[Federal Register Volume 83, Number 36 (Thursday, February 22, 2018)]
[Proposed Rules]
[Pages 7924-7948]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-03144]
[[Page 7923]]
Vol. 83
Thursday,
No. 36
February 22, 2018
Part III
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
Conservation; Rescission or Revision of Certain Requirements; Proposed
Rule
Federal Register / Vol. 83 , No. 36 / Thursday, February 22, 2018 /
Proposed Rules
[[Page 7924]]
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DEPARTMENT OF THE INTERIOR
Bureau of Land Management
43 CFR Parts 3160 and 3170
[18X.LLWO310000.L13100000.PP0000]
RIN 1004-AE53
Waste Prevention, Production Subject to Royalties, and Resource
Conservation; Rescission or Revision of Certain Requirements
AGENCY: Bureau of Land Management, Interior.
ACTION: Proposed rule.
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SUMMARY: On November 18, 2016, the Bureau of Land Management (BLM)
published in the Federal Register a final rule entitled, ``Waste
Prevention, Production Subject to Royalties, and Resource
Conservation'' (``2016 final rule''). After reconsidering the cost,
complexity, and other implications of the 2016 final rule, the BLM is
now proposing to revise the 2016 final rule in a manner that reduces
unnecessary compliance burdens, is consistent with the BLM's existing
statutory authorities, and re-establishes long-standing requirements
that the 2016 final rule replaced. In addition to requesting public
comment on the proposed rule generally, the BLM is also requesting
comment on ways that the BLM can reduce the waste of gas by
incentivizing the capture, reinjection, or beneficial use of the gas.
DATES: Send your comments on this proposed rule to the BLM on or before
April 23, 2018. A comment to the OMB on the proposed information
collection revisions is best assured of being given full consideration
if the OMB receives it by March 26, 2018.
ADDRESSES:
Mail: U.S. Department of the Interior, Director (630), Bureau of
Land Management, Mail Stop 2134LM, 1849 C St. NW, Washington, DC 20240,
Attention: 1004-AE53.
Personal or messenger delivery: U.S. Department of the Interior,
Bureau of Land Management, 20 M Street SE, Room 2134 LM, Washington, DC
20003, Attention: Regulatory Affairs.
Federal eRulemaking Portal: https://www.regulations.gov. In the
Searchbox, enter ``RIN 1004-AE53'' and click the ``Search'' button.
Follow the instructions at this website.
FOR COMMENTS ON INFORMATION-COLLECTION ACTIVITIES
Fax: Office of Management and Budget (OMB), Office of Information
and Regulatory Affairs, Desk Officer for the Department of the
Interior, fax 202-395-5806.
Electronic mail: [email protected].
Please indicate ``Attention: OMB Control Number 1004-0211,''
regardless of the method used to submit comments on the information
collection burdens. If you submit comments on the information-
collection burdens, you should provide the BLM with a copy, at one of
the street addresses shown earlier in this section, so that we can
summarize all written comments and address them in the final
rulemaking. Comments not pertaining to the proposed rule's information-
collection burdens should not be submitted to OMB. The BLM is not
obligated to consider or include in the Administrative Record for the
final rule any comments that are improperly directed to OMB.
FOR FURTHER INFORMATION CONTACT: Catherine Cook, Acting Division Chief,
Fluid Minerals Division, 202-912-7145 or [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 202-912-7441 or
[email protected]. Persons who use a telecommunications device for the
deaf (TDD) may call the Federal Relay Service (FRS) at 1-800-877-8339,
24 hours a day, 7 days a week, to leave a message or question with the
above individuals. You will receive a reply during normal business
hours.
SUPPLEMENTARY INFORMATION:
I. Executive Summary
II. Public Comment Procedures
III. Background
IV. Discussion of the Proposed Rule
V. Procedural Matters
I. Executive Summary
On November 18, 2016, the BLM published in the Federal Register a
final rule entitled, ``Waste Prevention, Production Subject to
Royalties, and Resource Conservation'' (82 FR 83008) (``2016 final
rule''). The 2016 final rule was intended to: Reduce waste of natural
gas from venting, flaring, and leaks during oil and natural gas
production activities on onshore Federal and Indian leases; clarify
when produced gas lost through venting, flaring, or leaks is subject to
royalties; and clarify when oil and gas production may be used royalty-
free. The 2016 final rule became effective on January 17, 2017, with
some requirements taking effect immediately, but the majority of
requirements phased-in on January 17, 2018 or later.
On March 28, 2017, President Trump issued Executive Order (E.O.)
13783, ``Promoting Energy Independence and Economic Growth,'' directing
the BLM to review the 2016 final rule and to publish proposed rules
suspending, revising, or rescinding it, if appropriate.
The BLM reviewed the 2016 final rule and found that some impacts
were under-estimated and many provisions of the rule would add
regulatory burdens that unnecessarily encumber energy production,
constrain economic growth, and prevent job creation. This proposed rule
would revise the 2016 final rule so that the remaining requirements
would be consistent with the policies set forth in section 1 of E.O.
13783, which states that ``[i]t is in the national interest to promote
clean and safe development of our Nation's vast energy resources, while
at the same time avoiding regulatory burdens that unnecessarily
encumber energy production, constrain economic growth, and prevent job
creation.''
More specifically, the BLM acknowledges that the 2016 final rule
contains requirements that overlap with other Federal and State
requirements and regulations. However, unlike the Environmental
Protection Agency (EPA) regulations with which the rule overlaps, the
2016 final rule would affect existing wells, including a substantial
number that are likely to be marginal or low-producing and therefore
less likely to remain economical to operate if subjected to additional
compliance costs. The 2016 final rule also contains numerous
administrative and reporting burdens that are unnecessary and likely to
constrain development. Finally, as explained in the Regulatory Impact
Analysis (RIA) prepared for this rule, the BLM reviewed the 2016 final
rule and determined that the costs the rule is expected to impose would
exceed the benefits it is expected to generate. For these reasons, the
BLM is now proposing to revise the 2016 final rule in a manner that
reduces unnecessary compliance burdens and, in large part, re-
establishes the long-standing requirements that the 2016 final rule
replaced.
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, and
explain the reason
[[Page 7925]]
for any changes you recommend. 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 above (see ADDRESSES).
Comments, including names and street addresses of respondents, will
be available for public review at the address listed under ``ADDRESSES:
Personal or messenger delivery'' during regular 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 ADDRESSES section. The 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 document
in the Federal Register. Therefore, a comment to the OMB on the
proposed information collection revisions is best assured of being
given full consideration if the OMB receives it by March 26, 2018.
III. Background
The BLM manages more than 245 million acres of public land, known
as the National System of Public Lands, primarily located in 12 Western
States, including Alaska. The BLM also manages 700 million acres of
subsurface mineral estate throughout the nation.
The BLM's onshore oil and gas management program is a major
contributor to the nation's oil and gas production. In fiscal year (FY)
2016, sales volumes from Federal onshore production lands accounted for
9 percent of domestic natural gas production, and 5 percent of total
U.S. oil production.\1\ Over $1.9 billion in royalties were collected
from all oil, natural gas, and natural gas liquids transactions in FY
2016 on Federal and Indian Lands.\2\ Royalties from Federal lands are
shared with States. Royalties from Indian lands are collected for the
benefit of the Indian owners.
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\1\ United States Department of the Interior, ``Budget
Justifications and Performance Integration Fiscal Year 2018: Bureau
of Land Management'' at VII-77, available at https://www.doi.gov/sites/doi.gov/files/uploads/fy2018_blm_budget_justification.pdf.
\2\ Derived from data available on the Office of Natural
Resources Revenue website's ``Statistical Information'' page,
accessible at https://statistics.onrr.gov/.
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The venting or flaring of some natural gas is a practically
unavoidable consequence of oil and gas development. Whether during well
drilling, production testing, well purging, or emergencies, it is not
uncommon for gas to reach the surface that cannot be feasibly used or
sold. When this occurs, the gas must either be combusted (``flared'')
or released to the atmosphere (``vented''). Depending on the
circumstances, operators may also flare natural gas on a longer-term
basis from production operations, predominantly in situations where an
oil well co-produces natural gas (or ``associated gas'') in an
exploratory area or a field that lacks adequate gas-capture
infrastructure to bring the gas to market. Still other venting or
flaring of gas from production equipment may occur by design and as a
substitute for other power generated facilities at the wellsite.
In response to oversight reviews and a recognition of increased
flaring from Federal and Indian leases, the BLM developed a final rule
entitled, ``Waste Prevention, Production Subject to Royalties, and
Resource Conservation,'' which was published in the Federal Register on
November 18, 2016 (81 FR 83008) (``2016 final rule''). The 2016 final
rule replaced the BLM's existing policy at that time, Notice to Lessees
and Operators of Onshore Federal and Indian Oil and Gas Leases, Royalty
or Compensation for Oil and Gas Lost (NTL-4A).
The 2016 final rule was intended to: Reduce waste of natural gas
from venting, flaring, and leaks during oil and natural gas production
activities on onshore Federal and Indian leases; clarify when produced
gas lost through venting, flaring, or leaks is subject to royalties;
and clarify when oil and gas production may be used royalty free on-
site. The 2016 final rule became effective on January 17, 2017, with
some requirements taking effect immediately, but the majority of
requirements phased-in over time.
On March 28, 2017, President Trump issued E.O. 13783, entitled,
``Promoting Energy Independence and Economic Growth,'' requiring the
BLM to review the 2016 final rule. Section 7(b) of E.O. 13783 directs
the Secretary of the Interior to review four specific rules, including
the 2016 final rule, for consistency with the policy articulated in
section 1 of the Order and to publish proposed rules suspending,
revising, or rescinding those rules, if appropriate. Among other
things, section 1 of E.O. 13783 states that ``[i]t is in the national
interest to promote clean and safe development of our Nation's vast
energy resources, while at the same time avoiding regulatory burdens
that unnecessarily encumber energy production, constrain economic
growth, and prevent job creation.''
To implement E.O. 13783, Secretary of the Interior Ryan Zinke
issued Secretarial Order No. 3349, entitled, ``American Energy
Independence'' on March 29, 2017, which, among other things, directs
the BLM to review the 2016 final rule to determine whether it is fully
consistent with the policy set forth in section 1 of E.O. 13783.
The BLM reviewed the 2016 final rule and believes that it is
inconsistent with the policy in section 1 of E.O. 13783. The BLM found
that the impacts resulting from some provisions of the rule were
underestimated and would add regulatory burdens that unnecessarily
encumber energy production, constrain economic growth, and prevent job
creation. This proposed rule would revise the 2016 final rule so that
the remaining requirements would be consistent with the policies set
forth in section 1 of E.O. 13783.
On October 5, 2017, the BLM published a proposed rule that would
suspend the implementation of certain requirements in the 2016 final
rule until January 17, 2019 (82 FR 46458). After a public comment
period, the BLM finalized this temporary suspension on December 8, 2017
(82 FR 58050) (``Suspension Rule''). The purpose of the Suspension Rule
is to avoid imposing temporary or permanent compliance costs on
operators for requirements that may be rescinded or significantly
revised in the near future. The BLM plans to conclude its revision of
the 2016 final rule during the period of the suspension effected by the
Suspension Rule.
The BLM has several reasons for modifying the requirements in the
2016 final rule. First, the 2016 final rule is more expensive to
implement and generates fewer benefits than initially
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estimated. The BLM reviewed the 2016 final rule's requirements and
determined that the rule's compliance costs for industry and
implementation costs for the BLM would exceed the rule's benefits. For
a more detailed explanation, see the analysis of the 2016 final rule's
requirements (baseline scenario) in the Regulatory Impact Analysis
(RIA) prepared for this rule (RIA at 38). Over the 10-year evaluation
period (2019-2028), the total net benefits posed by the 2016 final rule
are estimated to be -$627 to -$902 million (net present value (NPV) and
interim domestic social cost of methane (SC-CH4) using a 7
percent discount rate) or -$581 to -$945 million (NPV and interim
domestic SC-CH4 using a 3 percent discount rate).
