American Oil and Gas Reporter - July 2015 - 45

Judge Delays Federal Fracture Rules
CASPER, WY.-The U.S. Bureau of
Land Management's plans to impose new
regulations on hydraulic fracturing on
federal and Indian lands hit a judicial
roadblock the last week in June.
Reporting at the association's midyear
meeting the following day in Santa Fe,
N.M., Independent Petroleum Association
of America Vice President of Federal Resources & Political Affairs Dan Naatz said
a federal judge in Wyoming issued a stay
on the proposed regulations on June 23
and ordered BLM to file its administrative
record by July 22. The rules had been
scheduled to go into effect on June 24.
"One of the most important outcomes
is that the judge said both the states and
industry had compelling cases," Naatz
advised. "It was a good day."
IPAA and the Western Energy Alliance
had filed for a preliminary injunction
against the BLM rules (AOGR, June 2015,
pg. 14). Their request was combined with
a similar motion by the states of Wyoming,
Colorado, North Dakota and Utah.
Although U.S. District Judge Scott
Skavdahl declined to issue the preliminary
injunction sought by oil and gas groups
and states, his decision requires federal
agencies to process oil and gas permits
for federal lands under current regulations,
court documents state.
The judge's decision points out that
the federal government had not yet filed
the official administrative record that details how the rule was written or how it
was changed to reflect the 1.5 million
public comments the agency received.
Without that information, Skavdahl said
he couldn't make an informed decision
on whether the federal government had
addressed industry's concerns.
The Department of the Interior issued
the final rule covering hydraulic fracturing
on federal and tribal lands on March 20
(AOGR, April 2015, pg. 54). The regulations cover disclosure of chemicals used
in fracturing, wastewater storage, and
well construction standards.
IPAA and WEA immediately challenged the rules in the U.S. District Court
for the District of Wyoming. They filed
for a preliminary injunction in May, and
their motion was consolidated with the
states' case.
"The BLM rules are not ready for
prime time," says North Dakota Attorney
General Wayne Stenehjem. "These rules
undermine the state's authority to enforce
existing oil and gas regulations. They
also impose a new layer of federal bureaucracy on oil and gas development."

Lawyers for industry and the states
contend BLM has not considered the
costs of complying with new standards
(AOGR, April 2015, pg. 58). Government
regulators estimated compliance would
cost around $11,400 a well, which the
plaintiffs assert is much too low.
In explaining his decision, Skavdahl
says there is at least a credible threat that
the federal regulations would cause significant financial harm to well operators.
Limited Power
Lawyers for the states argued that in
creating the rule regulating fracturing on
public lands, BLM disregarded Congress'
specific limitation of federal regulatory
power over the completion technique,
and thus exceeded its jurisdiction.
"Should this rule take effect, states
that currently regulate hydraulic fracturing
on federal land, such as Wyoming and
Colorado, will suffer an immediate loss
of their exclusive sovereign authority over
hydraulic fracturing," the states warn.
The new rule creates a significant new
permitting regime, their injunction request
says.
The states asserted they were likely
to prevail in their lawsuits, arguing BLM
was claiming authority to regulate fracturing under several statutes, including
the Federal Land Policy and Management
Act, the Mineral Leasing Act of 1920,
and the Federal Oil and Gas Royalty

Management Act of 1982. However, they
say, none of those authorize regulating
fracturing. Instead, the Safe Drinking
Water Act and the 2005 Energy Policy
Act grant that authority directly to the
states.
"The bureau's (fracturing rule) upsets
the status quo by attempting to inject
federal oversight in an area already adequately regulated by the states," lawyers
for Colorado and Wyoming said. "Not
only do the states' hydraulic fracturing
programs adequately protect groundwater,
but the states have far more flexibility than
the bureau in the executing their rules."
Naatz praised the legal presentations
made on behalf of the oil and gas industry.
North Dakota and Wyoming's team pointed out how the BLM rule would threaten
not only their revenues, but also state
sovereignty, he said.
Naatz said Kathleen Sgamma, the Alliance's vice president of government
and public affairs, did an excellent job
on the witness stand and made a strong
argument on behalf of the industry. He
noted that Sgamma was on the witness
stand for 45 minutes in a tough legal environment.
Naatz said Skavdahl gave both sides
seven days to review the administrative
record once filed, and add any new
thoughts or comments. The judge then is
expected to issue his decision on the injunction within two weeks.
❒

IHS: Wolfcamp Delaware Play
Shows Promise Despite Youth
HOUSTON-The Wolfcamp Delaware
play along the Texas-New Mexico border
may have the potential to sustain select
operators through this period of distressed
oil prices, IHS Energy reports. Yet, "like
most adolescents, it is a story of promise,
potential and testing limits," the company's
analysts comment.
In IHS Energy Wolfcamp Delaware
Review, the company states that, unlike
its more developed counterparts such as
the Eagle Ford and the Bakken, the Wolfcamp is not yet considered mature. The
play has some of the best normalized
production of any in the onshore United
States, IHS confirms, with average peak
production rates around 120 barrels of
oil equivalent a day for every 1,000 feet
of lateral. This is nearly twice the Wolfcamp Midland basin average of approxi-

mately 63 boe/d per 1,000 feet of lateral.
In the central gas and southern liquids
subplays-two early sweet spots developing
in the play-IHS says normalized productivity has increased by more than 40
percent since first quarter 2013. The
southern liquids play, though, has more
than twice the producing horizontal wells
of the central gas subplay, at 127 and 60
wells, respectively.
"The Wolfcamp Delaware has promise,
but for now it is considered an adolescent
in maturity," says Reed Olmstead, IHS
Energy's principal analyst behind the review. "The sweet spots still are being defined because these normalized production
rates have not shown signs of flattening,
which means the limits of the play have
SEE WOLFCAMP PAGE 139
JULY 2015 45

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