[Federal Register Volume 87, Number 229 (Wednesday, November 30, 2022)]
[Proposed Rules]
[Pages 73588-73620]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25345]
[[Page 73587]]
Vol. 87
Wednesday,
No. 229
November 30, 2022
Part II
Department of the Interior
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Bureau of Land Management
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43 CFR Parts 3160 and 3170
Waste Prevention, Production Subject to Royalties, and Resource
Conservations; Proposed Rule
Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 /
Proposed Rules
[[Page 73588]]
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DEPARTMENT OF THE INTERIOR
Bureau of Land Management
43 CFR Parts 3160 and 3170
[212.LLHQ300000.L13100000.PP0000]
RIN 1004-AE79
Waste Prevention, Production Subject to Royalties, and Resource
Conservation
AGENCY: Bureau of Land Management, Interior.
ACTION: Proposed rule.
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SUMMARY: The Bureau of Land Management (BLM) is proposing new
regulations to reduce the waste of natural gas from venting, flaring,
and leaks during oil and gas production activities on Federal and
Indian leases. The proposed regulations would be codified in the Code
of Federal Regulations and would replace the BLM's current requirements
governing venting and flaring, which are more than four decades old.
DATES: Send your comments on this proposed rule to the BLM on or before
January 30, 2023. The BLM is not obligated to consider any comments
received after this date in making its decision on the final rule.
If you wish to comment on the information collection requirements
in this proposed rule, please note that the Office of Management and
Budget (OMB) is required to make a decision concerning the collection
of information contained in this proposed rule between 30 and 60 days
after publication of this proposed rule in the Federal Register.
Therefore, comments should be submitted to OMB by December 30, 2022.
ADDRESSES:
Mail, personal, or messenger delivery: U.S. Department of the
Interior, Director (630), Bureau of Land Management, 1849 C St. NW,
Room 5646, Washington, DC 20240, Attention: 1004-AE79.
Federal eRulemaking Portal: https://www.regulations.gov. In the
Searchbox, enter ``RIN 1004-AE79 and click the ``Search'' button.
Follow the instructions at this website.
For Comments on Information-Collection Requirements: Written
comments and recommendations for the information collection
requirements should be sent within 30 days of publication of this
notice to www.reginfo.gov/public/do/PRAMain. Find this particular
information collection by selecting ``Currently under Review--Open for
Public Comments'' or by using the search function. You may also provide
a copy of your comments to the BLM's Information Collection Clearance
Officer to the above address with ``Attention PRA Office,'' or by email
to [email protected]. Please reference OMB Control Number
1004-0211 and RIN 1004-AE79 in the subject line of your comments.
FOR FURTHER INFORMATION CONTACT: Lonny Bagley, Acting Division Chief,
Fluid Minerals Division, telephone: 307-622-6956, or email:
[email protected], for information regarding the substance of this
proposed rule or information about the BLM's Fluid Minerals program.
For questions relating to regulatory process issues, contact Faith
Bremner at email: [email protected]. Individuals in the United States
who are deaf, deafblind, hard of hearing, or have a speech disability
may dial 711 (TTY, TDD, or TeleBraille) to access telecommunications
relay services for contacting Mr. Bagley. Individuals outside the
United States should use the relay services offered within their
country to make international calls to the point-of-contact in the
United States.
SUPPLEMENTARY INFORMATION:
I. Executive Summary
II. Public Comment Procedures
III. Background
IV. Section-by-Section Discussion
V. Procedural Matters
I. Executive Summary
This proposed regulation aims to reduce the waste of natural gas
from oil and gas leases administered by the BLM. This gas is lost
during oil and gas exploration and production activities through
venting, flaring, and leaks. Although some losses of gas may be
unavoidable, the law requires that operators take reasonable steps to
prevent the waste of gas through venting, flaring and leakage. The
proposed rule describes the reasonable steps that operators of Federal
and Indian oil and gas leases must take to avoid the waste of natural
gas. The proposed rule would also ensure that, when Federal or Indian
gas is wasted, the public and Indian mineral owners are compensated
through royalty payments.
The BLM conducts a Federal onshore oil and gas leasing program
pursuant to the requirements of various statutes, including the Mineral
Leasing Act (MLA), the Federal Oil and Gas Royalty Management Act
(FOGRMA), the Inflation Reduction Act of 2022, and the Federal Land
Policy and Management Act (FLPMA). The MLA requires lessees to ``use
all reasonable precautions to prevent waste of oil or gas developed in
the land,'' \1\ and further requires oil and gas lessees to observe
``such rules . . . for the prevention of undue waste as may be
prescribed by [the] Secretary.'' \2\ Under FOGRMA, oil and gas lessees
are liable for royalty payments on gas wasted from the lease site.\3\
In addition, as discussed further later, a provision of the Inflation
Reduction Act (``IRA''), Public Law 117-169, provides that, for leases
issued after August 16, 2022, royalties are owed on all gas produced
from Federal land, subject to certain exceptions for gas lost during
emergency situations, gas used for the benefit of lease operations, and
gas that is ``unavoidably lost.'' FLPMA authorizes the BLM to
``regulate'' the ``use, occupancy, and development'' of the public
lands via ``published rules,'' while mandating that the Secretary,
``[i]n managing the public lands . . . shall, by regulation or
otherwise, take any action necessary to prevent unnecessary or undue
degradation of the lands.''
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\1\ 30 U.S.C. 225.
\2\ 30 U.S.C. 187.
\3\ 30 U.S.C. 1756.
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In addition to managing the leasing and production of oil and gas
from Federal lands, the BLM also oversees operations on many Indian and
Tribal oil and gas leases pursuant to a delegation of authority from
the Secretary of the Interior.\4\ The Secretary's management and
regulation of Indian mineral interests carries with it the duty to act
as a trustee for the benefit of the Indian mineral owners.
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\4\ Department of the Interior, Departmental Manual, 235 DM
1.1K.
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This proposed rule would replace the BLM's current requirements
governing venting and flaring, which are contained in Notice to Lessees
and Operators of Onshore Federal and Indian Oil and Gas Leases: Royalty
or Compensation for Oil and Gas Lost (``NTL-4A'').\5\ NTL-4A was issued
more than 40 years ago and its policies and requirements have become
outdated. To begin, NTL-4A is ill-suited to address the large volume of
flaring associated with the rapid development of unconventional tight
oil and gas resources that has occurred in recent years. In addition,
NTL-4A does not account for technological and operational advancements
that can reduce losses of gas from oil storage tanks, pneumatic
equipment, and equipment leaks.
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\5\ 44 FR 76600 (Dec. 27, 1979).
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In 2016, the BLM issued a final rule replacing NTL-4A with new
regulations intended to reduce the waste of gas from
[[Page 73589]]
venting, flaring, and leaks.\6\ However, industry groups and a set of
States immediately challenged that rule in Federal court, and the BLM
never fully implemented the rule due to that litigation.\7\ In
September 2018, the BLM issued a final rule effectively rescinding the
2016 Rule.\8\ Environmental groups and a different set of States then
challenged that rule in Federal court. Eventually, a U.S. District
Court vacated the 2018 rescission of the 2016 Rule on various grounds,
including that the resulting regulatory regime would fail to meet the
BLM's statutory mandate to prevent waste.\9\ Then a different U.S.
District Court vacated the 2016 Rule on the grounds that, among other
things: (1) the MLA's ``delegation of authority does not allow and was
not intended to authorize the enactment of rules justified primarily
upon the ancillary benefit of a reduction in air pollution''; and (2)
``BLM acted arbitrarily and capriciously in failing to fully assess the
impacts of the [2016 Rule] on marginal wells, failing to adequately
explain and support the [2016 Rule's] capture requirements, and failing
to separately consider the domestic costs and benefits of the [2016
Rule].'' \10\ The end result of these rulemakings and court decisions
is that NTL-4A continues to govern venting and flaring from BLM-managed
oil and gas leases.
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\6\ 81 FR 83008 (Nov. 18, 2016).
\7\ See Wyoming v. U.S. Dept. of the Interior, 493 F. Supp. 3d
1046, 1052-1057 (D. Wyo. 2020).
\8\ 83 FR 49184 (Sept. 28, 2018).
\9\ California v. Bernhardt, 472 F. Supp. 3d 573 (N.D. Cal.
2020).
\10\ See Wyoming v. U.S. Dept. of the Interior, 493 F. Supp. 3d
1046, 1086-87 (D. Wyo. 2020).
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These recent rulemakings and the related litigation have provided
the BLM with two important lessons. First, there are opportunities for
the BLM to reduce the waste of natural gas through improved regulatory
requirements pertaining to venting, flaring, and leaks. Second, courts
disagreed as to whether the BLM's regulatory authority allows for all
of the 2016 Rule provisions. The BLM, therefore, has chosen an approach
that seeks to improve upon NTL-4A in a variety of significant ways
while eschewing certain elements of the 2016 Rule that were the focus
of an unfavorable court ruling.
In brief, the primary components of this proposed rule are as
follows:
The proposed rule would establish the general rule that
``operators must use all reasonable precautions to prevent the waste of
oil or gas developed from the lease.'' It notes that the BLM may
specify reasonable measures to prevent waste as conditions of approval
of an Application for Permit to Drill and, after an Application for
Permit to Drill is approved, the BLM may order an operator to
implement, within a reasonable time, additional reasonable measures to
prevent waste at ongoing exploration and production operations.
Reasonable measures to prevent waste may reflect factors including, but
not limited to, relevant advances in technology and changes in industry
practice.
The proposed rule would require operators to submit a
waste minimization plan with all applications for permits to drill oil
wells. This plan would provide the BLM with information on anticipated
associated gas production, the operator's capacity to capture that gas
production for sale or use, and other steps the operator commits to
take to reduce or eliminate gas losses. Where the available information
indicates that the plan does not take reasonable steps to avoid wasting
gas, the BLM may delay action on the permit until the operator
adequately addresses the plan's deficiencies to the BLM's satisfaction.
The proposed rule would recognize, and clarify, that oil
or gas can be ``unavoidably lost'' in connection with certain oil and
gas operations. Unavoidably lost oil or gas will not be considered
wasted and therefore not be subjected to royalty payments. In
particular, if the operator has not been negligent; has taken ``prudent
and reasonable steps to avoid waste;'' complied fully with applicable
laws, lease terms, regulations, provisions of a previously approved
operating plan, and other written orders of the BLM; and the loss is
within the time or volume limits applicable to the particular
situation; then the lost oil or gas will qualify as ``unavoidably
lost'' waste gas for which no royalties are owed.
The proposed rule would lay out a number of specific
circumstances in which lost oil or gas would be considered
``unavoidably lost,'' including during well completions, production
testing, and emergencies. The proposed rule would also establish a
monthly volume limit on royalty-free flaring due to pipeline capacity
constraints, midstream processing failures, or other similar events
that may prevent produced gas from being transported to market.
The proposed rule would include a number of specific
affirmative obligations that operators must take to avoid wasting oil
or gas. In particular:
[cir] For certain operators on Federal or Indian leases, or Indian
Mineral Development Act (IMDA) agreements, the proposed rule would
prohibit the use of natural-gas-activated pneumatic controllers or
pneumatic diaphragm pumps with a bleed rate that exceeds 6 standard
cubic feet (scf)/hour.
[cir] The proposed rule would, where technically and economically
feasible, require oil storage tanks on Federal or Indian leases to be
equipped with a vapor recovery system or other mechanism that avoids
the loss of natural gas from the tank.
[cir] The proposed rule would require operators on Federal or
Indian leases to maintain a leak detection and repair (LDAR) program
designed to prevent the unreasonable and undue waste of Federal or
Indian gas. An operator's LDAR program must provide for regular
inspections of all oil and gas production, processing, treatment,
storage, and measurement equipment on the lease site.
The requirements of this proposed rule are explained in detail in
sections III and IV that follow.
As detailed in the Regulatory Impact Analysis (RIA) prepared for
this proposed rule, the BLM estimates that this rule would have the
following economic impacts:
Costs to industry of around $122 million per year
(annualized at 7 percent);
Benefits to industry in recovered gas of $55 million per
year (annualized at 7 percent);
Increases in royalty revenues from recovered and flared
gas of $39 million per year; and
Benefits to society of $427 million per year from reduced
greenhouse gas emissions.
II. Public Comment Procedures
If you wish to comment on this proposed rule, you may submit your
comments to the BLM by mail, personal or messenger delivery, or through
https://www.regulations.gov (see the ADDRESSES section).
Please make your comments on the proposed rule as specific as
possible, confine them to issues pertinent to the proposed rule,
explain the reason for any changes you recommend, and include any
supporting documentation. Where possible, your comments should
reference the specific section or paragraph of the proposal that you
are addressing. The BLM is not obligated to consider or include in the
Administrative Record for the final rule comments that we receive after
the close of the comment period (see DATES) or comments delivered to an
address other than those listed previously (see ADDRESSES).
Comments, including names and street addresses of respondents, will
be
[[Page 73590]]
available for public review at the address listed under ``ADDRESSES:
Personal or messenger delivery'' during regular hours (7:45 a.m. to
4:15 p.m.), Monday through Friday, except holidays. Before including
your address, telephone number, email address, or other personal
identifying information in your comment, be advised that your entire
comment--including your personal identifying information--may be made
publicly available at any time. While you can ask us in your comment to
withhold from public review your personal identifying information, we
cannot guarantee that we will be able to do so.
As explained later, this proposed rule would include revisions to
information collection requirements that must be approved by the Office
of Management and Budget (OMB). If you wish to comment on the revised
information collection requirements in this proposed rule, please note
that such comments must be sent directly to the OMB in the manner
described in the DATES and ADDRESSES sections. Please note that due to
COVID-19, electronic submission of comments is recommended.
III. Background
A. Waste of Natural Gas During the Development of Federal and Indian
Oil and Gas Resources
The BLM is responsible for managing more than 245 million acres of
land and 700 million acres of subsurface mineral estate--the latter
being nearly a third of the nation's total land mass. The BLM maintains
a program for leasing these lands for oil and gas development and
regulates oil and gas production operations on Federal leases. While
the BLM does not manage the leasing of Indian and Tribal lands for oil
and gas production, the BLM does regulate oil and gas operations on
many Indian and Tribal leases as part of its Tribal trust
responsibilities.
The BLM's onshore oil and gas management program is a major
contributor to the nation's oil and gas production. Domestic production
from 88,887 Federal onshore oil and gas wells \11\ accounts for
approximately 8 percent of the Nation's natural gas supply and 9
percent of its oil.\12\ In Fiscal Year (FY) 2021, operators produced
473 million barrels of oil and 3.65 trillion cubic feet (Tcf) of
natural gas from onshore Federal and Indian oil and gas leases. The
production of this oil and gas generated more than $4.2 billion in
royalties. Approximately $3.2 billion of these royalties were split
between the United States and the States in which the production
occurred. Approximately $1 billion of these royalties went directly to
Tribes and Indian allottees for production from Indian lands.\13\
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\11\ BLM Public Lands Statistics, Table 9 (FY 2021 data),
available at https://www.blm.gov/programs-energy-and-minerals-oil-and-gas-oil-and-gas-statistics.
\12\ Bureau of Land Management Budget Justifications and
Performance Information Fiscal Year 2023, p. V-79, available at
https://www.doi.gov/sites/doi.gov/files/fy2023-blm-greenbook.pdf.
\13\ Production and revenue number derived from data maintained
by the Office of Natural Resources Revenue at https://revenuedata.doi.gov/.
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In recent years, the United States has experienced a significant
increase in oil and natural gas production due to technological
advances, such as hydraulic fracturing combined with directional
drilling. This increase in production has been accompanied by a
significant waste of natural gas through venting and flaring. As the
following graph illustrates, the amount of venting and flaring from
Federal and Indian leases has increased dramatically from the 1990s to
the 2010s, and the upward trend in flaring suggests that it will
continue to be a problem in the coming years. Between 1990 and 2000,
the total venting and flaring reported by Federal and Indian onshore
lessees averaged approximately 11 billion cubic feet (Bcf) per year.
Between 2010 and 2020, in contrast, the total venting and flaring
reported by Federal and Indian onshore lessees averaged approximately
44.2 Bcf per year.\14\
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\14\ BLM analysis of ONRR Oil and Gas Operations Report Part B
(OGOR-B) data provided for 1990-2000 and 2010-2020.
[GRAPHIC] [TIFF OMITTED] TP30NO22.000
Assuming a $3 per thousand cubic feet (Mcf) price of gas,\15\ the
Federal and Indian gas that was vented and flared from 2010 to 2020
would be valued at $1.46 billion. The BLM notes that vented and flared
volumes have not
[[Page 73591]]
increased linearly with production. According to data maintained by the
Office of Natural Resources Revenue (ONRR), the average volume of
vented and flared gas as a percentage of total gas production was 0.42
percent from 1990-2000. From 2010-2020, however, vented and flared gas
averaged 1.07 percent of total gas production. This metric indicates a
157 percent increase in the waste of gas during oil and gas production
from Federal and Indian lands. Furthermore, the average amount of
vented and flared gas (Mcf) per barrel (bbl) of oil production was
0.8148 Mcf/bbl from 1990 to 2000, while it rose to 1.6418 Mcf/bbl from
2010 to 2020--a 102 percent increase in the waste of gas per barrel of
oil produced.
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\15\ The average annual Henry Hub spot price for natural gas
from 2010 through 2020 was $3.19. U.S. Energy Information
Administration (EIA), Henry Hub Natural Gas Spot Price, available at
https://www.eia.gov/dnav/ng/hist/rngwhhda.htm.
[GRAPHIC] [TIFF OMITTED] TP30NO22.001
In addition to the venting and flaring tracked by the ONRR, recent
studies have identified three other major sources of gas losses during
the oil and gas production process: emissions from natural-gas-
activated pneumatic equipment, venting from oil storage tanks, and
equipment leaks.\16\ The Environmental Protection Agency (EPA)
estimates that, overall, 36.2 Bcf of methane was emitted from pneumatic
controllers and 4.9 Bcf of methane was emitted from equipment leaks at
upstream oil and gas production sites in the United States in 2019.\17\
The BLM estimates that 13 Bcf of natural gas was lost from pneumatic
devices on Federal and Indian lands in 2019. The BLM estimates that an
additional 0.86 Bcf of gas was lost due to equipment leaks from Federal
natural gas production operations not subject to existing State or EPA
leak detection and repair requirements. Notably, the problem of leakage
appears to be exacerbated in areas where there is insufficient
infrastructure for natural gas gathering, processing, and
transportation \18\--a known issue in basins such as the Permian and
Bakken, where substantial BLM-managed oil and gas production occurs.
Finally, the BLM estimates that 17.9 Bcf of natural gas was emitted
from storage tanks on Federal and Indian lands in 2019. These losses
from pneumatic equipment, leaks and storage tanks would be valued at
$53.7 million dollars (at $3/Mcf) in 2019.
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\16\ Alvarez, et al., ``Assessment of methane emissions from the
U.S. oil and gas supply chain,'' Science 361 (2018); see also 81 FR
83015-17.
\17\ EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks:
1990-2019 at 3-73 (2019).
\18\ Zhang, et al., ``Quantifying methane emissions from the
largest oil-producing basin in the United States from space,''
Science Advances 6 (2020).
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Excessive venting, flaring, and leaks by Federal oil and gas
lessees is wasting valuable publicly owned resources that could be put
to productive use, and depriving American taxpayers, Tribes, and States
of substantial royalty revenues. In addition, the wasted gas may harm
local communities and surrounding areas through visual and noise
impacts from flaring, while also contributing to local and regional
exposure to smog and other harmful air pollutants such as small
particulates and benzene. Vented or leaked gas also contributes to
climate change, because the primary constituent of natural gas is
methane, an especially powerful greenhouse gas, with climate impacts
roughly 28-36 times those of carbon dioxide (CO2), if
measured over a 100-year period, or 84 times those of CO2 if
measured over a 20-year period.\19\ Thus, regulatory measures that
encourage operators to conserve gas and avoid waste could also
significantly benefit public health and the environment as well as
provide additional benefits to local communities.\20\
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\19\ See Intergovernmental Panel on Climate Change, Climate
Change 2013: The Physical Science Basis, Chapter 8, Anthropogenic
and Natural Radiative Forcing, at 714 (Table 8.7), available at
https://www.ipcc.ch/pdf/assessment-report/ar5/wg1/WG1AR5_Chapter08_FINAL.pdf.
\20\ The BLM notes that the BLM did not rely on such ancillary
benefits in developing or selecting the waste prevention/resource
conservation provisions presented in this proposed rule. Rather,
with the exception of the safety provisions in proposed Sec.
3179.6, the requirements of this proposed rule are independently
justified as reasonable measures to prevent waste that would be
expected of a prudent operator, regardless of ancillary benefits to
public health or the environment.
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To be clear, as the BLM has consistently recognized during its many
decades of implementing the MLA, not every loss of natural gas during
oil and gas production constitutes waste under the MLA. Indeed, some
amount of venting and flaring is unavoidable and expected to occur
during oil and gas exploration and production operations. For example,
an operator may need to flare gas on a short-term basis as part of
drilling operations, well completion, or production testing, among
other situations. Longer-term flaring may occur in exceptional
circumstances, which might include the drilling of and production from
a wildcat well in a new field, where gas pipelines have not yet been
built due to a lack of information regarding expected gas
production.\21\ In some fields, the overall quantity of gas produced
may be so small that the development of gas pipeline infrastructure may
not be economically justified.
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\21\ The BLM notes that, even in such exceptional circumstances,
operators should be expected to take measures to avoid excessive
flaring and this proposed rule would place limitations on royalty-
free flaring from exploratory (wildcat) wells.
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Although at least some venting or flaring may be unavoidable (and
thus not wasteful under the relevant statutes) under some
circumstances, operators have an affirmative obligation under the law
to use reasonable precautions to prevent the waste of oil or gas
developed from a lease. Measures that are considered reasonable to
prevent waste may shift over time with advances in technology and
changes in industry practice.
Further, operators' immediate economic interests may not always be
served by minimizing the loss of natural gas, and BLM regulation is
necessary to discourage operators from venting or flaring more gas than
is operationally necessary. A prime example is the
[[Page 73592]]
flaring of oil-well gas due to pipeline capacity constraints. Oil wells
in certain fields are known to produce relatively large volumes of
associated gas. Accordingly, natural-gas-capture infrastructure--
including pipelines--has been built out in those fields and operators
are expected to capture and sell the associated gas they produce.
However, it is not uncommon for the rate of oil-well development to
outpace the capacity of the related gas-capture infrastructure. When
the existing gas-capture infrastructure is overwhelmed, an operator is
faced with a choice: flare the associated gas in order to continue oil
production unabated, or curtail oil production in order to conserve the
associated gas. Absent clear requirements, an operator might conclude
that the former course of action best serves its immediate economic
interests by providing immediate revenue from the relatively more
valuable production stream. But the latter course of action may often
best serve the public's interest by maximizing overall energy
production (considering both production streams) and royalty revenues.
(This proposed rule would incentivize better communication and
coordination among operators and midstream companies, which is expected
to result in more deliberate development with greater volumes of
production sent to market in the long run.) Similar to the problem of
inadequate pipelines, maximizing the recovery of gas by investing in
vapor-recovery units for oil storage tanks, upgrading pneumatic
equipment, and regularly inspecting for leaks may not always maximize
the operator's profits, especially when the operator examines the
investment on a short time horizon. It is in these circumstances--where
an operator's interest in maximizing profits diverges from the public's
interest in maximizing resource recovery--that BLM regulation is
necessary and appropriate to ensure that operators take reasonable
measures to prevent waste.
B. Legal Authority
Pursuant to a delegation of Secretarial authority, the BLM is
authorized to regulate oil and gas exploration and production
activities on Federal and Indian lands under a variety of statutes,
including the MLA, the Mineral Leasing Act for Acquired Lands (MLAAL),
the IRA, FOGRMA, FLPMA, the Indian Mineral Leasing Act of 1938, the
IMDA, and the Act of March 3, 1909.\22\ These statutes authorize the
Secretary of the Interior to promulgate such rules and regulations as
may be necessary to carry out the statutes' various purposes.\23\
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\22\ Mineral Leasing Act, 30 U.S.C. 188-287; Mineral Leasing Act
for Acquired Lands, 30 U.S.C. 351-360; Federal Oil and Gas Royalty
Management Act, 30 U.S.C. 1701-1758; Federal Land Policy and
Management Act of 1976, 43 U.S.C. 1701-1785; Indian Mineral Leasing
Act of 1938, 25 U.S.C. 396a-g; Indian Mineral Development Act of
1982, 25 U.S.C. 2101-2108; Act of March 3, 1909, 25 U.S.C. 396.
\23\ 30 U.S.C. 189 (MLA); 30 U.S.C. 359 (MLAAL); 30 U.S.C.
1751(a) (FOGRMA); 43 U.S.C. 1740 (FLPMA); 25 U.S.C. 396d (IMLA); 25
U.S.C. 2107 (IMDA); 25 U.S.C. 396.
