RPC Reg Spotlight June 18, 2012

 

Regulatory Action in the Spotlight:

 

Department of Interior regulation requiring disclosure of chemicals used in hydraulic fracturing on public land and Indian land

 

Adverse Effects:

 

  • High cost of regulation disproportionately affects small businesses.
  • Rule could retard a fast-growing sector of the energy industry. 

 

Response of the Obama Administration:

 

Hydraulic fracturing is a well stimulation process used to maximize the extraction of underground resources such as oil and natural gas.  The process of hydraulic fracturing includes the acquisition of source water, well construction, well stimulation and waste disposal.  As the Bureau of Land Management (BLM) explains:

 

‘Hydraulic fracturing,’ a process used to stimulate production from oil and gas wells, has been a growing practice in recent years. Public awareness of fracturing has grown as new horizontal drilling technology has allowed increased access to shale oil and gas resources across the country, sometimes in areas that have not previously experienced significant oil and gas development.  The extension of the practice has caused public concern about whether fracturing can allow or cause the contamination of underground water sources, whether the chemicals used in fracturing should be disclosed to the public, and whether there is adequate management of well integrity and the “flowback” fluids that return to the surface during and after fracturing operations.

 

On May 11, 2012, the BLM unveiled a proposed rule (RIN 1004-AE26) that would affect hydraulic fracturing on public land and Indian land.  In the United States, BLM oversees approximately 700 million subsurface acres of Federal mineral estate and 56 million subsurface acres of Indian mineral estate.  This rule would require the “disclosure to the public of chemicals used in hydraulic fracturing on public land and Indian land, strengthen regulations related to well-bore integrity, and address issues related to flowback water.”  Essentially, the proposed rule would require companies to disclose, within 30 days, the chemicals used while hydraulic fracturing a well on federal land.  BLM has stated the rule should be finalized by the end of 2012. 

 

 

Impact on the United States:

 

According to the American Action Forum, the regulation stands to cost $376.8 million over ten years, with the highest costs coming in 2013.  This would be an estimated cost of $11,833 per well and would result in a paperwork burden of 28,560 hours per year.  BLM estimates that, using Economic Census data, “about 99% of the entities operating in the relevant sectors are small businesses in that they employ fewer than 500 employees.”

 

Kathleen Sgamma, vice president of government and public affairs for the Western Energy Alliance, stated, “Western energy producers already face excessive bureaucratic hurdles when developing American energy on public lands.  Since nearly every well drilled in the West requires the use of fracking, these unnecessary new rules will only discourage the production of American energy.”

 

 

In Closing:

 

Though the press release for the regulation said it “has been written to minimize litigation,” a reasonable individual could assume the high likelihood of lawsuits being involved in the enforcement of this new rule.  By adding another burdensome regulation to the energy industry, the Obama administration continues its trend of suppressing fossil-based power sources.  Also, since the overwhelming majority of the hydraulic fracturing industry is made up of small businesses, this regulation would disproportionately affect the very same job creators whom the economy is most dependent upon to create growth. 

 

 

Relevant Legislation:

 

The Committee on Science, Space, and Technology held a full committee hearing titled “Review of Hydraulic Fracturing Technology and Practices” on May 11, 2011 and on November 16, 2011, the Transportation and Infrastructure Subcommittee on Water Resources and Environment held a hearing titled “Hydraulic Fracturing of Shale Beds: Ensuring Regulatory Approaches that will Help Protect Jobs and Domestic Energy Production”.  At the November 16, 2011 hearing, Rep. James Lankford stated, “to be clear as well, 99 percent of what is used for hydraulic fracking is water and sand. One percent or less is actually the additional chemicals that are added in the treatment process. So, when we talk about all these chemicals being pumped into the ground, we need to keep the perspective together on it. Ninety-nine percent is just water and sand.”