A new industry-funded study estimates that the Bureau of Land Management's proposed regulations for hydraulic fracturing could cost the industry as much as $1.6 billion a year, stifling energy development on public land across the West.

The study, released today by the Denver-based Western Energy Alliance, analyzed the economic impacts of the proposed regulations on oil and natural gas drilling in 13 Western states, from Arizona to Wyoming. It estimated that "these proposed regulations will have a significant impact on the oil and gas production industry," requiring "significantly more permitting and operational expenses for companies drilling and completing oil and gas wells on federal lands."

The 11-page study, conducted for the Western Energy Alliance by the New York-based economic consulting firm John Dunham and Associates, also estimated that impacts "resulting not from any direct operational activity, but rather from waiting for permits and paperwork to be processed, could lead to significant financial costs for both operators and investors."

BLM last month proposed a rule requiring chemical disclosure and setting standards for well design and wastewater disposal for fracking operations on public lands. 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 (Greenwire, May 4).

The new study says the agency failed to conduct a full economic assessment of the rule, as required for all proposed rules with more than $100 million in annual costs, violating a host of federal regulations. BLM has said the cost of the proposed fracking rules would not impose a significant economic impact on the industry.

The Western Energy Alliance yesterday sent a three-page letter to the White House Office of Management and Budget, along with a copy of the new study, asking that efforts to adopt the new rule be suspended "while BLM goes back to the drawing board and conducts a comprehensive economic analysis."

This follows a letter the alliance sent to Interior Secretary Ken Salazar on Thursday asserting that the agency "has shown inadequate justification for moving forward with this rule and should refrain from proceeding."

Kathleen Sgamma, the Western Energy Alliance's vice president of government and public affairs, today said states have safely monitored fracking activity for 60 years and should continue to take the lead.

"States have been successfully regulating [fracturing] for generations, including on federal lands, with no incident of contamination that would necessitate redundant federal regulation," Sgamma said in a statement. "BLM's proposed [fracking] rule would impose a huge cost on society by diverting $1.615 billion annually away from investment in job creation into redundant regulation."

The study is the latest in the ongoing debate over proposed federal regulations for fracking, the controversial technique of injecting water, sand and chemicals underground at high pressure to create fissures in tight rock formations that allow oil and gas to flow freely to the surface.

The proposed rule has ruffled Republican lawmakers from the West, who said state regulators already have incentives to ensure oil and gas drilling is conducted safely. Even before the proposed rule was unveiled last month, Wyoming Gov. Matt Mead (R) wrote Salazar a letter arguing that "layering of federal rules on top of existing state rules is unnecessary, burdensome, and unreasonable" (EnergyWire, April 18).

Western Energy Alliance's stance that states should take the lead was echoed last month at hearings before the House Oversight and Government Reform Committee during which an array of state officials and industry critics, including some in the middle of the ongoing shale gas boom spurred by new hydraulic fracturing techniques, ripped BLM's proposed rules as unnecessary (E&E Daily, June 1).

"The Interior Department is willing to rush forward with regulations that lack a scientific basis and a thorough economic analysis as required for major rules that exceed the $100 million cost threshold," Sgamma said. "Western Energy Alliance calls on the federal government to abandon plans to move forward with this rule."

Brad Powell, energy director for Trout Unlimited's Sportsmen's Conservation Project in Payson, Ariz., disputes industry claims that the rule would impose a heavy burden.

"We think these are common sense rules that will have relatively little impact on the industry and greatly improve the public's understanding and support for the process," Powell said. "We don’t anticipate nor have we seen any information that indicates it would be a large cost to industry."

Click here to read the study.

Streater writes from Colorado Springs, Colo.