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[Federal Register Volume 77, Number 92 (Friday, May 11, 2012)]
[Proposed Rules]
[Pages 27691-27711]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-11304]

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DEPARTMENT OF THE INTERIOR

Bureau of Land Management

43 CFR Part 3160

[WO-300-L13100000.FJ0000]
RIN 1004-AE26

Oil and Gas; Well Stimulation, Including Hydraulic Fracturing, on 
Federal and Indian Lands

AGENCY: Bureau of Land Management, Interior.

ACTION: Proposed rule.

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SUMMARY: The Bureau of Land Management (BLM) is proposing a rule to 
regulate hydraulic fracturing on public land and Indian land. The rule 
would provide disclosure to the public of chemicals used in hydraulic 
fracturing on public land and Indian land, strengthen regulations 
related to well-bore integrity, and address issues related to flowback 
water. This rule is necessary to provide useful information to the 
public and to assure that hydraulic fracturing is conducted in a way 
that adequately protects the environment.

DATES: Send your comments on this proposed rule to the BLM on or before 
July 10, 2012. The BLM need not consider, or include in the 
administrative record for the final rule, comments that the BLM 
receives after the close of the comment period or comments delivered to 
an address other than those listed below (see ADDRESSES). If you wish 
to comment on the information collection requirements in this proposed 
rule, please note that the Office of Management and Budget (OMB) is 
required to make a decision concerning the collection of information 
contained in this proposed rule between 30 to 60 days after publication 
of this document in the Federal Register. Therefore, a comment to OMB 
is best assured of having its full effect if OMB receives it by June 
11, 2012.

ADDRESSES: Mail: U.S. Department of the Interior, Director (630), 
Bureau of Land Management, Mail Stop 2134 LM, 1849 C St. NW., 
Washington, DC 20240, Attention: 1004-AE26. Personal or messenger 
delivery: Bureau of Land Management, 20 M Street SE., Room 2134 LM, 
Attention: Regulatory Affairs, Washington, DC 20003. Federal 
eRulemaking Portal: http://www.regulations.gov. Follow the instructions 
at this Web site.
    Comments on the information collection requirement: Fax: Office of 
Management and Budget (OMB), Office of Information and Regulatory 
Affairs, Desk Officer for the Department of the Interior, fax 202-395-
5806. Electronic mail: oira_docket@omb.eop.gov. Please indicate 
``Attention: OMB Control Number 1004-XXXX,'' regardless of the method 
used to submit comments on the information collection burdens. If you 
submit comments on the information collection burdens, please provide 
the BLM with a copy of your comments, at one of the addresses shown 
above.

FOR FURTHER INFORMATION CONTACT: Steven Wells, Division Chief, Fluid 
Minerals Division, 202-912-7143 for information regarding the substance 
of the rule or information about the BLM's Fluid Minerals Program. 
Persons who use a telecommunications device for the deaf (TDD) may call 
the Federal Information Relay Service (FIRS) at 1-800-877-8339 to 
contact the above individual during normal business hours. FIRS is 
available 24 hours a day, 7 days a week to leave a message or question 
with the above individual. You will receive a reply during normal 
business hours.

SUPPLEMENTARY INFORMATION:

Executive Summary

    ``Hydraulic fracturing,'' a process used to stimulate production 
from oil and gas wells, has been a growing practice in recent years. 
Public awareness of fracturing has grown as new horizontal drilling 
technology has allowed increased access to shale oil and gas resources 
across the country, sometimes in areas that have not previously 
experienced significant oil and gas development. The extension of the 
practice has caused public concern about whether fracturing can allow 
or cause the contamination of underground water sources, whether the 
chemicals used in fracturing should be disclosed to the public, and 
whether there is adequate management of well integrity and the 
``flowback'' fluids that return to the surface during and after 
fracturing operations.
    The Bureau of Land Management (BLM) oversees approximately 700 
million subsurface acres of Federal

[[Page 27692]]

mineral estate and 56 million subsurface acres of Indian mineral estate 
across the United States. The BLM proposes to modernize its management 
of well stimulation activities, including hydraulic fracturing, to 
ensure that fracturing operations conducted on the public mineral 
estate (including split estate where the Federal Government owns the 
subsurface mineral estate) follow certain best practices, including: 
(1) The public disclosure of chemicals used in hydraulic fracturing 
operations on Federal lands; (2) confirmation that wells used in 
fracturing operations meet appropriate construction standards; and (3) 
a requirement that operators put in place appropriate plans for 
managing flowback waters from fracturing operations.
    The BLM proposes to apply the same rules and standards to Indian 
lands so that these lands and communities receive the same level of 
protection provided for public lands. Most of these requirements in 
this rule can be satisfied by submitting additional information during 
the process that the BLM currently applies to operators who are 
drilling on public or Indian lands. The proposed rule would require 
that disclosure of the chemicals used in the fracturing process be 
provided to the BLM after the fracturing operation is completed. This 
information is intended to be posted on a public web site, and the BLM 
is working with the Ground Water Protection Council to determine 
whether the disclosure can be integrated into the existing Web site 
known as FracFocus.org.
    The BLM has developed the draft with an eye toward improving public 
awareness and oversight without introducing complicated new procedures 
or delays in the process of developing oil and gas resources on public 
and Indian lands. Some states have started requiring similar 
disclosures and oversight for oil and gas drilling operations under 
their own jurisdiction. This proposal seeks to create a consistent 
oversight and disclosure model that will work in concert with other 
regulators' requirements while protecting Federal and tribal interests 
and resources.
    The BLM proposes these changes to existing well stimulation 
oversight partly in response to recommendations put forward by the 
Secretary of Energy's Energy Advisory Board in 2011. Also, current BLM 
regulations governing hydraulic fracturing operations on public lands 
are more than 30 years old and were not written to address modern 
hydraulic fracturing activities. In preparing this proposed rule, the 
BLM has received input from members of the public and stakeholders, and 
has initiated consultation with tribal representatives. The BLM is 
looking forward to obtaining additional public input and to ongoing 
tribal consultations regarding the specific proposed provisions that 
are set forth herein.
    The BLM has analyzed the costs and the benefits of this proposed 
action in an accompanying Regulatory Impact Analysis available in the 
rulemaking docket. The estimated benefits range from $12 million to $50 
million per year, with the range being based on the discount rate used 
for the analysis, and the estimates of the underlying risk reduced, and 
remediation costs avoided, by the regulation. The estimated costs range 
from $37 million to $44 million per year, and do not vary based on the 
uncertainty in the underlying risk reduced by the rule. Given the 
assumptions made about the costs of remediating contamination and the 
fact that certain benefits were not quantified, the BLM believes that 
the quantified range of estimated outcomes could underestimate actual 
net benefits.

I. Public Comment Procedures
II. Background
III. Discussion of the Proposed Rule
IV. Procedural Matters

I. Public Comment Procedures

    If you wish to comment, you may submit your comments by any one of 
several methods: Mail: You may mail comments to U.S. Department of the 
Interior, Director (630), Bureau of Land Management, Mail Stop 2134LM, 
1849 C Street NW., Washington, DC 20240, Attention: 1004-AE26. Personal 
or messenger delivery: Bureau of Land Management, 20 M Street SE., Room 
2134 LM, Attention: Regulatory Affairs, Washington, DC 20003. Federal 
eRulemaking Portal: http://www.regulations.gov. Follow the instructions 
at this Web site.
    You may submit comments on the information collection burdens 
directly to the Office of Management and Budget, Office of Information 
and Regulatory Affairs, Desk Officer for the Department of the 
Interior, fax 202-395-5806, or oira_docket@omb.eop.gov. Please include 
``Attention: OMB Control Number 1004-XXXX'' in your comments. If you 
submit comments on the information collection burdens, please provide 
the BLM with a copy of your comments, at one of the addresses shown 
above.
    Please make your comments as specific as possible by confining them 
to issues directly related to the content of this proposed rule, and 
explain the basis for your comments. The comments and recommendations 
that will be most useful and likely to influence agency decisions are:
    1. Those supported by quantitative information or studies; and
    2. Those that include citations to, and analyses of, the applicable 
laws and regulations.
    The BLM is not obligated to consider or include in the 
Administrative Record for the rule comments received after the close of 
the comment period (see DATES) or comments delivered to an address 
other than those listed above (see ADDRESSES).
    Comments, including names and street addresses of respondents, will 
be available for public review at the address listed under ADDRESSES 
during regular hours (7:45 a.m. to 4:15 p.m.), Monday through Friday, 
except holidays.
    Before including your address, telephone number, email address, or 
other personal identifying information in your comment, be advised that 
your entire comment--including your personal identifying information--
may be made publicly available at any time. While you can ask in your 
comment to withhold from public review your personal identifying 
information, we cannot guarantee that we will be able to do so.

II. Background

    Well stimulation techniques, such as hydraulic fracturing, are used 
by oil and natural gas producers to increase the volumes of oil and 
natural gas that can be extracted from wells. Hydraulic fracturing 
techniques are particularly effective in enhancing oil and gas 
production from ``shale'' gas or oil formations. Until quite recently, 
shale formations rarely produced oil or gas in commercial quantities 
because shale does not generally generate flow of hydrocarbons to well 
bores unless mechanical changes to the properties of the rock can be 
induced. The development of horizontal drilling, combined with 
hydraulic fracturing, have made the production of oil and gas from 
shale possible. Hydraulic fracturing involves the injection of fluid 
under high pressure to create or enlarge fractures in the reservoir 
rocks. The fluid that is used in hydraulic fracturing is usually 
accompanied by proppants, such as particles of sand, that are carried 
into the newly fractured rock and help keep the fractures open once the 
pressure from the fracturing operation is released. The proppant-filled 
fractures become conduits for fluid migration from the reservoir rock 
to the wellbore and the fluid is subsequently brought to the surface. 
In

[[Page 27693]]

addition to the water and sand (which together typically make up 98 to 
99 percent of the materials pumped into a well during a fracturing 
operation), chemical additives are also frequently used. These 
chemicals can serve many functions in hydraulic fracturing, including 
limiting the growth of bacteria and preventing corrosion of the well 
casing. The exact formulation of the chemicals used varies depending on 
the rock formations, the well, and the requirements of the operator.
    The BLM estimates that about 90 percent (approximately 3,400 wells 
per year) of wells currently drilled on Federal and Indian lands are 
stimulated using hydraulic fracturing techniques. Over the past 10 
years, there have been significant technological advances in horizontal 
drilling, which is frequently combined with hydraulic fracturing. This 
combination, together with the discovery that these techniques can 
release significant quantities of oil and gas from large shale 
deposits, has led to production from geologic formations in parts of 
the country that previously did not produce significant oil or gas. The 
resulting expansion of oil and gas drilling into new parts of the 
country as a result of the availability of new horizontal drilling 
technologies has significantly increased public awareness of hydraulic 
fracturing and the potential impacts that it may have on water quality 
and water consumption.
    The BLM's existing hydraulic fracturing regulations are found at 43 
CFR 3162.3-2. These regulations were established in 1982 and last 
revised in 1988, long before the latest hydraulic fracturing 
technologies became widely used. In response to public interest in 
hydraulic fracturing and in the BLM's regulation of hydraulic 
fracturing, in particular, the Department of the Interior (Department) 
held a forum on hydraulic fracturing on November 30, 2010 in 
Washington, DC, attended by the Secretary of the Interior and more than 
130 interested parties. The BLM later hosted public forums in Bismarck, 
North Dakota on April 20, 2011; Little Rock, Arkansas on April 22, 
2011; and Golden, Colorado on April 25, 2011, to collect broad input on 
the issues surrounding hydraulic fracturing. More than 600 members of 
the public attended the April forums. Some of the comments frequently 
heard during these forums included concerns about water quality, water 
consumption, and a desire for improved environmental safeguards for 
surface operations. Commenters also strongly encouraged the agency to 
require public disclosure of the chemicals used in hydraulic fracturing 
operations on Federal and Indian lands.
    Around the time of the BLM's forums, at the President's direction, 
the Secretary of Energy's Advisory Board convened a Natural Gas 
Subcommittee (Subcommittee) to evaluate hydraulic fracturing issues. 
The Subcommittee met with industry, service providers, state and 
Federal regulators, academics, environmental groups, and many others 
stakeholders. Initial recommendations were issued by the Subcommittee 
on August 18, 2011. Among other things, the report recommended that 
more information be provided to the public, including disclosure of the 
chemicals used in fracturing fluids. The Subcommittee also recommended 
the adoption of progressive standards for wellbore construction and 
testing. The initial report was followed by a final report that was 
issued on November 18, 2011. The final report recommended, among other 
things, that operators engaging in hydraulic fracturing prepare cement 
bond logs and undertake pressure testing to ensure the integrity of all 
casings. These reports are available to the public from the Department 
of Energy's Web site at http://www.shalegas.energy.gov.
    The BLM's proposed rule is consistent with the American Petroleum 
Institute's (API) guidelines for well construction and well integrity 
(see API Guidance Document HF 1, Hydraulic Fracturing Operations--Well 
Construction and Integrity Guidelines, First Edition, October 2009).
    Based on the input provided from a broad array of sources, 
including the individuals who spoke at the BLM's public forums and the 
recommendations of the Subcommittee, the BLM is proposing to make 
critical improvements to its regulations for hydraulic fracturing. The 
proposed regulations would be applied to all wells administered by the 
BLM, including those on Federal, tribal, and individual Indian trust 
lands.
    Tribal consultation is a critical part of this effort, and the 
Department is committed to making sure tribal leaders play a 
significant role as we work together to develop resources on public and 
Indian lands in a safe and responsible way. The BLM has initiated 
government-to-government consultation with tribes on this proposal and 
has offered to hold follow-up consultation meetings with any tribe that 
desires to have an individual meeting. The BLM held four tribal 
consultation meetings, to which over 175 tribal entities were invited. 
These initial consultations were held in Tulsa, Oklahoma on January 10, 
2012; in Billings, Montana on January 12, 2012; in Salt Lake City, Utah 
on January 17, 2012; and in Farmington, New Mexico on January 19, 2012. 
Eighty-one tribal members representing 27 tribes attended the meetings. 
In these sessions, tribal representatives were given a discussion draft 
of the hydraulic fracturing rule to serve as a basis for substantive 
dialogue about the hydraulic fracturing rulemaking process. The BLM 
asked the tribal leaders for their views on how a hydraulic fracturing 
rule proposal might affect Indian activities, practices, or beliefs if 
it were to be applied to particular locations on Indian and public 
lands. A variety of issues were discussed, including applicability of 
tribal laws, validating water sources, inspection and enforcement, 
wellbore integrity, and water management, among others. Additional 
individual consultations with tribal representatives have taken place 
since that time. One of the outcomes of these meetings is the proposed 
requirement in this rule that operators certify that operations on 
tribal lands comply with tribal laws.
    The BLM has been and will continue to be proactive about tribal 
consultation under the Department's newly-formalized Tribal 
Consultation Policy, which emphasizes trust, respect and shared 
responsibility in providing tribal governments an expanded role in 
informing Federal policy that impacts Indian lands. The BLM will 
continue to consult with tribal leaders throughout the rulemaking 
process. Responses from tribal representatives will inform the agency's 
actions in defining the scope of acceptable hydraulic fracturing rule 
options. Tribal governments, tribal members, and individual Native 
Americans are also invited to comment directly on this proposed rule 
through the process described in the Public Comment Procedures section 
of this document.
    Over the past few years, in response to strong public interest, 
several states--including Colorado, Wyoming, Arkansas, and Texas--have 
substantially revised their state regulations related to hydraulic 
fracturing. One of the BLM's key goals in updating its regulations on 
hydraulic fracturing is to complement these state efforts by providing 
a consistent standard across all public and Indian lands. The BLM is 
also actively working to minimize any duplication between the reporting 
required for state regulations and for this regulation and to make 
reported information consistent and easily accessible to the public. 
For instance, the BLM is working closely with the Ground Water 
Protection Council and the Interstate Oil and Gas

