New regulations setting standards for hydraulic fracturing, commonly known as fracking, in oil and gas wells drilled on federal lands were issued recently by the Obama administration through the U.S. Department of the Interior’s Bureau of Land Management. The standards focus on (1) requiring disclosure of chemicals used in the fracking process; (2) establishing baselines for wellbore integrity; and (3) establishing requirements for the disposal of chemicals and wastewater.
In particular, the new rules issued on March 20, 2015, require that companies disclose the specifics of chemicals used in the fracking process on FracFocus, an industry-run website, within 30 days of completing fracking operations. In addition, the rules require operators to allow federal employees to inspect the concrete barriers lining fracking wells and to submit detailed information regarding well geology to the BLM.
The BLM estimates that the implementation of the new rules will cost oil and gas operators approximately $11,400 per well, or about $32 million per year for the industry, which equates to between 0.13% and 0.21% of the total per-well drilling cost. Approximately 90% of new oil and gas wells drilled in the United States utilize fracking.
Though the rules are only applicable to oil and gas wells drilled on federal lands, observers deem it likely that the rules will serve as a baseline for states to consider as the states implement their own fracking regulation regimes. New York, for example, has established an outright ban on fracking in the state, leaving potential New York oil and gas producers with limited access to the Marcellus Shale, a prolific natural gas play that is partially located within the southern part of the state. Some industry stakeholders may point to the new rules as they mount a political challenge against the fracking ban in New York as well as in other jurisdictions that either have implemented or intend to implement similar restrictions. Industry experts and environmental groups alike may watch with keen interest in the coming months to observe the effect of the rules on the national debate over fracking.
