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[From the U.S. Government Publishing Office]


113th Congress  }                                            {   Report
  1st Session   }      HOUSE OF REPRESENTATIVES              {  113-261

=======================================================================

 
   PROTECTING STATES' RIGHTS TO PROMOTE AMERICAN ENERGY SECURITY ACT 

                                _______
                                

 November 12, 2013.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

 Mr. Hastings of Washington, from the Committee on Natural Resources, 
                        submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 2728]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Natural Resources, to whom was referred 
the bill (H.R. 2728) to recognize States' authority to regulate 
oil and gas operations and promote American energy security, 
development, and job creation, having considered the same, 
report favorably thereon with an amendment and recommend that 
the bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Protecting States' Rights to Promote 
American Energy Security Act''.

SEC. 2. STATE AUTHORITY FOR HYDRAULIC FRACTURING REGULATION.

  The Mineral Leasing Act (30 U.S.C. 181 et seq.) is amended by 
redesignating section 44 as section 45, and by inserting after section 
43 the following:

``SEC. 44. STATE AUTHORITY FOR HYDRAULIC FRACTURING REGULATION.

  ``(a) In General.--The Department of the Interior shall not enforce 
any Federal regulation, guidance, or permit requirement regarding 
hydraulic fracturing, or any component of that process, relating to 
oil, gas, or geothermal production activities on or under any land in 
any State that has regulations, guidance, or permit requirements for 
that activity.
  ``(b) State Authority.--The Department of the Interior shall 
recognize and defer to State regulations, permitting, and guidance, for 
all activities related to hydraulic fracturing, or any component of 
that process, relating to oil, gas, or geothermal production activities 
on Federal land regardless of whether those rules are duplicative, more 
or less restrictive, shall have different requirements, or do not meet 
Federal guidelines.
  ``(c) Hydraulic Fracturing Defined.--In this section the term 
`hydraulic fracturing' means the process by which fracturing fluids (or 
a fracturing fluid system) are pumped into an underground geologic 
formation at a calculated, predetermined rate and pressure to generate 
fractures or cracks in the target formation and thereby increase the 
permeability of the rock near the wellbore and improve production of 
natural gas or oil.''.

SEC. 3. TRIBAL AUTHORITY ON TRUST LAND.

  The Department of the Interior shall not enforce any Federal 
regulation, guidance, or permit requirement regarding the underground 
injection of fluids or propping agents as part of the hydraulic 
fracturing process, or any component of that process, relating to oil, 
gas, or geothermal production activities on any land held in trust or 
restricted status for the benefit of Indians except with the express 
consent of the beneficiary on whose behalf such land is held in trust 
or restricted status.

                          Purpose of the Bill

    The purpose of H.R. 2728 is to recognize States' authority 
to regulate oil and gas operations and promote American energy 
security, development, and job creation.

