The decision comes in the context of a proposed rule-making that is poised to eliminate the 2015 Rule. The Tenth Circuit acted in response to the BLM’s request that the appeal of the judgment be held in abeyance while it pursued further rulemaking in response to Executive Orders from President Trump. BLM’s proposed rescission would retain the prior regulatory framework without additional administrative or procedural requirements that could have cost millions of dollars per year. However, in an ironic twist, the 2015 Final Rule could become effective if BLM does not promptly finalize the proposed rescission.
In November 2010, the BLM, which operates as an agency under the United States Department of the Interior (“DOI”), prepared a rule aimed at regulating the use of hydraulic fracturing techniques in developing oil and gas resources on Federal and Indian lands. That rule, which was later supplemented, eventually resulted in the 2015 Final Rule being published on March 26, 2015. The BLM estimated that the 2015 Final Rule would affect as many as 90 percent of new wells on Federal and Indian lands. The primary regulations promulgated by the 2015 Final Rule required operators engaged in hydraulic fracturing techniques on Federal or Indian land to:
- Submit information regarding the proposed hydraulic fracturing operations to the BLM as part of either the Application for Permit to Drill (“ADP”) or a Notice of Intent (“NOI”) Sundry;
- Develop and implement a casing and cementing program that protects and/or isolates usable water, as defined by the 2015 Final Rule;
- Monitor cementing operations during well construction and provide reports to the BLM prior to the hydraulic fracturing operation;
- Take remedial action if there are indications of inadequate cementing, and demonstrate that the remedial actions taken were successful prior to commencing hydraulic fracturing operations;
- Demonstrate that there is at least 200 feet of adequately-bonded cement between the zone to be hydraulically fractured and the deepest usable water zone, unless the operator returns the cement behind the casing to the surface;
- Perform a successful mechanical integrity test prior to commencing hydraulic fracturing operations;
- Monitor annulus pressures during hydraulic fracturing operation;
- Store recovered fluids in rigid above-ground tanks, with capacity limited to 500 barrels;
- Submit information to the BLM after the hydraulic fracturing operation in a Subsequent Report Sundry; and
- Disclose the chemicals used in the fracturing fluid to the BLM directly or through FracFocus (with provision for protection of trade secrets, albeit through a very cumbersome process).
That proposed rulemaking was in response to Executive Orders 13,771 (January 30, 2017) and 13783 (March 28, 2017), which initially directed the Department of the Interior to review its regulations “for consistency with the policies and priorities of the new Administration,” and then specifically directed publication of proposed rules “suspending, revising, or rescinding” the 2015 Final Rule. Interior Secretary Ryan Zinke issued Secretarial Order No. 3349 (March 29, 2017) instructing the BLM to take steps to rescind the 2015 Final Rule.
Upon further review of the 2015 Final Rule, the BLM determined that the rule “unnecessarily burdens industry with compliance costs and information requests that are duplicative of regulatory programs of many states and some tribes.” Based on this determination, the BLM on July 25, 2017 proposed to rescind the 2015 Final Rule.
In announcing its proposal to rescind the 2015 Final Rule, the BLM noted the increase in state regulations and industry guidance since the rule was first announced. Specifically with regards to the requirement that operators disclose the contents of their fracturing fluid, the BLM stated, “[D]isclosures of the chemical content of hydraulic fracturing fluids to state regulatory agencies and/or databases such as FracFocus is more prevalent than it was in 2015 and there is no need for a Federal chemical disclosure requirement, since companies are already making those disclosures on most of the operations, either to comply with state law or voluntarily.” Moreover, the BLM determined that “resource damage was unlikely to increase by rescinding the 2015 Final Rule because of the rarity of adverse environmental impacts that occurred from hydraulic fracturing operations before the 2015 Final Rule.” Finally, the BLM determined that rescinding the 2015 Final Rule would result in a reduction of $14 to $34 million in compliance costs.
The BLM proposal to rescind the 2015 Final Rule is currently in the final days of the comment period, which will end September 25, 2017. Over 200 groups and individuals have commented on the decision to rescind the rule, with a number of individuals as well as groups such as the National Federation of Independent Business coming out in favor of rescinding the 2015 Final Rule.
After the BLM considers all comments, it can either proceed to finalize its proposed rule or take other action, such as modifying or abandoning the proposed rescission rule. If - as anticipated - the BLM finalizes the proposed rule, it would normally be expected to go into effect 30 days after publication. The Tenth Circuit’s decision to dismiss the pending appeal and vacate the lower court’s judgment invalidating the 2015 Final Rule may cause the BLM to move quickly, potentially using the “good cause” exception to have the rescission become effective less than 30 days after publication.
ABOUT BAKER BOTTS L.L.P.
Baker Botts is an international law firm of approximately 725 lawyers practicing throughout a network of 13 offices around the globe. Based on our experience and knowledge of our clients' industries, we are recognized as a leading firm in the energy and technology sectors. Since 1840, we have provided creative and effective legal solutions for our clients while demonstrating an unrelenting commitment to excellence. For more information, please visit bakerbotts.com.