Energy Fact and Opinion: Court Overturns BLM Hydraulic Fracturing Regulation

Facts:

  • On June 22, the U.S. District Court for the District of Wyoming ruled that the Bureau of Land Management (BLM) lacks the legal authority to regulate hydraulic fracturing on federal lands, effectively setting aside the regulations it has been working on since 2012.
  • In May 2012, BLM issued draft regulations designed to:

o provide disclosure of chemicals used in hydraulic fracturing;

o strengthen well-bore integrity regulations;

o address issues related to managing water produced during oil and gas operations;

o and “provide opportunities to coordinate standards and processes with individual states and tribes to reduce costs, increase efficiencies, and promote the development of more stringent standards by state and tribal governments.”

  • Despite BLM’s efforts to address state, industry, and environmental concerns about the content of the regulations that were finalized and released in March 2015, a group of western states, an industry association, and a tribal community sued BLM on the grounds that the regulation was “arbitrary, not in accordance with law, and in excess of the BLM’s statutory jurisdiction and authority.” These groups also argued that the rule would not provide coordination with adjacent state and local standards but create extra hurdles to the effective permitting and operation of wells drilled on private property adjacent to public land.
  • The court ruled on the basic question of whether BLM had the authority to issue such regulations and found that it does not. The decision does take on the merits of the regulation.
  • According to BLM “nearly 36 million acres of Federal land are under lease for potential oil and gas development in 33 states. As of June 30, 2014, there were approximately 47,000 active oil and gas leases on public lands, and approximately 95,000 oil and gas wells.”
  • Oil and gas development on public lands account for 11 percent of U.S. natural gas production and 5 percent of oil production.

Opinion:

Oil and gas has long been produced in the United States, and the practice of hydraulic fracturing has also been around for over half a century. There is no doubt, however, that the contextual reality around the location, pace, and scale that oil and gas are being hydraulically fractured and produced has changed dramatically over the last decade. It has provided an important economic boost to the United States and many local communities. At the same time, the surge in oil and gas production has caused local concerns in some communities about water pollution and global concerns about climate change (even though coal to gas fuel switching in the power generation sector is a large part of the U.S. emissions reduction story). The U.S. District Court decision about BLM regulating hydraulic fracturing on federal lands rule is but one piece of a large patchwork of state, local, and federal activity seeking to manage the practice of hydraulic fracturing as it continues to evolve and as industry brings its own solutions to the table. Much of the national debate on hydraulic fracturing centers around how to minimize the risk of environmental impacts. To that end, today’s decision says nothing about the merits of the regulation put forth by BLM nor the practice of hydraulic fracturing in general, but instead asserts that Congress has not given BLM authority to regulate.

The decision states that BLM’s authority under the Federal Land Management Program Act (FLMPA) is fundamentally about land use planning and not environmental protection and that Congress views those two activities as distinct even though there is often overlap. The court states that BLM’s assertion of broad authority under the FLMPA or Minerals Leasing Act to regulate hydraulic fracturing is inadequate and that they show no evidence of being specifically granted this authority. Moreover, the court believes that the regulation of hydraulic fracturing on federal lands goes against the expressed intent of other congressional action. An earlier court found that the Environmental Protection Agency had specific authority to regulate hydraulic fracturing under the underground injection control portion of the Safe Drinking Water Act. In 2005, Congress expressly removed that authority for regulating hydraulic fracturing (except in instances where diesel injection is used) under the Energy Policy Act of 2005. The court writes “Given Congress’ enactment of the Energy Policy Act of 2005, to nonetheless conclude that Congress implicitly delegated BLM authority to regulate hydraulic fracturing lacks common sense. Congress’ inability or unwillingness to pass a law desired by the executive branch does not default authority to the executive branch to act independently, regardless of whether hydraulic fracturing is good or bad for the environment or the Citizens of the United States.”

The decision comes at a particularly important time in the U.S. debate about the future of oil and gas production and the role of hydraulic fracturing. According to the Energy Information Administration half of domestic U.S. oil production and two-thirds of U.S. gas production comes from hydraulic fracturing. Some states and local communities have banned the use of hydraulic fracturing—although many local bans have been overturned—and the U.S. presidential election debate has included the issue of whether to ban or more aggressively regulate the practice. While several media outlets have suggested the administration will appeal this decision, it is unclear what the outcome of or the timing for a decision would be. Today’s decision will certainly inform the regulatory strategy of this and any future administration that wants to regulate hydraulic fracturing at the federal level and lacks support from Congress on the authority to do so. As we have seen in many other instances of environmental regulation, this latest decision is quite likely just the latest step in a much longer-term battle.

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Sarah Ladislaw

Sarah Ladislaw

Former Senior Associate (Non-resident), Energy Security and Climate Change Program