[[Page 27694]]

Commission in an effort to integrate the disclosure called for in this 
rule with the existing Web site known as FracFocus. The FracFocus.org 
Web site is already well established and used by many states. This 
online database includes information from oil and gas wells in roughly 
12 states and includes information from over 206 companies. The BLM 
understands that the database is in the process of being improved and 
will in the near future have enhanced search capabilities and allow for 
easier reporting of information.
    The BLM recognizes the efforts of states to regulate hydraulic 
fracturing and is focused on coordinating closely with individual state 
governments to avoid duplicative regulatory requirements. The agency 
has a long history of working cooperatively with state regulators and 
the BLM often enters into memorandums of understanding or establishes 
working groups to coordinate state and Federal activities, such as the 
oil and gas working groups that currently exist in many of our oil and 
gas states. The BLM is applying the same approach to this effort and 
will work closely with individual states on the implementation of the 
proposed regulation. The BLM's intent is to encourage efficiency in the 
collection of data and the reporting of information. The BLM routinely 
shares information on oil and gas operations with state regulatory 
authorities and the BLM will continue to work with individual states to 
ensure that duplication of efforts is avoided to the extent possible. 
Since the BLM is looking for all opportunities to avoid duplication of 
the collection of data and the reporting of information, we are 
specifically asking for public comment on how best to avoid duplication 
of requirements under this proposed rule with existing state 
requirements.
    The BLM acknowledges that some states already have in place rules 
and regulations that address hydraulic fracturing and that these rules 
may be either more or less stringent than the provisions in this 
proposal. In keeping with longstanding practice and consistent with 
relevant statutory authorities, it is the intention of the BLM to 
implement on public lands whichever rules, state or Federal, are most 
protective of Federal lands and resources and the environment.

III. Discussion of the Proposed Rule

    The BLM proposes to revise its hydraulic fracturing regulations, 
found at 43 CFR 3162.3-2, and adding a new section 3162.3-3. Existing 
section 3162.3-3 would be retained and renumbered. The Federal Land 
Policy and Management Act (FLPMA) directs the BLM to manage the public 
lands so as to prevent unnecessary or undue degradation, and to manage 
lands using the principles of multiple use and sustained yield. FLPMA 
declares multiple use to mean, among other things, a combination of 
balanced and diverse resource uses that takes into account long-term 
needs of future generations for renewable and non-renewable resources. 
FLPMA also requires that the public lands be managed in a manner that 
will protect the quality of their resources, including ecological, 
environmental, and water resources. The Mineral Leasing Act and the 
Mineral Leasing Act for Acquired Lands authorize the Secretary to lease 
Federal oil and gas resources, and to regulate oil and gas operations 
on those leases, including surface-disturbing activities. The Indian 
Mineral Leasing Act assigns regulatory authority to the Secretary over 
Indian oil and gas leases on trust lands (except those excluded by 
statute). As stewards of the public lands, and as the Secretary's 
regulator for oil and gas leases on Indian lands, the BLM has evaluated 
the increased use of well stimulation practices over the last decade 
and determined that the existing rules for well stimulation require 
updating.
    The current regulations make a distinction between routine fracture 
jobs and nonroutine fracture jobs. However, the terms ``routine'' and 
``nonroutine'' are not defined in 43 CFR 3162.3-2 or anywhere else in 
BLM regulations, making this distinction functionally difficult to 
apply and confusing for both the agency and those attempting to comply 
with the regulations. As previously stated, the regulations are now 30 
years old and need to be updated to keep pace with the many changes in 
technology and current best management practices. As discussed in the 
background section of this document, the increased use of well 
stimulation activities over the last decade has also generated concerns 
among the public about well stimulation and about the chemicals used in 
hydraulic fracturing. The proposed rule is intended to increase 
transparency for the public regarding the fluids used in the hydraulic 
fracturing process, in addition to providing assurances that well bore 
integrity is maintained throughout the fracturing process and that the 
fluids that flow back to the surface from hydraulic fracturing 
operations are properly stored and disposed of or treated.
    The following chart explains the major changes between the existing 
regulation(s) and the proposed regulation(s).

------------------------------------------------------------------------
                                     Proposed
      Existing regulation           regulation      Substantive changes
------------------------------------------------------------------------
43 CFR 3160.0-5 Onshore Oil     43 CFR 3160.0-5    This proposal would
 and Gas Operations: General     Onshore Oil and    replace the current
 Definitions.                    Gas Operations:    definition of usable
                                 General            water found in 43
                                 Definitions.       CFR 3162.5-2(d) and
                                                    define six other
                                                    terms used in the
                                                    oil and gas drilling
                                                    industry to make the
                                                    rule clearer and
                                                    easier to
                                                    understand. The
                                                    definitions would be
                                                    consistent with
                                                    those used in the
                                                    BLM's Oil and Gas
                                                    Onshore Orders and
                                                    by industry.
43 CFR 3162.3-2(a) Subsequent   43 CFR 3162.3-     This proposal would
 Well Operations.                2(a) Subsequent    remove the phrase
                                 Well Operations.   ``performing
                                                    nonroutine
                                                    fracturing jobs.''
43 CFR 3162.3-2(b) Subsequent   43 CFR 3162.3-     This proposal would
 Well Operations.                2(b) Subsequent    remove the phrase
                                 Well Operations.   ``routine fracturing
                                                    or acidizing jobs,
                                                    or * * * ''
No existing regulation........  43 CFR 3162.3-     This proposal would
                                 3(a) through (j).  add provisions
                                                    addressing well
                                                    stimulation
                                                    operations, would
                                                    require disclosure
                                                    of well stimulation
                                                    fluids, and would
                                                    require approval of
                                                    well stimulation
                                                    operations. The
                                                    proposed rule would
                                                    also require that
                                                    mechanical integrity
                                                    tests be conducted
                                                    before well
                                                    stimulation
                                                    activities are
                                                    conducted and would
                                                    require full
                                                    reporting of the
                                                    results of the well
                                                    stimulation activity
                                                    within thirty days
                                                    of its completion.
                                                    This proposal would
                                                    also add a section
                                                    allowing the
                                                    authorized officer
                                                    to grant a variance
                                                    to specific
                                                    conditions of these
                                                    rules if the
                                                    operator can
                                                    demonstrate that
                                                    alternative
                                                    procedures would
                                                    meet or exceed the
                                                    intent of the
                                                    minimum standards in
                                                    this rule. This
                                                    variance language is
                                                    consistent with that
                                                    found in the BLM's
                                                    Oil and Gas Onshore
                                                    Orders.

[[Page 27695]]

 
43 CFR 3162.5-2(d) Protection   43 CFR 3162.5-     This proposal removes
 of fresh water and other        2(d) Protection    the definition of
 minerals.                       of fresh water     usable water from
                                 and other          this section. The
                                 minerals.          new definition of
                                                    usable water would
                                                    be placed in 43 CFR
                                                    3160.0-5.
------------------------------------------------------------------------

Section-by-Section Discussion of Proposed Changes

    As an administrative matter, the proposed rule would amend the 
authorities section for the BLM's oil and gas operations management 
regulations at 43 CFR 3160.0-3 to include FLPMA. Section 310 of FLPMA 
authorizes the Secretary of the Interior to promulgate regulations to 
carry out the purposes of FLPMA and other laws applicable to the public 
lands. See 43 U.S.C. 1740. This amendment would not be a major change 
and would have no effect on lessees, operators, or the public.
    The proposed rule would remove the terms ``nonroutine fracturing 
jobs,'' ``routine fracturing jobs,'' and ``acidizing jobs'' from 43 CFR 
3162.3-2(a) and 43 CFR 3162.3-2(b). It would add a new section, 43 CFR 
3162.3-3, for well stimulation activities. In the proposed rule, there 
would be no distinction drawn between what was previously considered 
nonroutine or routine well stimulations. Prior approval would be 
required for well stimulation activities, generally in connection with 
the prior approval process that already is in place for general well 
drilling activities through the Application for Permit to Drill (APD) 
process. Operators also will be required to submit cement bond logs 
before fracturing operations begin. The running of cement bond logs on 
surface casing, which is currently an optional practice, would now be 
required for new wells. Existing wells would require mechanical 
integrity testing prior to hydraulic fracturing.
    The proposed rule would include six new definitions for technical 
terms used in the proposed rule. These definitions will improve 
readability and clarity of the regulations.
    The proposed rule intends to add the following definitions:
     Annulus means the space around a pipe in a wellbore, the 
outer wall of which may be the wall of either the borehole or the 
casing; sometimes also called the annular space.
     Bradenhead means a heavy, flanged steel fitting connected 
to the first string of casing that allows suspension of intermediate 
and production strings of casing, and supplies the means for the 
annulus to be sealed off.
     Proppant means a granular substance (most commonly sand, 
sintered bauxite, or ceramic) that is carried in suspension by the 
fracturing fluid and that serves to keep the cracks open when 
fracturing fluid is withdrawn after a hydraulic fracture treatment.
     Stimulation fluid means the liquid or gas, and any 
accompanying solids, used during a treatment of oil and gas wells, such 
as the water, chemicals, and proppants used in hydraulic fracturing.
     Usable water means water containing up to 10,000 ppm of 
total dissolved solids.
     Well stimulation means those activities conducted in an 
individual well bore designed to increase the flow of hydrocarbons from 
the rock formation to the well bore by modifying the permeability of 
the reservoir rock. Examples of well stimulation operations are 
acidizing and hydraulic fracturing.
    The proposed rule would delete the definition of ``fresh water.'' 
The BLM has maintained a definition of fresh water in its oil and gas 
operating regulations since 1988. However, in its onshore orders, the 
BLM has sought to protect all usable waters during drilling operations, 
not just fresh water. This distinction has led to confusion in the 
regulations. Usable water includes fresh water and water that is of 
lower quality than fresh water. The BLM intends to be more protective 
when it seeks to protect all usable water during drilling operations, 
not just fresh water. Therefore, the BLM proposes to delete the 
definition of fresh water.
    Revised section 3162.3-2(a) would remove the phrase ``perform 
nonroutine fracturing jobs'' from the current 43 CFR 3162.3-2(a). The 
phrase ``routine fracturing jobs or acidizing jobs, or'' would also be 
removed from existing section 3162.3-2(b). Well stimulation activities 
would be addressed under the new proposed 43 CFR 3162.3-3.
    Proposed section 3162.3-3(a) would make it clear that this section 
applies only to well stimulation activities and that all other 
injection activities must comply with section 3162.3-2. This language 
is necessary to make the distinction between well stimulation 
activities and other well injection activities, such as secondary and 
tertiary recovery operations.
    Proposed section 3162.3-3(b) would require the BLM's approval of 
all well stimulation activity. For new wells, the operator has the 
option of applying for the BLM's approval in its application for permit 
to drill (APD). For wells permitted prior to the effective date of this 
section or for wells permitted after the effective date of this 
section, the operator would submit a Sundry Notice and Report on Wells 
(Form 3160-5) for the well stimulation proposal for the BLM's approval 
before the operator begins the stimulation activity. This section would 
supersede and replace existing section 3162.3-2(b) that states that no 
prior approval is required for routine fracturing. This reference in 
the existing section would be deleted. Also, an operator must submit a 
Sundry Notice prior to well stimulation activity if the BLM's previous 
approval for well stimulation is more than five years old, or if the 
operator becomes aware of significant new information about the 
relevant geology, the stimulation operation or technology, or the 
anticipated impacts to any resource. The five-year period is consistent 
with common state practices, including those of Montana, Wyoming, and 
Colorado, which require that operators reconfirm well integrity for 
fracturing operations through a pressure test every five years.
    The BLM understands the time sensitive nature of oil and gas 
drilling and well completion activities and does not anticipate that 
the submittal of additional well stimulation-related information with 
APD applications will impact the timing of the approval of drilling 
permits. The BLM believes that the additional incremental information 
that would be required by this rule would be reviewed in conjunction 
with the APD and within the normal APD processing time frame. Also, the 
BLM anticipates that requests to conduct well stimulation activities on 
existing wells that have been in service more than five years will be 
reviewed promptly. The BLM understands that delays in approvals of 
operations can be costly to operators and the BLM intends to avoid 
delays whenever possible.
    Proposed section 3162.3-3(c)(1) would require a report that 
includes the geological names, a geological description, and the depth 
of the top and the bottom of the formation into which well stimulation 
fluids would be injected. The report is needed so that the BLM may 
determine the properties of the rock layers and the thickness of the 
producing formation and identify