In addition, many of the 2016 final rule's requirements would pose
a particular compliance burden to operators of marginal or low-
producing wells, and there is concern that those wells would not be
economical to operate with the additional compliance costs. Although
the characteristics of what is considered to be a marginal well can
vary, the percentage of the nation's oil and gas wells classified as
marginal is high. The Interstate Oil and Gas Compact Commission (IOGCC)
published a report in 2015 detailing the contributions of marginal
wells to the nation's oil and gas production and economic activity.\3\
According to the IOGCC, about 69.1 and 75.9 percent of the nation's
operating oil and gas wells, respectively, are marginal (IOGCC 2015 at
22). The IOGCC defines a marginal well as ``a well that produces 10
barrels of oil or 60 Mcf of natural gas per day or less'' (IOGCC 2015
at 2).\4\ The U.S. Energy Information Administration (EIA) reported
that, in 2016, roughly 76.4 percent of oil wells produced less than or
equal to 10 barrels of oil equivalent (BOE) per day and 81.3 percent of
oil wells produced less than or equal to 15 BOE/day. For gas wells, EIA
reported that roughly 71.6 percent produced less than or equal to 10
BOE/day and 78.2 percent less than or equal to 15 BOE/day. For both oil
and gas wells, EIA estimates that 73.3 percent of all wells produce
less than 10 BOE/day.\5\ On Federal lands, this would equate to 68,972
wells designated as marginal.\6\
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\3\ IOGCC, ``Marginal Wells: Fuel for Economic Growth. 2015
Report.'' Available on the web at http://iogcc.ok.gov/websites/iogcc/images/MarginalWell/MarginalWell-2015.pdf.
\4\ By other definitions, marginal or stripper wells might
include those with production of up to 15 barrels of oil or 90 Mcf
of natural gas per day or less. The U.S. Energy Information
Administration (EIA) reported that, in 2009, roughly 78.7 percent of
oil wells produced less than or equal to 10 barrels of oil
equivalent (BOE) per day and 85.4 percent of oil wells produced less
than or equal to 15 BOE/day. For gas wells, EIA reported that
roughly 64.5 percent produced less than or equal to 10 BOE/day and
73.3 percent less than or equal to 15 BOE/day. EIA, ``United States
Total 2009: Distribution of Wells by Production Rate Bracket.''
December 2010. Available on the web at https://www.eia.gov/naturalgas/archive/petrosystem/us_table.html.
\5\ EIA, ``The Distribution of U.S. Oil and Natural Gas Wells by
Production Rate.'' December 2017. Available on the web at https://www.eia.gov/petroleum/wells/.
\6\ Estimated percent of marginal wells applied to the number of
Federal and Indian wells, provided in the BLM Oil and Gas
Statistics, available at https://www.blm.gov/programs/energy-and-minerals/oil-and-gas/oil-and-gas-statistics.
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The 2016 final rule's requirements that would impose a particular
burden on marginal or low-producing wells include leak detection and
repair (LDAR), pneumatic equipment, and liquids unloading requirements.
The 2016 final rule allows for exemptions from many of the requirements
when compliance would impose such costs that the operator would cease
production and abandon significant recoverable reserves. Although the
2016 final rule allowed operators to request an alternative LDAR
program, there is no full exemption from the requirement. Due to the
prevalence of marginal and low-producing wells, we would expect that
many exemptions would be warranted, making the burden imposed by the
exemption process excessive. It is also possible that some proportion
of marginal wells would be prematurely shut-in by their operators due
to the costs and uncertainties involved in obtaining an exemption from
the BLM or the costs associated with an alternate LDAR program.
There are many other reporting requirements in the 2016 final rule
and the cumulative effect of the burden is substantial. Specifically,
the BLM estimates that the 2016 final rule would impose administrative
costs of about $14 million per year ($10.7 million to be borne by the
industry and $3.27 million to be borne by the BLM). The BLM estimates
that the proposed revision of the 2016 final rule would alleviate the
vast majority of these burdens and would pose administrative burdens of
only $349,000 per year. (See RIA section 3.2.2).
In addition, the 2016 final rule has many requirements that overlap
with the EPA's authority under the Clean Air Act, and in particular
EPA's New Source Performance Standards at 40 CFR part 60, subparts OOOO
(NSPS OOOO) and OOOOa (NSPS OOOOa). For example, the EPA's NSPS OOOO
regulates new, reconstructed, and modified pneumatic controllers,
storage tanks, and gas wells completed using hydraulic fracturing,
while NSPS OOOOa regulates new, reconstructed, and modified pneumatic
pumps, fugitive emissions from well sites and compressor stations, and
oil wells completed using hydraulic fracturing, in addition to the
requirements in NSPS OOOO.
The BLM's 2016 final rule also regulates these source categories.
While the EPA regulates new, modified, and reconstructed sources, the
BLM crafted the 2016 final rule to address the remaining existing
facilities within these same source categories. However, by forcing
operators to upgrade equipment to meet the BLM's standard, operators
could need to replace old equipment with new equipment. Thus, the 2016
final rule could compel facilities not intended to fall under the
purviews of NSPS OOOO and NSPS OOOOa to become regulated facilities.
In addition, as the BLM acknowledged during the development of the
2016 final rule,\7\ some States with significant Federal oil and gas
production have similar regulations addressing the loss of gas from
these sources. For example, the State of Colorado has regulations that
restrict methane emissions during most oil and gas well completions and
recompletions, impose requirements for pneumatic controllers and
storage vessels, require a comprehensive LDAR program, and set
standards for liquids unloading.\8\ The Utah Department of
Environmental Quality issued a General Approval Order on June 5, 2014,
that applies to new and modified oil and gas well sites and tank
batteries and requires: Pneumatic controllers to be low bleed or have
their emissions routed to capture or flare, pneumatic pumps to route
emissions to capture or flare, and operators to inspect for leaks at
least annually.\9\ Since the promulgation of the 2016 final rule, the
State of California has issued new regulations that require quarterly
monitoring of methane emissions from oil and gas wells, compressor
stations and other equipment involved in the production of oil and gas,
impose limitations on venting from natural gas powered pneumatic
devices and pumps,
[[Page 7927]]
and require vapor recovery from tanks under certain circumstances.\10\
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\7\ 81 FR 6616, 6633-34 (Feb. 8, 2016).
\8\ Colorado Air Quality Control Commission, Regulation 7, 5 CCR
1001-9, Sections XII, XVII, and XVIII.
\9\ State of Utah, Department of Environmental Quality, Division
of Air Quality, Approval Order: General Approval Order for a Crude
Oil and Natural Gas Well Site and/or Tank Battery, DAQE-
AN1492500001-14 (June 5, 2014).
\10\ Cal. Code Regs. Tit. 17, Sec. Sec. 95665-95677.
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Furthermore, the BLM is not confident that all provisions of the
2016 final rule would survive judicial review. During the development
of the 2016 final rule, the BLM received comments from the regulated
industry and some States arguing that the BLM's proposed rule exceeded
the BLM's statutory authority. Specifically, these commenters objected
that the proposed rule, rather than preventing ``waste,'' was actually
intended to regulate air quality, a matter within the regulatory
jurisdiction of the EPA and the States under the Clean Air Act.
Commenters also asserted that the proposed rule exceeded the BLM's
waste prevention authority by requiring conservation without regard to
economic feasibility, a key factor in determining whether a loss of oil
or gas is prohibited ``waste'' under the Mineral Leasing Act.
Immediately after the 2016 final rule was issued, petitions for
judicial review of the rule were filed by industry groups and States
with significant BLM-managed Federal and Indian minerals. Wyoming v.
U.S. Dep't of the Interior, Case No. 2:16-cv-00285-SWS (D. Wyo.).
Petitioners in this litigation maintain that the BLM's promulgation of
the 2016 final rule was arbitrary and capricious (in violation of the
Administrative Procedure Act), and that the 2016 final rule exceeded
the BLM's statutory authority by regulating air quality and failing to
give due consideration to economic feasibility. Although the court
denied petitioners' motions for a preliminary injunction, the court did
express concerns that the BLM may have usurped the authority of the EPA
and the States under the Clean Air Act, and questioned whether it was
appropriate for the 2016 final rule to be justified based on its
environmental and societal benefits, rather than on its resource
conservation benefits alone. The BLM requests comment on whether the
2016 final rule was consistent with its statutory authority.
The 2016 final rule also has requirements that limit the flaring of
associated gas produced from oil wells. The 2016 final rule sought to
constrain this flaring through the imposition of a ``capture
percentage'' requirement, requiring operators to capture a certain
percentage of the gas they produce, after allowing for a certain volume
of flaring per well. The requirement would become more stringent over a
period of years. The BLM reviewed State regulations, rules, and orders
designed to limit the waste of oil and gas resources and the flaring of
natural gas, and determined that states with the most significant BLM-
managed oil and gas production place restrictions or limitations on gas
flaring from oil wells. For example, the State of North Dakota has
requirements that are similar (but not identical) to the 2016 final
rule. Other States generally have flaring limits that trigger a review
by a governing board to determine whether the gas should be conserved.
A memorandum containing a summary of the statutory and regulatory
restrictions on venting and flaring in the 10 States responsible for
approximately 99 percent of Federal oil and gas production is available
on the Federal eRulemaking Portal: https://www.regulations.gov. In the
Searchbox, enter ``RIN 1004-AE53'', click the ``Search'' button, open
the Docket Folder, and look under Supporting Documents.
The BLM regulates the development of Federal and Indian onshore oil
and gas resources pursuant to its authority under the following
statutes: The Mineral Leasing Act of 1920 (30 U.S.C. 188-287), the
Mineral Leasing Act for Acquired Lands (30 U.S.C. 351-360), the Federal
Oil and Gas Royalty Management Act (30 U.S.C. 1701-1758), the Federal
Land Policy and Management Act of 1976 (43 U.S.C. 1701-1785), the
Indian Mineral Leasing Act of 1938 (25 U.S.C. 396a-g), the Indian
Mineral Development Act of 1982 (25 U.S.C. 2101-2108), and the Act of
March 3, 1909 (25 U.S.C. 396). 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.\11\ The Federal
and Indian mineral leasing statutes share a common purpose of promoting
the development of Federal and Indian oil and gas resources for the
financial benefit of the public and Indian mineral owners.\12\ The
Mineral Leasing Act requires lessees to ``use all reasonable
precautions'' \13\ to prevent the waste of oil or gas and authorizes
the Secretary of the Interior to prescribe rules ``for the prevention
of undue waste.'' \14\ The Federal Oil and Gas Royalty Management Act
establishes royalty liability for ``oil or gas lost or wasted . . .
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 [the mineral leasing
laws].'' \15\ In the Federal Land Policy and Management Act of 1976,
Congress declared ``that it is the policy of the United States that . .
. the public lands be managed in a manner which recognizes the Nation's
need for domestic sources of minerals . . . .'' \16\ In order to make
certain that the development of Federal and Indian oil and gas
resources will not be unnecessarily hindered by regulatory burdens, the
BLM is exercising its inherent authority \17\ to reconsider the 2016
final rule. The BLM's reconsideration of the 2016 final rule is
intended to ensure that the BLM's waste prevention regulations require
``reasonable precautions'' on the part of operators, that the BLM's
regulations prevent ``undue waste,'' and that the BLM's regulations do
not unnecessarily constrain domestic mineral production.
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\11\ 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.
\12\ See, e.g., California Co. v. Udall, 296 F.2d 384, 388 (DC
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.'').
\13\ 30 U.S.C. 225.
\14\ 30 U.S.C. 187.
\15\ 30 U.S.C. 1756.
\16\ 43 U.S.C. 1701.
\17\ See Ivy Sports Med., LLC v. Burwell, 767 F.3d 81, 86 (DC
Cir. 2014) (noting the ``oft-repeated'' principle that the ``power
to reconsider is inherent in the power to decide'').
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IV. Discussion of the Proposed Rule
A. Summary and Request for Comment
The 2016 final rule replaced the BLM's existing policy, NTL-4A,
which governed venting and flaring from BLM-administered leases for
more than 35 years. Because the BLM has found the 2016 final rule to
impose excessive costs, and believes that a regulatory framework
similar to NTL-4A can be applied in a manner that limits waste without
unnecessarily burdening production, the BLM is proposing to replace the
requirements contained in the 2016 final rule with requirements similar
to, but with notable improvements on, those contained in NTL-4A.
The preamble to the 2016 final rule suggested that NTL-4A was
outdated and needed to be overhauled to account for technological
advancements and to incorporate ``economical, cost-effective, and
reasonable measures that operators can take to minimize gas waste.''
\18\ But, as evidenced by the Regulatory Impact Analysis for the 2016
final rule and the RIA prepared for this proposed rule, many of the
requirements imposed by the 2016 final rule were not, in fact, cost-
effective and actually imposed
[[Page 7928]]
compliance costs well in excess of the value of the resource to be
conserved.
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\18\ 81 FR 83008, 83009, 83017 (Nov. 18, 2016).
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The BLM believes that a return to the NTL-4A framework, as
explained in more detail in the section-by-section discussion below, is
appropriate and will ensure that operators take ``reasonable
precautions'' to prevent ``undue waste.'' Where the 2016 final rule
introduced sensible improvements on NTL-4A--for example, the
requirement that a person remain onsite during liquids unloading in
order to minimize the loss of gas--the BLM has endeavored to retain
them in this proposed rule.
The BLM requests comments on each of the provisions proposed for
rescission, modification, or replacement as outlined below and
described more fully in the following section-by-section discussions.
