Wyoming State Oil and Gas Supervisor Mark Watson said the US Bureau of Land Management would benefit rather than the states from a variance stipulation within BLM's final hydraulic fracturing rule.
"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 said.
He said a primacy arrangement would provide certainty and uniformity in enforcing a fracturing rule.
The existing variance allows states having fracturing regulations to seek a variance under which state rules would apply if they were more stringent than federal regs, BLM Director Neil Kornze told a US Senate Energy and Natural Resources Public Lands, Forests, and Mining Subcommittee in Washington, DC, on Apr. 30.
Watson testified to the subcommittee that BLM inserted the provision after Wyoming and other states sought exemptions, saying they already have comprehensive fracturing regulations.
"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," Watson said.
The goal of the variance stipulation is for BLM and a particular state to receive the same information, he said.
"This is clearly a duplication of effort that forces operators to comply with two regulatory agencies," Watson said.
He also noted the possibility of varying interpretations by federal and state officials, which could cause more uncertainty. BLM has staff working in multiple field offices while the Wyoming Oil and Gas Conservation Commission has one office.
No incentives for states
When John A. Barrasso (R-Wyo.), the subcommittee's chairman, asked Watson if Wyoming planned to apply for a variance, Watson said there was no incentive to do so.
Kornze said federal requirements are necessary because only about half of the 32 states having potential for oil and gas development on public lands already have their own fracturing regulations.
"Those rules vary widely from state to state," Kornze said. 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.
But Barrasso and two other Republican committee members from western states asked Kornze if this all was an indication that federal fracturing regulation simply isn't necessary when states already have their own strong enforcement regimes.
"I've got concerns," said Sen. Mike Lee (Utah). "This looks to me like a solution in search of a problem."
Montana updated its fracturing rules in 2011, Sen. Steve Daines (Mont.) told Kornze. "In fact, we have some of the most robust disclosure rules in the country."
Kornze said if Montana's rule is stronger than BLM's, it would be the one that is used.
"Some states are ahead of us," Kornze said on fracturing rule updates. "Some are behind us. For Montana, you could say this is not an onerous, but a common sense, rule that dovetails with your regulations." Daines said many Montanans would not believe this.
Producers face restrictions
Kathleen Sgamma, vice-president of government and public affairs at the Western Energy Alliance in Denver, said the fracturing rule continues a pattern of mounting restrictions and revisions that are driving producers from federal onshore acreage.
"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 Sgamma.
She said policies enacted in the last several years having that effect include:
• "Reforms" which add years to the leasing process, such as longer processing requirements, master leasing plans, and the discontinuation of statewide lease sales.
• Land-planning restrictions more excessive than what is required to protect cultural, wildlife, land values, and other resources "to the point where it becomes nearly impossible to find a time in the year where development can actually occur."
• Stalled National Environmental Policy Act project analyses, with only three major oil and gas projects approved in 7 years and many projects languishing while in NEPA analysis.
• Retroactive audits based on a completely new interpretation that disallows natural gas cost deductions, despite their support in statute and regulation.
• Management of another 12 million acres in the Arctic National Wildlife Refuge as wilderness, despite the fact that oil and gas development would disturb an infinitesimal proportion of the refuge.
• And initiation of a rulemaking to raise royalty, lease, civil penalty, and bonding rates.
"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."
These practices effectively drive producers from public lands, she said.
Two national oil and gas groups issued statements supporting Sgamma's comments.
American Petroleum Institute Upstream and Industry Operations Director Erik Milito said, "States with large areas controlled by BLM are especially hard hit by duplicative federal regulations, slow permitting, and limited access to public lands."
He suggested additional BLM rules could impose more costs and delay oil and gas development without improving on existing state and federal regulations.
This could slow economic growth and reduce jobs in New Mexico, Colorado, and Wyoming, Milito said.
The Independent Petroleum Association of America said BLM's fracturing rule could rob independents of the flexibility needed to ensure the small possible environmental footprint.
Daniel T. Naatz, IPAA vice-president of federal resources and political affairs, said BLM fracturing regulation "will further discourage energy development on federal lands owned by American taxpayers."
Duplicative federal mandates add burdensome new costs on independent producers, he said.
"The last thing the American people need right now is the federal government hindering good-paying jobs and stifling reliable US energy production," Naatz said.
