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April 2024 Exclusive Story

Industry Representatives Are Scrutinizing BLM Waste Rule

WASHINGTON—Oil and gas industry advocates are offering measured responses to another methane-focused rule that the U.S. Department of Interior’s Bureau of Land Management finalized in late March. Although groups such as the Western Energy Alliance and the American Petroleum Institute indicate they are combing through the Waste Prevention Rule BLM finalized on March 27, neither responded with immediate alarm to its release.

Western Energy Alliance President Kathleen Sgamma notes that BLM’s waste prevention rule follows previous rules under the Obama and Trump administrations to reduce methane emissions, venting and flaring.

“Western Energy Alliance appreciates that with the waste prevention rule, BLM is attempting to achieve clarity on how to classify waste gas as avoidably and unavoidably lost, and hence whether it bears royalties or not.” Sgamma said on the day the rule was unveiled. “The Alliance is reviewing the final rule to ensure it has corrected the problems with the 2016 Obama administration rule that was overturned in the U.S. District Court for the District of Wyoming in State of Wyoming et al. v. DOI, of which Western Energy Alliance was a co-plaintiff.

“The 2022 proposed rule was better than the 2016 rule that we successfully overturned in court, as the Wyoming District Court found that BLM had usurped the air quality authority of EPA and the states,” she continued. “Many but not all of those problems were fixed in the proposed rule. We provided constructive feedback in our comments and hope they were taken into consideration in this final rule so that companies will have certainty on federal and tribal lands. We will be reviewing it carefully.”

That same day, API Vice President of Upstream Policy Holly Hopkins noted that BLM’s statutory authority to assess royalties on oil and natural gas production on federal lands applied only to gas that could be captured economically. API also submitted comments on the draft iteration, raising legal and practical concerns with several aspects of the proposal, including duplication of regulatory efforts already being undertaken by other federal agencies.

“API supports a smart regulatory framework for reducing methane emissions, but overlapping regulations and lack of coordination between policymakers could hinder progress, create unnecessary barriers to development on federal lands and result in regulatory incoherence,” Hopkins related. “We are reviewing the final rule to ensure it remains within BLM’s statutory authority to regulate waste of natural gas and will consider all options to prevent regulatory overreach.”

Aiming For Modernization

According to BLM, the rule will curb natural gas waste during oil and gas production on federal and tribal lands by modernizing regulations crafted more than four decades ago. The bureau says the rule requires oil and gas companies to avoid wasteful practices and find and fix leaks, while ensuring that American taxpayers and tribal mineral owners are fairly compensated through royalty payments.

Overall, BLM estimates that the industrywide annual cost of implementing the new requirements will be $19 million a year, and suggests that individual small business operators may only see their wells’ profit margins fall an average of less than 0.2%.

By building on technological advances and best management practices to help reduce waste, BLM calculates the rule will generate more than $50 million in additional natural gas royalty payments each year to the federal government and tribal mineral owners, while conserving billions of cubic feet of gas that otherwise may have been vented, flared or leaked.

“This final rule, which updates 40-year-old regulations, furthers the Biden-Harris administration’s goals to prevent waste, protect our environment, and ensure a fair return to American taxpayers,” maintains Interior Secretary Deb Haaland. “By leveraging modern technology and best practices to reduce natural gas waste, we are taking long-overdue steps that will increase accountability for oil and gas operators and benefit energy communities now and for generations to come.”

“This rule represents a common sense, fair, and equitable solution to preventing waste that provides a level playing field for all of our energy-producing communities,” claims BLM Director Tracy Stone-Manning. “The BLM worked extensively with a wide range of stakeholders to modernize our decades-old regulations and help protect communities across the country.”

According to the bureau, venting and flaring reported by federal and tribal land onshore lessees averaged about 44.2 Bcf a year between 2010 and 2020. BLM goes on to indicate that the final rule responds to a series of U.S. Government Accountability Office reports highlighting revenue lost under the previous regulatory structure.

“Several states, including Colorado, New Mexico, Pennsylvania and Wyoming, as well as the U.S. Environmental Protection Agency, have taken steps to limit venting, flaring and/or leaks from oil and gas operations either for purposes of preventing waste, as is BLM, or improving air quality,” DOI notes. “The BLM rule is separate and distinct from the EPA rule and ensures that operators can comply with applicable state, tribal or federal rules while meeting these commonsense requirements.”

The bureau says the updated rule requires current technology and practices to better account for natural gas waste. It requires operators of federal and tribal oil and gas leases to take reasonable steps to avoid natural gas waste from the very beginning of operations, carry out leak detection and repair across ongoing operations, and cut unnecessary gas venting and flaring, BLM describes. Consistent with the Inflation Reduction Act, BLM says, the rule also sets new limits on royalty-free flaring to properly compensate public and tribal mineral owners.

Sgamma and Hopkins say oil and gas companies are highly motivated to maximize the volume of U.S. natural gas that is captured, sold and put to worthwhile use, including the considerable output under BLM jurisdiction. “U.S. oil and natural gas producers are continuously working to meet growing energy demand while reducing emissions, and consistent access to federal resources is essential for maintaining America’s energy advantage,” Hopkins says.

“The oil and natural gas industry and the BLM share the goal of reducing waste of natural gas through venting, flaring and leaks,” Sgamma assures. “Even without the rule, companies have joined together to reduce methane emissions, venting and flaring, with every major basin showing significant declines. Our industry is proud to continue that work with or without new rules.”

The regulation takes effect 60 days after publication in the Federal Register, which press accounts estimate will likely mean a June implementation. BLM says some flare measurements will be required either six, 12 or 18 months after the rule’s effective date. Operators will have 18 months to submit leak detection and repair plans to BLM state offices.

A pre-publication version of the final rule can be found at https://www.blm.gov/sites/default/files/docs/2024-03/BLM-Waste-Prevention Final-Rule-1004-AE79-Unofficial-Prepublication.pdf.

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