On May 16, 2013, The U.S. Bureau of Land Management (BLM) released its new proposed rule governing hydraulic fracturing operations on federal and Indian land. BLM originally proposed this rule on May 11, 2012 but, following 177,000 public comments, scores of agency and White House meetings, and an extensive level of stakeholder engagement, BLM decided to re-work and re-propose a new rule.
This is an important proposal. While most of the key shale formations occur on private land, BLM oversees over 700 million acres of onshore mineral estate and has trust responsibilities for over 56 million acres of Indian land holding more than 92,000 oil and gas wells. With upwards of 90% of all new wells expected to utilize hydraulic fracturing technology, unconventional resources on public lands will play a key role in America’s energy future. Therefore, how we regulate those activities matters.
Context is important when it comes to regulating hydraulic fracturing on federal lands. Based on what we have seen in the press, many will be surprised to learn that hydraulic fracturing operations on federal lands is currently regulated. BLM has had hydraulic fracturing-specific regulations since 1982. Additionally, states impose their own hydraulic fracturing regulations on federal lands within the state. Finally, “drilling activities” are regulated across multiple jurisdictions. This final point is a critical one because many of the risks attributed to hydraulic fracturing are actually risks associated with oil and gas drilling. Opponents of hydraulic fracturing have been very strategic about attributing all the risks that may occur from oil and gas development exclusively to hydraulic fracturing and then failing to mention that oil and gas regulations help manage those risks. It is simply not credible.
Context is also important when it comes to understanding the risks associated with hydraulic fracturing. This administration has acknowledged, on many occasions and in many contexts, that there has never been an instance where hydraulic fracturing was shown to have caused groundwater contamination. So why is the administration intent on imposing costly and duplicative regulations to protect against a “risk” that has not occurred in 60 years and 1.2 million wells? BLM says it's to address public perceptions and public concerns. But public perception is an exceptionally poor justification for regulation, especially when the costs are so high.
BLM estimates the proposed rule would cost between $12 million and $20 million per year. Oddly, to arrive at that estimate BLM offset the financial “benefit” of avoiding the costs of remediating groundwater contamination caused by hydraulic fracturing – again, a “risk” that has not occurred in 60 years and 1.2 million wells. While we have not seen a cost estimate from industry on the re-proposed rule, industry estimated the cost of the substantially similar original rule at between $1.5 and $1.6 billion dollars. Even if those estimates were cut in half, they remain staggering.
The BLM Rule has been assailed by constituents of the environmentalist community as weak and a gift to industry – more so now that the “watered down” re-proposed rule has been released. Again, context is important. The fact that BLM proposed a rule at all shows that they are not cozy with industry. This rule duplicates state standards, costs millions of dollars, and was necessitated solely by public perception – not actual risk. It is difficult to see this rule as anything but a gift to anti-hydrocarbon environmental groups.