[Federal Register Volume 59, Number 46 (Wednesday, March 9, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5316]


[[Page Unknown]]

[Federal Register: March 9, 1994]


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DEPARTMENT OF THE INTERIOR

Bureau of Land Management

43 CFR Part 3160

[WO-610-4111-02-24 1A]
RIN: 1004-AB80

 

Onshore Oil and Gas Operations, Federal and Indian Oil and Gas 
Leases; Onshore Oil and Gas Order No. 4, Measurement of Oil

AGENCY: Bureau of Land Management, Interior.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise Onshore Oil and Gas Order No. 
4 originally issued February 24, 1989 (54 FR 8086), and made effective 
August 23, 1989. This proposed revision would reorganize the Order to 
make it more logical in sequence, remove unnecessary provisions, 
resolve internal inconsistencies identified in the Order, and amend or 
clarify certain provisions. These changes are based on more than 4 
years of experience in implementing the Order, and on suggestions from 
the public and internal personnel.

DATES: Comments should be submitted by May 9, 1994. Comments received 
or postmarked after the above date may not be considered in the 
decisionmaking process on the final rule.

ADDRESSES: Comments should be sent to: Director (140), Bureau of Land 
Management, room 5555, Main Interior Building, 1849 C Street, NW., 
Washington, DC 20240. Comments will be available for public review at 
the above address during regular business hours (7:45 a.m. to 4:15 
p.m.), Monday through Friday.

FOR FURTHER INFORMATION CONTACT: Stuart Cerovski, (307) 332-7822.

SUPPLEMENTARY INFORMATION: Order No. 4, Measurement of Oil, implements 
and supplements requirements set forth in 43 CFR 3162.7-2 relating to 
the measurement of oil produced under the terms of Federal and Indian 
(except Osage) oil and gas leases, as well as oil produced from State 
or privately owned lands when Federal and/or Indian leases receive a 
share of such production under the terms of an approved agreement. The 
Order addresses oil measurement by tank gauging, by positive 
displacement metering systems, and by other methods acceptable to and 
approved by the authorized officer of the Bureau of Land Management 
(BLM). Through the implementation of the existing Order, several 
provisions of the Order were identified as being in need of 
clarification or amendment, and some provisions relating to oil 
measurement need to be updated.
    No amendments are proposed to the existing definitions in Section 
II. of the Order. However, it is proposed to add one new definition 
(Light Ends), which supports and clarifies the amendments proposed in 
Section III.C.1.
    An additional reference to the standards and recommended practices 
of the American Petroleum Institute (API) would be included to update 
the Order. This reference, ``Chapter 18, Section 1--Custody Transfer, 
First Edition, September 1990--Measurement Procedures for Crude Oil 
Gathered From Small Tanks by Truck,'' would be added to appropriate 
provisions of the Order.
    It is proposed to remove all requirements that instrument standards 
be traceable to the standards of the National Institute of Standards 
and Technology (formerly the National Bureau of Standards). This 
applies to gauging tapes, instruments used to determine oil gravity, 
and thermometers (woodbacks) used for determining tank temperatures, 
and to certifications of accuracy by independent testing facilities. 
The rationale for removing these provisions is a determination, based 
on experience of BLM field personnel and discussions with operators and 
manufacturers' representatives, that compliance with them cannot be 
achieved by any practical and cost effective means. However, the 
requirement that manufacturers warrant that such equipment has been 
made in conformity with the applicable specifications of the National 
Institute of Standards and Technology would be retained. Any 
measurement equipment whose accuracy is questioned and found 
inadequate, based on observation of defects by BLM personnel, would be 
required to be replaced.
    All proposed changes in Order No. 4 are amendments and additions 
intended to enhance operator understanding of BLM's requirements for 
the proper measurement of oil produced from or for the benefit of 
Federal and Indian (except Osage) leases. The following is a section-
by-section discussion of the proposed revisions in the Order.
    III.C.1. and III.C.1.a. would be amended to clarify the nature and 
intent of the existing requirement for vent line- valves and/or 
pressure vacuum thief hatches. As proposed, the Order would require, in 
the absence of an approved variance, all crude oil storage tanks to be 
equipped with vent line-valves and/or pressure vacuum thief hatches to 
prevent the loss of light ends and the resultant decrease in the 
quantity, quality, and value of the crude oil.
    III.C.2. would be amended to remove the present requirement that 
tank gauge volumes be corrected for scale or high bottoms in accordance 
with API RP 2556, because adjustments in that regard are inexact. If 
high bottoms or scaling on a sales tank occurs, the tank should be 
cleaned prior to further use.
    III.C.3. would be amended to clarify the use of the two presently 
cited standards in API Chapter 8, and also would add Chapter 18, 
Section 1--Custody Transfer, First Edition, September 1990, as a new 
reference. This would allow all methods of oil sampling without prior 
approval, provided that the method used meets the applicable API 
standards of practice.
    III.C.3.b. would be amended to state more specifically the proper 
practice for retrieving oil samples from a sales tank for determining 
the physical properties thereof. The proposed changes are necessary to 
provide adequate instruction in the Order without the need for an 
operator to refer to API standard practices for sampling. Tanks of 
1,000 barrels or less capacity would require the use of the two-sample 
method and tanks of greater than 1,000 barrels capacity would require 
the use of either the two-sample method or the three-sample method 
depending on the height of the fluid level in the tank. Moreover, the 
proposed revision would allow an operator the option, with respect to 
tanks of 1,000 barrels or less, of using one representative sample from 
the middle of the oil column for gravity determinations.
    III.C.4. would be amended to provide for the use of hand gauging 
tapes to be the only acceptable method for gauging tank volumes. Any 
other method of gauging, as referenced in the applicable API standards, 
would not be accepted in the absence of prior approval by the 
authorized officer of a request for a variance. This would ensure the 
proper installation and use of any alternative method of tank volume 
measurement.
    III.C.6. would be amended to provide for the use of cup case 
thermometers as the only acceptable method for obtaining tank 
temperature. Any other method of obtaining tank temperature, as 
addressed in applicable API standards or any new industry innovations, 
would require the prior approval of a variance request by the 
authorized officer to ensure proper installation and use. The proposal 
would not limit tank temperature measurements by thermometer only, as 
other types of temperature measurement instruments could be used if the 
authorized officer agrees that the alternative method would ensure 
proper temperature measurements and approves a request for a variance. 
Language would also be added to ensure that temperature measurements 
are made at the same time that opening and closing gauges are taken.
    III.D.2.l. would be amended to include a new provision that would 
allow, without prior approval, the use of an electronic temperature 
averager (ETA) to record the temperature of oil sold through a positive 
displacement metering system. Any type of electronic temperature 
compensator (ETC) that meets the minimum requirements specified would 
be authorized in accordance with the proposed revision. It is also 
proposed to add a new Section III.D.3.c.(3) that would require that an 
ETA or ETC be checked for accuracy each time the related meter is 
proven.
    III.D.3.a.(2) would be replaced in its entirety with minimum 
requirements for meter proving. Positive displacement meters are 
required to be in good working order to measure the product as 
accurately as mechanically possible. Since the devices used in proving 
are expected to be more accurate than the meters being proven, that 
level of accuracy is required to be verified on a regular basis. As 
these devices are used in all types of operating environments for 
proving meters measuring oils of differing characteristics, the 
proposed section would impose stringent calibration requirements for 
provers.
    III.D.3.c.(1) and III.D.4.a. would be amended to clarify the 
differences among repeatability problems during proving, meter 
malfunctions, and excessive meter factor deviations, and to specify 
corrective actions appropriate to the identified problem.
    III.D.5.b. would be added as a new section that would require the 
immediate application of a newly obtained meter factor to the 
production sold after the the date when the meter is proved. In other 
words, the new meter factor would be used from that date forward until 
such time as a subsequent proving establishes a different meter factor.
    A new Section III.E. would be added to incorporate the 
documentation requirements for the removal of crude oil from storage 
facilities now included in Onshore Oil and Gas Order No. 3, Site 
Security. This consolidation should enhance operator understanding of 
requirements of the Order. These requirements will be removed from 
Order No. 3 when it is next revised. Existing sections III.E. and F. 
would be redesignated III.F. and G., respectively.
    The existing Order No. 4 provides in Section III.E.2. that an 
application is required to be submitted to the authorized officer and 
written approval obtained prior to any off-lease measurement facility 
being installed and operated. It is proposed to add off-lease storage 
to this section in order to conform with the regulations at 43 CFR 
3162.7-2, and to set forth the required contents of applications for 
approval of off-lease measurement and/or storage facilities.
    It is proposed to add a new Section III.H. to establish standards 
relating to the commingling of oil production, both on the surface and 
in a wellbore, and to set forth the required contents of applications 
for approval to commingle oil production.
    Other changes proposed are editorial corrections to accommodate the 
new sections addressed above and slight wording modifications to add 
emphasis and clarity to the requirements of the Order.
    The principal authors of this proposed rule are Stuart Cerovski, 
Petroleum Engineer, Lander Resource Area; Vince Balderaz, Supervisory 
Petroleum Engineering Technician, Carlsbad Resource Area; Joe Delozier, 
Supervisory Petroleum Engineering Technician, Caliente Resource Area; 
A.L. Schweighart, Supervisory Petroleum Engineering Technician, Worland 
District Office; Sherry Thompson, Petroleum Engineer, Colorado State 
Office; and Darrell Self, Petroleum Engineering Technician, Tulsa 
District Office, assisted by the staff of the Division of Legislation 
and Regulatory Management, all of the Bureau of Land Management.
    It is hereby determined that this proposed rule does not constitute 
a major Federal action significantly affecting the quality of the human 
environment, and that no detailed statement pursuant to Section 
102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 
4332(2)(C)) is required. The Bureau of Land Management has determined 
that this proposed rule is categorically excluded from further 
environmental review pursuant to 516 Departmental Manual (DM), Chapter 
2, Appendix 1, Item 1.10, and that the proposal would not significantly 
affect the 10 criteria for exceptions listed in 516 DM 2, Appendix 2. 
Pursuant to the Council on Environmental Quality regulations (40 CFR 
1508.4) and environmental policies and procedures of the Department of 
the Interior, ``categorical exclusions'' means a category of actions 
that do not individually or cumulatively have a significant effect on 
the human environment and that have been found to have no such effect 
in procedures adopted by a Federal agency and for which neither an 
environmental assessment nor an environmental impact statement is 
required.
    This rule was not subject to review by the Office of Management and 
Budget under Executive Order 12866.
    Further, the Department has determined under the Regulatory 
Flexibility Act (5 U.S.C. 601, et seq.) that it will not have a 
significant economic impact on a substantial number of small entities. 
The principal small entities affected by this rule will be the oil and 
gas lessees and operators known as ``independents.'' The standards 
prescribed by the American Petroleum Institute, upon which this rule is 
based, are equally applicable to all prudent oil and gas operations, 
regardless of size. The Order would impose no new standards, and 
certain proving requirements would be removed. The Order would not 
require a substantial amount of additional information or monitoring. 
Some additional equipment may be required in certain cases, but the 
total cost of these changes would not be significant. Costs to the 
public should not increase at all as a result of the Order.
    The Department certifies that this proposed rule does not represent 
a governmental action capable of interference with constitutionally 
protected property rights. There would be no taking of private property 
without due process. Failure to abate violations in a timely manner 
could result in assessments under the Mineral Leasing Act and/or 
penalties under the Federal Oil and Gas Royalty Management Act, and 
possible lease cancellation if the failure continues, but not without 
due process. Therefore, as required by Executive Order 12630, the 
Department of the Interior has determined that the proposed rule would 
not cause a taking of private property.
    The Department has certified to the Office of Management and Budget 
that this proposed rule meets the applicable standards provided in 
Sections 1(a) and 2(b)(2) of Executive Order 12788.
    The information collection requirements contained in Part 3160 that 
relate to this proposed Order have been approved by the Office of 
Management and Budget under 44 U.S.C. 3501, et seq.,and assigned 
clearance number 1004-0134.

