BLM final rule aims to curb venting, flaring on onshore federal lands

The US Bureau of Land Management issued a final rule aimed at reducing releases of natural gas into the atmosphere from oil and gas operations on onshore public and Indian tribal lands. Oil and gas associations were immediately critical. Two groups even sued in federal court, charging that the rule is a broad new air-quality regime that goes beyond authority that Congress grants BLM.

“We are proving that we can cut harmful methane emissions that contribute to climate change while putting in place standards that make good economic sense for the nation,” US Interior Sec. Sally Jewell said in announcing the final rule on Nov. 15.

“Not only will we save more natural gas to power our nation, but we will modernize decades-old standards to keep pace with industry and to ensure a fair return to the American taxpayers for use of a valuable resource that belongs to all of us,” she said.

The rule, which will be phased in, requires oil and gas producers to use currently available technologies and processes to cut flaring in half at oil wells on public and tribal lands, BLM said. Operators also must periodically inspect their operations for leaks, and replace outdated equipment that vents large quantities of gas into the air, it noted.

Other parts of the rule require operators to limit venting from storage tanks and to use best practices to limit gas losses when removing liquids from wells, the agency said. To ensure a fair return to taxpayers, it also clarifies when operators owe royalties on flared gas and restores the government’s congressionally authorized flexibility to set royalty rates at or above 12.5% of the value of production.

BLM said the rule also makes an important contribution to the Obama administration’s goal to cut methane emissions from US oil and gas operations by 40–45% from 2012 levels by 2025. This rule projects cutting methane emissions by as much as 35%, it indicated.

Reflects technological advances

BLM said that its previous venting and flaring rules were adopted long before new technologies unlocked vast US gas supplies and allowed operators to produce more oil and gas with less waste. It said that a 2010 Government Accountability Office report found that about 40% of the gas now vented or flared from onshore federal leases could be economically captured with currently available technologies.

“America’s natural gas helps power our economy—it’s a resource, not a waste product, and it’s time we start treating it that way,” observed BLM Director Neil Kornze.

Oil and gas trade officials were not impressed. “BLM's rush to regulate something already being regulated at the state and federal level is an example of poor government policy and a left hand not knowing what the right hand is doing,” American Petroleum Institute Upstream and Industry Operations Director Erik Milito said. “[Its] new regulations are unnecessary, redundant, and technically flawed. They also could stifle the innovations that have led to our nation’s environmental successes.”

In their lawsuit, which was filed on Nov. 15 in US District Court for Wyoming, the Independent Petroleum Association of America and Denver-based Western Energy Alliance said BLM’s venting and flaring rule creates duplicative regulation that conflicts with US Environmental Protection Agency requirements. Congress designated authority to regulate air quality to EPA under the Clean Air Act, yet BLM has tried to assume this role under the guise of reducing waste from oil and gas production, they contended.

“We support the goals of capturing greater quantities of associated gas and reducing waste gas, but overreaching regulation that fails to acknowledge industry success is not the most effective way to meet those goals,” said Kathleen Sgamma, vice-president of government and public affairs at WEA.

The US gas industry has reduced methane emissions by 21% since 1990 while increasing production by 47%, all without federal regulation, Sgamma noted. “We don’t need federal rules to tell us to reduce methane emissions, as it’s the very product we’re working so hard to capture and sell,” she said.

In industry’s best interests

“Make no mistake, reducing emissions is in the best interest of our industry,” said Daniel T. Naatz, senior vice-president of government relations and political affairs at IPAA. “Producers have every incentive to capture and sell as much of their product as possible to consumers, rather than letting it escape in the atmosphere. However, a lack of infrastructure and gathering lines to collect gas at the wellhead currently makes it difficult for producers to safely transport our product to market.”

Naatz noted that while independents have shared their concerns with the Obama administration repeatedly, it has responded with “an 11th hour shot that doesn’t fully understand how its rules impact our businesses.”

Naatz said, “Furthermore, potentially raising royalties on an industry that has been financially hurting is counterintuitive to any business certainty. The continued regulatory onslaught on American producers calls into question the president’s commitment to the laws requiring mineral production on federal lands or whether the misguided crusade to ‘keep it in the ground’ has overtaken this administration.”

API’s Milito suggested, “If the goal is to prevent emissions, not impede US energy production, then BLM should focus on fixing permitting, infrastructure, and pipeline delays that slow our nation’s ability to capture more natural gas and deliver affordable energy to consumers.”

Contact Nick Snow at nicks@pennwell.com.

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