The Obama administration released the first federal rules governing hydraulic fracturing, or fracking, on Friday, setting new standards across the 750 million acres containing federal minerals for the drilling method that has unlocked a domestic oil and gas boom.
Industry and environmental groups alike will contest the long-awaited final rule on the drilling practice, which involves injecting a high-pressure mixture of water, sand and chemicals into tight-rock formations to access hydrocarbons. While fracking has been used for decades, technological innovations like drilling laterally have increased its effectiveness in recent years.
“I’ve personally fracked wells, so I understand the risks as well as the rewards. I understand something else — many of the regulations on the books today haven’t been updated with advances in technology,” Interior Secretary Sally Jewell said in a call with reporters.
For oil and gas companies, the Interior Department rule is another kick while industry is down.
Low oil and natural gas prices — caused partly by the success of fracking, which has turned the United States into the world’s top oil and gas producer — have crimped budgets, prompting companies to lay off hundreds of workers. On top of that, the rule comes as the Interior Department is looking at regulations to reduce “venting” and “flaring” of excess natural gas produced at wells on federal lands.
“It’s more of the same. When you make things more expensive you get less of it. It’s just like taxation. It’s going to further push development off federal lands,” Kathleen Sgamma, vice president of government and public affairs with industry group Western Energy Alliance, told the Washington Examiner. “Whether it’s a low price environment or a high price environment, it’s still less attractive to operate on federal lands.”
The rule largely mirrors the draft released in May 2013, which was a revision from a 2012 proposal that environmental groups said offered more protection for potential groundwater contamination from fracking.
The rule would require companies to list the chemicals used on industry-backed website FracFocus no later than 30 days after fracking. That’s a win for industry groups, which said environmental groups’ insistence on disclosure before fracking was improper because the composition of fluid can change during the process if the geology proved more stubborn than anticipated.
“We remain disappointed with some provisions like continued reliance on the industry-run website FracFocus for disclosure of toxic chemicals, and the lack of a ban on fracking in our most treasured spaces. While this proposal has improved from previous versions, it represents a missed opportunity,” said Madeleine Foote, legislative representative with environmental group the League of Conservation Voters.
The final rule does, however, include some tweaks to satisfy environmentalists’ concerns.
Interior officials said they would work with FracFocus to make the data more accessible to more easily conduct analyses. Data are currently stored in PDF format on the website, but the goal is to turn them into functional spreadsheets.
Companies also would need to abide by new well construction standards, such as installing cement barriers to provide for safer isolation of groundwater. It also would establish stricter guidelines for managing so-called “flowback” water used to break rock layers underground from between the time it’s extracted and finally disposed.
“Recovered fluids will be closed in enclosed tanks rather than open pits, and that’s a significant change,” said Greg Zimmerman, policy director with Denver conservation group the Center for Western Priorities. “Most producers used closed pits anyway, but making it a requirement … increases the protections quite a bit.”
Oil and gas companies consider the requirements duplicative, as drillers already must go through state permitting before drilling wells on federal land — though fracking opponents contend those rules are outdated, weak or, in some states, not specific to fracking.
“Despite the renaissance on state and private lands, energy production on federal lands has fallen, and this rule is just one more barrier to growth,” said Erik Milito, director of upstream and industry operations with the American Petroleum Institute. “A duplicative layer of new federal regulation is unnecessary.”
The industry said the rule has the potential to create confusion and add hoops that could quash development. Sgamma’s group said a “conservative” estimate regarding the 2013 proposed rule would add $97,000 in expenses per well, which usually cost at least $1.5 million.
Zimmerman said that Western Energy Alliance used inflated figures for “enhanced casing costs,” an expense he said wouldn’t apply in the rule issued Friday. He said that the actual cost per well from the regulation without it would add up to less than $10,000.
The conflicts will be most apparent in the West, where the Interior Department’s Bureau of Land Management controls hundreds of millions of acres of federal land. Even some 56 million acres of private property will be affected by the rule, as the regulation would apply to federal minerals underneath privately held surface rights in “split estate” properties common in the West.
“[The regulatory costs] are borne almost exclusively by the West,” Sgamma said, saying the region hosts 97 percent of federal wells.
Lawmakers on either side of the issue are wasting little time to fight the proposal.
Sen. Jim Inhofe, R-Okla., introduced legislation Friday with 26 other Republican senators as co-sponsors that would give states, rather than the federal government, primacy over regulating fracking on federal lands within their borders.
“We have long supported a states-first approach to hydraulic fracturing, recognizing that states have a successful record of effectively regulating hydraulic fracturing with good environmental stewardship. Now, however, the Interior Department is imposing a federal regulation that duplicates what the states have been doing successfully for decades,” said bill co-sponsor Sen. John Hoeven, R-N.D.
In the House, Democrats introduced five bills Thursday designed to restrain fracking. Environmental groups cheered the effort, dubbed the ‘Frack Pack,’ which they said would increase transparency and close loopholes such as the exemption for most fracking activity under federal Safe Drinking Water Act.