The BLM is proposing to rescind the following requirements of the
2016 final rule:
Waste Minimization Plans;
Well drilling requirements;
Well completion and related operations requirements;
Pneumatic controllers equipment requirements;
Pneumatic diaphragm pumps equipment requirements;
Storage vessels equipment requirements; and
LDAR requirements.
In addition, under this proposal, the following requirements in the
2016 final rule would be modified and/or replaced with requirements
that are similar to those that were in NTL-4A:
Gas capture requirements would be revised to conform with
policy similar to that found in NTL-4A;
Downhole well maintenance and liquids unloading
requirements; and
Measuring and reporting volumes of gas vented and flared.
The remaining requirements in the 2016 final rule would either be
retained, modified only slightly, or removed, but the impact of the
removal would be small relative to the items listed previously.
The BLM is not proposing to revise the royalty provisions (Sec.
3103.3-1) or the royalty-free use provisions (subpart 3178) that were
part of the 2016 final rule. However, as explained below, the BLM is
taking comment on subpart 3178.
Many of the provisions of the 2016 final rule that are proposed for
complete rescission are focused on emissions from sources and
operations, which are more appropriately regulated by EPA under its
Clean Air Act authority, and for which there are analogous EPA
regulations at 40 CFR part 60, subparts OOOO and OOOOa. Specifically,
these emissions-targeting provisions of the 2016 final rule are
Sec. Sec. 3179.102, 3179.201, 3179.202, and 3179.203, and Sec. Sec.
3179.301 through 3179.305. The BLM has chosen to rescind these
provisions based on a number of considerations.
First, the BLM believes that these provisions create unnecessary
regulatory overlap in light of EPA's Clean Air Act authority and its
analogous EPA regulations that similarly reduce losses of gas.\19\ In
general, the emissions-targeting provisions of the 2016 final rule were
crafted so that compliance with similar provisions within EPA's
regulations would constitute compliance with the BLM's regulations.
Although EPA's regulations apply to new, reconstructed, and modified
sources, while the 2016 final rule's requirements would also apply to
existing sources, the BLM notes that the EPA's regulations at 40 CFR
part 60 subpart OOOO have been in place since 2011 and that over time,
as existing well sites are decommissioned and new well sites come
online, the EPA's regulations at 40 CFR part 60 subpart OOOOa will
displace the BLM's regulations, eventually rendering the emissions-
targeting provisions of the 2016 final rule entirely duplicative. By
removing these duplicative provisions, the proposed rule would fall
squarely within the scope of the BLM's authority to prevent waste and
would leave the regulation of air emissions to the EPA, the agency with
the experience, expertise, and clear statutory authority to do so.
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\19\ The BLM is aware that the EPA has proposed a temporary stay
of some of the requirements contained in NSPS OOOOa and that the EPA
is undertaking a reconsideration of these requirements. See 82 FR
27645 (June 16, 2017). The BLM has coordinated with the EPA during
the development of this proposed rule and is committed to continued
coordination with the EPA throughout the process of revising the
2016 final rule.
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Second, the BLM has reviewed and revised the impact analysis and
reconsidered whether the substantial compliance costs associated with
the emissions-targeting provisions are justified by the value of the
gas that is expected to be conserved as a result of compliance. The BLM
has made the policy determination that it is not appropriate for
``waste prevention'' regulations to impose compliance costs greater
than the value of the resources they are expected to conserve. Although
the RIA for the 2016 final rule found that, in total, the benefits of
these provisions outweighed their costs, this finding depended on
benefits that were likely overestimated and compliance costs that were
likely underestimated. The BLM seeks comment on the uncertainties and
assumptions in the RIA.
E.O. 13783, at Section 5, disbanded the earlier Interagency Working
Group on Social Cost of Greenhouse Gases (IWG) and withdrew the
Technical Support Documents \20\ upon which the RIA for the 2016 final
rule relied for the valuation of changes in methane emissions. The SC-
CH4 estimates presented by the BLM for this rule are interim
values for use in regulatory analyses until an improved estimate of the
impacts of climate change to the U.S. can be developed. In accordance
with E.O. 13783, they are adjusted to reflect discount rates of 3
percent and 7 percent, and to present domestic rather than global
impacts of climate change, consistent with OMB Circular A-4. The 7
percent rate is intended to represent the average before-tax rate of
return to private capital in the U.S. economy. The 3 percent rate is
intended to reflect the rate at which society discounts future
consumption, which is particularly relevant if a regulation is expected
to affect private consumption directly. When relying on the assumed
domestic impacts of climate change, the benefits of many of the
emissions-targeting provisions do not outweigh their costs. And,
because the value of the conserved gas would not outweigh the costs,
the BLM is not confident that its legal authority to prescribe rules
``for the prevention of undue waste'' \21\ would cover many of the
emissions-targeting provisions in the 2016 final rule.
---------------------------------------------------------------------------
\20\ Technical Update of the Social Cost of Carbon for
Regulatory Impact Analysis Under E.O. 12866 (published August 26,
2016) and its Addendum.
\21\ 30 U.S.C. 187.
---------------------------------------------------------------------------
Finally, the BLM recognizes that the oil and gas exploration and
production industry continues to pursue reductions in methane emissions
on a voluntary basis. For example, XTO Energy, Inc., which operates
2,435 BLM-administered leases, has publicly stated that it is
undertaking a 3-year plan to phase out high-bleed pneumatic devices
from its operations and will be implementing an enhanced LDAR program.
In December 2017, the American Petroleum Institute (API) announced a
voluntary program to reduce methane emissions. The API announced that
26 companies, including ExxonMobil, Chevron, Shell, Anadarko and EOG
Resources, would take action to implement LDAR programs and replace,
remove, or retrofit high-bleed pneumatic controllers with low- or zero-
emitting devices.\22\
---------------------------------------------------------------------------
\22\ Osborne, J., ``Oil companies clamping down on methane
leaks,'' Houston Chronicle (Dec. 6, 2017); American Petroleum
Institute, ``Natural Gas, Oil Industry Launch Environmental
Partnership to Accelerate Reductions in Methane, VOCs,'' available
at http://www.api.org/news-policy-and-issues/news/2017/12/04/natural-gas-oil-environmental-partnership-accelerate-reductions-methane-vocs.
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[[Page 7929]]
The BLM seeks comment on this proposed rule. The BLM has allowed a
60-day comment period for this proposed rule, which the BLM believes
will afford the public a meaningful opportunity to comment.
The BLM intends that each of the provisions of the proposed rule
are severable. It is reasonable to consider the provisions severable as
they do not depend on each other. To the extent that two or more
provisions inextricably depend on each other, they would not be
severable. The BLM requests comment on the severability of the proposed
provisions.
The BLM is also seeking comment on the royalty-free use
regulations, which were codified at 43 CFR subpart 3178 as part of the
2016 final rule. The royalty-free use provisions in subpart 3178 are
viewed as being consistent with applicable Federal law, executive
orders, and policies. However, the BLM is still interested in whether
the requirements of subpart 3178 can be improved. An issue of
particular interest to the BLM is whether the requirement for prior BLM
approval for royalty-free treatment in the situations covered under
Sec. 3178.5 is appropriate. The BLM would like to know whether the
incremental royalty accountability offered by prior BLM approval
justifies the requirement in Sec. 3178.5.
Finally, the BLM requests comment on ways that the BLM can reduce
the waste of gas by incentivizing the capture, reinjection, or
beneficial use of the gas. The BLM is interested to learn of best
practices that could be incorporated into the final rule that would
encourage operators to capture, use, or reinject gas without imposing
excessive compliance burdens that could unnecessarily encumber energy
production, constrain economic growth, and prevent job creation.
B. Section-by-Section Discussion
1. 2016 Final Rule Requirements Proposed for Rescission
With this proposed rule, the BLM would rescind the following
provisions of the 2016 final rule:
43 CFR 3162.3-1(j)--Drilling Applications and Plans
In the 2016 final rule, the BLM added a paragraph (j) to 43 CFR
3162.3-1, which requires that when submitting an Application for Permit
to Drill (APD) for an oil well, an operator must also submit a waste-
minimization plan. Submission of the plan is required for approval of
the APD, but the plan is not itself part of the APD, and the terms of
the plan are not enforceable against the operator. The purpose of the
waste-minimization plan is for the operator to set forth a strategy for
how the operator will comply with the requirements of 43 CFR subpart
3179 regarding the control of waste from venting and flaring from oil
wells.
The waste-minimization plan must include information regarding: The
anticipated completion date(s) of the proposed oil well(s); a
description of anticipated production from the well(s); 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; and identification of a gas pipeline to
which the operator plans to connect.
Additional information is required when an operator cannot identify
a gas pipeline with sufficient capacity to accommodate the anticipated
production from the proposed well, including: A gas pipeline system
location map showing the proposed well(s); the name and location of the
gas processing plant(s) closest to the proposed well(s); all existing
gas trunklines within 20 miles of the well, and proposed routes for
connection to a trunkline; the total volume of produced gas, and
percentage of total produced gas, that the operator is currently
venting or flaring from wells in the same field and any wells within a
20-mile radius of that field; and a detailed evaluation, including
estimates of costs and returns, of potential on-site capture
approaches.
The BLM estimates that the administrative burden of the waste-
minimization plan requirements would be roughly $1 million per year for
the industry and $180,000 per year for the BLM (2016 RIA at 96 and
100).
This proposed rule would completely rescind the waste minimization
plan requirement of Sec. 3162.3-1(j). The BLM believes that the waste
minimization plan requirement imposes an unnecessary administrative
burden on both operators and the BLM. The BLM believes that there will
be sufficient information-based safeguards against undue waste even in
the absence of the waste minimization plan requirement for the
following reasons. First, the BLM has found that comparable gas capture
plan requirements in North Dakota and New Mexico will ensure that
operators in those States take account of the availability of capture
infrastructure when seeking permission to drill a well. Second, State
regulations in Utah, Wyoming, and Montana require operators to submit
production information similar to that required under Sec. 3162.3-
1(j)(2) when operators seek approval for routine flaring. Finally,
where flaring is not otherwise authorized, an operator would be
required to submit one of the following before it could receive
approval for royalty-free flaring of associated gas under proposed
Sec. 3179.201(c): (1) A report supported by engineering, geologic, and
economic data which demonstrates to the BLM's satisfaction that the
expenditures necessary to market or use the gas are not economically
justified; or (2) An action plan that will eliminate the flaring within
a time period approved by the BLM. These requirements would help to
meet the purpose of Sec. 3162.3-1(j), which is to ensure that
operators do not waste gas without giving due consideration to the
possibility of marketing or using the gas.
In addition, the extensive amount of information that an operator
must include in the waste minimization plan makes compliance with the
requirement cumbersome for operators. Operators have also expressed
concern that the waste minimization plan requirement will slow down APD
processing as BLM personnel take time to determine whether the waste
minimization plan submitted by an operator is ``complete and
adequate,'' and whether the operator has provided all required pipeline
information to the full extent that the operator can obtain it.
In light of the foregoing, the BLM believes that there is limited
(if any) benefit to the waste minimization plan requirement of Sec.
3162.3-1(j) and is therefore proposing to rescind it in its entirety.
43 CFR 3179.7--Gas Capture Requirement
In the 2016 final rule, the BLM sought to constrain routine flaring
through the imposition of a ``capture percentage'' requirement,
requiring operators to capture a certain percentage of the gas they
produce, after allowing for a certain volume of flaring per well. The
capture percentage requirement (as amended by the 2017 Suspension Rule)
would become more stringent over a period of years, beginning with an
85 percent capture requirement (5,400 Mcf per well flaring allowable)
in January 2019, and eventually reaching a 98 percent capture
requirement (750 Mcf per well flaring allowable) in January
[[Page 7930]]
2027. An operator could choose to comply with the capture targets on
each of the operator's leases, units or communitized areas, or on a
county-wide or state-wide basis.
The BLM estimates that this requirement, over 10 years from 2019-
2028, would impose costs of $516 million to $1.04 billion and generate
cost savings from product recovery of $424 to $564 million (RIA at 41).
The annual costs and cost savings would be expected to increase as the
requirements increase in stringency.
