Last week, the Obama administration announced its intent to reconsider its two most aggressive programs to regulate hydraulic fracturing at the federal level.   On Tuesday, January 16th, EPA submitted an unopposed motion to the United State Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) to put challenges to the Agency’s air rules in abeyance while it reconsiders, and potentially reproposes, aspects of the rules.  Then, on Friday, January 18th, BLM announced that it would repropose its draft rules to regulate hydraulic fracturing on federal land.   While these are very different actions being undertaken for very different reasons, they collectively send a strong signal that this administration may be willing to seek common ground with industry and, hopefully, avoid unnecessary over-regulation.

EPA’s reconsideration involves the New Source Performance Standards (“NSPS”) and National Emissions Standards for Hazardous Air Pollutants (“NESHAP”) proposed by the Agency in August, 2012.   These rules required companies to capture smog-forming volatile organic compounds (VOCs) and GHGs like methane that can be released during drilling.   Industry fought for, and received, a critical phase-in period so that enough emission capturing equipment could be produced and deployed to make compliance with the rules feasible.   However, industry continued to have grave concerns about many of the practical nuances of the rule, including definitional issues which could broaden the rule beyond what EPA proposed or contemplated.  When industry petitioned the D.C. Circuit for review of the rule, it was widely seen as a protective petition so that industry could work with EPA to fix certain irrational and unworkable aspects of the rule.    EPA’s motion to put the case in abeyance is therefore not surprising.  Typically in cases like this, EPA agrees to a set of rule changes that address some or all of the petitioners concerns, and petitioners agree to drop their legal challenges.  EPA’s motion is step one in that process.

BLM, on the other hand, is not reconsidering a final rule.  It is reproposing a rule that it first proposed in draft form in May, 2012.   Unlike EPA, BLM is not acting in response to a legal challenge.  Instead, BLM’s reassessment is in response to over 170,000 comments in the docket and a strong argument that aspects of BLM’s regulatory approach unnecessarily overlie and frustrate existing and effective state hydraulic fracturing rules.   

BLM has apparently recognized the federalism concerns in stating that the reproposal is intended, in part, to “maximize flexibility [and] facilitate coordination with state practices . . .”   Still, BLM does not appear to be reconsidering the three main aspects of its original proposed rule:

• chemical disclosure;
• wellbore integrity testing; and
• water management plans for hydraulic fracturing operations.

While the test of this administration’s willingness to work cooperatively with the oil and gas industry will be whether BLM and EPA actually make meaningful changes to these rules, industry has appropriately not delayed in offering praise.   Industry has asked this administration for  a dialogue and they asked for a redrafting of these rule.  They got both.   The administration reached out a hand and industry was wise to shake it.   We hope this is a sign that the antagonistic first-term relationship between the president and the oil and gas industry may be reconsidered as well.