[[Page 27696]]

the confining rocks above and below the zone that would be stimulated.
    Proposed section 3162.3-3(c)(2) would require the operator to 
submit information in the form of a cement bond log, which will help 
the BLM in its efforts to make sure that water resources are protected. 
A cement bond log is a tool used to gauge the extent to which water 
bearing formations are isolated from the casing string. The log is a 
document that reports the data from a probe of the wellbore that uses 
sonic technology to detect gaps or voids in the cement and the casing. 
This log would be used to verify that the operator has taken the 
necessary precautions to prevent migration of fluids in the annulus 
from the fracture zone to the usable water horizons. The proposed 
regulation would allow for the use of other evaluation tools acceptable 
to the BLM in order to allow the substitution of equally effective 
tools or procedures. For example, an operator could request a variance 
from the requirements of proposed section 3162.3-3(c)(2) that it submit 
cement bond logs to prove that the occurrences of usable water have 
been isolated to protect them from contamination. The BLM could grant a 
variance to allow for the use of logs other than cement bond logs 
(e.g., slim array sonic tool, ultrasonic imager tool) if it was 
satisfied that the alternative logs would meet or exceed the objectives 
of section (c)(2). The BLM recognizes that the cement bond log would 
not be available prior to drilling a well. Therefore, when the operator 
takes advantage of the option to submit its well stimulation 
information as part of its APD, the cement bond log would be required 
after approval of the permit to drill and prior to commencing well 
stimulation activities. Many operators routinely perform cement bond 
logs for the zones of interest, so the BLM does not expect this step to 
be a burden for operators. The best available means for the BLM to help 
ensure that well stimulation activities do not contaminate aquifers is 
to require cement bond logs for the cement behind the pipe along all 
areas intersecting useable water, including running cement bond logs on 
the surface casing.
    Proposed section 3162.3-3(c)(3) would require reporting of the 
measured depth to the perforations in the casing and uncased hole 
intervals (open hole). This proposed section would also require the 
operator to disclose specific information about the water source to be 
used in the fracturing operation, including the location of the water 
that would be used as the base fluid. The BLM needs this information to 
determine the impacts associated with operations and the need for any 
mitigation applicable to Federal and Indian lands. This section would 
also require the operator to disclose the type of materials (proppants) 
that would be injected into the fractures to keep them open and the 
anticipated pressures to be used in the well stimulation operation.
    Proposed section 3162.3-3(c)(4), consistent with protecting public 
health and safety and preventing unnecessary or undue degradation to 
the public lands, would require operators to certify in writing that 
they have complied with all applicable Federal, tribal, state, and 
local laws, rules, and regulations pertaining to proposed stimulation 
fluids. The BLM will use this information to make an informed decision 
on the proposed action. This section also would require the operator to 
certify that it has complied with all necessary permit and notice 
requirements. The BLM acknowledges that other Federal, state, tribal, 
and local agencies may have regulatory requirements that would apply to 
chemical handling, injecting fluids into the subsurface, and the 
protection of groundwater. It remains the responsibility of the 
operator to be aware of and comply with these regulatory requirements. 
The BLM will rely on the operator's certification that it has complied 
with all of the laws and regulations that apply to its operation.
    Proposed section 3162.3-3(c)(5) would require the operator to 
submit a detailed description of the well stimulation engineering 
design to the BLM for approval. This information is needed in order for 
the BLM to be able to verify that the proposed engineering design is 
adequate for safely conducting the proposed well stimulation.
    Proposed section 3162.3-3(c)(5)(i) would require the operator to 
submit to the BLM an estimate of the total volume of fluid to be used 
in the stimulation.
    Proposed section 3162.3-3(c)(5)(ii) would require the operator to 
submit to the BLM a description of the range of the surface treating 
pressures anticipated for the stimulation. This information is needed 
by the BLM to verify that the maximum wellbore design burst pressure 
will not be exceeded at any stage of the well stimulation operation.
    Proposed section 3162.3-3(c)(5)(iii) would require the operator to 
submit to the BLM the proposed maximum anticipated injection pressure 
for the stimulation. This information is needed by the BLM to verify 
that the maximum allowable injection pressure will not be exceeded at 
any stage of the well stimulation operation.
    Proposed section 3162.3-3(c)(5)(iv) would require the operator to 
submit to the BLM the estimated or calculated fracture length and 
height anticipated as a result of the stimulation, so that the BLM can 
verify that the intended effects of the well stimulation operation will 
remain confined to the petroleum-bearing rock layers and will not have 
unintended consequences on other rock layers, such as aquifers.
    Proposed section 3162.3-3(c)(6) would require the operator to 
provide information pertaining to the handling of recovered fluids that 
will be used for the stimulation activities for approval. This 
information is being requested so that the BLM has all necessary 
information regarding chemicals being used in the event that the 
information is needed to help protect health and safety or to prevent 
unnecessary or undue degradation of the public lands.
    Proposed section 3162.3-3(c)(6)(i) would require the operator to 
submit to the BLM an estimate of the volume of fluid to be recovered 
during flow back, swabbing, and recovery from production facility 
vessels. This information is required to ensure that the facilities 
needed to process or contain the estimated volume of fluid will be 
available on location.
    Proposed section 3162.3-3(c)(6)(ii) would require the operator to 
submit to the BLM the proposed methods of managing the recovered 
fluids. This information is needed to ensure that the handling methods 
will adequately protect of public health and safety.
    Proposed section 3162.3-3(c)(6)(iii) would require the operator to 
submit to the BLM a description of the proposed disposal method of the 
recovered fluids. This is currently required by existing BLM 
regulations (i.e., Onshore Order Number 7, Disposal of Produced Water, 
(58 FR 47354). This information is requested so that the BLM has all 
necessary information regarding disposal of chemicals used in the event 
it is needed to protect the environment and human health and safety and 
to prevent unnecessary or undue degradation of the public lands. The 
BLM specifically requests comments on whether the operator should be 
required to submit as part of the Sundry Notice application additional 
information about how it will dispose of waste streams not specifically 
addressed in this proposal.
    Proposed section 3162.3-3(c)(7) would require the operator to 
provide, at the request of the BLM, additional information pertaining 
to any facet of the well stimulation proposal. For example, the BLM may 
require new or different tests or logs in cases where the

[[Page 27697]]

original information submitted was inadequate, out of date, or 
incomplete. Any new information that the BLM may request will be 
limited to information necessary for the BLM to ensure that operations 
are consistent with applicable laws and regulation. Such information 
may include, but is not limited to, tabular or graphical results of a 
mechanical integrity test, the results of logs run, the results of 
tests showing the total dissolved solids in water proposed to be used 
as the base fluid, and the name of the contractor performing the 
stimulation. This provision would allow the BLM to obtain additional 
information about the proposed well stimulation activities. For 
example, after initial cementing activities, an operator may be asked 
to perforate the well casing and squeeze cement into the areas with 
inadequate cement bonding. In this case, the BLM may ask for additional 
information to show that the corrective action was successful and to 
ensure that the corrective work addressed any cement bonding 
deficiencies. The BLM wants to ensure that any additional information 
requested under this provision is the least burdensome to operators as 
possible while still accomplishing the goal of protecting the public 
lands and resources; therefore, the BLM is specifically requesting 
public comment on how this may be best achieved.
    Proposed section 3162.3-3(d) would require the operator to perform 
a successful mechanical integrity test before beginning well 
stimulation operations. This requirement is necessary to help ensure 
the integrity of the wellbore under anticipated maximum pressures 
during well stimulation operations.
    Proposed section 3162.3-3(d)(1) would require the mechanical 
integrity test to emulate the pressure conditions that would be seen in 
the proposed stimulation process. This test would show that the casing 
is strong enough to protect water and other subsurface resources during 
well stimulation activities.
    The proposed section 3162.3-3(d)(2) would establish the engineering 
criteria for using a fracturing string as a technique during well 
stimulation. The requirement to be 100 feet below the cement top would 
be imposed to ensure that the production or intermediate casing is 
surrounded by a competent cement sheath as required by Onshore Order 
Number 2. The 100 foot requirement is required by some state statutes 
(e.g., Montana Board of Oil and Gas Conservation, section 36.22.1106, 
Hydraulic Fracturing) and is a generally accepted standard in the 
industry. Testing would emulate the pressure conditions that would be 
seen in the proposed stimulation process in order to ensure that the 
casing used in the well would be robust enough to handle the pressures.
    Proposed section 3162.3-3(d)(3) would require the use of the 
pressure test time requirement of holding pressure for 30 minutes with 
no more than 10 percent pressure loss. This requirement is the same 
standard applied in Onshore Order Number 2, Drilling, (53 FR 46790) 
Section III.B.h., to confirm the mechanical integrity of the casing. 
This language does not set a new standard in the BLM's regulations. 
This test, together with the other proposed requirements, would 
demonstrate if the casing is strong enough to protect water and other 
subsurface resources during well stimulation activities. The BLM 
believes that all of these tests are important to show that reasonable 
precautions have been taken to ensure the protection of other resources 
during well stimulation activities.
    Proposed section 3162.3-3(e)(1) would require the operator to 
continuously monitor and record the pressure(s) during the well 
stimulation operation. The pressure during the stimulation should be 
contained in the string through which the stimulation is being pumped. 
Unexpected changes in the monitored and recorded pressure(s) would 
provide an early indication of the possibility that well integrity has 
been compromised. This information is needed by the BLM to ensure that 
well stimulation activities are conducted as designed. This information 
would also show that stimulation fluids are going to the formation for 
which they were intended.
    Proposed section 3162.3-3(e)(2) would require the operator to 
orally notify the BLM as soon as possible, but no later than 24 hours 
following the incident, if during the stimulation operation the annulus 
pressure increases by more than 500 pounds per square inch over the 
annulus pressure immediately preceding the stimulation. Within 15 days 
after the occurrence, the operator must submit a Subsequent Report 
Sundry Notice (Form 3160-5, Sundry Notices and Report on Wells) to the 
BLM containing all details pertaining to the incident, including 
corrective actions taken. This information is needed by the BLM to 
ensure that stimulation fluids are going into the formation for which 
they were designed. The BLM also needs to obtain reasonable assurance 
that other resources are adequately protected. An increase of pressure 
in the annulus of this amount could indicate that the casing had been 
breached during well stimulation. Consistent with the BLM's Onshore 
Order Number 2, Drilling Operations, the operator must repair the 
casing should a breach occur.
    Proposed section 3162.3-3(f) would require the operator to store 
recovered fluids in tanks or lined pits. This provision grants 
flexibility for the operator to choose using either a lined pit or a 
storage tank, whichever the operator determines is the least burdensome 
or costly option for the storage of flowback fluid. The BLM is 
proposing this requirement because flowback fluids could contain 
hydrocarbons from the formation and could also contain additives and 
other components that might degrade surface and ground water if they 
were to be released without treatment. This provision is consistent 
with existing industry practice and American Petroleum Institute (API) 
recommendations for handling completion fluids (including hydraulic 
fracturing fluids) (see Section 6.1.6 of API Recommended Practice 51R, 
Environmental Protection for Onshore Oil and Gas Production Operations 
and Leases, First Edition, July 2009). Section 302(b) of the Federal 
Land Policy and Management Act (43 U.S.C. 1732(b)) states that ``In 
managing the public lands, the Secretary shall, by regulation or 
otherwise, take any action necessary to prevent unnecessary or undue 
degradation of the public lands.'' In addition, existing BLM 
regulations at 43 CFR 3161.2 requires that ``all operations be 
conducted in a manner which protects other natural resources and the 
environmental quality.'' Because the use of lined pits or tanks for the 
storage of recovered fluids are methods that best and reasonably 
protect the public lands from spills or leaks of recovered fluids, the 
BLM believes that this provision is in keeping with FLPMA's mandate to 
prevent unnecessary or undue degradation of the public lands and the 
BLM regulation's requirement to protect environmental quality.
    Additional conditions of approval for the handling of flowback 
water may be placed on the project by the BLM if needed to ensure 
protection of the environment and other resources. The BLM specifically 
requests comments on whether this rule should impose additional 
requirements that would require tanks or lined pits for drilling fluids 
and any other fluids associated with well stimulation operations. The 
BLM recognizes the ongoing efforts of states to regulate hydraulic 
fracturing operations. In implementing this rule, the BLM intends to 
avoid duplication of

[[Page 27698]]

