What new federal fracking rules mean for the oil and gas industry

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    The boom in hydraulic fracturing in the United States has transformed the energy picture. In fact, the U.S. is now poised to become the largest producer of oil and gas in the world.

    But there have been increasing worries about the environmental and health risks that come with that boom. Today, the Obama administration announced the first federal regulations for fracking.

    Hari Sreenivasan has the story.


    Fracking is a technique that involves injecting millions of gallons of water, sand and chemicals deep underground to fracture shale rock and release gas and oil. Today's new rules regulate how the process should be done on federal lands.

    Much more fracking is actually done on private and state property, but the regulations are seen by some as a template for wider drilling. They have been in the works since the president's first term. Among other things, they will affect the production of wells and what the industry must disclose about chemicals and wastewater in the process.

    We look at what's significant about them and some angry reaction in a number of quarters.

    Joining me now is Amy Harder. She is covering this for The Wall Street Journal.

    So, Amy, help us understand why these new rules are significant.

  • AMY HARDER, The Wall Street Journal:

    Well, they're significant because the federal government has not yet regulated hydraulic fracturing in terms of its impact on groundwater supply. So that's really at issue here.

    The administration first proposed these rules in 2012, and reproposed them again in 2013. And now, with the announcement today, we're seeing the final product of that. And while they only directly regulate oil and gas drilling on federal lands, which accounts for about 11 percent of the gas consumed in the country and 5 percent of the oil, it's still significant, because, as you said, analysts say that this will provide a benchmark that states throughout the country will aim to meet.


    What specific type of changes are people likely to see and how does it affect fracking?


    Well, there's two big changes, one that is considered a win for the environmental community and then one that is considered a win for the industry groups and oil and gas companies.

    The final rule requires companies to disclose the chemicals that they use in fracking to an industry-run Web site called FracFocus, instead of directly to the government. Now, environmental groups wanted that to be a requirement to disclose those chemicals directly to the government. So that was something that the industry lobbied for and got.

    On the other side of this — the issue, there is this new requirement that companies must include and have an above-ground tank to store the wastewater after the fracking process. Now, that has helped add to the cost of the regulation, almost double it, to about $11,000 per well, which is still quite a small fraction of what it costs to drill a well overall, but that's something that you can expect companies and states might push back on.


    OK. Let's talk a little bit about that pushback. Some lobbying groups representing oil and gas have already filed suit to try to stop this. What are they concerned about?


    Right. They were definitely prepared for this regulation, because the lawsuit was sent out mere minutes after the final regulation was posted online today.

    They say that the rule has no merit and no reason to exist, given that many states already regulate fracking. And that's true. Most states, especially those with most oil and gas resources, such as Colorado, and Wyoming, and Texas, and Pennsylvania, many of them already have pretty strict regulations.

    So that's their reasoning for why they don't think these regulations are necessary. Congressional Republicans also introduced legislation just yesterday evening that prohibits the federal government from regulating fracking as well.


    OK. What's the concern that environmental groups have? Where do they think that the government is not going far enough?


    Well, the environmental group is a little bit more fractured.

    You have some groups, some environmentalists that say fracking is dangerous no matter what and it should be banned. They won a victory on that front last year when New York moved to ban the practice, which is the first state to ban the practice that has substantial resources. Vermont also banned fracking over the last couple of years, but it has no resources, so it's primarily a symbolic victory for the environmentalists.




    As I noted, the environmentalists wanted the disclosure of fracking fluids made directly to the government. So they didn't get that.

    But I think, overall, they were happy that this regulation finally was released. It was delayed and reproposed for quite a while. So I think they're happy that it came out.


    Are there consequences Capitol Hill? Are there ways around this that either lobby is looking for?


    Well, you saw Senator James Inhofe, a Republican from Oklahoma, which is one of the states with a lot of oil and gas resources — he's the chairman of the Environment and Public Works Committee.

    He dropped a bill with support from every other Republican in the Senate that would ban the government from regulating fracking. I don't anticipate that they could get 60 votes, the required number of votes needed to pass a bill through the Senate, but even if they did, I'm pretty confident that President Obama would veto the bill.

    The Republican-controlled House has also signaled that they're planning some sort of legislative response. But I think, overall, their efforts are not going to succeed, which is how many things in the energy environment space go along Capitol Hill.


    All right, Amy Harder of The Wall Street Journal, thanks so much.


    Thanks for having me.