Obama Administration Acts on Hydraulic Fracturing Regulations With the Release of Its Revised Rules

On May 13, 2013, the Department of Interior (DOI) and its Bureau of Land Management (BLM) issued a set of revised proposed rules governing hydraulic fracturing on federal lands. The revised rules come on the heels of initially proposed rules issued by BLM in May 2012 that called for the expansion of fracking on federal lands. The initial rules drew instant criticism from environmental advocates and industry groups alike, with stakeholders presenting approximately 177,000 comments then. Keith Goldberg, “DOI Extends Fracking Rule Feedback By 60 Days,” Law360, June 6, 2013 [hereinafter Goldberg, Law360]. A discussion of the initial rules and critiques made by stakeholders can be found in a prior article written this past April in Sedgwick’s Hydraulic Fracturing Digest. Monty Cooper, "A Look at the Obama Administration’s Upcoming Hydraulic Fracturing Regulations," Sedgwick's Hydraulic Fracturing Digest, April 2013. Because of the complaints, DOI delayed finalizing the initial rules in order to undertake revisions of them – a process that led to the release of the revised rules this past May.

Predictably, the revised rules have also been controversial, with stakeholders actively engaged in the commenting process since their release. This is understandable, given the influence these rules will have on fracking regulations going forward and their potential impact on nearly 36 million acres of federal land currently under lease for potential oil and gas development. Oil and Gas; Including Hydraulic Fracturing, on Federal and Indian Lands (proposed May 13, 2013) (to be codified at 43 C.F.R. part 3160) (“Revised Rules”) at 5. This note provides a brief overview of the significant issues discussed in the revised rules.

Discussion

The initial rules addressed a number of issues important to ensuring the safety of the fracturing process, including (1) wellbore integrity, (2) disclosure of the chemicals used in the fracking fluid and trade secrets information, and (3) management of the process’ wastewater. The revised rule addresses each of these areas as well.

Well-bore integrity: Regarding well-bore integrity, the initial rules required, among other things, operators to submit information regarding the strength of the wells in the form of cement bond logs (CBL). Oil and Gas; Well Stimulation, Including Hydraulic Fracturing, on Federal and Indian Land (proposed May 11, 2012) (to be codified at 43 C.F.R. pt. 3160) (“Initial Rules”) at 20. CBLs provide information regarding the integrity of the cement job on a well, especially determining whether the cement is adhering solidly to the outside of the casing. Schlumberger Oilfield Glossary - http://www.glossary.oilfield.slb.com/en/Terms.aspx?LookIn=term%20name&filter=cement%20bond%20log.

But in the revised rules, the BLM requires contractors to use cement evaluation logs (CELs), instead of CBLs, to make such disclosures. Revised Rules at 7. CELs provide more information than CBLs – including the potential for detailed, 360-degree representations of the integrity of a cement job – while also allowing for a variety of logging methods to be used to show the adequacy of cementing, including ultrasonic logs, variable density logs, micro-seismograms, and ultrasonic pulse echo technique, as well as standard CBLs. Schlumberger Oilfield Glossary, http://www.glossary.oilfield.slb.com/en/Terms.aspx?LookIn=term%20name&filter=cement%20bond%20log; Revised Rules at 7. While the revised rules specify the use of CELs, if a state (on federal land) or tribe (on Indian land) designates the use of some other technology to meet its requirements that is at least as effective in assuring adequate cementing, BLM grants operators the flexibility to use such technology.

Public Disclosure of Chemicals and Trade Secrets Information: Like the initial rules, the revised rules require that disclosure of the chemicals used in the fracturing process be provided to the BLM after the fracturing operation is completed. See Revised Rules at 4. But the revised rules mandate the use of an existing website known as FracFocus.org, an online database that includes information from oil and gas wells in several states for reporting mandatory chemical disclosure of fracking chemicals. FracFocus.org already contains information about more than 206 companies, and BLM chose the website for use as a chemical clearinghouse given its potential to reduce reporting burdens for operators by avoiding duplicative reporting requirements and administrative duties.

Further with regard to public-disclosure requirements, the revised rules would change requirements regarding how trade secrets are kept and disclosed. Unlike the initial rules – which required operators to submit all information about chemicals to the BLM, segregate trade secrets, and then justify the assertion of trade secret protection – the revised rules allow operators to withhold trade secret information, requiring them to submit an affidavit stating that this information is entitled to be withheld from the public under federal statute or regulation. Operators would then have the ability to claim the information as trade secrets for up to six years. Revised Rules at 32. Ultimately though, BLM would retain authority to require operators to submit the claimed trade secret information if necessary.

Management of Wastewater: Finally, regarding the management of wastewater, the revised rules provide operators with the flexibility to store recovered fluids in tanks or lined pits. See Revised Rules at 80. As BLM explains in the revised rules, regulations regarding storage of fluids are important, given that flowback fluids can contain hydrocarbons and other components that might degrade surface and groundwater. Further, this section is consistent with existing industry practice and the American Petroleum Institute recommendations. And BLM states that the revised rules would not preempt state laws that require the particular use of tanks, nor would it preempt efforts to expand the use of mobile-recycling systems at the state level.

Response and Conclusion

As mentioned earlier, the revised rules have been met with criticism by both environmentalists and industry officials. While environmentalists claim that BLM “caved to the wealthy and powerful oil and gas industry” because of, among other things, BLM’s use of the FracFocus.org website for disclosure of chemicals, industry representatives argue that the regulations are unnecessary, given the states’ current role in regulating fracking. John M. Broder, “New Fracking Rules Proposed for U.S. Land,” The New York Times, May 16, 2013. The Obama Administration has responded to some of these criticisms, contending that, with regard to FracFocus.org for example, DOI would consider using a different reporting scheme if a better one were recommended. See id. Further, the administration has argued that these rules are necessary given the likely expansion of fracking on federal lands in the future.

Because of the numerous comments that have already been made regarding the rules, DOI has now extended the comment period to an additional 60 days. Goldberg, Law 360. While entities like the U.S. House Natural Resources Committee and the American Petroleum Institute request even more time for comments, DOI Secretary Sally Jewell considers the 60-day extension “ample time for people to comment” and that ultimately the department “needs to get on with this regulation.”

Given the impact this rulemaking is likely to have on future fracturing policy and regulations, we’ll continue to keep our clients posted on the developments.