BLM proposes updates to its oil, gas measurement requirements

The US Bureau of Land Management proposed regulations to ensure more accurate measurement, accountability, and royalty payments for oil and gas production from onshore federal and Indian oil and gas leases.

The proposal would replace Onshore Oil and Gas Order No. 3, which has not been updated since 1989 and does not reflect modern industry operations or technology, it said on July 10. Comments will be accepted through Sept. 11.

Order No. 3 sets minimum standards for ensuring that oil and gas produced from leases BLM oversees is properly and securely handled, the US Department of the Interior agency said. It said it determined that updates were necessary based on its experience with oil and gas measurement in the field, and changes in technology and industry operations which have occurred since the order was issued.

The agency’s rules concerning oil and gas measurement are more than 25 years old, and are long overdue for an update, BLM Director Neil Kornze said. “The reasonable and commonsense updates we are proposing today represent an important step forward toward modernizing our program, and will help us ensure that oil and gas sites are properly and responsibly managed,” he maintained.

BLM said the proposals respond to recommendations the Government Accountability Office made in a mid-June report which criticizes the agency’s management of tribal oil and gas leases for the US Bureau of Indian Affairs under existing procedures (OGJ Online, June 16, 2015). Tribal consultations and public listening sessions also were held, it indicated.

DOI’s Inspector General’s Office and Royalty Management Subcommittee also expressed concerns about the adequacy of the BLM’s existing requirements with respect to production accountability. These concerns contributed to the department’s inclusion on GAO’s High-Risk List in recent years, the agency said.

It said the proposed rule, which is scheduled to appear in the July 13 Federal Register, specifically would:

• Establish uniform procedures for designating official points for oil and gas measurement for royalty accounting purposes—known as facility measurement points—that are applicable to new and existing leases.

• Codify existing guidance related to approving commingling—such as the combining of production from multiple leases, unit Participating Areas (PAs), Communitized Areas (CAs), or fee or state properties—before the royalty measurement point.

• Establish conditions for approving off-lease oil and gas measurement.

• Update requirements related to the use of valve and drain seals, prohibitions on the use of meter by-passes, and reporting regulations.

• Require operators of new and existing oil and gas facilities to provide new site facility diagrams designed to help BLM meet its oversight responsibilities.

• Require purchasers and transporters to comply with the same records management standards as well operators.

Contact Nick Snow at nicks@pennwell.com.

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