existing state requirements and will continue to engage states in 
cooperative efforts to avoid duplication. Please comment on whether 
this proposed provision would be duplicative of provisions of state 
rules and whether it is unnecessarily burdensome.
    Proposed section 3162.3-3(g) would require the operator to submit 
to the BLM the post-operation data on a Subsequent Report Sundry Notice 
(Form 3160-5, Sundry Notices and Report on Wells) following the 
completion of the stimulation activities. The BLM would determine if 
the well stimulation operation was conducted as approved. This 
information would be retained by the BLM as part of the individual well 
record and would be available for use when the well has been depleted 
and the plugging of the well is being designed.
    Proposed section 3162.3-3(g)(1) would require reporting of the 
actual measured depth to the perforations and open hole interval. This 
information identifies the producing interval of the well and will be 
available for use when the well has been depleted and plugging of the 
well is being designed. Specific information as to the actual source of 
water, including location of the water being used as the base fluid, is 
required because the BLM needs the information to determine the impacts 
associated with operations and the need for any mitigation applicable 
to Federal and Indian lands.
    Proposed section 3162.3-3(g)(2) would require the operator to 
submit to the BLM the actual total volume of fluid used, including 
water, proppants, chemicals, and any other fluid used in the 
stimulation(s) in order for the BLM to maintain a record of the 
stimulation operation as actually performed.
    Proposed section 3162.3-3(g)(3) would require the operator to 
submit to the BLM a report of the surface pressure at the end of each 
stage pumped and the rate at which the fluid was pumped at the 
completion of each stage (i.e., just prior to shutting down the pumps). 
In addition to the information provided for the individual stages, the 
pressure values for each flush stage must also be included. This 
information is needed by the BLM for it to ensure that the maximum 
allowable pressure was not exceeded at any stage of the well 
stimulation operation.
    Proposed sections 3162.3-3(g)(4) and (5) would require the operator 
to identify to the BLM the stimulation fluid by additive trade name and 
additive purpose, the Chemical Abstracts Service Registry Number, and 
the percent mass of each ingredient used in the stimulation operation. 
This information is needed in order for the BLM to maintain a record of 
the stimulation operation as performed. The information is being 
required in a format that does not link additives (required by 3162.3-
3(g)(4)) to chemical composition of the materials (required by 3162.3-
3(g)(5)) to minimize the risk of disclosure of any formulas of 
additives. This approach is similar to the one the State of Colorado 
adopted in 2011 (Colorado Oil and Gas Conservation Commission Rule 
205A.b2.ix-xii). The BLM intends to place this information on a public 
Web site and is working with the Ground Water Protection Council in an 
effort to integrate this information into the existing Web site known 
as FracFocus.org. The disclosure of the fluids used in hydraulic 
fracturing would only be required after the fracturing operation has 
taken place.
    Proposed section 3162.3-3(g)(6) would require the actual, 
estimated, or calculated fracture length and height of the 
stimulation(s) to be reported to the BLM so that it can verify that the 
intended effects of the well stimulation operation remain confined to 
the petroleum-bearing rock layers and will not have unintended 
consequences on other rock layers or aquifers. This section would 
require the operator to show that the well stimulation activity was 
successfully implemented as designed and that the integrity of the well 
was maintained during stimulation.
    Proposed section 3162.3-3(g)(7) would allow the operator 
flexibility to report online the information listed in proposed 
sections 3162.3-3(g)(1) through 3162.3-3(g)(6) by attaching a copy of 
the service company contractor's job log or report, provided the 
information required is adequately addressed. The operator is 
responsible for ensuring the accuracy of any information provided to 
the BLM, even if originally drafted by a third party.
    Proposed section 3162.3-3(g)(8), would require operators to certify 
they have complied with all applicable Federal, state, tribal, and 
local laws, rules, and regulations pertaining to the stimulation fluids 
that were actually used during well stimulation operations. The 
proposed section would also require that the operator certify that it 
has complied with all necessary permit and notice requirements. This 
information would be retained by the BLM as part of the well record and 
be available for use when the well has been depleted and closure of the 
well is being designed. The information is also needed for the BLM to 
fulfill its obligation to prevent unnecessary or undue degradation of 
the public land.
    Proposed section 3162.3-3(g)(9) would require operators to certify 
that wellbore integrity was maintained throughout the operation. This 
information is needed because the BLM has a mandate to protect human 
health and safety and prevent contamination of the environment.
    Proposed section 3162.3-3(g)(10) would require the operator to 
provide information describing the handling of the fluids used for the 
stimulation activities, flow-back fluids, and produced water. The 
operator must also report how it handled those fluids after operations 
were completed.
    Proposed section 3162.3-3(g)(10)(i) would require the operator to 
report the volume of fluid recovered during flow back, swabbing, or 
recovery from production facility vessels.
    Proposed section 3162.3-3(g)(10)(ii) would require the operator to 
report the methods of managing the recovered fluids.
    Proposed section 3162.3-3(g)(10)(iii) would require the operator to 
report the disposal method of the recovered fluids. This section also 
makes it clear that the fluid disposal methods must be consistent with 
Onshore Order Number 7, Disposal of Produced Water (58 FR 47353). This 
information is needed so that the BLM can help protect human health and 
safety and prevent the contamination of the environment. The BLM also 
needs to confirm that the disposal methods used are those that were 
approved and conform to the regulations.
    Proposed section 3162.3-3(g)(11) would require the operator to 
submit documentation and an explanation if the actual operations 
deviated from the approved plan. Understanding the complexities of well 
stimulation, the BLM expects there to be slight differences between the 
proposed plan and the actual operation.
    Proposed sections 3162.3-3(h) and (i) would notify the operator of 
procedures it needs to follow to identify information required to be 
submitted under this section that the operator believes to be exempt, 
by law, from public disclosure. If the operator fails to specifically 
identify information as exempt from disclosure by Federal law, the BLM 
will release that information. The BLM may also release information 
which the operator has marked as exempt if the BLM determines that 
public release is not prohibited by Federal law after providing the 
operator with no fewer than 10 business days' notice of the 
determination. All other

[[Page 27699]]

information submitted by the operator will become a matter of public 
record.
    Proposed section 3162.3-3(j) would provide the operator with a 
process for requesting a variance from the minimum standards of this 
regulation. Variances apply only to operational activities and do not 
apply to the actual approval process. The proposed regulation would 
make clear that the BLM has the right to rescind a variance or modify 
any condition of approval due to changes in Federal law, technology, 
regulation, field operations, noncompliance, or other reasons. The BLM 
must make a determination that the variance request meets or exceeds 
the objectives of the regulation. For example, an operator could 
request a variance from the requirements of proposed section 3162.3-
3(c)(2) that it submit cement bond logs to prove that the occurrences 
of usable water have been isolated to protect them from contamination. 
The BLM could grant a variance to allow for the use of logs other than 
cement bond logs if it was satisfied that the alternative logs would 
meet or exceed the objectives of section (c)(2). This variance 
provision is consistent with existing BLM regulation such as Onshore 
Order Number 1 (see section X. of Onshore Oil and Gas Operations; 
Federal and Indian Oil and Gas Leases; Onshore Oil and Gas Order Number 
1, Approval of Operations (72 FR 10308, 10337).
    Revised section 3162.5-2(d) would remove the references to fresh 
water and remove the phrase ``containing 5,000 ppm or less of dissolved 
solids.'' This revision would require the operator to isolate all 
usable water. This language does not set a new standard in the BLM's 
regulations. Since 1988, Onshore Order Number 2, Drilling Operations, 
(53 FR 46790) Section II.Y. has defined usable water and Onshore Order 
Number 2, Drilling Operations, Section III.B. has required the operator 
to ``protect and/or isolate all usable water zones.'' Section 3162.5(d) 
was not revised when Onshore Order Number 2, Drilling Operations, was 
promulgated, which has led to some confusion in implementing and 
interpreting the regulations.

IV. Procedural Matters

Federal and Indian Oil and Gas Leasing Activity

    To understand the context of costs and benefits of the proposed 
rule, background information concerning the BLM's leasing of Federal 
oil and gas, and management of Federal and Indian leases may be helpful 
and is included here. This discussion is provided to explain the basis 
for the conclusions related to the procedural matters sections that 
follow. The BLM Oil and Gas Management program is one of the most 
important mineral leasing programs in the Federal Government. There 
were 49,173 Federal oil and gas leases covering 38,463,410 acres at the 
end of fiscal year (FY) 2011. For FY 2011, there were 90,452 producible 
and service drill holes and 96,606 producible and service completions 
on Federal leases.\1\
---------------------------------------------------------------------------

    \1\ U.S. Department of the Interior, Bureau of Land Management, 
www.blm.gov, Oil and Gas Statistics.
---------------------------------------------------------------------------

    For FY 2011, onshore Federal oil and gas leases produced about 98 
million barrels of oil, 2.97 billion Mcf of natural gas, 2.55 billion 
gallons of natural gas liquids, and approximately $2.7 billion in 
royalties. The production value of the oil and gas produced from public 
lands exceeded $23 billion. Oil and gas production from Indian leases 
was almost 20 million barrels of oil, 255 million Mcf of natural gas, 
and 143 million gallons of natural gas liquids, with a production value 
of $2.7 billion and generating royalties of $433 million.

               Table 1--Federal and Indian Oil and Gas Production and Royalties, Fiscal Year 2011
----------------------------------------------------------------------------------------------------------------
                                                                                    Sales value
                                                                  Sales volume         ($MM)       Royalty ($MM)
----------------------------------------------------------------------------------------------------------------
Federal Leases:
    Oil (bbl).................................................        97,721,813          $8,374          $1,111
    Gas (Mcf).................................................     2,974,916,041          12,556           1,360
    NGL (Gal).................................................     2,551,994,725           2,474             254
                                                               -------------------------------------------------
        Subtotal..............................................  ................          23,404           2,725
Indian Leases:
    Oil (bbl).................................................        19,550,536           1,571             271
    Gas (Mcf).................................................       255,401,453             950            145
----------------------------------------------------------------------------------------------------------------
Source: ONRR, Federal Onshore Reported Royalty Revenue, Fiscal Year 2011 and American Indian Reported Royalty
  Revenue, Fiscal Year 2011.

Estimating Benefits and Costs

    This analysis attempts to capture the potential benefits and costs 
that would result if the BLM implemented the proposed rule. As such, 
the current operating environment is the reference point from which the 
change is measured.
    Current regulations require operators conducting a ``non-routine'' 
well stimulation operation to submit a Notice of Intent Sundry and all 
operators, regardless of the type of well stimulation, to submit a 
Subsequent Report Sundry. The proposed rule would require BLM approval 
for all hydraulic fracturing events. For each event, operators would 
obtain the BLM's approval prior to the event and submit a Subsequent 
Report Sundry within 30 days of the event. The operator, if it so 
chooses, may seek approval for the stimulation operation at the same 
time that it submits the APD. Other information would be required if an 
incident occurs during a fracturing operation or if the BLM determines 
that there is a need for additional information. For example, the BLM 
may require new or different information in cases where the original 
information submitted in the Subsequent Report was inadequate or 
incomplete.
    Potential costs and benefits rely on the number of well stimulation 
events estimated to occur in the future. Those estimates depend on a 
number of factors, including, but not limited to, future oil and gas 
prices, the number of applications to drill, the number of wells 
completed, and the portion of wells that are stimulated. Expected costs 
and benefits are anticipated to increase in the future because the 
number of wells drilled and well stimulation activities are expected to 
increase in the

[[Page 27700]]

future, considering projected commodities prices and production.
    Administrative costs include only the additional burden posed by 
the requirements. For operators, this burden includes the submission of 
forms and supporting documentation that are not currently required. The 
reporting requirements would also pose an additional burden on the BLM, 
since it would review an additional number of sundry forms and 
additional information per form. The efficiency of processing 
applications could also be impacted if operators submit incomplete or 
inadequate information, thereby requiring additional communication 
between the BLM and the operators.
    The proposed rule seeks to achieve benefits by making more 
information available to the public about the chemicals injected in 
well stimulation fluids, while protecting trade secrets and 
confidential business information. The information that would be 
submitted to the BLM under this section would generally be made 
available to the public. The proposed rule, however, would allow an 
operator to identify specific information that it believes is protected 
from disclosure by Federal law, and to substantiate those claims of 
exemption. Under existing law, the BLM may nonetheless make that 
information available to the public, but only if it determines that the 
information is not protected by Federal law, and provides not less than 
10 business days notice to the operator before releasing the 
information.
    Furthermore, the disclosure mechanism in the proposed rule would 
require a table of the additives by trade name and the purpose for 
which they are included in the well stimulation fluid. It would also 
require a separate table listing all the chemicals used by the Chemical 
Abstracts Service Registry Number. This design will inhibit reverse-
engineering of specific additives.
    Potential costs include those to perform tests or take other 
actions that might not have been conducted otherwise. Operational costs 
include the cost of any additional logs, tests, or other requirements 
needed to prepare all documents required by the proposed rule that are 
not currently required. Depending on the well and the operator, these 
tests or other requirements currently may be conducted or practiced 
pursuant to other permits, general well testing, etc.
    New wells, where operators are conducting hydraulic fracturing 
operations, should already comply with many of the standards provided 
in this proposed rule, with the exception of running cement bond logs 
on the surface casing. Typically, an operator will assume that the 
casing is fully cemented if cement circulates to the surface during the 
cementing process. However, circulation to the surface does not confirm 
that there is appropriate or proper bonding. A cement bond log will 
provide confirmation that there is proper bonding by providing a 
graphical representation that proper bonding has occurred. Old vertical 
wells that are converted to horizontal wells already require a 
deepening sundry, a separate process that addresses some of the 
requirements in this proposed rule.
    The potential benefits of the proposed regulations include reduced 
surface and subsurface contamination. The analysis assumes that, absent 
this regulation, a certain number of well stimulation events may result 
in contamination and pose a cost to society. The proposed rule is 
designed to identify potential issues regarding wellbore integrity and 
the design of the operations, thereby reducing the likelihood of 
contamination events.
    Estimating the benefits of the proposed regulation is uncertain and 
subject to assumptions about the number of deficiencies, likelihood of 
contamination if a deficiency was present, and costs of remediation. 
One way to measure this benefit is by estimating the cost of 
internalizing the contamination, which for a subsurface event may 
include restoring a source of drinking water or remediation of an 
aquifer.
    There are other benefits that are difficult to quantify in monetary 
terms though they exist. The disclosure requirements might encourage 
operators to use fewer or safer chemicals in the hydraulic fracturing 
fluid. The public would benefit from increased knowledge about the 
fluids used. Increased transparency is also likely to benefit 
scientists, state and Federal agencies, and other organizations that 
study the potential impacts of hydraulic fracturing operations, and the 
BLM would have more information with which to make resource management 
decisions or respond to incidents.

Methodology

    This analysis presents costs and benefits expected to occur over 
the next 10 years, from 2013 to 2022. This period of analysis was 
chosen because 10 years is the length of the primary lease term on BLM-
managed lands. Net benefits are discounted using 7 and 3 percent 
discount rates. The analysis presents a range of expected outcomes 
since the number of well stimulation events occurring in the future is 
highly variable and subject to future conditions.
    The proposed regulation is designed to reduce the risk that well 
stimulation events may pose to the environment. Any contamination event 
that occurs is expected to require remediation. Since the remediation 
costs are uncertain, the analysis makes assumptions about remediation 
costs which may underestimate the true costs of remediation. The 
analysis assumes two scenarios: A low remediation cost--low 
environmental risk scenario and a high remediation cost--high 
environmental risk scenario. The benefits, while representing the value 
of risk reduction, will underestimate or overestimate the true benefits 
if the true risk of well stimulation operations varies from the 
assumptions.

Discounted Present Value

    There is a time dimension to estimates of potential benefits and 
costs. The potential events described, if they occur at all, may be in 
the distant future. The further in the future the benefits and costs 
are expected to occur, the smaller the present value associated with 
the stream of costs and benefits. As such, future costs and benefits 
must be discounted (the discount factor equals 1/(1+r) \t\ where r is 
the discount rate and t is time measured in years during which benefits 
and costs are expected to occur). The discount factor is then used to 
convert the stream of costs and benefits into ``present discounted 
values.'' When the estimated benefits and costs have been discounted, 
they can be added to determine the overall value of net benefits.
    The OMB's basic guidance on the appropriate discount rate to use is 
provided in OMB Circular A-94. The OMB's Circular A-94 states that a 
real discount rate of 7 percent should be used as a base-case for 
regulatory analysis. The OMB considers the 7 percent rate as an 
estimate of the average before-tax rate of return to private capital in 
the U.S. economy. It is a broad measure that reflects the returns to 
real estate and small business capital as well as corporate capital. It 
approximates the opportunity cost of capital, and it is the appropriate 
discount rate whenever the main effect of a regulation is to displace 
or alter the use of capital in the private sector. OMB Circular A-4 
also states that a 3 percent discount rate should be used for 
regulatory analyses and explains the use of that discount rate as 
follows: ``The effects of regulation do not always fall exclusively or 
primarily on the allocation of capital. When regulation primarily and 
directly affects private

[[Page 27701]]

consumption (e.g., through higher consumer prices for goods and 
services), a lower discount rate is appropriate. The alternative most 
often used is sometimes called the `social rate of time preference.' 
This simply means the rate at which ``society'' discounts future 
consumption flows to their present value.''

