An Obama administration plan to require companies to report the chemicals they use to stimulate oil and gas production will add costs to drilling on federal lands but will result in greater benefits to society, Interior Department officials said this morning.

The release of a proposed rule governing the disclosure of chemicals used in hydraulic fracturing, in addition to new requirements to prove that wells will not leak and that excess water can be managed, drew a mixture of scorn and applause both from industry and environmentalists.

The draft rule is the culmination of more than a year and a half of public forums, tribal consultation, and a handful of meetings between the White House, industry and environmental groups. Today's proposal looks much like a leaked draft E&ENews PM published Monday (E&ENews PM, April 30).

As such, key changes drew praise from industry groups -- though all stopped short of endorsing the BLM plan.

Environmental groups said that the BLM plan is a major improvement over regulations last updated in the 1980s but that it falls short of state regulations and will fail to protect human health and the environment.

"As we continue to offer millions of acres of America's public lands for oil and gas development, it is critical that the public have full confidence that the right safety and environmental protections are in place," said Interior Secretary Ken Salazar.

Key among the rule's provisions is a requirement that companies disclose the chemicals they use within a month of a fracturing job, rather than before the well is stimulated as proposed by environmentalists.

In addition, BLM is working with the Ground Water Protection Council, which is an association of state regulators, and the Interstate Oil and Gas Commission to integrate the disclosure called for in the proposed rule with the existing website known as FracFocus.org.

The proposed rule will be published next week in the Federal Register, triggering a 60-day public comment period. Salazar and Bureau of Land Management Director Bob Abbey said they expect to finalize a rule by the end of the year.

The rule was accompanied by an economic analysis gauging the potential costs of disclosure as well as the use of lined pits to store excess water that rises to the surface over the course of drilling and completing a well.

"At the end of the day, there is going to be an added cost to industry for complying with our proposals," Abbey said. "But nonetheless, the net benefit is to society. As we go forward, we believe the added cost to industry is not going to exceed what we believe is going to benefit society for knowing how these wells are being drilled."

Industry critics said the new rules represent another disincentive to develop oil and gas on federal lands, where companies already face significant delays associated with well permits and endangered species compliance, among other requirements.

Nearly all the recent growth in oil and gas production in the United States has occurred on state and private lands, according to a Congressional Research Service report.

"Energy production on federal lands has a history of driving job creation and creating significant revenue for the government," said Erik Milito, upstream director for the American Petroleum Institute. "But this potential could be stifled by a federal regulatory program that duplicates existing state regulations. This could have a chilling effect on investment and jobs."

Milito, echoing several other industry groups and supporters, said state agencies have successfully regulated hydraulic fracturing for decades, in part because they have the deepest knowledge of local geology.

"State regulatory bodies have repeatedly proven that they have the understanding of their state's own unique geologic conditions, the on-the-ground expertise needed to oversee this important work, and most importantly, the ability to respond to rapid change," said a statement by Tom Amontree, executive vice president for America's Natural Gas Alliance. "The proposal as drafted would create reporting requirements, regulatory impediments and certifications that could substantially affect the ability to produce resources that are placed in the BLM's stewardship for the benefit of all Americans."

While several states have already moved forward with some form of disclosure rules for fracturing chemicals, the federal rules aim to become a "role model" for the rest of the country to follow, Salazar said.

But Barry Russell, president of the Independent Petroleum Association of American, said industry has functioned fine under state laws.

"BLM's proposed regulations, which would mandate one-size-fits-all regulations on well construction and hydraulic fracturing operations on these lands, are redundant," he said. "They will undoubtedly insert an unnecessary layer of rigidity into the permitting and development process."

The rule also ruffled Republican lawmakers from the West who said state regulators already have incentives to ensure oil and gas drilling is conducted safely.

"The people in state government are the same people who live and work in the areas being regulated," Sen. Mike Enzi (R-Wyo.) said in a statement. "They take all the interests of the affected areas to heart because they have the same interests. Clean water is essential and so is energy. They don't have to be mutually exclusive."

Wyoming in the summer of 2010 adopted what many experts considered to be the most stringent chemical disclosure requirements for fracturing, in addition to regulations governing well bore integrity and flowback water.

But Wyoming is just one of many states in which oil and gas development occurs, said environmentalists who argued a national framework is necessary.

"We need BLM to be a leader when it comes protecting our lands, water and ultimately our health from fracking pollution, yet several states already have stronger protections in place than what the agency proposed today," said Amy Mall, senior policy analyst at the Natural Resources Defense Council. "This is a critical first step, but so much more needs to be done."

Rep. Ed Markey (D-Mass.), the ranking member of the House Natural Resources Committee, was largely supportive of the new rule, but he questioned why BLM does not require drilling companies to disclose chemicals they are using in the drilling process prior to drilling activities.

"Looking for fracking chemicals in our drinking water shouldn't be like a game of 20 questions," Markey said. "Drilling companies should be required to disclose the chemicals they use at all times, but especially before they start drilling, so communities can be on the lookout for any pollution in their water or environment."

Markey noted that while he expects some Republican leaders in Washington and oil and gas industry lobbyists to complain about the costs of the new rule, BLM performed a cost-benefit analysis of the new rule that determined the compliance costs are "insignificant when compared with the drilling costs in recent years, the production gains from hydraulically fractured well operations, and the net incomes of entities within the oil and natural gas industries."

Today's proposal follows U.S. EPA's release last month of first-ever limits on air pollution released during the fracturing process on federal and private lands. Mall said that proposal, too, was a significant step but also fell short by failing to rein in emissions of methane, a potent greenhouse gas.

Jessica Ennis, legislative representative for Earthjustice, said the new fracturing rules are a retreat from a draft proposal earlier this year that would have required disclosure of chemicals before a well is stimulated.

"This information is essential so communities can test drinking water before fracking occurs and monitor the safety of water supplies in real time," she said. "If there's a problem with their water, families deserve to know immediately -- not after they've been drinking it for years."