By Philip L. Comella, Eric E. Boyd, and William R. Schubert

On May 4th, the Bureau of Land Management at the Department of the Interior (DOI) issued a proposed rule, published at 77 Fed. Reg. 27691 (May 11, 2012), on hydraulic fracturing activities that would require, among other things, disclosure of the chemicals used in hydraulic fracturing operations under its jurisdiction.  The proposed rule includes a new version of 43 C.F.R. § 3162.3-3, which would implement a new authorization process and set new reporting requirements for hydraulic fracturing activities on public or Indian lands.

Hydraulic fracturing, or “fracking,” is a method of extracting oil or natural gas on land.  To separate the oil or gas from sediment (so that extraction is possible), fracking requires the injection of pressurized fluids into the ground.

Fracking technology has risen in popularity over the past several years, but accompanying this trend has been an increase in concern over long-term safety implications.  Environmental groups have raised concern about possible groundwater contamination resulting from the injection of certain fracking chemicals.

Disclosure of Fracking Fluids and Protection of Confidential Information

The DOI does not currently require pre-approval of routine fracking activities.  State law provides most of the industry’s regulation.  In acknowledgement of existing regulation, the DOI states that it intends to incorporate widely-accepted standards in order to minimize unnecessary duplication and compliance costs.

For example, although an older draft of the proposed rule would have required disclosure of fracking chemicals prior to commencement, the DOI has changed course on this issue.  Under the current proposal, it seeks to require companies to report this information within 30 days of completion of operations.  Specifically, proposed § 3162.3-3(g)(4) and (5)) would require that companies file the following information:

  • A report (table) that discloses all additives of the actual stimulation fluid, by additive trade name and purpose (such as, but not limited to, acid, biocide, breaker, brine, corrosion inhibitor, crosslinker, demulsifier, friction reducer, gel, iron control, oxygen scavenger, pH adjusting agent, proppant, scale inhibitor, or surfactant); [and]
  • A report (table) that discloses the complete chemical makeup of all materials used in the actual stimulation fluid without regard to original source additive (see paragraph (f)(4) of this section). . . .

The rule would put the burden of preventing disclosure of trade secrets and other legally protected information on companies.  The relevant provision (proposed paragraph (h)) provides that “[a]t the time of submission of any information required under this section, operators must:

  1. Specifically identify particular information claimed to be exempted from public disclosure by a Federal statute or regulation;
  2. Identify the Federal statute or regulation that prohibits the public disclosure of each piece of particular information, and explain in detail why the information is subject to the prohibition of the identified Federal statute or regulation; and
  3. Inform the BLM whether the particular information is available to the public through other means, such as disclosures required by state law.”

The industry is already accustomed to disclosure requirements for chemicals used in fracking operations.  In addition, many companies disclose this information to the public via the website (whether voluntarily or pursuant to state law).

Other Noteworthy Provisions in the Proposed Rule

Approval for New Well Stimulation Activity (See Proposed Paragraph (c))

To obtain approval for future well stimulation activities, companies would need to file a notice of intent with the DOI that includes, among other things:

  • Geological descriptions and measurements;
  • Identification of the areas in which fluids will be injected, and the estimated volume of fluid that will be recovered; and
  • Submission and approval of the cement bond log (in order to prove that all occurrences of useable water have been protected from contamination).

Mechanical Integrity Testing (MIT) (See Proposed Paragraph (d))

Companies would be required to test the casing of the wells prior to well stimulation.  The proposed rule provides that “[t]he MIT will be considered successful if the pressure applied holds for 30 minutes with no more than a 10 percent pressure loss.”

Protection of Usable Water

The proposal contains an amendment to 43 C.F.R. § 3162.5-2 that would add the following provision:

(d) Protection of usable water and other minerals. The operator shall isolate all usable water and other mineral-bearing formations and protect them from contamination. Tests and surveys of the effectiveness of such measures shall be conducted by the operator using procedures and practices approved or prescribed by the authorized officer.

The DOI would also change its definition of “usable water” (per proposed 43 C.F.R. § 3160.5) to mean “generally those waters containing up to 10,000 ppm of total dissolved solids” rather than 5,000 ppm, as § 3162.5-2 currently indicates.

Other Post-Completion Submissions (See Proposed Paragraph (g))

In addition to disclosing the chemicals used, companies would need to report other information on the actual operations within 30 days of their completion.  This would include, among other things:

  • Actual results obtained in the course of operation (see proposed paragraphs (e)(1) and (e)(2) for required monitoring and reporting requirements effective during operation) and afterwards, including measurements of perforations, the fracture length and height, the volume of fluid used, measurements of the surface pressure, flush volume, and pump pressure, and information pertaining to the recovery, handling, and extraction of fluids;
  • Certifications pertaining to the legality of treatment fluid and maintenance of wellborne integrity; and
  • Documentation and explanation of deviations from the approved well stimulation plan.

EPA Draft Guidance

The EPA’s Draft Permitting Guidance for Oil and Gas Fracturing Activities Using Diesel Fuels was also released on May 4th.  See the related notice at 77 Fed. Reg. 27451 (May 10, 2012). The guidance would only apply to fracking activities in which diesel fuels (as defined by the EPA) are used.  Although EPA guidance is non-binding, permitting authorities are likely to consider it instructive.

Public Comment Period

Public comments are invited on the proposed regulation, and are due on or before July 10, 2012.