Federal Government Issues Long-awaited Final Rules Governing Fracking on Federal Land and Indian Land

March 23, 2015

Authors: Carl J. Pernicone, Kathleen D. Wilkinson

On March 20, 2015, the Department of the Interior’s (DOI’s) Bureau of Land Management (BLM) issued its long-awaited “final” rules governing hydraulic fracturing operations on federal lands and land owned by Indian tribes. The 395-page set of rules, which will become effective in 90 days, prescribes regulations in three key areas, the high points of which are summarized as follows:

  • Well-boring integrity. First, the rules establish more stringent criteria for ensuring the integrity of well-borings used in the drilling process. Before drilling operations can begin, drillers will be required to “submit detailed information about the proposed operation.” The drilling proposal must include (1) details about “wellbore geology,” including the location of known faults and fractures and (2) a design recommendation for a casing and cementing program “that follows best practices and meets performance standards to protect and isolate usable water.” Additionally, drillers will be required to “monitor cementing operations during well construction,” conduct “integrity testing” before fracking operations begin and take steps to remedy any “inadequacies” that may be detected in the cement work.
  • Disclosure of chemicals in fracking fluid “cocktail.” In the interest of transparency and with a limited exception for trade secrets, the rules also require the full disclosure of all chemicals that drillers use in their fracking fluid “cocktail” mixes. Drillers will be able to satisfy this requirement by posting the chemical ingredients on the website maintained by FracFocus, the Internet database of information on fracking chemicals maintained by state water quality agencies working in conjunction with the Interstate Oil and Gas Compact Commission. The BLM regulations report that, to date, some 16 states with comparable disclosure requirements (e.g., North Dakota, Pennsylvania and Colorado) use FracFocus, and another four are considering it. The rule requires that the chemical data be posted to the FracFocus database within 30 days of the completion of drilling operations.

Drillers invoking the trade secret exception to the disclosure rule will need to submit an affidavit that “fully describe[s] and attest[s] to the basis for their claim of exemption from public disclosure for trade secrets.” The rules go on to provide that “The affidavit must be signed by a corporate officer or the equivalent responsible official of the operator.”

  • Mandatory above-ground storage of recovered fracking fluids. Additionally, the new rules adopt, with limited exception, a so-called “tank only” approach to the interim storage of “recovered fluids” (e.g., spent fracking fluid, produced water); specifically, they provide that all such fluids must be stored prior to disposal in “rigid, enclosed, covered or netted and screened above-aground storage tanks.” The “limited exception” to this rule will be granted only “on a case-by-case basis” and only where “lined pits could be used.”

Reaction from Energy Industry and Fracking Opponents
Reaction to the new regulations from the energy industry and fracking opponents has been swift and largely negative. In its press release commenting on the rules, the American Petroleum Institute called them a “duplicative layer of new federal regulation” that represents “one more barrier to growth.” In addition, on the day the regulations were released, two energy trade groups, the Independent Petroleum Association of America and the Western Energy Alliance sued the DOI and BLM in federal court in Wyoming. The suit urged the court to set aside the regulations on the ground that “BLM’s rulemaking represents a reaction to unsubstantiated concerns and the administrative record lacks the factual, scientific, or engineering evidence necessary to sustain the agency’s final rule.”

In its press release on the new rules, fracking opponent EarthJustice noted that, while an improvement over the 2013 proposal, the finalized BLM regulations “fail to ensure that sensitive, valuable and unique lands are kept off limits to drilling.” Echoing this same view, the Natural Resources Council said in a public statement: “The bottom line is: these rules fail to protect the nation’s public lands – home to our last wild places and sources of drinking water for millions of people – from the risks of fracking. More than ever this underscores the urgent need to get better protections in place around the country – at the local, state and federal levels.”

Analysis of the Impact of the New Regulation
Much can be said about a 395-page set of rules; however, in the interest of brevity we shall focus on two takeaway points:

First, it needs to be emphasized that these regulations only apply to hydraulic fracturing operations on federal land and Indian land, where a small fraction of hydraulic fracturing activity in the United States is taking place. They have no applicability to privately owned land where the vast majority of drilling operations in the United States are occurring. It could be argued, of course, that these rules represent a “placeholder” by the federal government as part of a long-term effort to “federalize” control of oil and gas drilling in the United States. Whether that turns out be the case remains to be seen. For the present at least, legally they apply only to federal land and Indian land – and nothing else.

Second – and in the long-run perhaps more importantly – the fracking rulemaking process presented BLM with a golden opportunity to grant the fracking opponents’ wish of completely banning fracking operations; yet it declined to do so. Significantly, the BLM admits on page 260 of the final rules that it “considered an alternative that would ban hydraulic fracturing activities in all areas.” (Emphasis supplied.) Continuing, BLM notes, “However, such an alternative may render most oil and gas development projects on Federal and Indian [land] infeasible.… The Secretary of the Interior has a responsibility … to assist tribes … in obtaining the benefits of mineral development while protecting other resources.” (Emphasis supplied.)

Reframing the Argument?
Could the industry turn this statement to its advantage in its ongoing battles with fracking opponents in states over proposed moratoria, bans and other restrictions on fracking? Might it not argue that, like the BLM, it too believes that we can responsibly “obtain the benefits of mineral development while protecting other resources”?

Time will tell whether this comes to pass. In the meantime, Wilson Elser will continue to monitor and report on developments on this cutting-edge subject.

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