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Proposed BLM Rules on Oil and Gas Wells Could Cost over $1.5 Billion Annually


A recent analysis from the Western Energy Alliance (WEA) estimates that the Bureau of Land Management’s (BLM) recently proposed rules on oil and gas well completions could hit the energy industry with more than $1.5 billion in additional annual expenses. The costs come primarily from delays in completion certificates for new wells and cement casing additions that would have to be made to active wells.

WEA estimates that in the Western states alone, over 5,000 potential new wells and 1,200 current wells will be affected by the new rules. New costs that producers in these areas would incur include:
  • Extending cement casing of wells by as much as 4,000 feet in order to protect groundwater sources
  • A 49-day delay in permit application processing
  • Additional mechanical integrity tests prior to well stimulation
In some cases, these new procedures would aggravate existing problems in the industry. Drilling permit applications already face months of delay, despite the regulatory requirement that a permit be issued within 30 days of completing an environmental approval process. BLM’s proposed rules would create additional delay.

Such costs could seriously stunt the development of the nation’s robust shale reserves, undermining exploration and inhibiting new drilling. Many in the industry worry that the BLM’s proposal could be the first of many federal regulatory efforts to slow industry growth to satisfy the unproven claims of environmentalists.

New study highlights benefits of unconventional gas development
A new study from America’s Natural Gas Alliance, meanwhile, highlights the job and economic opportunities at risk from efforts to restrict the development of shale gas and other unconventional natural gas development through overregulation.

The report found that in just three years development of unconventional sources will account for 67 percent of U.S. natural gas development, support 1.5 million jobs, and contribute nearly $50 billion in tax and royalty revenue. The impact of this activity will be felt nationwide, with one out of every jobs created in non-energy producing states.

While the research highlights the dramatic economic and employment growth in unconventional gas development, it also warns that new regulations could significantly alter the industry’s ability to maintain rapid growth.

Article Date: 2012-06-18
Source: Associated Equipment Distributors
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