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1. Authority Regarding the Waste of Natural Gas
The MLA rests on the fundamental principle that the public should
benefit from mineral production on public lands.\24\ An important means
of ensuring that the public benefits from mineral production on public
lands is minimizing and deterring the waste of oil and gas produced
from the Federal mineral estate. To this end, the MLA requires that oil
and gas lessees ``use all reasonable precautions to prevent waste of
oil or gas developed in the land.'' \25\ The MLA requires lessees to
exercise ``reasonable diligence, skill, and care'' in their operations
and also requires oil and gas lessees to observe ``such rules . . . for
the prevention of undue waste as may be prescribed by [the]
Secretary.'' \26\ Lessees are not only responsible for taking measures
to prevent waste, but also for making royalty payments on wasted oil
and gas when waste does occur, elaborating on the MLA's assessment of
royalties on all production ``removed or sold from the lease,'' \27\
FOGRMA expressly made lessees ``liable for royalty payments on oil or
gas lost or wasted from a lease site when such loss or waste is due to
negligence on the part of the operator of the lease, or due to the
failure to comply with any rule or regulation, order or citation issued
under [FOGRMA] or any mineral leasing law.'' \28\
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\24\ See, e.g., California Co. v. Udall, 296 F.2d 384, 388 (D.C.
Cir. 1961) (noting that the MLA was ``intended to promote wise
development of . . . natural resources and to obtain for the public
a reasonable financial return on assets that `belong' to the
public'').
\25\ 30 U.S.C. 225.
\26\ 30 U.S.C. 187.
\27\ 30 U.S.C. 226(b).
\28\ 30 U.S.C. 1756.
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In addition, on August 16, 2022, President Biden signed the IRA
into law. Public Law 117-169. Section 50263 of the IRA, which is
entitled, ``Royalties on All Extracted Methane,'' provides that, for
leases issued after August 16, 2022, royalties are owed on all gas
produced from Federal land, including gas that is consumed or lost by
venting, flaring, or negligent releases through any equipment during
upstream operations. Section 50263 further provides three exceptions to
the general obligation to pay royalties on produced gas, namely: (1)
gas that is vented or flared for not longer than 48 hours in an
emergency situation that poses a danger to human health, safety, or the
environment; (2) gas used or consumed within a lease, unit, or
communitized area for the benefit of the lease, unit, or communitized
area; and (3) gas that is unavoidably lost.
The BLM's authority to regulate the waste of Federal oil and gas is
not limited to operations that occur on Federal lands, but also extends
to operations on non-Federal lands where Federal oil and gas is
produced under a unit or communitization agreement (CA). ``For the
purpose of more properly conserving the natural resources of any oil or
gas pool, field, or like area,'' the MLA authorizes lessees to operate
their leases under a cooperative or unit plan of development and
operation, if the Secretary of the Interior determines such an
arrangement to be necessary or advisable in the public interest.\29\
The Secretary is authorized, with the consent of the lessees involved,
to establish or alter drilling, producing, and royalty requirements and
to make such regulations with respect to the leases as she may deem
necessary and proper to protect the public interest.\30\ The MLA states
that a cooperative or unit plan of development may contain a provision
authorizing the Secretary to regulate the rate of development and the
rate of production.\31\ Accordingly, the BLM's standard form unit
agreement provides that the BLM may regulate the quantity and rate of
production in the interest of conservation.\32\ The BLM's standard form
CA provides that the BLM ``shall have the right of supervision over all
fee and state mineral operations within the communitized area to the
extent necessary to monitor production and measurement, and to assure
that no avoidable loss of hydrocarbons occurs . . . .'' \33\ As noted
earlier, FOGRMA authorizes the BLM to assess royalties on gas lost or
wasted from a ``lease site.'' The term ``lease site'' is broadly
defined in FOGRMA,\34\ extending the BLM's
[[Page 73593]]
authority to assess royalties on wasted gas to the Federal or Indian
portion of gas wasted from operations on non-Federal tracts committed
to a Federal unit or communitization agreement. Thus, even where the
production of Federal oil and gas occurs on State- or privately owned
tracts, the BLM maintains the authority to regulate the waste of
Federal minerals from operations on those lands by requiring royalty
payments and setting appropriate rates of development and
production.\35\
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\29\ 30 U.S.C. 226(m).
\30\ Id..
\31\ Id..
\32\ 43 CFR 3186.1, ] 21.
\33\ See ``BLM Manual 3160-9--Communitization,'' Appendix 1, ]
12.
\34\ See 30 U.S.C. 1702(6); Maralex Resources, Inc. v.
Bernhardt, 913 F.3d 1189, 1200 (10th Cir. 2019) (``the statutory
definition of `lease site' necessarily includes any lands, including
privately-owned lands, on which [production] of oil or gas is
occurring pursuant to a communitization agreement''). Additionally,
FOGRMA defines ``oil and gas'' broadly to mean ``any oil or gas
originating from, or allocated to, the Outer Continental Shelf,
Federal, or Indian lands.'' 30 U.S.C. 1702(9) (emphasis added).
\35\ This conclusion is consistent with the assessment of the
BLM's authority expressed by the court that vacated the 2016 Waste
Prevention Rule. See Wyoming v. U.S. Dept. of the Interior, 493 F.
Supp. 3d 1046, 1081-85 (D. Wyo. 2020).
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2. Authority Regarding Environmental Impacts to the Public Lands
In addition to ensuring that the public receives a pecuniary
benefit from oil and gas production from public lands, the BLM is also
tasked with regulating the physical impacts of oil and gas development
on public lands. The MLA directs the Secretary to ``regulate all
surface-disturbing activities conducted pursuant to any lease'' and to
``determine reclamation and other actions as required in the interest
of conservation of surface resources.'' \36\ The MLA requires oil and
gas leases to include provisions ``for the protection of the interests
of the United States . . . and for the safeguarding of the public
welfare,'' which includes lease terms for the prevention of
environmental harm.\37\ The Secretary may suspend lease operations ``in
the interest of conservation of natural resources,'' a phrase that
encompasses not just conservation of mineral deposits, but also
preventing environmental harm.\38\ The Secretary also may refuse to
lease lands in order to protect the public's interest in other natural
resources and the environment.\39\ The MLA additionally requires oil
and gas leases to contain ``a provision that such rules for the safety
and welfare of the miners . . . as may be prescribed by the Secretary
shall be observed . . . .'' \40\ Accordingly, the BLM's regulations
governing oil and gas operations on the public lands have long required
operators to conduct operations in a manner that is protective of
natural resources, environmental quality, and public health and
safety.\41\
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\36\ 30 U.S.C. 226(g).
\37\ See Natural Resources Defense Council, Inc. v. Berklund,
458 F. Supp. 925, 936 n.17 (D.D.C. 1978). The BLM acknowledges that
the court that vacated the 2016 Waste Prevention Rule stated that
``it is not a reasonable interpretation of BLM's general authority
under the MLA to `safeguard[ ] the public welfare' as empowering the
agency to regulate air emissions, particularly when Congress
expressly delegated such authority to the EPA under the [Clean Air
Act].'' Wyoming, 493 F. Supp. 3d at 1067. The BLM further notes that
the court that vacated the BLM's rescission of the 2016 Waste
Prevention Rule found that the rescission failed to satisfy the
BLM's ``statutory obligation'' to ``safeguard[] the public
welfare,'' and stated that the MLA's ``public welfare'' provision
supports BLM's consideration of air emissions in promulgating its
waste prevention regulations. See California v. Bernhardt, 472 F.
Supp. 3d 573, 616 (N.D. Cal. 2020). The BLM need not elaborate on
the meaning of the MLA's ``public welfare'' provision in this
rulemaking, as the BLM is proposing requirements that are
independently justified as waste prevention measures and are not
proposed for environmental purposes. The one exception is proposed
Sec. 3179.6, which does serve an environmental purpose, but is an
exercise of the Secretary's authority to prescribe ``rules for the
safety and welfare of the miners'' under 30 U.S.C. 187.
\38\ 30 U.S.C. 209; see also, e.g., Copper Valley Machine Works
v. Andrus, 653 F.2d 595, 601 & nn.7-8 (D.C. Cir. 1981); Hoyl v.
Babbitt, 129 F.3d 1377, 1380 (10th Cir. 1997); Getty Oil Co. v.
Clark, 614 F. Supp. 904, 916 (D. Wyo. 1985).
\39\ Udall v. Tallman, 380 U.S. 1, 4 (1965); Duesing v. Udall,
350 F.2d 748, 751-52 (1965).
\40\ 30 U.S.C. 187.
\41\ See 43 CFR 3162.5-1, 3162.5-3.
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FLPMA authorizes the BLM to ``regulate'' the ``use, occupancy, and
development'' of the public lands via ``published rules.'' \42\ FLPMA
also mandates that the Secretary, ``[i]n managing the public lands . .
. shall, by regulation or otherwise, take any action necessary to
prevent unnecessary or undue degradation of the lands.'' \43\ FLPMA
expressly declares a policy that the BLM should balance the need for
domestic sources of minerals against the need to ``protect the quality
of scientific, scenic, historical, ecological, environmental, air and
atmospheric, water resources, and archeological values; . . . [and]
provide for outdoor recreation and human occupancy and use.'' \44\
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\42\ 43 U.S.C. 1732(b).
\43\ Id.
\44\ Id. at 1701(a)(8).
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FLPMA requires the BLM to manage public lands under principles of
multiple use and sustained yield.\45\ The statutory definition of
``multiple use'' explicitly includes the consideration of environmental
resources. ``Multiple use'' is a ``combination of balanced and diverse
resource uses that takes into account the long-term needs of future
generations for renewable and nonrenewable resources . . . .'' \46\
``Multiple use'' also requires resources to be managed in a
``harmonious and coordinated'' manner ``without permanent impairment to
the productivity of the land and the quality of the environment.'' \47\
Significantly, FLPMA directs the Secretary to consider ``the relative
values of the resources and not necessarily . . . the combination of
uses that will give the greatest economic return or the greatest unit
output.'' \48\
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\45\ Id. at 1702(c), 1732(a).
\46\ 43 U.S.C. 1702(c).
\47\ Id.
\48\ Id.
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3. Indian Oil and Gas Production
The Secretary's management and regulation of Indian mineral
interests carries with it the duty to act as a trustee for the benefit
of the Indian mineral owners.\49\ Congress has directed the Secretary
to ``aggressively carry out [her] trust responsibility in the
administration of Indian oil and gas.'' \50\ In furtherance of her
trust obligations, the Secretary has delegated regulatory authority for
administering operations on Indian oil and gas leases to the BLM,\51\
which has developed specialized expertise through regulating the
production of oil and gas from public lands administered by the
Department. In choosing from among reasonable regulatory alternatives
for Indian mineral development, the BLM is obligated to adopt the
alternative that is in the best interest of the Tribe and individual
Indian mineral owners.\52\ What is in the best interest of the Tribe
and individual Indian mineral owners is determined by a consideration
of all relevant factors, including economic considerations as well as
potential environmental and social effects.\53\
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\49\ See Woods Petroleum Corp. v. Department of Interior, 47
F.3d 1032, 1038 (10th Cir. 1995) (en banc).
\50\ 30 U.S.C. 1701(a)(4).
\51\ 235 DM 1.1.K.
\52\ See Jicarilla Apache Tribe v. Supron Energy Corp., 728 F.2d
1555, 1567 (10th Cir. 1984) (Seymour, J., concurring in part and
dissenting in part), adopted as majority opinion as modified en
banc, 782 F.2d 855 (10th Cir. 1986).
\53\ See 25 CFR 211.3.
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C. Regulatory History
The BLM has a long history of regulating venting and flaring from
onshore oil and gas operations. This section summarizes the BLM's
historic practices, as well as the BLM's experience in two recent
rulemakings related to venting and flaring.
1. Early Regulation of Surface Waste of Gas
The Department of the Interior has maintained regulations
addressing the waste of gas through venting and flaring from onshore
oil and gas leases since 1938. At that time, the Department's
regulations required the United States to be compensated ``at full
value'' for ``all
[[Page 73594]]
gas wasted by blowing, release, escape into the air, or otherwise,''
except where such disposal was authorized under the laws of the United
States and the State in which it occurred.\54\ The regulations further
provided that the production of oil or gas from the lease was to be
restricted to such amounts as could be put to beneficial use and that,
in order to avoid the excessive production of oil or gas, the Secretary
could limit the rate of production based on the market demand for oil
or the market demand for gas.\55\
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\54\ 30 CFR 221.5(h) (1938).
\55\ Id. at 221.27.
---------------------------------------------------------------------------
By 1942, the Department's regulations contained a definition of
``waste of oil or gas.'' This definition included the ``physical waste
of oil or gas,'' which was defined as ``the loss or destruction of oil
or gas after recovery thereof such as to prevent proper utilization and
beneficial use thereof, and the loss of oil or gas prior to recovery
thereof by isolation or entrapment, by migration, by premature release
of natural gas from solution in oil, or in any other manner such as to
render impracticable the recovery of such oil or gas.'' \56\ The
regulations stated that a lessee was ``obligated to prevent the waste
of oil or gas'' and, in order to avoid the physical waste of gas, the
lessee was required to ``consume it beneficially or market it or return
it to the productive formation.'' \57\ The regulations stated that
``unavoidably lost'' gas was not subject to royalty, though the
regulations did not define ``unavoidably lost.'' \58\
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\56\ 30 CFR 221.6(n) (1942).
\57\ Id. at 221.35.
\58\ Id. at 221.44.
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In 1974, the Secretary issued NTL-4, which established the
following policy for royalties on gas production:
Gas production subject to royalty shall include (1) that gas
(both dry and casing-head) which is produced and sold either on a
lease basis or that which is allocated to a lease under the terms of
an approved communitization or unitization agreement; (2) that gas
which is vented or flared in well tests (drill-stem, completion, or
production) on a lease, communitized tract, or unitized area; and
(3) that gas which is otherwise vented or flared on a lease,
communitized tract, or unitized area with the prior written
authorization of the Area Oil and Gas Supervisor (Supervisor).
NTL-4 thus effectively required onshore oil and gas lessees to pay
royalties on all gas produced, including gas that was unavoidably lost
or used for production purposes. Various oil and gas companies sought
judicial review of NTL-4. In 1978, the U.S. District Court for the
District of Wyoming overturned NTL-4, holding that the MLA does not
authorize the collection of royalties on gas production that is
unavoidably lost or used in lease operations.\59\
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\59\ Marathon Oil Co. v. Andrus, 452 F. Supp. 548, 553 (D. Wyo.
1978).
2. NTL-4A
From January 1980 to January 2017, the Department of the Interior's
instructions governing the venting and flaring of gas from onshore oil
and gas leases were contained in ``Notice to Lessees and Operators of
Onshore Federal and Indian Oil and Gas Leases: Royalty or Compensation
for Oil and Gas Lost'' (``NTL-4A'').\60\ NTL-4A was issued by the U.S.
Geological Survey (USGS), which was the Interior bureau tasked with
oversight of Federal onshore oil and gas production at the time.
---------------------------------------------------------------------------
\60\ 44 FR 76,600 (Dec. 27, 1979).
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Under NTL-4A, operators were required to pay royalties on
``avoidably lost'' gas--i.e., gas lost due to the operator's
negligence, failure to take reasonable precautions to prevent or
control the loss, or failure to comply with lease terms, regulations,
or BLM orders. NTL-4A expressly authorized royalty-free venting and
flaring ``on a short-term basis'' during emergencies, well purging and
evaluation tests, initial production tests, and routine and special
well tests. NTL-4A prohibited the flaring of gas from gas wells under
any other circumstances. For gas produced from oil wells, however, NTL-
4A authorized (but did not mandate) the BLM to approve flaring where
conservation of the gas was not ``economically justified'' because it
would ``lead to the premature abandonment of recoverable oil reserves
and ultimately to a greater loss of equivalent energy than would be
recovered if the venting or flaring were permitted to continue.'' NTL-
4A stated that, ``when evaluating the feasibility of requiring
conservation of the gas, the total leasehold production, including oil
and gas, as well as the economics of a field-wide plan,'' must be
considered. Finally, under NTL-4A, the loss of gas vapors from storage
tanks was considered ``unavoidably lost,'' unless the BLM
``determine[d] that the recovery of such vapors would be warranted.''
Soon after issuing NTL-4A, the USGS issued guidelines and
procedures for implementing NTL-4A, which were published in the
Conservation Division Manual (CDM) Part 644, Chapter 5. Among other
things, the CDM provided guidance regarding applications to flare oil-
well gas based on economics. Specifically, the CDM addressed how to
respond to a lessee's contention ``that reserves of casinghead gas are
inadequate to support the installation of facilities for gas collection
and sale.'' The CDM explained that ``[f]rom an economic basis, all
leasehold production must be considered; the major concern is
profitable operation of the lease, not just profitable disposition of
the gas.'' The CDM further explained that the ``economics of conserving
gas must be on a field-wide basis, and the Supervisor must consider the
feasibility of a joint operation between all other lessees/operators in
the field or area.'' Thus, the economic standard for obtaining approval
to flare oil-well gas under NTL-4A was intended to be a demanding one.
The fact that the capture and sale of oil-well gas from an individual
lease would not pay for itself was not sufficient to justify royalty-
free flaring of the gas.
The CDM also provided guidance for venting and flaring situations
involving both Federal and non-Federal lands. In such cases, the BLM
was directed to contact the appropriate State agency in order to work
jointly to effect optimum gas conservation. However, where such a
cooperative effort was not possible, the BLM was directed to ``proceed
unilaterally to take action to prevent unnecessary venting or flaring
from Federal lands.''
Under the plain terms of NTL-4A, flaring without prior approval
(outside of the short-term circumstances specified in Sections II and
III of NTL-4A) constituted a royalty-bearing loss of gas, regardless of
the economic circumstances. The BLM originally applied NTL-4A to that
effect, and this practice was upheld by the Interior Board of Land
Appeals. See Lomax Exploration Co., 105 IBLA 1 (1988). However, the BLM
changed this policy in Instruction Memorandum No. 87-652 (Aug. 17,
1987), which required the BLM to give an operator an opportunity to
demonstrate, after the fact, that capturing the gas was not
economically justified. See Ladd Petroleum Corp., 107 IBLA 5 (1989).
The number of applications for royalty-free flaring received by the
BLM increased dramatically between 2005 and 2016: in 2005, the BLM
received just 50 applications to vent or flare gas, while in 2015 it
received 4,181 flaring applications, with another 3,539 flaring
applications submitted in 2016. (Both the 2016 Waste Prevention Rule
and the 2018 Revision Rule dispensed with case-by-case flaring
approvals, and so post-2016 flaring application data does not provide a
useful comparison.) Most of the applications to flare royalty-free were
submitted to the New Mexico and
[[Page 73595]]
Montana-Dakotas State Offices, which oversee Federal and Indian mineral
interests in unconventional plays where oil production is accompanied
by large volumes of associated gas. Notably, the vast majority of these
applications involved wells that were connected to a gas pipeline but
flared due to pipeline capacity constraints.
3. 2016 Waste Prevention Rule
On November 18, 2016, the BLM issued a final rule intended to
reduce the waste of Federal and Indian gas through venting, flaring,
and leaks (``Waste Prevention Rule'').\61\ The Waste Prevention Rule
replaced NTL-4A and became effective on January 17, 2017. The BLM's
development of the Waste Prevention Rule was prompted by a combination
of factors, including the substantial increase in flaring over the
previous decade, the growing number of applications to flare royalty-
free, new information regarding the quantities of gas lost through
venting and leaks, and concerns expressed by oversight entities such as
the U.S. Government Accountability Office (GAO).\62\
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\61\ 81 FR 83008 (Nov. 18, 2016).
\62\ 81 FR 83014-83017; GAO, ``Federal Oil and Gas Leases--
Opportunities Exist to Capture Vented and Flared Gas, Which Would
Increase Royalty Payments and Reduce Greenhouse Gases'' (Oct. 2010);
GAO, ``OIL AND GAS--Interior Could Do More to Account for and Manage
Natural Gas Emissions'' (July 2016).
---------------------------------------------------------------------------
The Waste Prevention Rule applied to all onshore Federal and Indian
oil and gas leases, units, and communitized areas. The key components
of the Waste Prevention Rule were:
A requirement that applications for permits to drill
(APDs) be accompanied by a ``waste minimization plan'' that would
detail anticipated gas production and opportunities to conserve the
gas;
A provision specifying the various circumstances under
which a loss of oil or gas would be ``avoidably lost,'' and therefore
royalty-bearing;
A requirement that operators capture (rather than flare) a
certain percentage of the gas they produce;
Equipment requirements for pneumatic controllers,
pneumatic diaphragm pumps, and storage vessels (tanks); and
LDAR provisions requiring semiannual lease site
inspections, the use of specified instruments and methods, and
recordkeeping and reporting.
The rule's ``capture percentage'' requirements were intended to
address the routine flaring of gas from oil wells. The rule required an
operator to capture, rather than flare, a certain percentage of the gas
produced from the operator's ``development oil wells.'' The required
capture percentage would increase over a 10-year period, starting at 85
percent in 2018 and ultimately reaching 98 percent in 2026. Gas flared
in excess of the capture requirements would be royalty bearing.
The BLM recognized that the EPA had promulgated emissions
limitations for pneumatic equipment and storage tanks as well as LDAR
requirements for new and modified sources in the oil and gas production
sector pursuant to its authority under the Clean Air Act. The BLM
further recognized that these analogous EPA requirements would have the
effect of reducing the waste of gas from leases subject to those
requirements. So, in order to avoid unnecessary duplication or
conflict, the Waste Prevention Rule allowed for operators to comply
with the analogous EPA regulations as an alternative means of
compliance with the BLM's requirements.\63\
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\63\ See 83 FR 83018-19, 83085-89.
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The capture percentage, pneumatic equipment, storage tanks, and
LDAR requirements were each subject to phase-in periods, and the rule
allowed operators to obtain exemptions or reduced requirements where
compliance would ``cause the operator to cease production and abandon
significant recoverable oil reserves under the lease.'' The BLM's RIA
for the Waste Prevention Rule estimated that the rule would impose
costs of between $110 million and $275 million per year, while
generating benefits of between $20 million and $157 million per year
worth of additional gas captured and between $189 million and $247
million per year in quantified social benefits (in the form of forgone
methane emissions).
Industry groups and certain States \64\ filed petitions for
judicial review of the Waste Prevention Rule in the U.S. District Court
for the District of Wyoming. Wyoming v. DOI, Case No. 2:16-cv-00285-SWS
(D. Wyo.). A coalition of environmental groups and other States
intervened in the case in defense of the rule. Following the change in
Administration in January 2017, the litigation was effectively paused
in response to the BLM's administrative actions to suspend the rule.
After those actions were invalidated by a different court, the Wyoming
court stayed implementation of the capture percentage, pneumatic
equipment, storage tank, and LDAR requirements, and stayed the
litigation pending finalization of the BLM's voluntary revision of the
Waste Prevention Rule.
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\64\ The States of North Dakota, Texas, Wyoming, and Montana
joined the litigation in opposition to the rule.
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4. 2018 Revision of Waste Prevention Rule
On September 28, 2018, the BLM issued a final rule substantially
revising the Waste Prevention Rule (``Revision Rule'').\65\ In the
Revision Rule, the BLM rescinded the waste minimization plan, gas
capture percentage, pneumatic equipment, storage tank, and LDAR
requirements of the 2016 Rule. The BLM also revised the remaining
provisions of the rule to largely reflect the language of NTL-4A.
Finally, the BLM established a new policy of deferring to State
regulations for determining when the routine flaring of oil-well gas is
royalty-free.
---------------------------------------------------------------------------
\65\ 83 FR 49184 (Sept. 28, 2018).
---------------------------------------------------------------------------
In the Revision Rule, the BLM stated that the Waste Prevention Rule
exceeded the BLM's statutory authority by imposing requirements with
compliance costs that exceed the value of the gas that would be
conserved, thus violating the ``prudent operator'' standard implicitly
incorporated into the MLA when it was adopted in 1920. The BLM also
stated that the 2016 Rule created a risk of premature shut-ins of
marginal wells, as the compliance costs associated with the 2016 Rule
would represent a significant proportion of a marginal well's revenue.
Contrary to what the BLM had found in 2016, the BLM stated in the
Revision Rule that existing State flaring regulations provided
sufficient assurance against excessive flaring.
The RIA for the Revision Rule found that the economic benefits of
the Revision Rule (i.e., reduced compliance costs) would significantly
outweigh its economic costs (i.e., forgone gas production and
additional methane emissions). This result was based in large part on
the use of a ``domestic'' social cost of methane metric that was not
based on the best available science \66\ and drastically reduced the
monetized climate benefits of the 2016 Rule relative to what had been
estimated in the RIA for the 2016 Rule.
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\66\ See California v. Bernhardt, 472 F. Supp. 3d 573, 611 (N.D.
Cal. 2020).
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5. Judicial Review of the Revision Rule
In September of 2018, a coalition of environmental groups and the
States of California and New Mexico filed lawsuits challenging the
Revision Rule in the U.S. District Court for the Northern District of
California. On July 15, 2020, the district court ruled in favor of the
plaintiffs. California v. Bernhardt,
[[Page 73596]]
472 F. Supp. 3d 573 (N.D. Cal. 2020). The court's key findings were:
The BLM's interpretation of its statutory authority in the
Revision Rule was unjustifiably limited, failed to require lessees to
use all reasonable precautions to prevent waste, and failed to meet the
BLM's statutory mandate to protect the public welfare;
The BLM's decision to defer to State flaring regulations
was not supported by sufficient analysis or record evidence;
The record did not support the BLM's claims that the 2016
Rule posed excessive regulatory burdens and that the 2016 Rule's costs
outweighed its benefits; and
The BLM's cost-benefit analysis underlying the rule was
flawed for a variety of reasons, including that the use of a
``domestic'' social cost of methane was unreasonable and not based on
the best available science.
