The Western Energy Alliance, a trade association representing more than 400 companies involved in oil and gas production, released a report on the supposed economic impacts of the new proposed Bureau of Land Management (BLM) rules for oil and gas drilling on federal lands. To call this report junk science is kind – better to just call it junk.
The conclusions reached in this report are based on unsubstantiated and poorly reasoned assumptions that in some cases rely on anecdotal information from interviews with unidentified industry employees and contractors, newspaper reports, and press releases (see for example footnotes 5, 7, 18, and 19).
Many of the claims are either just flat-out wrong or omit facts that undermine the report’s conclusions, for example:
- On page 7 under the heading “Additional Casing Costs” the report claims that the requirement to protect “usable ground water” will increase the cost of well construction. But in fact a more careful reading of existing and proposed BLM rules shows that operators have been required to protect “usable water” since the promulgation of Onshore Oil and Gas Order No. 2 in 1988. The proposed rules don’t actually result in any changes to the way wells have to be constructed and therefore do not increase construction costs. All they do is delete the term “fresh water” to eliminate confusion.
- Also on page 7, under the heading “Additional Cement Bond Log,” the report claims that the proposed BLM requirement to run a cement bond log (CBL) on casing strings that protect usable water will substantially increase drilling costs due to delays while the cement hardens. What the report fails to mention is that oil and gas drillers often use two different rigs to drill wells. First, a smaller rig sets the casing that isolates useable water. Then a second, larger rig is brought in to drill the deeper portion of the well. In the industry, this technique is commonly referred to as “preset surface casing.” This practice eliminates what the report calls “downtime for the rig while the operator is completing the CBL,” and therefore the associated cost, because the CBL can be run in the time between when the first rig finishes and the second rig starts. While this practice is not used on every well, the fact that it was not included in the WEA cost estimate at all indicates that the report overestimates this cost.
The report concludes that the two requirements listed above account for 36 percent and 56.5 percent, respectively, of the cost increases they claim the proposed BLM rules would create – in their words, “the bulk of the additional costs.” The fact that there are major flaws with their assumptions about these two requirements calls into question the validity of the entire report.
Even if the new proposed BLM rules do impose new costs, the report fails to take into account the avoided costs of potential environmental remediation. In the case of water contamination, the cost of cleanup can be so high as to make it impossible. The goal of the proposed rules is to reduce environmental risk by updating regulations that are 30-years outdated, to help reduce the chance that contamination will happen in the first place.
Is it any surprise that the oil and gas industry will do or say just about anything to try and weasel out of even modest new rules to protect the environment and public health?
Nope, but it sure is getting old.