List of Subjects in 43 CFR Part 3160

    Government contracts, Indian lands-mineral resources, mineral 
royalties, Oil and gas exploration, Public lands-mineral resources, 
Reporting and recordkeeping requirements.

    Dated: February 4, 1994.
Bob Armstrong,
Assistant Secretary of the Interior.
    For the reasons stated above, and under the authorities cited 
below, it is proposed to amend part 3160, Group 3100, subchapter C, 
chapter II of title 43 of the Code of Federal Regulations, as set forth 
below:

PART 3160--[AMENDED]

    1. The authority citation for part 3160 is revised to read as 
follows:

    Authority: 30 U.S.C. 181 et seq.; 30 U.S.C. 351-359; 30 U.S.C. 
301-306; 25 U.S.C. 396; 25 U.S.C. 396a-396q., 397, 398, 398a- 398e, 
399; 43 U.S.C. 1457; see also 40 Op. Atty. Gen. 41; 40 U.S.C. 471 et 
seq.; 42 U.S.C. 4321 et seq.; 42 U.S.C. 6508; 30 U.S.C. 1701 et 
seq.; and 25 U.S.C. 2101 et seq.

    2. Section 3164.1 is amended by revising the table in paragraph (b) 
to read as follows:


Sec. 3164.1  Onshore Oil and Gas Orders.

* * * * *
    (b) * * *

----------------------------------------------------------------------------------------------------------------
                                                                             Federal Register                   
          Order No./Subject                     Effective date                  reference            Supersedes 
----------------------------------------------------------------------------------------------------------------
1. Approval of Operations............  Nov. 21, 1983..................  48 FR 48916 and 48 FR      NTL-6.       
                                                                         56226.                                 
2. Drilling Operations...............  Dec. 19, 1988..................  53 FR 46798..............  None         
3. Site Security.....................  Mar. 27, 1989..................  54 FR 8060...............  NTL-7        
4. Measurement of Oil................  [30 days after date of           .........................  None.        
                                        publication].                                                           
5. Measurement of Gas................  [date to be supplied upon        .........................  None.        
                                        publication of No.5].                                                   
6. Hydrogen Sulfide Operations.......  Jan. 22, 1991..................  55 FR 48958..............  None.        
7. Disposal of Produced Water........  Oct. 8, 1993...................  58 FR 47354..............  NTL-2B.      
----------------------------------------------------------------------------------------------------------------


    Note: Numbers will be assigned sequentially by the Washington 
Office, Bureau of Land Management, as additional Orders are prepared 
for publication and added to this table.

    The Appendix--text of Oil and Gas Order reads as follows:

Appendix--Text of Oil and Gas Order No. 4

    Note: This appendix will not appear in the Code of Federal 
Regulations.

Onshore Oil and Gas Order No. 4

I. Introduction.
    A. Authority.
    B. Purpose.
    C. Scope.
II. Definitions.
III. Requirements.
    A. Required Recordkeeping.
    B. General.
    C. Oil Measurement by Tank Gauging.
    D. Oil Measurement by Positive Displacement Metering System.
    E. Documentation for Removal of Crude Oil from Storage 
Facilities.
    F. Oil Measurement by Other Methods or at Other Locations 
Acceptable to the Authorized Officer.
    G. Determination of Oil Volumes by Methods Other than 
Measurement.
    H. Commingling of Production.
IV. Variances from Minimum Standards. .