The court ordered that the Revision Rule be vacated in its
entirety. However, the court stayed vacatur until October 13, 2020.
6. Judicial Review of the 2016 Waste Prevention Rule
Following the California v. Bernhardt decision, the district court
in Wyoming lifted the stay on the litigation over the Waste Prevention
Rule. In the briefing, the Department confessed error on the grounds
that the BLM exceeded its statutory authority and was ``arbitrary and
capricious'' in promulgating the rule. In October 2020, the district
court ruled in favor of the plaintiffs, finding that the BLM had
exceeded its statutory authority and had been arbitrary and capricious
in promulgating the Waste Prevention Rule. Wyoming v. DOI, 493 F. Supp.
3d 1046 (D. Wyo. 2020). Specifically, the court found that the Waste
Prevention Rule was essentially an air quality regulation and that the
BLM had usurped the authority to regulate air emissions that Congress
had granted to EPA and the States in the Clean Air Act. The court found
that the rule was not independently justified as a waste-prevention
measure under the MLA. Rather, in the court's view, the record
reflected that the BLM's primary concern was regulating methane
emissions from existing oil and gas sources. The court faulted the
BLM's rulemaking for imposing requirements beyond what could be
expected of a ``prudent operator'' that develops the lease for the
mutual profit of lessee and lessor. Finally, the court faulted the BLM
for applying air quality regulations--as opposed to waste-prevention
regulations--to unit and CA operations on non-Federal lands. The court
ordered that the Waste Prevention Rule be vacated, thereby reinstating
NTL-4A as the BLM's standard for managing venting and flaring from
Federal oil and gas leases.
7. The Inflation Reduction Act
As discussed earlier, on August 16, 2022, President Biden signed
the IRA into law. Public Law 117-169. The IRA is designed to ``make a
historic down payment on deficit reduction to fight inflation, invest
in domestic energy production and manufacturing, and reduce carbon
emissions by roughly 40 percent by 2030.'' Summary: The Inflation
Reduction Act of 2022, available at https://www.democrats.senate.gov/imo/media/doc/inflation_reduction_act_one_page_summary.pdf. The Act
authorizes, among other things, massive and unprecedented investments
to enhance energy security and combat the climate crisis.
Of particular relevance here, the IRA contains a suite of
provisions addressing onshore and offshore oil and gas development
under Federal leases. For example, Section 50265 requires, inter alia,
the Department to maintain a certain level of onshore oil and gas
leasing activity as a prerequisite to approving renewable energy
rights-of-way on Federal lands. Importantly, that provision of the IRA
is accompanied by other provisions that serve to ensure that lessees
pay fair and appropriate compensation to the Federal Government in
exchange for the opportunity to conduct their industrial activities
under Federal leases.
One such provision of the Act is Section 50263, which is entitled,
``Royalties on All Extracted Methane.'' Consistent with the MLA's
assessment of royalties on all gas ``removed or sold from the lease''
\67\ and FOGRMA's requirement that lessees pay royalties on lost or
wasted gas,\68\ Section 50263 of the IRA provides that, for leases
issued after the date of enactment of the Act, royalties are owed on
all gas produced from Federal land, including gas that is consumed or
lost by venting, flaring, or negligent releases through any equipment
during upstream operations. Section 50263 further provides three
exceptions to the general obligation to pay royalties on produced gas,
namely: (1) gas that is vented or flared for not longer than 48 hours
in an emergency situation that poses a danger to human health, safety,
or the environment; (2) gas used or consumed within a lease, unit, or
communitized area for the benefit of the lease, unit, or communitized
area; and (3) gas that is unavoidably lost.
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\67\ 30 U.S.C. 226(b).
\68\ 30 U.S.C. 1756.
---------------------------------------------------------------------------
The BLM has for decades assessed royalties on upstream production
and has exempted from royalties gas lost in emergency situations,
``beneficial use'' gas, and ``unavoidably lost'' gas. IRA Section 50263
is consistent with the BLM's prior agency practice regarding emergency
situations and the unavoidable loss of gas, and it provides additional
support for the approach set forth in this proposed rule. Importantly,
IRA Section 50263 confirms that the concepts of ``avoidable'' and
``unavoidable'' loss are appropriate for assessing royalties. Section
50263 also confirms that the BLM's pecuniary interest in regulating
losses extends to those from upstream equipment. But the IRA leaves
certain questions open, such as what losses qualify as ``unavoidably
lost'' and what qualifies as an ``emergency situation.'' Congress thus
has left it to the BLM, as an exercise of the agency's expertise and
judgment, to determine answers to the specific questions the IRA leaves
open. As set forth later, this proposed rule addresses these issues in
a manner that is consistent with the IRA's focus (and the MLA's and
FOGRMA's pre-existing emphasis) on ensuring that Federal lessees pay
fair and appropriate compensation to the Federal Government in exchange
for the opportunity to conduct their industrial activities under
Federal leases.
D. A New Approach
The BLM has authority under the MLA to promulgate such rules and
regulations as may be necessary ``for the prevention of undue waste''
\69\ and to ensure that lessees ``use all reasonable precautions to
prevent waste of oil or gas.'' \70\ For many years, the BLM has
implemented this authority through restrictions on the venting and
flaring of gas from onshore Federal oil and gas leases. However, as
illustrated by the judicial decisions noted previously, courts have
disagreed (prior to enactment of the IRA) as to the full scope of the
BLM's authority to regulate venting and flaring. Requirements that one
court might consider necessary for the BLM to meet its statutory
mandates might be seen as regulatory overreach by another court. In
this proposed rulemaking, the BLM has chosen to focus on improving upon
NTL-4A in a variety of ways without advancing elements of the 2016
Waste Prevention
[[Page 73597]]
Rule that were the subject of certain judicial criticism.
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\69\ 30 U.S.C. 187.
\70\ 30 U.S.C. 225.
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As explained in more detail later and in the section-by-section
discussion, this proposed rule would make substantial improvements in
addressing the waste of Federal and Indian gas while also addressing
the criticisms of the 2016 Rule that were raised by the Wyoming court.
First, the proposed requirements more clearly constitute reasonable
waste prevention measures that should be expected of a prudent
operator. The proposed requirements should impose fewer overall costs
than those of the 2016 Rule and would ensure either actual conservation
of gas that would otherwise be wasted or compensation to the public and
Indian mineral owners through royalty payments when gas is wasted.
(This contrasts with certain provisions in the 2016 Rule that would
have reduced pollution--but not necessarily reduced waste--by allowing
operators to comply with analogous EPA standards in place of the BLM
requirements.) Second, in order to address the Wyoming court's concern
with the BLM's limited authority regarding unit and CA operations on
non-Federal/Indian lands, certain requirements in this proposed rule
are narrower in scope than similar requirements in the 2016 Rule.
Specifically, the proposed rule's requirements pertaining to safety,
pneumatic equipment, storage tanks, and leak detection and repair would
apply only to operations on a Federal or Indian lease. Third, the
proposed requirements are consistent with the ``prudent operator''
standard as that term has been applied in the oil and gas
jurisprudence. Fourth, the proposed rule was developed with an eye
towards avoiding excessive compliance burdens on marginal wells.
Finally, the BLM is expressly excluding the social cost of greenhouse
gases from the considerations underpinning any of the proposed waste
prevention requirements, thereby addressing the Wyoming court's concern
that the 2016 Rule was inappropriately supported by ``climate change
benefits.''
The provisions of this proposed rule serve straightforward waste
prevention objectives by promoting gas conservation. In order to avoid
situations where oil-well development outpaces the capacity of the
available gas capture infrastructure, the BLM is proposing to require
operators to submit a waste minimization plan with oil-well APDs and is
also proposing to establish a process for delaying action on an APD
where undue waste of Federal gas is expected to result from approving
the permit. The BLM recognizes that not all venting and flaring can be
prevented. In the circumstances in which some venting or flaring cannot
be prevented (e.g., initial production tests or emergencies), the BLM
is proposing to set appropriate time or volume limits on royalty-free
venting or flaring. The BLM is proposing to address the problem of
intermittent flaring due to pipeline capacity constraints by setting a
monthly volume limit on royalty-free flaring caused by inadequate
capture infrastructure. Requiring royalty payments on venting and
flaring that exceeds the appropriate volume limits would both
discourage waste and ensure that Federal and Indian royalty revenues
are not harmed by an operator's wasteful practices. The BLM estimates
that the royalty-free flaring limits of the proposed rule would
generate $32.9 million a year in additional royalties. See section 7.6
of the RIA for more information.
This proposed rule also contains provisions intended to reduce
losses of natural gas from pneumatic equipment, oil storage tanks, and
equipment leaks. Unlike the 2016 Waste Prevention Rule--which extended
these requirements to State and private lands in certain situations
\71\--the requirements now proposed by the BLM would apply only to
operations on Federal or Indian lands, where the BLM has express
authority and responsibility to regulate both for the prevention of
waste and for the protection of the environment. These requirements
would not apply to operations that occur on State or private tracts
committed to a Federal unit or CA. The BLM estimates that the
requirements of this proposed rule regarding pneumatic equipment, oil
storage tanks, and LDAR would result in the conservation of up to 15.3
Bcf of gas each year.
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\71\ Cf. Wyoming v. DOI, 493 F. Supp. 3d 1046, 1083-85 (D. Wyo.
2020).
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The BLM acknowledges that the contents of this proposed rule may
differ in some regards from the Revision Rule's unnecessarily narrow
interpretation of the BLM's statutory authority and the similarly
narrow interpretation reflected in the confession of error related to
the 2016 Waste Prevention Rule.\72\ Consistent with the BLM's
understanding of its authority prior to 2018, the BLM has reconsidered
the relevant conclusions of the Revision Rule and its related
confession of error and now rejects those conclusions for the following
reasons. To begin, nothing in the MLA's plain text, which requires
lessees to take ``all reasonable precautions to prevent waste'' and to
abide by rules and regulations issued ``for the prevention of undue
waste,'' suggests that the BLM's authority is limited to the
promulgation of rules that effectively pay for themselves (as measured
by balancing compliance costs against the value of the recovered gas).
Consistent with this text, the BLM's longstanding policy governing
venting and flaring has assessed the economic feasibility of gas
conservation in the context of ``the total leasehold production,
including oil and gas, as well as the economics of a field-wide plan.''
See supra, Part III.C.2. As the CDM made clear, the BLM's concern under
the MLA for nearly four decades prior to the Revision Rule was
``profitable operation of the lease, not just profitable disposition of
the gas.''
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\72\ See 83 FR 49185-86.
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Despite suggestions to the contrary in the 2018 Revision Rule, the
BLM's longstanding emphasis on overall ultimate resource recovery, not
lessee profits vis-[agrave]-vis wasted gas, is entirely consistent with
the ``prudent operator'' standard in oil and gas law. While the prudent
operator standard rests on an expectation of ``mutually profitable
development of the lease's mineral resources,'' \73\ it does not follow
that lessees can maximize their profit by wasting recoverable
hydrocarbon resources without regard for the lessor's lost royalty
revenues or the lessor's interest in conserving the gas for future
disposition. To the contrary, lessees have an obligation of reasonable
diligence in the development of the leased resources, rooted in due
regard for the interests of both the lessee and the lessor.\74\ And in
the MLA, FOGRMA, and the IRA, Congress enshrined the United States'
interest, as a mineral lessor, in avoiding waste and maximizing royalty
revenues.\75\ The
[[Page 73598]]
BLM, in managing oil and gas resources on behalf of the United States,
may value more production--considering both oil and gas production--
over a longer time period more highly than does an operator, who might
be more focused on generating near-term profits. None of the
authorities previously relied upon by the BLM to interpret the
``prudent operator'' standard foreclose any Secretarial action that
might marginally affect lessee profits.\76\
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\73\ Wyoming v. DOI, 493 F. Supp. 3d 1046, 1072 (D. Wyo. 2020).
\74\ See id.; see also Sinclair Oil & Gas Co. v. Bishop, 441
P.2d 436, 447 (Okla. 1967) (``Necessarily, we determine the lessee
was acting prudently when he ascertained that it was illegal and
improper to flare gas in the quantities shown by the evidence, in
order to produce the unallocated allowable of oil.''); Tr. Co. of
Chicago v. Samedan Oil Corp., 192 F.2d 282, 284 (10th Cir. 1951)
(``A first consideration is the precept that a prudent operator may
not act only for his self interest. He must not forget that the
primary consideration to the lessor for the lease is royalty from
the production of the lease free of cost of development and
operation.'').
\75\ See 30 U.S.C. 187, 225, 226(m), 1756; see also California
Co. v. Udall, 296 F.2d 384, 388 (DC Cir. 1961) (``[The Secretary]
has a responsibility to insure that these resources are not
physically wasted and that their extraction accords with prudent
principles of conservation. To protect the public's royalty interest
he may determine that minerals are being sold at less than
reasonable value. Under existing regulations he can restrict a
lessee's production to an amount commensurate with market demand,
and thus protect the public's royalty interest by preventing
depression of the market.'').
\76\ Cf. California v. Bernhardt, 472 F. Supp. 3d 573, 596 (N.D.
Cal. 2020) (``The statutory language demonstrates on its face that
any consideration of waste management limited to the economics of
individual well-operators would ignore express statutory mandates
concerning BLM's public welfare obligations.'').
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In contrast to NTL-4A, this proposed rule would not allow operators
to request that flared oil-well gas be deemed royalty-free based on
case-by-case economic assessments. There are a number of reasons for
this change. In the first instance, there is no statutory requirement
that the public forgo royalties on wasted gas based on an operator's
individual economic circumstances. Although it was the BLM's practice
to engage in case-by-case economic assessments under NTL-4A, that
approach is no longer appropriate, as the practical realities of
oilfield development have changed dramatically since 1980. As the U.S.
Department of Energy explained in a recent report, ``flaring has become
more of an issue with the rapid development of unconventional tight oil
and gas resources over the past two decades'' that has ``brought online
hydrocarbon resources that vary in their characteristics and
proportions of natural gas, natural gas liquids and crude oil.'' \77\
As explained earlier, the BLM has witnessed a massive increase in the
amount of venting and flaring from the 1990's to the 2010's. The
average amount of annual venting and flaring from Federal and Indian
leases between 1990 and 2000 was 11 Bcf but quadrupled to an average of
44.2 Bcf per year, between 2010 and 2020; and, as noted earlier, the
upward trend in flaring suggests it will continue to be a problem in
the coming years. The related increase in the number of royalty-free
flaring applications--from 50 in 2005 to 4,181 in 2015--has created a
significant administrative burden for the BLM as well as an estimated
information collection burden of approximately 33,488 total annual
burden hours potentially incurred by operators, and significant
uncertainty for operators as hundreds of applications wait to be
processed. Finally, it is important to note that the bulk of the recent
royalty-free flaring applications have concerned flaring from wells
that are actually connected to pipeline infrastructure. Although the
capacity of that infrastructure may be overwhelmed from time to time,
these are not the situations that the NTL-4A economic standard was
designed to accommodate. The purpose of the economic inquiry under NTL-
4A was to determine whether the volumes of associated gas production
would make the installation of gas-capture infrastructure economically
viable. Where the gas-capture infrastructure has already been built
out, its economic viability is not in question.
---------------------------------------------------------------------------
\77\ U.S. Department of Energy, Office of Fossil Energy, Office
of Oil and Natural Gas, ``Natural Gas Flaring and Venting: State and
Federal Regulatory Overview, Trends, and Impacts'' (June 2019).
---------------------------------------------------------------------------
One of the primary concerns underlying the BLM's promulgation of
the Revision Rule in 2018 was the compliance burden on ``marginal
wells,'' i.e., wells that produce approximately 10 barrels of oil or 60
Mcf of natural gas per day or less.\78\ The court that vacated the
Revision Rule rejected that concern as unfounded.\79\ However, the
court that vacated the Waste Prevention Rule faulted the BLM for
failing to adequately assess the impact of that rule on marginal
wells.\80\ The BLM does not wish to impose requirements that
inadvertently cause recoverable oil or gas resources to be stranded due
to premature lease abandonment. Simultaneously, even the operators of
marginal wells are capable of taking reasonable precautions to prevent
waste, as they must under the MLA. (For example, there is no real risk
of premature abandonment by requiring the operator of a marginal gas
well to minimize the loss of gas during liquids unloading operations,
as required in this proposed rule.)
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\78\ 83 FR 49187.
\79\ California v. Bernhardt, 472 F. Supp. 3d 573, 606 (N.D.
Cal. 2020).
\80\ Wyoming v. DOI, 493 F. Supp. 3d 1046, 1075-78 (D. Wyo.
2020).
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The BLM developed this proposed rule to avoid excessive compliance
burdens on marginal wells when balanced against the need to reduce
waste. In the Revision Rule, the BLM noted that the provisions of the
2016 Waste Prevention Rule that placed a particular burden on marginal
wells were those pertaining to pneumatic controllers, pneumatic
diaphragm pumps, and LDAR. In this proposed rule, the requirements for
pneumatic equipment would apply only where a lease, unit PA, or CA is
producing a quantity of oil or gas (120 Mcf of gas or 20 barrels of oil
per month) that would offset the compliance costs within a reasonable
payout period. And, as explained in more detail in the following
section-by-section discussion, the LDAR provisions of this proposed
rule are more flexible than those in the 2016 Waste Prevention Rule,
reducing the potential burden on marginal wells. The BLM requests
comment on the proposed approach to marginal wells, the point at which
additional regulatory burdens might result in stranded resources from
marginal wells, and whether the proposed rule is sufficient to prevent
avoidable waste from marginal wells.
The BLM acknowledges that, in the Revision Rule, the BLM asserted
that additional restrictions on flaring were unnecessary because the
States with the most significant BLM-managed oil and gas production
maintain regulatory restrictions on flaring from oil wells, and that
these State regulations ``provide[d] a reasonable assurance . . . that
the waste of associated gas will be controlled.'' \81\ This assertion
was in direct conflict with the BLM's prior findings during the
promulgation of the 2016 Waste Prevention Rule, and a U.S. District
Court found that the BLM's decision to rely on State flaring
regulations was unjustified based on the record evidence.\82\
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\81\ 83 FR 49202.
\82\ California v. Bernhardt, 472 F. Supp. 3d 573, 601-04 (N.D.
Cal. 2020).
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For this rulemaking, the BLM analyzed the State regulations
governing flaring, venting, and leaks in the 10 States responsible for
99 percent of Federal oil and gas production: New Mexico, Wyoming,
Colorado, North Dakota, Utah, California, Montana, Texas, Alaska, and
Oklahoma. Summaries of these regulations were collected in a table that
is available in the docket for this rulemaking at www.regulations.gov.
While there have been notable advancements in some States since the
promulgation of the 2016 Waste Prevention Rule--for example, new
comprehensive flaring regulations have since been adopted in New Mexico
and Colorado, and new requirements for storage tanks, pneumatic
equipment, and LDAR have been adopted in Colorado and Utah--State
regulations vary widely in their scope and stringency.\83\ And,
[[Page 73599]]
importantly, many of the State flaring regulations reserve substantial
discretion to the States to authorize additional flaring.\84\ That
discretion creates significant uncertainty about the extent to which
the BLM could rely on those regulations to protect the interests of the
United States and Indian mineral owners in minimizing waste and
maximizing royalty revenues.
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\83\ Examples of variations among State regulations include the
following. Unlike other States, (1) the States of New Mexico, North
Dakota, Montana, Texas, Alaska, and Oklahoma do not have regulations
to control losses of gas from pneumatic equipment; (2) Texas'
requirements to inspect for and repair leaks are focused on storage
tanks; (3) Alaska does not maintain LDAR requirements; and (4)
Wyoming's requirements for tanks, pneumatic equipment, and LDAR are
limited to the Upper Green River Basin ozone nonattainment area.
\84\ These States are: Wyoming, Utah, Montana, Texas, and
Oklahoma.
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For example, the BLM's review of State regulations revealed that
North Dakota's flaring rules were modified in recent years in a manner
allowing for more flaring within the State's gas-capture-percentage
requirements. Operators in the Bakken, Bakken/Three Forks, and Three
Forks pools are currently subject to a 91 percent gas capture
requirement under North Dakota Industrial Commission (NDIC) Order
24655. However, the NDIC's current Policy/Guidance \85\ for Order 24655
identifies a number of circumstances under which flared volumes will
not be counted against the operator's capture percentage. These
circumstances (referred to as ``variances'' by the NDIC) include
flaring due to ``force majeure'' events, flaring due to new wells being
connected to the same gas infrastructure system, and right-of-way
delays. Thus, it appears that many flaring events that are rooted in
inadequate gas-capture infrastructure will not count against an
operator's gas-capture percentage under NDIC Order 24655. The BLM notes
that in 2019--when NDIC Order 24655 ostensibly imposed an 88 percent
capture requirement on operators--19 percent of total natural gas
production in North Dakota was flared.\86\ North Dakota is a major
source of Federal oil and gas production, producing approximately 89
Bcf of Federal gas and 45 million barrels of Federal oil in 2019.
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\85\ NDIC Order 24665 Policy/Guidance Version 09-22-2020.
\86\ EIA, ``Natural gas venting and flaring in North Dakota and
Texas increased in 2019'' (Dec. 8, 2020), available at https://www.eia.gov/todayinenergy/detail.php?id=46176.
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In addition to State regulation, the BLM recognizes that the EPA
maintains regulations governing VOCs and/or methane emissions from
certain aspects of oil and gas production operations at 40 CFR part 60,
subparts OOOO and OOOOa, and that these regulations can have the co-
benefit of reducing the waste of gas during production activities.
Specifically, EPA's regulations require: (1) operators to capture or
flare gas that reaches the surface during well completion operations
with hydraulic fracturing; (2) operators of storage tanks (at
facilities constructed, modified, or reconstructed after August 23,
2011) with potential VOC emissions of 6 tons or more per year to
control those emissions (including through combustion); (3) pneumatic
controllers (at facilities constructed, modified or reconstructed after
October 15, 2013) to be low-bleed (i.e., bleed rate less than 6
standard cubic feet/hour) or no-bleed at onshore natural gas processing
plants; (4) emissions from pneumatic pumps (at facilities that were
constructed, modified, or reconstructed after September 18, 2015) to be
routed to a control device or process; and (5) operators of well sites
constructed, modified, or reconstructed after September 18, 2015, to
develop and implement a leak-monitoring plan involving instrument-based
leak detection and semi-annual inspections.
Although operator compliance with these EPA requirements can reduce
the waste of natural gas from Federal and Indian leases, they do not
supplant the need for BLM standards for the following reasons. First,
the EPA's requirements for storage tanks, pneumatic equipment, and LDAR
apply only to emissions sources that were constructed, modified, or
reconstructed after August 23, 2011, or later, depending on the
requirement. Thus, relying on EPA's requirements would ignore wasteful
practices at many \87\ well sites producing Federal and Indian gas.\88\
Second, EPA's requirements are not a substitute for BLM standards
because EPA's requirements are focused on controlling methane and VOC
emissions, rather than conserving natural gas, and compliance with the
EPA's standards will not always reduce the waste of natural gas. For
example, an operator can comply with EPA's current requirements for
storage tanks and pneumatic pumps by routing the emissions to
combustion (i.e., flaring) and therefore eliminating venting from the
tanks and pumps altogether--a process that results in the same loss of
gas as venting the gas from the tank or pump.
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\87\ The BLM estimates that approximately 39% of BLM-managed
well sites are not covered by the EPA requirements.
\88\ The BLM recognizes that the EPA has proposed to revise new
source performance standards for new, modified, and reconstructed
oil and gas sources and has proposed emissions guidelines for
existing oil and gas sources. See 86 FR 63110 (Nov 15, 2021). The
BLM cannot presuppose the outcome of that rulemaking process. Cf.
California v. Bernhardt, 472 F. Supp. 3d 573, 625 (N.D. Cal. 2020)
(``BLM was not required to prejudge the outcome of that proposed
rulemaking in its EA.''). However, the BLM will maintain an
awareness of developments in EPA's regulations and will make
adjustments to the final rule as appropriate. The BLM further notes
that, under the Clean Air Act, once the EPA finalizes the new
emission guidelines, States with one or more existing sources must
develop and submit State plans to the EPA for approval. Under this
statutory structure, State plans that would implement new emissions
guidelines for existing sources would likely not go into effect
until some period of time after such guidelines are finalized.
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Based on its review and analysis of State and EPA regulations, the
BLM finds that it is necessary to establish a uniform standard
governing the wasteful losses of Federal and Indian gas through
venting, flaring, and leaks.\89\ The BLM cannot rely on a patchwork of
State and EPA regulations to ensure that operators of Federal oil and
gas leases consistently meet the waste prevention mandates of the MLA,
that the American public receives a fair return for the development of
the Federal mineral estate, and that the Department's trust
responsibility to Indian mineral owners is satisfied. The BLM
acknowledges that this is a change in position from what the BLM stated
in the Revision Rule regarding analogous State and EPA regulations.
