In 2012, the Department of the Interior’s Bureau of Land Management (BLM) circulated a proposed rule governing the use of hydraulic fracturing on federal land. That proposal garnered a significant amount of interest and public comment. Today, the BLM released a final version of those regulations aimed specifically at hydraulic fracturing. The BLM has been working on these regulations since President Obama’s first term.
Under the new regulations, operators are required to conduct a mechanical integrity test before engaging in hydraulic fracturing operations. Moreover, if an operator encounters cementing problems with a well, the operator is required to show the BLM that the problem has been remedied. Operators are also required to monitor annulus pressure while hydraulic fracturing operations are ongoing. In addition, any fluids recovered during fracking operations must be contained in an above-ground storage tank. The rules contains a few limited exceptions; however, the exceptions have to be approved on a case-by-case basis. Additionally, the new regulations require all wells to satisfy best practices standards. The regulations authorize government employees to inspect the cement barriers of wells.
The new regulations also heighten reporting requirements. Oil and gas companies will be required to disclose the chemical composition of their fracking fluids. Companies must make this disclosure within thirty days of finishing a particular drilling operation. The new rules make an exception for information qualifying as a trade secret; however, companies must submit an affidavit to prove trade secret status. Companies are still permitted to use FracFocus to make their disclosures. The BLM noted that it is negotiating a memorandum of understanding (MOU) with the Ground Water Protection Council (GWPC), the organization that manages FracFocus. Under the MOU, the GWPC will notify the BLM each time chemical disclosures are uploaded on the site. The rules require companies with operations on federal land to follow state and federal disclosure requirements; however, if the state regulation is stricter, the state can request a variance that requires operators to comply with the stricter state rule. Companies will also have to submit additional information to the BLM concerning wellbore geology, fault and fracture locations, water depths, the volume of fluids used, and the direction and length of fractures.
According to the BLM, the new regulations are necessary because of the dramatic growth in hydraulic fracturing operations throughout the country. The BLM has indicated that it believes the new rules will ensure that wells are constructed in a manner that will protect water supplies and that fluids involved in hydraulic fracturing operations are utilized so as to avoid any negative impact on the environment. In addition, the BLM has expressed a desire that the new regulations improve public disclosure of the chemicals used in hydraulic fracturing and increase the cohesion between federal and state standards.
The new rules are set to take effect in ninety days after it is published in the Federal Register. The impact of the rule is debatable as the new regulations only apply to oil and gas wells on public lands, and the majority of fracking is conducted on private property. That said, commentators have suggested that these new regulations will further stymie the growth of hydraulic fracturing on public lands. In fact, the BLM estimated that it will cost operators $11,400 per well to comply with the new regulations. The Independent Petroleum Association of America and Western Energy Alliance have already filed suit to challenge the regulations.
Read the new regulations.
This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.