Onshore Oil And Gas Order No. 4

Federal and Indian Oil and Gas Leases--Measurement of Oil

I. Introduction

    A. Authority. This Order is established pursuant to the 
authority granted to the Secretary of the Interior under various 
Federal and Indian mineral leasing statutes and the Federal Oil and 
Gas Royalty Management Act of 1982. This authority has been 
delegated to the Bureau of Land Management (BLM) and is implemented 
by the onshore oil and gas operations regulations contained in 43 
CFR part 3160. Section 3164.1 thereof specifically authorizes the 
Director, BLM, to issue Onshore Oil and Gas Orders when necessary to 
implement or supplement the operating regulations, and provides that 
all such Orders shall be binding on the lessees and operators of all 
Federal and restricted Indian oil and gas leases that have been, or 
may hereafter be, issued.
    Specific authority for the provisions contained in this Order is 
found at Sec. 3162.4-1 Well records and reports; Sec. 3162.4-2 
Samples, tests, and surveys; Sec. 3162.7-1 Disposition of 
production; Sec. 3162.7-2 Measurement of oil; Sec. 3162.7-5 Site 
security on Federal and Indian (except Osage) oil and gas leases; 
and Subpart 3163--Noncompliance, Assessments, and Penalties.
    B. Purpose. One purpose of this Order is to establish the 
requirements and minimum standards for the measurement of oil, and 
to provide standard operating practices for oil storage and handling 
facilities by the methods authorized in 43 CFR 3162.7-2, i.e., 
measurement by tank gauging, positive displacement metering system, 
or other methods acceptable to and approved by the authorized 
officer. Proper oil measurement ensures that the Federal Government 
and Indian mineral owners receive the correct royalties due, as 
specified in the governing oil and gas leases.
    Another purpose of this Order is to establish abatement periods 
for corrective action when noncompliance with the minimum standards 
is detected. This Order also serves as notice to any party cited for 
noncompliance that it may request from the authorized officer an 
extension of the abatement period for any violation, provided that 
the request for extension is applied for and granted prior to the 
expiration of the abatement period previously allowed.
    C. Scope. This Order is applicable to all Federal and Indian 
(except Osage) oil and gas leases. In addition, this Order also is 
applicable to all wells and facilities on State or privately-owned 
mineral lands committed to a unit or communitization agreement that 
affects Federal or Indian interests, notwithstanding any provision 
of the unit or communitization agreement to the contrary.

II. Definitions

    A. Authorized officer means any employee of the BLM authorized 
to perform the duties described in Groups 3000 and 3100.
    B. Barrel (bbl) means 42 standard United States gallons of 231 
cubic inches each.
    C. Business day means any day, Monday through Friday, excluding 
Federal holidays.
    D. Cpl. means the correction factor for the effect of pressure 
on liquid.
    E. Cps. means the correction factor for the effect of pressure 
on steel.
    F. Ctl. means the correction factor for the effect of 
temperature on liquid.
    G. Cts. means the correction factor for the effect of 
temperature on steel.
    H. INC means incident of noncompliance, which serves as a Notice 
of Violation under 43 CFR subpart 3163.
    I. Lessee means a person or entity holding record title in a 
lease issued by the United States.
    J. Light ends means those lighter hydrocarbons such as, but not 
limited to, gasoline, light kerosene, heptane, and natural gasoline.
    K. Major violation means noncompliance that causes or threatens 
immediate, substantial, and adverse impact on public health and 
safety, the environment, production accountability, or royalty 
income.
    L. Minor violation means noncompliance that does not rise to the 
level of a ``major violation.''
    M. Operating rights owner means a person or entity holding 
operating rights in a lease issued by the United States. A lessee 
also may be an operating rights owner if the operating rights in a 
lease or portion thereof have not been severed from record title.
    N. Operator means any person or entity, including but not 
limited to the lessee or operating rights owner, that has stated in 
writing to the authorized officer that it is responsible under the 
terms and conditions of the lease for the operations conducted on 
the leased lands or portions thereof.
    O. Oil, for the purpose of this Order, means any liquid 
hydrocarbons produced from or for the benefit of jurisdictional 
leases, including condensate or oil from tar sands that is measured 
as a liquid.
    O.1. Clean oil/Pipeline oil means crude oil or condensate that 
is acceptable to purchasers.
    O.2. Slop oil means crude oil that is of such quality that it is 
not acceptable to purchasers and requires special treatment other 
than that which can be provided economically with the existing or 
modified facilities or by portable equipment, and is usually sold to 
oil reclaimers.
    O.3. Waste oil means crude oil that has been determined by the 
authorized officer to be of such quality that it cannot be treated 
economically and put in a marketable condition with existing or 
modified lease facilities or portable equipment, cannot be sold to 
reclaimers, that has been determined by the authorized officer to 
have no economic value, and for which no royalty is due.

III. Requirements

A. Required Recordkeeping

    The operator shall keep all test data, meter reports, charts/
recordings, and other similar records for 6 years after the date 
generated or, if involved in an audit or investigation, the records 
shall be maintained until the record holder is released by the 
Secretary of the Interior or appropriate delegate from the 
obligation to maintain them. The authorized officer may request 
these records any time within this period. Records submitted shall 
include all additional information used to compute volumes so that 
computations may be verified.

B. General

    The regulations at 43 CFR 3162.7-2 authorize oil measurement 
methods for production from leases, units, and communitization 
agreements subject to BLM jurisdiction, as such jurisdiction is 
defined in 43 CFR 3161.1. The authorized oil measurement methods are 
tank gauging, positive displacement metering systems, and other 
methods acceptable to and approved by the authorized officer. The 
requirements and minimum standards for each of these methods are set 
forth below.
    These requirements and minimum standards are based on the 
standards and practices recommended by the American Petroleum 
Institute (API). The API standards and recommended practices are 
considered by both the Department of the Interior and the oil and 
gas industry to be appropriate for proper oil measurement. The 
requirements and minimum standards set out herein are those 
necessary to promote conservation of natural resources and to ensure 
that oil production, except for waste oil, is properly measured for 
sales or removal and for allocation purposes, in order that the 
Federal Government and Indian mineral owners will receive the proper 
royalties due under the governing oil and gas leases.
    When an infraction of the minimum standards in this Order is 
discovered, it will be considered noncompliance and an incident of 
noncompliance (INC) will be issued. Operators who discover 
noncompliance with these minimum standards and take immediate 
corrective action will not be issued an INC. If the authorized 
officer is present when an operator discovers a malfunction or does 
not use correct procedures as specified in this Order, an INC will 
be issued unless immediate corrective action is taken.
    A major violation, as defined in this Order, will generally 
require an immediate shut-in of the metering device. However, where 
irreparable damage to the resource is likely to occur if a shut-in 
is required, an abatement period of 24 hours may be given.
    The intent of these minimum standards is to ensure that when 
equipment malfunctions occur that could result in inaccurate 
measurement, that proper corrective actions are taken, the 
authorized officer notified, and a report is submitted. An equipment 
failure that is discovered by the operator and promptly corrected 
will not be considered a violation. However, equipment failures that 
are not corrected are considered violations, and a partial list is 
as follows:
    Failure to install equipment properly.
    Failure to repair or correct an equipment malfunction properly 
or in a timely manner.
    Failure to submit a report when an alternate method of 
measurement is used for sales.
    Failure to submit other required reports in a timely manner.
    Failure to adhere to the minimum standards and procedures 
specified in this Order.
    The use of improper equipment or procedures, when discovered, 
will be considered a violation, and an INC will be issued.
    When improper procedures are witnessed by the authorized 
officer, immediate corrective action will be required. The use of 
such improper procedures will still be considered a violation, but 
in the event that proper procedures are then used, as required by 
this Order, prior to completing the operation, calibration, or 
proving, the violation will be considered properly corrected. In 
this case, although the violation will be documented in BLM's files, 
no formal INC will be issued.
    All sales and allocation facilities shall meet the minimum 
standards prescribed in this Order, unless covered by a valid 
variance.
    Meter facilities constructed in accordance with the API 
standards in effect at the time of installation shall not be 
required automatically to retrofit to meet revised API standards. 
The BLM will review any revised API standards and, when deemed 
necessary, will amend the Order through the rulemaking process.
    Any variances from these requirements and minimum standards 
shall be in accordance with Section IV. of this Order.
    A violation of a minimum standard established by this Order 
shall be abated within the time period specified in this Order. 
Unless stated otherwise, all abatement periods shall be measured 
from the date of notification by the authorized officer.
    Where abatement is required ``prior to sales or removal,'' this 
means that necessary actions shall be taken so that no oil may be 
sold or removed beyond the measurement point until it can be 
properly measured.
    If any such violation is not abated within the required period, 
action shall be initiated in accordance with 43 CFR subpart 3163.