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\89\ The BLM acknowledges that the court in Wyoming questioned
what it described as the BLM's authority to ``hijack'' cooperative
federalism under the Clean Air Act ``under the guise of waste
management.'' Wyoming, 493 F. Supp. 3d 1046, 1066 (D. Wyo. 2020).
However, as noted elsewhere, this proposed rule is justified not by
any ancillary effects on air quality or climate change, but solely
on the basis of waste prevention--an arena where the BLM has
independent statutory authority to regulate. See Wyoming, 493 F.
Supp. 3d at 1063 (``The terms of the MLA and FOGRMA make clear that
Congress intended the Secretary, through the BLM, to exercise
rulemaking authority to prevent the waste of Federal and Indian
mineral resources and to ensure the proper payment of royalties to
Federal, State, and Tribal governments.''). On its own terms,
therefore, the Wyoming court's reference to cooperative federalism
under the Clean Air Act is therefore inapplicable to this proposal.
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The RIA \90\ for this rule calculates that this rule would cost
operators $122 million a year, using a 7 percent discount rate, for the
next 10 years ($110 million a year using a 3 percent discount rate)
while generating benefits to operators of approximately $54.2 million a
year, using a 7 percent discount rate, in the form of 15.3 Bcf of
additional captured gas ($54.8 million using a 3 percent discount
rate). The RIA estimates that this proposed rule would generate $39
million a year in additional royalties. The BLM acknowledges that the
costs of this rule
[[Page 73600]]
to operators will outweigh the benefits in terms of the monetized
market value of the gas conserved. The BLM notes that the statutory
provisions authorizing the BLM to regulate oil and gas operations for
the prevention of waste do not impose a net-benefit requirement.
---------------------------------------------------------------------------
\90\ The cost-benefit analysis contained in the RIA was
generated to comply with Executive Order 12866 and is not required
by the statutes authorizing the BLM to regulate for the prevention
of waste from oil and gas leases.
---------------------------------------------------------------------------
The reduced methane emissions associated with the proposed rule
would provide a monetized benefit to society (in the form of avoided
climate damages) of $427 million a year over the same time frame,
leading to an overall net monetized benefit from the rule of $359
million a year, as well as additional unquantified benefits (see
section 7.2 of the RIA regarding unquantified benefits). The basis for
the BLM's estimates of social benefits from reduced methane emissions--
namely, the social cost of greenhouse gases (SC-GHG)--is explained in
detail in Section 7 of the RIA. To be clear, although the BLM is
reporting its estimates of the social benefits of reduced methane
emissions here and in the RIA, the purpose of that reporting is solely
to provide the most complete and transparent accounting of the costs
and benefits of the proposed rule for the public's awareness and
consideration. The requirements of this proposed rule reflect
reasonable measures to avoid waste that could be expected of a prudent
operator, irrespective of any impacts with respect to climate change.
IV. Section-by-Section Discussion of Proposed Rule
A. 43 CFR Part 3160--Onshore Oil and Gas Operations
Section 3162.3-1 Drilling Applications and Plans
Existing Sec. 3162.3-1 contains the BLM's longstanding requirement
that operators must submit an APD prior to conducting any drilling
operations on a Federal or Indian oil and gas lease. No drilling
operations may be commenced prior to the BLM's approval of the APD.
This proposed rule would add two new paragraphs to Sec. 3162.3-1 that
are intended to help operators and the BLM avoid situations where
substantial volumes of natural gas are flared due to inadequate gas
capture infrastructure.
Proposed Sec. 3162.3-1(j) would require an APD for an oil well to
be accompanied by a plan to minimize the waste of natural gas from that
well. This ``waste minimization plan'' would demonstrate how the
operator plans to capture associated gas upon the start of oil
production, or as soon thereafter as reasonably possible, and would
also explain why any delay in capture of the associated gas would be
necessary. The waste minimization plan would contain certain
information that would provide the BLM with a more complete picture of
the consequences of approving the APD in terms of wasted natural gas.
Specifically, the waste minimization plan would be required to include
the following information: the anticipated completion date of the well;
a description of the anticipated production of both oil and associated
gas; a certification that the operator has informed at least one
midstream processing company of the operator's production plans; and
information regarding the gas pipeline to which the operator plans to
connect. If an operator cannot identify a gas pipeline with sufficient
capacity to accommodate the anticipated associated gas production, the
waste minimization plan would be required to also include: a gas-
pipeline-system map showing the existing pipelines within 20 miles of
the well and the location of the closest gas processing plant;
information about the operator's flaring from other wells in the
vicinity; and a detailed evaluation of opportunities for alternative
on-site capture approaches, such as compression of the gas, removal of
NGLs, or electricity generation. Finally, the operator would also be
required to include any other information demonstrating the operator's
plans to avoid the waste of gas production from any source, including
pneumatic equipment, storage tanks, and leaks.
The contents of the operator's waste minimization plan would
provide the BLM with the information necessary to understand how much
associated gas would be lost to flaring if the oil-well APD were
approved, and whether such loss of gas would be reasonable under the
circumstances. If the available information demonstrates that approving
the APD could result in the unreasonable and undue waste of Federal or
Indian gas, proposed Sec. 3162.3-1(k) would expressly authorize the
BLM to take one of the following actions on the APD. First, the BLM
could approve the APD subject to conditions for gas capture and/or
royalty payments on vented and flared gas. Second, the BLM could defer
action on the APD in the interest of preventing waste. If the BLM were
to defer action on the APD under proposed Sec. 3162.3-1(k)(2), the BLM
would notify the applicant and specify steps that the applicant could
take for the APD to be issued. If the potential for unreasonable and
undue waste is not addressed within 2 years of the applicant's receipt
of the notice, the BLM could deny the APD. The BLM notes that this
proposed process is based on the requirements for APD processing in the
MLA (30 U.S.C. 226(p)) and is consistent with the APD processing
provisions of Onshore Order Number 1. The BLM seeks comment on its
definition of ``unreasonable and undue waste'' (see discussion of Sec.
3179.3 later) and whether or to what extent the final rule (or
implementing guidance) should spell out in additional detail how the
BLM expects to make decisions to defer or deny an APD due to concerns
regarding excessive waste of associated gas.
The BLM believes that the proposed amendments to Sec. 3162.3-1
would help to reduce the waste of associated gas from oil wells for the
following reasons. First, the requirement to submit a waste
minimization plan would force operators to think critically about
opportunities for gas capture before the well is drilled. Second, the
information provided in the proposed waste minimization plan would help
the BLM make better decisions about which APDs should be approved and
under what conditions. Finally, the express authorization for the BLM
to defer--and potentially deny--an APD would incentivize operators to
tailor their development plans to the available gas-capture
infrastructure and avoid the waste of public, Tribal, and allottee-
owned gas.
The BLM notes that some States have already incorporated concepts
similar to the proposed waste minimization plan requirement into their
regulations governing flaring. In New Mexico, operators must submit a
``natural gas management plan'' with any APD that describes the actions
the operator will take to ensure that it will meet New Mexico's gas-
capture requirements. In Wyoming, an operator's application for
authorization to flare must include, among other information, a gas-
capture plan identifying gas gathering and transportation facilities in
the area, the name of gas gatherers providing ``gas take-away
capacity,'' and information on the gas gathering line to which the
operator proposes to connect. In Colorado, an operator must either
commit to connecting to a gathering system by the commencement of
production or submit a gas-capture plan containing information about
the closest or contracted natural-gas gathering system and describing
the operator's plan for connecting to the gas-gathering system or
otherwise putting the gas to beneficial use. In North Dakota, an
operator that has failed to meet its gas-capture requirements in any of
the previous 3 months must submit a gas-capture plan with any
application for a permit to drill. These existing, State-
[[Page 73601]]
level gas-capture planning requirements demonstrate that operators have
the capacity to comply with the BLM's proposed waste minimization plan
requirement and that the proposed requirement is consistent with the
regulatory practices of other traditional oil and gas resource
conservation agencies. To be clear, these State requirements do not
obviate the need for a waste minimization plan requirement in the BLM's
regulations. In the first instance, many States (including Utah,
Montana, Texas, and Oklahoma) in which the BLM manages oil and gas
drilling and production do not have analogous planning requirements.
Second, the gas capture plan requirements in Wyoming and North Dakota
are only triggered after flaring is demonstrated to be a problem at the
well, and therefore do not address flaring at the well permitting
stage. Finally, none of the State gas capture plan requirements require
the operator to submit the plans to the BLM and, therefore, do not
provide the BLM, in its capacity as regulator of the Federal mineral
estate, with an opportunity to render its own determinations regarding
potential waste when processing an APD.
The BLM acknowledges that the BLM's proposal to require waste
minimization plans with oil-well APDs constitutes a change from the
position the BLM articulated in the 2018 Revision Rule. See 83 FR
49184, 49191-92 (Sept. 28, 2018). For the reasons discussed earlier,
the BLM has concluded that many assertions made in the Revision Rule
are not supported by contemporary data, and the proposed waste
minimization plan requirement; would facilitate less wasteful
development; would not be unnecessarily duplicative of existing State
requirements; and would not impose an undue administrative burden on
operators.
The proposed additions to Sec. 3162.3-1 would reduce the waste of
Federal and Indian gas by allowing the BLM to make better-informed
decisions when processing oil-well APDs. In effect, the BLM would be
able to more swiftly approve wells that pose the least risk of waste,
while deferring approval of APDs for wells that lack access to the
necessary gas-capture infrastructure and that would therefore result in
waste. The BLM is not alone in recognizing the potential benefits of
the proposed waste minimization plan requirement. In a recent report,
the GAO analyzed State-level gas capture plan requirements and
recommended that the BLM ``consider whether to require gas capture
plans that are similar to what States require, including gas capture
percentage targets, from operators on federal lands.'' \91\ (As
discussed later in the section-by-section discussion of proposed Sec.
3179.8, the BLM has decided not to use gas-capture percentage targets
in this proposed rule.)
---------------------------------------------------------------------------
\91\ GAO, OIL AND GAS: Federal Actions Needed to Address Methane
Emissions from Oil and Gas Development (April 2022) (GAO-22-104759).
---------------------------------------------------------------------------
Although the proposal discussed here pertains specifically to the
permitting stage of oil and gas development, information regarding the
capacity of available gas-capture infrastructure helps the BLM make
better decisions at the leasing stage as well. The BLM currently has
the discretion to offer, or not offer, parcels for lease based on
waste/conservation considerations,\92\ and the proposed waste
minimization plans could provide an efficient (though not exclusive)
means of collecting additional information regarding the location of
adequate gas capture infrastructure that would be relevant for lease
sale decisions. The BLM requests comment on how it can improve its
processes pertaining to the leasing stage of development so as to
minimize the waste of natural gas during later stages of development.
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\92\ See, e.g., Western Energy Alliance v. Salazar, 709 F.3d
1040, 1044 (10th Cir. 2013) (MLA ``vest[s] the Secretary with
considerable discretion to determine which lands will be leased'').
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B. 43 CFR Part 3170--Onshore Oil and Gas Production
Subpart 3179--Waste Prevention and Resource Conservation
Section 3179.1 Purpose
Proposed Sec. 3179.1 would state that the purpose of subpart 3179
is to implement and carry out the purposes of statutes relating to
prevention of waste from Federal and Indian oil and gas leases,
conservation of surface resources, and management of the public lands
for multiple use and sustained yield, including Section 50263 of the
Inflation Reduction Act. These statutes are discussed in detail in
Section III.B of this preamble.
Section 3179.1 would also clarify that subpart 3179 would supersede
those portions of NTL-4A pertaining to, among other things, flaring and
venting of produced gas, unavoidably and avoidably lost gas, and waste
prevention. Subpart 3178 has already superseded the portions of NTL-4A
pertaining to oil or gas used for beneficial purposes (see 43 CFR
3178.1). Thus, if proposed subpart 3179 is ultimately adopted, NTL-4A
will have been superseded in its entirety.
Section 3179.2 Scope
Section 3179.2 identifies the operations to which the various
provisions of proposed subpart 3179 would apply. Paragraph (a) states
that, in general, the provisions of proposed subpart 3179 would apply
to: (1) all onshore Federal and Indian (other than Osage Tribe) oil and
gas leases, units, and communitized areas; (2) Indian Mineral
Development Act oil and gas agreements; (3) leases and other business
agreements and contracts for the development of Tribal energy resources
under a Tribal Energy Resource Agreement entered into with the
Secretary; and (4) wells, equipment, and operations on State or private
tracts that are committed to a federally approved unit or CA.
Paragraph (b) states that certain provisions in proposed subpart
3179 would apply only to operations and production equipment located on
a Federal or Indian oil and gas lease, and would not apply to
operations on State or private tracts, even where such tracts have been
committed to a federally approved unit or CA (sometimes referred to as
``mixed-ownership'' units or CAs). The provisions of subpart 3179
subject to this more limited scope are those provisions pertaining to
safety (proposed Sec. 3179.6), pneumatic equipment (proposed Sec.
3179.201), storage tanks (proposed Sec. 3179.203), and LDAR (proposed
Sec. Sec. 3179.301 through 303).
As mentioned in Section III.D, proposed Sec. 3179.2(b) responds to
a question regarding the BLM's authority raised by the court that
vacated the 2016 Waste Prevention Rule. Specifically, that court stated
that the MLA ``does not provide broad authorization for the BLM to
impose comprehensive Federal regulations similar to those applicable to
operations on Federal lands on State or privately owned tracts or
interests.'' \93\ Rather, in that court's view, the BLM's authority to
regulate unit or CA operations on State and private tracts under the
MLA and FOGRMA is limited to rates of development and matters directly
relevant to the BLM's proprietary interest in the Federal minerals.\94\
The BLM maintains that the requirements proposed herein related to
pneumatic equipment, storage tanks, and LDAR serve a legitimate waste-
prevention purpose by requiring interventions that would lead to the
conservation of natural gas and, therefore, to additional royalties
allocable to the United States
[[Page 73602]]
or Indian mineral owners in a mixed-ownership unit or CA. In this
rulemaking, however, the BLM has chosen to limit the scope of these
provisions to operations on Federal or Indian leases. Other provisions
that have a more direct impact on royalty revenues--such as the limits
on royalty-free flaring in proposed Sec. Sec. 3179.4, 3179.8,
3179.102, 3179.103, 3179.104, and 3179.105, and the measurement and
reporting requirements of proposed Sec. 3179.9--would apply to all
operations producing Federal or Indian gas, whether on lease or as part
of a mixed-ownership unit or CA. The BLM requests comment on its
proposed approach to balancing its resource conservation objectives.
---------------------------------------------------------------------------
\93\ Wyoming v. DOI, 493 F. Supp. 3d 1046, 1082 (D. Wyo. 2020).
\94\ Id. at 1082-83.
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Section 3179.3 Definitions and Acronyms
This proposed section contains definitions for 13 terms that are
used in subpart 3179: ``automatic ignition system;'' ``capture;''
``compressor station;'' ``gas-to-oil ratio;'' ``gas well;'' ``high-
pressure flare;'' ``leak;'' ``liquids unloading;'' ``lost oil or lost
gas;'' ``low-pressure flare;'' ``pneumatic controller;'' ``storage
vessel;'' and ``unreasonable and undue waste of gas.'' Some defined
terms would have a particular meaning in this proposed rule. Other
defined terms may be familiar to many readers, but we include their
definitions in the proposed regulatory text to enhance the clarity of
the rule.
The proposed rule would define ``unreasonable and undue waste of
gas'' to mean a frequent or ongoing loss of gas that could be avoided
without causing an ultimately greater loss of equivalent total energy
than would occur if the loss of gas were to continue unabated. The
intent of this definition is to clarify that the goal of waste
prevention is maximizing the overall recovery of energy resources. To
illustrate, the long-term flaring of associated gas from an oil well
would constitute ``unreasonable and undue waste of gas'' if the
operator could avoid or reduce the flaring by curtailing production in
the near-term and producing an equal or greater amount of total energy
resources (considering both oil and gas production) from the well in
the long term. Thus, this proposed definition incorporates the
fundamental concept of waste contained in NTL-4A. The phrase ``frequent
or ongoing loss'' is intended to exclude one-off events such as an
unanticipated equipment failure or a specific operation, like liquids
unloading, that involves some venting or flaring of a limited duration.
The phrase ``total equivalent energy'' compares the total expected
energy production from the well with capture required to the total
expected energy production from the well without capture, considering
both production streams (oil and gas). Expected gas production is
converted to barrels of oil equivalent to allow for an ``apples to
apples'' comparison. In brief, if the gas that would otherwise be lost
could be conserved without stranding more energy resources in the
ground (i.e., without creating more waste overall), the operator should
be expected to take the necessary measures to conserve that gas. The
BLM seeks comment on this definition of ``unreasonable and undue waste
of gas.''
The phrase ``unreasonable and undue waste of gas'' appears in
proposed Sec. Sec. 3162.3-1(k), 3179.8, and 3179.301, which pertain to
APD processing, oil-well gas flaring, and LDAR, respectively. As
explained elsewhere in this section-by-section analysis, proposed
Sec. Sec. 3162.3-1(k), 3179.8, and 3179.301 each authorize the BLM to
take some discretionary action based on its view of the ``unreasonable
and undue waste of gas.'' This definition would establish parameters on
the exercise of that discretion.
The BLM seeks comment on the following alternative definition:
``Unreasonable and undue waste of gas'' means a frequent or ongoing
loss of substantial quantities of gas that could reasonably be avoided
if the operator were to take prudent steps to plan for and manage
anticipated production of both oil and associated gas from its
operation, including, where appropriate, coordination with other nearby
operations.
The BLM also seeks comment on the inter-relation and interaction of
the ``unreasonable and undue waste'' concept with the ``avoidable/
unavoidable loss'' concept detailed later. The BLM views ``avoidable/
unavoidable loss'' primarily as a means of determining when royalties
must be paid on lost gas, while the concept of ``unreasonable and undue
waste'' would inform BLM decision-making with respect to other, more
complicated waste prevention measures, such as delaying or denying a
permit to drill or ordering a well to be shut-in due to excessive
flaring. The BLM requests comment on whether the BLM should be
considering other ways to view the inter-relation and interaction of
these two concepts.
Section 3179.4 Determining When the Loss of Oil or Gas Is Avoidable or
Unavoidable
This proposed section would specify when lost oil or gas would be
classified as ``unavoidably lost'' (i.e., when it is royalty free) and
when it would be classified as ``avoidably lost'' (i.e., when it is
royalty bearing). NTL-4A contains similar provisions addressing when
oil or gas is ``avoidably lost'' or ``unavoidably lost.'' However,
these NTL-4A provisions have been subject to interpretation and have
not always been applied consistently. In order to address this
deficiency in NTL-4A, this proposed rule would deem losses from
specified operations and sources to be ``unavoidably lost'' when the
operator has not been negligent, has not violated laws, regulations,
lease terms or orders, and has taken prudent and reasonable steps to
avoid waste. Any oil or gas that is not categorized as unavoidably lost
would be considered ``avoidably lost,'' and therefore royalty-bearing.
The listed operations and sources that may constitute an unavoidable
loss under this proposed rule include: well drilling; well completions
and related operations; initial production tests; subsequent well
tests; emergencies; downhole well maintenance and liquids unloading;
facility and pipeline maintenance; and flaring due to pipeline capacity
constraints, midstream processing failures, or other similar events.
Notably, the proposed rule would apply reasonable time and/or volume
limitations on royalty-free flaring attributable to many of these
operations and sources. See the discussion of proposed Sec. Sec.
3179.8, 3179.102, 3179.103., 3179.104, and 3179.105 later in this
preamble. The BLM requests comment on whether the definition of
``unavoidably lost'' can be more narrowly defined than as proposed.
Section 3179.5 When Lost Production Is Subject to Royalty
This section would state that royalty is due on all ``avoidably
lost'' gas, and that no royalty is due on ``unavoidably lost'' gas.
Section 3179.6 Safety
Proposed Sec. 3179.6 contains provisions intended to ensure safety
at the well site. First, proposed Sec. 3179.6(a) would require that
gas that cannot be captured must be flared (rather than vented), except
under certain specified circumstances. It is generally safer to combust
gas rather than to allow it to vent into the surrounding air due to the
gas' explosiveness and the risks to workers from hypoxia and exposure
to various associated pollutants.\95\ The
[[Page 73603]]
preference for flaring over venting is well-established in oilfield
operations. Indeed, the USGS implementing guidance for NTL-4A stated
that, ``[b]ecause of safety requirements, gas which cannot be
beneficially used or sold must normally be flared, not vented.'' CDM,
644.5.3G (June 1980). Operators would be allowed to vent gas when
flaring is technically infeasible, under emergency conditions, and when
gas is vented through the normal operation of pneumatic equipment,
among other circumstances.
---------------------------------------------------------------------------
\95\ NIOSH-OSHA Hazard Alert, ``Health and Safety Risks for
Workers Involved in Manual Tank Gauging and Sampling at Oil and Gas
Extraction Sites,'' February 2016, available at https://www.osha.gov/sites/default/files/publications/OSHA3843.pdf.
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Proposed Sec. 3179.6(b) would require flares or combustion devices
be equipped with automatic ignition systems. There is no similar
requirement in NTL-4A. Under proposed Sec. 3179.6(b), the BLM would be
authorized to issue an immediate assessment of $1,000 upon discovering
a flare that is not lit.
Finally, proposed Sec. 3179.6(c) would require that flares be
placed a sufficient distance from the tank battery containment or other
significant structures or objects so as not to create a safety hazard.
NTL-4A does not contain similar flare location requirements.
Section 3179.7 Gas-Well Gas
This section states that gas-well gas cannot be flared or vented
unless it is unavoidably lost under proposed Sec. 3179.4(b).
Currently, gas-well gas is prohibited from being vented or flared under
NTL-4A unless it qualifies as ``unavoidably lost'' or is specially
authorized by the BLM. Unlike oil wells, the primary purpose of a gas
well is the production and sale of gas. Therefore, consistent with
longstanding BLM policy, gas-well gas should not be vented or flared
except in narrow circumstances.
Section 3179.8 Oil-Well Gas
Proposed Sec. 3179.8 would establish a new policy governing the
flaring of associated gas from oil wells. Most of the flaring from BLM-
managed oil and gas leases occurs at oil wells that are connected to a
gas pipeline with insufficient takeaway capacity for the well(s)
connected to the pipeline. When the gas pipeline associated with an oil
well becomes overwhelmed, the well is ``kicked off'' the pipeline and
the operator is faced with a choice: flare the associated gas in order
to continue oil production unabated, or curtail oil production in order
to conserve the associated gas. At this point, the interests of the
operator and the lessor (either the United States or the Indian mineral
owner) may diverge. Specifically, the operator may wish to continue oil
production unabated, sacrificing the associated gas production for
near-term revenues from the oil production. When an operator chooses
this course of action, proposed Sec. 3179.8(a) would ensure that the
financial interests of the public and Indian mineral owners are not
unduly compromised. Under proposed Sec. 3179.8(a), when oil-well gas
must be flared due to pipeline capacity constraints, midstream
processing failures, or other similar events that prevent produced gas
from being transported through the connected pipeline, a maximum of
1,050 Mcf per month (per lease, unit, or CA) of such flared gas would
be considered a royalty-free ``unavoidable loss.'' The operator would
owe royalties on flaring beyond that limit.
The proposed monthly volume limit on royalty-free flaring due to
pipeline capacity constraints replaces the case-by-case flaring
approval process of NTL-4A. Under NTL-4A, an operator could seek BLM
approval to flare where conservation of the gas was not ``economically
justified.'' \96\ As the rapid development of unconventional tight oil
and gas resources resulted in more flaring due to midstream problems
such as pipeline capacity constraints, many operators began to submit
applications arguing that the flaring was justified under the economic
circumstances and should therefore be royalty free.\97\ The BLM has
never taken the position that long-term flaring due to pipeline
capacity constraints is economically justified. Furthermore, the BLM
does not believe that the economic test in NTL-4A was intended to
accommodate situations where large volumes of associated gas are flared
in order to maximize an individual operator's near-term profits.
Rather, as explained in detail previously, the economic standard in
NTL-4A looked to ``the total leasehold production, including oil and
gas, as well as the economics of a field-wide plan,'' when evaluating
the feasibility of conserving the associated gas, and this standard did
not envision that operators could use a pipeline constraint as an
economic justification for long-term flaring. Finally, the drastic
increase in flaring applications under NTL-4A demonstrates that the
case-by-case application process is not a sustainable approach for
evaluating the appropriateness of flaring. Therefore, the BLM is
proposing to set a volume limit that will accommodate any truly
unavoidable losses due to midstream failures while ensuring that
royalties are paid when an operator makes the business decision to
flare gas in order to continue producing oil.
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\96\ See Section III.C.2 of this preamble for additional detail
on this process and the applicable standard.
\97\ See, e.g., Petro-Hunt, LLC, 197 IBLA 100, 105-106 (``Petro-
Hunt stated that `[t]he flaring at issue was primarily the result
of, among other things, force majeure events, maintenance, and/or
capacity issues in the third-party gas gathering and processing
system, a common cause of flaring in the Williston Basin.' It argued
that `[w]hile [it] could have prevented flaring by shutting-in its
productive oil wells and refusing to continue developing the field,
such actions would not have been reasonable' because `there are vast
discrepancies in value between produced oil and gas.' '').
