Feds make concessions to oil industry in new hydraulic fracturing rule

An anti-fracking sign sits in the yard of a home in New York. (Photo: Williams Montgomery, Houston Chronicle)
An anti-fracking sign sits in the yard of a home in New York. (Photo: Williams Montgomery, Houston Chronicle)

The Obama administration on Thursday unveiled a new plan to tighten standards for drilling on public lands and force companies to reveal the chemicals they use in the process, after making significant concessions to the oil industry.

Although it is poised to be the first major federal rule governing the hydraulic fracturing process that is unlocking vast domestic oil and gas reserves, the measure would apply only on the small sliver of U.S. land under the Interior Department’s control.

Rewritten in response to a flood of criticism from both environmentalists and the oil industry, the new proposal left both groups unsatisfied. Conservationists said it doesn’t go far enough to protect drinking water near drilling sites, and industry officials said the mandates could hike costs and cause delays in drilling.

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Interior Secretary Sally Jewell cast the proposed rule as a pragmatic approach to protecting environment and public health while allowing oil and gas development on federal lands.

“We are proposing some common-sense updates that increase safety while also providing flexibility and facilitating coordination with states and tribes,” Jewell said. “As we continue to offer millions of acres of America’s public lands for oil and gas development, it is important that the public has full confidence that the right safety and environmental protections are in place.”

To a striking degree, Interior Department officials emphasized their desire for a final set of mandates that protects public health and the environment while providing flexibility and avoiding duplicate regulation. Jewell acknowledged that the measure was sure to be criticized on all sides.

“You’re going to hear from folks that we caved to industry or we’re bowing to pressure from environmentalists,” Jewell told reporters on a conference call. “The fact is, this is an improved common sense proposal that benefited from the feedback we got from all stakeholders on all sides of this issue.”

The measure would set new standards for the integrity of wells to ensure groundwater is isolated from fluids pumped underground and any hydrocarbons flowing at the sites. Companies also would be required to have water management plans for handling the fluids that flow back to the surface, in response to concerns that the material can be contaminated with naturally occurring radioactive substances found underground.

In a concession to oil and gas companies, the Bureau of Land Management would require the firms to reveal the chemicals they pump underground at well sites only after the work is done and would accept disclosures via the industry-backed website FracFocus, rather than a new, government-run system.

That follows the lead of Texas, Colorado and other states, which have deemed FracFocus the registry of choice for disclosing chemicals used in hydraulic fracturing, the process of pumping sand, water and other substances underground to open the pores of dense rock and release hydrocarbons trapped inside.

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The proposed rule also would allow oil and gas companies to continue to make trade secrets claims, in an approach modeled after the one adopted by state regulators in Colorado.

But environmentalists said the approach is tantamount to letting the fox guard the henhouse. Michael Brune, executive director of the Sierra Club, accused the administration of “putting the American public’s health and well being at risk, while continuing to give polluters a free ride.”

“This 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,” Brune noted.

Jessica Ennis, the legislative representative for Earthjustice, accused federal regulators of “settling for shoddy protections peddled by the oil and gas industry.”

“Comparing today’s rule governing fracking on public lands with the one proposed a year earlier, it is clear … the Bureau of Land Management caved to the wealthy and powerful oil and gas industry and left the public to fend for itself,” Ennis said.

A Harvard Law School report issued last month documented problems with FracFocus, including the absence of some state-required data in the system and the ease with which companies using the registry can inconsistently and too liberally shield chemicals as trade secrets. (Supporters of FracFocus said the study didn’t reflect new and coming changes to the system, many driven by state regulators’ concerns).

But Deputy Interior Secretary David Hayes suggested there was some wiggle room when it comes to using FracFocus for chemical disclosure.

“We are aware of the concerns that have been expressed that the tool is not as facile as everyone would like,” he told reporters. “What we’re interested in is good public disclosure, and we’re interested in public comments on the best mechanism to do it.”

The public has 30 days to weigh in on the proposed FracFocus disclosure approach as well as the rest of the proposal.

“If it’s not adequate, we will look for some other mechanism to ensure that transparency and access to information about the constituents that are going downhole in the tracking process is available to the public,” Hayes said.

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The rule unveiled Thursday is a complete rewrite of an initiative the Bureau of Land Management first proposed a year ago. After receiving nearly 200,000 comments, the agency scrapped the initial proposal in January and went back to the drawing board.

In response to industry criticism, the measure proposed Thursday would require oil and gas companies to isolate wells from underground sources of usable water as determined by state regulators and tribal authorities. By contrast, the proposal issued a year ago would have applied even to small, already contaminated pockets of water underground, potentially forcing companies to install far more surface casing than would be necessary to protect true drinking water supplies.

While last year’s proposal was written to cover a wide array of “well stimulation” activities, the new version focuses more narrowly on hydraulic fracturing. Industry officials had argued for the change on the grounds that the broader approach roped in “routine maintenance activities,” forcing a 30-day waiting period for permit reviews and approvals before even that work. Conservationists, however, said the more fracturing-focused approach leaves out existing — and yet undeveloped — techniques for stimulating oil and gas production at wells, including methods that pose environmental risks.

