Sidley Shale and Hydraulic Fracturing Report

Vol. 6, No. 14

Topics discussed in this week’s Report include:

  • President Trump signed Energy Independence executive order requiring agencies to review oil and natural gas regulations.
  • Interior Department to repeal valuation rule for fossil fuels produced on federal land.
  • California Air Resources Board approved methane regulations for oil and gas operations.
  • Maryland to permanently ban hydraulic fracturing.


President Trump signs Energy Independence executive order requiring agencies to review oil and natural gas regulations. On March 28, President Donald Trump signed an Executive Order on Energy Independence and Economic Growth, directing agencies to review and revoke or revise regulations that unnecessarily burden energy production. In addition to requiring a broad review of all existing regulations that potentially burden energy production, it specifically directs the Environmental Protection Agency (EPA) to review the Obama administration’s Clean Power Plan and related regulations along with the agency’s regulations of methane emissions from new sources in the oil and natural gas sector under NSPS Subpart OOOOa. The order also requires the Bureau of Land Management (BLM) to reconsider its 2015 hydraulic fracturing regulations, regulations addressing nonfederal oil and gas rights and waste prevention regulations. On March 29, the Secretary of the Interior issued an order implementing the President’s executive order, directing BLM to revoke the 2015 hydraulic fracturing regulations and to evaluate the remaining rules for consistency with the executive order. The executive order also revoked the Council on Environmental Quality’s guidance on addressing greenhouse gas emissions under the National Environmental Policy Act and the federal government’s efforts to quantify the social cost of carbon and social cost of methane when conducting cost-benefit analyses. Federal agencies are expected to respond by undertaking rulemakings to rescind and potentially replace the regulations specifically mentioned in the executive order.

Interior Department to repeal Valuation Rule for fossil fuels produced on federal land. On March 23, the Department of Interior (DOI) announced it would commence a rulemaking to repeal an Obama-era regulation addressing the calculation of royalties for fossil fuels produced on federal land. DOI also requested a stay on litigation over the regulation, which had not yet gone into effect. The stay was granted on March 27. Under the new valuation regulation, royalties for fossil fuel production would be based on the first “arm’s-length” sale. DOI had asserted that the regulation was designed to close a loophole allowing sales to subsidiaries at artificially low prices. Opponents of the rule have argued that it adds unnecessary complexity and uncertainty to the valuation of fossil fuels and fails to account for transportation costs incurred prior to the sale leading to valuation. DOI also announced the formation of a Royalty Policy Committee to provide regular advice to the Secretary on the fair market value of and collection of revenues from federal and Tribal mineral and energy leases, include renewable energy sources.


California Air Resources Board approves methane regulations for oil and gas operations. The California Air Resources Board (CARB) recently approved new regulations addressing methane emissions from new and existing sources in the oil and gas production, processing and storage sectors. The regulations would require operators to monitor for and repair methane leaks. If adopted, CARB asserts that the regulations will reduce emissions from methane leaks by 1.4 million tons of carbon dioxide equivalents, based on the assumption that methane emission is three times more potent a greenhouse gas than what EPA has projected. CARB’s chairperson stated that the regulations were approved in part due to the federal government’s failure to address methane emissions from existing sources.

Maryland to permanently ban hydraulic fracturing. On March 27, Maryland’s legislature approved legislation to permanently ban hydraulic fracturing in the state. Gov. Larry Hogan has indicated that he would sign the legislation, making Maryland the first state to enact a statutory ban on hydraulic fracturing. Hydraulic fracturing has been temporarily banned in Maryland for the past two years.