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In order to determine the appropriate monthly volume limit on
royalty-free flaring due to midstream constraints, the BLM examined
flaring data reported to ONRR for the years 2015-2019. Based on that
data, the BLM determined that a limit of 1,050 Mcf per month would
impact the 20 percent of flaring operations responsible for 95 percent
of the reported flaring volumes. Thus, the proposed limit targets only
those operators that generate the vast majority of the flaring. The BLM
estimates that the proposed 1,050 Mcf per month limit would make
approximately 85 percent of flared volumes royalty-bearing and generate
an average of nearly $33 million in royalty revenues each year. The BLM
examined limits lower than 1,050 Mcf per month, but found diminishing
returns in terms of additional royalties relative to the number of
operations impacted.
In most cases, payment of royalties on flared associated gas would
be sufficient to protect the proprietary interests of the United States
and Indian mineral owners. However, because the incentive to flare is
strongest where the price of gas (and, therefore, the royalty value of
the gas) is lowest with respect to the price of oil, the BLM must be
prepared for the possibility of egregious cases where the volume of
flaring is unacceptable even in the face of royalty payments. In order
to protect the public interest in such cases, paragraphs (b) and (c) of
proposed Sec. 3179.8 would establish a process whereby the BLM could,
under a narrow set of circumstances, order an operator to curtail or
shut-in production as necessary to avoid the unreasonable waste of
Federal or Indian gas. The BLM is proposing to limit shut-in or
curtailment orders under this section to situations where the operator
had reported flaring in excess of 4,000 Mcf per month for 3 consecutive
months and the BLM confirms that flaring is ongoing. According to ONRR
data, only
[[Page 73604]]
3 percent of reporting units had 3 consecutive months of more than
4,000 Mcf of flaring. However, this 3 percent accounted for
approximately 16 percent of the total flaring in 2019.
The proposed standard for shut-in or curtailment orders is based on
flaring over a consecutive 3-month period to account for the fact that
flaring is often at its highest levels during the first months of a
well's life and can taper off to substantially lower levels soon
thereafter. One reason for this phenomenon is that facilities are often
designed to accommodate long-term production levels, as opposed to the
high levels of gas production experienced in the initial months of
production. The purpose of the 3-month time frame is to focus shut-in
and curtailment orders on wells most likely to flare large volumes for
longer periods. The BLM requests comment on the proposed standard for
shut-in or curtailment orders, including the volume threshold and the
3-month time frame.
If a shut-in or curtailment order would adversely affect production
of oil or gas from non-Federal and non-Indian mineral interests (e.g.,
State or private leases in a mixed-ownership unit or CA), the BLM is
proposing to issue such an order only where the BLM is authorized to
regulate the rate of production under the governing unit or
communitization agreement. In the absence of such authorization, the
BLM would contact the State regulatory authority having jurisdiction
over the oil and gas production from the non-Federal and non-Indian
interests and request that that entity take appropriate action to limit
the waste of gas.
The BLM requests comment on this proposed approach to regulating
the flaring of associated gas from oil wells. Specifically, the BLM
would like comment on whether the proposed volume thresholds are
appropriate, whether the proposed limit on royalty-free flaring in
proposed Sec. 3179.8(a) should cover sources of flaring besides
midstream constraints, and whether shut-in or curtailment orders under
proposed Sec. 3179.8(b) can or should be applied more broadly (e.g.,
for lower volumes of flaring, over a shorter time frame, or using a
different standard for impacting non-Federal production).
The BLM also invites comment on alternative approaches to
regulating flaring, such as the capture percentage regimes employed by
New Mexico and North Dakota. The BLM has not proposed capture
percentage requirements similar to those in the 2016 Rule because such
requirements would appear to be more difficult for the BLM to implement
and enforce (due to the relative complexity of the calculations) and
not necessarily more effective at controlling waste or ensuring
appropriate royalty payments as opposed to the provisions proposed
herein.
Section 3179.9 Measuring and Reporting Volumes of Gas Vented and Flared
Under proposed Sec. 3179.9(a), operators would be required to
estimate (using estimation protocols) or measure (using a metering
device) all flared and vented gas, whether royalty-bearing or royalty-
free. Operators would also be required to report all volumes vented or
flared under applicable ONRR reporting requirements.
Proposed paragraph (b) would require operators to use an orifice
meter for any flare that is flaring at a rate of 1,050 Mcf per month or
higher. The meter would be required to conform to the requirements of
43 CFR subpart 3175 for a low-volume facility measurement point (FMP),
but with lesser requirements for plate inspection, EGM verification,
determination of heating value, and overall measurement uncertainty.
The proposed section would establish the timeframe for installation of
the required meter (6 months after the effective date of the final
rule) and would establish special requirements relating to the location
of the meter. The BLM requests comment on whether operators should be
required to document compliance with proposed paragraph (b) and provide
that documentation to the BLM on a regular or as-needed basis.
Proposed paragraph (c) would provide the requirements for flares
not covered by paragraph (b). This section would allow those flared
volumes to be measured per the requirements of paragraph (b), estimated
utilizing sampling and compositional analysis that complies with the
requirements of proposed Sec. 3179.203(c), or estimated using another
method that has been approved by the BLM.
Proposed paragraph (d) would address situations where a flare is
combusting gas that is combined across multiple leases, unit PAs, or
communitized areas. This proposed paragraph would allow the operator to
measure or estimate the gas at a single point at the flare but would
require the operator to use an allocation method approved by the BLM to
allocate the quantities of flared gas to each lease, unit PA, or
communitized area.
Paragraph (e) would clarify that flare meters are not FMPs for the
purposes of the BLM's gas measurement regulations at 43 CFR subpart
3175.
Section 3179.10 Determinations Regarding Royalty-Free Flaring
This proposed section would provide for a transition period for
operators that are operating under existing approvals for royalty-free
flaring as of the effective date of the final rule. Proposed paragraph
(a) states those operators could continue to flare royalty-free
pursuant to such approvals for 6 months after the effective date of the
rule.
Paragraph (b) would clarify that nothing in proposed subpart 3179
would alter the royalty-bearing status of flaring that occurred prior
to the effective date of the final rule or the BLM's authority to
determine that status and collect appropriate back-royalties.
Section 3179.11 Incorporation by Reference (IBR)
The proposed rule would incorporate two industry standards without
republishing the standards in their entirety in the CFR, a practice
known as incorporation by reference. These standards were developed
through a consensus process, facilitated by the Gas Processors
Association (GPA) Midstream, with input from the oil and gas industry.
The BLM has reviewed these standards and determined that they would
further the purposes of Sec. 3179.203 of this proposed rule. These
standards reflect the industry-accepted standards for compositional
analysis for samples under pressure where the sample is expected to
have C10+ components. Under Sec. 3179.203, pressurized samples from
the last pressurized vessel upstream of the storage tank would be used
to determine whether the volumes of gas lost from the storage tank are
of sufficient quantity and quality to justify the installation of a
vapor recovery unit. The legal effect of incorporation by reference is
that the incorporated standards become regulatory requirements. This
proposed rule would incorporate the specific versions of the standards
listed. The standards referenced in this section would be incorporated
in their entirety.
The proposed incorporation of industry standards follows the
requirements found in 1 CFR part 51. The industry standards can be
incorporated by reference pursuant to 1 CFR 51.7 because, among other
things, they would substantially reduce the volume of material
published in the Federal Register; the standards are published, bound,
numbered, and organized; and the standards proposed for incorporation
are readily available to the general public through purchase
[[Page 73605]]
from the standards organization or through inspection at any BLM office
with oil and gas administrative responsibilities. 1 CFR 51.7(a)(3) and
(4). The language of incorporation in proposed 43 CFR 3179.11 meets the
requirements of 1 CFR 51.9.
All of the GPA Midstream materials for which the BLM is seeking
incorporation by reference are available for inspection at the Bureau
of Land Management, Division of Fluid Minerals, 301 Dinosaur Trail,
Santa Fe, NM 87505, telephone 505-954-2000; and at all BLM offices with
jurisdiction over oil and gas activities.
The GPA materials are also available for inspection and purchase
from GPA Midstream, 6060 American Plaza, Suite 700, Tulsa, OK 74135;
telephone 918-493-3872.
The following describes the GPA standards that the BLM proposes to
incorporate by reference into this rule:
GPA 2286-14, Method for the Extended Analysis for Natural Gas and
Similar Gaseous Mixtures by Temperature Program Gas Chromatography,
Revised 2014 (``GPA 2286''). This standard covers the methods for
determination of natural gas chemical composition when specifics of
heavier fractions up to C14 is needed or required.
GPA 2186-14, Method for the Extended Analysis of Hydrocarbon Liquid
Mixtures Containing Nitrogen and Carbon Dioxide by Temperature
Programmed Gas Chromatography, Revised 2014 (``GPA 2186''). This
standard covers the methods for determination of natural gas chemical
composition when specifics of heavier fractions up to C10 is needed or
required.
Sec. 3179.12 Reasonable Precautions To Prevent Waste
Proposed Sec. 3179.12 would further implement the BLM's authority
to prevent waste. Paragraph (a) is a nearly verbatim recitation of the
MLA's requirement that operators must use all reasonable precautions to
prevent the waste of oil or gas developed from the lease. See 30 U.S.C.
225. Paragraph (b) would reiterate the BLM's existing authority to
specify certain reasonable precautions to prevent waste as conditions
of approval (COA) of an APD. See 43 CFR 3162.3-1(h)(1). Paragraph (c)
would authorize the Authorized Officer to order an operator to
implement, within a reasonable time, other measures to prevent waste at
ongoing operations. Finally, paragraph (d) would recognize that the
reasonable precautions to prevent waste may evolve over time and would
clarify that such reasonable precautions are not therefore limited to
the waste prevention standards and requirements reflected elsewhere in
the BLM's regulations. For example, under proposed Sec. 3179.12, the
BLM could impose a COA on an APD requiring the operator to use a
particular instrument to detect leaks as part of its LDAR program if,
due to technological advancements, changes in common industry practice,
or other appropriate considerations, the failure to employ the
specified instrument would constitute a failure to use all reasonable
precautions to prevent waste. The BLM seeks comments on this section,
specifically whether and to what extent the standards described in
proposed paragraphs (c) and (d) provide the BLM with the appropriate
flexibility to prevent waste.
Flaring and Venting Gas During Drilling and Production Operations
Section 3179.101 Well Drilling
This proposed section would address gas that is lost as a result of
loss of well control. Gas lost as a result of a loss of well control
during drilling would be classified as unavoidably lost and royalty-
free, unless the loss of well control was due to operator negligence,
in which case it would be avoidably lost and subject to royalties (see
proposed Sec. 3179.4(b)(1)). If there is a loss of well control, the
BLM would determine whether it was due to operator negligence, and if
so, the BLM would notify the operator in writing.
Section 3179.102 Well Completion and Related Operations
This proposed section would address gas that reaches the surface
during well completions, post-completion and fluid recovery operations,
and re-fracturing. Proposed paragraph (a) provides that, for new
completions, up to 10,000 Mcf of gas that reaches the surface may be
flared royalty-free. This would cover the operations of well
completion, post-completion, and fluid recovery operations.
Proposed paragraph (b) provides that, for refracturing of existing
completions at a well connected to a pipeline, up to 5,000 Mcf of gas
that reaches the surface may be flared royalty-free. This would cover
the operations of well completion, post-completion, and fluid-recovery
operations.
Under the 2016 Waste Prevention Rule, royalty-free flaring during
well completions and related operations was limited to 20,000 Mcf or up
to 30 days, whichever occurred first. Upon further investigation,
including post-2016 consultation with certain operators, the BLM
believes that prudent operators conducting new completion operations
are likely able to capture gas production before flaring more than
10,000 Mcf of gas. Specifically, the BLM understands from its
conversations with mid-size operators that the flowback process has
changed considerably over the past few years, and that it is now
standard practice to connect to a gas sales line as soon as possible.
The BLM understands that many operators are not using temporary
production equipment, but rather production is flowing directly to
permanent production facilities after completion, thereby substantially
reducing the need for flaring. In addition, the BLM believes that a
lower volume limit is appropriate for refractured wells because, though
those wells would have some need for flaring, they should already have
an established and available means of capture (e.g., a pipeline to
sales).
Section 3179.103 Initial Production Testing
This proposed section would clarify the limits on royalty-free
flaring during a well's initial production test. This section is
essentially the same as the 2016 Waste Prevention Rule provision
governing royalty-free flaring during initial production testing. The
BLM is proposing to adopt these limits rather than retaining the more
liberal limits reflected in NTL-4A and the 2018 Revision Rule (which
set a 30-day or 50,000 Mcf limit, subject to extensions) because the
BLM believes the proposed limits would accommodate any truly
unavoidable flaring during production testing while better protecting
the public's and Indian mineral owners' interests in obtaining
royalties on the extracted gas. Based on consultations with BLM State
and Field Offices regarding their experiences with production testing,
the BLM believes that it would be rare for operators to exceed the
royalty-free flaring limits proposed in this section.
Proposed paragraph (a) would provide that gas could be flared
royalty-free during initial production testing for up to 30 days or
20,000 Mcf of flared gas, whichever occurs first. Volumes flared during
well completion would count against the 20,000 Mcf limit. Additionally,
royalty-free flaring would end when oil production begins, even if the
30-day or 20,000 Mcf limit had not been reached.
Paragraph (b) would allow the BLM to approve royalty-free flaring
during a longer testing period of up to 60 additional days if there are
testing delays due to well or equipment
[[Page 73606]]
problems or a need for additional testing to develop adequate reservoir
information.
Paragraph (c) would allow the BLM to increase the royalty-free
flaring volume specified in paragraph (a)(2) by up to 30,000 additional
Mcf if the well is an exploratory well in a remote location that would
require additional testing related to the development of pipeline
infrastructure.
Paragraph (d) would allow a 90-day (rather than 30-day) period for
royalty-free flaring during the variable and time-intensive dewatering
and initial evaluation of an exploratory coalbed methane well. In
addition, the BLM could approve up to two extensions of 90 days each to
allow for more time to dewater and evaluate the coalbed methane well.
Paragraph (e) would clarify that the operator would have to
transmit a request for a longer test period under paragraphs (b), (c),
or (d) of this proposed section through a Sundry Notice.
Section 3179.104 Subsequent Well Tests
The proposed requirement in this section is essentially the same as
NTL-4A's requirement regarding subsequent well tests. It would limit
royalty-free flaring during production tests after the initial
production test to 24 hours, unless the BLM approves or requires a
longer test period. The operator would be required to transmit its
request for a longer test period through a Sundry Notice.
Section 3179.105 Emergencies
Under proposed Sec. 3179.4(b)(6), and consistent with IRA Section
50263, gas lost during an ``emergency situation'' would be royalty-
free. Proposed Sec. 3179.105 would serve to clearly define what
constitutes ``an emergency situation,'' specify circumstances that do
not constitute an emergency situation, and place a time limit on
royalty-free venting or flaring.
Proposed Sec. 3179.105(a) would allow an operator to flare or, if
flaring is not feasible due to the emergency situation, vent gas
royalty-free under Sec. 3179.4(b)(6) of this subpart for no longer
than 48 hours during an emergency situation. IRA Section 50263 does not
define what is an ``emergency situation that poses a danger to human
health, safety, and the environment.'' The BLM is proposing to
implement the statute in a way that is reasonable in light of its
longstanding authority under the MLA and FOGRMA and its experience
implementing those authorities (and is also proposing to make the same
provision governing emergency situations applicable on Indian lands).
Specifically, Sec. 3179.105(a) would define an ``emergency situation''
as a temporary, infrequent, and unavoidable situation in which the loss
of gas is necessary to avoid a danger to human health, safety, or the
environment. Although NTL-4A limited royalty-free losses to 24 hours
per ``emergency'' incident (except where otherwise approved by the
BLM), this rule would implement a 48-hour limit (not subject to
discretionary extensions) to reflect the time constraint contained in
Section 50263 of the IRA.
Proposed Sec. 3179.105(b) would clarify that the following
circumstances do not constitute ``emergencies'' for the purposes of
royalty assessment: (1) recurring equipment failures; (2) the
operator's failure to install appropriate equipment of a sufficient
capacity to accommodate production conditions; (3) the failure to limit
production when the production rate exceeds the capacity of the related
equipment, pipeline, or gas plant, or exceeds sales contract volumes of
oil or gas; (4) scheduled maintenance; and (5) operator negligence.
Proposed Sec. 3179.105(c) would require an operator to file a
report to the BLM for any emergency situation that requires the
operator to vent or flare beyond the timeframe authorized under
paragraph (a).
To be clear, proposed Sec. 3179.105 would not prohibit an operator
from engaging in venting or flaring when the operator deems it
operationally necessary to do so. The BLM is not attempting to
substitute its judgment for that of the operator with respect to the
management of emergencies. Rather, the purpose of proposed Sec.
3179.105 is to safeguard the public interest in royalty revenues by
ensuring that a royalty-free flaring exception for ``emergencies'' is
limited to events that are truly out of the operator's control and
could not have been avoided through more careful management.
Conservation of Gas From Equipment, Storage Vessels, and During Well
Maintenance Operations
Section 3179.201 Pneumatic Controllers and Pneumatic Diaphragm Pumps
Under proposed Sec. 3179.201, an operator of a lease, unit
participating area (PA), or CA producing at least 120 Mcf of gas or 20
barrels of oil per month would be prohibited from using natural-gas-
activated pneumatic controllers or pneumatic diaphragm pumps with a
bleed rate that exceeds 6 scf/hour. In effect, this would require
operators to use ``low-bleed'' pneumatic equipment or pneumatic
equipment that does not bleed natural gas, such as air-activated
pneumatic equipment.
Prudent operators should be expected to employ less wasteful
technologies where it is economically feasible to do so. Thus, the
proposed prohibition on the use of higher-bleed natural-gas-activated
pneumatic equipment is limited to operations producing amounts of oil
or gas that would render the adoption of these less wasteful
technologies economically feasible. Specifically, the BLM chose
production thresholds of oil and gas that would pay for the
installation of a low-bleed pneumatic controller (estimated to be about
$2,200) in a period of less than 1 year (around 10 months). The BLM
understands that it is unlikely that an operator of a lease, unit, or
CA producing only 120 Mcf of gas or 20 barrels of oil per month could
re-direct the entirety of its revenues for 10 months towards paying for
upgrading its pneumatic equipment. However, the BLM expects that the
life of such a lease, unit, or CA would extend well beyond 10 months
and that the cost of the required equipment could be financed over a
longer period. The more a lease, unit, or CA is producing above 120 Mcf
of gas or 20 barrels of oil per month, the more revenue will be
available to subsidize the new equipment. In a prior rulemaking, the
BLM found that low-bleed continuous pneumatic controllers are already
very common in the petroleum and natural gas production sector, and
that low-bleed continuous pneumatic controllers have the potential to
generate revenue for operators as gas that would otherwise be vented is
captured and sold. See 83 FR 49184, 49195 (Sept. 28, 2018).
In order to temper the potentially disruptive effect of this new
requirement on existing operations, proposed Sec. 3179.201(b) would
set a compliance deadline of 1 year after the effective date of the
final rule. The RIA estimates that operators would need to replace up
to 53,213 pneumatic devices to meet the conditions of this rule. It is
estimated that such replacements would conserve about 5.93 Bcf of gas a
year. The proposed requirement is expected to cost operators up to
$15.6 million dollars a year while generating $21 million in benefits
from increased gas sales each year. Although the private benefits to
industry would exceed the costs to industry--thereby indicating that
operators should adopt this technology even in the absence of a
regulation requiring them to do so--the BLM finds this requirement
necessary
[[Page 73607]]
because, in the BLM's experience, operators do not typically replace
functional equipment, nor do they typically replace malfunctioning
equipment unless the repair costs exceed the purchase price of new
equipment. There would be an added benefit to society of $165 million a
year in the value of reduced methane emissions. The BLM also notes that
the reduced emissions of natural gas would reduce emissions of other
pollutants (e.g., VOCs and hazardous air pollutants), though the BLM
has not quantified or monetized the benefits to society associated with
reducing those pollutants. The BLM requests comment on appropriate
methodologies for quantifying and monetizing these benefits.
The BLM considered requiring the use of no-bleed, air-activated
devices instead of gas-activated equipment, but based on the
information at our disposal, the BLM currently proposes that the higher
price of the air-activated equipment may not be consistent with our
statutory focus on waste reduction, considering the marginal increase
in gas capture relative to the lower cost and effective low-bleed
devices.\98\ The BLM also considered different production thresholds at
which the requirements would be imposed but found the proposed
thresholds to provide the best balance of gas conservation and economic
feasibility. The BLM requests comment on the proposed approach to
pneumatic equipment on Federal and Indian leases, including the
estimated costs and benefits, appropriate production thresholds for
these requirements, and the economic and technical feasibility of
alternative approaches (such as requiring no-bleed equipment).
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\98\ See Section 7.11 of the RIA for detailed discussion of this
analysis.
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Section 3179.203 Oil Storage Vessels
Storage vessels or tanks are used on-site to store produced
hydrocarbons and other fluids. In most cases, an operator will direct
recovered fluids from the well to a separator, with the hydrocarbons
then directed to the storage tanks. During storage, light hydrocarbons
dissolved in the crude oil or condensate vaporize and collect in the
space between the tank liquids and the tank roof. These vapors are
often vented to the atmosphere when the liquid level in the tank
subsequently fluctuates.
Proposed Sec. 3179.203 would establish new requirements that would
limit the loss of natural gas from oil storage vessels. Paragraph (a)
would require the thief hatch on a storage tank to remain closed,
except as necessary to conduct production and measurement operations.
Paragraph (a) would require the BLM to issue a $1,000 immediate
assessment upon discovering a thief hatch that has been left open and
unattended.
Under proposed Sec. 3179.203(b), all oil storage vessels would be
required to be equipped with a vapor-recovery system or other mechanism
that avoids the intentional loss of natural gas from the vessel, unless
the operator is able to establish that it would be technically or
economically infeasible. In order to temper the disruptive effect of
this new requirement on existing operations, proposed Sec. 3179.203(b)
would set a compliance deadline of 1 year after the effective date of
the final rule. The proposed rule does not contain a definition or
formula for determining economic feasibility for the purposes of Sec.
3179.203(b). The BLM oversees a wide variety of production scenarios--
from multi-well facilities operated by large companies to individual
``stripper wells'' operated by very small companies--and recognizes
that the economic feasibility (from a waste-prevention perspective) of
a vapor-recovery system will depend on a variety of factors, such as
the oil gravity and the production rate. The BLM would, therefore, like
to retain flexibility in making this determination. To be clear,
flexibility does not indicate unrestrained discretion. Were the BLM to
order an operator to install a vapor-recovery unit or other mechanism
to capture gas from a storage vessel, traditional administrative law
principles would require the BLM to explain why the ``technically or
economically infeasible'' exemption does not apply. The BLM requests
comment on this approach, and specifically requests comment on whether,
and how, economic feasibility should be defined for this section.
Under proposed Sec. 3179.203(c), where an operator has not
equipped a storage vessel with a vapor-recovery system or other
appropriate mechanism, the operator would be required to submit an
annual compositional analysis of production flowing to the storage
vessel. Proposed Sec. 3179.203(c) would contain technical sampling and
analysis requirements intended to ensure the accuracy of the
compositional analysis submitted by the operator. The purpose of the
compositional-analysis requirement would be to demonstrate that
installing a vapor-recovery system (or other similar mechanism) is, in
fact, technically or economically infeasible. The compositional
analysis would allow the operator and the BLM to estimate the quantity
and quality of natural gas emitted from the storage tank, which would
in turn indicate the value and volume of the gas to be recovered, and
therefore the economic feasibility of a vapor-recovery system. The BLM
estimates that each annual compositional analysis report would cost
approximately $500. The BLM requests comment on this approach to
ensuring that operators take all reasonable measures to conserve
natural gas from oil storage tanks, and the BLM invites comment on
alternative approaches. Specifically, the BLM is interested in
alternative standards for requiring vapor recovery, which might include
using the tank's throughput (the volume of oil stored in the tank over
a period of time) as an indicator of when vapor recovery should be
required.
Proposed Sec. 3179.203(d) would generally require gas released
from an oil storage vessel to be flared rather than vented. This
paragraph would also make clear that an operator may commingle vapors
from multiple storage vessels to a single flare without the need for
prior BLM approval.
The RIA estimates that operators would need to install up to 2,774
vapor recovery units on existing storage tanks to meet the conditions
of this rule. It is estimated that this would conserve about 9 Bcf of
gas a year. The proposed requirement is expected to cost operators up
to $93 million dollars a year while generating $33 million in benefits
from increased gas sales each year. There would be an added benefit to
society of $253 million per year in the value of reduced methane
emissions. The BLM also notes that the reduced emissions of natural gas
would reduce emissions of other pollutants (e.g., VOCs and hazardous
air pollutants), though the BLM has not quantified or monetized the
benefits to society associated with reducing those pollutants. The BLM
requests comment on appropriate methodologies for quantifying and
monetizing these benefits.