                  Background and Need for Legislation

    The United States has some of the largest reserves of shale 
oil and shale gas in the world. Recent innovations combining 
horizontal drilling with hydraulic fracturing (HF) technology 
in coal beds, tight gas sands and unconventional gas shale 
formations have unlocked previously inaccessible, vast new 
supplies of natural gas. This technology is enabling the 
development of unconventional domestic oil resources, such as 
the Bakken Formation in North Dakota and Montana, which is 
thought to hold 4 billion barrels of oil (second only to 
Alaska) and has kept North Dakota's unemployment rate the 
lowest in the nation. However, much of this production occurs 
on private and state land, as developers aim to avoid 
burdensome and time-consuming federal regulations. Currently, 
93% of shale wells are located on private land, with 7% located 
on federal land.
    While these technological advances in horizontal drilling 
have helped spawn the economic development of shale oil, it has 
primarily benefited and revolutionized domestic natural gas 
production by delivering vast amounts of cheap natural gas from 
U.S. underground shale-rock formations. Shale gas production is 
one of the most rapidly expanding trends in onshore domestic 
oil and gas exploration and production today. In some areas, 
this has included bringing exploration, production and energy 
to regions of the country that have seen little or no activity 
in the past. In 2000, shale gas provided 1% of our nation's gas 
supplies; today it is 25%. Half of the natural gas consumed 
today is produces from wells drilled within the last 3.5 years. 
Prior to the shale breakthrough, U.S. natural gas reserves were 
in decline, prices exceeded $15 per million btu and investors 
were building ports to import liquid natural gas. Today proven 
reserves are the highest since 1971, and prices have fallen 
close to $4 per million btu.
    Currently, states are responsible for regulating oil and 
natural gas development stemming from the use of hydraulic 
fracturing. These state regulations have proven successful in 
overseeing hydraulic fracturing and stemming concerns related 
to the chemical composition of fracturing fluid, as there have 
been no confirmed reports of groundwater contamination from 
hydraulic fracturing. Administration officials such as former 
Environmental Protection Agency heds Lisa Jackson and Carol 
Browner have testified to this fact.
    Critics say environmental regulators and the industry have 
failed to ensure that hydraulic fracturing is safe and does not 
have adverse effects on water resources, particularly with 
respect to the fracturing fluid contaminating drinking water. 
Horizontal drilling or directional drilling enters the debate 
as it generally relies on the practice of hydraulic fracturing. 
However, federal, state, and local laws address every aspect of 
exploration and production operations. These include well 
design, location, water and waste management and disposal, air 
emissions, wildlife protection, surface impact and health and 
safety. In addition to government oversight, new industry 
standards advance operation and practices. The industry has 
created a number of guidance documents and other initiatives 
relating to hydraulic fracturing, including recommended 
practices for environmental protection for onshore oil and 
natural gas production and leases, well construction and well 
integrity, water use management, and surface environmental 
considerations.
    Additionally, oil and natural gas companies voluntarily 
comply with FracFocus and state regulations to publicly 
disclose chemicals used in the hydraulic fracturing process.
    While the states have demonstrated an ability to implement 
effective and efficient regulations for development on their 
own lands, nonetheless, the Obama Administration continues to 
pursue implementation of its own burdensome and duplicative 
regulations for hydraulic fracturing on federal land. The 
Administration claims these regulations will have minimal 
impacts on economic development, job creation, cost, and energy 
production, estimating the regulations will cost only $11,000 
per well. However, state regulators strongly disagree. An 
economic analysis done by John Dunham & Associates estimates 
the proposed regulations will cost $253,800 per well.
    States have repeatedly voiced their strong bipartisan 
opposition to the Administration's hydraulic fracturing 
regulations, as these regulations could significantly hinder 
oil and natural gas development within their borders. Small, 
independent producers will likely bear the brunt of these 
regulations as they are less able to absorb the additional 
regulatory cost and depend largely on federal land for their 
production. Further, each state is unique in geography and 
energy production considerations. States have carefully crafted 
state-specific regulations for energy production taking into 
account the specific needs and characteristics of each state. A 
one size fits all approach to energy regulation will not work 
and would be difficult to implement across the country.
    Furthermore, state regulations have proven sufficient and 
effective in managing hydraulic fracturing on their lands. The 
Lieutenant Governor of Utah, Greg Bell, has testified before 
the House Committee on Natural Resources that there have been 
no reports of environmental contamination due to hydraulic 
fracturing in Utah. In addition, at a 2012 Natural Resources 
Committee hearing in Denver, Colorado, acting Director of the 
Colorado Oil and Gas Conservation Commission, Tom Kerr, 
testified that of over 2,000 samples of water wells, there has 
been no statistically significant increase in chemical 
concentrations. Many state officials have also testified 
regarding their concerns that federal hydraulic fracturing 
regulations will slow and greatly reduce energy development, 
job creation and economic development in their states.
    H.R. 2728 would prohibit the Bureau of Land Management from 
enforcing federal regulations on federal lands in states that 
already have state hydraulic regulations in place.

                            Committee Action

    H.R. 2728 was introduced on July 18, 2013, by Congressman 
Bill Flores (R-TX). The bill was referred to the Committee on 
Natural Resources, and within the Committee to the Subcommittee 
on Energy and Mineral Resources. On July 25, 2013, the 
Subcommittee held a hearing on the bill. On July 31, 2013, the 
Full Natural Resources Committee met to consider the bill. The 
Subcommittee on Energy and Mineral Resources was discharged by 
unanimous consent. Congressman Alan Lowenthal (D-CA) offered an 
amendment designated _011 to the bill; the amendment was not 
adopted by a bipartisan roll call vote of 13 to 22, as follows:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Congressman Markwayne Mullin (R-OK) offered an amendment 
designated _001 to the bill; the amendment was adopted by a 
bipartisan roll call vote of 23 to 14, as follows:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Congressman Matt Cartwright (D-PA) offered an amendment 
designated _035 to the bill; the amendment was not adopted by a 
roll call vote of 14 to 22, as follows:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Congressman Cartwright offered an amendment designated _036 
to the bill; the amendment was not adopted by a bipartisan roll 
call vote of 13 to 24, as follows:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    No further amendments were offered, and the bill, as 
amended, was then adopted and ordered favorably reported to the 
House of Representatives by a bipartisan roll call vote of 23 
to 15, as follows:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Committee Oversight Findings and Recommendations

    Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of 
rule XIII of the Rules of the House of Representatives, the 
Committee on Natural Resources' oversight findings and 
recommendations are reflected in the body of this report.

