Study finds BLM Hydraulic Fracturing Rule to Cost $345 Million

Breaking Energy 2013-08-02

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An industry economic analysis report estimates that BLM’s revised draft of regulations governing hydraulic fracturing on public lands would cost at least $345 million.

On July 22, 2013, the Western Energy Alliance and the Independent Petroleum Association of America released an analysis of compliance costs of the Department of Interior’s (DOI) revised draft rule governing hydraulic fracturing on public lands.  The analysis, conducted by John Dunham & Associates (JDA), estimated an annual cost of approximately $345 million or higher, at an average cost of $96,913 per well, if applied to all 3,566 projects underway in the western states.  The study found that approximately 90 percent of the cost would pertain to enhanced well-casings estimated to cost about $310 million.  By comparison, DOI’s Bureau of Land Management (BLM) estimated that the proposed rule would incur an annual cost of $12 to $20 million.

BLM-Managed-Lands-Hydraulic-Fracturing

Public lands managed by Bureau of Land Management (BLM)

The BLM issued the revised draft rule in May 2013 to avoid duplication with state regulations and simplify compliance burden.  It issued the original draft in May 2012.  The revised version retains three key components of the original version – public disclosure of chemicals used for fracturing, adherence to well-bore-integrity requirements, and establishment of proper water management plans.  Among the major revisions, the new draft eliminates provisions to submit applications for BLM approval before well-completion and obligation to undergo full well-stimulation requirements.   The revised draft requires cement logs on representative wells rather than all wells and modifies administrative and permitting efforts for operators.

Due to elimination of specific provisions and substantial delays, the estimated cost is lesser when compared to the original version.  JDA estimated the original proposal to cost $1.3 billion annually if applied to 5,058 wells that would be affected.  Additional costs of the earlier analysis include approximately $273 million per year for well-stimulation and $38 million for approval delays, among others.

July 23, 2013 via Energy Solutions Forum