Section 3179.204 Downhole Well Maintenance and Liquids Unloading
In producing gas wells, fluids may accumulate in the wellbore and
impede the flow of gas, sometimes halting production itself. Gas wells
generally have sufficient pressure to produce both formation fluids and
gas early on, but, as production continues and reservoir pressure
declines, the gas velocity in the production tubing may not be
sufficient to lift the formation fluids. When this occurs, liquids
(hydrocarbons and salinized water) may accumulate in the
[[Page 73608]]
tubing, causing a further drop in pressure, slowed gas velocity, and
raised pressure at the perforations. When the bottom-hole pressure
becomes static, gas flow stops, and all liquids accumulate at the
bottom of the tubing. In order to return the flow of gas, operators
will engage in ``liquids unloading,'' which will often involve venting.
This proposed section would establish limits on royalty-free
venting and flaring during downhole well maintenance and liquids
unloading in order to prevent waste. This section would impose a 24-
hour limit on royalty-free venting or flaring for each event, and the
24-hours of royalty-free venting or flaring would only be available if
the operator employs best practices that prevent or minimize vented gas
and the need for well venting. For wells equipped with a plunger lift
system or an automated well control system, the operator would be
required to optimize the operation of the system to prevent or minimize
gas losses. During any liquids unloading by manual well purging, the
person conducting the well purging would be required to be present on-
site to minimize, to the maximum extent practicable, any venting to the
atmosphere.
Section 3179.205 Size of Production Equipment
This proposed section would state that the equipment used for
production and processing would be required to be appropriately sized
to handle the expected volumes produced at the lease site. For example,
production equipment would be required to be sized to provide for the
proper retention time of fluid flows, which has a direct impact on the
gas-oil ratio of the fluid as it enters the storage tank. Under-sizing
of the separator equipment can result in a higher quantity of gas
remaining entrained in the fluid. That, in turn, can be the source of
unnecessary losses of natural gas, since the gas will be released when
the fluid weathers in the tank.
Leak Detection and Repair (LDAR)
This proposed rule would require operators on Federal and Indian
leases to maintain LDAR programs in order to minimize the waste of
Federal and Indian gas. The 2016 Waste Prevention Rule also contained
LDAR requirements, though those requirements were more stringent, less
flexible, and more costly for operators than the requirements put
forward in this proposed rule. Although the LDAR requirements of the
2016 Rule were expected to result in higher reductions in lost gas than
the requirements proposed today, they were also heavily criticized by
the court that vacated the 2016 Rule and contributed to that court's
finding that the BLM had been arbitrary and capricious in promulgating
the rule.\99\ The 2016 Rule broadly imposed strict LDAR requirements
and invited operators to seek reductions in their obligations based on
site-specific economic circumstances. This proposed rule, in contrast,
would establish some basic parameters (such as the time frame for
repairs) while providing substantial flexibility for operators to
tailor their LDAR programs to their operations. Simultaneously,
operators would not be permitted to seek exemptions based on site-
specific economic considerations. The BLM has concluded that even the
operators of marginal wells could be expected to take reasonable
measures to identify and repair leaks. The RIA estimates that this
provision of the rule would only affect 2,178 well sites (or, around
2.2 percent of Federal well sites and 0.2 percent of the total well
sites in the U.S.) due to existing State or EPA rules that meet or
exceed the BLM's proposed standards. It is estimated that the proposed
requirements would conserve about 0.3 Bcf of gas a year. It is expected
to cost operators up to $2.8 million dollars a year while generating
$.98 million per year in benefits from increased gas sales. There would
also be an added benefit to society of $8.5 million a year in reduced
methane emissions. The BLM also notes that the reduced emissions of
natural gas would reduce emissions of other pollutants (e.g., VOCs and
hazardous air pollutants), though the BLM has not quantified or
monetized the benefits to society associated with reducing those
pollutants. The BLM requests comment on appropriate methodologies for
quantifying and monetizing these benefits. The LDAR requirements of the
proposed rule are explained in more detail as follows.
---------------------------------------------------------------------------
\99\ See Wyoming v. DOI, 493 F. Supp. 3d 1046, 1075-77 (D. Wyo.
2020).
---------------------------------------------------------------------------
Section 3179.301 Leak Detection and Repair Program
This proposed section would require an operator to maintain an LDAR
program designed to prevent the unreasonable and undue waste of Federal
or Indian gas. The program would be required to include regular
inspections of all oil and gas production, processing, treatment,
storage, and measurement equipment on the lease site. Within 6 months
of the effective date of the final rule, the operator of an existing
lease would be required to submit a Sundry Notice to the BLM describing
the operator's LDAR program. For leases issued after the effective date
of the final rule, the operator would be required to submit the Sundry
Notice within 6 months of the lease's issuance. The BLM would then
review the operator's description of its LDAR program to determine
whether the program is adequate to prevent the unreasonable and undue
waste of gas, in light of all the circumstances at the lease site,
including the variety of equipment at the lease site and the quantities
of production that might support a more robust LDAR program. That is, a
large, multi-well lease site with many pieces of equipment and
substantial revenues from production might warrant a more vigorous LDAR
program than a single marginal well for which additional regulatory
burdens might risk a premature shut in. The LDAR program would need to
provide for regular inspections (at least annually), and would not
require any specific LDAR process or equipment to be used. The BLM
would then notify the operator if the BLM deems the LDAR program to be
inadequate. The notification would explain the basis for the BLM's
determination, identify the plan's inadequacies, describe any
additional measures necessary to address the inadequacies, and provide
a reasonable time frame for the submission of a revised LDAR program.
This proposed section would require that LDAR inspections occur at
least annually. For existing operations, the first inspection would be
required within 1 year of the effective date of the final rule. For
future leases and operations, the operator would be required to conduct
the initial inspection within 1 year of the commencement of operations.
In developing the proposed rule, the BLM considered requiring semi-
annual--rather than annual--inspections, but this proposed rule finds,
based on the information at our disposal as well as our judgment and
assumptions about costs over time, that the additional compliance costs
increased out of proportion with the additional gas to be saved by the
more frequent inspections. This is based on evidence that leaks do not
arise on a consistent basis such that twice as many inspections may not
necessarily catch twice as many leaks or conserve twice as much leaked
gas. So, while there is a risk of more leaks being undetected for
longer, annual inspections appeared to be a more cost-effective (with
respect to gas conservation) basic requirement than
[[Page 73609]]
semi-annual inspections in the long run. To be clear, the BLM is
judging the cost-effectiveness of the proposed requirements in terms of
gas conservation only. The BLM recognizes that the EPA has set, and is
in the process of promulgating, different (though not incompatible)
LDAR standards based on a different view of cost-effectiveness.\100\
Any divergence between the BLM and EPA on LDAR standards (or those
pertaining to pneumatic equipment or storage vessels) is due to the
fact that the BLM and the EPA regulate these matters under different
statutory authorities and for different purposes.
---------------------------------------------------------------------------
\100\ See 86 FR 63154.
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The BLM requests comment on alternative approaches, including
whether required LDAR inspections should be more frequent, in line with
the requirements of some States and EPA, as well as data on likely
costs and benefits over time.
The BLM notes that the proposed rule envisions operators submitting
LDAR program documents on a lease-by-lease basis. The BLM requests
comment on alternative approaches, such as allowing operators to submit
a document detailing a program that would apply to its operations
across multiple leases or even to all of its operations on BLM-managed
lands.
Section 3179.302 Repairing Leaks
This proposed section would require operators to repair any leak as
soon as practicable, and no later than 30 calendar days after discovery
of the leak, unless there is good cause for repair to take longer. This
proposed section of the rule would require the operator to notify the
BLM by Sundry Notice if there is good cause to delay the repairs beyond
30 days, and to complete the repair at the earliest opportunity, but in
no event longer than 2 years after discovery. The operator would also
be required to conduct a follow-up inspection within 30 days after the
repair to verify the effectiveness of the repair, and to make
additional repairs within 15 days if the previous repair was not
effective. The operator would be required to follow this repair and
follow-up process until the repair is effective.
Section 3179.303 Leak Detection Inspection Recordkeeping and Reporting
This proposed section would require operators to maintain records
of LDAR inspections and repairs, including the date and location of
required inspections, the methods used to identify leaks, the equipment
where the leaks were found, the dates of repairs, and the dates of
follow-up inspections. These records would be required to be made
available to the BLM upon request. Audio, visual, or olfactory (AVO)
inspections would only have to be documented if the operator finds a
leak requiring repair. Paragraph (b) of the section would require
operators to submit to the BLM, by March 31 of each calendar year, an
annual summary report on the previous year's LDAR inspection
activities. The BLM plans to make these reports available to the
public, subject to any protections for confidential business
information.
State or Tribal Variances
Section 3179.401 State or Tribal Requests for Variances From the
Requirements of This Subpart
Proposed Sec. 3179.401 would reinstate the State or Tribal
variance provision from the 2016 Waste Prevention Rule.\101\ Under this
section, States and Tribes would be able to request a variance under
which analogous State or Tribal rules would apply in place of some or
all of the requirements of subpart 3179. The State or Tribe's variance
request would be required to: identify the subpart 3179 provision(s)
for which the variance is requested; identify the State, local, or
Tribal rules that would be applied instead; explain why the variance is
needed; and, demonstrate how the State, local, or Tribal rules would be
as effective as the subpart 3179 provisions in terms of reducing waste,
reducing environmental impacts, assuring appropriate royalty payments,
and ensuring the safe and responsible production of oil and gas. The
BLM State Director would be authorized to approve the variance request
or approve it subject to conditions, after considering all relevant
factors. This decision would be entirely at the BLM's discretion and
would not be subject to administrative appeals under 43 CFR part 4. If
the BLM were to approve a variance, the State or Tribe that requested
the variance would be obligated to notify the BLM of any substantive
amendments, revisions, or other changes to the State, local, or Tribal
rules to be applied under the variance. Finally, if the BLM were to
approve a variance under this section, the BLM would be authorized to
enforce the State, local, or Tribal rules applied under the variance as
if they were contained in the BLM's regulations.
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\101\ The BLM chose not to include a similar State variance
provision in the 2018 Revision Rule, concluding that the provision
in the 2016 Waste Prevention Rule was no longer necessary in light
of the predominance State regulations in the Revision Rule. 83 FR
49197. This proposed rule would not defer to State regulations to
the same extent as the Revision Rule, and so a variance provision--
i.e., a provision providing for appropriate State and Tribal
flexibility--is therefore a relevant consideration in this
rulemaking. At the final rule stage, the BLM will assess whether the
proposed variance provision is ``too restrictive'' in light of
comments from States, Tribes, and other stakeholders.
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Before including a variance provision in the final rule, the BLM is
seeking to confirm that such variances would be both useful and
practical. Operators on Federal and Indian lands are already required
to adhere to other applicable State, Tribal, and local laws and
regulations, so applying for a variance on the basis that a State,
Tribal, or local rule would provide increased protection for the
taxpayer or lower levels of waste through, for example, lower allowable
monthly flaring volumes, would be unnecessary and a burden for States
and Tribes that would apply for the variance provision, and a potential
source of confusion for operators. To put it another way, operators in
States or on Tribal lands that have more stringent standards than those
contained in this proposed rule would be required to conform to the
more stringent State or Tribal standards in any event, regardless of
whether the State or Tribe receives a variance under the provision of
the proposed rule. Such situations routinely arise in the context of
other BLM oil and gas operational regulations, which raises questions
about the usefulness or need of the variance provision contained in
this proposed rule. The BLM believes that alignment of data collection
processes or other potential areas of regulatory duplication, such as
through a common reporting form that could be submitted to both the
State or Tribal regulatory agency and the BLM, could bring greater
efficiencies for both operators and regulators, but believes that a
memorandum of understanding (MOU) between the BLM and a State or Tribe
could more efficiently achieve many of those goals without the need for
a State or Tribal variance. The BLM requests that commenters provide
specific examples of situations where the variance provision in
proposed Sec. 3179.401 would improve on existing practices and
administrative tools, such as MOUs, in terms of providing better
environmental protection, better protecting taxpayer and lessor
interests, achieving better administrative efficiencies, and reducing
burdens on operators.
[[Page 73610]]
V. Procedural Matters
A. Regulatory Planning and Review (E.O. 12866, E.O. 13563)
Executive Order 12866 provides that the Office of Information and
Regulatory Affairs (OIRA) within the Office of Management and Budget
(OMB) will review all significant rules. The OIRA has determined that
this proposed rule is economically significant.
Executive Order 13563 reaffirms the principles of Executive Order
12866 while calling for improvements in the Nation's regulatory system
to promote predictability, to reduce uncertainty, and to use the best,
most innovative, and least burdensome tools for achieving regulatory
ends. The Executive Order directs agencies to consider regulatory
approaches that reduce burdens and maintain flexibility and freedom of
choice for the public where these approaches are relevant, feasible,
and consistent with regulatory objectives. Executive Order 13563
emphasizes further, that regulations must be based on the best
available science and that the rulemaking process must allow for public
participation and an open exchange of ideas. We have developed this
rule in a manner consistent with these requirements.
This proposed rule would replace the BLM's current rules governing
venting and flaring, which are contained in NTL-4A. We have developed
this proposed rule in a manner consistent with the requirements in
Executive Order 12866 and Executive Order 13563.
The monetized costs and benefits of this rule can be seen on the
following table along with the transfer payments this rule would
provide in the form of increased royalties from increased gas sales.
The total monetized Net Benefit on an annualized basis is $359 million
at a 7 percent discount rate and $372 million at a 3 percent discount
rate. Additional unquantified benefits from reduced emissions of VOCs
and hazardous air pollutants are discussed further in the RIA. The BLM
reiterates that, while it has included benefits associated with the
social cost of greenhouse gases in this particular presentation of
costs and benefits and in the RIA, this was done to respond to
Executive Orders 12866 and 13563 and in order to present as complete a
picture as possible of the total costs and benefits of the proposed
rule for the public. Climate benefits derived from foregone emissions
were not a factor in the decision to propose any of the individual
waste prevention requirements in this proposed rule.
Costs and Benefits Summary
[2022-2031]
----------------------------------------------------------------------------------------------------------------
7% Discount rate 3% Discount rate
---------------------------------------------------------------
Annualized Annualized
NPV ($MM) ($MM) NPV ($MM) ($MM)
----------------------------------------------------------------------------------------------------------------
Costs:
Measurements................................ $9.99 $1.42 $11.13 $1.31
Tanks....................................... 657.75 93.65 716.74 84.02
Pneumatics.................................. 109.79 15.63 114.06 13.37
LDAR........................................ 20.16 2.87 24.48 2.87
Administrative Burdens...................... 58.61 8.34 71.18 8.34
---------------------------------------------------------------
Total Cost.............................. 856.30 121.92 937.59 109.91
----------------------------------------------------------------------------------------------------------------
Benefits:
Tanks....................................... 2,386.70 285.48 2,438.33 285.85
Pneumatics.................................. 1,558.34 186.40 1,592.05 186.64
LDAR........................................ 79.37 9.48 80.94 9.49
---------------------------------------------------------------
Total Benefits.......................... 4,024.41 481.36 4,111.32 481.97
---------------------------------------------------------------
Net Benefits............................ 3,168.10 359.44 3,173.72 372.06
---------------------------------------------------------------
Transfer Payments....................... 274.10 39.03 336.66 39.47
----------------------------------------------------------------------------------------------------------------
The BLM reviewed the requirements of the proposed rule and
determined that it would not adversely affect in a material way the
economy, a sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or State, local, or Tribal
governments or communities. For more detailed information, see the RIA
prepared for this proposed rule. The RIA has been posted in the docket
for the proposed rule on the Federal eRulemaking Portal: https://www.regulations.gov. In the Searchbox, enter ``RIN 1004-AE79'', click
the ``Search'' button, open the Docket Folder, and look under
Supporting Documents.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA)
requires that Federal agencies prepare a regulatory flexibility
analysis for rules subject to the notice-and-comment rulemaking
requirements under the Administrative Procedure Act (5 U.S.C. 500 et
seq.), if the rule would have a significant economic impact, whether
detrimental or beneficial, on a substantial number of small entities.
See 5 U.S.C. 601-612. Congress enacted the RFA to ensure that
government regulations do not unnecessarily or disproportionately
burden small entities. Small entities include small businesses, small
governmental jurisdictions, and small not-for-profit enterprises.
The BLM reviewed the Small Business Administration (SBA) size
standards for small businesses and the number of entities fitting those
size standards as reported by the U.S. Census Bureau in the Economic
Census. The BLM concludes that the vast majority of entities operating
in the relevant sectors are small businesses as defined by the SBA. As
such, the proposed rule would likely affect a substantial number of
small entities.
The BLM reviewed the proposed rule and has determined that,
although the proposed rule would likely affect a substantial number of
small entities,
[[Page 73611]]
that effect would not be significant. The basis for this determination
is explained in more detail in the RIA. In brief, the per-entity,
annualized compliance costs associated with this proposed rule are
estimated to represent only a small fraction of the annual net incomes
of the companies likely to be impacted. Because the proposed rule would
not have a ``significant economic impact on a substantial number of
small entities,'' as that phrase is used in 5 U.S.C. 605, an initial
regulatory flexibility analysis is not required. Nonetheless, in an
effort to be thorough and in recognition of the substantial number of
``small entities'' operating Federal and Indian oil and gas leases, the
BLM conducted an initial regulatory flexibility analysis, which is
detailed in the RIA. The Secretary of the Interior certifies under 5
U.S.C. 605(b) that this rule would not have a significant economic
impact on a substantial number of small entities.
C. Small Business Regulatory Enforcement Fairness Act
This proposed rule is a major rule under 5 U.S.C. 804(2), the Small
Business Regulatory Enforcement Fairness Act, because it is estimated
that the rule would have an annual economic impact of $100 million or
more. As noted earlier, the RIA that the BLM produced for this rule
calculates that this rule would cost operators $122 million per year
(using a 7 percent discount rate) for the next 10 years, while
generating benefits to operators of approximately $54 million a year
(using a 7 percent discount rate) in the form of 15.3 Bcf of additional
captured gas. The reduced methane emissions associated with the
proposed rule would provide a benefit to society of $427 million a year
over the same time frame, leading to a net benefit from the rule of
$359 million a year.
D. Unfunded Mandates Reform Act (UMRA)
The proposed rule would not have a significant or unique effect on
State, local, or Tribal governments or the private sector. The proposed
rule contains no requirements that would apply to State, local, or
Tribal governments. The proposed rule would revise requirements that
would otherwise apply to the private sector participating in a
voluntary Federal program. The costs that the proposed rule would
impose on the private sector are below the monetary threshold
established at 2 U.S.C. 1532(a). A statement containing the information
required by the Unfunded Mandates Reform Act (UMRA) (2 U.S.C. 1531 et
seq.) is therefore not required for the proposed rule. This proposed
rule is also not subject to the requirements of section 203 of UMRA
because it contains no regulatory requirements that might significantly
or uniquely affect small governments, because it contains no
requirements that apply to such governments, nor does it impose
obligations upon them.
E. Governmental Actions and Interference With Constitutionally
Protected Property Right--Takings (Executive Order 12630)
This proposed rule would not affect a taking of private property or
otherwise have taking implications under Executive Order 12630. A
takings implication assessment is not required. The proposed rule would
replace the BLM's current rules governing venting and flaring, which
are contained in NTL-4A. Therefore, the proposed rule would impact some
operational and administrative requirements on Federal and Indian
lands. All such operations are subject to lease terms which expressly
require that subsequent lease activities be conducted in compliance
with subsequently adopted Federal laws and regulations.
This proposed rule conforms to the terms of those leases and
applicable statutes and, as such, the rule is not a government action
capable of interfering with constitutionally protected property rights.
Therefore, the BLM has determined that the rule would not cause a
taking of private property or require further discussion of takings
implications under Executive Order 12630.
F. Federalism (Executive Order 13132)
Under the criteria in section 1 of Executive Order 13132, this
proposed rule does not have sufficient federalism implications to
warrant the preparation of a federalism summary impact statement. A
federalism impact statement is not required.
The proposed rule would not have a substantial direct effect on the
States, on the relationship between the Federal Government and the
States, or on the distribution of power and responsibilities among the
levels of government. It would not apply to States or local governments
or State or local governmental entities. The rule would affect the
relationship between operators, lessees, and the BLM, but it would not
directly impact the States. Therefore, in accordance with Executive
Order 13132, the BLM has determined that this proposed rule would not
have sufficient federalism implications to warrant preparation of a
Federalism Assessment.
G. Civil Justice Reform (Executive Order 12988)
This proposed rule complies with the requirements of Executive
Order 12988. More specifically, this proposed rule meets the criteria
of section 3(a), which requires agencies to review all regulations to
eliminate errors and ambiguity and to write all regulations to minimize
litigation. This proposed rule also meets the criteria of section
3(b)(2), which requires agencies to write all regulations in clear
language with clear legal standards.
H. Consultation and Coordination With Indian Tribal Governments
(Executive Order 13175 and Departmental Policy)
The Department strives to strengthen its government-to-government
relationship with Indian Tribes through a commitment to consultation
with Indian Tribes and recognition of their right to self-governance
and Tribal sovereignty.
The BLM evaluated this proposed rule under the Department's
consultation policy and under the criteria in Executive Order 13175 to
identify possible effects of the rule on federally recognized Indian
Tribes. Since the BLM approves proposed operations on all Indian
(except Osage Tribe) onshore oil and gas leases, the proposed rule has
the potential to affect Indian Tribes.
In August of 2021, the BLM sent a letter to each registered Tribe
informing them of certain rulemaking efforts, including the development
of this proposed rule. The letter offered Tribes the opportunity for
individual government-to-government consultation regarding the proposed
rule. The opportunity for Tribal consultation will remain open
throughout the rulemaking process.
I. Paperwork Reduction Act
1. Overview
The Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq.)
generally provides that an agency may not conduct or sponsor a
collection of information, and, notwithstanding any other provision of
law, a person is not required to respond to collection of information
unless it has been approved by the Office of Management and Budget
(OMB) and displays a currently valid OMB Control Number. The existing
information collections requirements contained in 43 CFR parts 3160,
and 3170 have been approved by OMB under OMB Control Numbers 1004-0137
and 1004-0211.
This proposed rule contains new information collection (IC)
requirements for BLM regulations, and a submission
[[Page 73612]]
to OMB for review under the PRA as outlined in the PRA implementing
regulations at 5 CFR 1320.11. The IC requirements are necessary to
assist the BLM in preventing venting, flaring, and leaks that waste the
public's resources and assets. Respondents are holders of Federal and
Indian oil and gas leases. The information collection requirements are
outlined in the BLM's waste prevention standards as well as on BLM Form
3160-5 (Sundry Notices and Reports on Wells). Form 3160-5 is used
broadly for onshore oil and gas operations and production purposes
under 43 CFR parts 3160 and 3170 and is approved under OMB control
number 1004-0137. This proposed rule would not introduce any changes to
Form 3160-5 and the form will continue to be approved under OMB control
number 1004-0137; however, this information collection request (ICR)
seeks to include burdens specific to the use of Form 3160-5 in regard
to the proposed waste prevention standard subject to this proposed
rule. The proposed rule contains the following new and revised IC
requirements.
2. Effects on Existing Information Collections Requirements
Existing Sec. 3162.3-1 Drilling Applications and Plans (Application
for Permit To Drill Oil Well and Waste Minimization Plan)
Currently, the BLM does not have a mechanism whereby to factor
waste into the decision-making process on an APD. As with the 2016
Waste Prevention Rule, operators would be required to submit a ``waste
minimization plan'' with an APD for an oil well. The waste minimization
plan would disclose anticipated gas production and the capacity of the
extant infrastructure to capture the gas. The BLM's onshore oil and gas
operations and production regulations (43 CFR 3162.3-1(a) through (i))
currently provide that each well shall be drilled in conformity with an
acceptable well-spacing program and that the operator shall submit to
the authorized officer for approval an APD for each well. The APD is
currently approved under OMB control number 1004-0137. This proposed
would not introduce any changes to this requirement.
This proposed rule would, however, add Sec. 3162.3-1(j), which
would require that when submitting an APD for an oil well, the operator
must also submit a plan to minimize waste of natural gas from that
well. The waste minimization plan would need to demonstrate how the
operator plans to capture associated gas upon the start of oil
production, or as soon thereafter as reasonably possible, including an
explanation of why any delay in the capture of the associated gas would
be necessary.
Request for Approval for Royalty-Free Uses On-Lease or Off-Lease (43
CFR 3178.5, 3178.7, 3178.8, and 3178.9)
Sections 3178.5, 3178.7, 3178.8, and 3178.9 of the BLM's current
regulations require submission of a Sundry Notice (Form 3160-5) to
request prior written BLM approval for use of gas royalty-free for
operations and production purposes on the lease, unit or communitized
area. This proposed rule would not change this existing requirement.
3. New Information Collection Requirements
This proposed rule would add a new subpart to the BLM's waste
prevention standards. The proposed new subpart 3179 would add new
information collection requirements as discussed later. The purpose of
this subpart would be to implement and carry out the purposes of
statutes relating to prevention of waste from covered Federal and
Indian oil and gas leases by enhancing conservation of surface
resources, particularly in regard to flaring and venting of produced
gas, unavoidably and avoidably lost gas, and waste prevention.
