Industry would do well to embrace the new US Department of Interior Bureau of Land Management (BLM) rules for hydraulic fracturing on public lands. Stronger regulation and compliance in the sector is the industry’s best avenue to roll back an increasing trend for localities to seek outright bans. Twenty four US states currently have municipal or county-wide bans on fracking in place. In many cases, including in California, Colorado, Texas, Ohio and Pennsylvania, key municipalities initiated their bans in response to water contamination incidents and other significant environmental hazards that have taken place due to bad practices. Some communities are experiencing tremors and air pollution.
In Colorado, citizens groups whose grievances include verified instances of water contamination came close last year to imposing a state-wide ban on fracking. Colorado municipalities that have actively tried to ban fracking include Boulder City, Broomfield, Colorado Springs, Erie, Fort Collins, Lafayette, Longmont, Loveland and Nederland. In California, Culver City and Los Angeles also imposed bans after finding industry ventures were fracking without a permitting process. New York’s ban similarly was initiated after it was found that improper or weak casing in older wells was leading to water contamination. Thirty six municipalities in Ohio have initiated bans while 16 communities in Pennsylvania do not allow fracking. Famously, Denton, Texas made news when it imposed a ban; Bartonville, Dish and Flower Mound also have bans.
The new BLM rules focus on the core issues: proper disclosure of chemicals used in operations, well integrity, a ban on open air pits to store flowback water, limits on drilling distance to water sources and tighter monitoring rules for wells that have been found to have a history of casing problems. The new federal standards should help states like California that need to tight up water handling rules. Federal officials say that they are encouraging states with tighter regulations than the new baselines to keep their individuals rules in tact through a variances process but environmentalists worry that federal rules will open even more law suits on requirements. Industry has weighed in on the operating difficulties that could ensure from the regulations and has the right to apply for many exemptions – for example, by filing an affidavit for trade secret exemptions for disclosure of specific frack fluid formulations or to avoid using storage tanks for water if land acreage does not permit practical or safe construction.
A recent Baker Institute study found that imposition of widespread local bans on fracking could noticeably lower US liquefied natural gas (LNG) exports to the detriment of European energy security. So far, the current level of bans has not had significant effect on prices or exports because the US resource base is so large and diverse, allowing for substantial elasticity of supply. Studies have also shown that the cost of compliance with green completions is relatively small – perhaps under $.035 per mmbtu- and easily absorbed by the major operators who have already been moving in this direction. Importantly, forward looking companies like Apache and Encana have initiated practices that exceed regulatory guidelines to ensure that community engagement is positive where they have valuable operations. The new Federal baselines are aimed to pull in that same direction to ensure that the industry continues to have a right to operate.