US: Fracking Regulations for Federal Lands?

Bottom Line: US Interior Secretary Ken Salazar is talking about a proposal to regulate oil and gas fracking on public lands, and while we haven't seen a draft of this proposal yet, word is that it will emerge in the very near future.

Analysis: US media reports coming out of Washington say that Salazar has told a House subcommittee that draft regulations on fracking on public lands are in the works and should be announced in the near-term future. According to Salazar, these regulations are "imminent" and his successor will reveal them soon. It's not the first time this has been floated. Draft regulations were toyed with in January, but the proposal was withdrawn for more work. The regulations will likely require E&P companies to fully disclose the nature and volume of chemicals used in their hydraulic fracturing operations. They will also likely contain tougher provisions government the management of "flowback" frack water. Fracking on public lands is already regulated by states, and the new regulations would seek to boost this oversight on a federal level. 

Recommendation: E&P majors have been holding a flurry of meetings with the White House since early this year when the first draft of fracking regulations was sidelined, and we believe these meetings are continuing into this month, while a new draft could come as early as next month. These regulations will likely entail new costs for E&P companies operating on public lands, and there is a very heavy lobbying effort against the regulations.