Fracking Ruling

Well casing is stacked alongside a natural gas drilling rig contracted by Jonah Energy on Sept. 8, 2014 in the Jonah Field near Pinedale.

Alan Rogers, Star-Tribune

A federal judge issued a stay Tuesday of a U.S. Bureau of Land Management fracking rule, temporarily halting an Obama administration effort to regulate oil and gas operations on public land nationwide.

The BLM rule had been scheduled to go into effect Wednesday before U.S. District Court Judge Scott W. Skavdahl's decision. The ruling amounted to a legal cease-fire and means permitting of oil and gas wells on federal land will proceed under current regulations for at least another month. 

Skavdahl stopped short of issuing the injunction sought by industry groups and oil- and gas-producing states. But he left open the possibility of halting the Obama administration's effort to police fracking until the matter can be decided in court, a process which could take years. 

Skavdahl noted the federal government has yet to file the official administrative record that explains how the rule was crafted, and details the BLM's efforts to address concerns raised during the public comment process. 

Without the official record, Skavdahl said he could not make an informed decision on whether the government had made an adequate effort to address issues raised by industry. 

"It is too important an issue," he said, to make a hasty ruling. 

Once the administrative record is filed by the BLM, both sides will have seven days to cite the document to bolster their respective arguments. Skavdahl said he will make a decision within two weeks of receiving their updated briefs. 

Tuesday's proceedings in Casper were effectively two cases in one. Industry groups have filed a challenge arguing the BLM did not follow federal rule-making law in issuing the fracking regulation. 

Colorado, North Dakota, Utah and Wyoming challenged the BLM's authority to regulate fracking in a separate case, contending the agency lacked the power to regulate the practice of injecting sand, chemicals and water at high pressure into wells to break open oil and gas bearing rock.  That authority rests with the U.S. Environmental Protection Agency, they claimed. 

Both challenges were combined, with the states and industry arguing the rule should be suspended until courts have a chance to decide its legal merits. 

They maintained implementation of the standard would have grave financial consequences for oil and gas companies, as well as the states that rely on tax revenue generated by the industry. 

Attorneys for the federal government countered, saying both sets of challengers' claims were speculative and failed to conclusively prove extraordinary damage.   

All sides found something to like in the decision. Oil and gas interests noted it keeps their case for an injunction alive. 

"We're obviously very pleased. The judge is being very careful," said Kathleen Sgamma, vice president of the Western Energy Alliance, an industry group that brought one of the challenges against the rule. "It gives us more time to comply with a rule BLM cannot articulate clearly."

Industry groups alleged the BLM had not considered the financial impact of complying with the rule, which they contended would cost companies a substantial sum. 

The BLM argued compliance costs would be minimal. The government estimated complying with the new rule would cost a little more than $11,000 per well. Today's horizontal wells often cost between $4 million and $9 million to complete, the government estimated. 

They also noted that the bureau's estimate of per well costs differed only slightly from industry's own analysis. 

Skavdahl, in explaining his decision, noted there was at least a "credible threat" that the rule could cause oil and gas operators grave financial harm.

North Dakota Attorney General Wayne Stenehjem said about 99 percent of all the wells that would be covered by the federal rule are already regulated by the states. 

Skavdahl's ruling was a sign of respect for the state's efforts, he said. The states argued the BLM's regulations would add an arbitrary and redundant set of regulations to the ones they already have in place.    

"I think it recognizes that these rules are not ready for prime time," Stenehjem told reporters after the hearing.  

Skavdahl's ruling was not a surprise, said Michael Freeman, an attorney for Earthjustice, an environmental group that intervened on the government's behalf. Industry and the states had failed to prove how the rule would cause extraordinary financial damage, he said. 

A spokeswoman for the U.S. Department of the Interior said the agency is assessing the ruling. 

"While the matter is being resolved, the BLM will follow the court's order and will continue to process applications for permit to drill and inspect well sites under its pre-existing regulations," said Jessica Kershaw, a department spokeswoman. 

The BLM rule would govern fracking on millions of federal acres across the West. The practice has increased dramatically in recent years, helping to fuel a boom in American oil and gas production. 

But its use has also generated concerns among environmentalists and landowners, who fear the chemicals used in fracking could contaminate drinking water supplies. 

Government attorneys argued the BLM has long regulated the technical aspects of drilling on federal land and that the fracking rule represented the bureau's attempt to address changes in the industry.  

Follow energy reporter Benjamin Storrow on Twitter @bstorrow

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