Proposed Sec. 3179.4 Determining When the Loss of Oil or Gas Is
Avoidable or Unavoidable (Notifying BLM Prior to Flaring)
Proposed Sec. 3179.4(b)(13) would require that an operator notify
the BLM through a Sundry Notice (Form 3160-5) prior to the flaring of
gas from which at least 50 percent of NGLs have been removed and
captured for market, if the operator wishes such flaring to qualify for
royalty-free treatment.
Proposed Sec. 3179.9 Measuring and Reporting Volumes of Gas Vented and
Flared
Proposed Sec. 3179.9(a) of this proposed rule would require
operators to measure or estimate all volumes of gas vented or flared
from wells, facilities, and equipment on a lease, unit, or CA and
report those volumes to ONRR. The burden associated with the reporting
of volumes of gas vented or flared is accounted for under ONRR's OMB
control number 1012-0004, 30 CFR Parts 1210 and 1212, Royalty and
Production Reporting, using Form ONRR-4054, Oil and Gas Operations
Report. This proposed rule would not change this existing reporting
requirement. Section 3179.9(b) of the proposed rule would introduce
inspection and measurement requirements for all high-pressure flares
flaring 1,050 Mcf per month or more. Furthermore, as applicable, the
orifice plate for the meter must be pulled and inspected at least once
a year and the meter must be verified at least once a year.
Proposed Sec. 3179.103 Initial Production Testing and Sec. 3179.104
Subsequent Well Tests (Requests for Longer Test Period or Increase
Limit)
This proposed rule would allow royalty-free flaring during initial
production testing until one of the following occurs: (1) the operator
determines that it has obtained adequate reservoir information; (2) 30
days have passed since beginning of the production test; (3) 20,000 Mcf
of gas have been flared; or (4) oil production begins. Proposed Sec.
3179.103 would allow an operator to flare gas for 30 days since the
beginning of the production test under certain conditions and specified
limits. Proposed Sec. 3179.104 would permit an operator to flare gas
for no more than 24 hours during well tests subsequent to the initial
production test. An operator would be required to submit its request
for a longer test periods or increased limits using a Sundry Notice.
Proposed Sec. 3179.105 Emergencies (Reporting Volumes Flared or Vented
Beyond Timeframes)
This proposed rule would allow for royalty-free flaring during an
emergency situation that poses a danger to human health, safety, or the
environment. This proposed rule defines ``emergency situation'' in a
manner that emphasizes its temporary and unavoidable nature. This
proposed rule would place a 48-hour limit on the royalty-free emergency
flaring and specify circumstances that would not constitute an
emergency. Proposed Sec. 3179.105 would allow an operator to flare or,
if flaring is not feasible given the emergency situation, vent gas
royalty-free under proposed Sec. 3179.4(b)(6) of this subpart during
an emergency. Within 45 days of the start of the emergency situation,
the operator would be required to estimate and report to the BLM on a
Sundry Notice the volumes flared or vented beyond the timeframes
specified in proposed Sec. 3179.105(b).
Proposed Sec. 3179.203 Oil Storage Vessels (Composition Analysis)
Proposed Sec. 3179.203(b) would require tanks to be equipped with
a vapor recovery system or other mechanism that avoids the intentional
loss of gas from the tank unless it is technically or
[[Page 73613]]
economically infeasible. If an operator does not equip a tank with
vapor recovery, the operator would be required to submit an annual
compositional analysis based on samples of production flowing to the
tank. The purpose of the compositional analysis would be to show
whether installation of vapor recovery is feasible. These requirements
would only apply to operations on Federal or Indian lands.
Additionally, this section of this proposed rule would require that the
compositional analysis be based on pressurized samples and that the
compositional analysis must show the expected emissions from the
storage vessel at 60 degrees Fahrenheit and 14.73 psia.
Proposed Sec. 3179.301 Leak Detection and Repair (LDAR) Program
This proposed rule would require an operator to maintain an LDAR
program designed to prevent the unreasonable and undue waste of Federal
or Indian gas. The LDAR program would have to provide for regular (at
least annual) inspections of all oil and gas production, processing,
treatment, storage, and measurement equipment on the lease site.
Operators would submit their LDAR programs for BLM review, and the BLM
would notify the operator if its program was determined to be
inadequate. Operators would be required to submit an annual report on
inspections and repairs. Proposed Sec. 3179.301(b) would require that
the operator of a Federal or Indian lease must submit a Sundry Notice
to the BLM describing the operator's leak detection and repair program
for the lease site, including the frequency of inspections and any
instruments to be used for leak detection.
Proposed Sec. 3179.302 Repairing Leaks (Notifying the BLM for Delaying
a Leak Repair)
Proposed Sec. 3179.302(b) would require that if there is good
cause for delaying the repair beyond 30 calendar days, the operator
must notify the BLM of the cause by Sundry Notice.
Proposed Sec. 3179.303 Leak Detection Inspection Recordkeeping and
Reporting
Operators would be required to keep records of inspections and
repairs and submit those records to the BLM upon request and to
maintain such records for the period required under 43 CFR 3162.4-1(d).
Proposed Sec. 3179.401 State or Tribal Requests for Variances From the
Requirements of This Subpart
This proposed rule would include the State or Tribal variances
provision from the 2016 Rule. In essence, this provision would allow
States and Tribes to submit a request to the BLM to have analogous
State or Tribal regulations apply in place of the BLM's. Section
3179.401(e) of the proposed rule would require that if the BLM approves
a variance under this section, the State or Tribe that requested the
variance must notify the BLM in writing in a timely manner of any
substantive amendments, revisions, or other changes to the State, local
or Tribal regulation(s) or rule(s) to be applied under the variance.
The purpose of this section and the associated information collection
requirements is to reduce regulatory burden and duplication where a
State or Tribal government has implemented regulations that are
demonstrated to be at least as effective as the BLM's regulatory waste
prevention requirements. The information collection requirements of
this section are intended to assist the BLM in making appropriate
determinations regarding the variances contemplated in proposed Sec.
3179.401.
In order to comply with the proposed information collection
requirements, the BLM believes that some operators may need to purchase
and install new equipment in order to collect, maintain, and report the
required information. These one-time cost burdens for operators that
may need to install new orifice meters and/or vapor recovery systems
would be a result of the proposed rule.
D. Public Information Collection Burdens by Information Collection
Currently, there are 50 respondents, 50 responses, 400 annual
burden hours, and $0 non-hour cost burdens approved under OMB Control
Number 1004-0211. These burdens pertain to a Request for Approval for
Royalty-Free Uses On-Lease or Off-Lease (43 CFR 3178.5, 3178.7, 3178.8,
and 3178.9) which is not addressed in this proposed rule. The BLM
projects that the information collections as contained in this proposed
rule would result in the following additional new burdens: 552 new
respondents; 48,337 new annual responses; 117,410 new burden hours and
$1,050,000 new non-hour cost burden. The new total estimated burdens
for the existing information collection and for the proposed new
information collections under this OMB Control Number are listed as
follows.
Title: Waste Prevention, Production Subject to Royalties, and
Resource Conservation (43 CFR parts 3160, 3170, and 3179).
OMB Control Number: 1004-0211.
Form Number: 3160-5 (OMB Control Number 1004-0137).
Type of Review: Revision of a currently approved collection.
Description of Respondents: Federal and Indian leases, as well as
State and private tracts committed to a federally approved lease, unit,
or communitized area.
Estimated Number of Respondents: 602.
Estimated Number of Annual Responses: 48,337.
Estimated Completion Time per Response: Varies from 1 hour to 8
hours depending on activity.
Estimated Total Annual Burden Hours: 117,410.
Respondents' Obligation: Required to obtain or retain a benefit.
Frequency of Collection: On occasion, Annually, Monthly, or one-
time depending on activity.
Estimated Total Non-Hour Cost: $1,050,000.
As part of our continuing effort to reduce paperwork and respondent
burdens, we invite the public and other Federal agencies to comment on
any aspect of this information collection, including:
(1) Whether the collection of information is necessary for the
proper performance of the functions of the agency, including whether
the information will have practical utility;
(2) The accuracy of our estimate of the burden for this collection
of information, including the validity of the methodology and
assumptions used;
(3) Ways to enhance the quality, utility, and clarity of the
information to be collected; and
(4) Ways to minimize the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology, e.g., permitting
electronic submission of response.
In accordance with the PRA and the PRA implementing regulations at
5 CFR 1320.11, the BLM has submitted an ICR to OMB for the new and
revised ICs in this proposed rule. If you wish to comment on the IC
requirements in this proposed rule, please see the DATES and ADDRESSES
sections earlier.
J. National Environmental Policy Act
The BLM has prepared a draft EA to determine whether this proposed
rule
[[Page 73614]]
would have a significant impact on the quality of the human environment
under the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C.
4321 et seq.). The draft EA will be shared with the public during the
public comment period on the proposed rule. The BLM will respond to
substantive comments on the EA. If the final EA supports the issuance
of a Finding of No Significant Impact for the rule, the preparation of
an environmental impact statement pursuant to the NEPA would not be
required.
The draft EA has been placed in the file for the BLM's
Administrative Record for the rule at the address specified in the
ADDRESSES section. The EA has also been posted in the docket for the
rule on the Federal eRulemaking Portal: https://www.regulations.gov. In
the Searchbox, enter ``RIN 1004-AE79'', click the ``Search'' button,
open the Docket Folder, and look under Supporting Documents. The BLM
invites the public to review the draft EA and suggests that anyone
wishing to submit comments on the EA should do so in accordance with
the instructions contained in the ``Public Comment Procedures'' section
earlier.
K. Actions Concerning Regulations That Significantly Affect Energy
Supply, Distribution, or Use (Executive Order 13211)
Under Executive Order 13211, agencies are required to prepare and
submit to OMB a Statement of Energy Effects for significant energy
actions. This statement is to include a detailed statement of ``any
adverse effects on energy supply, distribution, or use (including a
shortfall in supply, price increases, and increase use of foreign
supplies)'' for the action and reasonable alternatives and their
effects.
Section 4(b) of Executive Order 13211 defines a ``significant
energy action'' as ``any action by an agency (normally published in the
Federal Register) that promulgates or is expected to lead to the
promulgation of a final rule or regulation, including notices of
inquiry, advance notices of proposed rulemaking, and notices of
proposed rulemaking: (1)(i) that is a significant regulatory action
under Executive Order 12866 or any successor order, and (ii) is likely
to have a significant adverse effect on the supply, distribution, or
use of energy; or (2) that is designated by the Administrator of (OIRA)
as a significant energy action.''
Since the compliance costs for this rule would represent a small
fraction of company net incomes, the BLM has concluded that the rule is
unlikely to impact the investment decisions of firms. See Section 9 of
the BLM's RIA. Also, any incremental production of gas estimated to
result from the rule's enactment would constitute a small fraction of
total U.S. gas production, and any potential and temporary deferred
production of oil would likewise constitute a small fraction of total
U.S. oil production. For these reasons, we do not expect that the
proposed rule would significantly impact the supply, distribution, or
use of energy. As such, the rulemaking is not a ``significant energy
action'' as defined in Executive Order 13211.
L. Clarity of This Regulation (Executive Orders 12866, 12988, and
13563)
We are required by Executive Orders 12866 (section 1(b)(12)), 12988
(section 3(b)(1)(B)), and 13563 (section 1(a)), and by the Presidential
Memorandum of June 1, 1988, to write all rules in plain language. This
means that each rule must:
(a) Be logically organized;
(b) Use the active voice to address readers directly;
(c) Use common, everyday words and clear language rather than
jargon;
(d) Be divided into short sections and sentences; and
(e) Use lists and tables wherever possible.
If you feel that we have not met these requirements, send us
comments by one of the methods listed in the ADDRESSES section. To
better help the BLM revise the proposed rule, your comments should be
as specific as possible. For example, you should tell us the numbers of
the sections or paragraphs that you find unclear, which sections or
sentences are too long, the sections where you feel lists or tables
would be useful, etc.
Authors
The principal authors of this final rule are: Amanda Eagle,
Petroleum Engineer, Santa Fe, NM; Beth Poindexter, Petroleum Engineer,
Santa Fe, NM (now retired); and Christopher Rhymes, Attorney Advisor,
Office of the Solicitor, Department of the Interior. Technical support
provided by: Tyson Sackett, Economist, Cheyenne, WY; Scott Rickard,
Economist, Billings, MT; Janna Simonsen, Senior Natural Resources
Specialist, Santa Fe, NM; and Barbara Sterling, Senior Natural
Resources Specialist, BLM Colorado State Office (now retired). Assisted
by: Stormy Phillips, Petroleum Engineer, Tulsa, OK (Contractor); Casey
Hodges, Petroleum Engineer, Granby, CO (Contractor); and Senior
Regulatory Analysts Faith Bremner and Darrin King of the BLM Washington
Office.
List of Subjects
43 CFR Part 3160
Administrative practice and procedure, Government contracts,
Indians-lands, Mineral royalties, Oil and gas exploration, Penalties,
Public lands-mineral resources, Reporting and recordkeeping
requirements.
43 CFR Part 3170
Administrative practice and procedure, Flaring, Immediate
assessments, Incorporation by reference, Indians-lands, Mineral
royalties, Oil and gas exploration, Oil and gas measurement, Public
lands--mineral resources, Reporting and record keeping requirements,
Royalty-free use, Venting.
For the reasons set out in the preamble, the Bureau of Land
Management proposes to amend 43 CFR parts 3160 and 3170 as follows:
PART 3160--ONSHORE OIL AND GAS OPERATIONS
0
1. The authority citation for part 3160 continues to read as follows:
Authority: 25 U.S.C. 396d and 2107; 30 U.S.C. 189, 306, 359,
and 1751; 43 U.S.C. 1732(b), 1733, 1740; and Sec. 107, Pub. L. 114-
74, 129 Stat. 599, unless otherwise noted.
0
2. Amend Sec. 3162.3-1 by adding paragraphs (j) and (k) to read as
follows:
Sec. 3162.3-1 Drilling applications and plans.
* * * * *
(j) When submitting an Application for Permit to Drill an oil well,
the operator must also submit a plan to minimize waste of natural gas
from that well. The waste minimization plan must demonstrate how the
operator plans to capture associated gas upon the start of oil
production, or as soon thereafter as reasonably possible, including an
explanation of why any delay in capture of the associated gas would be
necessary. The BLM may deny an Application for Permit to Drill if the
operator fails to submit a complete and adequate waste minimization
plan. The waste minimization plan must include the following
information:
(1) The anticipated completion date of the proposed well(s);
(2) A description of anticipated production, including:
(i) The anticipated date of first production;
(ii) The expected oil and gas production rates and duration from
the proposed well. If the proposed well is on a multi-well pad, the
plan must include the total expected production for all wells being
completed;
[[Page 73615]]
(iii) The expected production decline curve of both oil and gas
from the proposed well; and
(iv) The expected Btu value for gas production from the proposed
well.
(3) Certification that the operator has provided one or more
midstream processing companies with information about the operator's
production plans, including the anticipated completion dates and gas-
production rates of the proposed well or wells;
(4) Identification of a gas pipeline to which the operator plans to
connect that has sufficient capacity to accommodate the anticipated
production of the proposed well(s), and information on the pipeline,
including, to the extent that the operator can obtain it, the following
information:
(i) Maximum current daily capacity of the pipeline;
(ii) Current throughput of the pipeline;
(iii) Anticipated daily capacity of the pipeline at the anticipated
date of first gas sales from the proposed well;
(iv) Anticipated throughput of the pipeline at the anticipated date
of first gas sales from the proposed well; and
(v) Any plans known to the operator for expansion of pipeline
capacity for the area that includes the proposed well;
(5) If an operator cannot identify a gas pipeline with sufficient
capacity to accommodate the anticipated production of the proposed
well(s), the waste minimization plan must also include:
(i) A gas-pipeline-system location map of sufficient detail, size,
and scale to show the field in which the proposed well will be located,
and all existing gas trunklines within 20 miles of the well. The map
must also contain:
(A) The name and location of the gas processing plant(s) closest to
the proposed well(s), and the name and location of the intended
destination processing plant, if different;
(B) The name and location of the operator of each gas trunkline
within 20 miles of the proposed well;
(C) The proposed route and tie-in point that connects or could
connect the subject well to an existing gas trunkline;
(ii) The total volume of produced gas, and percentage of total
produced gas, that the operator is currently flaring or venting from
wells in the same field and any wells within a 20-mile radius of that
field; and
(iii) A detailed evaluation, including estimates of costs and
returns, of opportunities for on-site capture approaches, such as
compression or liquefaction of natural gas, removal of natural gas
liquids, or generation of electricity from gas.
(6) Any other information demonstrating the operator's plans to
avoid the waste of gas production from any source, including, as
appropriate, from pneumatic equipment, storage tanks, and leaks.
(k) Where the available information indicates that drilling an oil
well could result in the unreasonable and undue waste of Federal or
Indian gas (as defined in Sec. 3179.4), the BLM may take one of the
following actions:
(1) Approve the application subject to conditions for gas capture
and/or royalty payments on vented or flared gas; or
(2) Defer action on the permit in the interest of preventing waste.
The BLM will notify the applicant that its application, if approved,
could result in unreasonable and undue waste of Federal or Indian gas
and specify any steps the applicant could take for the permit to be
issued. If the applicant does not address the potential for
unreasonable and undue waste to the BLM's satisfaction within 2 years
of the applicant's receipt of the BLM's initial notice under this
paragraph, the BLM may deny the permit.
PART 3170--ONSHORE OIL AND GAS PRODUCTION
0
3. The authority citation for part 3170 continues to read as follows:
Authority: 25 U.S.C. 396d and 2107; 30 U.S.C. 189, 306, 359,
and 1751; and 43 U.S.C. 1732(b), 1733, and 1740.
0
4. Revise subpart 3179 to read as follows:
Subpart 3179--Waste Prevention and Resource Conservation
Secs.
3179.1 Purpose.
3179.2 Scope.
3179.3 Definitions and acronyms.
3179.4 Determining when the loss of oil or gas is avoidable or
unavoidable.
3179.5 When lost production is subject to royalty.
3179.6 Safety.
3179.7 Gas-well gas.
3179.8 Oil-well gas.
3179.9 Measuring and reporting volumes of gas vented and flared.
3179.10 Determinations regarding royalty-free flaring.
3179.11 Incorporation by Reference (IBR).
3179.12 Reasonable precautions to prevent waste.
Flaring and Venting Gas During Drilling and Production Operations
3179.101 Well drilling.
3179.102 Well completion and related operations.
3179.103 Initial production testing.
3179.104 Subsequent well tests.
3179.105 Emergencies.
Gas Flared or Vented From Equipment and During Well Maintenance
Operations
3179.201 Pneumatic controllers and pneumatic diaphragm pumps.
3179.203 Oil storage vessels.
3179.204 Downhole well maintenance and liquids unloading.
3179.205 Size of production equipment.
Leak Detection and Repair (LDAR)
3179.301 Leak detection and repair program.
3179.302 Repairing leaks.
3179.303 Leak detection inspection recordkeeping and reporting.
State or Tribal Variances
3179.401 State or Tribal requests for variances from the
requirements of this subpart.
Subpart 3179--Waste Prevention and Resource Conservation
Sec. 3179.1 Purpose.
The purpose of this subpart is to implement and carry out the
purposes of statutes relating to prevention of waste from Federal and
Indian (other than Osage Tribe) oil and gas leases, conservation of
surface resources, and management of the public lands for multiple use
and sustained yield. This subpart supersedes those portions of Notice
to Lessees and Operators of Onshore Federal and Indian Oil and Gas
Leases, Royalty or Compensation for Oil and Gas Lost (NTL-4A)
pertaining to, among other things, flaring and venting of produced gas,
unavoidably and avoidably lost gas, and waste prevention.
Sec. 3179.2 Scope.
(a) Except as provided in provided in paragraph (b), this subpart
applies to:
(1) All onshore Federal and Indian (other than Osage Tribe) oil and
gas leases, units, and communitized areas;
(2) Indian Mineral Development Act (IMDA) agreements, unless
specifically excluded in the agreement or unless the relevant
provisions of this subpart are inconsistent with the agreement;
(3) Leases and other business agreements and contracts for the
development of Tribal energy resources under a Tribal Energy Resource
Agreement (TERA) entered into with the Secretary, unless specifically
excluded in the lease, other business agreement, or TERA;
(4) Wells, equipment, and operations on State or private tracts
that are committed to a federally approved unit or communitization
agreement defined by or established under 43 CFR subpart 3105 or 43 CFR
part 3180.
(b) Sections 3179.6, 3179.201, 3179.203, and 3179.301-.303 of this
[[Page 73616]]
subpart apply only to operations and production equipment located on a
Federal or Indian oil and gas lease. They do not apply to operations
and production equipment on State or private tracts, even where those
tracts are committed to a federally approved unit or communitization
agreement.
(c) For purposes of this subpart, the term ``lease'' also includes
IMDA agreements.
Sec. 3179.3 Definitions and acronyms.
As used in this subpart, the term:
Automatic ignition system means an automatic ignitor and, where
needed to ensure continuous combustion, a continuous pilot flame.
Capture means the physical containment of natural gas for
transportation to market or productive use of natural gas and includes
reinjection and royalty-free on-site uses pursuant to subpart 3178.
Compressor station means any permanent combination of one or more
compressors that move natural gas at increased pressure through
gathering or transmission pipelines, or into or out of storage. This
includes, but is not limited to, gathering and boosting stations and
transmission compressor stations. The combination of one or more
compressors located at a well site, or located at an onshore natural
gas processing plant, is not a compressor station.
Gas-to-oil ratio (GOR) means the ratio of gas to oil in the
production stream expressed in standard cubic feet of gas per barrel of
oil.
Gas well means a well for which the energy equivalent of the gas
produced, including its entrained liquefiable hydrocarbons, exceeds the
energy equivalent of the oil produced. Unless more specific British
thermal unit (Btu) values are available, a well with a gas-to-oil ratio
greater than 6,000 standard cubic feet (scf) of gas per barrel of oil
is a gas well.
High-pressure flare means an open-air flare stack or flare pit
designed for the combustion of natural gas leaving a pressurized
production vessel (such as a separator or heater-treater) that is not a
storage vessel.
Leak means a release of natural gas from a component that is not
associated with normal operation of the component, when such release
is:
(1) A hydrocarbon emission detected by use of an optical-gas-
imaging instrument;
(2) At least 500 ppm of hydrocarbon detected using a portable
analyzer or other instrument that can measure the quantity of the
release; or
(3) A hydrocarbon emission detected via visible bubbles detected
using soap solution.
Releases due to normal operation of equipment intended to vent as
part of normal operations, such as gas-driven pneumatic controllers and
safety-release devices, are not considered leaks unless the releases
exceed the quantities and frequencies expected during normal
operations. Releases due to operator errors or equipment malfunctions
or from control equipment at levels that exceed applicable regulatory
requirements, such as releases from a thief hatch left open, a leaking
vapor recovery unit, or an improperly sized combustor, are considered
leaks.
Liquids unloading means the removal of an accumulation of liquid
hydrocarbons or water from the wellbore of a completed gas well.
Lost oil or lost gas means produced oil or gas that escapes
containment, either intentionally or unintentionally, or is flared
before being removed from the lease, unit, or communitized area, and
cannot be recovered.
Low-pressure flare means any flare that does not meet the
definition of high-pressure flare.
Pneumatic controller means an automated instrument used for
maintaining a process condition, such as liquid level, pressure, delta-
pressure, or temperature.
Storage vessel means a tank or other vessel that contains an
accumulation of crude oil, condensate, intermediate hydrocarbon
liquids, or produced water, and that is constructed primarily of non-
earthen materials (such as wood, concrete, steel, fiberglass, or
plastic) that provides structural support. A well-completion vessel
that receives recovered liquids from a well after startup of production
following flowback, for a period that exceeds 60 days, is considered a
storage vessel under this subpart, unless the storage of the recovered
liquids in the vessel is governed by Sec. 3162.3-3 of this title. For
purposes of this subpart, the following are not considered storage
vessels:
(1) Vessels that are skid-mounted or permanently attached to
something that is mobile (such as trucks, railcars, barges or ships),
and are intended to be located at a site for less than 180 consecutive
days. This exclusion does not apply to well-completion vessels or to
storage vessels that are located at a site for at least 180 consecutive
days.
(2) Process vessels, such as surge-control vessels, bottoms
receivers, or knockout vessels.
(3) Pressure vessels designed to operate in excess of 15 psig and
without emissions to the atmosphere.
(4) Tanks holding hydraulic-fracturing fluid prior to
implementation of an approved permanent disposal plan under Onshore Oil
and Gas Order No. 7.
Unreasonable and undue waste of gas means a frequent or ongoing
loss of gas that could be avoided without causing an ultimately greater
loss of equivalent total energy than would occur if the loss of gas
were to continue unabated.
Sec. 3179.4 Determining when the loss of oil or gas is avoidable or
unavoidable.
For purposes of this subpart:
(a) Lost oil is ``unavoidably lost'' if the operator has not been
negligent; the operator has taken prudent and reasonable steps to avoid
waste; and the operator has complied fully with applicable laws, lease
terms, regulations, provisions of a previously approved operating plan,
and other written orders of the BLM.