This proposed rule would completely rescind the 2016 final rule's
capture percentage requirements for a number of reasons. The BLM
believes these requirements to be overly complex and ultimately
ineffective at reducing flaring. In the early years, when capture
percentages are not as high and allowable flaring is high, the 2016
final rule allows for large amounts of royalty-free flaring. In the
later years, the BLM believes that the 2016 final rule would introduce
complexities that would undermine its effectiveness. Because of the
common use of horizontal drilling through multiple leaseholds of
different ownership, the 2016 final rule's coordination requirements in
Sec. 3179.12 (providing for coordination with States and tribes when
any requirement would adversely impact production from non-Federal and
non-Indian interests) create a high degree of uncertainty over how the
capture requirements would be implemented and what their impact would
be. Even if the capture percentage requirements were implemented and
effective, the BLM is concerned that the prescriptive nature of the
approach would allow for unnecessary flaring in some cases while
prohibiting necessary flaring in others. For example, even if an
operator could feasibly capture all of the gas it produces from a
Federal well, the operator could still flare a certain amount of gas
without violating Sec. 3179.7's capture percentage requirements. Thus,
in situations where the operator faces transmission or processing plant
capacity limitations (i.e., where a pipeline or processing plant does
not have the capacity to take all of the gas that is being supplied to
it), Sec. 3179.7 would allow the operator to flare gas from a Federal
well in order to produce more gas from a nearby non-Federal well for
which there are tighter regulatory or contractual constraints on
flaring.
In addition, the capture percentage requirement affords less
flexibility for smaller operators with fewer operating wells than it
does for larger operators with a greater number of operating wells. A
small operator with only a few wells in an area with inadequate gas-
capture infrastructure would likely be faced with curtailing production
or violating Sec. 3179.7's prescriptive limits. On the other hand, a
larger operator with many wells would have greater flexibility to
average the flaring allowable over its portfolio and avoid curtailing
production or other production constraints.
In place of the 2016 final rule's capture percentage requirements,
the proposed rule would address the routine flaring of associated gas
by deferring to State or tribal regulations where possible and
codifying the familiar NTL-4A standard for royalty-free flaring as a
backstop where no applicable State or tribal regulation exists. The
proposed rule's approach to the routine flaring of associated gas is
explained more fully below (see the discussion of revised Sec.
[thinsp]3179.201).
43 CFR 3179.8--Alternative Capture Requirement
Section 3179.8 allows operators of leases issued before January 17,
2017, to request a lower capture percentage requirement than would
otherwise be imposed under Sec. 3179.7. In order to obtain this lower
capture requirement, an operator must demonstrate that the applicable
capture percentage under Sec. 3179.7 would ``impose such costs as to
cause the operator to cease production and abandon significant
recoverable oil reserves under the lease.'' Because the BLM is
proposing to rescind the capture requirements of Sec. 3179.7, the BLM
is also proposing to rescind the mechanism for obtaining a lower
capture requirement. If Sec. 3179.7 is rescinded, there is no need for
Sec. 3179.8.
43 CFR 3179.11--Other Waste Prevention Measures
Section 3179.11(a) states that the BLM may exercise its existing
authority under applicable laws and regulations, as well as under the
terms of applicable permits, orders, leases, and unitization or
communitization agreements, to limit production from a new well that is
expected to force other wells off of a common pipeline. Section
3179.11(b) states that the BLM may similarly exercise existing
authority to delay action on an APD or impose conditions of approval on
an APD. Section 3179.11 is not an independent source of authority or
obligation on the part of the BLM. Rather, Sec. 3179.11 was intended
to clarify how the BLM may exercise existing authorities in addressing
the waste of gas. However, the BLM understands that Sec. 3179.11 could
easily be misread to indicate that the BLM has plenary authority to
curtail production or delay or condition APDs regardless of the
circumstances. Because Sec. 3179.11 is unnecessary and is susceptible
to misinterpretation, the BLM is proposing to rescind Sec. 3179.11.
43 CFR 3179.12--Coordination With State Regulatory Authority
Section 3179.12 states that, to the extent an action to enforce 43
CFR subpart 3179 may adversely affect production of oil or gas from
non-Federal and non-Indian mineral interests, the BLM will coordinate
with the appropriate State regulatory authority. The purpose of this
provision is to ensure that due regard is given to the States'
interests in regulating the production of non-Federal and non-Indian
oil and gas. The BLM is proposing to rescind Sec. 3179.12 because, as
explained more fully below, the BLM is proposing to revise subpart 3179
in a manner that defers to State and tribal requirements with respect
to the routine flaring of associated gas. In light of this new
approach, the BLM believes that there is much less concern that subpart
3179 could be applied in ways that State regulatory agencies find to be
inappropriate. The BLM continues to recognize the value of coordinating
with State regulatory agencies, but no longer considers it necessary to
include a coordination requirement in subpart 3179.
43 CFR 3179.101--Well Drilling
Current Sec. 3179.101(a) requires that gas reaching the surface as
a normal part of drilling operations be used or disposed of in one of
four ways: (1) Captured and sold; (2) Directed to a flare pit or flare
stack; (3) Used in the operations on the lease, unit, or communitized
area; or (4) Injected. Section 3179.101(a) also specifies that gas may
not be vented, except under the circumstances specified in Sec.
3179.6(b) or when it is technically infeasible to use or dispose of the
gas in one of the ways specified above. Section 3179.101(b) states that
gas lost as a result of a loss of well control will be classified as
avoidably lost if the BLM determines that the loss of well control was
due to operator negligence.
The BLM is proposing to rescind Sec. 3179.101 because it would be
duplicative under revised subpart 3179. In essence, Sec. 3179.101(a)
requires an operator to flare gas lost during well drilling rather than
vent it (unless technically infeasible). This same requirement would be
contained in proposed Sec. 3179.6(b). Current Sec. 3179.101(b) states
that where gas is lost during a loss of well control, the
[[Page 7931]]
lost gas will be considered ``avoidably lost'' if the BLM determines
that the loss of well control was due to operator negligence. This
principle would be contained in proposed Sec. 3179.4(b), which
requires an absence of operator negligence in order for lost gas to be
considered ``unavoidably lost.''
43 CFR 3179.102--Well Completion and Related Operations
Current Sec. 3179.102 addresses gas that reaches the surface
during well-completion, post-completion, and fluid-recovery operations
after a well has been hydraulically fractured or refractured. It
requires the gas to be disposed of in one of four ways: (1) Captured
and sold; (2) Directed to a flare pit or stack, subject to a volumetric
limitation in Sec. 3179.103; (3) Used in the lease operations; or (4)
Injected. Section 3179.102 specifies that gas may not be vented, except
under the narrow circumstances specified in Sec. 3179.6(b) or when it
is technically infeasible to use or dispose of the gas in one of the
four ways specified above. Section 3179.102(b) provides that an
operator will be deemed to be in compliance with its gas capture and
disposition requirements if the operator is in compliance with the
requirements for control of gas from well completions established under
40 CFR part 60, subparts OOOO or OOOOa, or if the well is not a ``well
affected facility'' under those regulations. Section 3179.102(c) and
(d) would allow the BLM to exempt an operator from the requirements of
Sec. 3179.102 where the operator demonstrates that compliance would
cause the operator to cease production and abandon significant
recoverable oil reserves under the lease.
This proposed rule would rescind current Sec. 3179.102 in its
entirety. The EPA finalized regulations in 40 CFR part 60, subpart
OOOOa, that are applicable to all of the well completions covered by
Sec. 3179.102. See 81 FR 35824 (June 3, 2016); 81 FR 83055-56. In
light of the complete overlap with EPA regulations, and the fact that
compliance with these regulations satisfies an operator's obligations
under Sec. 3179.102, the BLM has concluded that Sec. 3179.102 is
duplicative and unnecessary. In the 2016 final rule, the BLM recognized
the duplicative nature of Sec. 3179.102, but sought to establish a
``backstop'' in the ``unlikely event'' that the analogous EPA
regulations ceased to be in effect. See 81 FR 83056. The BLM no longer
believes that it is appropriate to insert duplicative regulations into
the CFR as insurance against unlikely events. In addition, the BLM
questions the appropriateness of issuing regulations that serve as a
backstop to the regulations of other Federal agencies, especially when
those regulations are promulgated under different authorities. The BLM
continues to believe that applicable EPA regulations adequately address
the loss of gas associated with unconventional well completions, and
therefore proposes to rescind Sec. 3179.102.
43 CFR 3179.201--Equipment Requirements for Pneumatic Controllers
Section 3179.201 addresses pneumatic controllers that use natural
gas produced from a Federal or Indian lease, or from a unit or
communitized area that includes a Federal or Indian lease. Section
3179.201 applies to such controllers if the controllers: (1) Have a
continuous bleed rate greater than 6 standard cubic feet per hour (scf/
hour) (``high-bleed'' controllers); and (2) Are not covered by EPA
regulations that prohibit the new use of high-bleed pneumatic
controllers (40 CFR part 60, subparts OOOO or OOOOa), but would be
subject to those regulations if the controllers were new, modified, or
reconstructed. Section 3179.201(b) requires the applicable pneumatic
controllers to be replaced with controllers (including, but not limited
to, continuous or intermittent pneumatic controllers) having a bleed
rate of no more than 6 scf/hour, subject to certain exceptions. Section
3179.201(d) (as amended by the 2017 Suspension Rule) requires that this
replacement occur no later than January 17, 2019, or within 3 years
from the effective date of the 2016 final rule if the well or facility
served by the controller has an estimated remaining productive life of
3 years or less. Section 3179.201(b)(4) and (c) would allow the BLM to
exempt an operator from the requirements of Sec. 3179.201 where the
operator demonstrates that compliance would cause the operator to cease
production and abandon significant recoverable oil reserves under the
lease.
The BLM estimates that this requirement, over 10 years from 2019-
2028, would impose costs of about $12 million to $13 million and
generate cost savings from product recovery of $24 million to $30
million (RIA at 41).
This proposed rule would rescind Sec. 3179.201 in its entirety.
Low-bleed continuous pneumatic controllers are already very common,
representing about 89 percent of the continuous bleed pneumatic
controllers in the petroleum and natural gas production sectors.\23\
The EPA has regulations in 40 CFR part 60, subparts OOOO and OOOOa that
require new, modified, or reconstructed continuous bleed controllers to
be low-bleed.
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\23\ EPA. Inventory of U.S. Greenhouse Gas Emissions and Sinks:
1990-2015 (published April 2017). Annex 3. Data are available in
Table 3.5-5 and Table 3.6-7.
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The BLM believes that these analogous EPA regulations will
adequately address the loss of gas from pneumatic controllers on
Federal and Indian leases over time, as new facilities come online and
more of the existing high-bleed continuous controllers are replaced by
low-bleed continuous controllers, pursuant to the EPA regulations. The
BLM understands the typical lifespan of a pneumatic controller to be 10
to 15 years.
Furthermore, low-bleed continuous pneumatic controllers are
expected to generate revenue for operators when employed at sites from
which gas is captured and sold and when the sale price of gas is
generally higher than it is now. Thus, we expect many operators to
adopt low-bleed pneumatic controllers even in the absence of Sec.
3179.201's requirements.
Finally, as discussed above, the BLM recognizes that the oil and
gas exploration and production industry continues to pursue reductions
in methane emissions on a voluntary basis, and the BLM expects these
efforts to result in a reduction in the number of high-bleed pneumatic
devices employed by the industry. For the foregoing reasons, the BLM
finds Sec. 3179.201 to be unnecessary and is therefore proposing to
rescind it.
43 CFR 3179.202--Requirements for Pneumatic Diaphragm Pumps
Section 3179.202 establishes requirements for operators with
pneumatic diaphragm pumps that use natural gas produced from a Federal
or Indian lease, or from a unit or communitized area that includes a
Federal or Indian lease. It applies to such pumps if they are not
covered under EPA regulations at 40 CFR part 60, subpart OOOOa, but
would be subject to that subpart if they were a new, modified, or
reconstructed source. For covered pneumatic pumps, Sec. 3179.202
requires that the operator either replace the pump with a zero-
emissions pump or route the pump exhaust to processing equipment for
capture and sale. Alternatively, an operator may route the exhaust to a
flare or low-pressure combustion device if the operator makes a
determination (and notifies the BLM through a Sundry Notices and
Reports on Wells, Form 3160-5) that replacing the pneumatic diaphragm
pump with a zero-emissions
[[Page 7932]]
pump or capturing the pump exhaust is not viable because: (1) A
pneumatic pump is necessary to perform the function required; and (2)
Capturing the exhaust is technically infeasible or unduly costly. If an
operator makes this determination and has no flare or low-pressure
combustor on-site, or routing to such a device would be technically
infeasible, the operator is not required to route the exhaust to a
flare or low-pressure combustion device. Under Sec. 3179.202(h) (as
amended by the 2017 Suspension Rule), an operator must replace its
covered pneumatic diaphragm pump or route the exhaust gas to capture or
flare beginning no later than January 17, 2019. Section 3179.202(f) and
(g) would allow the BLM to exempt an operator from the requirements of
Sec. 3179.202 where the operator demonstrates that compliance would
cause the operator to cease production and abandon significant
recoverable oil reserves under the lease.
This proposed rule would rescind Sec. 3179.202 in its entirety.