Uncertainty

    The benefits and costs provided in this analysis are indeed 
estimates and come with uncertainty. Estimated costs and benefits rely 
on the number of well stimulation events occurring in future years and 
those estimates are uncertain. This analysis estimates the number of 
future well stimulation events using regression models and future 
projections of commodity prices.
    Assuming the number of well stimulation events is known, though 
administrative costs are more easily estimated, the operational costs 
required by producers to comply with the regulations are subject to 
assumptions about the number of wells that would require such 
expenditures.
    Further uncertainty lies in the estimation of benefits and 
remediation costs. For the purposes of this analysis, a range of 
assumed average costs of remediating both subsurface and surface 
contaminations are used. This assumption may be too low or too high in 
the real world, depending on the location, severity, consequences, 
duration of the contamination, and if a causal link between the source 
and contamination can be made.
    This analysis does not quantify other benefits that are undoubtedly 
relevant, such as the benefit that disclosing the components of 
fracturing fluids will have for public health research and the 
remediation of contamination events. It is also uncertain what 
additional benefits, if any, would result from the disclosure 
requirements, for instance, if companies find safer substitutes for the 
chemicals in the fracturing fluids.

Results

    The analysis estimates the effects of the proposed regulations over 
a baseline scenario, where no action is taken. The BLM considered an 
alternative to the proposed regulation which would remove the 
requirement for operators to use lined pits if they choose to use pits 
to store hydraulic fracturing fluids.
    A summary of the results appears in Table 2 and Table 3, with the 
entire results available in the full Economic Analysis and Initial 
Regulatory Flexibility Analysis available at the address listed in the 
ADDRESSES section of this rule.

             Table 2--Annualized Value of Net Benefits of the Proposed Regulations and Alternatives
                                             [7% Discount rate; $MM]
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
                                            Low remediation cost/low
                                               environmental risk
                                           High remediation cost/high
                                               environmental risk
                                     ---------------------------------------------------------------------------
Proposed Regulations
    Social Benefits.................              11.70              13.79              42.67              50.27
    Costs...........................              37.34              43.99              37.34              43.99
                                     ---------------------------------------------------------------------------
        Net Benefits................             -25.63             -30.20               5.33               6.28
Alternative 1: No Requirement for
 Lined Pits
    Social Benefits.................               0.01               0.02               7.60               8.95
    Costs...........................              34.68              40.86              34.68              40.86
                                     ---------------------------------------------------------------------------
        Net Benefits................             -34.67             -40.84             -27.08             -31.90
----------------------------------------------------------------------------------------------------------------
      Estimated Number of Well               Low                High               Low                High
            Stimulations
----------------------------------------------------------------------------------------------------------------
    Total...........................             31,328             37,015             31,328             37,015
    Annual Average..................              3,133              3,701              3,133              3,701
----------------------------------------------------------------------------------------------------------------

             Table 3--Annualized Value of Net Benefits of the Proposed Regulations and Alternatives
                                             [3% Discount rate; $MM]
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
                                            Low remediation cost/low
                                               environmental risk
                                           High remediation cost/high
                                               environmental risk
                                     ---------------------------------------------------------------------------
Proposed Regulations:
    Social Benefits.................              11.74              13.85              42.79              50.27
    Costs...........................              37.44              44.18              37.44              44.18
                                     ---------------------------------------------------------------------------
        Net Benefits................             -25.70             -30.33               5.35               6.31
Alternative 1: No Requirement for
 Lined Pits:
    Social Benefits.................               0.01               0.02               7.62               8.99
    Costs...........................              34.77              41.04              34.77              41.04
                                     ---------------------------------------------------------------------------
        Net Benefits................             -34.76             -41.02             -27.15             -32.04
----------------------------------------------------------------------------------------------------------------
      Estimated Number of Well               Low                High               Low                High
            Stimulations
----------------------------------------------------------------------------------------------------------------
    Total...........................             31,328             37,015             31,328             37,015
    Annual Average..................              3,133              3,701              3,133              3,701
----------------------------------------------------------------------------------------------------------------

[[Page 27702]]

Results for the Proposed Regulations (Preferred Approach)

    Benefits: Under the proposed regulations, it is assumed that the 
regulations would remove much of the risk associated with potential 
wellbore integrity issues and unlined pits. The change in social 
benefits from the baseline scenario is positive. If you assume that 
there is low environmental risk posed by wellbore integrity issues and 
storage of hydraulic fracturing fluids in unlined pits and the costs of 
surface and subsurface remediation is low (on the range assumed), then 
the change in social benefit as a result of the proposed regulation is 
positive and ranges between $11.70MM and $13.79MM per year using a 
discount rate of 7% and between $11.74MM and $13.85MM per year using a 
discount rate of 3%. If you assume that environmental risks are high 
and remediation costs are high (on the range assumed), then the social 
benefits of the proposed regulation is positive and ranges between 
$42.67MM and $50.27MM per year using a discount rate of 7% and between 
$42.79MM and $50.49MM per year using a discount rate of 3%. Tables 7 
and 8 (below) show the annual change in benefits over the baseline.
    Note that the figures for the estimated benefits of the proposed 
rule do not include such benefits as avoiding harm to water users that 
cannot be compensated by later providing alternative water sources. The 
increase in information about additives could aid water users when they 
consider the potential effects of well stimulation operations and 
constituent chemicals.
    Costs: The costs include both costs to the industry and the BLM 
under this alternative. Costs include operational tests that 
demonstrate wellbore integrity and those associated with lining open 
pits in the instances where operators use pits instead of storage 
tanks. The change in costs over the baseline ranges between $37.34MM 
and $43.99MM per year using a discount rate of 7% and between $37.44MM 
and $44.18MM per year using a discount rate of 3%, assuming low 
remediation costs and low environmental risks. The change in costs 
ranges between $37.34MM and $43.99MM per year using a discount rate of 
7% and between $37.44MM and $44.18MM per year using a discount rate of 
3%, assuming high remediation costs and high environmental risks. 
Tables 7 and 8 (below) show the annual change in costs over the 
baseline.
    Net Benefits: The change in net benefits for the proposed 
regulations varies depending on the amount of environmental risk 
associated with wellbore integrity issues and unlined pits and the 
level of remediation costs associated with contamination events. 
Assuming low remediation costs and low environmental risks, the change 
in net benefits from the baseline is negative and ranges from -$25.63MM 
and -$30.20MM per year using a discount rate of 7% and between -
$25.70MM and -$30.33MM per year using a discount rate of 3%. Assuming 
high remediation costs and high environmental risks, the change in net 
benefits is positive and ranges between $5.33MM and $6.28MM per year 
using a discount rate of 7% and between $5.35MM and $6.31MM per year 
using a discount rate of 3%.
    Given the assumptions made and the fact that certain benefits were 
not quantified, the range of estimated outcomes could underestimate the 
actual net benefits, i.e., where net benefits are estimated to be 
negative, the net benefits would be greater (or less negative).
    This analysis also does not capture the potential benefits 
associated with the disclosure of fracturing fluids. For example, 
disclosure might encourage operators to use fewer or safer chemicals in 
the hydraulic fracturing fluid. The public would benefit from increased 
knowledge about the fluids used. This transparency is also likely to 
benefit scientists, state and Federal agencies, and other organizations 
that study the potential impacts of well stimulation operations. The 
BLM would be able to make more informed resource decisions and respond 
effectively to events where environmental resources have been 
compromised.
    Also, the variance language might also enable operators to reduce 
costs, in which case, these estimates may overestimate the actual costs 
and underestimate the change in net benefits.
    It should be noted that the low cost and risk scenario results in 
negative net benefits while the high cost and risk scenario results in 
positive net benefits. The primary difference is not a result of the 
administrative or operational costs changing between the scenarios. 
Instead, the difference is due to the valuation of social benefits. If 
the assumed risk of contamination is greater and the costs of 
remediation are higher, then benefits of the proposed rule would be 
greater and offset the compliance costs.
    The annual cost per well stimulation does not vary greatly between 
the cost and risk scenarios, but the benefits do. The average annual 
cost per well (including administrative and operational costs) is 
estimated to be about $11,833. However, the average annual benefit 
ranges more widely, between $3,754 and $13,688. The uncertainty about 
risk and damages causes this variability. The net benefit ranges from -
$8,079 to $1,855 on a per well stimulation basis.
    Note that the figures for the estimated benefits of the proposed 
rule do not include such benefits as avoiding harm to water users that 
cannot be compensated by later providing alternative water sources. The 
increase in information about additives could aid water users when they 
consider the potential effects of well stimulation operations and 
constituent chemicals.

Economic Impact Analysis and Distributional Assessments

Energy System Impact Analysis
    Executive Order 13211 provides that agencies prepare and submit to 
the Administrator of the Office of Information and Regulatory Affairs 
(OIRA), OMB, a Statement of Energy Effects for certain actions 
identified as significant energy actions. Section 4(b) of Executive 
Order 13211 defines a ``significant energy action'' as ``any action by 
an agency (normally published in the Federal Register) that promulgates 
or is expected to lead to the promulgation of a final rule or 
regulation, including notices of inquiry, advance notices of proposed 
rulemaking, and notices of proposed rulemaking: (1)(i) That is a 
significant regulatory action under Executive Order 12866 or any 
successor order, and (ii) is likely to have a significant adverse 
effect on the supply, distribution, or use of energy; or (2) that is 
designated by the Administrator of OIRA as a significant energy 
action.''
    This analysis estimates the additional cost burden per well 
stimulation event and finds that the average burden per stimulation is 
about $11,833 in 2013.
    The BLM believes that the additional cost per well stimulation 
resulting from this proposed rule is insignificant when compared with 
the drilling costs in recent years, the production gains from 
hydraulically fractured well operations, and the net incomes of 
entities within the oil and natural gas industries.
    Table 4 presents drilling costs per well for a range of wells from 
1998 to 2007. The data clearly show that drilling costs increased 
during this time. Using the estimates for the average burden per well 
stimulation and the average cost of drilling wells in 2007, the annual 
costs of this proposed rule represent about 0.3% of the drilling cost 
of a well.

[[Page 27703]]

    As such, the proposed regulations are unlikely to have an effect on 
the investment decisions of firms, and the rule is unlikely to affect 
the supply, distribution, or use of energy.

                       Table 4--Per Well Costs of Crude Oil and Natural Gas Wells Drilled
----------------------------------------------------------------------------------------------------------------
                                                                    Crude oil,
                                                                   natural gas,      Crude oil      Natural gas
                              Year                                 and dry wells   wells drilled   wells drilled
                                                                      drilled       (nominal $)     (nominal $)
                                                                    (nominal $)
----------------------------------------------------------------------------------------------------------------
1998............................................................         769,100         566,000         815,600
1999............................................................         856,100         783,000         798,400
2000............................................................         754,600         593,400         756,900
2001............................................................         943,200         729,100         896,500
2002............................................................       1,054,200         882,800         991,900
2003............................................................       1,199,500       1,037,300       1,106,000
2004............................................................       1,673,100       1,441,800       1,716,400
2005............................................................       1,720,700       1,920,400       1,497,600
2006............................................................       2,101,700       2,238,600       1,936,200
2007............................................................       4,171,700       4,000,400       3,906,900
----------------------------------------------------------------------------------------------------------------
Source: Energy Information Administration (2012), ``Costs of Crude Oil and Natural Gas Wells Drilled''.

Employment Impact Analysis
    Executive Order 13563 reaffirms the principles established in 
Executive Order 12866, but calls for additional consideration of the 
regulatory impact on employment. It states, ``Our regulatory system 
must protect public health, welfare, safety, and our environment while 
promoting economic growth, innovation, competitiveness, and job 
creation.'' An analysis of employment impacts is a standalone analysis 
and the impacts should not be included in the estimation of benefits 
and costs.
    This analysis seeks to inform the discussion of labor demand and 
job impacts by providing an estimate of the employment impacts of the 
proposed regulations using labor requirements for the additional 
administration and operational needs.
    This proposed rule would require operators who have not already 
done so to conduct one-time tests on a well or make a one-time 
installation of a mitigation control feature. In addition, operators 
would be required to perform administrative tasks related to a one-time 
event. Compliance with the operational requirements would shift 
resources within the industry from the operators to firms providing the 
services or supplies. For example, the requirement for a cement bond 
log represents an additional cost to the operator, but a benefit to the 
company running the log.
    In 2013, the BLM estimates that the labor requirements for 
operators to meet additional administrative and operational needs are 
estimated to be about 15 to 18 full time equivalents in each of the 
next three years. According to the U.S. Census Bureau, employment in 
the related sectors was 257,302 persons in 2007. Note that these 
impacts are only for the regulated sector. The BLM cannot predict the 
net national employment impact, i.e., whether the increased employment 
in the regulated sector comes from previously unemployed workers or is 
displaces workers actively employed in other sectors.
    Another area of interest is the extent to which the financial 
burden is expected to change operators' investment decisions. If the 
financial burden is not significant and all other factors are equal, 
then one would expect operators to maintain existing levels of 
investment and employment. As with the results in the earlier 
discussion, the BLM believes that the proposed rule would result in an 
additional cost per well stimulation that is small and would not alter 
the investment or employment decisions of firms. Therefore, considering 
the labor requirements and those operators would not likely reduce 
investment, the BLM anticipates an overall net gain in employment in 
the sectors.

Executive Order 12866, Regulatory Planning and Review

    In accordance with the criteria in Executive Order 12866, the 
Office of Management and Budget has determined that this rule is a 
significant regulatory action.
    The rule will not have an annual effect on the economy of $100 
million or more or adversely affect in a material way the economy, a 
sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or state, local, or tribal 
governments or communities. However, the rule may raise novel policy 
issues because of the proposed requirement that operators provide to 
the BLM information regarding well stimulation activities that they are 
not currently providing to the BLM.
    This proposed rule would not create inconsistencies or otherwise 
interfere with an action taken or planned by another agency. This 
proposed rule would not change the relationships of the oil and gas 
operations with other agencies. These relationships are included in 
agreements and memoranda of understanding that would not change with 
this rule. In addition, this proposed rule would not materially affect 
the budgetary impact of entitlements, grants, loan programs, or the 
rights and obligations of their recipients. Please see the discussion 
of the impacts of the proposed rule as described earlier in this 
section of the preamble.

