The Obama administration released its final rule today for drilling and hydraulic fracturing on federal land, its biggest foray yet into the divisive issue many call "fracking."
The rule, announced by Interior Secretary Sally Jewell, offered something for each side in the divisive debate.
The rule keeps industry-backed FracFocus as a means of disclosing fracturing chemicals and allows a state "variance" process to be used when state or tribal regulations meet the Bureau of Land Management’s standards, as industry had hoped. Yet it all but bans pits at well sites, requiring wastewater to be stored in metal tanks.
"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," Jewell said in a release. "It is absolutely critical the public have confidence that transparent and effective safety and environmental protections are in place."
The rule was challenged in court within an hour of its announcement. The Independent Petroleum Association of America (IPAA) and Western Energy Alliance (WEA) filed suit to block it this morning in U.S. District Court in Wyoming.
Oil and gas companies have called the regulations overreach since they were first proposed, while environmental groups have grumbled that the administration is going too far in placating the industry. Those themes continued in initial reactions today.
The environmental group Earthworks described the rule as "some concrete steps that will curb some problems with fracking on public lands, but still falls short of the protections Americans deserve."
The American Petroleum Institute (API), the industry’s biggest trade group, criticized the rule as "one more barrier to growth" on federal lands, where the growth in oil production has failed to keep pace with the production boom in shale plays on private lands in states such as Texas and North Dakota.
"A duplicative layer of new federal regulation is unnecessary," said Erik Milito, API’s director of upstream operations. "We urge the BLM to work carefully with the states to minimize costs and delays."
Commonly referred to as the "BLM fracking rule," the regulations update regulations about drilling and "fracking" on land managed by BLM, the Forest Service and other federal land, and tribal land. The rule would affect roughly 3,400 wells that are hydraulically fractured each year.
Jewell said current rules were developed more than 30 years ago, long before the advances in fracturing and horizontal drilling that have spurred a boom in domestic oil and gas production.
On a teleconference with reporters this morning, Jewell emphasized that while she personally fracked wells in Oklahoma as a petroleum engineer more than 30 years ago, modern hydraulic fracturing is "increasingly complex" and involves deeper wells, higher pressures and increased horizontal drilling.
The final rules will act as a federal backstop in states whose fracking regulations fall short of BLM’s standards. Jewell said states such as Wyoming and Colorado have regulations that may be more stringent than BLM’s and could therefore supplant the new BLM regulations.
BLM has oil and gas leases in 32 states, but 13 states have regulations addressing hydraulic fracturing, said Interior Assistant Secretary for Land and Minerals Management Janice Schneider. Administration officials also said about 11 percent of the fracturing in the country occurs on public lands.
Hill battles ahead
BLM’s draft fracking rules in May 2013 garnered 1.4 million comments from oil and gas groups, states, conservationists, and other stakeholders, Interior said.
The rules, first proposed in 2010, are being released as the oil and gas industry is reeling from low oil prices and pleading with Congress to lift a ban on exporting crude.
Green groups have been frustrated with Obama’s "all of the above" strategy and the accommodations it has included for drilling. But facing no more elections, Obama has signalled a somewhat harder line with the industry (EnergyWire, Jan. 15).
Administration officials were careful to emphasize what the rule does not do — it doesn’t extend past federal lands and minerals, and it doesn’t shift regulation of drilling away from state agencies.
"Ultimately, this is an issue that is going to be decided in state capitals and in localities, as well as within the industry," Obama’s senior adviser, Brian Deese, said today at a breakfast hosted by The Christian Science Monitor in Washington, D.C.
Industry prefers regulation by state agencies, which are usually also tasked with promoting development. Environmental groups generally prefer regulation by federal agencies, which often have more protective missions.
But regulation by cities and counties has emerged as possibly the biggest regulatory concern as residents petition local officials to use their zoning power.
The rule may also trigger skirmishes in Congress.
Senate Environment and Public Works Chairman James Inhofe (R-Okla.), a leading supporter of the industry, introduced a bill yesterday along with 26 other GOP senators that would allow only states to regulate hydraulic fracturing on federal land.
"This top-down regulation is duplicative, burdensome and, ultimately, a direct attack on American energy production," said Sen. Steve Daines (R-Mont.), one of the co-sponsors.
