments, Wyoming environmental groups have become concerned about protection of groundwater and surface water from contamination by fracking companies in the state and made a public records request for required disclosures of the chemicals in several companies’ hydraulic fracturing products. As a result, Wyoming law now requires companies that frack in the state to submit to the Wyoming Oil and Gas Conservation Commission “[t]he chemical additives, compounds and concentrations or rates proposed to be mixed,” as well as “the type of chemical (the ingredient’s purpose), the chemical compound name, [Chemical Abstracts Service] number, and the concentration of each chemical.” 2014 WY at *6. However, the Commission’s regulations permit companies to seek protection of their information from public disclosure as being trade secrets. See Rules, Wyoming Oil and Gas Conservation Commission, Chapter 3, Sec. 45(d).
Undeterred, environmental groups requested that the Commission release the fracking companies’ submitted information about their chemical formulations. Id. at *13 The Commission highlighted the environmental groups’ desire to use the information about chemical identification for deformulation and reverse engineering purposes and denied the environmental groups’ multiple requests, as affirmed by the Wyoming district court, concluding that the companies’ right to protect their proprietary information outweighed the identified public interest and public health arguments. Id. at *13, *14.
The Wyoming Supreme Court reversed and remanded the case for the district court to individually examine the information requests and apply the FOIA’s definition of a trade secret to determine whether the Commission correctly denied the requested information. The Court placed the burden on the Commission, as custodian, to show that the denial of the public right of access to the records did not run afoul of statutory limitations. Id. at *17, *27, *32-38. The Court specifically noted that the FOIA’s “definition [of a trade secret] requires that there be a direct relationship between the trade secret and the fracking formulation and process” – thus placing a higher burden on the Commission, and thus on the companies requesting trade secret protection in the first place. Id. at *38 (internal citation omitted).
While the Wyoming Supreme Court left to the district court the question of whether individual chemicals can constitute trade secrets under the FOIA standard, it indicated that expert opinion and credibility assessment would be appropriate. Id. at *44. As practitioners will appreciate, fracking companies will face a high burden to establish trade secret protection with expert evidence demonstrating that each chemical or the resulting combination of chemicals in the fracking fluid constitutes “a secret, commercially valuable plan, formula, process . . . that is used for the making, preparing, compounding, or processing of trade commodities and that can be said to be the end product of either innovation or substantial effort, with a direct relationship between the trade secret and the productive process.” Id. at *43, 44.
Gibbons will continue to monitor developments in this area.