Regulatory Flexibility Act

    Congress enacted the Regulatory Flexibility Act of 1980 (RFA), as 
amended, 5 U.S.C. 601-612, to ensure that Government regulations do not 
unnecessarily or disproportionately burden small entities. The RFA 
requires a regulatory flexibility analysis if a rule would have a 
significant economic impact, either detrimental or beneficial, on a 
substantial number of small entities. For the purposes of this 
analysis, we will assume that all entities (all lessees and operators) 
that may be affected by this proposed rule are small entities, even 
though that is not actually the case.
    The proposed rule deals with well stimulation on all Federal and 
Indian lands (except those excluded by statute). There would be some 
increased costs associated with the proposed enhanced

[[Page 27704]]

recordkeeping requirements and some new operational requirements. 
However, the BLM expects that these costs would be minor in comparison 
to overall operations costs. Therefore, the BLM has determined under 
the RFA that the proposed rule would not have a significant economic 
impact on a substantial number of small entities. Please see the 
discussion earlier in this section of the preamble for a discussion of 
the impacts of the rule.

Small Business Regulatory Enforcement Fairness Act

    The Regulatory Flexibility Act as amended by the Small Business 
Regulatory Enforcement Fairness Act (SBREFA) generally requires an 
agency to prepare a regulatory flexibility analysis of any rule subject 
to notice and comment rulemaking requirements under the Administrative 
Procedure Act or any other statute, unless the agency certifies that 
the rule will not have a significant economic impact on a substantial 
number of small entities. Small entities include small businesses, 
small governmental jurisdictions, or small not-for-profit enterprises.
    The BLM reviewed the Small Business Administration (SBA) size 
standards for small businesses and the number of entities fitting those 
size standards as reported by the U.S. Census Bureau in the 2007 
Economic Census. Using the Economic Census data, the BLM concludes that 
about 99% of the entities operating in the relevant sectors are small 
businesses in that they employ fewer than 500 employees. Also, small 
firms account for 74% of the total value of shipments and receipts for 
services, 86% of the total cost of supplies, 78% of the total capital 
expenditures (excluding land and mineral rights), and 67% of the paid 
employees.
    Small entities represent the overwhelming majority of entities 
operating in the onshore crude oil and natural gas extraction industry. 
As such, the proposed rule is likely to affect a significant number of 
small entities. To examine the economic impact of the rule on small 
entities, the BLM performed a screening analysis for impacts on a 
sample of expected affected small entities by comparing compliance 
costs to entity net incomes.
    Under the cost and risk scenarios, the average cost per entity in 
2013 is estimated to represent between 0.002% and 0.22% of the 2010 net 
incomes of the sampled companies, depending on the U.S. Energy 
Information Administration's Annual Energy Outlook commodity price 
forecasts. The proportions do not change substantially over the outlook 
period.
    After considering the economic impact of the proposed rule on these 
small entities, the screening analysis indicates that this proposed 
rule would not have a significant economic impact on a substantial 
number of small entities. Please see the discussion earlier in this 
section of the preamble for a discussion of the impacts of the rule.

Unfunded Mandates Reform Act

    This proposed rule does not contain a Federal mandate that may 
result in expenditures of $100 million or more for state, local, and 
tribal governments, in the aggregate, or to the private sector in any 
one year. Thus, the proposed rule is also not subject to the 
requirements of Sections 202 or 205 of the Unfunded Mandates Reform Act 
(UMRA).
    This proposed rule is also not subject to the requirements of 
Section 203 of UMRA because it contains no regulatory requirements that 
might significantly or uniquely affect small governments; it contains 
no requirements that apply to such governments nor does it impose 
obligations upon them.

Executive Order 12630, Governmental Actions and Interference With 
Constitutionally Protected Property Rights (Takings)

    Under Executive Order 12630, the proposed rule would not have 
significant takings implications. A takings implication assessment is 
not required. This proposed rule would establish recordkeeping 
requirements for hydraulic fracturing operations and some additional 
operational requirements on Federal and Indian lands. All such 
operations are subject to lease terms which expressly require that 
subsequent lease activities be conducted in compliance with 
subsequently adopted Federal laws and regulations. The proposed rule 
conforms to the terms of those Federal leases and applicable statutes, 
and as such the proposed rule is not a governmental action capable of 
interfering with constitutionally protected property rights. Therefore, 
the proposed rule would not cause a taking of private property or 
require further discussion of takings implications under this Executive 
Order.

Executive Order 13352, Facilitation of Cooperative Conservation

    Under Executive Order 13352, the BLM has determined that this 
proposed rule would not impede facilitating cooperative conservation 
and would take appropriate account of and consider the interests of 
persons with ownership or other legally recognized interests in land or 
other natural resources. This rulemaking process will involve Federal, 
State, local and tribal governments, private for-profit and nonprofit 
institutions, other nongovernmental entities and individuals in the 
decision-making. The process would provide that the programs, projects, 
and activities are consistent with protecting public health and safety.

Executive Order 13132, Federalism

    Under Executive Order 13132, this proposed rule would not have 
significant Federalism effects. A Federalism assessment is not required 
because the proposed rule would not have a substantial direct effect on 
the states, on the relationship between the national government and the 
states, or on the distribution of power and responsibilities among the 
various levels of government. The proposed rule would not have any 
effect on any of the items listed. The proposed rule would affect the 
relationship between operators, lessees, and the BLM, but would not 
impact states. Therefore, under Executive Order 13132, the BLM has 
determined that the proposed rule would not have sufficient Federalism 
implications to warrant preparation of a Federalism Assessment.

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    Under Executive Order 13175, the President's memorandum of April 
29, 1994, ``Government-to-Government Relations with Native American 
Tribal Governments'' (59 FR 22951), and 512 Departmental Manual 2, the 
BLM evaluated possible effects of the proposed rule on federally 
recognized Indian tribes. The BLM approves proposed operations on all 
Indian onshore oil and gas leases (except those excluded by statute). 
Therefore, the proposed rule has the potential to affect Indian tribes. 
In conformance with the Secretary's policy on tribal consultation, the 
Bureau of Land Management held four tribal consultation meetings to 
which over 175 tribal entities were invited. The consultations were 
held in:
     Tulsa, Oklahoma on January 10, 2012;
     Billings, Montana on January 12, 2012;
     Salt Lake City, Utah on January 17, 2012; and
     Farmington, New Mexico on January 19, 2012.
    The purpose of these meetings was to solicit initial feedback and 
preliminary comments from the tribes. Comments

[[Page 27705]]

from tribes will be received and consultation will continue as this 
rulemaking proceeds. To date, the tribes have expressed concerns about 
the BLM's Inspection and Enforcement program's ability to enforce the 
terms of this rule; previously plugged and abandoned wells being 
potential conduits for contamination of ground water; and the operator 
having to provide documentation that the water used for the fracturing 
operation was legally acquired. The BLM will further address these 
concerns during the drafting of the final rule.

Executive Order 12988, Civil Justice Reform

    Under Executive Order 12988, the Office of the Solicitor has 
determined that the proposed rule would not unduly burden the judicial 
system and meets the requirements of Sections 3(a) and 3(b)(2) of the 
Order. The Office of the Solicitor has reviewed the proposed rule to 
eliminate drafting errors and ambiguity. It has been written to 
minimize litigation, provide clear legal standards for affected conduct 
rather than general standards, and promote simplification and avoid 
unnecessary burdens.

Paperwork Reduction Act

    The Paperwork Reduction Act (PRA) (44 U.S.C. 3501-3521) provides 
that an agency may not conduct or sponsor, and a person is not required 
to respond to, a ``collection of information,'' unless it displays a 
currently valid control number. Collections of information include 
requests and requirements that an individual, partnership, or 
corporation obtain information, and report it to a Federal agency (44 
U.S.C. 3502(3); 5 CFR 1320.3(c) and (k)).
    In accordance with the PRA, the BLM is inviting public comment on 
its request that OMB assign a new control number for proposed new uses 
of Form 3160-5 (Sundry Notices and Reports on Wells). The BLM is 
proposing that these new uses would replace certain existing uses of 
Form 3160-5 for well-stimulation operations.
    OMB has approved the use of Form 3160-5 under control number 1004-
0137, Onshore Oil and Gas Operations (43 CFR part 3160) to collect 
information on a number of operations, including some well-stimulation 
operations. Once the BLM is authorized to collect well-stimulation 
information in accordance with finalized new section 3162.3-3 and a new 
control number, the BLM will request revision of control number 1004-
0137 to:
     Add the new well-stimulation uses and burdens of Form 
3160-5 to control number 1004-0137, and
     Remove the existing well-stimulation uses and burdens from 
the existing approval of Form 3160-5.
    The new collection of information would be required to obtain or 
retain a benefit for the operators of Federal and Indian (except on the 
Osage Reservation, the Crow Reservation, and certain other areas) 
onshore oil and gas leases, units, or communitization agreements that 
include Federal leases. The BLM has requested a 3-year term of approval 
for the new control number.
    The information collection request for this proposed rule has been 
submitted to OMB for review under 44 U.S.C. 3504(h) of the Paperwork 
Reduction Act. A copy of the request can be obtained from the BLM by 
electronic mail request to Barbara Gamble at barbara_gamble@blm.gov or 
by telephone request to 202-912-7148. The BLM requests comments to:
     Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
     Evaluate the accuracy of the agency's estimate of the 
burden of the proposed collection of information, including the 
validity of the methodology and assumptions used;
     Enhance the quality, utility, and clarity of the 
information to be collected; and
     Minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., permitting 
electronic submission of responses.
    Comments on the information collection requirements should be sent 
to both OMB and the BLM as directed in the ADDRESSES section of this 
preamble. OMB is required to make a decision concerning the collection 
of information contained in this proposed rule between 30 to 60 days 
after publication of this document in the Federal Register. Therefore, 
a comment to OMB is best assured of having its full effect if OMB 
receives it by June 11, 2012.

Summary of Information Collection Requirements

    The proposed rule is intended to increase transparency for the 
public regarding the fluids and additives used in well stimulation. The 
proposed provisions that include information collection requirements 
are amendments to 43 CFR 3162.3-2 new 43 CFR 3162.3-3.
    OMB has approved the use of Form 3160-5 under control number 1004-
0137 for the operations listed in existing section 3162.3-2. As 
amended, section 3162.3-2 would no longer include well stimulation jobs 
(i.e., nonroutine fracturing, routine fracturing, and acidizing) on the 
list of operations for which prior approval and subsequent reports 
would be required. Other categories of operations would remain subject 
to the information collection requirements in section 3162.3-2. Once 
the BLM is authorized to collect well-stimulation information under new 
section 3162.3-3 and a new control number, the BLM will request 
revision of control number 1004-0137 by removing the well-stimulation 
burdens from the existing approval of Form 3160-5. New section 3162.3-3 
would require operators to use Form 3160-5 both to seek prior BLM 
approval of well stimulation operations, and to submit a report on 
subsequent actual well stimulation operations. It would also encourage 
operators to use Form 3160-5 if they want to request a variance from 
the requirements of new section 3162.3-3.

Request for Prior Approval (i.e., Notice of Intent Sundry)

    New section 3162.3-3(b) would require operators to seek and obtain 
prior approval by the BLM for proposed well stimulation operations. 
Submission of the information, called a Notice of Intent (NOI) Sundry 
in the proposed rule, would be required at least 30 days before the 
date the operator wants to begin well stimulation operations. The 
information to be included in this Notice of Intent Sundry, and the 
reasons for requiring it, are listed in the following table:

------------------------------------------------------------------------
                               Proposed regulatory
 Proposed regulation 43 CFR           text                Rationale
------------------------------------------------------------------------
Sec.   3162.3-3(c)(1).......  The geological        The BLM would use
                               names, a geological   the information to
                               description, and      determine the
                               the proposed          properties of the
                               measured depth of     rock layers and the
                               the top and the       thickness of the
                               bottom of the         producing
                               formation into        formation, and
                               which well            identify the
                               stimulation fluids    confining rocks
                               are to be injected.   above and below the
                                                     zone that would be
                                                     stimulated.