C. Oil Measurement by Tank Gauging

    Oil measurement by tank gauging shall accurately compute the 
volume of oil withdrawn from a properly calibrated sales tank by 
measuring the height of the oil level in the tank before delivery 
(opening gauge) and by measuring the height of the oil level in the 
tank after delivery (closing gauge). The opening and closing gauges 
obtained shall be used with the applicable tank calibration chart 
(tank table) to compute accurately the volume of oil withdrawn. 
Gauging may be accomplished by measuring the height of the oil level 
from the tank bottom or a fixed datum plate upward to the surface of 
the oil in the tank (innage gauging) or by measuring from a fixed 
reference point at the top of the tank downward to the surface of 
the oil in the tank (outage gauging). Before gauging, samples shall 
be taken of the oil to determine the API oil gravity and the 
sediment and water content. As the opening and closing gauges are 
taken, the opening and closing temperature of the oil in the tank 
shall be obtained. The measured oil volume shall then be corrected 
for sediment and water content, and to the standard sales 
temperature of 60 deg.F.
    The following requirements and minimum standards shall be met in 
accordance with API Standard 2545 (ANSI/ASTM D 1085), Method of 
Gauging Petroleum and Petroleum Products, 1965 (Reaffirmed in 1987), 
and ANSI/ASTM D 1250, Tables 5A and 6A.
    1. Tanks and Production Equipment. All oil storage tanks used 
for oil sales by tank gauging shall be properly equipped for such 
gauging, using the API Recommended Practices for Setting, 
Connecting, Maintenance, and Operation of Lease Tanks, API RP 12 R1, 
1986. Tanks also shall be connected, maintained, and operated to 
comply with the site security regulations, 43 CFR 3162.7-5, and 
Onshore Oil and Gas Order No. 3. Tanks and production equipment 
shall meet the following requirements:
    a. All oil tanks and vessels shall be equipped and maintained in 
such a manner as to minimize potential shrinkage and gravity loss 
from the evaporation of light ends to the atmosphere. Equipment may 
include, but is not limited to, vent-line valves and pressure-vacuum 
thief hatches.
    Violation: Major.
    Corrective Action: Replace or repair defective equipment or 
install any necessary equipment.
    Abatement Period: 30 days.
    b. Each sales tank shall be set and maintained level and free of 
distortion in accordance with the above-referenced API recommended 
practices.

    Violation: Major.
    Corrective Action: Level tank.
    Abatement Period: Prior to sales.
    c. Pursuant to API Standard 2545 (ANSI/ASTM D 1085), Method of 
Gauging Petroleum and Petroleum Products, October 1965 (Reaffirmed 
August 1987), each tank shall be equipped with a gauging reference 
point, with the height of the reference point stamped on a fixed 
bench-mark plate or stenciled on the tank near the gauging hatch.

    Violation: Minor.
    Corrective Action: Affix a gauging reference point in the 
gauging hatch and stamp on bench-mark plate or stencil on tank near 
gauging hatch.
    Abatement Period: 30 days.
    2. Sales Tank Calibrations. Each oil storage tank used for sales 
shall be accurately calibrated for tank gauging, using the API 
Standard 2550 (ANSI/ASTM D 1220), Method for Measurement and 
Calibration of Upright Cylindrical Tanks, 1965 (Reaffirmed August 
1987). The following minimum standards shall be satisfied:
    a. Sales tank capacities shall be determined by actual tank 
measurements by the method known as ``tank calibration,'' and in 
accordance with the above-referenced API standard.

    Violation: Minor.
    Corrective Action: Make capacity determination and develop an 
appropriate capacity table.
    Abatement Period: 60 days.
    b. A sales tank shall be recalibrated if it is relocated or 
repaired or the capacity is changed through denting, damage, or the 
installation or removal of interior components, or otherwise.

    Violation: Minor.
    Corrective Action: Recalibrate tank and develop new (revised) 
capacity table.
    Abatement Period: 60 days.
    c. Calibration charts (tank tables) shall be submitted to the 
authorized officer on request.

    Violation: Minor.
    Corrective Action: Submit requested tables to authorized 
officer.
    Abatement Period: 30 days.
    3. Oil Sampling. Sampling of oil to be sold from a sales tank is 
required and shall be conducted to yield a representative sample of 
the oil for purposes of determining the physical properties of the 
oil, as addressed in C.5. and C.7. of this Section, following the 
API Standards in Chapter 8, Section 1--Manual Sampling (ASTM D 
4057), October 1981 (Reaffirmed August 1987), for thief or tap 
sampling; or Chapter 8, Section 2--Automatic Sampling, April 1983 
(Reaffirmed August 1987), for automatic sampling; or, Chapter 18, 
Section 1--Custody Transfer, First Edition, September 1990, for 
tanks of 1,000 barrels or less in capacity. The sampling shall meet 
the following minimum standards:
    a. All samples shall be taken from the contents of the sales 
tank prior to gauging, after allowing the tank contents to settle 
for at least 30 minutes following isolation of the tank.

    Violation: Major.
    Corrective Action: Repeat sampling procedure.
    Abatement Period: Prior to sales or removal.
    b. Samples for determining the gravity and the sediment and 
water content of the oil in sales tanks of 1,000 barrels or less in 
capacity shall be obtained by the two-sample method. For gravity 
determinations on tanks of 1,000 barrels or less in capacity, one 
representative sample from the middle of the oil column may be used. 
For tanks greater than 1,000 barrels in capacity, samples for 
determining gravity shall be a composite using the two-sample method 
or, if the oil column is greater than 15 feet, the three-sample 
method.

    Violation: Major.
    Corrective Action: Repeat sampling procedure.
    Abatement Period: Prior to sales or removal.
    4. Sales Tank Gauging. Gauging of the oil sales tank is required 
using gauging tapes warranted by the manufacturer as having been 
made in conformity with the applicable specifications of the 
National Institute of Standards and Technology. Other methods of 
gauging may be approved by the authorized officer provided these 
meet or exceed the standard of measurement accuracy achievable by a 
gauging tape. Gauging tapes shall be used to measure the contents of 
the tank accurately, following API Standard 2545 (ANSI/ASTM D 1085), 
Method of Gauging Petroleum and Petroleum Products 1965 (Reaffirmed 
August 1987), or Chapter 18, Section 1--Custody Transfer, First 
Edition, September 1990. Gauging shall meet the following minimum 
standards:
    a. Gauging shall be accomplished using gauging tapes made of 
steel or corrosion-resistant material with the graduations clearly 
legible and not be kinked or spliced. Gauging tapes shall be 
maintained in good working condition.

    Violation: Major.
    Corrective Action: Replace tape.
    Abatement Period: Prior to sales or removal.
    b. Acceptable gauging requires two identical gauges to the 
nearest \1/4\ inch for tanks with a capacity of 1,000 barrels or 
less, and two identical gauges to the nearest \1/8\ inch for tanks 
with a capacity of more than 1,000 barrels.

    Violation: Major.
    Corrective Action: Repeat gauging until two identical readings 
are obtained.
    Abatement Period: Prior to sales or removal.
    c. The proper bob for innage gauging or outage gauging shall be 
used in accordance with the above-referenced API Standard 2545.

    Violation: Major.
    Corrective Action: Repeat gauging using proper bob.
    Abatement Period: Prior to sales or removal.
    5. Oil Gravity. Tests for oil gravity are required using 
instruments warranted by the manufacturer as having been made in 
conformity with the applicable specifications of the National 
Institute of Standards and Technology. All such tests shall be 
conducted in accordance with the API Manual of Petroleum Measurement 
Standards, Chapter 9--Density Determination (ASTM D 1298-80) 1961, 
and ASTM D 287-82, Standard Test Method for API Gravity of Crude 
Petroleum and Petroleum Products (Hydrometer Method). Tests shall be 
performed on a representative sales tank oil sample obtained 
following API Manual of Petroleum Measurement Standards, Chapter 
8.1--Manual Sampling of Petroleum and Petroleum Products (ASTM D 
4057), October 1981 (Reaffirmed August 1987), or Chapter 18, Section 
1--Custody Transfer, First Edition, September 1990, for tanks of 
1,000 barrels or less in capacity. Gravity tests shall meet the 
following minimum standards:
    a. All gravity determinations shall be completed before oil 
sales are made.

    Violation: Major.
    Corrective Action: Obtain sample from sales tank and determine 
oil gravity.
    Abatement Period: Prior to sales or removal.
    b. The instrument used to obtain the oil gravity shall be clean, 
with no loose shot weights or detached gravity scale.

