House Republicans blasted the Bureau of Land Management (BLM) for its proposed rule to regulate hydraulic fracturing (fracking) on federal and tribal lands, calling it "outrageous" and a "national embarrassment" had it not been blocked by a court, as Democrats were split over whether the measure was a "modest modernization" or "too weak."
During a House Subcommittee on Energy and Mineral Resources hearing on Wednesday, BLM Director Neil Kornze also revealed that the bureau had a team of economists calculate how much it would cost operators to comply with the rule -- figures that were immediately disputed by the oil and gas industry.
GOP: Rule Too Constrictive
Rep. Rep. John Fleming (R-LA) -- reading the comments of the panel's chairman, Rep. Doug Lamborn (R-CO), who was absent at the start of the hearing -- said that while the BLM has acknowledged that 99.3% of all well completions on federal and tribal lands had occurred in states with fracking regulations, the bureau had never identified a jurisdiction that had inadequate laws governing the practice. He added that a report last month from the Environmental Protection Agency (EPA) had determined that fracking posed no system impacts to drinking water (see Shale Daily, June 4).
"These facts highlight that states were proactive in regulating the process of fracking, and that they have been successful in doing so," Lamborn said, as quoted by Fleming. "BLM's final rule on fracking is nothing more than a frivolous regulatory exercise, if not for the severe and unfortunate consequences the rule carries."
Lamborn added that attempts by states to receive a variance from the rules were "troubling."
"Like the rest of the rule, the BLM failed to provide any nationwide or baseline guidance that would have informed the state offices on how to proceed in the variance discussions. As such, not a single variance agreement has been entered into.
"If any group should be thrilled the judge postponing the effective date of the rule, it should be the BLM. Without the stay, the implementation of the rule would have been a national embarrassment and would have effectively paused fracking on federal and tribal lands for the foreseeable future.
"Maybe if this had been an emergency rulemaking -- in which BLM had a limited timeframe to address a severe issue -- these major oversights and lack of preparedness would be excusable. However, that is not the case it is simply inexcusable that after three years, numerous stakeholders meetings and over one million comments, that BLM can't even provide standardized guidance to its state offices. Unfortunately, it is too late for the BLM to withdraw this rule. And so the nation is left with an uncertain future for fracking on federal lands."
Rep. Louie Gohmert (R-TX) used the EPA report to grill Kornze.
"You come in here with these robust regulations, and you really are a solution in search of a problem because the problem has been found not to exist with fracking," Gohmert said. "It is outrageous. When we look at the production from federal lands and how it has dramatically dropped compared to the energy being produced from private lands, it is staggering what you've done. Did you not care that the EPA found there were no groundwater problems with fracking?"
Last month, a federal judge in Wyoming granted a request from four states and an Indian tribe to temporarily block the BLM rules from taking effect (see Shale Daily, June 24).
Dems: Rule May Not Be Strong Enough
Meanwhile, Democrats appeared split over the merits of the proposed rule.
"I've heard a lot of complaints from the oil and gas industry, and my colleagues on the other side of the aisle, about what they see as overblown concerns about fracking," said Rep. Alan Lowenthal (D-CA). "To them, fracking is perfectly safe and anyone who questions that is needlessly scaring people.
"But when it comes to overblown hysteria, nothing matches the industry's reaction to the BLM's fracking rule. If you listen to them, you would think that this rule was a royal edict, completely changing the rules of the game on federal lands, and that the BLM has never regulated oil and gas before. But you would be wrong because this rule is nothing but a modest modernization of longstanding BLM regulations to take into account how the industry currently operates."
Rep. Raul Grijalva (D-AZ) called the proposed rule "much too weak."
"I am pleased to discover that several western states completely agree with me," Grijalva said. "Throughout their court arguments, the states point out that they have much stronger regulations than BLM, which means that companies in those states can keep going on with their business as usual, regardless of risks they might be posing to our air, water, health and to the equity of homeowners throughout many of those lands.
"That's a problem. The federal government should be raising the bar, not settling for the lowest common denominator. The rule is necessary and will some benefits, particularly in states that don't have robust rules, but we should be doing more."
Grijalva said he also thought the states and the industry should be thanking the BLM "for issuing a rule that will have very little impact in the field and cost almost nothing," and Congress "for leaving in place the loopholes that exempt them from a number of our fundamental environmental laws.
"No, instead they're complaining that the rule is too confusing, redundant and expensive...never mind that the rule allows states to continue to regulate as they wish [and] actually simplifies requirements for companies in some cases.
"The industry creates confusion. It invents unrealistic costs, and then their allies on the Hill rush to their defense. This rule does not do as much as it should, but it also doesn't do half of what the Republicans claim. The rule does not do as much as I would like it to, but it is much better than nothing. And that is what the majority would actually have us do -- nothing."
Disagreement Over Costs
Kornze said each well drilled by a major operator costs $5-10 million, and that a regulatory impact analysis conducted by the bureau had determined the average cost per well to comply with the proposed rule was approximately $11,000.
"We have a team of very accomplished economists that look at publically available information, that work with our engineers in the field, and use our knowledge from the ground," Kornze said, when asked how the bureau determined the costs. "They look at publications from journals that take information from the EIA [U.S. Energy Information Administration]. They look at API [American Petroleum Institute] documents. These are professional documents that are put together with some significant effort and significant review, including at the Office of Management and Budget, where economists look at them over there.
"We feel very good about the product that we've put forward."
But Lloyd Hetrick, operations engineering adviser for Newfield Exploration Co., said the BLM was underestimating the costs.
"That wouldn't apply to my company," Hetrick said of the $11,000 figure. "The amount of additional time on the front end to prepare the application would easily surpass that.
"There are operational uncertainties that have a much greater dollar value, anywhere from a few hours of operational downtime -- which could be tens of thousands of dollars an hour -- all the way up to the costs of a well that we drilled, but were not allowed to complete using fracking because we couldn't provide either the records for the cementing assurances, or we had a disagreement on a cement evaluation law."
Kornze added that the BLM did not "give grades" to the states for their oil and gas regulatory regimens.
"We looked at what best management practices are," Kornze said. "We took in 1.5 million public comments on this rule, and we had two draft versions for the world to work on with us. We took a holistic view about where has industry gone, where have best practices gone, and what should a basic floor be in terms of standards for federal lands."