On March 26, 2015, after years of wrangling with industry and environmental groups, the Department of the Interior's Assistant Secretary for Land and Minerals Management published a final rule for hydraulic fracturing on Federal and Indian lands in the Federal Register to be administered by the Bureau of Land Management (BLM). In addition to current drilling regulations, which will remain in effect, the rule creates new requirements for operators using hydraulic fracturing to stimulate oil and natural gas wells. Seeing that BLM estimates about 90% of new wells spudded in 2013 on federal and Indian lands used this technique, the rule will clearly have wide-ranging impacts for industry—if, that is, it goes into effect. The rule has already spawned multiple legal challenges and garnered intense scrutiny on Capitol Hill. Keeping up with these legal and political headwinds will remain as important as the substance of the rule.
The Final Rule
The final rule remains substantially similar to the proposals released in May 2012 and May 2013. Among the most consequential new requirements for operators on federal and Indian lands are:
- Operators must submit detailed information on their proposed hydraulic fracturing plans, including geological information, location of useable water, estimated volume of fluids to be used, data on the planned fracture zone, and a plan for the recovery of used fracturing fluid. This information must be approved by a BLM official before hydraulic fracturing may take place at the well.
- Operators must monitor cementing operations on any casing used to protect useable water zones and submit a verification report to a BLM official at least 48 hours prior to commencing hydraulic fracturing operations. If the casing is not cemented to the surface, the operator must also utilize a cement evaluation log (such as a cement bond log, ultrasonic imaging log, or a similar type of log) to show adequate cementing.
- Operators must perform a mechanical integrity test prior to hydraulic fracturing operations.
- Within 30 days after the completion of hydraulic fracturing, operators must disclose various details of the operation. This includes a description of the base fluid and each additive in the hydraulic fracturing fluid, all of which must be disclosed either to a BLM official or to FracFocus.
- An operator may withhold chemical information that it claims to be a trade secret. However, BLM may still require the operator to submit the information and make it available to the public after ten days' notice if the agency determines the information is not exempt from disclosure.
Challenges to the Rule
In addition to the oil and gas industry, a number of Indian tribes with oil and gas resources on their reservations submitted comments stating concerns that the rule will cause operators to leave tribal lands for off-reservation state and private lands that are subject to less burdensome requirements. Western states (which contain 93% of federal lands) have expressed similar concerns with respect to non-Indian federal lands. These groups have vocally opposed BLM's actions throughout the rulemaking process. Now, some are wasting no time in challenging the rule through litigation and soliciting political support on Capitol Hill.
On the day that the final rule was released (March 20), but before it was published in the Federal Register, industry trade groups filed a petition for review in the District of Wyoming. The groups claim "the administrative record lacks the factual, scientific, or engineering evidence necessary to sustain the agency's final rule." Similarly, on March 26, the State of Wyoming also filed a petition for review in the District Court of Wyoming, claiming that the final rule "exceeds the agency's statutory jurisdiction, conflicts with the Safe Drinking Water Act, and unlawfully interferes with the State of Wyoming's hydraulic fracturing regulations." On April 1, North Dakota filed a motion to intervene in Wyoming's suit.
Outside the courtroom, legislators on Capitol Hill are keeping a spotlight on the rule and its possible effects. BLM Director Neil Kornze testified before the House Committee on Natural Resources' Subcommittee on Energy and Mineral Resources on March 26. And the Senate will have its chance to examine the rule on April 30 when the Committee on Energy and Natural Resources' Subcommittee on Public Lands, Forests, and Mining, chaired by Senator John Barrasso of Wyoming, takes up the rule. No witnesses have yet been publicly announced for this hearing.
For more information on how the new BLM hydraulic fracturing rule may affect your business, contact the authors of this alert.