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Interior Unveils Final Fracking Rule, Hits Swift Opposition, Lawsuit

The Department of Interior (DOI) issued its long-awaited rule for hydraulic fracturing (fracking) on public and tribal lands on Friday. It requires operators to temporarily store produced water in aboveground tanks and disclose most of the chemicals they use to the FracFocus registry.

But the rule ran into immediate opposition. Shortly after the DOI announcement, two industry groups filed suit in federal court to block it from taking effect. Meanwhile, 27 Republicans in the U.S. Senate launched a preemptive strike against the rule Thursday night, introducing a bill that would give states the authority to regulate fracking on all land within their borders, including federal lands.

The final rule, outlined in a 395-page document on the DOI's Bureau of Land Management (BLM) website, will take effect in 90 days. Specifically, operators will be required to:

  • Submit detailed information about the proposed operation, including wellbore geology, the location of faults and fractures, the depths of all usable water, estimated volume of fluid to be used, and estimated direction and length of fractures;
  • Design and implement a casing and cementing program that follows best practices and meets performance standards to protect and isolate usable water, defined generally as those waters containing less than 10,000 parts per million of total dissolved solids (TDS);
  • Monitor cementing operations during well construction;
  • Take remedial action if there are indications of inadequate cementing and demonstrate to the BLM that the remedial action was successful;
  • Perform a successful mechanical integrity test prior to fracking operations;
  • Monitor annulus pressure during fracking operations;
  • Manage recovered fluids in rigid enclosed, covered or netted and screened aboveground storage tanks, with very limited exceptions that must be approved on a case-by-case basis;
  • Within 30 days after a fracking operation begins, disclose the chemicals used to the BLM and the public, with limited exceptions for material demonstrated through affidavit to be trade secrets; and
  • Provide documentation of all of the above actions to the BLM.

During a conference call Friday, DOI Secretary Sally Jewell said the BLM would use FracFocus -- a registry jointly operated by the Groundwater Protection Council (GWPC) and the Interstate Oil and Gas Compact Commission (IOGCC) -- for fracking chemical disclosures. The move significantly boosts the importance of the registry, which was launched in 2011 (see Shale Daily, April 6, 2011).

Jewell said the BLM will have representation on the board at FracFocus, but she did not provide details. She also said that after the rule takes effect, the BLM will be the largest contributor to FracFocus.

"They have already instituted a machine-readable format [and] are about to come out with a 3.0 version that continues to make improvements," Jewell said (see Shale Daily, Feb. 27). "We feel like we've got an appropriate seat at the table, and they're listening to input to address some of the concerns that were initially raised."

BLM Director Neil Kornze added that the bureau "[has] confidence that FracFocus has been headed in the right direction, but it will be getting even better. We will be at the table in shaping the future of that disclosure mechanism."

Kornze said cost was a factor for the decision to have the BLM use FracFocus. He said an advisory board from the U.S. Department of Energy had estimated it would cost about $25 million for the BLM to operate its own registry.

On the issue of chemical disclosures, Kornze said that "because some of this information may be considered proprietary by operators, they will be able to exercise limited exceptions for disclosure under the protection of the Trade Secrets Act. But the BLM will have assurances that we can get to this information anytime during the life of the well should something go wrong."

Jewell said she thought states that currently have no laws governing fracking, but have federal lands within their borders, would ultimately use their rule as a guide to craft their own state regulations for drilling on state and private lands.

"These may be the only standards they have," Jewell said. "I do think it's fair to assume that for states that do not have regulations right now that they would look hard at the federal regulations we've put out there, to apply on other lands within their states that aren't subject to our regulations. I think that's a potentially likely outcome, but that will be up to the states to determine."

Kornze said the BLM wanted to get operators to use aboveground tanks for produced water, instead of lined pits on the ground, in order to instill public confidence that groundwater is being protected.

"If there's a leak [or] a spill, we will have an easy ability to make that detection and address it," Kornze said. "We think this is a significant step forward in terms of making sure that we have a responsible program out there. And it also echoes standards that you see as a common practice in some states, like New Mexico, for instance."

Janice Schneider, assistant secretary for land and minerals management, said a "large majority" of operators are already using aboveground tanks, and didn't think making them a requirement would be an issue. She said operators not currently using tanks "have indicated that it would not be a substantial issue for them to switch over to that. Our economic analysis indicates that on average the cost of this requirement is approximately $5,500 per operation."

Industry, GOP Voice Opposition

In a statement Friday, the law firm Baker & Hostetler LLP said it had filed a lawsuit on behalf of the Independent Petroleum Association of America (IPAA) and the Western Energy Alliance in U.S. District Court for the District of Wyoming to block the rule from taking effect.

"Independent producers operate in a responsible manner that protects the nation's public lands, but the rule BLM has promulgated provides no public benefit," said attorney Mark Barron. "Requiring oil and gas operators to file repetitive paperwork with multiple government agencies will not prevent or remediate environmental harm. To the contrary, if implemented the rule will rob oil and gas operators of the operational flexibility needed to ensure that the environmental footprint of development is reduced to the greatest extent possible."

Thomas Lorenzen, a former assistant chief in the Environmental and Natural Resources Division at the U.S. Justice Department, said he thought there would be a two-fold immediate effect from the rule.

