[Federal Register Volume 71, Number 45 (Wednesday, March 8, 2006)]
[Proposed Rules]
[Pages 11557-11559]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-2170]
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DEPARTMENT OF THE INTERIOR
Bureau of Land Management
43 CFR Part 3100
Minerals Management Service
30 CFR Part 203
[WO-310-06-1310-PP]
RIN 1004-AD82
Enhanced Oil and Natural Gas Production Through Carbon Dioxide
Injection
AGENCY: Bureau of Land Management, Minerals Management Service,
Interior.
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: The Bureau of Land Management (BLM) and the Minerals
Management Service (MMS) request comments and suggestions to assist in
preparing a proposed rule governing carbon dioxide injection for
increased production and recovery of oil and natural gas. The rule
would provide for royalty relief incentives to promote the capture,
transportation, and injection of produced carbon dioxide
(CO2), natural CO2, and other appropriate gases
or other matter for injection/sequestration into oil and gas fields, to
promote oil and natural gas production from the Outer Continental Shelf
(OCS) and onshore Federal leases. We encourage members of the public to
provide comments and suggestions to help clarify and define the
requirements for enhanced oil and natural gas recovery production
incentives as described in the Energy Policy Act of 2005.
DATES: We will accept comments and suggestions on the advance notice of
proposed rulemaking until April 7, 2006.
ADDRESSES: You may submit comments by any of the following methods
listed below. Federal rulemaking portal: http://www.regulations.gov
(Follow the instructions for submitting comments.) Internet e-mail:
[email protected]. (Include ``Attn: AD82'') Mail: Director
(630), Bureau of Land Management, Administrative Record, Room 401-LS,
Eastern States Office, 7450 Boston Boulevard, Springfield, Virginia
22153. Personal or messenger delivery: Room 401, 1620 L Street, NW.,
Washington, DC 20036.
FOR FURTHER INFORMATION CONTACT: For onshore, Thomas J. Zelenka at
(202) 452-0334 and for offshore, Marshall Rose at (703) 787-1536, as to
the substance of the advance notice, or Ted Hudson at (202) 452-5042,
as to procedural matters. Persons who use a telecommunications device
for the deaf (TDD) may call the Federal Information Relay Service
(FIRS) at 1-800-877-8330, 24 hours a day, seven days a week, to contact
the above individuals.
SUPPLEMENTARY INFORMATION:
I. Public Comment Procedures
II. Background
III. Description of Information Requested
I. Public Comment Procedures
A. How Do I Comment on the Advance Notice of Proposed Rulemaking?
Your written comments should:
Be specific;
Explain the reason for your comments and suggestions; and
Be about the issues outlined in the notice.
Comments and recommendations that will be most useful and likely to
influence decisions on the content of the proposed rule are:
Those supported by quantitative information or studies,
and
Those that include citations to and analyses of any
applicable laws and regulations.
We are particularly interested in receiving comments and
suggestions about the topics listed under Section III. Description of
Information Requested.
If you wish to comment, you may submit your comments by any one of
several methods, in each case referring to ``1004-AD82''.
You may mail comments to Director (630), Bureau of Land
Management, Administrative Record, Room 401 LS,
[[Page 11558]]
Eastern States Office, 7450 Boston Boulevard, Springfield, Virginia
22153.
You may deliver comments to Room 401, 1620 L Street, NW.,
Washington, DC 20036.
You may comment on the rule at the Federal eRulemaking
Portal: http://www.regulations.gov following the instructions at that
link.
You may also comment via e-mail to: [email protected].
BLM and MMS may not necessarily consider or include in the
Administrative Record for the final rule comments that BLM receives
after the close of the comment period (see DATES) or comments delivered
to an address other than those listed above (see ADDRESSES).
B. May I Review Comments Submitted by Others?
Comments, including names and street addresses of respondents, will
be available for public review at the address listed under ``ADDRESSES:
Personal or messenger delivery'' during regular business hours (7:45
a.m. to 4:15 a.m.), Monday through Friday, except holidays.
