Today the United States Bureau of Land Management (BLM) released their long awaited final rules on hydraulically fracked wells on federal land after two rounds of proposed rules in 2012 and 2013 proved highly contentious. In our article on the 2013 proposed rules, we hoped BLM rules would be a model for states to follow, but concluded that they backed off of more stringent regulations in 2012 and that the BLM rules didn’t break new ground, being more stringent than some states and less in others.
Is three times a charm?
Let’s go through what BLM says is “new.” From an environmentalist perspective, the requirement for frac tanks to store waste fluids as opposed to keeping open the use of lined pits is a step forward, going beyond nearly all state regulatory practice. But the data show that there are risk-risk tradeoffs. Tanks in tornado alley are probably a bad idea, and have been not infrequently used as target practice. But tank leaks and spills are easier to monitor and not vulnerable to rainy weather. With the industry moving to mobile storage tanks anyway, and with exceptions able to be made (in tornado alley?), the rule seems reasonable. One concern is that the exceptions are to be “limited and rarely granted” and not on cost grounds.
The requirement to submit details about the geology and fracking plans before drilling is a very good idea, so long as BLM has criteria to reject some plans and enough personnel to make reviews serious rather than pro forma. This provision also comes with a plan to distribute the data to the public on the web site, although the details remain to be worked out. Another great idea, but execution is critical.
There are a few provisions about casing and cementing as well as well integrity testing and reporting. Plans in these areas do not require approval, however, and criteria for deciding when inadequacies or bad test results show up are not provided. The requirement for a successful mechanical integrity test prior to fracking is a step towards lower risks compared with current regulation, but has been overtaken by best practice and state regulation.
There are several rules which return to the generally more stringent 2012 proposal. Most important is the requirement that testing be carried out on each well. The 2013 rules permitted well sampling among wells with similar specifications and geologic parameters.
Finally, the BLM is now requiring fracking fluid disclosure after completions through FracFocus, the reporting tool set up by the Groundwater Protection Council with funding from the US Department of Energy. As FracFocus improves, this strategy will look better and better. The 2012 rules asked for disclosure before the drilling began, but BLM argued that the actual mixture used was a field decision. There are still exceptions for trade secret protection, which can be granted via an affidavit attesting for the need – an approach that appears no different than the 2013 rules but weaker than in 2012 where chemical information would have had to be submitted to substantiate claims.
How do these rules stack up against the states’ rules? This question is not only important for judging whether these rules can be considered model rules but also in considering costs. Since operators on federal land are subject to whichever rule (state or federal) is more stringent, costs are incurred only where the BLM's rules are more stringent. Our rapid assessment is that, other than for the requirement of frac tanks (and even here best practice in the industry favors this option), no new ground is being broken vis-a-vis the states as a whole (even here a few states prohibit pits and others are moving to phase them out). Beyond this point, all that can be said in general is that with state regulations extremely heterogeneous and the ground shifting so quickly, BLM’s regulations are more stringent for some states and less stringent for others. The BLM’s stated desire to reduce confusion about which rules apply on federal lands is admirable, but seems an administrative nightmare if done on a case by case basis.
BLM assessed the costs of its rule, which, at $11,400 per well for 2,800 new wells annually, are trivial compared to total per well costs in the $3-5 million range. These costs include those for frac tanks, testing and administrative paperwork. And even these aggregate costs of $32 million per year may be overestimated unless BLM’s baseline included what industry was already doing on its own or in compliance with applicable state regulations. The BLM’s Final Draft shows that such an attempt was made (pgs. 278-311). Note however, that this per well figure is an average. BLM estimated that the cost to an operator that would not have otherwise used frac tanks would be over $50,000 compared to pits with liners.
So, overall, if you were looking for magic (three is a charm) you won’t find it here, but the final rules represent a more thoughtful and more contemporary approach to regulation than we had before.