(b) Lost gas is ``unavoidably lost'' if the operator has not been
negligent; the operator has taken prudent and reasonable steps to avoid
waste; the operator has complied fully with applicable laws, lease
terms, regulations, provisions of a previously approved operating plan,
and other written orders of the BLM; and the gas is lost from the
following operations or sources:
(1) Well drilling;
(2) Well completion and related operations, subject to the
limitations in Sec. 3179.102;
(3) Initial production tests, subject to the limitations in Sec.
3179.103;
(4) Subsequent well tests, subject to the limitations in Sec.
3179.104;
(5) Exploratory coalbed methane well dewatering;
(6) Emergency situations, subject to the limitations in Sec.
3179.105;
(7) Normal operating losses from a natural-gas-activated pneumatic
controller or pump;
(8) Normal operating losses from a storage vessel or other low-
pressure production vessel that is in compliance with Sec. 3179.203
and Sec. 3174.5(b);
(9) Well venting in the course of downhole well maintenance and/or
liquids unloading performed in compliance with Sec. 3179.204;
(10) Leaks, when the operator has complied with the leak detection
and repair requirements in Sec. Sec. 3179.301 and 302;
(11) Facility and pipeline maintenance, such as when an operator
must blow-down and depressurize equipment to perform maintenance or
repairs;
(12) Pipeline capacity constraints, midstream processing failures,
or other
[[Page 73617]]
similar events that prevent oil-well gas from being transported through
the connected pipeline, subject to the limitations in Sec. 3179.8;
(13) Flaring of gas from which at least 50 percent of natural gas
liquids have been removed and captured for market, if the operator has
notified the BLM through a Sundry Notices and Report on Wells, Form
3160-5 (Sundry Notice) that the operator is conducting such capture and
the inlet of the equipment used to remove the natural gas liquids will
be an FMP;
(14) Flaring of gas from a well that is not connected to a gas
pipeline, to the extent that such flaring was authorized by the BLM in
the approval of the Application for Permit to Drill.
(c) Lost oil or gas that is not ``unavoidably lost'' as defined in
paragraphs (a) and (b) of this section is ``avoidably lost.''
Sec. 3179.5 When lost production is subject to royalty.
(a) Royalty is due on all avoidably lost oil or gas.
(b) Royalty is not due on any unavoidably lost oil or gas.
Sec. 3179.6 Safety.
(a) The operator must flare, rather than vent, any gas that is not
captured, except:
(1) When flaring the gas is technically infeasible, such as when
volumes are too small to flare;
(2) Under emergency conditions, when the loss of gas is
uncontrollable or venting is necessary for safety;
(3) When the gas is vented through normal operation of a natural-
gas-activated pneumatic controller or pump;
(4) When the gas is vented from a storage vessel, provided that
Sec. 3179.203 does not require the capture or flaring of the gas;
(5) When the gas is vented during downhole well maintenance or
liquids unloading activities performed in compliance with Sec.
3179.204;
(6) When the gas is vented through a leak;
(7) When venting is necessary to allow non-routine facility and
pipeline maintenance, such as when an operator must, upon occasion,
blow-down and depressurize equipment to perform maintenance or repairs;
or
(8) When a release of gas is necessary and flaring is prohibited by
Federal, State, local, or Tribal law or regulation, or enforceable
permit term.
(b) All flares or combustion devices must be equipped with an
automatic ignition system. Upon discovery of a flare that is not lit,
the BLM may subject the operator to an immediate assessment of $1,000
per violation.
(c) The flare must be placed a sufficient distance from the tank
battery containment area and any other significant structures or
objects so that the flare does not create a safety hazard. The
prevailing wind direction must be taken into consideration when
locating the flare.
Sec. 3179.7 Gas-well gas.
Gas well gas may not be flared or vented, except where it is
unavoidably lost pursuant to Sec. 3179.4(b).
Sec. 3179.8 Oil-well gas.
(a) Where oil-well gas must be flared due to pipeline capacity
constraints, midstream processing failures, or other similar events
that prevent produced gas from being transported through the connected
pipeline, up to 1,050 Mcf per month, per lease, unit, or CA, of such
flared gas will be considered ``unavoidably lost'' for the purposes of
Sec. Sec. 3179.4(b)(12) and 3179.5.
(b) Where substantial volumes of oil-well gas are flared, resulting
in the unreasonable and undue waste of Federal or Indian gas, the BLM
may order the operator to curtail or shut-in production as necessary to
avoid the unreasonable and undue waste of Federal or Indian gas. The
BLM will not issue a shut-in or curtailment order under this paragraph
unless the operator has reported flaring in excess of 4,000 Mcf per
month for 3 consecutive months and the BLM confirms that flaring is
ongoing.
(c) If a BLM order under paragraph (b) of this section would
adversely affect production of oil or gas from non-Federal and non-
Indian mineral interests (e.g., production allocated to a mix of
Federal, State, Indian, and private leases under a unit agreement), the
BLM may issue such an order only to the extent that the BLM is
authorized to regulate the rate of production under the governing unit
or communitization agreement. In the absence of such authorization, the
BLM will contact the State regulatory authority having jurisdiction
over the oil and gas production from the non-Federal and non-Indian
interests and request that that entity take appropriate action to limit
the waste of gas.
Sec. 3179.9 Measuring and reporting volumes of gas vented and
flared.
(a) The operator must measure or estimate all volumes of gas vented
or flared from wells, facilities, and equipment on a lease, unit PA, or
communitized area and report those volumes under applicable Office of
Natural Resources Revenue (ONRR) reporting requirements (see the ONRR
Minerals Revenue Reporter Handbook for details on reporting vented and
flared volumes).
(b) The following requirements apply to all high-pressure flares
flaring 1,050 Mcf per month or more:
(1) Flaring from all high-pressured flares must be measured by
orifice meters. Starting on [DATE 6 MONTHS AFTER THE EFFECTIVE DATE OF
THE FINAL RULE], an appropriate meter must be installed at all high-
pressure flares.
(2) The orifice plate for the meter must be pulled and inspected at
least once a year.
(3) The meter must be verified at least once a year.
(4) The quality of the flared gas must be determined at least once
a year.
(A) A C6+ analysis must be performed for any gas samples
used in determining the quality of the flared gas.
(B) The gas sample must be taken from one of the following
locations:
(i) At the flare meter;
(ii) At the gas FMP, if there is a gas FMP at the well site and the
gas composition is the same as that of the flare-meter gas; or
(iii) At another location approved by the BLM.
(5) Measurement at the high-pressure flare must achieve an overall
measurement uncertainty within 5 percent.
(6) The operator must take radiant heat from the flare into
consideration when determining the placement of the flare meter.
(7) Except as otherwise specified in this paragraph, measurement
from high-pressure flares must meet the measurement requirements for a
low-volume FMP under subpart 3175 of this part.
(c) For all other flares, the operator must:
(1) Measure flared volumes in accordance with paragraph (b) of this
section;
(2) Estimate flared volumes utilizing sampling and compositional
analysis conducted pursuant to, or consistent with, Sec. 3179.203(c);
or
(3) Estimate flared volumes using another method approved by the
BLM.
(d) If a flare is combusting gas that is combined across multiple
leases, unit PAs, or communitized areas, the operator may measure or
estimate the gas at a single point at the flare but must use an
allocation method approved by the BLM to allocate the quantities of
flared gas to each lease, unit PA, or communitized area.
(e) Measurement points for flared volumes are not FMPs for the
purposes of subpart 3175 of this part.
[[Page 73618]]
Sec. 3179.10 Determinations regarding royalty-free flaring.
(a) Approvals to flare royalty free, which are in effect as of the
effective date of this rule, will continue in effect until [DATE 6
MONTHS AFTER THE EFFECTIVE DATE OF THE FINAL RULE]. From this date
forward, the royalty-bearing status of all flaring will be determined
according to the provisions of this subpart.
(b) The provisions of this subpart do not affect any determination
made by the BLM before or after [EFFECTIVE DATE OF THE FINAL RULE],
with respect to the royalty-bearing status of flaring that occurred
prior to [EFFECTIVE DATE OF THE FINAL RULE].
Sec. 3179.11 Incorporation by Reference (IBR).
Certain material is incorporated by reference into this subpart
with the approval of the Director of the Federal Register under 5
U.S.C. 552(a) and 1 CFR part 51. To enforce any edition other than that
specified in this section, the BLM must publish a rule in the Federal
Register, and the material must be reasonably available to the public.
All approved incorporation by reference (IBR) material is available for
inspection at the Bureau of Land Management (BLM) and at the National
Archives and Records Administration (NARA). Contact Amanda Eagle with
the BLM at: Division of Fluid Minerals, 301 Dinosaur Trail, Santa Fe,
NM 87505, telephone 505-954-2016; email [email protected]; https://www.blm.gov/programs/energy-and-minerals/oil-and-gas. The approved
material is also available for inspection at all BLM offices with
jurisdiction over oil and gas activities. For information on inspecting
this material at NARA, visit www.archives.gov/federal-register/cfr/ibr-locations.html or email [email protected]. The material may be
obtained from the following source:
(a) GPA Midstream Association (GPA), 6060 American Plaza, Suite
700, Tulsa, OK 74135; telephone 918-493-3872.
(1) GPA Midstream Standard 2286-14, Method for the Extended
Analysis for Natural Gas and Similar Gaseous Mixtures by Temperature
Program Gas Chromatography, Revised 2014 (``GPA 2286''), IBR approved
for Sec. 3179.203(c).
(2) GPA Midstream Standard 2186-14, Method for the Extended
Analysis of Hydrocarbon Liquid Mixtures Containing Nitrogen and Carbon
Dioxide by Temperature Programmed Gas Chromatography, Revised 2014
(``GPA 2186''), IBR approved for Sec. 3179.203(c).
(b) [Reserved]
Sec. 3179.12 Reasonable precautions to prevent waste.
(a) Operators must use all reasonable precautions to prevent the
waste of oil or gas developed from the lease.
(b) The Authorized Officer may specify reasonable measures to
prevent waste as conditions of approval of an Application for Permit to
Drill.
(c) After an Application for Permit to Drill is approved, the
Authorized Officer may order an operator to implement, within a
reasonable time, additional reasonable measures to prevent waste at
ongoing exploration and production operations.
(d) Reasonable measures to prevent waste may reflect factors
including but not limited to relevant advances in technology and
changes in industry practice.
Flaring and Venting Gas During Drilling and Production Operations
Sec. 3179.101 Well drilling.
If, during drilling, gas is lost as a result of loss of well
control, the BLM will make a determination as to whether the loss of
well control was due to operator negligence. Such gas is avoidably lost
if the BLM determines that the loss of well control was due to operator
negligence. The BLM will notify the operator in writing when it makes a
determination that gas was lost due to operator negligence.
Sec. 3179.102 Well completion and related operations.
(a) When a new completion is in the process of being hydraulically
fractured, up to 10,000 Mcf of gas that reaches the surface during well
completion, post-completion, and fluid recovery operations may be
flared royalty-free.
(b) When an existing completion is refractured and the well is
connected to a gas pipeline, up to 5,000 Mcf of gas that reaches the
surface during well completion, post-completion, and fluid recovery
operations may be flared royalty-free.
Sec. 3179.103 Initial production testing.
(a) Gas flared during a well's initial production test is royalty-
free under Sec. Sec. 3179.4(b)(3) and 3179.5(b) of this subpart until
one of the following occurs:
(1) The operator determines that it has obtained adequate reservoir
information for the well;
(2) 30 days have passed since the beginning of the production test,
except as provided in paragraphs (b) and (d) of this section;
(3) The operator has flared 20,000 Mcf of gas, including volumes
flared under Sec. 3179.102(a), except as provided in paragraph (c) of
this section; or
(4) Oil production begins.
(b) The BLM may extend the period specified in paragraph (a)(2) of
this section, not to exceed an additional 60 days, based on testing
delays caused by well or equipment problems or if there is a need for
further testing to develop adequate reservoir information.
(c) The BLM may increase the limit specified in paragraph (a)(3) of
this section by up to an additional 30,000 Mcf of gas for exploratory
oil wells in remote locations where additional testing is needed in
advance of development of pipeline infrastructure.
(d) During the dewatering and initial evaluation of an exploratory
coalbed methane well, the 30-day period specified in paragraph (a)(2)
of this section is extended to 90 days. The BLM may approve up to two
extensions of this evaluation period, of up to 90 days each.
(e) The operator must submit its request for a longer test period
or increased limit under paragraphs (b), (c), or (d) of this section
using a Sundry Notice.
Sec. 3179.104 Subsequent well tests.
During well tests subsequent to the initial production test, the
operator may flare gas royalty free under Sec. 3179.4(b)(4) for no
more than 24 hours, unless the BLM approves or requires a longer
period. The operator must submit any request for a longer period under
this section using a Sundry Notice.
Sec. 3179.105 Emergencies.
(a) An operator may flare or, if flaring is not feasible due to the
emergency situation, vent gas royalty-free under Sec. 3179.4(b)(6) of
this subpart for no longer than 48 hours during an emergency situation.
For purposes of this subpart, an ``emergency situation'' is a
temporary, infrequent, and unavoidable situation in which the loss of
gas is necessary to avoid a danger to human health, safety, or the
environment.
(b) The following examples do not constitute emergency situations
for the purposes of royalty assessment:
(1) Recurring failures within a single piece of equipment;
(2) The operator's failure to install appropriate equipment of a
sufficient capacity to accommodate the production conditions;
(3) Failure to limit production when the production rate exceeds
the capacity of the related equipment, pipeline, or
[[Page 73619]]
gas plant, or exceeds sales contract volumes of oil or gas;
(4) Scheduled maintenance; or
(5) A situation caused by operator negligence.
(c) Within 45 days of the start of the emergency, the operator must
estimate and report to the BLM on a Sundry Notice the volumes flared or
vented beyond the timeframe specified in paragraph (a) of this section.
Gas Flared or Vented From Equipment and During Well Maintenance
Operations
Sec. 3179.201 Pneumatic controllers and pneumatic diaphragm pumps.
(a) Where a lease, unit PA, or CA is producing at least 120 Mcf of
gas or 20 barrels of oil per month, the operator may not use a natural-
gas-activated pneumatic controller or pneumatic diaphragm pump with a
bleed rate that exceeds 6 scf per hour.
(b) Operators must comply with paragraph (a) of this section
beginning on [DATE 1 YEAR AFTER THE EFFECTIVE DATE OF THE FINAL RULE].
Sec. 3179.203 Oil storage vessels.
(a) The thief hatch on a storage vessel may be open only to the
extent necessary to conduct production and measurement operations. Upon
discovery of a thief hatch that has been left open and unattended, the
BLM will impose an immediate assessment of $1,000 on the operator.
(b) Beginning on [DATE 1 YEAR AFTER THE EFFECTIVE DATE OF THE FINAL
RULE], all oil storage vessels must be equipped with a vapor-recovery
system or other mechanism that avoids the intentional loss of natural
gas from the vessel, unless the operator determines that equipping the
storage vessel with a vapor-recovery system or other appropriate
mechanism is technically or economically infeasible.
(c) Where an operator has not equipped a storage vessel with a
vapor recovery system or other appropriate mechanism under paragraph
(b) of this section, the operator, using a Sundry Notice, must submit
an annual compositional analysis of production flowing to the storage
vessel.
(1) The compositional analysis must be based on pressurized samples
taken downstream of the last pressurized vessel and upstream of the
last pressure reduction (e.g., a valve) prior to the oil flowing into
the storage vessel.
(2) The compositional analysis must show the expected emissions
from the storage vessel at 60 degrees Fahrenheit and 14.73 psia.
(3) The following sampling requirements apply:
(i) Samples must be collected from a sample probe located
downstream of the last pressurized vessel at least 2 feet below the
gas-liquid interface of the vessel on the oil discharge, and upstream
of the last pressure reduction prior to oil flowing into the storage
vessel.
(ii) Samples must be collected in constant pressure (CP) cylinders.
(iii) Samples must be collected at a rate between 100 ml/minute and
60 ml/minute.
(iv) Samples must be collected within 30 minutes of the well cycle
completion for intermittent flow.
(v) Samples must indicate the pressure and temperature at the
sample probe at the time of sampling. The equipment used to measure
pressure and temperature must be certified to NIST within 0.5 psi and 1 degree Fahrenheit.
(4) The following analysis requirements apply:
(i) Flash-gas compositional analysis must be consistent with GPA
2286 (incorporated by reference, see Sec. 3179.11).
(ii) Dead oil composition analysis must be consistent with GPA 2186
(incorporated by reference, see Sec. 3179.11).
(d) Where practical and safe, gas released from an oil storage
vessel must be flared rather than vented. An operator may commingle
vapors from multiple storage vessels to a single flare without prior
approval from the BLM.
Sec. 3179.204 Downhole well maintenance and liquids unloading.
(a) Gas vented or flared during downhole well maintenance and well
purging is royalty free for a period not to exceed 24 hours per event,
provided that the requirements of paragraphs (b) through (d) of this
section are met. Gas vented or flared from a plunger lift system and/or
an automated well control system is royalty free, provided the
requirements of paragraphs (b) and (c) of this section are met.
(b) The operator must minimize the loss of gas associated with
downhole well maintenance and liquids unloading, consistent with safe
operations.
(c) For wells equipped with a plunger lift system and/or an
automated well control system, minimizing gas loss under paragraph (b)
of this section includes optimizing the operation of the system to
minimize gas losses to the extent possible, consistent with removing
liquids that would inhibit proper function of the well.
(d) For any liquids unloading by manual well purging, the operator
must ensure that the person conducting the well purging remains present
on-site throughout the event to end the event as soon as practical,
thereby minimizing to the maximum extent practicable any venting to the
atmosphere.
(e) For purposes of this section, ``well purging'' means blowing
accumulated liquids out of a wellbore by reservoir gas pressure,
whether manually or by an automatic control system that relies on real-
time pressure or flow, timers, or other well data, where the gas is
vented to the atmosphere, and it does not apply to wells equipped with
a plunger lift system.
Sec. 3179.205 Size of production equipment.
Production and processing equipment must be of sufficient size to
accommodate the volumes of production expected to occur at the lease
site.
Leak Detection and Repair (LDAR)
Sec. 3179.301 Leak detection and repair program.
(a) Pursuant to paragraph (b) of this section, the operator must
maintain a leak detection and repair (LDAR) program designed to prevent
the unreasonable and undue waste of Federal or Indian gas. The LDAR
program must provide for regular inspections of all oil and gas
production, processing, treatment, storage, and measurement equipment
on the lease site.
(b) The operator of a Federal or Indian lease must submit a Sundry
Notice to the BLM describing the operator's LDAR program for the lease
site, including the frequency of inspections and any instruments to be
used for leak detection. The BLM will review the operator's LDAR
program and notify the operator if the BLM deems the program to be
inadequate. The notification will explain the basis for the BLM's
determination, identify the plan's inadequacies, describe any
additional measures that could address the inadequacies, and provide a
reasonable time frame in which the operator must submit a revised LDAR
program to the BLM for review. For leases in effect on [EFFECTIVE DATE
OF THE FINAL RULE], the operator must submit the Sundry Notice
describing the operator's LDAR program no later than [6 MONTHS AFTER
THE EFFECTIVE DATE OF THE FINAL RULE]. For leases issued after
[EFFECTIVE DATE OF THE FINAL RULE], the operator must submit the Sundry
Notice describing the operator's LDAR program within six months of the
lease's issuance.
[[Page 73620]]
(c) LDAR inspections must occur on an annual basis, if not more
frequently. For leases in effect on [EFFECTIVE DATE OF THE FINAL RULE]
and on which operations have commenced, the operator must conduct an
initial inspection within 1 year of [EFFECTIVE DATE OF THE FINAL RULE].
For other leases, the operator must conduct an initial inspection
within one year of the commencement of operations.
Sec. 3179.302 Repairing leaks.
(a) The operator must repair any leak as soon as practicable, and
in no event later than 30 calendar days after discovery, unless good
cause exists to delay the repair for a longer period. Good cause for
delay of repair exists if the repair (including replacement) is
technically infeasible (including unavailability of parts that have
been ordered), would require a pipeline blowdown, a compressor station
shutdown, or a well shut-in, or would be unsafe to conduct during
operation of the unit.
(b) If there is good cause for delaying the repair beyond 30
calendar days, the operator must notify the BLM of the cause by Sundry
Notice and must complete the repair at the earliest opportunity, such
as during the next compressor station shutdown, well shut-in, or
pipeline blowdown. In no case will the BLM approve a delay of more than
2 years.
(c) Not later than 30 calendar days after completion of a repair,
the operator must verify the effectiveness of the repair by conducting
a follow-up inspection using an appropriate instrument or a soap bubble
test under Section 8.3.3 of EPA Method 21--Determination of Volatile
Organic Compound Leaks (40 CFR Appendix A-7 to part 60).
(d) If the repair is not effective, the operator must complete
additional repairs within 15 calendar days and conduct follow-up
inspections and repairs until the leak is repaired.
Sec. 3179.303 Leak detection inspection recordkeeping and reporting.
(a) The operator must maintain the following records for the period
required under Sec. 3162.4-1(d) of this title and make them available
to the BLM upon request:
(1) For each inspection required under Sec. 3179.301 of this
subpart, documentation of:
(i) The date of the inspection; and
(ii) The site where the inspection was conducted;
(2) The monitoring method(s) used to determine the presence of
leaks;
(3) A list of leak components on which leaks were found;
(4) The date each leak was repaired; and
(5) The date and result of the follow-up inspection(s) required
under Sec. 3179.302(c) of this subpart.
(b) By March 31 of each calendar year, the operator must provide to
the BLM an annual summary report on the previous year's inspection
activities that includes:
(1) The number of sites inspected;
(2) The total number of leaks identified, categorized by the type
of component;
(3) The total number of leaks repaired;
(4) The total number of leaks that were not repaired as of December
31 of the previous calendar year due to good cause and an estimated
date of repair for each leak.
(c) Audio/visual/olfactory (AVO) checks are not required to be
documented unless they find a leak requiring repair.
State or Tribal Variances
Sec. 3179.401 State or Tribal requests for variances from the
requirements of this subpart.
(a)(1) At the request of a State (for Federal land) or a Tribe (for
Indian lands), the BLM State Director may grant a variance, from any
provision(s) of this subpart, that would apply to all Federal leases,
units, or communitized areas within a State or to all Tribal leases,
IMDAs, units, or communitized areas within the Tribe's lands, or to
specific fields or basins within the State or Tribe's lands, if the BLM
finds that the variance would meet the criteria in paragraph (b) of
this section.
(2) A State or Tribal variance request must:
(i) Identify the provision(s) of this subpart from which the State
or Tribe is requesting the variance;
(ii) Identify the State, local, or Tribal regulation(s) or rule(s)
that would be applied in place of the provision(s) of this subpart;
(iii) Explain why the variance is needed; and
(iv) Demonstrate how the State, local, or Tribal regulation(s) or
rule(s) would perform at least equally well to reduce waste of oil and
gas, reduce environmental impacts from venting and/or flaring of gas,
assure appropriate royalty payments to the United States or to the
beneficial Indian owners, and ensure the safe and responsible
production of oil and gas, compared to the particular regulatory
provision(s) from which the State or Tribe is requesting the variance.
(b) The BLM State Director, after considering all relevant factors,
may approve the request for a variance, or approve it with one or more
conditions, only if the BLM determines that the State, local or Tribal
regulation(s) or rule(s) would perform at least equally well in terms
of reducing waste of oil and gas, reducing environmental impacts from
venting and/or flaring of gas, assuring appropriate royalty payments to
the United States or to the beneficial Indian owners, and ensuring the
safe and responsible production of oil and gas, compared to the
particular regulatory provision(s) from which the State or Tribe is
requesting the variance, and would be consistent with the terms of the
affected Federal or Indian leases and applicable statutes. The BLM's
decision to grant or deny the variance will be in writing and is
discretionary. The decision on a variance request is not subject to
administrative appeals under 43 CFR part 4.
(c) A variance from any particular regulatory requirement of this
subpart does not constitute a variance from provisions of any other
regulations, laws, or orders.
(d) The BLM reserves the right to rescind a variance or modify any
condition of approval, in which case the BLM will provide notice to the
affected State or Tribe.
(e) If the BLM approves a variance under this section, the State or
Tribe that requested the variance must notify the BLM in writing and in
a timely manner of any substantive amendments, revisions, or other
changes to the State, local or Tribal regulation(s) or rule(s) to be
applied under the variance.
(f) If the BLM approves a variance under this section, the State,
local or Tribal regulation(s) or rule(s) to be applied under the
variance, including any changes to the regulation(s) or rule(s)
described in paragraph (e) of this section, may be enforced by the BLM
as if the regulation(s) or rule(s) were provided for in this subpart.
The State, locality, or Tribes' own authority to enforce its
regulation(s) or rule(s) to be applied under the variance is not to be
affected by the BLM's approval of a variance.
Laura Daniel-Davis,
Principal Deputy Assistant Secretary, Land and Minerals Management.
[FR Doc. 2022-25345 Filed 11-29-22; 8:45 am]
BILLING CODE 4310-84-P