Industry, BLM far apart on frack rule cost
A revised Department of Interior proposal to update hydraulic fracturing rules would cost far less than the original one, according to an estimate prepared for oil and gas industry groups.
But that cost remains more than the groups consider to be warranted — and far more than the BLM itself is projecting.
According to a study released last week by the Western Energy Alliance and the Independent Petroleum Association of America, the new Bureau of Land Management rules could cost $345 million annually, or an average of $96,913 per well. That’s down from the $1.28 billion the same economics firm, John Dunham and Associates, had said the initial BLM proposal could cost each year.
“DOI 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,” the Western Energy Alliance’s Kathleen Sgamma said in a news release.
The groups contend the BLM has not conducted a full economic assessment despite being required to do so because the rule exceeds a $100 million cost threshold.
But according to Bev Winston, a BLM spokeswoman in Washington, D.C., “Our economic analysis put the cost in a range from $12 million to $20 million per year, which is down from the estimated costs of $37 million to $44 million per year of the original proposed rule. … When averaged over all hydraulically fractured wells on federal lands each year, the cost comes out to be no more than $5,100 per well.”
Much of the disparity between the BLM and industry estimates pertains to the cost of what the Dunham report refers to as “enhanced casing costs” of $310 million a year.
The report says these costs pertain to the deeper surface well casing and the well cementing requirements the BLM wants to impose to protect “usable groundwater.”
“The simple fact is that the definition of ‘usable water’ in the proposed rule is extremely broad, and could require operators to run cement casings to depths far beyond any economically usable water,” it says.
The BLM says in its proposal, “The BLM already requires casing and cementing to protect usable water zones that are consistent with the final rule. Therefore, the rule does not pose an additional burden to operators.”
Dunham’s response: “This statement simply does not make sense. If the provision requires no action, the BLM should see no need for the rule.”
Winston declined to respond further to that concern. She said of the proposal more generally, “The rule establishes a baseline standard for safety and environmental protection across all federal and Indian trust lands throughout the country.”
The agency is seeking to modernize rules governing hydraulic fracturing to reflect the boom in use of the practice in recent years and address concerns about protecting groundwater and surface water. It would require public disclosure of chemicals used in fracking on federal and tribal lands, hold fracked wells to certain construction standards and govern the handling of fluids coming back up a well after fracking.
Several modifications to the original proposal have been made. For example, full testing would no longer be required of all wells, but instead could be done on representative ones.
The revised proposal also allows variances from the rule where state or tribal rules are as rigorous. Colorado has a fracking disclosure rule in place.
A bill sponsored by Rep. Bill Flores, R-Texas, would prevent the BLM from regulating fracking wherever states already do so, even if state rules are less restrictive. The Sportsmen for Responsible Energy Development coalition opposes that bill.
“The Interior Department should not abdicate its responsibility to ensure that our public lands, air, water, communities, fish and wildlife are safeguarded. There must be minimum conservation standards,” Ed Arnett, director of the Theodore Roosevelt Conservation Partnership’s Center for Responsible Energy Development, said in a news release.