On Thursday, March 26, 2015, the U.S. Department of the Interior’s Bureau of Land Management (BLM) published in the Federal Register the Final Rule on hydraulic fracturing on federal and Indian lands.1 The Final Rule sets forth the first federal regulations of hydraulic fracturing and culminates the BLM’s efforts since 20102 to issue regulations that “ensure the environmentally responsible development of oil and gas resources on Federal and Indian lands.”3 The regulations set forth in the Final Rule are effective on June 24, 2015.
The Final Rule states that its regulations fulfill three main goals:
- Ensure that wells are properly constructed to protect water supplies;
- Make certain that the fluids that flow back to the surface as a result of hydraulic fracturing operations are managed in an environmentally responsible way; and
- Provide public disclosure of the chemicals used in hydraulic fracturing fluids.
While the federal regulations apply only to hydraulic fracturing operations on public and Indian lands, the Final Rule sets forth a framework for regulating hydraulic fracturing that may be adopted by state, local or even international regulators. In fact, the Final Rule’s preamble indicates that the BLM will continue to work with states and tribes to implement the Final Rule as “consistently as possible with state or tribal regulations.”4 In response to public comments on the types of operations within the scope of the regulations, the Final Rule modifies the term “hydraulic fracturing” to include the phrase “by applying fluids under pressure.” Hydraulic fracturing, however, does not include certain types of well stimulation operations, such as acidizing. Further, the Final Rule’s preamble states that hydraulic fracturing includes all hydraulic fracturing operations regardless of depth. The Final Rule also clarifies and expands the definition of “Usable Water.”
Application of Final Rule to Operators
The Final Rule regulations will apply to wells at various stages of completion. Specifically, the Final Rule distinguishes the applicability of the regulations for those leases with an approved Application for Permit to Drill (APD) from leases without approved APDs, as well as leases with approved APDs that do not have wells spudded.
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How to Submit a Request for Approval of Hydraulic Fracturing and What Must be Included
The operator must submit a request for approval of hydraulic fracturing and obtain approval before the operations begin. The operator may submit the request along with an application for permit to drill (APD) or with a Sundry Notice and Report on Wells (Form 3160-5) as a Notice of Intent (NOI). The Final Rule introduces the ability for an operator to submit a Master Hydraulic Fracturing Plan (MHFP) for hydraulic fracturing proposals at the APD or NOI stage for a group of similar wells with a single submission, so long as the geologic characteristics of the wells are “substantially similar.” The BLM’s field office will make the determination as to whether the geographic area for which an MHFP applies is appropriate. The Final Rule notes, however, that an MHFP does not relieve the operator from obtaining an approved APD for each individual well in the group.
The Final Rule requires a higher level of specificity for the information an operator must submit to request approval. For example, a request for approval must include a hydraulic fracturing design plan and fluid recovery plan with certain information regarding wellbore geology, including but not limited to, descriptive and identifying information on the formation into which hydraulic fracturing liquids will be injected. The information must include the location and extent of any known or suspected faults or fractures within one-half mile of the wellbore, estimated depths of the Confining Zones and occurrences of Usable Water based on the best available information to the operator.
Monitoring and Verification Requirements
The fracking regulations will require operators to monitor and verify operations prior, during and after the completion of hydraulic fracturing activities. The monitoring and verification requirements will generally require operators to (i) design and implement a casing and cementing program that follows best practices and meets performance standards to protect and isolate usable water5, (ii) continuously monitor cementing operations during well construction, (iii) perform a successful mechanical integrity test (MIT) prior to the hydraulic fracturing operation, (iv) monitor annulus pressure during a hydraulic fracturing operation, and (v) manage flowback fluid storage in rigid enclosed, covered, or netted and screened above-ground tanks, subject to very limited case-by-case exceptions that would allow lined pits to be used instead.
Information and Chemical Disclosure Requirements
Under the disclosure requirement, operators must submit a post-fracture report of its monitoring and verification activities within 30 days after the completion of the last stage of hydraulic fracturing operations for each well. The post-fracture report requires public disclosure of all chemicals used, with the availability of a limited exception from this requirement for information that an operator affirms, through an affidavit, to be a trade secret.
Operators may use the existing database for public disclosure of chemicals, FracFocus, to submit its post-fracture report. Since many state fracking regulations also require the use of FracFocus, a single submission to FracFocus will meet both the state and federal requirements.
Finally, it should be noted that the BLM is in the process of finalizing a Memorandum of Understanding (MOU) with the Ground Water Protection Council (GWPC), a non-profit organization involved with managing FracFocus, to ensure, among other things, that the database can be searched and downloaded easily and that the BLM is automatically notified when an operator uploads chemical disclosure information.
The regulatory framework set forth in the Final Rule contains many of the same requirements already in place at the state level. Nevertheless, although the BLM contends that its new rules are consistent with state regulations and industry standards, some stakeholders believe the rules are unnecessary, duplicative or simply miss the mark. Although the Final Rule provides operators, states and tribes the ability to request a variance from specific provisions, relief from the federal regulation would only be granted if the state or tribal regulations in place are demonstrated to be equal to or more protective than the BLM’s rules. The variance provision, however, is unlikely to satisfy many stakeholders. In fact, even before the regulations were published in the Federal Register, the Independent Association of America and Western Energy Alliance both filed a lawsuit challenging the new rules.6 On March 26, 2015, Wyoming became the first state to formally challenge the new rules.7
Taking into account that these are the first federal rules regulating hydraulic fracturing and the patchwork of state regulations on the issue, it is no surprise that there has been such a quick reaction to litigate the rules.