House panel questions funding support for BLM to regulate fracing

US House Natural Resources Committee members from both sides of the aisle questioned whether Congress would be willing to fund a federal hydraulic fracturing regulatory regime at the US Bureau of Land Management.

They did so after two witnesses and some committee Democrats suggested robust federal enforcement would improve protection for communities and landowners beyond existing states’ regulations.

Officials from three onshore producing states and a producer from a fourth, meanwhile, told the committee during a May 8 hearing that states are in a much better position to regulate oil and gas activities because they’re better acquainted with local conditions and can respond more quickly.

“Nobody knows more about geology in North Dakota than the state geologist who works for me,” asserted Lynn D. Helms, who directs the state’s Department of Mineral Resources.

A stronger federal onshore oil and gas regulatory presence clearly is needed, argued Sara Kendall, DC office director for the Billings, Mont.-based Western Organization of Resource Councils.

“The scale of the exploration and development taking place in many formations today is greater than in the past and often occurs in closer proximity to more people,” she said. “The surface footprint is larger, the demand for water is much greater, and there is a growing body of research regarding the risks of hydraulic fracturing and oil and gas development.”

Outdated regulations

Many BLM rules are decades old, and need to be updated to assure resources on federal land are developed responsibly now, she continued. “Many state oil and gas agencies have updated their rules more recently, but there is great variation in their requirements,” Kendall said.

US Rep. Jared Huffman (D-Calif.) said the number of onshore oil and gas safety violations which have been documented justifies federal intervention. He said the committee’s minority staff analyzed data and found state regulators issued 2,025 safety citations to producers from 1998 to 2011. Monetary penalties were rarely imposed and averaged $135 when they were, Huffman added.

But another committee Democrat from California, Grace F. Napolitano, said the Obama administration requested a 28% increase for BLM’s oil and gas program budget, which Congress then cut by $28 million. “There you are,” she drily observed.

Republicans said an inadequately funded federal onshore regulatory regime would needlessly duplicate state programs that are already working well.

“States like Montana, Wyoming, Texas, and North Dakota are experiencing tremendous economic growth and have some of the lowest unemployment rates in the country due to their commitment to developing their energy resources,” Committee Chairman Doc Hastings (Wash.) said.

“This should be emulated on federal lands, but unfortunately federal red tape and regulations too often slow, and at times flat-out block, energy production,” Hastings said, adding, “New regulations currently being considered by the Obama Administration’s Department of the Interior will only make it worse.”

Underestimated costs

Witnesses questioned Interior’s estimates that new regulations it proposed would only cost producers $11,000/well. Helms noted that when North Dakota’s Industrial Commission analyzed the proposal, it found that DOI “enormously underestimated” the additional rig time expenses.

“Rig standby time would be very expensive—far more than the $11,000 figure which involves paperwork,” added John Byrom, president of DJ Simmons Inc., a private independent based in Farmington, NM. Byrom testified on behalf of Denver-based Western Energy Alliance. “The last thing we need is further regulations that will drive up costs. Added red tape will divert investment from job creation and economic growth into redundant regulations,” he said.

Montana State Sen. Alan Olson (R-Roundup), who spent 19 years as a field inspector for the state’s Oil & Gas Conservation Board as well as 35 years in the industry, said BLM’s fracing regulatory proposals could add 100 days to a federal regulatory process which already takes up to 228 days, compared with an average of 30 days for states, he warned.

Cindy DeLancey, executive director of the Wyoming County Commissioners Association, said while BLM is surface owner and most likely mineral estate owner on land it regulates, states regulate groundwater. “BLM’s attempt to assert regulatory authority through the regulation of hydraulic fracturing over groundwater is an invasion upon Wyoming’s ownership and right to protect and regulate its groundwater,” she testified.

She said the association’s members, as county officials in a state where more than 48% of the land is federally managed, already work closely with BLM’s field offices, and are all too familiar with the agency’s shrinking budget and workforce. “Commissioners also question BLM’s ability to hire and retain a workforce knowledgeable about fracing,” DeLancey said. “States already have such employees at work.”

Contact Nick Snow at nicks@pennwell.com.

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