    Violation: Major.
    Correction Action: Clean and/or replace hydrometer.
    Abatement Period: Prior to sales or removal.
    c. The instrument used to obtain the oil gravity shall be 
calibrated for a gravity range that includes the observed gravity of 
the oil sample being tested.

    Violation: Major.
    Corrective Action: Repeat gravity tests using hydrometer with 
proper scale.
    Abatement Period: Prior to sales or removal.
    d. Temperatures shall be measured and recorded to the nearest 
1 deg. F.

    Violation: Major.
    Corrective Action: Repeat test, measuring and recording 
temperature to nearest 1 deg. F.
    Abatement Period: Prior to sales or removal.
    e. Liquid density (gravity) will be measured and recorded to the 
nearest 0.1 deg. API gravity, making any necessary meniscus 
correction. The observed gravity shall be corrected to 60 deg. F., 
using Table 5A, Generalized Crude Oils, Correction of Observed 
Gravity, to API gravity at 60 deg. F.

    Violation: Major.
    Corrective Action: Repeat test, measuring and recording gravity 
to nearest 0.1 deg. API gravity after making necessary correction 
for fluid meniscus.
    Abatement Period: Prior to sales or removal.
    6. Tank Temperature. Determination of the temperature of oil 
contained in a sales tank is required using a thermometer warranted 
by the manufacturer as having been made in conformity with the 
applicable standards of the National Institute of Standards and 
Technology. All such determinations shall be made in accordance with 
API Standard 2543, Method of Measuring the Temperature of Petroleum 
and Petroleum Products (ANSI/ASTM D 1086) October 1965 (Reaffirmed 
August 1987), or Chapter 18, Section 1--Custody Transfer, First 
Edition, September 1990. Temperatures shall be taken with a cup case 
thermometer at the time of the opening and closing gauges. Other 
methods for obtaining tank temperatures may be approved by the 
authorized officer provided that these meet or exceed the standard 
of measurement accuracy achievable by a cup case thermometer. The 
use of cup case thermometers shall meet the following minimum 
standards:
    a. Cup case thermometers shall be no less than 12 inches in 
length, graduated in 1 deg. F., and be equipped with a cup case 
assembly.

    Violation: Major.
    Corrective Action: Use above-specified temperature measurement 
equipment.
    Abatement Period: Prior to sales or removal.
    b. Thermometers shall be kept clean and free of mercury 
separation. The tank temperature shall be taken by immersing the 
thermometer to the approximate vertical center of the fluid column, 
not less than 12 inches from the shell of the tank, for a minimum of 
5 minutes, and then read and recorded to the nearest 1 deg. F.

    Violation: Major.
    Corrective Action: Replace thermometer or repeat measurement, as 
prescribed.
    Abatement Period: Prior to sales or removal.
    7. Sediment and Water Content. Determinations of the sediment 
and water content of oil contained in sales tanks, using samples 
obtained in accordance with Sections III.C.3. and III.C.5.a. hereof, 
is required following the API Manual of Petroleum Measurement 
Standards, Chapter 10--Sediment and Water in Crude Oils by the 
Centrifuge Method (Field Procedure), Second Edition, May 1988 (ASTM 
96-88), or Chapter 18, Section 1--Custody Transfer, First Edition, 
September 1990, for tanks of 1,000 barrels or less in capacity, and 
shall meet the following minimum standards:
    a. A thoroughly mixed oil sample-solvent combination, prepared 
in accordance with the procedures described in the above-referenced 
API standards, shall be heated to at least 140  deg.F. if asphaltic-
based oil, or to at least 160  deg.F., if paraffin-based oil, prior 
to centrifuging.

    Violation: Major.
    Corrective Action: Repeat procedures using the defined 
standards.
    Abatement Period: Prior to sales or removal.
    b. The heated sample shall be whirled in the centrifuge for not 
less than 5 minutes and, at the conclusion of centrifuging, the 
temperature shall be a minimum of 115  deg.F. without water-
saturated diluent, or a minimum of 125  deg.F. with water-saturated 
diluent.

    Violation: Major.
    Corrective Action: Repeat test, as prescribed.
    Abatement Period: Prior to sales or removal.
    c. The combined volume of sediment and water at the bottom of 
the 100 ml. centrifuge tube shall be read:
    (1) To the nearest 0.05 ml. in the range from 0.1 to 1 ml.
    (2) To the nearest 0.1 ml. if above the 1 ml. graduation.
    (3) Estimated to the nearest 0.0025 ml. if the volume is less 
than 0.1 ml.
    The sediment and water volume in the centrifuge tube so 
determined shall be multiplied by the appropriate factor for the 
centrifuge tube size and oil sample-solvent ratio, as specified in 
the above-referenced API standards, and the product recorded as the 
percentage of water and sediment.

    Violation: Major.
    Corrective Action: Repeat test as specified or repeat procedures 
using specified factors.
    Abatement Period: Prior to sales or removal.

D. Oil Measurement by Positive Displacement Metering System

    Oil measurement by a positive displacement metering system, for 
purposes of oil sales, shall be accomplished by a Lease Automatic 
Custody Transfer (LACT) unit designed to provide for the unattended 
transfer of liquid hydrocarbons from a production facility to the 
transporting carrier while providing proper and accurate means for 
the determination of net standard volume and quality, while also 
providing for fail-safe and tamper-proof operations in accordance 
with the regulations at 43 CFR 3162.7-5 and Onshore Oil and Gas 
Order No. 3.
    A positive displacement meter is one that registers the volume 
passing through said meter by a system that constantly and 
mechanically isolates the flowing liquid into segments of known 
volume.
    LACT unit design shall follow API Specification 11N for Lease 
Automatic Custody Transfer (LACT) Equipment, 1988, and API Manual of 
Petroleum Measurement Standards, Chapter 6--Metering Assemblies, 
Section 1, LACT Systems, February 1981 (Reaffirmed August 1987). 
LACT units shall be constructed and operated so as to satisfy the 
following requirements and minimum standards:

1. LACT Unit Components and General Operating Requirements

    a. As a minimum, each LACT unit shall include all of the 
following listed components:
    (1) Charging pump and motor.
    (2) Sampler, composite sample container, and mixing system.
    (3) Strainer.
    (4) Positive displacement meter.
    (5) Meter proving connections.
    (6) Meter backpressure valve and check valve.
    (7) Air eliminator.
    (8) Diverter valve or shut-off valve.
    (9) Sediment and Water Monitor.
    (10) Automatic Temperature/Gravity Compensator (ATC or ATG) or 
Electronic Temperature Recorder.

    Violation: Major: a.1., 2., 4., 5., 6., and 10.
    Corrective Action: Install component.
    Abatement Period: Prior to sales or removal.

    Violation: Minor: a.3., 7., 8., and 9.
    Corrective Action: Install component.
    Abatement Period: 30 days.
    b. All components of a LACT unit shall be accessible for 
reasonable inspection by the authorized officer.

    Violation: Minor.
    Corrective Action: Provide authorized officer with means of 
access to LACT.
    Abatement Period: 30 days.
    c. The authorized officer shall be notified of any LACT unit 
failure, such as electrical, meter, or other failure that results in 
the use of an alternate method of measurement.

    Violation: Minor.
    Corrective Action: Notify authorized officer of alternate method 
used.
    Abatement Period: By 5th business day following use of alternate 
method.
    d. Any and all tests conducted on oil samples extracted from 
LACT samplers for determination of oil gravity and sediment and 
water (S&W) content shall meet the same requirements and minimum 
standards specified in this Order for determining the gravity and 
S&W content of oil sold or removed by the tank gauging method of 
measurement (Section III.C.5. and C.7.).

    Violation: Major.
    Corrective Action: Report tests for gravity and S&W content per 
Section III.C.5. and C.7. minimum standards.
    Abatement Period: Prior to sales or removal.
    2. Operating Requirements for LACT Unit Components. All required 
LACT unit components shall be operated to satisfy the following 
minimum standards:
    a. Charging pump and motor. The LACT unit shall include an 
electrically driven pump rated for a discharge pressure and rate 
that are compatible with the rating for meter used and be sized to 
assure turbulent flow in the LACT main stream piping.

