Obama administration delays hydraulic fracturing rule

In response to criticism from both the oil industry and environmentalists, the Obama administration is scrapping a 2012 plan to impose new mandates governing drilling on public lands.

The move forces a major delay in the final regulations, which are set to be the first major federal rules governing hydraulic fracturing.

The regulation would cover only a sliver of the United States' onshore oil and natural gas production — roughly 6 percent and 13 percent respectively, according to ClearView Energy Partners — but industry officials fear it could provide the foundation and justification for broader mandates in the future. The oil and gas industry generally has argued that state regulators are best positioned to oversee drilling.

Interior Department spokesman Blake Androff confirmed the Bureau of Land Management would unveil a new proposal by the end of March after “making improvements ... in order to maximize flexibility, facilitate coordination with state practices and ensure that operators on public lands implement best practices.”

The plan is to tighten standards for the process of unlocking oil and natural gas via horizontal drilling and hydraulic fracturing, which involves pumping a mix of sand, chemicals and water underground to free hydrocarbons trapped in dense rock formations.

The measure unveiled last May would have forced energy companies to reveal chemicals used when drilling for oil and natural gas on federal lands.

In a move that riled environmentalists, the Interior Department decided to require those disclosures only after the substances are pumped underground.

The proposed rule also would have imposed new well construction standards, testing requirements and mandates for managing and storing water that flows back after fracturing begins.

It is unclear how much the proposal could change, but it appears likely the new draft rule still will include some kind of chemical disclosure, well-bore integrity assurances and plans for managing flowback water. The Bureau of Land Management is using more than 170,000 public comments to guide the rewrite.

Androff said the 2012 draft “leverages technologies already in use by companies to protect important water resources and improve transparency.”

“Many companies are already implementing these best practices,” he said.

Industry trade groups had asked the administration to reconsider the rule after warning that compliance costs could discourage energy production on federal lands.

American Petroleum Institute President Jack Gerard said he welcomed the administration's decision, but “the real test will be in the substance of the re-proposal.”

“The shale energy revolution is reshaping America's energy future,” Gerard added. “We need to be smart about regulating it.”

Once the new draft is released, the administration will take public comments on it.

jdlouhy@hearstdc.com