The US Bureau of Land Management finalized revisions to three onshore orders that aim to assure that oil and gas produced from federal and Indian tribal oil and gas leases are correctly measured, properly reported, and have accurate records. BLM originally proposed the changes to Onshore Oil and Gas Orders 3, 4, and 5 in late 2015.
An Independent Petroleum Association of America official said the organization is reviewing the final rule. “We are, however, displeased that three BLM regulations are, in essence, going into effect at the exact same time,” Daniel T. Naatz, IPAA’s senior vice-president of government relations and political affairs, said on Oct. 17 when the new rules were announced.
“We believe the collective costs that these three regulations will impose on America’s small businesses and job-creators have not accurately been taken into consideration. Releasing these final regulations all at once in the waning months of this administration’s term is both disingenuous and careless policymaking,” he said.
Officials at the US Department of the Interior agency said the rules update and replace Onshore Oil and Gas Orders 3 (new part 3173), 4 (new part 3174), and 5 (new part 3175), and represent the first comprehensive update of BLM’s measurement rules since they were issued more than 25 years ago.
They said that the rule to replace Order 3 governs oil and gas handling and is designed to ensure that production is properly accounted for in order to prevent theft and loss and enable that production to be verified. Orders 4 and 5 establish minimum standards for the accurate measurement of all oil and gas, respectively.
BLM officials said that the new rules incorporate the latest industry standards, measurement technology, and practices; and establish a one-stop, national process for review and approval of new measurement technologies and practices to allow them to be deployed quickly across land managed by the US Department of the Interior agency.
Address changing technology
“These new rules provide a strong foundation for our oil and gas program that will ensure we are meeting our obligation to the American people and to the tribes we work with,” said BLM Director Neil Kornze. “[They] also give BLM the tools to be responsive to new technology. This change is particularly important because changing technology often provides opportunities to make oil field operations safer and more efficient.” Copies of the revised rules are available on BLM’s web site.
BLM said the new rules will ensure that oil and gas produced from federal and Indian leases are accurately measured and accounted for so that the proper royalties due can be paid. Royalties from federal leases are split between the US Treasury and the state where the production occurs. Indian tribes and individual Indian allotment owners keep 100% of the royalties collected from leases on their lands.
Accurate measurement and production accountability is important because the agency’s oil and gas program is one of the federal government’s most important mineral leasing programs. The total value of production last year was nearly $20 billion, which generated more than $2 billion/year in royalty revenue from federal leases and nearly $600 million/year in royalty revenue from tribal and allotted leases, BLM said.
It said that while all three of the rules address changing technologies and industry practices, the final rules also will contribute to oil field safety by expressly recognizing automatic tank gauging as a permissible means to measure oil and prepare end-of-month inventories. This change gives operators the opportunity to deploy a technology more broadly that protects workers and reduces the need for workers to enter storage tanks and to open hatches that may expose them to potentially lethal fumes, the agency said.
“While we understand the need for modernizing some of these rules, the federal government’s rulemaking approach has been inherently prescriptive. It would lock in costly technologies that will likely become obsolete in a few short years, while the industry continues to advance and technology improves,” said Naatz.
“The White House regulatory affairs office should immediately retract these three regulations, conduct further review on the inflexibility and the comprehensive costs of these rules, and collaborate with industry stakeholders in developing sensible, performance-based rules that are workable for both industry and government regulators,” Naatz suggested.
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