    Violation: Major.
    Corrective Action: Install properly designed pump and motor.
    Abatement Period: Prior to sales or removal.
    b. Sampler. The sampler probe shall extend into the center \1/3\ 
of the flow piping in a vertical run at least 3 pipe diameters 
downstream of any pipe fitting. The probe shall always be in a 
horizontal position.

    Violation: Major.
    Corrective Action: Install component properly.
    Abatement Period: Prior to sales or removal.
    c. Composite Sample Container. The composite sample container 
shall be capable of holding the sample under pressure and shall be 
equipped with a vapor proof top closure and operated to prevent the 
unnecessary escape of vapor, and the container shall be emptied upon 
completion of each sample withdrawal.

    Violation: Major.
    Corrective Action: Install component properly, and empty after 
each sample withdrawal.
    Abatement Period: Prior to sales or removal.
    d. Mixing System. The mixing system shall completely blend the 
sample into a homogeneous mixture before and during the withdrawal 
of a portion of the sample for testing.

    Violation: Major.
    Corrective Action: Repair mixing system.
    Abatement Period: Prior to sales or removal.
    e. Strainer. The strainer shall be made of corrosion-resistant 
material of a mesh size no larger than \1/4\ inch, shall be 
constructed so that it may be depressurized, opened, and cleaned, 
and shall be installed upstream of the meter.

    Violation: Minor.
    Corrective Action: Replace with properly designed strainer and/
or install properly.
    Abatement Period: 30 days.
    f. Positive Displacement Meter. The meter shall register the 
volume of oil passing through it utilizing a system that constantly 
and mechanically isolates the flowing oil into segments of known 
volume, and be equipped with a non-resettable totalizer.

    Violation: Major.
    Corrective Action: Replace or repair meter or non-resettable 
totalizer.
    Abatement Period: Prior to sales or removal.
    g. Meter Proving Connections. All meter proving connections 
shall be installed downstream from the LACT meter, with the line 
valve(s) between the inlet and outlet of the prover loop having a 
double block and bleed design feature to provide for leak testing 
during proving operations.

    Violation: Major.
    Corrective Action: Relocate the prover loop downstream from LACT 
meter, and install block and bleed valve, as specified.
    Abatement Period: Prior to proving LACT.
    h. Back Pressure and Check Valves. The back pressure valve and 
check valve shall be installed downstream from the LACT meter and 
meter proving connections.

    Violation: Major.
    Corrective Action: Install back pressure valve and check valve 
downstream from LACT and meter proving connections.
    Abatement Period: Prior to sales or removal.
    i. Air Eliminator. The air eliminator shall be installed and 
prevent air/gas from entering the meter.

    Violation: Minor.
    Corrective Action: Install air eliminator.
    Abatement Period: 30 days.
    j. Diverter Valve/Shut-off Valve. The diverter valve/shut-off 
valve shall be activated by the S&W monitor so that the valve moves 
to divert flow to the clean oil discharge only when it receives a 
positive signal, or provide a shut-off valve configured to shut off 
oil delivery upon failure to receive a positive signal from the S&W 
Monitor.

    Violation: Minor.
    Corrective Action: Install diverter/shut-off valve.
    Abatement Period: 30 days.
    k. Sediment and Water (S&W) Monitor. The S&W Monitor shall be an 
internally plastic-coated capacitance probe, no smaller in diameter 
than the skid piping, and shall be mounted in a vertical pipe 
located upstream from the diverter/shut-off valve and the meter.

    Violation: Minor.
    Corrective Action: Install S&W monitor.
    Abatement Period: 30 days.
    l. Automatic Temperature/Gravity Compensators (ATC or ATG) and 
Electronic Temperature Recorders. Automatic Temperature Compensators 
shall be sized according to the characteristics of the fluid being 
measured. If an Electronic Temperature Averager is used in lieu of 
an ATC or ATG, it shall be installed in accordance with the 
manufacturer's specifications and shall meet the following minimum 
standards:
    (1) The temperature shall be recorded at least once per barrel 
put through the positive displacement meter.
    (2) The accuracy of the temperature probe shall be at least 
0.5  deg.F. over the probe's operating range.
    (3) The temperature shall be recorded to the nearest 0.1  deg.F. 
with a count accuracy of 1 percent.
    (4) A backup power source shall be available to preserve all 
data in case of a failure of the primary power source.
    (5) The reset switch and internal circuitry shall be encased in 
a boxed enclosure having the capability of being sealed.
    (6) The temperature averager shall be equipped with a printer 
output for maintaining permanent records.

    Violation: Major.
    Corrective Action: Install properly sized ATC or ATG or properly 
sized electronic temperature averager.
    Abatement Period: Prior to sales or removal.
    3. Sales Meter Proving Requirements. LACT positive displacement 
meters shall be proved periodically. Meter provings shall follow API 
Manual of Petroleum Measurement Standards, Chapter 4--Proving 
Systems, 1978, and shall meet the following minimum standards.
    a. The types of meter provers to be used and the calibration 
requirements are as follows:
    (1) The acceptable types of meter provers are pipe provers, tank 
provers, master meters, or other API-recognized meter provers.

    Violation: Minor.
    Corrective Action: Prove again with acceptable meter prover.
    Abatement Period: 30 days.
    (2) If a pipe or tank prover is used, the operator shall provide 
documentation to demonstrate that the prover has been calibrated 
within the last 12 months. The documentation shall include the 
unique number assigned to and inscribed on the prover. The 
calibration documentation for a pipe or tank prover shall show the 
certified volume as determined by the water draw method. The 
allowable tolerance for calibrating a pipe or tank prover shall be 
within 0.0002 (0.02 percent).
    If a master meter is used, the operator shall provide 
documentation of the most recent calibration report for said master 
meter. The calibration report shall show that the master meter has 
been calibrated in accordance with API requirements within the last 
90 days, demonstrate that the master meter has an operating factor 
within the range from 0.9900 to 1.0100, and that 5 consecutive runs 
were matched within a tolerance of 0.0002 (0.02 percent).

    Violation: Minor.
    Corrective Action: Provide required calibration certification.
    Abatement Period: Prior to proving.
    b. Minimum Proving Frequency: For all sales and allocation 
meters, the accuracy of the measuring equipment at the point of 
delivery or allocation shall be tested following initial meter 
installation or following repair, and if proven adequate, at least 
quarterly thereafter unless a longer period is approved in writing 
by the authorized officer.

    Violation: Minor.
    Corrective Action: Notify authorized officer of scheduled 
proving and prove meter.
    Abatement Period: Within 10 business days.
    (1) In the event that the total throughput of a meter exceeds 
100,000 bbls. per month, then proving shall be accomplished monthly.

    Violation: Minor.
    Corrective Action: Prove meter on a monthly basis.
    Abatement Period: By the 10th business day after notification by 
the authorized officer.
    (2) The operator shall notify the authorized officer at least 10 
business days prior to proving a sales or allocation meter.

    Violation: Minor.
    Corrective Action: Notify authorized officer prior to the next 
scheduled proving.
    Abatement Period: At least 10 business days prior to the next 
scheduled proving.
    c. Establishing the Operating Meter Factor. (1) At least five 
consecutive runs shall match within a tolerance of 0.0005 (0.05 
percent) between the highest and lowest readings. This required 
repeatability shall be achieved prior to establishing a meter factor 
and completing the meter proving report.

    Violation: Major.
    Corrective Action: Notify authorized officer and re-prove the 
meter.
    Abatement Period: 10 business days.
    (2) The arithmetic average of these 5 consecutive runs shall be 
used for computation of the meter factor.

    Violation: Minor.
    Corrective Action: Compute meter factor using arithmetic average 
of the 5 consecutive runs.
    Abatement Period: Prior to completion of proving.
    (3) If the LACT is equipped with an electronic temperature 
averager, the accuracy of the averager shall be compared with a 
mercury thermometer over the operating range of the averager.

    Violation: Major.
    Corrective Action: Conduct the required temperature recording 
accuracy comparison.
    Abatement Period: Prior to the completion of proving.
    (4) Meter factor computations shall also include the correction 
factor for the effect of pressure on steel (Cps.) for provers; the 
correction factor for the effect of temperature on steel (Cts.) for 
provers; the correction factor for the effect of temperature on 
liquid (Ctl.); and the correction factor for the effect of pressure 
on liquid (Cpl.). The Cps. and Cts. correction factors shall be 
determined using the API Manual of Petroleum Measurement Standards, 
Chapter 12, Section 2, 1981, or latest revised API standard. The 
Ctl. correction factor shall be obtained from the API Standard 2540, 
Chapter 11.1, Volume I (ASTM D 1250-80), Table 6A, 1980, or latest 
revised API standard, and the Cpl. correction factor shall be 
obtained from the API Manual of Petroleum Measurement Standards, 
Chapter 11.2.1, or the latest revised API standard.

