Cost exceeds benefits, usurps state authority
(DENVER and WASHINGTON DC) - Today, Western Energy Alliance and the Independent Petroleum Association of America (IPAA) released an economic analysis of the Department of the Interior’s (DOI) proposed hydraulic fracturing rule by John Dunham & Associates, a respected economics firm. DOI’s proposed rule will impose a cost to society of $345 million annually, with an average per well cost of $96,913. Despite the fact that the rule exceeds the $100 million threshold, BLM has not conducted a full economic assessment as required by law.
The cost of the second version of the rule is lower than the first because some positive changes have been made. Among the changes are the elimination of the requirement to regulate well maintenance; revised Bureau of Land Management (BLM) estimates on the number of wells; the reduction of permitting times; and “type well” provisions that will require operators to run full testing only on representative wells in a field.
“While there are improvements in the second version of the rule, it still remains fundamentally flawed from an engineering perspective, as well as bad regulatory policy,” said Kathleen Sgamma VP of Government and Public Affairs for Western Energy Alliance. “DOI still has not justified the rule from an economic or scientific point of view, and continues to lack the budget, staff or expertise to implement it.”
“In response to legitimate criticism from governors, state regulators, tribes and members of Congress that fracing should continue to be regulated by the states, DOI tried to make this rule more palatable in its public statements. However, DOI has provided no actual mechanism for states and tribes to receive “certification” of their rules nor any real deference to their superior regulations, expertise, and experience,” added Sgamma.
“John Dunham’s analysis once again shows that the economic impact from this proposed rule on independent oil and natural gas producers will be significant,” said Dan Naatz, vice president of federal resources for the IPAA. “Despite the best efforts of producers, manufacturers, state regulators and others impacted by the proposed rule, the BLM continues to move forward with this misguided effort. IPAA will continue to work with the Western Energy Alliance and others to stop the BLM from implementing this ill-conceived regulatory plan.”
About Western Energy Alliance
Western Energy Alliance, founded in 1974 as the Independent Petroleum Association of Mountain States, is a non-profit trade association representing more than 400 companies engaged in all aspects of environmentally responsible exploration and production of oil and natural gas in the West. More information on Western Energy Alliance and its members is available at www.westernenergyalliance.org.
IPAA is the leading, national upstream trade association representing oil and natural gas producers that drill 95 percent of the nation’s oil and natural gas wells. These companies account for 54 percent of America’s oil production and 85 percent of its natural gas production. For more information, visit www.ipaa.org.