                    Compliance With House Rule XIII

    1. Cost of Legislation. Clause 3(d)(1) of rule XIII of the 
Rules of the House of Representatives requires an estimate and 
a comparison by the Committee of the costs which would be 
incurred in carrying out this bill. However, clause 3(d)(2)(B) 
of that rule provides that this requirement does not apply when 
the Committee has included in its report a timely submitted 
cost estimate of the bill prepared by the Director of the 
Congressional Budget Office under section 402 of the 
Congressional Budget Act of 1974. Under clause 3(c)(3) of rule 
XIII of the Rules of the House of Representatives and section 
403 of the Congressional Budget Act of 1974, the Committee has 
received the following cost estimate for this bill from the 
Director of the Congressional Budget Office:

H.R. 2728--Protecting States' Rights to Promote American Energy 
        Security Act

    H.R. 2728 would prevent the Department of the Interior 
(DOI) from enforcing regulations related to hydraulic 
fracturing in any state where those activities are governed by 
state regulations. Hydraulic fracturing involves pumping 
liquids into the ground to generate cracks within geologic 
formations to increase access to liquids and gases trapped 
within those formations.
    Because there are currently no federal regulations directly 
related to hydraulic fracturing, CBO estimates that 
implementing H.R. 2728 would have no significant impact on the 
federal budget. The Department of the Interior has proposed 
regulations concerning hydraulic fracturing on federal and 
Indian lands. If those, or similar regulations, were to go into 
force in the future, H.R. 2728 could limit the implementation 
of those regulations, possibly reducing federal costs. Enacting 
the legislation would not affect direct spending or revenues; 
therefore, pay-as-you-go procedures do not apply.
    H.R. 2728 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Jeff LaFave. The 
estimate was approved by Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.
    2. Section 308(a) of Congressional Budget Act. As required 
by clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives and section 308(a) of the Congressional Budget 
Act of 1974, this bill does not contain any new budget 
authority, spending authority, credit authority, or an increase 
or decrease in revenues or tax expenditures. CBO estimates that 
implementing H.R. 2728 would have no significant impact on the 
federal budget.
    3. General Performance Goals and Objectives. As required by 
clause 3(c)(4) of rule XIII, the general performance goal or 
objective of this bill is to recognize States' authority to 
regulate oil and gas operations and promote American energy 
security, development, and job creation.

                           Earmark Statement

    This bill does not contain any Congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined 
under clause 9(e), 9(f), and 9(g) of rule XXI of the Rules of 
the House of Representatives.

                    Compliance With Public Law 104-4

    This bill contains no unfunded mandates.

                       Compliance With H. Res. 5

    Directed Rule Making. The Chairman does not believe that 
this bill directs any executive branch official to conduct any 
specific rule-making proceedings.
    Duplication of Existing Programs. This bill does not 
establish or reauthorize a program of the federal government 
known to be duplicative of another program. Such program was 
not included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-139 
or identified in the most recent Catalog of Federal Domestic 
Assistance published pursuant to the Federal Program 
Information Act (Public Law 95-220, as amended by Public Law 
98-169) as relating to other programs.

                Preemption of State, Local or Tribal Law

    This bill is not intended to preempt any State, local or 
tribal law.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

MINERAL LEASING ACT

           *       *       *       *       *       *       *



SEC. 44. STATE AUTHORITY FOR HYDRAULIC FRACTURING REGULATION.

  (a) In General.--The Department of the Interior shall not 
enforce any Federal regulation, guidance, or permit requirement 
regarding hydraulic fracturing, or any component of that 
process, relating to oil, gas, or geothermal production 
activities on or under any land in any State that has 
regulations, guidance, or permit requirements for that 
activity.
  (b) State Authority.--The Department of the Interior shall 
recognize and defer to State regulations, permitting, and 
guidance, for all activities related to hydraulic fracturing, 
or any component of that process, relating to oil, gas, or 
geothermal production activities on Federal land regardless of 
whether those rules are duplicative, more or less restrictive, 
shall have different requirements, or do not meet Federal 
guidelines.
  (c) Hydraulic Fracturing Defined.--In this section the term 
``hydraulic fracturing'' means the process by which fracturing 
fluids (or a fracturing fluid system) are pumped into an 
underground geologic formation at a calculated, predetermined 
rate and pressure to generate fractures or cracks in the target 
formation and thereby increase the permeability of the rock 
near the wellbore and improve production of natural gas or oil.