    Violation: Minor.
    Corrective Action: Include proper correction factors.
    Abatement Period: Prior to the completion of meter proving.
    (5) The initial meter factor for a new or repaired meter shall 
be within the range from 0.9950 to 1.0050, unless the deviation can 
be justified to the satisfaction of the authorized officer.

    Violation: Minor.
    Corrective Action: Replace/repair/re-prove meter or justify to 
authorized officer deviation from the specified range of 0.9950 to 
1.0050.
    Abatement Period: Prior to the completion of meter proving.
    4. Excessive Meter Factor Deviation. Excessive meter factor 
deviation may be evidence of meter malfunction, and corrective 
action shall be taken upon discovery of a meter malfunction. 
However, if the operator determines that the meter did not, in fact, 
malfunction, the operator shall submit, for approval by the 
authorized officer, a report of the findings and reasons for the 
excessive meter factor deviation and the determination of no meter 
malfunction. In the event a malfunction occurred, the meter shall be 
immediately removed from service, checked for damage or wear, 
adjusted and/or repaired, and re-proven prior to return to service. 
The arithmetic average of the malfunction factor and the previous 
factor shall be applied to the production measured through the meter 
between the date of the previous factor and the date of the 
malfunction factor.
    Malfunction meter factors shall be clearly indicated on the 
proving report, and the report shall also contain all appropriate 
remarks regarding subsequent repairs and/or adjustments. The minimum 
standards for evidence of a meter malfunction, and corrective action 
required, are as follows:
    a. Deviation in the meter factor shall not exceed 
0.0025 since the last proving of the meter unless 
explained by changed conditions, i.e., temperature, gravity, or 
flow-rate.

    Violation: Minor.
    Corrective Action: Replace or repair the meter and make 
appropriate volume adjustments. If the operator determines that no 
meter malfunction occurred, a report stating the reasons supporting 
that determination shall be submitted to the authorized officer for 
approval. If a malfunction did occur, the meter shall remain out of 
service until repaired or replaced and a new meter factor is 
established. Applicable volume adjustments, reports, and other 
information shall be submitted to the authorized officer.
    Abatement Period: Within 10 business days after the initial 
proving of the repaired or new meter.
    b. A meter factor shall not exceed 1 percent above or below 
unity, i.e., outside of the range from 0.9900 to 1.0100.

    Violation: Minor.
    Corrective Action: Make proper adjustments and note on proving 
report.
    Abatement Period: Prior to the completion of meter proving.
    5. Meter Reporting Requirements. All meter provings, meter 
failures, and volume adjustments following a meter malfunction shall 
be reported to the authorized officer, as follows:
    a. Meter Proving Reports. The meter proving report shall be 
filed on one of the forms set out in API Manual of Petroleum 
Measurement Standards, Chapter 12--Calculation of Petroleum 
Quantities, Section 2--Calculation of Liquid Petroleum Quantities 
Measured by Turbine or Displacement Meters, 1981 (Reaffirmed August 
1987). Any similar format is acceptable provided all required data 
are included and a proper calculation sequence is maintained.
    Each meter proving report shall be identified by lease number, 
communitization agreement number, or unit participating area name, 
and the location of the facility.
    Each meter proving report shall be filed with the authorized 
officer no later than 10 business days following the meter proving.

    Violation: Minor.
    Corrective Action: Submit proper proving report to authorized 
officer.
    Abatement Period: File with authorized officer no later than the 
10th business day following notification by the authorized officer.
    b. Meter Factor Effective Date. The date on which a meter is 
proved shall be used as the effective date of the meter factor until 
the next factor is established.

    Violation: Minor.
    Corrective Action: Apply the effective meter factor to the 
appropriate run ticket sales volume.
    Abatement Period: Within 10 business days.

E. Documentation of the Removal of Crude Oil From Storage 
Facilities

1. Transfers by Tank Gauging

    The run ticket, as a minimum, shall include the following:
    a. The name of the seller.
    b. The Federal or Indian lease number or Indian agreement number 
or, if appropriate, the communitization agreement number, or unit 
agreement name and number and the participating area 
identification.*
    c. The location of the tank by quarter-quarter section, section, 
township, and range, or other location description methods 
acceptable to the authorized officer.
    d. The unique tank number and capacity.
    e. The unique run ticket number.
    f. The date(s) of the transaction.
    g. The opening gauge and opening oil temperature.*
    h. The closing gauge and closing oil temperature.*
    i. The API gravity at 60  deg.F or observed gravity and 
temperature.*
    j. The observed sediment and water (S&W) percentage.*
    k. The number of each seal removed.
    l. The number of each seal installed.
    m. The signature of the purchaser's representative.
    n. The signature of the operator's representative made within 2 
business days after the sale or removal.

    Violation: Minor (unless marked by asterisk).
    Corrective Action: Submit the missing information.
    Abatement Period: Within 7 business days of notice.

    Violation: Major (if marked by asterisk).
    Corrective Action: Submit a complete, correct run ticket.
    Abatement Period: Within 3 business days of notice.

2. Transfers by LACT

    The run ticket, at a minimum, shall include the following:
    a. The name of the seller.
    b. The Federal or Indian lease number or Indian agreement number 
or, if appropriate, the communitization agreement number, or unit 
agreement name and number and the participating area 
identification.*
    c. The location of the tank(s) by quarter-quarter section, 
section, township, and range, or other location description methods 
acceptable to the authorized officer.
    d. The meter's unique identification number.
    e. The opening and closing dates.
    f. The opening and closing meter readings.*
    g. Effective meter factor(s).
    h. The observed sediment and water (S&W) percentage.*
    i. The API gravity at 60  deg.F or observed gravity and 
temperature.*
    j. The signature of the purchaser's representative.
    k. The signature of the operator's representative made within 2 
business days after the sale or removal.

    Violation: Minor (unless marked by asterisk).
    Corrective Action: Submit the missing information.
    Abatement Period: Within 7 business days of notice.

    Violation: Major (if marked by asterisk).
    Corrective Action: Submit a complete, correct run ticket.
    Abatement Period: Within 3 business days of notice.

3. Transfers by Truck

    When a single truckload constitutes a complete sale or removal, 
the minimum information required to be in the driver's possession 
includes the following:
    a. The name of the seller.
    b. The Federal or Indian lease number or Indian agreement number 
or, if appropriate, the communitization agreement number, or unit 
agreement name and number and the participating area identification.
    c. The location of the tank(s) by quarter-quarter section, 
section, township, and range, or other location description methods 
acceptable to the authorized officer.
    d. The unique tank number(s) if by tank gauging and/or the 
unique identification number of the LACT meter(s) involved.
    e. The date(s) of the transaction.
    f. The approximate volume of oil on board.
    g. The name of the first purchaser or destination.
    When multiple truckloads are involved in a sale or removal, only 
the driver of the last truck is required to have the documentation 
listed in paragraphs a. through g. on board. All other drivers shall 
have in their possession appropriate documentation in the form of a 
trip log or manifest.

    Violation: Major.
    Corrective Action: Discontinue trucking operation until the 
required documentation is provided.
    Abatement Period: Immediately.

F. Oil Measurement by Other Methods or at Other Locations 
Acceptable to the Authorized Officer

    Any method of oil measurement other than tank gauging or 
positive displacement metering system requires the prior approval of 
the authorized officer based on applicable API standards. Other 
measurement methods include, but are not limited to, turbine 
metering systems, measurement by calibrated tank truck, measurement 
by weight, and net oil computer.
    The requirements and minimum standards for oil measurements by 
an alternate method on the lease, unit, unit participating area, or 
communitized area, or by either an authorized or an alternate method 
of measurement at a location off the lease, unit, unit participating 
area, or communitized area, are as follows:
    1. Measurement on the Lease, Unit, Unit Participating Area or 
Communitized Area.
An application for approval of an alternate oil measurement method 
shall be submitted to the authorized officer, and written approval 
obtained, before any such alternate oil measurement method is utilized. 
An operator requesting approval of any alternate oil sales measurement 
system shall submit performance data, actual field test results, or any 
other supporting data or evidence acceptable to the authorized officer 
to demonstrate that the proposed alternate oil sales measurement system 
will meet or exceed the objectives of the applicable minimum 
standard(s) or will not adversely affect royalty income or production 
accountability.

