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Appellate Court Hears Oral Arguments on BLM Fracking Rule

Lawyers for the federal government faced off against attorneys representing states and the oil and gas industry in appellate court on Thursday, for oral arguments over an embattled rule governing hydraulic fracturing (fracking) on public and tribal lands.

At issue in U.S. Court of Appeals for the Tenth Circuit Court in Denver are rules promulgated by the Interior Department's Bureau of Land Management (BLM). Court records show Judges Mary Beck Briscoe, Harris Hartz and Jerome Holmes presided over the hearing, which involved two companion cases: State of Wyoming et al v. Zinke et al [No. 16-8068] and State of Wyoming et al v. DOI [No. 16-8069].

Appellees in the cases include Colorado, North Dakota, Utah and Wyoming; the Ute Indian Tribe of the Uintah and Ouray Reservation; and the Independent Petroleum Association of America (IPAA) and the Western Energy Alliance (WEA).

"We are appreciative of the court's willingness to hear extended argument on the issues this case presents, both procedural and substantive," attorney Mark Barron told NGI’s Shale Daily on Thursday. He is Baker & Hostetler LLP and is representing IPAA and WEA. "More important than the outcome of this specific lawsuit, however, we are grateful that Interior has finally recognized the legal and technical flaws in the 2015 hydraulic fracturing rule and initiated steps to correct those flaws through rulemaking."

On Tuesday, the BLM’s notice was published in the Federal Register stating that the agency plans to rescind the rule because it is duplicative of state and tribal laws, and imposes unreasonable reporting requirements and costs on the oil and gas industry. BLM is currently taking public comments over its plans to rescind the rule.

"America's independent oil and gas producers hope that the parties can now put this case behind them and turn their collective attention to the administrative rulemaking process currently underway," Barron said. "That process, not the federal courts, is the appropriate forum for the parties to address their policy differences on the important subject of hydraulic fracturing."

When asked how Thursday's hearing went, Barron said it was "very difficult to say."

"The court was quite thorough and probing of both sides, but played their cards close to the vest," he said. "I feel confident that we presented the key elements of our case, but I don't think this is a result that I can prognosticate on with any confidence. If they decide to issue a decision on the merits, I won't be surprised either way."

The BLM said a regulatory impact analysis found the rule could shoulder the oil and gas industry with at least $32 million in annual compliance costs, but the costs could potentially be as high as $45 million/year.

The rule would require oil and gas operators to use the FracFocus registry to disclose the chemicals used in fracking and use above-ground tanks to temporarily store produced water, among other things. However, U.S. District Court Judge Scott Skavdahl ruled in June 2016 that BLM does not have the authority to regulate fracking. The government subsequently filed an appeal.

Last March, the Tenth Circuit gave the Trump administration one week to decide whether it wanted to continue defending the rule in court. Attorneys for the BLM said the Obama-era rule did not reflect the Trump administration's priorities and asked the court to postpone a pair of cases over the rule. The court granted the request, postponing oral arguments until Thursday.

"Congress simply did not give the federal government authority to regulate fracking, period," WEA President Kathleen Sgamma said before Thursday's hearing. "We remain confident in our arguments and the previous decision. States have shown they've successfully regulated fracking with no incident on public lands that justifies this rule. States have regulated fracking for many years, and BLM has failed to show any gap in state regulation."

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