New BLM Rules a Solution in Search of a Problem

Mark Green
Posted August 23, 2013

“API is concerned that this proposed rule is a solution in search of a problem, an attempt to throw the regulatory apparatus of the federal government over an issue solely to address unsubstantiated ‘public concern.’ That alone cannot justify additional and costly rules that would have no discernible benefit.”

In short, that’s the API analysis of federal hydraulic fracturing rules proposed by the Bureau of Land Management (BLM). You can read the oil and natural gas industry’s full official comments on BLM’s proposal here. Key concerns:

• BLM fails to identify a regulatory void that requires an additional regulatory layer.

• BLM fails to cite an example of groundwater pollution from more than 1 million wells that have been hydraulically fractured in the U.S. - again, as a reason for an additional layer of regulation.

• BLM’s proposal would make worse current delays in federal permitting and subsequent production.

• State laws and regulations, existing federal laws and regulatory oversight and industry standards and best practices have established a track record that satisfies all of the objectives of the proposed rule.

• BLM has no record to justify the costs and burdens of increased regulation that potentially could increase costs to industry for operations on federal lands from $30 million to $2.7 billion a year.

API’s Erik Milito, director of upstream and industry operations:

"A new layer of duplicative regulations would raise costs and create needless delays for domestic energy production, threatening jobs and revenues that are driving U.S. growth. The BLM has taken steps to improve its proposal from last year, and it wisely follows the lead of states that have already adopted FracFocus to improve transparency, but there is still no clear benefit to imposing additional federal rules on top of state environmental stewardship.”

Scrutiny of BLM’s proposal is critical, because the stakes surrounding oil and natural gas development using hydraulic fracturing and horizontal drilling are high:

• An IHS study found that unconventional oil and natural gas already supports more than 1.7 million jobs and could support 3 million by the end of the decade.

• The U.S. Energy Information Administration confirms that from 2007 to 2012, industry created new jobs 40 times faster than the overall U.S. private sector. Much of this growth is associated with the energy revolution launched by hydraulic fracturing.

• EPA Administrator Gina McCarthy recently said natural gas by itself could support more than 600,000 jobs by decade’s end.

Certainly, those numbers and others suggest it’s appropriate to discuss whether BLM’s proposal could unnecessarily hamstring development of America’s oil and natural gas reserves, chilling investment and production on federal lands. Some specifics from API’s comments:

BLM’s rule isn’t needed because there have been no confirmed cases of fracking impacting groundwater – Citing public statements from federal officials – including those by former EPA Administrator Lisa Jackson, current Administrator McCarthy, Interior Secretary Sally Jewell and Energy Secretary Ernest Moniz – API argues there’s no scientific basis to justify BLM’s rule:

BLM has now had an additional year to review and analyze available data on hydraulic fracturing as compared to when it issued the May 2012 proposed rule, yet BLM has not included any new data on groundwater impacts to justify this proposed rule. If anything, the various statements and scientific studies, new and revised state laws and regulations regarding hydraulic fracturing, and new and revised industry standards and best practices developed during the past 15 months and available to BLM, support the conclusion that the proposed rule has little if any legal or factual support.

The proposal will exacerbate current delays in federal permitting as well as declining production on federal lands – According to BLM data, the number of new federal oil and natural gas leases issued by BLM is down 45 percent from an average of 3,294 leases in 2005-08, to 1,824 in 2009-12. New permits to drill are down 32 percent. The number of new wells drilled on federal lands has declined 24 percent.

BLM’s proposed definition of “useable water” and related protection requirements are arbitrary and impose costs that outweigh possible benefits – Analysis by Advanced Resources International (ARI) found that the proposal to identify and isolate useable water-bearing zones in a field could cost up to an additional $400,000 plus up to an additional $776,000 per individual well in cementing and casing, depending on the location and characteristics of the well. API:

ARI estimates that the total costs associated with this rule could range from $30 million per year to $2.7 billion per year. Even on the low end, this estimate is substantially higher than the BLM’s which assumes annualized costs to industry, without empirical support, of only “about $12 to $20 million.”

Again, check API’s comments for a thorough analysis of BLM’s proposal. It minimizes the good work state regulators are and have been doing, and it could slow or blunt America’s energy renaissance by discouraging oil and natural gas development on public lands. Milito:

“The BLM itself has praised the sophisticated and effective oversight of state regulators, and the safety record of oil and natural gas producing states has been exemplary. This industry is leading an economic renaissance in America and has created jobs at a rate forty times faster than the broader economy, according to federal estimates. There is no sound legal or environmental reason to jeopardize that growth with regulatory confusion and uncertainty."