The newly proposed rule also would allow the Bureau of Land Management to effectively waive all of the mandate’s requirements in certain states or tribal regions if the agency determines they meet or exceed the new federal standards. Amy Mall, a senior policy analyst with the Natural Resources Defense Council, said the bureau would be able to make those exceptions without first accepting public comment on the wisdom of the decision.

Existing regulations governing hydraulic fracturing operations on public lands are more than three decades old — written well before the technique was combined with horizontal drilling to allow companies to tap previously unrecoverable oil and gas supplies. Now, roughly 90 percent of wells drilled on federal and Indian lands use hydraulic fracturing.

The Bureau of Land Management’s principal deputy director, Neil Kornze, stressed that the measure hews to industry’s best management practices.

“We know from experience that hydraulic fracturing and horizontal drilling methods can be used safely and effectively, employing many of the best management practices reflected in this draft rule,” Kornze said. “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.”

Although the new proposal responds to many of oil and gas companies’ biggest concerns, industry leaders have argued that a layer of federal mandates isn’t necessary at all.

Barry Russell, the head of the Independent Petroleum Association of America, insisted the measure would solve “no existing problem” while creating “additional burdens” for industry.

“Federal land management should encourage energy development,” Russell said. “This rule discourages the promise of America’s new energy supplies, threatening jobs and the progress we’ve made on energy security.”

Erik Milito, director of upstream operations for the American Petroleum Institute, suggested that federal regulators were moving in the right direction but still missed the mark.

“States have led the way in regulating hydraulic fracturing operations while protecting communities and the environment for decades,” Milito said. “While changes to the proposed rule attempt to better acknowledge the state role, BLM has yet to answer the question why it is moving forward with these requirements in the first place.”

In congressional testimony earlier this month, industry representatives and state officials examining last year’s version of the rule said it could add hundreds of thousands of dollars to the price tag for new wells.

That forecast does not reflect the proposed change in what underground water supplies would have to be isolated at wells, which could pare costs considerably. And some industry trade groups, including the American Petroleum Institute, have been waiting for the new rule to study the potential costs of compliance.

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Environmentalists were angry that the updated proposal still would not require companies to conduct baseline water testing at sites before conducting hydraulic fracturing. The measure also would not specifically outlaw the use of diesel in fracturing fluids.

Frances Beinecke, the president of the Natural Resources Defense Council, said the rule would “protect industry, not people.”

The mandates “are riddled with gaping holes that endanger clean, safe drinking water supplies for millions of Americans nationwide,” Beinecke said.

Fundamentally, the fight over the details of the newly proposed rule is about a bigger war over regulation of the energy industry. Where oil and gas companies prefer state-based regulation they say is more geared toward vastly different geologies across the U.S., many environmentalists insist the federal government should set some baseline standards. Rep. Rush Holt, D-N.J., said last week that because state regulations “vary widely . . . it’s important that the Interior Department put in place a regulatory floor of safety measures to ensure there are at least minimal protections in place.”

Even though the proposed rule would cover about a tenth of the United States’ onshore oil and natural gas production, industry officials believe it could crack the door for further federal regulation of drilling techniques on private land.

On Capitol Hill, reaction to the rule divided along party lines, with both sides blasting the measure.

For instance, Rep. Ed Markey, D-Mass., called the proposal “extremely disappointing.”

“It gives oil and gas companies the freedom to (fracturing) without the proper safety protections and disclosures the American public deserve,” Markey said. The rule “would treat wells like cookie cutter activities, potentially leaving huge holes in ensuring that (fracturing) activities on public lands are being done properly and safely.”

Rep. Doc Hastings, R-Wash., said the administration was “choosing costly red tape at the expense of American jobs and American energy production” by charging forward with new regulations “that are burdensome, restrictive, unnecessary and directly duplicate what states have been doing efficiently and effectively for over 60 years.”

Not everyone was angry. Leo McKinney, the mayor of Glenwood Springs, Colo., the state whose drilling regulations have served as a model for the federal government, said the measure is “is a sign that President Obama is committed to protecting the health and safety of our citizens.” But McKinney stressed the importance of going further, to ensure energy development is focused in “appropriate” places, while protecting the “treasured lands and waters that drive the Western economy.”

Sen. Lisa Murkowski, R-Alaska, also struck a measured tone and praised administration officials for creating a possible exemption for energy production in some states.

“It appears BLM has addressed some of the concerns,” said Murkowski, the top Republican on the Senate Energy and Natural Resources Committee. “But we still must guard against duplicative and potentially contradictory regulations.”

Rep. Jared Polis, D-Colo., also commended “the BLM’s efforts to increase its oversight of natural gas extraction on public lands” even though “there is a great deal of room for improvement.” Polis stressed that by advancing the proposal, the Interior Department “has acknowledged that fracking operations are directly impacting communities across the country.”

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