The BLM is concerned that the costs of compliance with Sec. 3179.202
outweigh the value of its conservation effects. The BLM estimates that
Sec. 3179.202, over 10 years from 2019-2028, would impose costs of
about $29 million to $30 million, but only generate cost savings from
product recovery of $18 million to $22 million (RIA at 41). The BLM
also believes that the analogous EPA regulations in 40 CFR part 60,
subpart OOOOa, will adequately address the loss of gas from pneumatic
diaphragm pumps on Federal and Indian leases as more and more of them
are covered by the EPA regulations over time.
Finally, as discussed above, industry is reportedly making ongoing
efforts to retire old leak-prone equipment, including pneumatic pumps,
on a voluntary basis.
For these reasons, the BLM is proposing to rescind Sec. 3179.202
in its entirety.
43 CFR 3179.203--Storage Vessels
Section 3179.203 applies to crude oil, condensate, intermediate
hydrocarbon liquid, or produced-water storage vessels that contain
production from a Federal or Indian lease, or from a unit or
communitized area that includes a Federal or Indian lease, and that are
not subject to 40 CFR part 60, subparts OOOO or OOOOa, but would be if
they were new, modified, or reconstructed sources. If such storage
vessels have the potential for volatile organic compound (VOC)
emissions equal to or greater than 6 tons per year (tpy), Sec.
3179.203 requires operators to route all gas vapor from the vessels to
a sales line. Alternatively, the operator may route the vapor to a
combustion device if it determines that routing the vapor to a sales
line is technically infeasible or unduly costly. The operator may also
submit a Sundry Notice to the BLM that demonstrates that compliance
with the above options would cause the operator to cease production and
abandon significant recoverable oil reserves under the lease due to the
cost of compliance.
The BLM is proposing to rescind Sec. 3179.203 in its entirety. The
BLM is concerned that the costs of compliance with Sec. 3179.203
outweigh the value of its conservation effects. The BLM estimates that
Sec. 3179.203, over 10 years from 2019-2028, would impose costs of
about $51 million to $56 million while only generating cost savings
from product recovery of about $1 million (RIA at 41). The BLM also
believes that the analogous EPA regulations in 40 CFR part 60, subparts
OOOO and OOOOa, will adequately address the loss of gas from storage
vessels on Federal and Indian leases as more and more of them are
covered by the EPA regulations over time.
Furthermore, the BLM has always believed that Sec. 3179.203 would
have a limited reach, due to the 6 tpy emissions threshold and the
carve-out for storage vessels covered by EPA regulations. The BLM
estimated in the RIA for the 2016 final rule that Sec. 3179.203 would
impact fewer than 300 facilities on Federal and Indian lands.\24\ In
light of the EPA's requirements for storage vessels, and the limited
reach and modest conservation impacts of Sec. 3179.203, the BLM is
proposing to rescind Sec. 3179.203 in its entirety. Finally, we note
that, even if Sec. 3179.203 is rescinded as proposed, the BLM would
retain the authority to impose royalties on vapor losses from storage
vessels under proposed Sec. 3179.4(b)(2)(vii) when the BLM determines
that recovery of the vapors is warranted.
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\24\ U.S. Bureau of Land Management, ``Regulatory Impact
Analysis for: Revisions to 43 CFR 3100 (Onshore Oil and Gas Leasing)
and 43 CFR [3160] (Onshore Oil and Gas Operations), Additions of 43
CFR 3178 (Royalty-Free Use of Lease Production) and 43 CFR 3179
(Waste Prevention and Resource Conservation),'' pg. 69 (Nov. 10,
2016).
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43 CFR 3179.301 Through 3179.305--Leak Detection and Repair
Sections 3179.301 through 3179.305 establish leak detection,
repair, and reporting requirements for: (1) Sites and equipment used to
produce, process, treat, store, or measure natural gas from or
allocable to a Federal or Indian lease, unit, or communitization
agreement; and (2) Sites and equipment used to store, measure, or
dispose of produced water on a Federal or Indian lease. Section
3179.302 prescribes the instruments and methods that may be used for
leak detection. Section 3179.303 prescribes the frequency for
inspections and Sec. 3179.304 prescribes the time frames for repairing
leaks found during inspections. Finally, Sec. 3179.305 requires
operators to maintain records of their LDAR activities and submit an
annual report to the BLM. Pursuant to Sec. 3179.301(f) (as amended by
the 2017 Suspension Rule), operators must begin to comply with the LDAR
requirements of Sec. Sec. 3179.301 through 3179.305 before: (1)
January 17, 2019, for all existing sites; (2) 60 days after beginning
production for sites that begin production after January 17, 2019; and
(3) 60 days after a site that was out of service is brought back into
service and re-pressurized.
The BLM is proposing to rescind Sec. Sec. 3179.301 to 3179.305 in
their entirety. The BLM is concerned that the costs of compliance with
Sec. Sec. 3179.301 to 3179.305 outweigh the value of their
conservation effects. The BLM estimates that these requirements, over
10 years from 2019-2028, would impose costs of about $550 million to
$688 million and generate cost savings from product recovery of about
$116 million to $148 million (RIA at 41). In addition, the BLM
estimates that the administrative burdens associated with the LDAR
requirements, at roughly $5 million, represent the bulk of the
administrative burdens of the 2016 final rule.
The BLM believes that the analogous EPA regulations in 40 CFR part
60, subpart OOOOa, will adequately address the loss of fugitive gas on
Federal and Indian leases over time, as new facilities come online and
more and more existing facilities are reconstructed or modified and
become covered by the EPA regulations.
Finally, the BLM is concerned that Sec. Sec. 3179.301 to 3179.305
apply to all wellsites equally. Wellsites that are not connected to
deliver gas to market would not achieve any waste reduction because
sales from the recovered gas would not be realized. More importantly,
the BLM believes that the LDAR requirements are unnecessarily
burdensome to operators of marginal wells, particularly marginal oil
wells. The BLM does not believe that the potential fugitive gas losses
from marginal oil wells (with production rates fewer than 10 bbl per
day or 15 bbl per day) would be substantial enough to warrant the costs
of maintaining a LDAR program with semi-annual inspection frequencies.
As noted previously, the
[[Page 7933]]
BLM believes that over 69 percent of oil wells on the public lands are
marginal.
43 CFR 3179.401--State or Tribal Requests for Variances From the
Requirements of This Subpart
Section 3179.401 would allow a State or tribe to request a variance
from any provisions of subpart 3179 by identifying a State, local, or
tribal regulation to be applied in place of those provisions and
demonstrating that such State, local, or tribal regulation would
perform at least equally well as those provisions in terms of reducing
waste of oil and gas, reducing environmental impacts from venting and/
or flaring of gas, and ensuring the safe and responsible production of
oil and gas.
The BLM is proposing to rescind Sec. 3179.401 because it believes
that the variance process established by this section will no longer be
necessary in light of the BLM's proposal to codify NTL-4A standards and
to defer to State and tribal regulations for the routine flaring of
associated gas, as explained in the discussion of proposed Sec.
3179.201.
2. Revised Subpart 3179
With this proposed rule, the BLM would revise subpart 3179, as
follows:
43 CFR 3179.1 Purpose
Section 3179.1 states that the purpose of 43 CFR subpart 3179 is to
implement and carry out the purposes of statutes relating to prevention
of waste from Federal and Indian leases, the conservation of surface
resources, and management of the public lands for multiple use and
sustained yield. The BLM is not proposing any revision to existing
Sec. 3179.1 as a part of this rulemaking. Section 3179.1 is presented
here for context.
43 CFR 3179.2 Scope
This section specifies which leases, agreements, tracts, and
facilities are covered by this subpart. The section also states that
subpart 3179 applies to 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, and to agreements for the development of tribal energy
resources under a Tribal Energy Resource Agreement entered into with
the Secretary of the Interior, unless specifically excluded in the
agreement. Existing Sec. 3179.2 remains largely unchanged. However,
the BLM is proposing to revise paragraph (a)(5) by using the more-
inclusive words ``well facilities'' instead of the words ``wells,
tanks, compressors, and other equipment'' to describe the onshore
equipment that would be subject to this proposed rule. The purpose of
the phrase ``wells, tanks, compressors, and other equipment'' has been
to specify components subject to LDAR requirements which, as described
above, the BLM is proposing to rescind.
43 CFR 3179.3 Definitions and Acronyms
This proposed section would keep, in their entirety, four of the 18
definitions that appear in existing Sec. 3179.3: ``Automatic ignition
system,'' ``gas-to-oil ratio,'' ``liquids unloading,'' and ``lost oil
or lost gas.'' The definition for ``capture'' is retained in this
proposed rule, except the word ``reinjection'' has been changed to
``injection'' in order to be consistent with references to conservation
by injection (as opposed to reinjection) elsewhere in subpart 3179.
A definition for ``gas well'' is also maintained in this proposed
rule, however the second and third sentences in the existing definition
would be removed. The second-to-last sentence in the existing
definition of ``gas well'' would be removed because, though a well's
designation as a ``gas'' well or ``oil'' well is appropriately
determined by the relative energy values of the well's products, the
6,000 scf/bbl standard in existing Sec. 3179.3 is not a commonly used
standard. The last sentence in the existing definition of ``gas well,''
which states generally that an oil well will not be reclassified as a
gas well when its gas-to-oil ratio (GOR) exceeds the 6,000 scf/bbl
threshold, would be removed and replaced with a simpler qualifier
making clear that a well's status as a ``gas well'' is ``determined at
the time of completion.''
A new definition for ``oil well'' is proposed to be added that
would define an ``oil well'' as a ``well for which the energy
equivalent of the oil produced exceeds the energy equivalent of the gas
produced, as determined at the time of completion.'' The addition of a
definition of ``oil well'' should help to make clear when proposed
Sec. 3179.201's requirements for ``oil-well gas'' apply.
A definition of ``waste of oil or gas'' is proposed to be added
that would define waste, for the purposes of subpart 3179, to mean any
act or failure to act by the operator that is not sanctioned by the
authorized officer as necessary for proper development and production,
where compliance costs are not greater than the monetary value of the
resources they are expected to conserve, and which results in: (1) A
reduction in the quantity or quality of oil and gas ultimately
producible from a reservoir under prudent and proper operations; or (2)
avoidable surface loss of oil or gas. This definition incorporates the
familiar definition of ``waste of oil or gas'' from BLM's operating
regulations at 43 CFR 3160.0-5, but adds an important limitation: Waste
does not occur where the cost of conserving the oil or gas exceeds the
monetary value of that oil or gas. This definition is intended to
codify the BLM's policy determination that it is not appropriate for
``waste prevention'' regulations to impose compliance costs greater
than the value of the resources they are expected to conserve. The BLM
requests comment and data pertinent to this proposed definition of
``waste of oil or gas.''
This proposed section would remove 12 definitions from the existing
regulations because they are no longer needed: ``Accessible
component,'' ``capture infrastructure,'' ``compressor station,''
``continuous bleed,'' ``development oil well,'' ``high pressure
flare,'' ``leak,'' ``leak component,'' ``liquid hydrocarbon,''
``pneumatic controller,'' ``storage vessel,'' and ``volatile organic
compounds (VOC).'' These definitions pertain to requirements in
existing subpart 3179 that the BLM is proposing to rescind.
43 CFR 3179.4 Determining When the Loss of Oil or Gas Is Avoidable or
Unavoidable
Proposed Sec. 3179.4 describes the circumstances under which lost
oil or gas would be classified as ``avoidably lost'' or ``unavoidably
lost.'' Under proposed Sec. 3179.5, royalty would be due on all
avoidably lost oil or gas, while royalty is not due on unavoidably lost
oil or gas. The proposed revision of Sec. 3179.4 includes concepts
from both existing Sec. 3179.4 and NTL-4A, Sections II. and III.
Proposed paragraph (a) defines ``avoidably lost'' production and
mirrors the ``avoidably lost'' definition in NTL-4A Section II.A.
Proposed paragraph (a) would define avoidably lost gas as gas that is
vented or flared without BLM approval, and produced oil or gas that is
lost due to operator negligence, the operator's failure to take all
reasonable measures to prevent or control the loss, or the operator's
failure to comply fully with applicable lease terms and regulations,
appropriate provisions of the approved operating plan, or prior written
BLM orders. This paragraph would replace the ``avoidably lost''
definition that appears in the last paragraph of existing Sec. 3179.4,
which primarily defines ``avoidably lost'' oil or gas as lost oil gas
that is not ``unavoidably lost'' and also expressly includes ``excess
flared gas'' as defined
[[Page 7934]]
in existing Sec. 3179.7, which the BLM is proposing to rescind.
Proposed paragraph (b) defines ``unavoidably lost'' production.
