Obama Administration Finalizes Yet Another Expansion of Oil and Gas Regulations
Lately, it seems as if a day does not go by without the Obama Administration unveiling a regulatory proposal targeting the oil and gas industry. We anticipate more of the same as the Administration winds down and the onslaught of midnight regulations commences. Today, the National Park Service (“NPS”) released final regulations (“NPS Final Rule”) applicable to non-federal oil and gas operations undertaken within NPS boundaries in all states except for Alaska.
The NPS Final Rule updates and expands NPS’s regulations at 36 CFR Part 9, Subpart B ("9B Regulations") that were first published in 1978. The NPS regulations currently effect just over 500 operations across 12 NPS system units; however, the NPS attempts to justify the rule in part because it anticipates future non-federal oil and gas operations within NPS boundaries to increase.
Key updates to the 9B Regulations included in this final rule include, the elimination of exemptions effecting approximately 60 percent of the oil and gas operations on NPS lands, removal of the bonding cap, new well-plugging requirements, and new access fees for land use outside an operator’s mineral lease.
Interestingly, the NPS Final Rule incorporates aspects of the BLM Hydraulic Fracturing Rule, which the U.S. District Court for the District of Wyoming struck down back in June 2016. In that case, Judge Skavdahl concluded that BLM lacked congressional authority to regulate hydraulic fracturing. Here, the NPS acknowledges the litigation, but asserts it has the authority to implement the rule under the NPS Organic Act, 54 U.S.C. § 100101 et seq.
Industry should take notice of the NPS Final Rule for because (1) the federal government is attempting to shoehorn in the same hydraulic fracturing regulations that were recently set aside by a federal court; (2) the NPS Final Rule appears to be yet another unnecessary layer of regulation considering the robust state oil and gas regulatory programs currently in place; and (3) operators may decide to pursue takings claims to the extent NPS’s regulations make development of mineral rights economically infeasible. The NPS Final Rule is effective December 5, 2016.
What Operations are Subject to the Rule?
The 9B Regulations cover the exercise of non-federal oil and gas rights in units of the NPS System (“System units”). Non-federal oil and gas rights can occur within an NPS System unit when the U.S. government owns the land but not the underlying oil and gas interest. This could occur because either (1) the U.S. acquired the property from a grantor that did not own the oil and gas interest; or, (2) the U.S. acquired the property from a grantor that reserved the oil and gas interest from the conveyance. According to the NPS, there are currently 534 non-federal oil and gas operations across 12 NPS System units.
The NPS Final Rule removes two key exemptions included in the 1978 regulations, resulting in an additional 60 percent of wells within NPS System units being brought under NPS regulation. The original 1978 9B Regulations did not apply (1) if the subject operations did not require access on, across, or through federally owned or controlled lands or waters (15 percent of total operations); or (2) in instances where operations were “grandfathered,” i.e., operators who were conducting operations at the time the regulations became effective had already obtained any valid federal or state permit (40 percent of total operations). Now, the 9B Regulations apply to all operators conducting non-federal oil or gas operations on lands or waters within a System unit, regardless of the ownership or legislative jurisdictional status of those lands or waters.
The position of the NPS is that now, even grandfathered operations must bring their operations into compliance. This includes applying for a permit and evaluating whether operations have an adverse effect on the environment or human health and safety. These previously exempt operations are also subject to mitigation measures and bonding and reclamation requirements.
Operators are required to have either a Temporary Access Permit or an Operations Permit prior to conducting any work on NPS lands. The NPS Final Rule clarifies that NPS will not review any application for an Operations Permit until the operator demonstrates they hold a valid existing right to conduct their operations.
While Operations Permits were required under the original regulations, the NPS Final Rule establishes new and updated information requirements for operators to include in their applications, including requiring:
- Additional information regarding the source, transportation method and quantity of water to be used in addition to how the operator will manage waste water;
- Site security measures and an operation’s power sources and transmission systems;
- Baseline soil and water testing;
- Descriptions of all alternative technologically feasible, least damaging methods that are viable based on economic, environmental, and technological considerations; and
- Information regarding the specific well stimulation undertaken, including chemical disclosure, the geologic barriers between the target zone and the deepest usable water zone, verifying mechanical integrity of the wellbore, and describing water use and disposal management of flowback fluids.