[[Page 27706]]

 
Sec.   3162.3-3(c)(2).......  The proposed          The BLM would use
                               measured depths       the information to
                               (both top and         help protect water
                               bottom) of all        resources.
                               occurrences of
                               usable water and
                               the Cement Bond
                               Logs (or another
                               log acceptable to
                               the authorized
                               officer) proving
                               that the
                               occurrences of
                               usable water have
                               been isolated to
                               protect them from
                               contamination.
Sec.   3162.3-3(c)(3).......  The proposed          The BLM would use
                               measured depth of     the information to
                               perforations or the   determine the
                               open-hole interval,   impacts associated
                               the source and        with operations and
                               location(s) of the    the need for any
                               water used in the     mitigation
                               stimulation fluid     applicable to
                               or trade name of      Federal and Indian
                               the base fluid (if    lands.
                               other than water),
                               type of proppants,
                               and estimated pump
                               pressures.
                               Information
                               concerning water
                               supply, such as
                               rivers, creeks,
                               springs, lakes,
                               ponds, and wells,
                               which may be shown
                               by quarter-quarter
                               section on a map or
                               plat, or which may
                               be described in
                               writing. The NOI
                               Sundry must also
                               identify the
                               source, access
                               route, and
                               transportation
                               method for all
                               water anticipated
                               for use in
                               stimulating the
                               well.
Sec.   3162.3-3(c)(4).......  A certification       The BLM would use
                               signed by the         the information to
                               operator that the     make an informed
                               proposed treatment    decision on the
                               fluid complies with   proposed well
                               all applicable        stimulation.
                               permitting and
                               notice requirements
                               as well as all
                               applicable Federal,
                               tribal, state, and
                               local laws, rules,
                               and regulations.
Sec.   3162.3-3(c)(5).......  A detailed            The information
                               description of the    would enable the
                               proposed well         BLM to verify that
                               stimulation design,   the proposed
                               including: (i) The    engineering design
                               estimated total       is adequate for
                               volume of fluid to    safely conducting
                               be used; (ii) The     the proposed well
                               anticipated surface   stimulation, that
                               treating pressure     the maximum
                               range; (iii) The      wellbore design
                               maximum injection     burst pressure will
                               treating pressure;    not be exceeded at
                               and (iv) the          any stage of the
                               estimated or          well stimulation
                               calculated fracture   operations, and
                               length and fracture   that the intended
                               height                effects of the well
                                                     stimulation
                                                     operation will
                                                     remain confined to
                                                     the petroleum-
                                                     bearing rock layers
                                                     and will not have
                                                     unintended
                                                     consequences for
                                                     other rock layers,
                                                     such as aquifers.
Sec.   3162.3-3(c)(6).......  The following         The BLM would use
                               information           the information to
                               concerning the        ensure that the
                               handling of           facilities needed
                               recovered fluids:     to process or
                               (i) The estimated     contain the
                               volume of fluid to    estimated volume of
                               be recovered during   fluid will be
                               flow back,            available on
                               swabbing, and         location, that the
                               recovery from         handling methods
                               production facility   will adequately
                               vessels; (ii) The     ensure protection
                               proposed methods of   of public health
                               handling the          and safety, and
                               recovered fluids,     that the BLM has
                               including, but not    all necessary
                               limited to, pit       information
                               requirements,         regarding disposal
                               chemical              of chemicals used,
                               composition of the    in the event it is
                               fluid, pipeline       needed to protect
                               requirements,         the environment and
                               holding pond use,     human health and
                               re-use for other      safety and to
                               stimulation           prevent unnecessary
                               activities, or        or undue
                               injection; and        degradation of the
                               (iii) The proposed    public lands.
                               disposal method of
                               the recovered
                               fluids, including,
                               but not limited to,
                               injection, hauling
                               by truck, or
                               transporting by
                               pipeline
Sec.   3162.3-3(c)(7).......  Additional            The information
                               information, as       would allow the BLM
                               requested by the      to make an informed
                               authorized officer.   decision about the
                                                     proposed well
                                                     stimulation if
                                                     special
                                                     circumstances
                                                     exist.
------------------------------------------------------------------------

Subsequent Report (i.e., Subsequent Report Sundry Notice)

    Within 30 days after the completion of well stimulation operations, 
section 3162.3-3(f) of the proposed rule would require operators to 
submit a Subsequent Report Sundry Notice on Form 3160-5 (Sundry Notices 
and Report on Wells). The information to be included in this Subsequent 
Report, and the reasons for requiring it, are listed in the following 
table.

------------------------------------------------------------------------
                               Proposed regulatory
 Proposed regulation  43 CFR          text                Rationale
------------------------------------------------------------------------
Sec.   3162.3-3(e)(1).......  A continuous record   The BLM would use
                               of the annulus        the information to
                               pressure must be      ensure that well
                               submitted with the    stimulation
                               required Subsequent   activities are
                               Report Sundry         conducted as
                               Notice (Form 3160-    designed. The
                               5, Sundry Notices     information would
                               and Reports on        also show that
                               Wells) identified     stimulation fluids
                               in paragraph (g) of   are going to the
                               this section.         formation for which
                                                     they were intended.

[[Page 27707]]

 
Sec.   3162.3-3(e)(2).......  If during the         The BLM would use
                               stimulation the       the information to
                               annulus pressure      ensure that
                               increases by more     stimulation fluids
                               than 500 pounds per   are going into the
                               square inch as        formation for which
                               compared to the       they were designed.
                               pressure              The BLM also needs
                               immediately           to obtain
                               preceding the         reasonable
                               stimulation, the      assurance that
                               operator must         other resources are
                               orally notify the     adequately
                               authorized officer    protected.
                               as soon as
                               practicable, but no
                               later than 24 hours
                               following the
                               incident. Within 15
                               days after the
                               occurrence, the
                               operator must
                               submit a report
                               containing all
                               details pertaining
                               to the incident,
                               including
                               corrective actions
                               taken, as part of a
                               Subsequent Report
                               Sundry Notice (Form
                               3160-5, Sundry
                               Notices and Reports
                               on Wells).
Sec.   3162.3-3(g)(1).......  The actual measured   The BLM would use
                               depth of              the information to
                               perforations or the   determine the
                               open-hole interval,   impacts associated
                               the source and        with operations and
                               location(s) of the    the need for any
                               water used in the     mitigation
                               stimulation fluid     applicable to
                               or trade name of      Federal and Indian
                               base fluid (if        lands.
                               other than water),
                               type of proppants,
                               and estimated pump
                               pressures.
                               Information
                               concerning water
                               supply, such as
                               rivers, creeks,
                               springs, lakes,
                               ponds, and wells,
                               which may be shown
                               by quarter-quarter
                               section on a map or
                               plat, or which may
                               be described in
                               writing. It must
                               also identify the
                               source, access
                               route, and
                               transportation
                               method for all
                               water used in
                               stimulating the
                               well.
Sec.   3162.3-3(g)(2).......  The actual total      The BLM would use
                               volume of the fluid   the information to
                               used.                 maintain a record
                                                     of the stimulation
                                                     operation as
                                                     actually performed.
Sec.   3162.3-3(g)(3).......  The actual surface    The BLM would use
                               pressure and rate     the information to
                               at the end of each    ensure that the
                               fluid stage, and      maximum allowable
                               the actual flush      pressure has not
                               volume, rate, and     been exceeded at
                               final pump pressure.  any stage of the
                                                     well stimulation
                                                     operation.
Sec.   3162.3-3(g)(4) and     (4) A report (table)  The BLM would use
 (5).                          that discloses all    the information to
                               additives of the      maintain a record
                               actual stimulation    of the stimulation
                               fluid, by additive    operation as
                               trade name and        performed.
                               purpose (such as,
                               but not limited to,
                               acid, biocide,
                               breaker, brine,
                               corrosion
                               inhibitor,
                               crosslinker,
                               demulsifier,
                               friction reducer,
                               gel, iron control,
                               oxygen scavenger,
                               pH adjusting agent,
                               proppant, scale
                               inhibitor, or
                               surfactant); and.
                              (5) A report (table)
                               that discloses the
                               complete chemical
                               makeup of all
                               materials used in
                               the actual
                               stimulation fluid
                               without regard to
                               original source
                               additive (see
                               paragraph (g)(4) of
                               this section). For
                               each chemical, the
                               operator must
                               provide the
                               Chemical Abstracts
                               Service Registry
                               Number as well as
                               the percentage by
                               mass. The percent
                               mass value is the
                               mass value for each
                               component (Mc)
                               divided by the
                               value of the entire
                               fluid mass (Mt)
                               times 100. (Mc/
                               Mt)*100 = percent
                               value. The percent
                               mass values should
                               be for the entire
                               stimulation
                               operation, not for
                               the individual
                               stages.
Sec.   3162.3-3(g)(6).......  The actual,           The BLM would use
                               estimated, or         the information to
                               calculated fracture   verify that the
                               length and fracture   intended effects of
                               height.               the well
                                                     stimulation
                                                     operation remain
                                                     confined to the
                                                     petroleum-bearing
                                                     rock layers and
                                                     will not have
                                                     unintended
                                                     consequences on
                                                     other rock layers
                                                     or aquifers.
Sec.   3162.3-3(g)(7).......  The Subsequent        This provision would
                               Report Sundry         allow the operator
                               Notice (Form 3160-    the flexibility to
                               5, Sundry Notices     submit a copy of
                               and Reports on        the service company
                               Wells) may be         contractor's job
                               completed in whole    log or other report
                               or in part, as        in lieu of all or
                               applicable, by        part of the data
                               attaching the         described above, so
                               service               long as the
                               contractor's job      required
                               log or other          information is
                               report, so long as    complete and
                               the information       readily apparent.
                               required in
                               paragraphs (g)(1)
                               through (g)(6) of
                               this section is
                               complete and
                               readily apparent.
Sec.   3162.3-3(g)(8).......  A certification       The BLM would use
                               signed by the         the information to
                               operator that the     help protect public
                               treatment fluid       health and safety
                               used complies with    and obtain the
                               all applicable        operator's self-
                               permitting and        certification of
                               notice requirements   compliance with all
                               as well as all        necessary permits
                               applicable Federal,   and notice
                               tribal, state, and    requirements.
                               local laws, rules,
                               and regulations.
Sec.   3162.3-3(g)(9).......  A certification       The BLM would use
                               signed by the         the information to
                               operator that         help protect public
                               wellbore integrity    health and safety
                               was maintained        and obtain the
                               throughout the        operator's self-
                               operation, as         certification that
                               required by           wellbore integrity
                               paragraphs (d),       was maintained
                               (e)(1), and (e)(2)    throughout the
                               of this section.      operation.

[[Page 27708]]

 
Sec.   3162.3-3(g)(10)......  The following         The BLM would use
                               information           the information to
                               concerning the        help protect human
                               handling of           health and safety
                               recovered fluids:     and prevent the
                               (i) The volume of     contamination of
                               fluid recovered       the environment.
                               during flow back,     The BLM also needs
                               swabbing, or          to confirm that the
                               recovery from         disposal methods
                               production facility   used are those that
                               vessels; (ii) The     were approved and
                               methods of handling   conform to the
                               the recovered         regulations.
                               fluids, including,
                               but not limited to,
                               pipeline
                               requirements,
                               holding pond use,
                               re-use for other
                               stimulation
                               activities, or
                               injection; and
                               (iii) The disposal
                               method of the
                               recovered fluids,
                               including, but not
                               limited to,
                               injection, hauling
                               by truck, or
                               transporting by
                               pipeline. The
                               disposal of fluids
                               produced during the
                               flow back from the
                               well stimulation
                               process must follow
                               the requirements
                               set out in Onshore
                               Order Number 7,
                               Disposal of
                               Produced Water,
                               Section III. B.
Sec.   3162.3-3(g)(11)......  If the actual         The BLM would use
                               operations deviate    the information to
                               from the approved     maintain a record
                               plan, the             of any deviations
                               deviation(s) must     of the operation
                               be documented.        from the approved
                                                     plan in the event
                                                     such information is
                                                     needed to protect
                                                     health and safety
                                                     and prevent undue
                                                     degradation of the
                                                     environment.
------------------------------------------------------------------------

Requesting a Variance

    Proposed 43 CFR 3162.3-3(j) would encourage operators to use Form 
3160-5 to request a variance from the requirements under proposed 
section 3162.3-3. Any request for a variance, whether filed on Form 
3160-5 or not, would have to specifically identify the regulatory 
provision of this section for which the variance is being requested, 
explain the reason the variance is needed, and demonstrate how the 
operator would satisfy the objectives of the regulation for which the 
variance is being requested.

Estimated Annual Hour and Cost Burdens

    The estimated annual hour and costs burdens of each aspect of this 
information collection are shown in the following table:

----------------------------------------------------------------------------------------------------------------
                                                                                                  D. Total hours
                       A. Type of response                         B. Number of    C. Hours per     (column B x
                                                                     responses       response        column C)
----------------------------------------------------------------------------------------------------------------
Sundry Notices and Reports on Wells/Well Stimulation/Notice of             1,700               8          13,600
 Intent Sundry, (43 CFR 3162.3-3), Form 3160-5..................
Sundry Notices and Reports on Wells/Well Stimulation/Subsequent            1,700               8          13,600
 Report, Sundry Notice, (43 CFR 3162.3-3, Form 3160-5...........
Sundry Notices and Reports on Wells/Well Stimulation/Variance                170               8           1,360
 Request, (43 CFR 3162.3-3), Form 3160-5........................
                                                                 -----------------------------------------------
    Totals......................................................           3,570  ..............          28,560
----------------------------------------------------------------------------------------------------------------

National Environmental Policy Act

    The BLM has prepared an environmental assessment (EA) that 
concludes that the proposed rule would not constitute a major Federal 
action that may result in a significant adverse effect on the human 
environment under section 102(2)(C) of the National Environmental 
Policy Act (NEPA), 42 U.S.C. 4332(2)(C). A detailed statement under 
NEPA would not be required if the proposed amendments were promulgated 
as regulations. The BLM has placed the EA and the draft Finding of No 
Significant Impact on file in the BLM Administrative Record at the 
address specified in the ADDRESSES section.

Data Quality Act

    In developing this rule, we did not conduct or use a study, 
experiment, or survey requiring peer review under the Data Quality Act 
(Pub. L. 106-554).

Executive Order 13211, Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use

    In accordance with Executive Order 13211, the BLM has determined 
that the proposed rule will not have substantial direct effects on the 
energy supply, distribution, or use, including a shortfall in supply or 
price increase. Please see the discussion earlier in this section of 
the preamble for a discussion of the impacts of the rule.

Clarity of the Regulations

    Executive Order 12866 requires each agency to write regulations 
that are simple and easy to understand. We invite your comments on how 
to make these proposed regulations easier to understand, including 
answers to questions such as the following:
    1. Are the requirements in the proposed regulations clearly stated?
    2. Do the proposed regulations contain technical language or jargon 
that interferes with their clarity?
    3. Does the format of the proposed regulations (grouping and order 
of sections, use of headings, paragraphing, etc.) aid or reduce their 
clarity?
    4. Would the regulations be easier to understand if they were 
divided into more (but shorter) sections?
    5. Is the description of the proposed regulations in the 
SUPPLEMENTARY INFORMATION section of this preamble helpful in 
understanding the proposed regulations? How could this description be 
more helpful in making the proposed regulations easier to understand?
    Please send any comments you have on the clarity of the regulations 
to the address specified in the ADDRESSES section.

[[Page 27709]]

Authors

    The principal authors of this rule are: Michael Worden of the BLM 
Washington Office; Nicholas Douglas of BLM Washington Office; Adrienne 
Brumley of the BLM New Mexico State Office; Donato Judice of the BLM 
Great Falls, Montana Oil and Gas Field Office, assisted by Ian Senio 
and Joe Berry of the BLM's Division of Regulatory Affairs and the 
Department of the Interior's Office of the Solicitor.

List of Subjects

43 CFR Part 3160

    Administrative practice and procedure; Government contracts; 
Indians--lands; Mineral royalties; Oil and gas exploration; Penalties; 
Public lands--mineral resources; Reporting and recordkeeping 
requirements.

43 CFR Chapter II

    For the reasons stated in the preamble, and under the authorities 
stated below, the Bureau of Land Management proposes to amend 43 CFR 
part 3160 as follows:

PART 3160--ONSHORE OIL AND GAS OPERATIONS

    1. The authorities citation for part 3160 is revised to read as 
follows:

    Authority:  25 U.S.C. 396d and 2107; 30 U.S.C. 189, 306, 359 and 
1751; 40 U.S.C. 4332, and 43 U.S.C. 1732(b), 1733, and 1740.

