Federal fracturing rule carries hefty price, industry groups say

The Obama administration’s proposed rules on hydraulic fracturing would cost an average $96,913 per well, according to a study commissioned by two oil industry groups.

The Western Energy Alliance and the Independent Petroleum Association of America say the new federal standards for drilling new oil and natural gas wells on public lands would cost a total of $345 million a year, if applied to all 3,566 projects that could be affected by the rules.

Conducted by John Dunham and Associates, the study found a steep decline in the estimated cost of the rule compared to its previous version. Last year, the firm said the Obama administration’s plan would cost about $253,839 per well, for a total as high as $1.6 billion a year.

The groups say the second version of the rule is less costly because of reduced permitting times and other revisions.

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“While there are improvements in the second version of the rule, it still remains fundamentally flawed from an engineering perspective, as well as bad regulatory policy,” said Kathleen Sgamma, vice president of government and public affairs for Western Energy Alliance.  The Department of Interior “still has not justified the rule from an economic or scientific point of view, and continues to lack the budget, staff or expertise to implement it.”

The biggest additional cost would be for enhanced well casings, with a total pricetag of $310 million. Additional costs would come from cement logging, administrative fees and delays while awaiting permit approvals. Rule revisions have reduced the number of affected wells from an estimated 5,058 to 3,566.

The oil industry has argued that states are better equipped to regulate drilling and hydraulic fracturing than federal agencies because of the nation’s diverse geology and other variances.