A Drilling rig drills for natural gas just west of the Wind River Range in the Wyoming Rockies... [+]
“Obama's Proposed Fracking Rule Would Lead to Dirty Energy”
That was the headline for this post at the Energy Collective by Amy Mall, Senior Policy Analyst for the anti-development group, Natural Resources Defense Council (NRDC). The outlash towards the Administration and the BLM’s proposed regulation governing well completions and fracking operations from NRDC was quite predictable, and it was replicated by a raft of similarly-oriented conflict groups whose fundraising efforts rely on the perpetuation of never-ending crisis, real or imagined.
At the same time, the oil and natural gas industry’s comments related to the proposed regulation as the comment period closed last Thursday also expressed a high level of discontent, not just with the higher costs the new rules would bring to everyone, but also the apparent lack of a legitimate basis for BLM to pursue the regulation in the first place.
Joint industry comments filed by the Independent Petroleum Association of America (IPAA) and the Western Energy Alliance (WEA) on behalf of themselves and 46 additional state and national oil and gas industry trade associations came quickly to the crux of the matter:
“Sixteen months into the rulemaking process, BLM remains unable to provide a supportable reason to impose its additional layer of regulations on top of those laws States already enforce. For the high cost this rule will impose on the industry - $345 million per year – what benefit will the public receive? For the disincentive this rule will create to invest in federal and tribal oil and gas leases, to whom will the tribes and the taxpayers turn for the lost leasing and royalty revenue? BLM has been unable to answer these questions. BLM should recognize that states are already regulating hydraulic fracturing admirably. The only imperative to adopt this rule is an arbitrary desire “to do something”.”
The American Petroleum Institute (API), citing a study it had commissioned, estimated the annual cost of the rule to be somewhere between $30 million and $2.7 billion, a large gap that signified prevailing uncertainties about how the regulations would be applied once they become final.
Wyoming Governor Matt Mead urged Interior Secretary Sally Jewell to reject the proposed regulation, pointing out that his state, like every other oil and gas producing state, already regulates the processes covered by the proposed rule for all wells drilled within its borders. “Wyoming has led the nation in regulating hydraulic fracturing, and the BLM should allow us to continue that leadership,” Governor Mead said.
For itself, the BLM estimated the cost of the regulation at between $12 million and $20 million per year, and was unable to quantify any benefit that would accrue as a result of its imposition of the new regulation. Thus, at the end of the day, BLM appears to have created a proposed regulation that no one likes, provides no tangible benefit, and duplicates already-existing state-level regulations.
Lovely.
The joint industry comments hit the nail on the head when they point out that the main reason for implementing this rule is an “arbitrary desire ‘to do something’”. In other words, the main reason BLM has pursued this regulation is political in nature, which is inevitably a problematic motivation for regulation of any industry. As API spokesman Erik Milito pointed out, "There is still no clear benefit to imposing additional federal rules on top of state environmental stewardship.” It’s a very good point.
For example, the BLM rule contains a whole suite of provisions designed to regulate how wells are completed, including new requirements related to casing and cementing. Can the BLM point to a rash of casing or cement job failures on federal lands, or significant failures in state oversight of well completions as a justification for the provisions? If it can, it doesn’t do so in the preamble to its proposed rule, nor has any representative of the Administration done so in any public statements. The reason for that, of course, is that no such justifications exist.
The proposed rule also would implement a requirement that oil and gas operators disclose the chemical and other contents in the fluids they use to conduct hydraulic fracturing operations on federal lands. Again, pretty much every state with any significant federal lands in their borders already have their own laws and/or regulations containing similar requirements for all wells drilled within their borders – including those on federal lands - requirements that are already working quite well. So what is the driving need for the federal government to now come in and increase everyone’s costs and add time delays with a duplicate set of reporting requirements?
The reality, of course, is that no such driving need exists. The whole “disclosure” issue was a fake controversy to begin with. There never has been any overwhelming outcry from real landowners demanding to know what is in fracking fluids. The issue was invented out of whole cloth by fracktivist groups in the Barnett Shale who convinced a handful of landowners to complain at public hearings. But most landowners have real jobs and occupations, and have neither the time nor the inclination to coordinate efforts with professional protesters.
But because a compliant news media reported on the issue as if there were some great groundswell of concern from real landowners, the states that are home to significant oil and gas development have taken it upon themselves to deal with the matter, and they have done so quite effectively at this point. As a result, there is no real justification for any federal agency – the BLM or otherwise – to be pursuing a duplicative and costly regulatory regime at the federal level.
And yet, here it is.
At the end of the day, BLM’s proposed regulation is a solution desperately in search of a problem, a problem which it has found itself painfully unable to quantify or really to even identify. In its overwhelming institutional need “to do something”, the BLM proposes to impose a rule that has, by its own admission, no quantifiable benefit and that will only serve to impose new costs on producers and consumers of oil and natural gas from federal lands.