Subpart 3160--Onshore Oil and Gas Operations: General

Sec.  3160.0-3  [Amended]

    2. In section 3160.0-3 add ``the Federal Land Policy and Management 
Act (43 U.S.C. 1701 et seq.),'' after ``the Mineral Leasing Act for 
Acquired lands, as amended (30 U.S.C. 351-359),''.
    3. Amend Sec.  3160.0-5 by adding definitions of ``annulus,'' 
``bradenhead,'' ``proppant,'' ``stimulation fluid,'' ``usable water,'' 
and ``well stimulation'' in alphabetical order and by removing the 
definition of ``fresh water'':
    The additions read as follows:

Sec.  3160.0-5  Definitions.

* * * * *
    Annulus means the space around a pipe in a wellbore, the outer wall 
of which may be the wall of either the borehole or the casing; 
sometimes also called annular space.
* * * * *
    Bradenhead means a heavy, flanged steel fitting connected to the 
first string of casing that allows suspension of intermediate and 
production strings of casing and supplies the means for the annulus to 
be sealed off.
* * * * *
    Proppant means a granular substance (most commonly sand, sintered 
bauxite, or ceramic) that is carried in suspension by the fracturing 
fluid that serves to keep the cracks open when fracturing fluid is 
withdrawn after a hydraulic fracture treatment.
* * * * *
    Stimulation fluid means the liquid or gas, including any associated 
solids, used during a treatment of oil and gas wells, such as the 
water, chemicals, and proppants used in hydraulic fracturing.
* * * * *
    Usable water means generally those waters containing up to 10,000 
ppm of total dissolved solids.
* * * * *
    Well stimulation means those activities conducted in an individual 
well bore designed to increase the flow of hydrocarbons from the rock 
formation to the well bore through modifying the permeability of the 
reservoir rock. Examples of well stimulation operations are acidizing 
and hydraulic fracturing.
* * * * *

Subpart 3162--Requirements for Operating Rights Owners and 
Operators

    4. Amend Sec.  3162.3-2 by revising the first sentence of paragraph 
(a) and revising paragraph (b) to read as follows:

Sec.  3162.3-2  Subsequent well operations.

    (a) A proposal for further well operations shall be submitted by 
the operator on Form 3160-5 for approval by the authorized officer 
prior to commencing operations to redrill, deepen, perform casing 
repairs, plug-back, alter casing, recomplete in a different interval, 
perform water shut off, commingling production between intervals and/or 
conversion to injection. * * *
    (b) Unless additional surface disturbance is involved and if the 
operations conform to the standard of prudent operating practice, prior 
approval is not required for recompletion in the same interval; 
however, a subsequent report on these operations must be filed on Form 
3160-5.
* * * * *
    5. Add a new Sec.  3162.3-3 to read as follows:

Sec.  3162.3-3  Subsequent well operations; Well stimulation.

    (a) This section applies to well stimulation activities. All other 
injection activities must comply with section 3162.3-2.
    (b) When an Operator Must Submit Notification for Approval of Well 
Stimulation.
    A proposal for well stimulation must be submitted by the operator 
and approved by BLM before commencement of operations. The proposal may 
be submitted in one of the following ways:
    (i) For new wells, the operator may submit with its Application for 
Permit to Drill the information required in paragraph (c) of this 
section, except for the cement bond log required by paragraph (c)(2). 
The approved permit to drill will require submission and approval of 
the cement bond log required by paragraph (c)(2) prior to conducting 
well stimulation activities;
    (ii) For wells permitted prior to the effective date of this 
section or for wells permitted after the effective date of this 
section, if the application for permit to drill a well did not include 
the information required in paragraph (c) of this section, the operator 
must submit a proposal for well stimulation operations on Form 3160-5 
(Sundry Notices and Reports on Wells) as a Notice of Intent Sundry for 
approval by the authorized officer prior to well stimulation. If there 
is additional surface disturbance, the proposal must include a surface 
use plan of operations; and
    (iii) If an operator has received BLM approval for well stimulation 
activities, it must submit a new Notice of Intent Sundry if either: (A) 
Well stimulation activities have not commenced within five years after 
the effective date of approval of the well stimulation activity; or (B) 
The operator has significant new information about the geology of the 
area, the stimulation operation or technology to be used, or the 
anticipated impacts of the stimulation activity to any resource.
    (c) What the Notice of Intent Sundry Must Include. The authorized 
officer may prescribe that each proposal contain all or a portion of 
the information set forth in Sec.  3162.3-1 of this title. The Notice 
of Intent Sundry must include the following:
    (1) The geological names, a geological description, and the 
proposed measured depth of the top and the bottom of the formation into 
which well stimulation fluids are to be injected;
    (2) The proposed measured depths (both top and bottom) of all 
occurrences of usable water and the cement bond logs (or another log 
acceptable to the authorized officer) proving that the occurrences of 
usable water have been isolated to protect them from contamination;

[[Page 27710]]

    (3) The proposed measured depth of perforations or the open-hole 
interval, the source and location(s) of the water used in the 
stimulation fluid or trade name of the base fluid (if other than 
water), type of proppants, and estimated pump pressures. Information 
concerning water supply, such as rivers, creeks, springs, lakes, ponds, 
and wells, which may be shown by quarter-quarter section on a map or 
plat, or which may be described in writing. It must also identify the 
source, access route, and transportation method for all water 
anticipated for use in stimulating the well;
    (4) A certification signed by the operator that the proposed 
treatment fluid complies with all applicable permitting and notice 
requirements as well as all applicable Federal, tribal, state, and 
local laws, rules, and regulations;
    (5) A detailed description of the proposed well stimulation design, 
including:
    (i) The estimated total volume of fluid to be used;
    (ii) The anticipated surface treating pressure range;
    (iii) The maximum injection treating pressure; and
    (iv) The estimated or calculated fracture length and fracture 
height;
    (6) The following information concerning the handling of recovered 
fluids:
    (i) The estimated volume of fluid to be recovered during flow back, 
swabbing, and recovery from production facility vessels;
    (ii) The proposed methods of handling the recovered fluids, 
including, but not limited to, pit requirements, chemical composition 
of the fluid, pipeline requirements, holding pond use, re-use for other 
stimulation activities, or injection; and
    (iii) The proposed disposal method of the recovered fluids, 
including, but not limited to, injection, hauling by truck, or 
transporting by pipeline.
    (7) The authorized officer may request additional information under 
this subsection prior to the approval of the Notice of Intent Sundry.
    (d) Mechanical Integrity Testing Prior to Well Stimulation. Prior 
to the well stimulation, the operator must perform a successful 
mechanical integrity test (MIT) of the casing.
    (1) If well stimulation through the casing is proposed, the casing 
must be tested to not less than the maximum anticipated treating 
pressure.
    (2) If well stimulation through a fracturing string is proposed, 
the fracturing string must be inserted into a liner or run on a packer-
set not less than 100 feet below the cement top of the production or 
intermediate casing. The fracturing string must be tested to not less 
than the maximum anticipated treating pressure minus the annulus 
pressure applied between the fracturing string and the production or 
intermediate casing.
    (3) The MIT will be considered successful if the pressure applied 
holds for 30 minutes with no more than a 10 percent pressure loss.
    (e)(1) Monitoring and Recording During Well Stimulation. During the 
well stimulation operation, the operator must continuously monitor and 
record the annulus pressure at the bradenhead. If an intermediate 
casing has been set on the well that is being stimulated, the pressure 
in the annulus between the intermediate casing and the production 
casing must also be continuously monitored and recorded. A continuous 
record of the annulus pressure during the well stimulation must be 
submitted with the required Subsequent Report Sundry Notice (Form 3160-
5, Sundry Notices and Reports on Wells) identified in paragraph (f) of 
this section.
    (e)(2) If during the stimulation the annulus pressure increases by 
more than 500 pounds per square inch as compared to the pressure 
immediately preceding the stimulation, the operator must orally notify 
the authorized officer as soon as practicable, but no later than 24 
hours following the incident. Within 15 days after the occurrence, the 
operator must submit a report containing all details pertaining to the 
incident, including corrective actions taken, as part of a Subsequent 
Report Sundry Notice (Form 3160-5, Sundry Notices and Reports on 
Wells).
    (f) Storage of all recovered fluids must be in either tanks or 
lined pits. The authorized officer may require additional measures to 
protect the mineral resources, other natural resources, and 
environmental quality from the release of recovered fluids.
    (g) Information that Must be Provided to the Authorized Officer 
After Completed Operations. The following information must be provided 
to the authorized officer in the required Subsequent Report Sundry 
Notice (Form 3160-5, Sundry Notices and Reports on Wells) within 30 
days after the operations are completed (see subpart 3160.0-9(c)(1)):
    (1) The actual measured depth of perforations or the open-hole 
interval, the source and location(s) of the water used in the 
stimulation fluid or trade name of base fluid (if other than water), 
type of proppants, and actual pump pressures. Information concerning 
water supply, such as rivers, creeks, springs, lakes, ponds, and wells, 
which may be shown by quarter-quarter section on a map or plat, or 
which may be described in writing. It must also identify the source, 
access route, and transportation method for all water used in 
stimulating the well;
    (2) The actual total volume of the fluid used;
    (3) The actual surface pressure and rate at the end of each fluid 
stage, and the actual flush volume, rate, and final pump pressure;
    (4) A report (table) that discloses all additives of the actual 
stimulation fluid, by additive trade name and purpose (such as, but not 
limited to, acid, biocide, breaker, brine, corrosion inhibitor, 
crosslinker, demulsifier, friction reducer, gel, iron control, oxygen 
scavenger, pH adjusting agent, proppant, scale inhibitor, or 
surfactant);
    (5) A report (table) that discloses the complete chemical makeup of 
all materials used in the actual stimulation fluid without regard to 
original source additive (see paragraph (f)(4) of this section). For 
each chemical, the operator must provide the Chemical Abstracts Service 
Registry Number as well as the percentage by mass. The percent mass 
value is the mass value for each component (Mc) divided by the value of 
the entire fluid mass (Mt) times 100. (Mc/Mt) * 100 = percent value. 
The percent mass values should be for the entire stimulation operation, 
not for the individual stages.
    (6) The actual, estimated, or calculated fracture length and 
fracture height;
    (7) The Subsequent Report Sundry Notice (Form 3160-5, Sundry 
Notices and Reports on Wells) may be completed in whole or in part, as 
applicable, by attaching the service contractor's job log or other 
report, so long as the information required in paragraphs (g)(1) 
through (g)(6) of this section is complete and readily apparent;
    (8) A certification signed by the operator that the treatment fluid 
used complied with all applicable permitting and notice requirements as 
well as all applicable Federal, tribal, state, and local laws, rules, 
and regulations;
    (9) A certification signed by the operator that wellbore integrity 
was maintained throughout the operation, as required by paragraphs (d), 
(e)(1), and (e)(2) of this section;
    (10) The following information concerning the handling of recovered 
fluids:
    (i) The volume of fluid recovered during flow back, swabbing, or 
recovery from production facility vessels;

[[Page 27711]]

    (ii) The methods of handling the recovered fluids, including, but 
not limited to, pipeline requirements, holding pond use, re-use for 
other stimulation activities, or injection; and
    (iii) The disposal method of the recovered fluids, including, but 
not limited to, injection, hauling by truck, or transporting by 
pipeline. The disposal of fluids produced during the flow back from the 
well stimulation process must follow the requirements set out in 
Onshore Order Number 7, Disposal of Produced Water, Section III.B. 
(October 8, 1993, 58 FR 47354).
    (11) If the actual operations deviate from the approved plan, the 
deviation(s) must be documented and explained.
    (h) Identifying Information Claimed to be Exempt from Public 
Disclosure. At the time of submission of any information required under 
this section, operators must:
    (1) Specifically identify particular information claimed to be 
exempted from public disclosure by a Federal statute or regulation;
    (2) Identify the Federal statute or regulation that prohibits the 
public disclosure of each piece of particular information, and explain 
in detail why the information is subject to the prohibition of the 
identified Federal statute or regulation; and
    (3) Inform the BLM whether the particular information is available 
to the public through other means, such as disclosures required by 
state law.
    (i) Any information that is provided in accordance with this 
section for which the operator does not substantiate a reason for 
withholding under paragraph (h) of this section shall be deemed not to 
be protected by the Trade Secrets Act or other Federal law and shall be 
released to the public. If an operator identifies information as exempt 
from disclosure, the BLM may nonetheless release that information if it 
determines that the information is not prohibited from disclosure by 
Federal law, after providing the operator with no fewer than 10 
business days notice of the BLM's determination.
    (j) Requesting a Variance from the Requirements of this Section. 
The operator may make a written request to the authorized officer to 
request a variance from the requirements under this section. The BLM 
encourages submission using a Sundry Notice (Form 3160-5, Sundry 
Notices and Reports on Wells).
    (1) A request for a variance must specifically identify the 
regulatory provision of this section for which the variance is being 
requested, explain the reason the variance is needed, and demonstrate 
how the operator will satisfy the objectives of the regulation for 
which the variance is being requested.
    (2) The authorized officer, after considering all relevant factors, 
may approve the variance, or approve it with one or more conditions of 
approval, only if the BLM determines that the proposed alternative 
meets or exceeds the objectives of the regulation for which the 
variance is being requested. The decision whether to grant or deny the 
variance request is entirely within the BLM's discretion.
    (3) A variance under this section does not constitute a variance to 
provisions of other regulations, laws, or orders.
    (4) Due to changes in Federal law, technology, regulation, BLM 
policy, field operations, noncompliance, or other reasons, the BLM 
reserves the right to rescind a variance or modify any conditions of 
approval. The authorized officer must provide a written justification 
if a variance is rescinded or a condition of approval is modified.
    6. Amend Sec.  3162.5-2 by revising the first sentence of paragraph 
(d) to read as follows:

Sec.  3162.5-2  Control of wells.

* * * * *
    (d) Protection of usable water and other minerals. The operator 
shall isolate all usable water and other mineral-bearing formations and 
protect them from contamination. Tests and surveys of the effectiveness 
of such measures shall be conducted by the operator using procedures 
and practices approved or prescribed by the authorized officer. * * *

    Dated: May 4, 2012.
Marcilynn Burke,
Acting Assistant Secretary, Land and Minerals Management.
[FR Doc. 2012-11304 Filed 5-10-12; 8:45 am]
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