The Obama administration’s plan to impose tighter regulations on hydraulic fracturing will be an economic burden on natural gas producers, according to an official with EOG Resources Inc.
“The proposed rule is unnecessary, excessive and requires actions that no state currently regulating oil and natural gas production deems necessary,” Eric Dille, government affairs director for Houston-based EOG, said in comments posted on a website Aug. 31. “The proposed rule will also place undue economic burdens and time delays on independent oil and natural- gas producers that will inevitably drive many smaller companies away from exploring for oil and natural gas on federal lands.”
The plan to stiffen regulations, requiring producers to disclose chemical usage and certification of well isolation, will cost more than 20 times U.S. estimates, according to a new study conducted by John Dunham and Associates.
EOG and officials in Wyoming and Utah said the study estimates the cost at $253,839 per well to meet the proposed regulations—a number quite higher than the Bureau of Land Management’s estimated cost of $11,833 per well.
The proposed regulations were developed because of concerns of environmentalists and homeowners. They believe hydraulic fracturing could contaminate water supplies.
Under the rule, proposed on May 4, companies would have to list the chemicals used in their watery mix and ensure that the well is designed and drilled to limit spill risks when drilling on public lands.
The per-well estimate issued by the Bureau of Land Management didn’t account for the 72 hours that rigs would be idled to let drillers document for regulators that cement, required by the rule to assure the well’s integrity, has set properly. The wait while the cement cures would cost $140,400, according to John Dunham and Associates.
Dunham estimates total costs of the rule at $1.5 billion to $1.62 billion a year. The Interior Department didn’t estimate total compliance costs.