Judge strikes down BLM fracking rule

Western states gained ground last week in the ongoing tug of war with the federal government over whose say matters most in how federal lands are managed. Hydraulic fracturing, the engineering technique behind the nation’s surge in oil and gas production, is arguably the biggest business on Western public lands. And on June 21, a federal judge in Wyoming sided with several states and industry groups to strike down a 2015 Bureau of Land Management rule designed to update 30-year-old drilling requirements in light of hydraulic fracturing.

U.S. District Judge Scott Skavdahl held that the BLM doesn’t have the authority to regulate hydraulic fracturing in federal oil and gas reserves, where tens of thousands of wells have been drilled in recent years, most of which are fracked. The same judge temporarily blocked the rule last year pending this decision.

Colorado joined Wyoming, Utah, North Dakota, the Ute Indian Tribe and industry groups in opposing the rule, which would impact drilling for oil and gas on lands managed by the BLM, U.S. Forest Service and even where the government owns the minerals under private property. “This case has never been about whether we should regulate hydraulic fracturing. As a state, Colorado is doing so effectively and responsibly,” Attorney General Cynthia Coffman said in a press release. “This case is about holding the federal government accountable when it ignores the law.”

The ruling was the most recent setback for the Obama administration’s efforts to curtail environmental damage from fossil fuels. The Supreme Court earlier this year stalled the Environmental Protection Agency’s Clean Power Plan, designed to slash greenhouse gas emissions from the electricity sector, pending its review.

In the case of the BLM fracking rule, the Obama administration didn’t immediately announce whether it would appeal the ruling but lawyers on both sides said an appeal is all but certain.

At the heart of the Skavdahl ruling was his finding that BLM had “attempted an end-run” around the 2005 Energy Policy Act, in which Congress explicitly restricted the EPA from regulating fracking under the Safe Drinking Water Act. But defenders of the rule, including some legal scholars, counter that the judge got it wrong because Congress was referring to a different law and a different agency.

What’s at stake is not just part of President Obama’s environmental legacy but also the balance of power between the federal government and the states with regard to federal lands management in the West.

“That’s exactly the problem here; for 100 years BLM has never just let states manage oil and gas drilling on federal lands. Congress made BLM manager of oil and gas drilling on federal lands to protect the environment,” says Mike Freeman, the lead Earthjustice attorney representing environmental groups in the case.

Although some states argued that their rules are as protective or more protective than federal rules, the BLM and environmental groups assert that the agency’s rule would tighten protections for groundwater. For example, it would require that companies store large quantities of water mixed with hydraulic fracturing chemicals in closed tanks rather than in open pits after the fluids flow back up from wells.

In its rule, the BLM said storing these fluids in open pits creates risks of polluting the air and water and harming wildlife. The tanks, by contrast, “are less prone to leaking, are safer for wildlife, and will have less air emissions.” (Six of the nine states impacted by the rule do not require tanks, and the remaining three — Colorado, Utah and Wyoming — require tanks in some circumstances, according to BLM’s survey of state rules.)

Another way the BLM and environmental groups say the BLM rule is more protective is that companies would be required to tell the agency before they fracked. Companies would be required to ensure that a barrier layer existed between underground water supplies and the formations where they planned to inject fluids under intense pressure to make cracks in the rock (or tight sands) to get the oil or gas flowing.

Recent research linking contamination of groundwater to hydraulic fracturing in Pavillion, Wyoming, cited a lack of a barrier layer as one reason for the contamination.

Industry groups opposed the requirement to use tanks, saying sometimes pits are the better and more environmentally friendly solution. They also argued that the BLM rule would require companies to disclose hydraulic fracturing strategies without protection for their trade secrets. “That’s the essence of competition in the oil and gas business,” said Mark Barron, a lawyer representing industry in the case.

Industry representatives also argued that the BLM had failed to show that fracking needed to be regulated. “The risks to groundwater are statistically insignificant,’’ Barron added.

The immediate impact of the ruling is not likely to be substantial because drilling has plummeted in the West due to low prices for oil and gas. Still, Barron and others in the industry said that not having the BLM rules on the books will make it easier for companies to resume drilling as prices increase.

“It matters more than ever. It changes the economics of when drilling will be affordable again. We’re at a point where every dollar counts,” Barron said.

In New Mexico, for instance, where most of the drilling takes place on federal land, the number of drill rigs dropped from 100 in 2014 to 20.

Defenders of the rule hope to get a response from the 10^th U.S. Circuit Court of Appeals by the end of the year. But even if the appeals court overturns Skavdahl’s decision, that may not be the end of it. The appeals court likely would send the case back to Skavdahl, who had a long list of problems with the BLM fracking rule and could find another reason to again strike it down. For instance, in his 2015 decision to temporarily stay the rule pending his final ruling, Skavhahl cited concerns that the BLM failed to adequately consult with tribes.

“The Tribe is already effectively regulating fracking and all other aspects of oil and gas production, and adding yet another layer of regulation would only have driven production to off-reservation locations. We are pleased that the District Court has struck this misguided BLM rule,” Shaun Chapoose, chairman of the Ute Indian Tribe Business Committee, said in a statement.

Although the judge didn’t decide that issue in his ruling last week, he could if the appeals court overturns him. “There are still other things that the judge did not like,” said Jeffrey Rasmussen, an attorney for the Ute Tribe. “We could go back and forth a few times.”

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