"First, because it applies only on federal and tribal lands, it will create a patchwork of regulatory regimes, making it more difficult for industry to devise uniform practices to limit any possible adverse effects on drinking water from fracking operations," said Lorenzen, now a partner with the law firm Dorsey & Whitney LLP. "Second, it could well result in an increase in the price of natural gas, thus potentially putting a crimp in the administration's effort to drive energy production away from higher-CO2 coal and toward cheap and lower-emitting natural gas-fired power."

Other industry groups were also opposed to the rule. Frank Macchiarola, executive vice president of government affairs for America's Natural Gas Alliance (ANGA) called it "a step in the wrong direction."

"We are disappointed that the rule did not appropriately recognize the extensive regulatory structures already in place in states across this country," Macchiarola said Friday. "State regulators have shown that they best understand the unique geological conditions that exist within their borders, and they have the expertise needed to oversee natural gas development."

Don Briggs, president of the Louisiana Oil & Gas Association, added "at a time when oil and natural gas prices are low, the last thing the industry needs is more confining regulations on a process like fracking that has been proven time and time again by federal studies to be a safe industry practice."

Republicans in the U.S. Senate had the rule in their crosshairs. On Thursday, U.S. Sen. Jim Inhofe (R-OK), chairman of the Senate Environment and Public Works Committee, introduced a bill, S-828. The bill, also known as the Fracturing Regulations and Effective in State Hands (FRESH) Act, would recognize fracking as a commercial practice and keep regulations at the state level.

"The Obama Administration's rule on fracking adds unnecessary, duplicative red tape that will in turn make it more costly and arduous for our nation to pursue energy security," Inhofe said. "While I am glad to see the federal government endorse FracFocus, the rule as a whole fails to acknowledge that states have led the way in safely and effectively regulating fracking.

"There is no logical reason to add a new layer of top-down bureaucratic regulation that duplicates what is already being done effectively by the states. This is simply an assault of energy production on federal lands, which is already struggling significantly compared to private lands under this administration."

In a separate statement Friday, U.S. Sen. Lisa Murkowski (R-AK), who was not listed as one of the 27 Senators in support of the FRESH Act, said federal lands, especially in the West, held vast resources but they were out of the reach of operators.

"This administration has already taken unprecedented steps to block development in Alaska," Murkowski said. "Given its anti-development approach, we should expect this rule to make it even harder to produce oil and gas on federal lands. The fact remains: if DOI was half as interested in new production as it is in new regulation, our nation would be in a far better place."

Jewell Reaction to FRESH Act

During a Q&A with reporters Friday, Jewell said she wasn't surprised by the reaction by Republicans but still thinks the rules "will in fact stick."

"I don't think anybody would say it's common sense to keep regulations in place that were created over 30 years ago," Jewell said. "I know that there are comments coming out of Congress trying to undermine this, but I think at the end of the day the industry certainly recognizes that thoughtful regulation can help them, because it reassures the public that there are rules in place that protect them.

"It would be a mistake to take a very thoughtful, long-term process and overrule it through Congressional action when these are regulations that are really very consistent with best practices going on in the industry and best practices going on in many of the states. I guess the political reaction is not surprising, but we're confident...it will end up being adopted and appreciated across the areas where we have lands."

Environmental Groups Split, But Many Opposed

For their part, environmental groups had a mixed reaction to the rule. Mark Brownstein, associate vice president for the Environmental Defense Fund (EDF), welcomed the move as step that addresses several issues with oil and gas development on public and tribal lands.

"With this rule, the [BLM] is taking important steps to ensure that [fracking] on public lands is done according to ambitious new safety and environmental standards," Brownstein said. "As steward of public lands, BLM has an obligation to the citizens of the United States to make sure that whatever oil and gas development occurs on federal lands is done with the utmost attention to environmental protection. But states also play an important role here, and we strongly encourage BLM to work constructively with them, as they have expertise, talent, and resources that must be engaged for effective oversight of these new rules."

But other environmental groups said the rule didn't go far enough. One group, Friends of the Earth (FOE), derided it as "toothless."

"This fracking rule is merely a continuation of Obama's harmful all-of-the-above energy policy that emphasizes natural gas development over protection of public health and the environment," said FOE spokeswoman Kate DeAngelis. "This country needs real climate leadership from President Obama, not weak regulations that do nothing to stop the devastating impacts of climate disruption. President Obama should use his authority to keep fossil fuels in the ground by placing a ban on federal fossil fuel leasing."

Bill Snape, senior counsel of the Center for Biological Diversity, said the rule "has far too many loopholes," while Charlie Cray, a research specialist of Greenpeace, said President Obama "should direct BLM to stop issuing any new leases immediately until there is evidence that we won't cross the climate tipping point, or the very least until their new methane pollution regulations are finalized and binding."

Last Tuesday, Jewell said DOI was months away from unveiling standards designed to cut methane emissions from drilling on public lands (see Shale Daily, March 17).

The BLM oversees about 700 million subsurface areas of federal mineral estate. It also carries out regulatory duties for the DOI secretary for an additional 56 million acres of Indian mineral estate across the United States. The bureau said there are currently more than 100,000 oil and gas wells on lands managed by the federal government.

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