Proposed paragraph (b)(1) follows language from Section II.C(2) of NTL-
4A. It states that oil or gas that is lost due to line failures,
equipment malfunctions, blowouts, fires, or other similar circumstances
is considered to be unavoidably lost production, unless the BLM
determines that the loss resulted from operator negligence, the failure
to take all reasonable measures to prevent or control the loss, or the
failure of the operator to comply fully with applicable lease terms and
regulations, appropriate provisions of the approved operating plan, or
prior written orders of the BLM.
Proposed paragraph (b)(2) is substantially similar to the
definition of ``unavoidably lost'' oil or gas that appears in existing
Sec. 3179.4(a). This paragraph improves upon NTL-4A by providing
clarity to operators and the BLM about which losses of oil or gas
should be considered ``unavoidably lost.'' Paragraph (b)(2) introduces
a list of operations or sources from which lost oil or gas would be
considered ``unavoidably lost,'' so long as the operator has not been
negligent, has taken all reasonable measures to prevent or control the
loss, and has complied fully with applicable laws, lease terms,
regulations, provisions of a previously approved operating plan, or
other written orders of the BLM.
Except for cross references, proposed Sec. 3179.4(b)(2)(i) through
(vi) are the same as paragraphs (a)(1)(i) through (vi) in existing
Sec. 3179.4. These paragraphs list the following operations or sources
from which lost oil or gas would be considered ``unavoidably lost'':
Well drilling; well completion and related operations; initial
production tests; subsequent well tests; exploratory coalbed methane
well dewatering; and emergencies.
This proposed rule would remove normal operating losses from
pneumatic controllers and pumps (existing Sec. 3179.4(a)(1)(vii)) from
the list of unavoidable losses because the use of gas in pneumatic
controllers and pumps is already royalty free under existing Sec.
3178.4(a)(3).
Proposed paragraph (b)(2)(vii) is similar to existing Sec.
3179.4(a)(1)(viii), but has been rephrased to reflect the NTL-4A
provisions pertaining to storage tank losses (NTL-4A Section II.C(1)).
Under proposed 3179.4(b)(2)(vii), normal gas vapor losses from a
storage tank or other low-pressure production vessel would be
unavoidably lost, unless the BLM determines that recovery of the vapors
is warranted. Changing the phrase ``operating losses'' (as used in
existing Sec. 3179.4(a)(1)(viii)) to ``gas vapor losses'' makes clear
that this provision applies to low pressure gas losses and that the
operator should have separated gas from the oil before placing it in
the tank.
Proposed Sec. 3179.4(b)(2)(viii) is the same as existing Sec.
3179.4(a)(1)(ix). It states that well venting in the course of downhole
well maintenance and/or liquids unloading performed in compliance with
Sec. 3179.104 is an operation from which lost gas is considered
``unavoidably lost.''
The proposed revision does not retain existing Sec.
3179.4(a)(1)(x), which classifies leaks as unavoidable losses when the
operator has complied with the LDAR requirements in existing Sec. Sec.
3179.301 through 3179.305. The BLM is proposing to rescind these LDAR
requirements and so there is no need to reference these requirements as
a limitation on losses through leaks. The BLM requests comment on
whether regulatory text should be added to Sec. 3179.4(b) to provide
clarity to the BLM's position that leaks are considered unavoidably
lost.
Proposed Sec. 3179.4(b)(2)(ix) is the same as existing Sec.
3179.4(a)(1)(xi), identifying facility and pipeline maintenance, such
as when an operator must blow-down and depressurize equipment to
perform maintenance or repairs, as an operation from which lost oil or
gas would be considered ``unavoidably lost,'' so long as the operator
has not been negligent and has complied with all appropriate
requirements.
The proposed rule does not include existing Sec.
3179.4(a)(1)(xii). This paragraph lists the flaring of gas from which
at least 50 percent of natural gas liquids have been removed and
captured for market as an unavoidable loss. This provision was included
in the 2016 final rule as part of the BLM's effort to adopt a gas
capture percentage scheme similar to that of North Dakota. The BLM is
proposing to remove this provision because it is proposing to rescind
the gas capture percentage requirements contained in the 2016 final
rule.
The proposed rule does not include existing Sec. 3179.4(a)(2).
Section 3179.4(a)(2) provides that gas that is flared or vented from a
well that is not connected to a gas pipeline is unavoidably lost,
unless the BLM has determined otherwise. Existing Sec. 3179.4(a)(2)
was essentially a blanket approval for royalty-free flaring from wells
not connected to a gas pipeline. Flaring from these wells, however,
would no longer be royalty free if the operator failed to meet the gas
capture requirements imposed by existing Sec. 3179.7 and the flared
gas thus became royalty-bearing ``excess flared gas.'' Because the BLM
is proposing to rescind Sec. 3179.7, maintaining existing 3179.4(a)(2)
would amount to sanctioning unrestricted flaring from wells not
connected to gas pipelines. The routine flaring of oil-well gas from
wells not connected to a gas pipeline is addressed by proposed Sec.
3179.201, which is discussed in more detail below.
Proposed Sec. 3179.4(b)(3) states that produced gas that is flared
or vented with BLM authorization or approval is unavoidably lost. This
provision mirrors proposed Sec. 3179.4(a), which states that gas that
is flared or vented without BLM authorization or approval is avoidably
lost, and provides clarity to operators about royalty obligations with
respect to authorized venting and flaring.
43 CFR 3179.5 When Lost Production Is Subject to Royalty
The proposed rule would not change Sec. 3179.5. This section would
continue to state that royalty is due on all avoidably lost oil or gas
and that royalty is not due on any unavoidably lost oil or gas.
43 CFR 3179.6 Venting Limitations
The title of this section in the proposed rule has been changed
from ``venting prohibitions'' to ``venting limitations.'' The proposed
rule would retain most of the provisions in existing Sec. 3179.6. The
purpose of both sections is to prohibit flaring and venting from gas
wells, with certain exceptions, and to require operators to flare,
rather than vent, any uncaptured gas, whether from oil wells or gas
wells, with certain exceptions.
Proposed Sec. 3179.6(a) is the same as the existing Sec.
3179.6(a), except the cross reference has been updated. It states that
gas-well gas may not be flared or vented, except where it is
unavoidably lost, pursuant to Sec. 3179.4(b). This same restriction on
the flaring of gas-well gas was included in NTL-4A.
Both proposed and existing Sec. 3179.6(b) state that operators
must flare, rather than vent, any gas that is not captured, with the
exceptions listed in subsequent paragraphs. Although the text of NTL-4A
did not contain a similar requirement that, in general, lost gas should
be flared rather than vented, the implementing guidance for NTL-4A in
the United States Geological Survey's (USGS) Conservation Division
Manual did contain a similar preference for flaring over venting. The
flaring of gas is generally preferable to the venting of
[[Page 7935]]
gas due to safety concerns. Proposed Sec. 3179.6(b) therefore
represents an improvement on NTL-4A by making clear in the regulation,
rather than in implementation guidance, that lost gas should be flared
when possible.
The first three flaring exceptions in both the proposed and
existing Sec. 3179.6 are identical: Paragraph (b)(1) allows for
venting when flaring is technically infeasible; paragraph (b)(2) allows
for venting in the case of an emergency, when the loss of gas is
uncontrollable, or when venting is necessary for safety; and, paragraph
(b)(3) allows for venting when the gas is vented through normal
operation of a natural-gas-activated pump or pneumatic controller.
The fourth flaring exception, listed in proposed Sec.
3179.6(b)(4), would allow gas vapors to be vented from a storage tank
or other low-pressure production vessel, except when the BLM determines
that gas-vapor recovery is warranted. Although this language is
somewhat different than what appears in existing Sec. 3179.6(b)(4), it
has the same practical effect. It has been changed in this proposed
rule in order to align the language with proposed Sec. 3179.4(b)(vii)
and to remove the cross-reference to the storage tank requirements in
existing Sec. 3179.203, which the BLM is proposing to rescind.
The fifth flaring exception, listed in proposed Sec. 3179.6(b)(5),
would apply to gas that is vented during downhole well maintenance or
liquids unloading activities. This is similar to existing Sec.
3179.6(b)(5), except that the proposed rule would remove the cross
reference to existing Sec. 3179.204. Although the proposed revision of
subpart 3179 would retain limitations on royalty-free losses of gas
during well maintenance and liquids unloading in proposed Sec.
3179.104, no cross-reference to those restrictions is necessary in this
section, which simply addresses whether the gas may be vented or
flared, not whether it is royalty-bearing.
The proposed rule would remove the flaring exception listed in
existing Sec. 3179.6(b)(6), which applies when gas is vented through a
leak, provided that the operator has complied with the LDAR
requirements in Sec. Sec. 3179.301 through 3179.305. The BLM is
proposing to rescind these LDAR requirements so there is no need to
reference these requirements as a limitation on venting through leaks.
The sixth flaring exception, listed in proposed Sec. 3179.6(b)(6),
is identical to the exception listed in existing Sec. 3179.6(b)(7).
This exception would allow gas venting that is necessary to allow non-
routine facility and pipeline maintenance to be performed.
The seventh flaring exception, listed in proposed Sec.
3179.6(b)(7), is identical to the exception listed in existing Sec.
3179.6(b)(8). This exception would allow venting when a release of gas
is unavoidable under Sec. 3179.4, and Federal, State, local, or tribal
law, regulation, or enforceable permit terms prohibit flaring.
Proposed Sec. 3179.6(c) is identical to existing Sec. 3179.6(c).
Both sections require all flares or combustion devices to be equipped
with automatic ignition systems.
Authorized Flaring and Venting of Gas
43 CFR[thinsp]3179.101 Initial Production Testing
Proposed Sec. 3179.101 would establish volume and duration
standards which limit the amount of gas that may be flared royalty free
during initial production testing. The gas is no longer royalty free
after reaching either limit. Proposed Sec. 3179.101 would establish a
volume limit of 50 million cubic feet (MMcf) of gas that may be flared
royalty free during the initial production test of each completed
interval in a well. Additionally, proposed Sec. 3179.101 would limit
royalty-free initial production testing to a 30 day period, unless the
BLM approves a longer period.
The 2016 final rule also uses volume and duration thresholds to
limit royalty-free initial production testing. Existing Sec. 3179.103
provides for up to 20 MMcf of gas to be flared royalty free during well
drilling, well completion, and initial production testing operations
combined. Under existing Sec. 3179.103, upon receiving a Sundry Notice
request from the operator, the BLM may increase the volume of royalty-
free flared gas up to an additional 30 MMcf. Under existing Sec.
3179.103, similar to proposed Sec. 3179.101, the BLM allows royalty-
free testing for a period of up to 30 days after the start of initial
production testing. The BLM may extend, upon request, the initial
production testing period by up to an additional 60 days. Further,
existing Sec. 3179.103 provides additional time for dewatering and
testing exploratory coalbed methane wells. Under existing Sec.
3179.103, such wells have an initial royalty-free period of 90 days
(rather than 30 days for all other well types), and the possibility of
the BLM approving, upon request, up to two additional 90-day periods.
Under NTL-4A, gas lost during initial production testing was
royalty free for a period not to exceed 30 days or the production of 50
MMcf of gas, whichever occurred first, unless a longer test period was
authorized by the State and accepted by the BLM.
The volume and duration limits in proposed Sec. 3179.101 are
similar to those in existing Sec. 3179.103. Both sections allow 30
days from the start of the test, and both allow for extensions of time.
However, existing Sec. 3179.103 limits an extension to no more than 60
days, whereas proposed Sec. 3179.101 does not specify an extension
limit. Proposed Sec. 3179.101 would allow for up to 50 MMcf of gas to
be flared royalty free, with no express opportunity for an extension.
By comparison, existing Sec. 3179.103 allows for 20 MMcf to be flared
royalty free, with the possibility of an additional 30 MMcf of gas
flared with BLM approval, and no opportunity for an extension beyond
the cumulative 50 MMcf of gas. The BLM requests comment on whether
royalty-free flaring during initial production testing should be
limited to 50 MMcf or 30 days (with the possibility of an extension).
The provision for exploratory coalbed methane wells in existing
Sec. 3179.103 is the most notable difference between it and this
proposed rule with regard to the initial production testing. Existing
Sec. 3179.103 provides for up to 270 cumulative royalty-free
production testing days for exploratory coalbed methane wells, whereas
the proposed rule contains no special provision for such wells.
Exploratory coalbed methane wells are expected to be an exceedingly low
percentage of future wells drilled, and so the BLM does not believe
that a special provision addressing these wells is necessary. In the
future, if an exploratory coalbed methane well requires additional time
for initial production testing, this can be handled under proposed
Sec. 3179.101(b), which allows an operator to request a longer test
period without imposing an outside limit on the length of the
additional test period the BLM might approve.
