BLM fracing variance inadequate, Wyo. official tells Senate panel

The US Bureau of Land Management’s final hydraulic fracturing rule allows states with their own requirements to seek a variance under which their rules would apply if they were more stringent, BLM Director Neil Kornze told a US Senate Energy and Natural Resources subcommittee. But Mark Watson, Wyoming state oil and gas supervisor, said BLM would benefit instead of the states.

BLM inserted the provision after Wyoming and other states that already have comprehensive fracing regulations sought exemptions, Watson told the Public Lands, Forests, and Mining Subcommittee. “However, upon further review and meetings with BLM officials, it became apparent that the variance was simply a requirement that allowed BLM to require additional information if a state’s requirements exceeded the BLM frac rule’s objectives,” he said.

The clear goal is for BLM and a state to receive the same package of information, Watson said. “This is clearly a duplication of effort that forces operators to comply with two regulatory agencies,” he said. Since the Wyoming Oil & Gas Conservation Commission has a single office and BLM has nine field offices, varying interpretations on implementing the new rule could create more uncertainty, he warned.

“A better solution would be a mechanism to allow states to apply for primacy if they could demonstrate that the objectives of the BLM frac rule could be met by the states’ rules and regulations,” Watson testified. “This would provide certainty and uniformity in enforcing a frac rule for the benefit of citizens and the oil and gas industry.”

The Underground Injection Control Program is a prime example of a federal rule that is implemented and enforced by the states, Watson added. When John A. Barrasso (R-Wyo.), the subcommittee’s chairman, asked Watson if Wyoming planned to apply for a variance, the state official said there was no incentive to do so.

Kornze said federal requirements are necessary because only slightly more than half of the 32 states with the potential for development of oil and gas resources on public lands have their own fracing regulations in place, “and those rules vary widely from state to state.” BLM developed the variance provision to recognize instances where state and tribal requirements exceed its rules and ensure the more stringent regulations would be applied, he said.

Solution searching for problem

But Barrasso and two other Republican committee members from western states asked Kornze if this all simply was an indication that federal fracing regulation simply isn’t necessary when states already have their own strong enforcement regimes. “I’ve got concerns,” said Mike Lee (Utah). “This looks to me like a solution in search of a problem.”

Steve Daines (Mont.) told Kornze, “We updated our fracing rules in 2011. In fact, we have some of the most robust disclosure rules in the country.” Kornze said that if Montana’s rule is stronger than BLM’s, it would be the one that is used. “Since 1981, BLM has updated 37 oil and gas regulations,” its director said. “Some states are ahead of us. Some are behind us. For Montana, you could say this is not an onerous, but a commonsense rule that dovetails with your regulations.” Daines said many Montanans would not believe this.

The fracing rule continues an established pattern of mounting restrictions and revisions which effectively are driving producers from federal onshore acreage, a third witness declared.

“The actions of [the US Department of the Interior] over the last several years lead us to the conclusion that the real goal is to discourage responsible energy development on federal lands, pushing it to adjacent private and state lands or to areas of the country that are not predominated by public lands,” said Kathleen Sgamma, vice-president of government and public affairs at the Western Energy Alliance in Denver.

“Besides declared policies, there is deliberate bureaucratic delay,” Sgamma said. “In addition to general foot dragging, BLM field offices arbitrarily add ad hoc requirements onto the permitting process at the whim of individual BLM staff and with no basis in regulation. Overall, there has been a diversion of resources from oil and gas to other activities, such as renewable energy development.”

This effectively drives producers from public lands, she said. Kornze said that producers may be heading to parts of the country such as the Marcellus shale where more extensive transportation systems already are in place.

Two national oil and gas groups issued statements supporting Sgamma’s points on Apr. 30. “States with large areas controlled by BLM are especially hard hit by duplicative federal regulations, slow permitting, and limited access to public lands,” said Erik Milito, American Petroleum Institute upstream and industry operations director.

“New BLM rules could impose more costs and delays on energy development without improving on existing state and federal regulations, stunting growth, and pushing away jobs in places like New Mexico, Colorado, and Wyoming,” Milito said.

Daniel T. Naatz, vice-president of federal resources and political affairs for the Independent Petroleum Association of America, said, “This BLM rule will rob independent producers of the flexibility needed to ensure that their environmental footprint is reduced to the greatest extent possible, and will further discourage energy development on federal lands owned by American taxpayers.”

Naatz said, “These duplicative federal mandates will add burdensome new costs on independent producers, taking investments away from developing new American-made energy, much-needed job creation, and economic growth. The last thing the American people need right now is the federal government hindering good-paying jobs and stifling reliable US energy production.”

Contact Nick Snow at nicks@pennwell.com.

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