Shale Daily / NGI All News Access

Revised DOI Frack Rule Still Too Expensive, Industry Groups Say

The second version of the U.S. Department of Interior's (DOE) proposed rule to regulate hydraulic fracturing (fracking) on public lands isn't as bad as the first, but with a projected cost per well of $96,913, it still leaves much to be desired, industry groups said.

"While there are improvements in the second version of the rule, it still remains fundamentally flawed from an engineering perspective, as well as bad regulatory policy," said Kathleen Sgamma vice president of government and public affairs for Western Energy Alliance (WEA), which along with the Independent Petroleum Association of America (IPAA) released the economic analysis of the rule, which was conducted by John Dunham & Associates.

"DOI still has not justified the rule from an economic or scientific point of view, and continues to lack the budget, staff or expertise to implement it," Sgamma said.

According to the analysis, the rule as it currently stands would "impose a cost to society of $345 million annually," the groups said, adding that since that's more than $100 million, DOI's Bureau of Land Management (BLM) is required to conduct a full economic assessment of the rule, something it has not yet done.

The second version of the rule eliminates a requirement to regulate well maintenance. It also revised BLM estimates on the number of wells affected; the reduction of permitting times; and "type well" provisions that will require operators to run full testing only on representative wells in a field. These helped lower the projected cost of the requirements, the industry groups said.

"In response to legitimate criticism from governors, state regulators, tribes and members of Congress that fracking should continue to be regulated by the states, DOI tried to make this rule more palatable in its public statements," Sgamma said. "However, DOI has provided no actual mechanism for states and tribes to receive 'certification' of their rules nor any real deference to their superior regulations, expertise, and experience."

In June, at the industry's behest, the BLM extended the comment period for the proposed fracking rule until Aug. 23 (see Shale Daily, June 10). Interior explained in the draft rule why a federal rule is needed. "The BLM recognizes the efforts of some states to regulate hydraulic fracturing and seeks to avoid duplicative regulatory requirements. However, it is important to recognize that a major impetus for a separate BLM rule is that states are not legally required to meet the stewardship standards applying to public lands and do not have trust responsibilities for Indian lands under federal jurisdiction."

Earlier this month, DOI Secretary Sally Jewell defended the agency's intention of regulating fracking on public lands before the House Natural Resources Committee, which is sharply divided on the issue along party lines (see Shale Daily, July 18).

WEA and IPAA said revisions made to the proposed rule at the request of industry include:

Despite the modifications to the proposal, the rule would "still have a significant impact on the oil and gas production industry," the report said.

"Despite the best efforts of producers, manufacturers, state regulators and others impacted by the proposed rule, the BLM continues to move forward with this misguided effort," said IPAA's Dan Naatz, vice president of federal resources. "IPAA will continue to work with the Western Energy Alliance and others to stop the BLM from implementing this ill-conceived regulatory plan."

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