Scaled-Back U.S. Fracking Rule Draws Qualified Praise

Oil and gas industry representatives offered qualified support for a U.S. proposal to govern hydraulic fracturing on public lands that establishes federal oversight while deferring to state standards in some cases.

In the proposal released yesterday, the U.S. Interior Department made a second attempt to establish national regulations for hydraulic fracturing, or fracking.

While industry officials said they prefer state to federal regulation, they welcomed the changes made by the Bureau of Land Management from its initial proposal last year. Environmentalists expressed disappointment at what they saw as a weakening of disclosure requirements. The new proposal calls for drilling chemicals to be listed with a website established by the industry.

“While changes to the proposed rule attempt to better acknowledge the state role, BLM has yet to answer the question why BLM is moving forward with these requirements in the first place,” Erik Milito, director for industry operations for the trade group American Petroleum Institute, said in a statement.

Closely Watched

The rule is being watched closely by the drilling industry because fracking is used in about 90 percent of the wells drilled on federal lands. The standards will also serve as a marker for states regulating the process locally. Fracking is a technique in which water, chemicals and sand are shot underground to free oil or gas from rock.

A draft rule released last year was so heavily criticized by companies and Republicans that the administration of President Barack Obama went back to the drawing board.

“It appears BLM has addressed some of the concerns, but we still must guard against duplicative and potentially contradictory regulations,” Alaska Republican Senator Lisa Murkowski said in a statement yesterday.

The new, 171-page regulation would cost industry as much as $20 million a year, about half what Interior estimated for its previous proposal. “Our thorough review of all the comments convinced us that we could maintain a strong level of protection of health, safety, and the environment while allowing for increased flexibility and reduced regulatory duplication,” said Neil Kornze, the principal deputy of BLM.

Outside parties have 30 days to comment on the proposal after publication in the Federal Register. Interior didn’t say when it plans to issue its final regulation.

Largest Landowner

BLM, the largest landowner in the U.S., oversees approximately 700 million subsurface acres of mineral rights. Farmers or ranchers own the surface rights on large tracts of federal land. Domestic production from more than 92,000 wells on public lands accounts for about 13 percent of U.S. natural-gas production and 5 percent of oil production.

“If you set aside the argument about whether the rule is necessary or duplicative, I think the BLM listened to industry and made a number of significant changes” on technical issues, said John Northington, of Northington Strategy Group, an oil and gas public-policy firm in Washington.

The rule lets state or tribal rules that “meet or exceed” the U.S. standard to take priority, limiting duplication. In announcing the revision, the agency cited regulations in Colorado, Wyoming, North Dakota and Texas, without specifying that drilling in those states would qualify.

FracFocus Disclosure

In addition, drillers would need to disclose the chemicals they mix with the water and sand to the industry-created website FracFocus. That’s a concession to industry that drew the ire of environmental groups, which argue the site makes it difficult to track or aggregate the data. In addition, drillers can withhold details on “trade-secret” chemicals.

“The proposal does not require drillers to disclose all chemicals being used for fracking and continues to allow trade-secret exemptions for the oil and gas industry,” Michael Brune, executive director of the Sierra Club, said in a statement. “We believe the administration is putting the American public’s health and well-being at risk.”

The Interior Department did offer a hint of a change that might be welcomed by environmental groups. It said it wanted comment on whether it should ban the use of open pits for the water that flows back after a well is fracked. Those pits can leak or leach chemical-laden liquid, which can contaminate groundwater.

“We would like to explore the idea of tanks being the standard,” Kornze told reporters yesterday.

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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