43 CFR[thinsp]3179.102 Subsequent Well Tests
Proposed Sec. 3179.102(a) provides that gas flared during well
tests subsequent to the initial production test is royalty free for a
period not to exceed 24 hours, unless the BLM approves or requires a
longer test period. Proposed Sec. 3179.102(b) provides that the
operator may request a longer test period and must submit its request
using a Sundry Notice. Proposed Sec. 3179.102 is functionally
identical to existing Sec. 3179.104.
NTL-4A included royalty-free provisions for ``evaluation tests''
and for ``routine or special well tests.'' Because NTL-4A also
contained specific
[[Page 7936]]
provisions for ``initial production tests,'' all of the other mentioned
tests were presumed to be subsequent to the initial production tests.
Under NTL-4A, royalty-free evaluation tests were limited to 24 hours,
with no mention of a possibility for extension. Routine or special well
tests, which are well tests other than initial production tests and
evaluation tests, were royalty free under NTL-4A, but only after
approval by the BLM.
The provisions for subsequent well tests in proposed Sec. 3179.102
are essentially the same as those in both the 2016 final rule and in
NTL-4A. All three provide for a base test period of 24 hours, and all
three have a provision for the BLM to approve a longer test period.
Proposed Sec. 3179.102 improves upon NTL-4A by making the requirements
for subsequent well tests more clear.
43 CFR[thinsp]3179.103 Emergencies
Under proposed Sec. 3179.4(b)(2)(vi), royalty is not due on gas
that is lost during an emergency. Proposed Sec. 3179.103 describes the
conditions that constitute an emergency, and lists circumstances that
do not constitute an emergency. As provided in proposed Sec.
3179.103(d), an operator would be required to estimate and report to
the BLM on a Sundry Notice the volumes of gas that were flared or
vented beyond the timeframe for royalty-free flaring under proposed
Sec. 3179.103(a) (i.e., venting or flaring beyond 24 hours, or a
longer necessary period as determined by the BLM).
The provisions in proposed Sec. 3179.103 are nearly identical to
those in existing Sec. 3179.105. The most notable change from the 2016
final rule is in describing those things that do not constitute an
emergency. Where existing Sec. 3179.105(b)(1) specifies that ``more
than 3 failures of the same component within a single piece of
equipment within any 365-day period'' is not an emergency, proposed
Sec. 3179.103(c)(4) simplifies that concept by including ``recurring
equipment failures'' among the situations caused by operator negligence
that do not constitute an emergency. This simplification addresses the
practical difficulties involved in tracking the number of times the
failure of a specific component of a particular piece of equipment
causes emergency venting or flaring, and recognizes that recurring
failures of the same equipment, even if involving different
``components,'' may not constitute a true unavoidable emergency. The
BLM requests comment on how to best determine when recurring equipment
failures constitute emergencies and whether a certain number of
failures of the same equipment should provide a standard for when
losses of gas due to equipment failures are royalty-bearing.
The description of ``emergencies'' in NTL-4A was brief and was
subject to varied interpretations. The purpose behind both existing
Sec. 3179.105 and proposed Sec. 3179.103 is to improve upon NTL-4A by
narrowing the meaning of ``emergency,'' such that it is uniformly
understood and consistently applied.
43 CFR 3179.104 Downhole Well Maintenance and Liquids Unloading
Under proposed Sec. 3179.4(b)(2)(viii), gas lost in the course of
downhole well maintenance and/or liquids unloading performed in
compliance with proposed Sec. 3179.104 is royalty free. Proposed Sec.
3179.104(a) states that gas vented or flared during downhole well
maintenance and well purging is royalty free for a period not to exceed
24 hours. Proposed Sec. 3179.104(a) also states that gas vented from a
plunger lift system and/or an automated well control system is royalty
free. Proposed Sec. 3179.104(b) states that the operator must minimize
the loss of gas associated with downhole well maintenance and liquids
unloading, consistent with safe operations. Proposed Sec. 3179.104(c)
states, for wells equipped with a plunger lift system or automated
control system, minimizing gas loss under paragraph (b) 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. Proposed Sec. 3179.104(d) provides that
the operator must ensure that the person conducting the purging remains
present on-site throughout the event in order to end the event as soon
as practical, thereby minimizing any venting to the atmosphere.
Proposed Sec. 3179.104(e) defines ``well purging'' as 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. Proposed Sec. 3179.104(e) is identical to
existing Sec. 3179.204(g).
Existing Sec. 3179.204 requires the operator to ``minimize vented
gas'' in liquids unloading operations, but does not impose volume or
duration limits. As with proposed Sec. 3179.104, existing Sec.
3179.204 allows for gas vented or flared during well purging to be
royalty free provided that the operator ensures that the person
conducting the operation remains on-site throughout the event. Existing
Sec. 3179.204 also requires plunger lift and automated control systems
to be optimized to minimize gas loss associated with their effective
operation. The main difference between existing Sec. 3179.204 and
proposed Sec. 3179.104 is that existing Sec. 3179.204(c) requires the
operator to file a Sundry Notice with the BLM the first time that each
well is manually purged or purged with an automated control system.
That Sundry Notice would need to include documentation showing that the
operator evaluated the feasibility of using methods of liquids
unloading other than well purging and that the operator determined that
such methods were either unduly costly or technically infeasible.
Although the administrative burden is apparent, filing this Sundry
Notice would require the operator to evaluate and analyze other methods
of liquids unloading, which is expected to impose costs on the
operator. And, the evaluation may lead the operator to identify a more
costly alternative that could not be ignored as ``unduly costly.''
Additionally, under existing Sec. 3179.204, the operator would file a
Sundry Notice with the BLM each time a well purging event exceeded
either a duration of 24 hours in a month or an estimated gas loss of 75
Mcf in a month. For each manual purging event, the operator would also
need to keep a record of the cause, date, time, duration, and estimate
of the volume of gas vented. The operator would maintain these records
and make them available to the BLM upon request.
With respect to royalty, gas vented during well purging was
addressed in NTL-4A as follows: ``. . . operators are authorized to
vent or flare gas on a short-term basis without incurring a royalty
obligation . . . during the unloading or cleaning up of a well during .
. . routine purging . . . not exceeding a period of 24 hours.'' As used
in NTL-4A, it is unclear whether the ``24 hours'' limit was intended to
be 24 hours per month or 24 hours per purging event. Under the latter
interpretation, there would be no practical or enforceable limit to the
volume of gas vented, or to the time during which purging could occur,
because purging could occur in successive events of 24 hours duration.
In terms of minimizing the loss of gas during well purging events,
proposed Sec. 3179.104 and existing Sec. 3179.204 are essentially the
same. Differences between the two are found in the reporting and
recordkeeping requirements imposed by the 2016 final rule. The intent
of these recordkeeping requirements, as explained in the 2016 final
rule preamble, was to build a
[[Page 7937]]
record of the amount of gas lost through these operations so that
information might lead to better future management of liquids unloading
operations. The BLM now believes that the reporting and recordkeeping
requirements in existing Sec. 3179.204 are unnecessary and unduly
burdensome. In particular, the reporting requirement of existing Sec.
3179.204(c) appears to be unnecessary because wells undergoing manual
well purging are in decline and any alternative method of liquids
unloading is unlikely to be economical for those wells. At this time,
the BLM does not believe that it is in a position to develop better
waste management techniques based on information collected pursuant to
existing Sec. 3179.204.
As mentioned above, proposed Sec. [thinsp]3179.104(d) would
require the person conducting manual well purging to remain present on-
site throughout the event to end the event as soon as practical. This
provision was not a requirement in NTL-4A, and was first established in
the 2016 final rule. The BLM is seeking comment on the operational
feasibility of this provision or if another measure would be less
burdensome, but achieve the same result.
Other Venting or Flaring
43 CFR 3179.201 Oil Well Gas
Proposed Sec. 3179.201 would govern the routine flaring of
associated gas from oil wells. The requirements of proposed Sec.
3179.201 would replace the ``capture percentage'' requirements of the
2016 final rule. Short term flaring, such as that experienced during
initial production testing, subsequent well testing, emergencies, and
downhole well maintenance and liquids unloading, would be governed by
proposed Sec. Sec. 3179.101 through 3179.104.
Proposed Sec. 3179.201(a) would allow operators to vent or flare
oil-well gas royalty free when the venting or flaring is done in
compliance with applicable rules, regulations, or orders of the State
regulatory agency (for Federal gas) or tribe (for Indian gas). This
section establishes State or tribal rules, regulations, and orders as
the prevailing regulations for the venting and flaring of oil-well gas
on BLM-administered leases, unit participating areas (PAs), or
communitization agreements (CAs).
Under the 2016 rule, an operator's royalty obligations for venting
or flaring are determined by the avoidable/unavoidable loss definitions
and the gas capture requirement thresholds. Operator royalty
obligations for vented or flared gas from oil wells in NTL-4A was, for
the most part, dependent on an ``avoidable loss'' determination by the
BLM. NTL-4A allowed for the BLM to ratify or accept the venting or
flaring rules, regulations, or orders of the appropriate State
regulatory agency. The proposed rule implements this concept from NTL-
4A by deferring to the rules, regulations, or orders of State
regulatory agencies or a tribe. This change both simplifies an
operator's obligations by aligning Federal and State venting and
flaring requirements for oil-well gas and allows for region-specific
regulation of oil-well gas that accounts for regional differences in
production, markets, and infrastructure. An operator would owe royalty
on any oil-well gas flared in violation of applicable State or tribal
requirements.
The BLM has analyzed the statutory and regulatory restrictions on
venting and flaring in the 10 States constituting the top eight
producers of Federal oil and the top eight producers of Federal gas,
which collectively produce more than 99 percent of Federal oil and more
than 98 percent of Federal gas. The BLM found that each of these States
have statutory or regulatory restrictions on venting and flaring that
are expected to constrain the waste of associated gas from oil wells.
Most of these States require an operator to obtain approval from the
State regulatory authority (by justifying the need to flare) in order
to engage in the flaring of associated gas.\25\ North Dakota has a
similar requirement, but, in the Bakken, Bakken/Three Forks, and Three
Forks pools, restricts flaring through the application of gas-capture
goals that function similarly to the capture percentage requirements of
the 2016 final rule. Summaries of the State statutory and regulatory
restrictions on venting and flaring analyzed by the BLM are contained
in a Memorandum that has been published for public review on https://www.regulations.gov. In the Searchbox, enter ``RIN 1004-AE53'', click
the ``Search'' button, open the Docket Folder, and look under
Supporting Documents.
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\25\ These States are: New Mexico, Wyoming, Colorado, Utah,
Montana, Texas, and Oklahoma.
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It is the intent of proposed Sec. 3179.201(a) to defer to State
and tribal statutes and regulations, like those described in the
Memorandum, that provide a reasonable assurance to the BLM that
operators will not be permitted to engage in the flaring of associated
gas without limitation and that the waste of associated gas will be
controlled. The BLM requests comment on whether the language of
proposed Sec. 3179.201(a) achieves that intent.
Proposed Sec. 3179.201(b) exclusively addresses oil-well gas
production from an Indian lease. Vented or flared oil-well gas from an
Indian lease will be treated as royalty free pursuant to proposed Sec.
3179.201(a) only to the extent it is consistent with the BLM's trust
responsibility.
In the event a State regulatory agency or tribe does not currently
have rules, regulations or orders governing venting or flaring of oil-
well gas, the BLM is proposing to codify the NTL-4A approach as a
backstop, providing a way for operators to obtain BLM approval to vent
or flare oil-well gas royalty free by submitting an application with
sufficient justification as described in proposed Sec. 3179.201(c).
Applications for royalty-free venting or flaring of oil-well gas must
include either: (1) An evaluation report supported by engineering,
geologic, and economic data demonstrating that capturing or using the
gas is not economical; or (2) An action plan showing how the operator
will minimize the venting or flaring of the gas within 1 year of the
application. If an operator vents or flares oil-well gas in excess of
10 MMcf per well during any month, the BLM may determine the gas to be
avoidably lost and subject to royalty assessment. The BLM notes that
there was no similar provision in NTL-4A allowing for the BLM to impose
royalties where flaring under an action plan exceeds 10 MMcf per well
per month. However, this provision is based on guidance in the
Conservation Division Manual \26\ (at 644.5.3F), which was developed by
the USGS and has long been used by the BLM as implementation guidance
for NTL-4A. The BLM requests comment on this provision, including
whether 10 MMcf per well per month is an appropriate threshold and
whether specific criteria for when royalty will be imposed should be
included in the regulatory text. The BLM also requests comment on
whether a longer or shorter period for minimizing flaring under an
action plan is appropriate.
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\26\ Available at https://www.ntc.blm.gov/krc/uploads/172/NTL-4A%20Royalty%20or%20Compensation%20for%20Oil%20and%20Gas%20Lost.pdf.
