Proposed BLM fracking rules could cost oil and gas industry plenty

Greg Campbell | Contributor

Proposed fracking rules for oil and gas operations on federal lands will cost the industry as much as $345 million per year, according to a new cost analysis done on behalf of the Western Energy Alliance and the Independent Petroleum Association of America.

The Bureau of Land Management released a draft of the new regulations in May, suggesting that they would cost from $12 million to $20 million annually, but the analysis by New York based economic consultant firm John Dunham and Associations (JDA) shows a much higher price tag.

“John Dunham’s analysis once again shows that the economic impact from this proposed rule on independent oil and natural gas producers will be significant,” said Dan Naatz, vice president of federal resources for the IPAA, in a statement.

Naatz called the regulatory scheme “ill conceived” even though many in the industry consider it to be an improvement over an earlier, more stringent proposal.

BLM’s original plan called for several new layers of oversight with the stated goal of protecting air and water. These included requirements that operators prove the integrity of each well and wait to receive approval from the BLM before they were fracked. They also required that operators provide detailed data about how each new well is fortified with cement to ensure no fracking chemicals leaked out of the well bore. And they instituted new reporting and administrative requirements that the industry called burdensome and costly.

JDA estimated that implementing the rules would cost more than $1 billion annually and lead to lengthy delays in production.

The BLM has revised the proposed rules to loosen some of the restrictions, but kept some of the costlier provisions, including regulations for reinforcing the casing of well bores to prevent leaks.

Naatz told Reuters that casings were already regulated at the state level.

“The effort by BLM is really a duplication of state efforts and is redundant without any real environmental benefits,” he said.

That echoes a complaint by Kathleen Sgamma VP of Government and Public Affairs for Western Energy Alliance.

“[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,” she said in a statement.

Indeed, a recent federal study has found no evidence that existing fracking practices pose a danger to groundwater. A yearlong study by the National Energy Technology Laboratory in Pittsburgh, in which chemical tracers were included in the fracking fluid, found that it didn’t contaminate drinking water sources. The results are preliminary.

Industry groups may sue the BLM to stop the regulations if they’re adopted.

“I don’t think industry would stop short of a lawsuit if they felt it was needed,” WEA spokesman Jon Haubert told Reuters.

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