    Violation: Major.
    Corrective Action: Shut in operations. Submit application for 
approval of desired alternate method of oil measurement.
    Abatement Period: Prior to sales or removal.
    2. Measurement and/or storage at a Location off the Lease, Unit, 
Unit Participating Area, or Communitized Area. a. An application for 
off-lease measurement and/or storage shall be submitted to the 
authorized officer and written approval obtained before any such 
off-lease oil measurement and/or storage facilities are installed or 
operated. The application for written approval of off-lease 
measurement and/or storage shall justify the intended off-lease 
location of the measurement and/or storage facilities before 
approval will be granted. No additional approval as to the oil 
measurement method is required, provided that measurement is to be 
accomplished by tank gauging or positive displacement metering 
system, pursuant to the requirements and minimum standards of this 
Order.
    Applications for off-lease measurement and/or storage of oil 
produced from the same formation and same source (lease, or unit 
area, or unit participating area, or communitized area) shall be 
justified by valid environmental, topographic, or economic concerns, 
or any combination thereof (e.g., environmental problems that 
preclude the cost effective construction of an on-lease measurement 
and/or storage facility; better access to all weather roads, 
pipeline connections, and truck loading points; or increased 
production value through reduction of transportation costs). In 
addition to the above justification, the application shall be 
accompanied by the following:
    (1) A map showing the single source (the lease, unit area, unit 
participating area, or communitized area), and the well(s) thereon 
producing from the same formation, for which approval is sought for 
an off-lease measurement and/or storage facility; and
    (2) A schematic diagram that clearly shows and identifies all 
equipment and piping that will be used for this purpose, both on and 
off the source.
    No additional wells from the same source shall be added to an 
approved off-lease measurement and/or storage facility without the 
authorized officer's prior concurrence. Oil produced from wells 
located on other sources or produced from different formations on 
the same source may not be combined with the oil production at an 
approved off-lease measurement and/or storage facility without the 
prior written approval of the authorized officer to commingle the 
production pursuant to Section III.H.

    Violation: Minor.
    Corrective Action: Submit application for written approval of 
off-lease measurement.
    Abatement Period: Within 20 business days.
    b. If oil measurement and/or storage is to be accomplished at a 
location off the lease, unit, unit participating area, or 
communitized area by an alternate measurement method (any method 
other than tank gauging or positive displacement metering system), 
then the application, in addition to justifying the location of the 
off-lease measurement and/or storage facilities, shall also 
demonstrate the acceptability of the proposed alternate measurement 
method, pursuant to Section III.F.1.

    Violation: Major.
    Corrective Action: Include in the application for approval of 
off-lease measurement justification of the desired method of 
measurement.
    Abatement Period: Prior to sales or removal.

G. Determination of Oil Volumes by Methods Other Than Measurement

    Pursuant to 43 CFR 3162.7-2, when production cannot be measured 
due to spillage or leakage, the amount of production shall be 
determined in accordance with the methods approved or prescribed by 
the authorized officer. This category of production includes, but is 
not limited to, oil that is classified as slop oil or waste oil. No 
slop or waste oil may be sold or otherwise disposed of without prior 
approval from the authorized officer.
    The minimum standards for determining the volume of oil that 
cannot be measured are as follows:
    1. No oil located in an open pit or sump, in a stock tank, in a 
production vessel, or elsewhere, may be classified or disposed of as 
waste oil unless it can be shown, to the satisfaction of the 
authorized officer, that it is not economically feasible to put the 
oil into marketable condition.

    Violation: Major.
    Corrective Action: Put oil into marketable condition or 
demonstrate the economic infeasibility thereof.
    Abatement Period: Within 10 business days.
    2. Following the approved sale or disposal of slop or waste oil, 
the operator shall notify the authorized officer within 20 days as 
to the volume sold or disposed, and the method used to compute the 
volume.

    Violation: Major.
    Corrective Action: Submit complete report of sale or disposal.
    Abatement Period: Within 24 hours of the notification by the 
authorized officer that the report has not been received.

H. Commingling of Production

    Pursuant to 43 CFR 3162.7-2, oil production from different 
formations on the same source (lease, unit area, unit participating 
area, communitized area), or from the same formation but from a 
different source, may not be commingled with one another on the 
surface without the prior written approval of the authorized 
officer.
    1. Application for approval to commingle oil production on the 
surface shall provide a detailed explanation of the proposed 
operation and the necessity for doing so, and be accompanied by:
    a. A map showing, as appropriate, all leases, unit areas, unit 
participating areas, communitized areas, and the wells thereon that 
will contribute oil production to the commingled storage facility;
    b. A schematic diagram that clearly shows and identifies all 
equipment and piping to be used for this purpose;
    c. The estimated monthly quantity and quality of the oil to be 
contributed by the well(s) on each source;
    d. Details of the method proposed for allocating production and 
related revenues back to each contributing source;
    e. A statement that all working and basic royalty owners in the 
involved sources have been notified of the proposed commingling;
    f. Calculations showing that the royalty value attributable to 
the involved Federal and/or Indian lease(s) will not be reduced if 
the commingling is approved; and
    g. If the reason for the application is to avoid the premature 
abandonment of all or a majority of the wells involved, a detailed 
economic evaluation supporting that reason shall be included.
    No additional wells or sources may be added to an approved 
commingled facility without the prior written approval of the 
authorized officer.

    Violation: Major.
    Corrective Action: Submit application for approval to commingle 
or to add wells, formations, or sources to an approved commingled 
facility.
    Abatement Period: Prior to sales or removal.
    2. Applications for approval to commingle oil production from 
different formations in a single wellbore shall provide a detailed 
explanation as to the necessity for doing so and shall include:
    a. A map showing all wells for which approval is sought for 
wellbore commingling and the source (lease, unit area, unit 
participating area, communitized area) on which each such well is 
located;
    b. The estimated monthly quantity and quality of the oil to be 
contributed by each formation in each well;
    c. Details of the method proposed for allocating the production 
and related revenues back to each formation in each well; and
    d. Calculations showing that the royalty value attributable to 
the Federal and/or Indian leases involved will not be reduced if the 
wellbore commingling is approved.

    Violation: Minor.
    Corrective Action: Submit application for approval of wellbore 
commingling.
    Abatement Period: 20 days.

IV. Variances From Minimum Standards

    An operator may request the approval of the authorized officer 
for a variance from any of the minimum standards prescribed in 
Section III. All such requests shall be submitted in writing to the 
appropriate authorized officer and shall provide information as to 
the circumstances that warrant approval of the variance(s) requested 
and the proposed alternative means by which the related minimum 
standard(s) will be satisfied. The authorized officer, after 
considering all relevant factors, shall approve the requested 
variance(s) on making a determination that the proposed 
alternative(s) meet or exceed the objectives of the applicable 
minimum standard(s), or will not adversely affect royalty income or 
production accountability. In addition, approval may be given orally 
by the authorized officer before the operator initiates actions that 
require a variance from minimum standards. The oral request, if 
granted, shall be followed by a written request not later than the 
fifth business day following oral approval, and written approval 
will then be granted.
    The authorized officer, on his/her motion, also may issue NTLs 
(Notices to Lessees) that establish modified standards or variances 
for specific geographic areas of operations.
    After notice to the operator, the authorized officer also may 
require compliance with standards that exceed those contained in 
this Order whenever such additional requirements are necessary to 
achieve protection of royalty income or production accountability. 
The rationale for any such additional requirements shall be 
documented in writing to the operator.

Attachment

    I. Sections from 43 CFR subparts 3163 and 3165 (not included 
with the Federal Register publication).

[FR Doc. 94-5316 Filed 3-8-94; 8:45 am]
BILLING CODE 4310-84-P