DOI ponders ways to regulate fracing on public lands

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Dec. 2 -- The US Department of the Interior is considering whether existing regulations need to be expanded or new rules need to be developed for hydraulic fracturing and other natural gas exploration and production activities on public lands, DOI officials said at a Nov. 30 forum at DOI’s headquarters.

Interior Sec. Ken Salazar conceded in his opening remarks that the US Environmental Protection Agency, White House Council on Environmental Quality, and other Obama administration entities already are looking at the process being used to recover gas from tight shale formations. But it also matters to DOI and its US Bureau of Land Management, he added.

“We want to make sure that as gas is developed on BLM lands, it is in a way that protects the environment and other natural resources,” Salazar said. “About 11% of our total domestic gas supplies are on BLM lands. We’ve leased about 12 million acres for gas production. It’s very much a part of what we’re doing here at Interior.”

Fracing has become “a very hot and difficult issue” with some environmental activists and hunting and fishing groups saying it should be heavily restricted and others from the oil and gas industry and state regulators saying it has a 60-year record of safety, he continued.

“The main concern is that fracing be safe and protects the environment. We will consider issuing a policy resulting from disposal of the fluids used in hydraulic fracturing on public lands,” Salazar said. “Some parts of the industry may say this should not be addressed because the information is proprietary. But there are others who believe it is essential that the information be transparent so everyone will know what’s being injected into the ground. We have not settled the question at [DOI], but are carefully considering it.”

Regulations limited
BLM estimates that about 90% of the oil and gas wells drilled on public land it administers are stimulated by hydraulic fracturing, according to Marcilynn Burke, the agency’s deputy director for programs and policy. “Despite this growth, BLM’s regulations covering the process are limited, and even the ones which exist may not be as salient as they were when we enacted them,” she told the forum.

She cited one rule that requires in routine fracing cases notification of BLM within 30 days and advance notification in nonroutine fracing without differentiating the two situations. “What was nonroutine a decade ago may, in fact, be routine today,” she suggested.

BLM also requires oil and gas well operators to keep surface and groundwater supplies from being contaminated, but receives little information about well stimulation substances that are used and their chemical composition, Burke said. “Given the questions that are being raised today about this technology, most agree that having more information about the process and materials used would be beneficial,” she observed.

Steve Salzman, chief of BLM’s fluid minerals division within the agency’s Minerals & Realty Management Office, said while the agency reviews all well plans to ensure that surface and groundwater supplies aren’t threatened, “there currently are no regulations that specifically address disposal of hydraulic fracturing flowback fluids.” He said, “If they are placed in an approved disposal pit, they are covered in produced water disposal regulations.”

While horizontal drilling has made it possible to drill more wells from a single pad, Salzman said, it also creates a regulatory challenge for the agency because many formations extend across multiple leases, and lessees want to be certain that resources they have paid for are not produced by someone else. “BLM has spacing rules as part of its reservoir management program, and pays attention to states’ approaches,” he said, adding, “North Dakota has developed spacing rules based on science and best management practices, for example.”

States’ experiences
Regulators from two Rocky Mountain states cited their agencies’ extensive experience with fracing and producers. “Fracing is an incredibly important technology,” observed Mark E. Fesmire, oil conservation division director within New Mexico’s Energy, Minerals, and Natural Resources Department. “It has become a ‘whipping boy’ over violations of underground water supply contamination rules, maintaining well bore integrity, and controlling waste. This last issue is the most problematic and probably is the source of issues other states are having.”

Thomas E. Doll, supervisor of the state’s oil and gas conservation commission, added, “If hydraulic fracturing was not allowed, we would not have an active oil and gas industry in Wyoming. That definitely would be an adverse economic impact.” He said after Gov. Dave Freudenthal (D) asked the commission to draft new well stimulation regulations, it developed one that went into effect on Sept. 15 with four main provisions: identification and testing of shallow groundwater wells within ¼ mile of a proposed oil and gas well before the latter is drilled; well integrity requirements covering steel casing and cement that may be stronger than industry operating practices and standards to reflect specific geographic areas; handling of flowback fluids following well stimulation, and their recycling, re-use, disposal, or other treatment and handling; and chemical component disclosure, which was the main issue.

“We’ve had an interesting time with issues we didn’t anticipate since the rules went into effect,” Doll said. “The disclosure takes place with a permit application or by a sundry disclosure application. This did not cover the secondary chemical market which provides much of the material to the frac fluid providers. We don’t have a provision to protect proprietary information, but the Wyoming Public Records Act has a very narrow definition of trade secrets which are eligible for protection. As a result, we can issue a trade secret exemption to the disclosure requirement after a chemical supplier provides the necessary information.”

The state still requires that the information be submitted, but pledges to not make it public unless an incident requires it to do so, he explained.