Individual respondents may request confidentiality, which we will
honor to the extent allowable by law. If you wish to withhold your name
or address, except for the city or town, you must state this
prominently at the beginning of your comment. We will make all
submissions from organizations or businesses, and from individuals
identifying themselves as representatives or officials of organizations
or businesses, available for public inspection in their entirety.
II. Background
A. Statutory: The Energy Policy Act of 2005 (EPAct), at Section
354, Enhanced Oil and Natural Gas Production through Carbon Dioxide
Injection, is intended: (1) To promote the capture, transportation, and
injection of produced CO2, natural CO2, and other
appropriate gases or other substances for sequestration into oil and
gas fields; and (2) to promote oil and natural gas production from the
OCS and onshore Federal leases by providing royalty incentives to use
enhanced recovery techniques using injection of substances referred to
above. The statute directs the Secretary to undertake a rulemaking to
grant royalty relief ``if the Secretary determines that reduction of
the royalty under a Federal oil and gas lease * * * is in the public
interest and promotes the purposes of this section * * *''. The EPAct,
at Section 354(b)(2), also directs the Secretary to issue an Advance
Notice of Proposed Rulemaking within 180 days after the August 8, 2005,
date of its enactment.
B. Technical Review: Traditional primary and secondary oil
production methods typically recover one third of the oil in place in a
field. This leaves behind two thirds of the oil as a target for
enhanced oil recovery (EOR) techniques. Thermal, chemical, and gas
flooding are three major EOR methods which have been developed and
utilized for maximizing oil reserves recovery from onshore fields.
EOR is fairly advanced in some regions of the United States. Steam
flooding is used to enhance production from many California fields
because the oil can be very viscous. CO2 flooding is common
in the fields in New Mexico, West Texas, western Oklahoma, and Wyoming
because commercial pipelines deliver the CO2 gas to these
regions from natural CO2 sources or from natural gas
processing plants. CO2 is also available for some fields in
Mississippi and Louisiana. EOR operations are not common in most of the
rest of the nation because steam is not needed or CO2 is not
available. Where CO2 from natural sources is not available
nearby, the use of CO2 sequestration from gas processing or
other industrial plants may be an alternative source.
Studies conducted by DOE and industry estimate that 55 percent of
oil and 33 percent of gas remain stranded offshore Louisiana using
traditional primary and secondary recovery practices. Preliminary
research suggests that one-tenth to one-third of that stranded resource
could be recovered using CO2 EOR technology. In Norway, the
target for original oil left behind in place is about 45% and other new
offshore projects are attempting further increases in the rate of
recovery. Domestically, incentives to spur new technology may encourage
additional technologies and recovery efficiencies.
C. Ongoing Research and Development Activities: The potential for
enhanced oil recovery through CO2 injection has been
demonstrated to be a viable technology for mature onshore oil fields.
Until recently, most of the CO2 used for EOR projects has
come from naturally-occurring reservoirs. New technologies are being
developed to produce CO2 from industrial applications such
as natural gas processing, fertilizer, ethanol, and hydrogen plants in
locations where naturally-occurring CO2 reservoirs are not
available.
Large scale field expansion potential for enhanced coal bed methane
(ECBM) gas recovery through CO2 and nitrogen gas
(N2) injection into coal bed natural gas reservoirs has not
yet been demonstrated to be technically and economically feasible.
Until more pilot performance testing can be successfully performed and
evaluated for large project expansion, enhanced natural gas production
potential remains to be realized.
III. Description of Information Requested
We are committed to carrying out the provisions of the EPAct. The
diverse enhanced recovery (ER) techniques available for increasing oil
and gas recovery from the OCS and onshore Federal lands suggest that a
rule providing for a flexible, case-by-case assessment of each ER
application for royalty relief would be the most logical approach to
take.
The CO2 and other gases or matter injection production
incentive aims to promote additional oil and natural gas recovery from
mature oil and natural gas fields by providing a royalty suspension
volume of up to 5 million barrels of oil equivalent for each eligible
lease, the maximum amount authorized under the EPAct. A lease may be
eligible if:
It is a lease for the production of oil and gas from the
OCS or Federal onshore lands;
The injection of produced CO2, natural
CO2, and other appropriate gases or matter will be used as
an enhanced recovery technique on such lease; and
The Secretary determines the lease contains oil or gas
that would likely not be produced without the royalty reduction
provided in the EPAct.
