American Oil and Gas Reporter - August 2015 - 128

ConventionSection: Petroleum Association of Wyoming
Fracturing Lawsuit
Opponents of U.S. Bureau of Land
Management's hydraulic fracturing rule
received a boost in late June, when a
federal judge in Casper issued a stay on
the regulation until he could review the
administrative record (AOGR, July 2015,
pg. 45). In early July, PAW President
Bruce Hinchey estimated the stay could
last 30-45 days. "It is good," he assesses.
"The government does not have a blank
check to do whatever it wants."
That may well be news to the Obama
administration, Hinchey says, based on
the impressions he has formed from observing the legal proceedings. "The federal
attorneys did not respond very well to
the points raised," Hinchey describes.
"The State of North Dakota's presentation
was very good. It not only showed how
much the rule would cost the state, but it
also demonstrated how (the North Dakota
Oil & Gas Division) already had sufficient
rules-just like Wyoming does-and that
the BLM rule amounted to costly duplication."
Harris echoes that point. "There simply
does not seem to be an appreciation for
what states such as Texas, Colorado and
Wyoming have done with their own fracturing rules," he assesses. "The states are
doing a marvelous job to regulate that."
PAW Vice President John Robitaille
also highlights a point from attorneys
representing the state of Wyoming. He
recalls that a provision in the Energy
Policy Act of 2005-which some industry
opponents dubbed the "Halliburton loophole"-states that EPA is the only federal
agency that can oversee hydraulic fracturing, and then only for the purposes of
regulating fracturing fluid that contains
diesel fuel or the volatile organic compounds benzene, toluene, ethylbenzene
and zylene. "That is federal law," Robitaille points out. "I will be fascinated
to see how BLM argues against that."
The main thrust of the government's
argument amounted to claiming that large
companies could afford to accommodate
the rule, Hinchey describes. "The feds do
not seem to care about compliance costs;
their attorneys basically said, 'Big companies
can afford it,'" he characterizes. "They do
not care a whit about the little guy."
To the extent the administration acknowledges small producers, it seems to
regard their lack of financial wherewithal
as evidence they will cut environmental
corners, Hinchey relates. Such suspicion
ignores small independents' history as

trailblazers, he counters. "Little guys
found the Jonah Field, one of the world's
largest natural gas fields," Hinchey observes. "Small operators have a place in
this world, even if the government keeps
trying to make it too expensive."
Hinchey indicated in early July that
he expected the court to rule on the fracturing regulation by late July or early
August. And while the rule's opponents
seem strong on the merits, he assesses,
history favors the administration. "Federal
judges all too often rule with the federal
government, but it is kind of a crapshoot,"
he compares.

Other Regulations
Other federal regulations that Hinchey
says have PAW's attention include the
U.S. Environmental Protection Agency's
efforts to redefine "waters of the United
States" for purposes of the Clean Water
Act (see "Industry Awaits 'Waters of
U.S.' Rule, AOGR, July 2015, pg. 169).
Although there have been some congressional efforts to circumvent that rule
making or cut its support funding, he
says, they seem to have a relatively low
profile.
"That definition has a lot of implications," Hinchey surmises. "I am a little
surprised Congress has not jumped all
over that."
Then there are EPA's plans to tighten
the National Ambient Air Quality Standard
for ground-level ozone. Robitaille says
he has encountered rumors the new limit
will drop from 75 to 68 parts per billion.
"If that is indeed the case, for the most
part (Wyoming) should be OK," he assesses. "I do not think we will have a
problem with that in the Pinedale area,
although we may have to implement all
kinds of situational regulations if it is set
lower. If that is the case, places such as
Laramie County, Wy.,-which has only a
little development-will be in nonattainment. If it gets into the lower 60s, Yellowstone National Park will be out of attainment."

Flaring, Bonding, Setbacks
Robitaille points out the Wyoming
Oil & Gas Conservation Commission's
most recent initiatives largely mirror
items mentioned in a citizens' petition.
"The Powder River Basin Resource Council asked for increased setbacks, higher
bonding requirements, and restrictions
on flaring," he recounts. "The commission
initially disregarded the petition as the

128 THE AMERICAN OIL & GAS REPORTER

WOGCC should be the one to bring new
rule changes. The WOGCC has taken up
setbacks and is planning bonding changes
and will review flaring requirements in
the near future."
With regard to setbacks, the commission released a set of amended requirements in April that have since taken
effect (AOGR, May 2015, pg. 16). According to Robitaille, PAW considers the
rule a good compromise that was improved
over the draft proposal. And although
companies have not been working under
the regulation for long, he says PAW
members have not raised any complaints.
"To my knowledge, nobody is having a
real problem with it," he relates.
Robitaille reports PAW also expects
WOGCC to propose a rule that will increase bonding requirements. Although
the commission has not raised the amounts
in about a decade, he says, PAW wants
to make sure any adjustment does not
hurt small producers and unnecessarily
entangle capital that otherwise would go
toward drilling wells.
Harris says PAW also is closely watching WOGCC's plan to revise its flaring
requirements for associated natural gas.
Both PAW and the state want what is
best, he suggests, but he says it is incorrect
to compare Wyoming's situation with
that of North Dakota. Instituting new
flaring standards in the Bakken Shale's
primary playground does not necessarily
mean Wyoming should imitate them, he
says.
"Wyoming is blessed with infrastructure to the point that it is pretty hard to
drill wells exceedingly far from a gas
line connection," Harris details.
Moreover, he emphasizes, companies
such as Black Hills have an obvious incentive to sell associated gas if it will be
profitable. "We go through a very pragmatic, thorough analysis so we can be as
efficient as possible to capture that resource," Harris describes. "We are looking
at maps, finding the nearest midstream
take-away, and contacting those companies
to learn about our options."
Ultimately, he says, producers have
no desire to flare gas if producing it will
yield a profit. On the other hand, he
notes, they also have no desire to shut in
an oil well because of a small amount of
natural gas. "That impacts economics
and rate of return on a significant investment," Harris observes. "That could be
very detrimental to the opportunity to
develop an area."

American Oil and Gas Reporter - August 2015

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