Bureau of Land Management (BLM) Targets “Waste” in the Oil and Gas Industry
On January 22, 2016, the Bureau of Land Management (BLM) proposed a new rule targeting oil and gas producers on federal and Indian lands. The rule aims to reduce waste of natural gas by limiting flaring, prohibiting venting, and requiring operators to identify and repair leaks. Additionally, the proposal would grant BLM discretion to increase the royalty rate for future leases. The rule represents the latest in a series of recent efforts by state and federal regulators to limit greenhouse gas emissions by the oil and gas production sector. BLM will accept comments on the proposed rule for 60 days after it appears in the Federal Register.
This rule will apply to the over 100,000 oil and gas wells currently operating on federal land. The Bureau of Land Management estimates that these wells lost 375 billion cubic feet of natural gas between 2009 and 2014. BLM projects that the rule would reduce flaring by up to 60% and venting by up to 46%. BLM anticipates, however, that it will cost industry up to $161 million per year to comply with this rule.
The rule proposes several measures to prevent waste, including:
Limiting routine flaring to 1,800 thousand cubic feet of gas per month. This limit would be phased in gradually over the course of two years.
Banning venting, with limited exceptions, such as for emergencies.
Mandating periodic leak detection and immediate leak repair.
Requiring new Applications for Permit to Drill to contain waste minimization plans.
The rule would also allow BLM to raise royalty rates above the current level of 12.5%. BLM expresses no immediate plans to raise royalty rates for new leases, but seeks the discretion to do so in the future.
Though the proposal focuses on waste reduction, it reflects a recent trend towards increased regulation of the energy industry’s greenhouse gas emissions. Colorado, Wyoming, North Dakota, and Pennsylvania have all taken steps to reduce emissions from oil and gas producers in recent years. At the federal level, EPA finalized new source performance standards under the Clean Air Act for oil and gas producers in 2012. Additionally, the Obama administration announced a cross-agency initiative to control methane emissions in early 2015. BLM’s proposed waste-reduction rule is the latest manifestation of this trend.