The royalty relief, if authorized under a final rule and approved for
an eligible lease, would apply only to production occurring on or after
the date of publication of this advance notice of proposed rulemaking.
Under Section 354(b)(4) of the EPAct, while relief is retroactive to
the date of the advance notice of proposed rulemaking, lessees must pay
royalty on production that occurs before publication of a final rule.
However, lessees may request a refund of the royalties paid after
publication of a final rule. In addition, pursuant to Section 354(b)(5)
of the EPAct, royalty relief may be subject to oil and natural gas
price threshold provisions or other limitations based on market price.
We are interested in receiving comments regarding incentive
provisions that would encourage enhanced recovery techniques to
increase oil and gas production from existing fields.
Topics we are considering for the proposed regulations include, but
are not limited to, the following:
1. Is there an appropriate Federal role in providing production
incentives for
[[Page 11559]]
enhanced oil and gas recovery projects or should such decisions be left
to market forces?
2. If the Secretary determines that incentives are warranted, does
the case-by-case assessment approach for enhanced recovery project
evaluation provide the appropriate framework for the intended
production incentives?
3. Should existing enhanced oil recovery (EOR) projects be
considered to qualify for production royalty relief to promote
additional oil recovery as the project nears the end of its economic
life? If yes, how?
4. How should the assessment be structured with regard to
determining whether royalty relief is needed? Is it reasonable to
expect that such assessments can be consistently and reliably completed
for a wide variety of projects? If the Secretary determines that relief
is warranted, how should the amount of relief be calculated?
5. Should the relief awarded be conditioned on market price? If
yes, how?
6. How should the production incentive be applied to the enhanced
recovery projects to promote project expansions and maximum oil and gas
recoveries?
7. Should this incentive be limited to new technology? Should other
gases and matter be considered for EOR royalty relief?
8. How should royalty relief be structured for the additional
production resulting from enhanced recovery methods?
9. How should production currently using CO2 for
recovery be differentiated from new production which results from an
incentive?
10. How could we encourage the capture, transportation, and
sequestration of CO2 and promote other public interests in
addition to enhanced oil recovery?
11. In making the determination of whether the royalty relief
described in Section 354 would be in the public interest, how should
the Secretary value the benefit associated with the sequestration of
CO2 or other appropriate gases used to increase oil and gas
production?
12. How, where, and when in the process should the value of the
CO2 (or other gas) or the benefit of its sequestration be
measured: at its source or upon its capture, transportation, or
sequestration on the lease?
13. Are there recommended methodologies, economic models, or other
precedents that the Secretary could consider in assessing the value of
sequestration?
14. Can relief be structured to focus on sequestering
CO2 that would otherwise be released into the atmosphere or
not used for productive purposes?
15. Should this royalty relief take into consideration any existing
incentives available for energy production?
16. Are there other issues that should be considered?
Section 354(b)(1) of the EPAct requires that the Secretary
determine that royalty reduction is in the public interest and promotes
the purposes of the Act. Thus, the Secretary must determine whether the
anticipated amount of additional production justifies the level of
Federal subsidies that would be provided through such royalty
reduction. As a result of comments received in response to this Advance
Notice of Proposed Rulemaking, the Secretary may determine that the
production royalty incentive provided for by Section 354 of the EPAct
is either unnecessary to promote enhanced oil and gas recovery or is
insufficient to increase oil and gas production through enhanced
recovery. Therefore, the Secretary is not yet prepared to make the
determination under Section 354(b)(1) of the EPAct that royalty relief
for CO2 injection is in the public interest and promotes the
purpose of that section of the Act. However, if BLM and/or MMS adopt a
royalty relief rule it would be applicable to any eligible production
occurring on or after the publication date of this Advance Notice of
Proposed Rulemaking in the Federal Register.
Dated: February 1, 2006.
Johnnie Burton,
Acting Assistant Secretary of the Interior.
[FR Doc. 06-2170 Filed 3-7-06; 8:45 am]
BILLING CODE 4310-84-P; 4310-MR-P