On May 16, 2013, the US Bureau of Land Management (“BLM” or the “Bureau”), part of the Department of the Interior, released a supplemental notice of proposed rulemaking for hydraulic fracturing on public and Indian lands (the “Revised Proposal”). The Revised Proposal refines the BLM’s proposed rule that appeared in the May 11, 2012 issue of the Federal Register. For further background on the BLM’s first proposal, please see our May 8, 2012 update.

After receiving more than 177,000 comments on its original approach, the Bureau decided to issue a new draft rather than proceeding directly to a final rule. Key changes include the following:

  • The Bureau is narrowing the scope of the proposed rule to focus on hydraulic fracturing, not other “well stimulation” activities such as acidizing.
  • The definition of “usable water” expressly lists zones that are deemed included and deemed excluded.
  • The Revised Proposal would require a hydraulic fracturing application to include the estimated fracture direction, length and height, including the fracture propagation plotted on a map. Fraction direction similarly would be included in the post-completion report.
  • Operators would be able to show usable water zones are isolated by running a cement evaluation log (CEL), which may include any of a class of tools such as ultrasonic imagers, variable density logs and micro-seismograms as well as cement bond logs (CBLs). The CEL would be submitted to BLM after fracturing, unless problems are identified. Under the initial proposal, the BLM would have required submittal of a CBL for approval prior to fracturing.
  • Originally, the BLM would have required a CBL on each casing in a hydraulically fractured well that protects usable water. The Revised Proposal would give operators the option of running a CEL on a “type well” that would be used as a model for completions in a field with similar geology.
  • Any indication of inadequate cementing would need to be reported to the BLM within 24 hours, with written confirmation within 48 hours.
  • Chemical information could be reported directly to the BLM or through the FracFocus.org website.
  • For trade secrets, the BLM modeled the Revised Proposal on Colorado’s procedures. Operators would be able to submit an affidavit to establish that certain information, including identities of the chemicals in hydraulic fracturing fluids and their maximum concentrations, is exempt from disclosure. Such information would be submitted to the BLM only at the Bureau’s request.
  • The Revised Proposal contains a procedure for operators to request a variance, which could be field-wide, basin-wide, or state-wide. Further, the BLM plans to enter formal agreements with states and tribes to minimize duplicative agency efforts.

The Bureau is retaining the right to ask for any additional information during the approval process—on the grounds that it provides flexibility to regulate operations “over a broad range of geologic and environmental conditions.” Mechanical integrity tests (MITs) still would be performed prior to fracturing. And, as in the original proposal, flowback fluids would be managed in tanks or lined pits (provided, however, that the BLM is reserving authority to require other protective measures).

For now, the Bureau is rejecting several of the enhancements that commenters requested. For example, the Revised Proposal does not require baseline water testing or up-front disclosure of specific chemicals proposed for fracturing. Nor does it expressly include leak detection or double-liners for impoundments, although the Bureau is requesting comments on those potential additions.

Many features of the Revised Proposal purport to give industry more flexibility. The proof of that pudding will lie in the final version, the resources allocated to its implementation and its application in the field (including coordination with other requirements such as the National Environmental Policy Act). With a final rule, the BLM still would be adding its own layer of requirements to state and tribal regulations to address a risk that BLM itself terms “largely unknown” and to realize benefits that are challenging to quantify.

Reactions to the Revised Proposal from fracturing opponents have been strongly negative. Environmental groups are accusing the BLM of giving “polluters a free ride” and preparing a proposal “riddled with gaping holes.”

BLM is accepting comments on the entire Revised Proposal. The comment deadline is likely to be 30 days after the proposal appears in the Federal Register. More time is a possibility; Congressmen Hastings (R-Wash.) and Markey (D-Mass.) already have jointly asked for a 120-day comment period. 

For more information about the Revised Proposal, or any other matter raised in this Legal Update, please contact Roger W. Patrick at +1 202 263 3343, or your regular Mayer Brown lawyer.

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