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Message to BLM: Dump Fracking Rule, Start Over

September 17, 2012
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Producers, oil service companies, states, Native Americans and even some environmentalists agree on one point: that the Department of Interior's Bureau of Land Management (BLM) should scrap its proposed rule regulating hydraulic fracturing (fracking) operations on public and Indian lands and start all over again. But their reasons for requesting the do-over are entirely different.

The oil and gas industry and states contend that the agency rule should be jettisoned because it duplicates existing state regulation and would be costly and burdensome. A New York environmental group urged the Obama administration to go back to the drawing board and make the rule more stringent on industry. A Native American group challenged the authority of BLM to regulate oil and gas activities on Indian lands.

Halliburton Energy Services Inc. (HESI) "believes that the appropriate course for BLM is to terminate the rulemaking." The agency has not demonstrated a need for the proposed federal rule in light of the "extensive and effective" state regulation of oil and gas activities, the Houston-based oilfield services firm said. "If BLM nevertheless proceeds to adopt rules, the bureau should rely on the existing state programs [and exempt] from the requirements of the [fracking] regulations...states that already have adopted effective oil and gas regulatory programs."

To the extent that BLM extends its rules to states that do not have existing regulatory programs, "HESI encourages BLM to follow the states' approach by 1) using [the website] FracFocus as the vehicle for disclosure of [fracking] chemicals used on federal lands, and 2) modifying its regulations to conform them more closely to existing state regulations, which will result in the elimination of a number of unnecessarily burdensome aspects of BLM's proposed approach."

At a minimum the agency should establish a process whereby operators -- and/or service companies and chemical suppliers -- can submit requests to BLM for advance bureau approval of trade secret protection for particular proprietary fracking products, chemicals, and/or related information before these products or chemicals are used on individual wells on federal lands, Haliburton said.

While the states allow companies to withhold trade secret information with respect to fracking fluids, the BLM's proposed rule would not guarantee protection of proprietary information. The agency issued its fracking rule in May (see NGI, May 7). Comments on the proposed rule were due at the BLM Sept. 10.

"We believe the proposed new rule is unacceptable overreach into an area that has been successfully regulated by the states," said Kenny Jordan, executive director of the Houston-based Association of Energy Service Companies (AESC), which represents upstream oil and gas companies and firms that provide services to the industry..

"For the past 60 years, states have safely regulated more than one million fracking operations...It seems unnecessary to establish a federal mandate now. State regulations are custom fit to each area's unique geologic conditions. Local officials are better suited to manage environmental and safety issues related [to] nearby groundwater. A redundant federal rule managed from, in some cases thousands of miles away, does not seem on the face of it to be the best way to ensure the environment is protected.

"The AESC commends the agency's efforts to protect our precious federal lands but firmly believes that the best methods to achieve that goal are those already in place at the state level. Further, we ask the BLM to suspend this proposed rulemaking until a thorough economic analysis is completed."

BLM "should suspend this rulemaking until it conducts [a] thorough economic and federalism analyses required for rules costing society over $100 million and impacting the relationship between states and the federal government," wrote Utah's Duchesne County Commission in its comments to the agency. It said economic research firm John Dunham and Associates reviewed the BLM rule and found that the total cost to society would be $1.4-$1.6 billion annually, or about $253,000 per well.

In addition, the "BLM is moving forward, under pressure from environmental extremists, without being informed by the scientific conclusions and recommendations of the study" being conducted by the Environmental Protection Agency of the impacts of fracking on the environment and public health, the Utah commission said. "We know of no incidents of contamination from fracking on public or other lands in our county and the BLM has offered no sound justification for proceeding with the development of these rules."

Barrell Russell, CEO of the Independent Petroleum Association of America, and Tim Wigley, president of Denver-based Western Energy Alliance, asked Interior Secretary Ken Salazar to meet with them face-to-face to discuss in detail the fracking rule.

Yates Petroleum Corp. "understands the BLM's motivation to adopt the proposed [fracking] rule in light of the fact that existing federal [fracking] rules are over 30 years old. However, state agencies have been effectively regulating oil and gas operations, including hydraulic fracturing, for over 60 years," said Casper, WY-based Gene R. George & Associates Inc., which filed comments on behalf of Yates Petroleum.

"We strongly urge the BLM to reconsider adoption of the proposed hydraulic fracturing rule and leave the regulation of such operations to the state regulatory agencies, especially in states such as Wyoming, New Mexico and North Dakota that have proactively adopted hydraulic fracturing regulations to supplement existing oil and gas regulations in recent years," the firm said.

The "rule goes far beyond disclosure of hydraulic fluids and includes wellbore construction standards and water regulations that directly encroach upon individual states," said Denver-based Black Hills Exploration and Production.

Moreover, "the time delays and uncertainty this rule imposes will further cloud a leasing process on federal lands that is becoming untenable for America's small oil and natural gas operators. At a time when the federal government should be looking for ways to encourage oil and natural gas exploration on federal lands, the proposed rule adds more layers of regulation on a system that is already overwhelmed," the company noted.

"I urge the BLM to withdraw this rule and begin working with the states to address any issues the agency feels need to be clarified regarding oil and natural gas activities," said John Jensen, executive vice president of operations services at Houston-based EP Energy.

Likewise Karen A. Harbert of the 21st Century Energy Institute, an affiliate of the U.S. Chamber of Commerce, called on the agency to shelve the rule on fracking and "begin meaningful collaboration with the respective state oil and gas regulatory programs and multi-state organizations to determine whether potential regulatory gaps exist" between the states and federal government.

"If BLM does propose a new rule, it must clearly describe and assess those gaps and explain why BLM is the appropriate regulatory body to remedy any such gaps."

Joesph Martens, commissioner of New York State's Department of Environmental Conservation, urged the BLM to reject the proposed rule outright and start all over, but for a different reason -- to make it stricter on industry, requiring full disclosure of all chemicals used in fracking and limiting the use of chemicals to only nontoxic and nonhazardous fluids.

The Natural Resources Defense Council (NRDC) also called for a more stringent rule. It filed comments on behalf of a number of groups, including the Sierra Club, The Wilderness Society, Southern Environmental Law Center, Western Environmental Law Center, Earthjustice, the Powder River Basin Resource Council and the Upper Green River Alliance.

The environmental and conservation groups recommended that the agency identify areas that will be completely off limits to oil and gas drilling; establish safe setback distances of drilling activity from schools, hospitals and drinking water supplies; ensure adequate well casing and water protections; strengthen the disclosure standards for oil and gas producers; and protect national parks from drilling.

The Council of Energy Resource Tribes (CERT) requested that the BLM scrap the proposed rule and restart the rulemaking process, with greater involvement from the Bureau of Indian Affairs. The group further challenged BLM's authority to regulate oil and gas activity on Indian lands under the Federal Land Policy and Management Act of 1976 (FLPMA).

"FLPMA mandates that the BLM is to regulate activity on 'public lands.' FLPMA defines 'public lands' as any land and interest in land owned by the United States...and administered by the secretary of the Interior through the BLM, except...lands held for the benefit of Indians, Aleuts and Eskimos," CERT said. "Indian lands are, therefore, specifically and explicitly excluded from the BLM's organic statute."

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