“I think a lot of people mistakenly believe their private water well is pristine when, in fact, it’s only a hole in the ground with plastic pipe and weak grouting that taps supplies tens instead of hundreds of feet deep,” Doll said, adding, “Many are subject to cross-influences that can be easily identified by state engineers, but when problems occur, the residents see oil and gas production trucks passing through and blame that company.”

BLM offices in the two states work closely and effectively with state oil and gas regulators, the two officials agreed. “We have rules in place which require proper disposal of frac fluids and flowback, and since June of 2008 have had a regulation for pits to be properly lined and located,” said Fesmire. “Unfortunately, that rule is under attack by the governor-elect [Republican Susana Martinez] who has said she wants to repeal it. If she’s successful, New Mexico could have the kind of problems other states are having.”

Water issues
Potential water impacts were the biggest single issue that emerged at the forum. Douglas Duncan, the associate coordinator of the US Geological Survey’s Energy Resources Program, said many unproduced gas plays in the Rockies are very large and raise serious water consumption questions.

“You don’t get this water back,” Duncan stated. “The effects could be particularly significant in headwater streams, which are not as large as areas downstream and could have an impact on the wildlife and habitat. There also are surface water impacts from transportation of brines and other substances. Obviously, if you don’t have a good cement job, you can contaminate underground water supplies. If flowback is not handled well, it also can have an impact.”

Landscape issues also need to be considered since disturbances can affect stream flows with sedimentation, and plants and animals can feel impacts from dust, traffic, air quality, and socioeconomic sources, Duncan said. USGS has a number of water studies under way and recently began to examine water and other fluid flowbacks from wells, he said.

Two witnesses representing a national environmental organization and a sporting and recreation group said that more needs to be done. Peter Lehner, executive director of the Natural Resources Defense Council, noted that while the idea that environmental protection and economic growth are incompatible has become generally obsolete, “we need to come to a set of best management practices so there can be trust of the industry.” He said, “Chemical disclosure also will be critical to that trust. Some areas should be off-limits because the risks are too high. We have a lot of land fortunately, so that won’t put a limit on our use of this resource.”

Steve Moyer, vice-president for government affairs at Trout Unlimited, a national organization which aims to protect freshwater fish and their watersheds, said, “I think we have a long way to go. We support the development of gas on public lands as long as it’s done in the right places and in the right way so that fish and wildlife and water resources are not adversely affected. Our volunteers on the ground know that fracing poses a threat to trout and water resources. We’d like the gas industry to do a better job over time to work with us and other stakeholders to minimize harm to trout and water resources.”

Industry initiatives
Three witnesses representing the oil and gas industry said such efforts have been under way for some time. “At this point, we’re working on two key areas of public concern,” said Sherri Stuewer, ExxonMobil Corp.’s vice-president of environmental policy and planning. “First, we must find a workable solution on the disclosure of ingredients in fracing fluids. States already are acting on this issue, which has fallen under their traditional purview on this issue. Colorado and Wyoming already have passed regulations, and the GWPA developed a system to improve state-level reporting. Second, we’re working with others in the industry to develop a robust set of best practices and operating standards. These are best developed at the state level because conditions vary, and a nationwide one-size-fits-all solution would not work as well.”

Stuewer noted that only about 53% of total recoverable federal gas resources are accessible. “We believe expanded access can be fully consistent with the other priorities of protecting ecosystems and federal lands,” she said. “Equally important is not allowing permitting processes to be slowed down significantly from challenges by opponents. ExxonMobil and others in the industry are strongly committed to developing resources without adverse major environmental consequences.”

Fred Toney, vice-president for US pressure pumping at BJ Services Co., said that the Baker Hughes Inc. subsidiary has standard operating practices to minimize impacts by limiting surface activities and following procedures which emphasize safe operations. The company inspects equipment before it is sent out, evaluates each site beforehand to identify and remedy any hazards, transports equipment under the direction of a health and safety official who remains at the site throughout, and immediately investigates and stops any leaks, he said.

James J. Kleckner, vice-president of operations at Anadarko Petroleum Corp., said the independent producer engages in ongoing discussions with federal, state, and local officials as it prepares to develop its gas resources. It also drills multiple wells from a single pad; recycles groundwater, frac fluid, and completion fluid; and finds ways to minimize truck traffic to and from drill sites, he noted. “Drinking water must be protected,” he added. “We surpass requirements to protect groundwater by using strong steel pipes. We use different depths, different cement types and different casing configurations based on conditions. Generally, all the surface casing designed to isolate hydrocarbons from groundwater is set several hundred feet below.”

NRDC’s Lehner maintained: “I think there’s tremendous opportunity to come together and take advantage of the promise of natural gas, but only if we get past a growing atmosphere of mistrust. If we don’t aggressively move forward, we’ll move backwards. Groups need to come together. In the past when they have, they’ve held one meeting and stopped. They need to keep going.”

Contact Nick Snow at nicks@pennwell.com.

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