American Oil and Gas Reporter - July 2016 - 38

Federal Court Halts Fracture Regulation
While oil and gas groups hailed a federal judge's decision to revoke the Bureau
of Land Management's hydraulic fracturing rule as a victory for industry, others
viewed it as a further rebuke of the Obama
administration's propensity for accomplishing by regulatory fiat that which
Congress refused to do legislatively.
On June 21, U.S. District Judge Scott
W. Skavdahl in Cheyenne, Wy., struck
down the BLM rule, the Independent Petroleum Association of America reports,
ruling that "Congress has not delegated
to the Department of Interior the authority
to regulate hydraulic fracturing. The
BLM's effort to do so through (its fracturing rule) is in excess of its statutory
authority and contrary to law."
"This is a huge win for independent
producers and our industry," responds
IPAA President and Chief Executive Officer Barry Russell. "IPAA has long said
federal regulations are unnecessary, duplicative, and would further drive independent producers from federal lands."
Adds Kathleen Sgamma, vice president
of government and public affairs for the
Western Energy Alliance, which along
with IPAA filed the initial challenge to

the BLM rule: "We are overjoyed with
the ruling. States have shown they have
successfully regulated fracturing with no
incidence of contamination in its 70-year
history. BLM failed to show any gap in
state regulation. In fact, the agency couldn't
point to a single incident on public lands
to justify the new rule."
Sgamma recalls that the Alliance and
IPAA filed their challenge in U.S. District
Court for the District of Wyoming on
March 20, 2015, only moments after
BLM announced its final rule to regulate
hydraulic fracturing on federal and Indian
lands. That regulation required companies
to disclose frac fluid constituents on the
FracFocus website, mandated aboveground
tanks for storing produced water, and established minimum well construction
standards (AOGR, April 2015, pg. 54).
Attorney Mark Barron, who is a member of BakerHostetler's energy and shale
practice in Denver, and along with Poe
Leggette and Alexander Obrecht served
as lead attorney for the associations, explains that their lawsuit challenged BLM's
assertion of jurisdiction despite specific
congressional actions to remove hydraulic
fracturing from federal regulation.

IPAA and the Alliance filed for a preliminary injunction in May, at which
point their lawsuit was consolidated with
suits brought by the states of Colorado,
Utah, Wyoming and North Dakota, and
the Ute Indian Tribe. The states and tribe
contended BLM's rule infringed on their
respective sovereignty, Barron points out.
Judge Skavdahl stayed the BLM rule
on June 23, 2015, the day before it was to
become effective, and then issued a preliminary injunction against the rule on
Sept. 30 (AOGR, October 2015, pg. 18).
No Congressional Intent
In writing his opinion in the case, which
was consolidated as State of Wyoming v.
U.S. Department of the Interior Secretary
et al (No. 2:15-CV-043-SWS) Judge Skavdahl noted that BLM based its authority to
regulate fracturing on seven federal statutes,
including the Federal Land Policy & Management Act of 1976 and the Mineral
Leasing Act of 1938. However, the judge
noted that underground injection was controlled by the Safe Drinking Water Act.
Skavdahl reasoned, "For two decades
after enactment of the SDWA, the (Environmental Protection Agency) took the
position that hydraulic fracturing was not
subject to the UIC program because that
technique . . . did not, by its interpretation,
fall within the regulatory definition of
'underground injection.'"
Furthermore, Skavdahl observed, the
Energy Policy Act of 2005 included an
amendment "expressly and unambiguously
revising the definition of underground
injection to exclude 'the underground injection of fluids or propping agents (other
than diesel fuels) pursuant to hydraulic
fracturing operations related to oil, gas
or geothermal production activities.'
"There can be no question that Congress
intended to remove hydraulic fracturing
operations (not involving diesel fuels)
from EPA regulation under the SDWA's
UIC program," Skavdahl concluded, adding
that while BLM was not claiming authority
to regulate fracturing under the SDWA,
"it makes no sense to interpret the more
general authority granted by the MLA
and FLPMA as providing the BLM authority to regulate (fracturing) when Con-

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American Oil and Gas Reporter - July 2016

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