Such legislation went nowhere in past years when Democrats controlled the Senate. But it could gain traction now that both chambers are in Republican hands.
Democrats this week rolled out a suite of proposed restrictions on drilling and fracking that they’ve dubbed the "Frack Pack."
Hot-button issues
Environmental and open government groups have criticized FracFocus, a privately managed website run with industry money, for putting needless restrictions on the information it releases.
Jewell defended BLM’s decision to use FracFocus.org, saying BLM has been given some say in how the site is run. She also noted that the group that administers it recently announced planned changes to address the criticism. The changes have not yet been implemented (EnergyWire, Feb. 27).
"We feel like we have an appropriate seat at the table," Jewell said.
Kornze said cost was a consideration, too, since an Energy Department advisory board estimated it would cost BLM $25 million to establish its own chemical disclosure database.
Environmentalists and some Democrats had also urged that companies also be required to disclose fracturing chemicals before they are used to fracture a well so that landowners are capable of monitoring potential changes in groundwater.
The regulation does not include such provisions. It also won’t cover "acidization," another well-stimulation technique more commonly used in California.
Green groups also wanted BLM’s rule to put some sensitive landscapes in the West off limits to drilling and to impose drilling setbacks from homes and public drinking water supplies, but BLM has said such steps were outside the purview of its fracking rule.
Some environmentalists have also warned that BLM has failed to evaluate the impacts of its fracking rule under the National Environmental Policy Act, a sign that groups may explore legal challenges should the rule fall short of their expectations.
The bill requires that all "produced water" be stored in above-ground tanks, although it says there will "very limited exceptions" in which lined pits can be used.
Schneider said most companies are already using above-ground tanks rather than lined pits to store water that returns to the surface during fracking. For those companies that aren’t, complying with BLM’s rule would add $5,500 per operation, she said.
But companies have pushed back against such requirements in some public lands states. New Mexico in 2013 rolled back its "pit rule," ending the requirement to use steel tanks (EnergyWire, Nov. 14, 2013).
David Hayes, who served as Interior’s deputy secretary during President Obama’s first term and is now a senior fellow at the liberal Center for American Progress, said the final rule improves upon BLM’s earlier draft by requiring more secure storage of wastewater and strengthening chemical disclosure requirements, while maintaining flexibility for states that have stronger well standards in place.
"Amid this rapidly changing energy landscape, it is vital that safety practices keep pace with advancing technologies and that the public have confidence that drilling is being done as safely as possible," Hayes said. "These standards are a big step forward toward safer drilling practices on America’s public lands."
BLM officials say the regulations also require companies to submit more detailed information on the geology, depth and location of pre-existing wells to lower the risk of cross-well contamination, commonly called "frack hits" (EnergyWire, Aug. 5, 2013).
Industry lawsuit
Industry groups met with White House regulatory staff at least six times last fall to urge them to scrap the rule or at least significantly overhaul it. Today, they offered the faintest of praise with their condemnation.
Kathleen Sgamma, vice president of government and public affairs for Denver-based Western Energy Alliance, said enabling state and tribal regulations to trump federal regulations would be a "key improvement," but "that would be the opposite of this administration’s regulatory philosophy, so I’m not optimistic."
One WEA-backed study in summer 2013 found that BLM’s draft fracking rules would cost an average of $96,913 per well to implement, which is nearly 20 times higher than BLM’s estimate at the time. More than half the cost derived from the requirement to conduct cement bond logs, which verify the integrity of the cement surrounding well pipes. Environmentalists said WEA’s study greatly exaggerated the rule’s cost.
Interior’s Schneider described the cost to industry as "modest."
BLM estimates the final rule will cost less than one-fourth of 1 percent of the cost of drilling a well, based on the Energy Information Administration’s average per well cost of $5.4 million.
The industry groups which filed suit, IPAA and WEA, say the rulemaking was arbitrary and capricious in imposing steep costs for oil and gas operators without commensurate environmental benefit. They also argue that certain geologic disclosure requirements are illegal because they require operators to disclose confidential business information.
The complaint says Interior’s regulations are "a reaction to unsubstantiated concerns" and asks the court to strike them down.
Click here for the rule.
Reporters Robin Bravender, Ellen Gilmer and Nick Juliano contributed.
