United States: Independent Producers Lead Legal Challenge Against BLM’s Hydraulic Fracturing Rule

After a regulatory review process lasting more than three years, the Bureau of Land Management (BLM) issued today a final rule purporting to govern hydraulic fracturing on federal and Indian lands. Given BLM's failure to correct flaws in earlier versions of the rule – flaws that were addressed expressly in public comments responsive to the agency's proposal — BakerHostetler immediately filed a lawsuit in federal court on behalf of the two most prominent national trade associations representing independent oil and gas producers: the Independent Petroleum Association of America (IPAA) and Western Energy Alliance (the Alliance). The associations' Complaint, filed in the United States District Court for the District of Wyoming, asserts that BLM's final rule is both substantively meritless and the product of a procedurally deficient rulemaking process. The Complaint requests that the federal court set aside the final rule.

Independent oil and gas producers note several factors that undermine the legitimacy of BLM's approach. Most important, even were another layer of administrative rules necessary to ensure that hydraulic fracturing can be conducted safely, a position that contravenes decades of technical evidence, BLM's new regulations do not represent those rules. Despite being titled as a rule for "Hydraulic Fracturing on Federal and Indian Lands," BLM's proposal does not attempt to govern any aspect of the hydraulic fracturing process. This omission suggests little more than a politically-motivated attempt to appeal to those that misrepresent "hydraulic fracturing," using the term as a proxy for all oil and gas development rather than focusing on the more accurate, and narrower, definition of the term as a well stimulation technique.

What is included in the final rule are new regulations imposing administrative impediments that will complicate and frustrate oil and gas production on federal lands. BLM has included cementing and construction standards that it contends will ensure well bore integrity, but which simply duplicate existing state regulations and industry best practices. The agency will now require public disclosure of chemical additives injected during production operations, mirroring requirements that already exist under state law. But unlike the states, BLM will now also require operators to disclose highly confidential operational and engineering design information in a manner that disregards the prohibitions against such disclosures under federal public records laws. And BLM's proposal will impose rigid requirements for the methods that may be used to manage and store water produced during oil and gas operations, regardless of whether that storage method represents the most environmentally sensitive method of managing produced water.

"Independent producers operate in a responsible manner that protects the nation's public lands, but the rule BLM has promulgated provides no public benefit. Requiring oil and gas operators to file repetitive paperwork with multiple government agencies will not prevent or remediate environmental harm," said Mark Barron, a Denver-based attorney in BakerHostetler's Energy and Shale practice team. "To the contrary, if implemented the rule will rob oil and gas operators of the operational flexibility needed to ensure that the environmental footprint of development is reduced to the greatest extent possible."

America's oil and gas producers consider it telling that BLM fails to identify a single environmental problem related to hydraulic fracturing that persists under state law but that the new rule would remediate; or list a single incident that the new federal rules would have prohibited, but which was not covered under existing state rules.

Oil and natural gas operators will not be the only ones negatively affected should the new regulations be implemented. While the amount of oil and gas extracted from American wells has increased steadily over the last decade (the United States is poised to become the world's leading producer of hydrocarbons), the percentage of that production extracted from federal lands has declined for most of the same period. A complex network of regulatory requirements – both existing and proposed – as well as logistical inefficiencies inherent in the federal government's management of the nation's public lands represent an enormous incentive for operators to focus their efforts on state and private lands. With the issuance of this rule, BLM has now exacerbated this incentive.

"The results are not difficult to predict: more rigs moving off federal lands, fewer jobs and reduced economic growth in the western public lands states, and less revenue flowing into the federal treasury," said L. Poe Leggette, co-leader of the firm's Energy and Shale practice team.

"With the lawsuit filed today, IPAA and the Alliance have taken an essential step toward continuing the environmentally responsible development of resources that contribute to domestic security and America's economic well-being," added Barron. "Working with our partners in the private sector, as well as within state and tribal governments, we remain committed to supporting the associations' members and repelling government overreach that undermines those objectives."

A copy of the Complaint that BakerHostetler filed in the United States District Court for the District of Wyoming is available here.

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