BLM Publishes Final Public Lands Fracking Rule, Industry Responds with Lawsuit

The federal Bureau of Land Management (“BLM”), within the Department of the Interior (“DOI”), published their final rule on hydraulic fracturing last Thursday, March 26.  (Hydraulic Fracturing on Federal and Indian Lands, 80 Fed. Reg. 16,128 (Mar. 26, 2015).)  The finalized rule comes almost four years after the initial proposed rule was published in the Federal Register on May 11, 2012 and follows the supplemental notice of proposed rulemaking and request for comment which was published on May 24, 2013.  The final rule becomes effective on June 24, 2015 and only governs wells hydraulically fracked on Federal and Indian Lands.  It does not apply to fracking activity on private and state-owned land, where most of the fracking in the United States occurs. 

In 2013, 90% of the 2,800 new wells on Federal and Indian lands were stimulated using hydraulic fracturing techniques, and the BLM approximates that the final rule will impact about 2,800-3,800 wells each year.  Regarding monetary impacts on operators, the “BLM estimates that the compliance cost will be about $11,400 per well . . . On average this equates to approximately 0.13 to 0.21% of the cost of drilling a well.”  (Id. at 16130.) 

The overarching purpose of the final rule is to protect human health and the environment from potential risks associated with hydraulic fracturing.  Further, the BLM’s rule states the following themes: “To ensure that wells are properly constructed to protect water supplies, to make certain that the fluids that flow back to the surface as a result of hydraulic fracturing operations are managed in an environmentally responsible way, and to provide public disclosure of the chemicals used in hydraulic fracturing fluids.”  (Id. at 16128.) 

Requirements under the Final Rule

The principal requirement under existing oil and gas regulations is the requirement of a permit for hydraulic fracturing activities.  Before beginning operations, an operator must submit an Application for a Permit to Drill (“APD”) to the BLM and wait for approval.  As the new regulations supplement the existing regulations, and do not replace them, this permit requirement will continue under the new regulations.

Additionally, the final rule requires the operator to do the following:

• Submit additional information with its APD including wellbore geology, location of faults and fractures, and the depths of all usable water;
• Design and implement a cementing program to protect usable water;
• Monitor cementing operations during well construction;
• Perform a mechanical integrity test;
• Monitor annulus pressure during the fracking activity;
• Store waste fluids in “rigid enclosed, covered or netted and screened above-ground storage tanks;” and
• Disclose chemicals used in the fracking activity. (Id. at 16129-30.)

One of the most controversial aspects of the rule is the new definition of “usable water.”  Usable water is “defined generally as those waters containing less than 10,000 parts per million of total dissolved solids (TDS).”  (Id.)  The BLM altered this definition from previous versions of the rule in response to public comments, including removing from the definition aquifers used for agricultural or industrial purposes.  However, the BLM ultimately claims that there has been no substantial change in the definition and there will be “no significant changes in costs of running casing and cement.”  (Id. at 16142.)

In addition, the final rule provides that variances may be granted to states and tribes, only if the state or tribal requirements meet or exceed the objectives of the BLM rule.  A variance may be granted for specific requirements of the rule but not from the entire rule.  (Id. at 16167.)  Unlike several environmental statues, nothing in the BLM’s statutory authorities authorize delegation of BLM’s duties to state or tribal agencies.  (Id.)  However, in areas where BLM lacks regulatory authority, state and tribal laws will apply.  The final rule “recognizes that some tribes have been proactive in regulating hydraulic fracturing on their lands.”  (Id. at 16185.)  “It is not the BLM’s intent to preempt tribal regulations.”  (Id.)  Thus, in the absence of any preemption, the final rule will not change any tribal laws and regulations that would apply to leases of tribal and individually owned tribal lands.

Similarities to California’s Fracking Regulations

The final rule is similar to California’s Permanent Well Stimulation Treatment Regulations under Senate Bill 4, and the BLM notes that the regulations are consistent.  (Id. at 16129.)  The federal regulations and California’s regulations share the following requirements: a permitting scheme, chemical disclosure requirements, and well integrity testing.  California’s regulations, however, are more stringent and have the following, additional requirements: neighboring landowner notification and a water testing request option for such landowner, preparation of a groundwater monitoring plan, and an independent scientific study of the impacts of fracking commissioned by the California Natural Resources Agency.  The federal final rule differs from California’s regulations because the rule gives specific requirements for storage of waste fluids (in a “rigid, enclosed, covered or netter and screened above-ground storage tank”), whereas regulations under SB 4 merely instruct that “[f]luids shall be stored in containers and shall not be stored in sumps or pits.”  (§ 1786(a)(4).)

Opposition to the Final Rule

BLM’s final rule has failed to satisfy environmentalists or industry groups.  Environmental organizations argue that the regulations do not fully address and prevent potential risks of fracking, primarily climate change impacts.  Some environmental groups continue to advocate for a complete ban on hydraulic fracturing.

Industry groups have shown their dissatisfaction by filing a lawsuit.  On March 20, the Independent Petroleum Association of American and the Western Energy Alliance filed suit against the Department of the Interior and the BLM.  They argue that the “BLM’s rulemaking represents a reaction to unsubstantiated concerns and the administrative record lacks the factual, scientific, or engineering evidence necessary to sustain the agency’s final rule.”

On March 26, the state of Wyoming filed a lawsuit challenging the BLM’s final rule, making Wyoming the first state to challenge the regulations.  (Wyoming v. U.S. Dept. of Interior, Case No. 15-CV-43-5 (Mar. 26, 2015).)  Among other claims, Wyoming argues that the BLM’s 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.”  Additionally, on March 31, the state of North Dakota announced that it is joining Wyoming’s suit.

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