DOI Rule on Hydraulic Fracturing on Federal Lands Widely Criticized

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The pundits were right: virtually no one welcomed the new rule from the U.S. Department of the Interior (DOI) (Washington, D.C.) on hydraulic fracturing on federal lands, released March 20. Four years in the making, the 100-page rule sets out new federal standards for Oil & Gas Industry activity on federal lands, including new standards for well integrity, water protection and disclosure of chemicals used in hydraulic fracturing.

Oil and gas groups, criticizing the new rule as costly and unnecessary, filed a federal lawsuit in Wyoming to block the rule, which is scheduled to become effective in June. Environmental groups, on the other hand, said the new rule doesn't go far enough to protect federal lands from hydraulic fracturing. The final rule is very close to the agency's draft rule, released in 2013, which drew more than 1.5 million comments.

In an industry conference held in late 2014, weeks before the new rule was unveiled, Mark Barron, a lawyer at BakerHostetler (Cleveland, Ohio), predicted, "Litigation is inevitable. Everyone hates it, for different reasons." On March 20, BakerHostetler filed the lawsuit to stop the rule. For more on this issue, see December 22, 20104, article - EPA Delays Decision on Methane Reduction Among Oil & Gas Companies.

In his conference talk last December, Barron also said the Oil & Gas Industry planned to mobilize for a legislative intervention against the rule. That, too, came to pass: Within hours of the new rule's announcement, Capitol Hill Republicans were criticizing it. "This administration never misses a chance to appease radical environmentalists," House Speaker John Boehner said. The new rule amounts to "regulating a process that is already properly regulated" by states, Boehner said. "Meanwhile, the people who work hard every day to produce American energy safely and reliably will have to bear needless costs and headaches."

Alaska Senator Lisa Murkowski, chair of the Senate Energy & Natural Resources Committee, added: "The energy renaissance is largely a story about state and private land, but vast resources remain inaccessible and untapped in federal areas, particularly in the West. "This administration has already taken unprecedented steps to block development in Alaska. Given its anti-development approach, we should expect this rule to make it even harder to produce oil and gas on federal lands. The fact remains: if Interior was half as interested in new production as it is in new regulation, our nation would be in a far better place."

Industry sources said somewhat less than 10% of domestic oil and gas is produced on federal lands. The Bureau of Land Management (BLM) (Washington, D.C.), a department within the DOI, oversees about 700 million subsurface acres of federal minerals and also carries out regulatory duties of the Secretary of the Interior for an additional 56 million acres of Indian mineral estate across the United States. DOI estimated the new rule would add about one-quarter of one percent to the cost of drilling and hydraulically fractures per well. Industry sources said the cost could be 20 times that.

In announcing the new rule March 20, DOI Secretary Sally Jewell said, "Current federal well-drilling regulations are more than 30 years old and they simply have not kept pace with the technical complexities of today's hydraulic fracturing operations. This updated and strengthened rule provides a framework of safeguards and disclosure protocols that will allow for the continued responsible development of our federal oil and gas resources. As we continue to offer millions of acres of public lands for conventional and renewable energy production, it is absolutely critical the public have confidence that transparent and effective safety and environmental protections are in place."

But DOI's new rule was panned by environmental groups. "These rules put the interests of big oil and gas above people's health and America's natural heritage," said Amy Mall, who directs the fracking advocacy at the Natural Resources Defense Council. "The bottom line is: the rule fails to protect the nation's public lands--home to our last wild places, and sources of drinking water for millions of people."

Madeleine Foote, legislative representative at the League of Conservation Voters (Washington, D.C.), said the rule was a step forward from earlier drafts, but "it represents a missed opportunity to set a high bar for protections that would truly increase transparency and reduce the impacts (of fracking) to our air, water and public lands."

As detailed by DOI, the new rule includes:

• Provisions for ensuring the protection of groundwater supplies by requiring a validation of well integrity and strong cement barriers between the wellbore and water zones through which the wellbore passes;
• Increased transparency by requiring companies to publicly disclose chemicals used in hydraulic fracturing to the Bureau of Land Management through the website FracFocus, within 30 days of completing fracturing operations;
• Higher standards for interim storage of recovered waste fluids from hydraulic fracturing to mitigate risks to air, water and wildlife; and
• Measures to lower the risk of cross-well contamination with chemicals and fluids used in the fracturing operation, by requiring companies to submit more detailed information on the geology, depth, and location of preexisting wells to afford the BLM an opportunity to better evaluate and manage unique site characteristics.

"Like so many other energy initiatives that are taking place in divided government, it looks like this conflict will be settled in a federal court," remarked Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Production, Pipelines and Terminals industries. "The portion of Oil & Gas produced from federal lands is not very significant, but the industry is concerned that a new rule that applied only to hydraulic fracturing on federal lands could be applied by states, which are the primary regulators for Oil & Gas produced from private lands."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.