SEC. [44.] 45. SHORT TITLE.

  This Act may be cited as the ``Mineral Leasing Act''.

                            DISSENTING VIEWS

    We oppose H.R. 2728 because it is bad policy, a bad 
precedent, and based on a poor understanding of how oil and gas 
regulation actually operates in this country.
    The bill is an attempt to halt a deliberative, public rule-
making process before it is even completed. The Department of 
the Interior first proposed fracking regulations in May 2012, 
and proposed a revised set of regulations in May 2013. Out of 
1.3 million comments on the latest proposal, nearly 1.2 million 
people called for increased federal oversight of the widespread 
and highly controversial practice of fracking. Despite this 
overwhelming ground swell of support for strong federal 
fracking regulations, H.R. 2728 would move in precisely the 
opposite direction, and preclude the federal government from 
having any oversight, inspection, or enforcement responsibility 
for fracking whatsoever.
    Natural gas reserves have become more accessible through 
the use of hydraulic fracturing techniques, and America is 
producing more natural gas today than ever before. We support 
expanded development of domestic energy resources, including 
natural gas, but we must develop this resource in a way that 
protects public health, safety and the environment.
    Many states with fracking activity have enacted their own 
regulations to oversee this practice, but those requirements 
vary widely, and do not provide assurance to the Federal 
government or the American people that a common-sense baseline 
of protection exists on over 750 million acres of land 
containing federal minerals.
    This bill, as written, does not even require a state to 
have reasonably stringent regulations for fracking--or any 
regulations at all. The bill states that federal regulations 
are forbidden ``in any State that has regulations, guidance, or 
permit requirements'' for fracking. This means that a state 
with one page, or even one sentence, of guidance for fracking 
is therefore exempt from federal oversight of federal 
resources.
    Furthermore, the federal government is required to defer to 
the states on an overly broad suite of issues: ``all activities 
related to hydraulic fracturing.'' That could be read to 
encompass everything from site preparation, to water sourcing 
and disposal, to air emissions, and more, as long as it is 
considered related to fracking. Given that roughly 90% of the 
wells in this country are fracked, this would effectively 
eliminate federal regulations on 90% of the drilling activity 
in the United States. With one short paragraph, this bill would 
destroy the foundation of environmental oversight and 
enforcement which has been built cooperatively over decades by 
the federal government, the states, and the public.
    The fundamental premise of this bill--that states with 
strong fracking regulations should be allowed to regulate the 
activity themselves--is based on a fundamentally flawed 
understanding of how oil and gas regulation actually works. 
Those states with fracking regulations more stringent than the 
proposed federal fracking rule would see virtually no impact 
from this rule whatsoever.
    Oil and gas drillers abide by the laws of the state in 
which they operate, and if they are drilling into federal 
minerals, they also must meet any additional federal 
regulations. The Bureau of Land Management (BLM) routinely 
includes language into leases and permits expressly requiring 
drillers to adhere to all state and local laws. If a state 
already has regulations that exceed the BLM's requirements, 
drillers do nothing differently on federal land. Nothing. There 
is no need for a variance, or additional analysis, or anything 
else for that matter. A federal fracking rule would place no 
new requirements on states with good regulations in place; it 
would only provide a necessary floor in states without good 
regulations on the books.
    This is not just how it would work for fracking. This is 
how it works for every federal oil and gas regulation on the 
books. Oil and gas companies have operated under this situation 
of federal and state regulation for decades, and they have 
driven federal onshore oil production up 16% in the past four 
years.
    During consideration of H.R. 2728 by the Committee, 
Representative Lowenthal's (D-CA) amendment to allow public 
disclosure of fracking chemicals, and Representative 
Cartwright's (D-PA) amendments to allow federal regulation of 
well safety and to protect National Parks, wilderness areas, 
and endangered species were defeated on nearly party line 
votes.
    Instead of ham-handed legislative attempts to kick the 
federal government out of the management of federal resources, 
the states and the federal government should be working 
together to improve the safety of oil and gas operations. The 
BLM has memoranda of understanding with multiple states, and in 
the preamble of the fracking rule they encourage creating new 
memoranda where they don't exist, and updating those that do.
    There is nothing to be gained from eliminating the ability 
of the federal government to regulate fracking, and much to be 
lost. We strongly oppose H.R. 2728.

                                   Peter DeFazio.
                                   Rush Holt.
                                   Jared Huffman.
                                   Raul M. Grijalva.
                                   Madeleine Z. Bordallo.
                                   Niki Tsongas.
                                   Carol Shea-Porter.
                                   Matthew A. Cartwright.
                                   Alan Lowenthal.