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As under NTL-4A, the evaluation report required under proposed
Sec. 3179.201(c)(1) would be required to demonstrate to the BLM's
satisfaction that the expenditures necessary to market or beneficially
use the gas are not economically justified. Under proposed Sec.
3179.201(d)(1), the evaluation report would be required to include
estimates of the volumes of oil and gas that would be produced to the
economic limit if the application to vent or flare were approved, and
estimates of
[[Page 7938]]
the volumes of oil and gas that would be produced if the applicant was
required to market or use the gas.
From the information contained in the evaluation report, the BLM
will determine whether the operator can economically operate the lease
if it is required to market or use the gas, taking into consideration
both oil and gas production, as well as the economics of a field-wide
plan. Under proposed Sec. 3179.201(d)(2), the BLM would be able to
require operators to provide updated evaluation reports as additional
development occurs or economic conditions improve, but no more than
once a year. NTL-4A did not contain a similar provision allowing the
BLM to require an operator to update its evaluation report based on
changing circumstances. Proposed Sec. 3179.201(d)(2) thus represents a
change from NTL-4A. The BLM requests comment on methods for determining
whether the operator can economically operate the lease. The BLM also
requests comment on the once-a-year limitation on the BLM's authority
to require an updated report.
An action plan submitted under proposed Sec. 3179.201(c)(2) would
be required to show how the operator will minimize the venting or
flaring of the oil-well gas within 1 year. An operator may apply for an
approval of an extension of the 1-year time limit. In the event the
operator fails to implement the action plan, the entire volume of gas
vented or flared during the time covered by the action plan would be
subject to royalty.
Proposed Sec. 3179.201(e) provides for grandfathering of prior
approvals to flare royalty free. These approvals would continue in
effect until no longer necessary because the venting or flaring is
authorized by the rules, regulations, or orders of an appropriate State
regulatory agency or tribe under proposed Sec. 3179.201(a), or the BLM
requires an updated evaluation report and determines to amend or revoke
its approval. Existing Sec. 3179.10 of the 2016 rule (as amended by
the 2017 Suspension Rule) allows approvals to flare royalty free to
continue in effect until January 17, 2019. The BLM specifically
requests comment on whether the grandfathering scheme outlined in
proposed Sec. 3179.201(e) is appropriate and whether any possible
improvements can be made in order to ensure a smooth transition for
operators, including whether it is appropriate to phase-out or require
the BLM to provide affirmative determinations (i.e., allow for negative
consent).
Measurement and Reporting Responsibilities
43 CFR 3179.301 Measuring and Reporting Volumes of Gas Vented and
Flared
Proposed Sec. 3179.301(a) would require operators to estimate or
measure all volumes of lost oil and gas, whether avoidably or
unavoidably lost, from wells, facilities, and equipment on a lease,
unit PA, or CA and report those volumes under applicable Office of
Natural Resources Revenue (ONRR) reporting requirements. Under proposed
Sec. 3179.301(b), the operator could: (1) Estimate or measure the
vented or flared gas in accordance with applicable rules, regulations,
or orders of the appropriate State or tribal regulatory agency; (2)
Estimate the volume of the vented or flared gas based on the results of
a regularly performed GOR test and measured values for the volume of
oil production and gas sales, to allow BLM to independently verify the
volume, rate, and heating value of the flared gas; or (3) Measure the
volume of the flared gas. The BLM requests comment on any other
potential means of estimating these volumes that would reduce burden
and maintain accuracy.
Under proposed Sec. 3179.301(c), the BLM would be able to require
the installation of additional measurement equipment whenever it
determines that the existing methods are inadequate to meet the
purposes of subpart 3179. NTL-4A contained essentially the same
provision. Based on past experience in implementing NTL-4A, the BLM
believes that proposed Sec. 3179.301(c) would help to ensure accuracy
and accountability in situations in which high volumes of royalty-
bearing gas are being flared.
Proposed Sec. 3179.301(d) would allow the operator to combine gas
from multiple leases, unit PAs, or CAs for the purpose of flaring or
venting at a common point, but the operator would be required to use a
BLM-approved method to allocate the quantities of the vented or flared
gas to each lease, unit PA, or CA. Commingling to a single flare is
allowed because the BLM recognizes that the additional costs of
requiring individual flaring measurement and meter facilities for each
lease, unit PA, or communitized area are not necessarily justified by
the incremental royalty accountability afforded by the separate meters
and flares.
Proposed Sec. 3179.301 is essentially the same as existing Sec.
3179.9. The main difference between the two is that existing Sec.
3179.9 requires measurement or calculation under a particular protocol
when the volume of flared gas exceeds 50 Mcf per day.
C. Summary of Estimated Impacts
The BLM reviewed the proposed rule and conducted an RIA and
Environmental Assessment (EA) that examine the impacts of the proposed
requirements. The draft RIA and draft EA that the BLM prepared have
been posted in the docket for the proposed rule on the Federal
eRulemaking Portal: https://www.regulations.gov. In the Searchbox,
enter ``RIN 1004-AE53'', click the ``Search'' button, open the Docket
Folder, and look under Supporting Documents. The following discussion
is a summary of the proposed rule's economic impacts. For a more
complete discussion of the expected economic impacts of the proposed
rule, please review the draft RIA.
The BLM's proposed rule would remove almost all of the requirements
in the 2016 final rule that we previously estimated would pose a
compliance burden to operators and generate benefits of gas savings or
reductions in methane emissions. The proposed rule would replace the
2016 final rule's requirements with requirements largely similar to
those that were in NTL-4A. Also, for the most part, the proposed rule
would remove the administrative burdens associated with the 2016 final
rule's subpart 3179.
The baseline for the analysis of this proposed rule accounts for
the BLM's 2017 Suspension Rule that has suspended or delayed certain
requirements of the 2016 final rule until January 17, 2019. 82 FR 58050
(Dec. 8, 2017). The effect of the 2017 Suspension Rule is to shift the
impacts of the affected requirements into the near future. The BLM also
revisited the underlying assumptions used in the RIA for the 2016 final
rule. Specifically, the BLM revisited the underlying assumptions
pertaining to LDAR, administrative burdens, and climate benefits (see
sections 3.2, 3.3, and 7 of the RIA).
For this proposed rule, we track the impacts over the first 10
years of implementation against the baseline. The period of analysis in
the RIA prepared for the 2016 final rule was 10 years and the period of
analysis in the RIA prepared for the 2017 Suspension Rule was 10 years
after the suspension or delay. Results are provided using the net
present value (NPV) of costs and benefits estimated over the evaluation
period, calculated using 7 percent and 3 percent discount rates.
[[Page 7939]]
Estimated Reductions in Compliance Costs (Excluding Cost Savings)
First, we examined the reductions in compliance costs, excluding
the savings that would have been realized from product recovery. The
proposed rule would reduce compliance costs from the baseline. Over the
10-year evaluation period (2019-2028), we estimate a total reduction in
compliance costs of $1.32 billion to 1.60 billion (NPV using a 7
percent discount rate) or $1.66 billion to 2.03 billion (NPV using a 3
percent discount rate). We expect very few compliance costs associated
with the proposed rule, including the remaining administrative burdens.
Estimated Reduction in Benefits
The proposed rule would reduce benefits from the baseline, since
estimated cost savings that would have come from product recovery would
be forgone and the emissions reductions would also be forgone. The
proposed rule would result in forgone cost savings from natural gas
recovery. Over the 10-year evaluation period (2019-2028), we estimate
total forgone cost savings from natural gas recovery (from the
baseline) of $629 million (NPV using a 7 percent discount rate) or $824
million (NPV using a 3 percent discount rate). The proposed rule also
expected to result in forgone methane emissions reductions. Over the
10-year evaluation period (2019-2028), we estimate total forgone
methane emissions reductions from the baseline valued at $66 million
(NPV and interim domestic SC-CH4 using a 7 percent discount rate) or
$259 million (NPV and interim domestic SC-CH4 using a 3 percent
discount rate).
Estimated Net Benefits
The proposed rule is estimated to result in positive net benefits
relative to the baseline. More specifically, we estimate that the
reduction of compliance costs would exceed the forgone cost savings
from recovered natural gas and the value of the forgone methane
emissions reductions. Over the 10-year evaluation period (2019-2028),
we estimate total net benefits from the baseline of $625-900 million
(NPV and interim domestic SC-CH4 using a 7 percent discount
rate) or $578-942 million (NPV and interim domestic SC-CH4
using a 3 percent discount rate).
Energy Systems
The proposed rule is expected to influence the production of
natural gas, natural gas liquids, and crude oil from onshore Federal
and Indian oil and gas leases. However, since the relative changes in
production are expected to be small, we do not expect that the proposed
rule would significantly impact the price, supply, or distribution of
energy.
The proposed rule would reverse the estimated incremental changes
in crude oil and natural gas production associated with the 2016 final
rule. Over the 10-year evaluation period (2019-2028), we estimate that
18.4 million barrels of crude oil production and 22.7 Bcf of natural
gas production would no longer be deferred (as it would have been under
the 2016 final rule). However, we also estimate that there would be 299
Bcf of forgone natural gas production (that would have been produced
and sold under the 2016 final rule).
For context, we note the share of the total U.S. production in 2015
that the incremental changes in production would represent. The per-
year average of the estimated crude oil volume that would no longer be
deferred represents 0.058 percent of the total U.S. crude oil
production in 2015. The per-year average of the estimated natural gas
volume that would no longer be deferred represents 0.008 percent of the
total U.S. natural gas production in 2015. The per-year average of the
estimated forgone natural gas production represents 0.109 percent of
the total U.S. natural gas production in 2015.
Royalty Impacts
The 2016 final rule, when implemented, would be expected to impact
the production of crude oil and natural gas from Federal and Indian oil
and gas leases. In the RIA for the 2016 final rule, the BLM estimated
that the rule's requirements would generate additional natural gas
production, but that substantial volumes of crude oil production would
be deferred or shifted to the future. The BLM concluded that the 2016
final rule would generate overall additional royalty, with the royalty
gains from the additional natural gas produced outweighing the value of
the royalty losses from crude oil production (and some associated gas)
being deferred into the future.
The proposed rule, which reverses most of the 2016 final rule's
provisions, is expected to reverse the estimated royalty impacts of the
2016 final rule. This formulation does not account for the potential
countervailing impacts of the reduction in compliance burdens, which
might spur additional production on Federal and Indian lands and
therefore have a positive impact on royalties.
We note that royalty impacts are presented separately from the
costs, benefits, and net benefits. Royalty payments are recurring
income to Federal or tribal governments and costs to the operator or
lessee. As such, they are transfer payments that do not affect the
total resources available to society. An important but sometimes
difficult problem in cost estimation is to distinguish between real
costs and transfer payments. While transfers should not be included in
the economic analysis estimates of the benefits and costs of a
regulation, they may be important for describing the distributional
effects of a regulation.
The proposed rule is expected to result in forgone royalty payments
to the Federal Government, tribal governments, States, and private
landowners. Over the 10-year evaluation period (2019-2028), we estimate
total forgone royalty payments (from the baseline) of $26.4 million
(NPV using a 7 percent discount rate) or $32.7 million (NPV using a 3
percent discount rate).
Consideration of Alternative Approaches
E.O. 13563 reaffirms the principles of E.O. 12866 and requires that
agencies, among other things, ``identify and assess available
alternatives to direct regulation, including providing economic
incentives to encourage the desired behavior, such as user fees or
marketable permits, or providing information upon which choices can be
made by the public.''
The 2016 final rule established requirements and direct regulation
on operators. If the proposed rule were finalized, then the BLM would
remove the requirements of the 2016 final rule that impose the most
substantial direct regulatory burdens on operators. Also, with the
proposed rule, the BLM would remove the duplicative operational and
equipment requirements and paperwork and administrative burdens.
In developing this proposed rule, the BLM considered scenarios for
retaining certain requirements currently in subpart 3179. For example,
we examined the impacts of retaining subpart 3179 in its entirety
(essentially taking no action). We also examined the impacts of
retaining the gas capture requirements of the 2016 final rule
(Sec. Sec. 3179.7-3179.8) and the measurement/metering requirements
(Sec. 3179.9) while rescinding the operational and equipment
requirements addressing venting from leaks, pneumatic equipment, and
storage tanks. The results of these alternative scenarios are presented
in Section 4 of the RIA.
[[Page 7940]]
Employment Impacts
E.O. 13563 reaffirms the principles established in E.O. 12866, but
calls for additional consideration of the regulatory impact on
employment. E.O. 13563 states, ``Our regulatory system must protect
public health, welfare, safety, and our environment while promoting
economic growth, innovation, competitiveness, and job creation.'' An
analysis of employment impacts is a standalone analysis and the impacts
should not be included in the estimation of benefits and costs.
This proposed rule would remove or replace requirements of the
BLM's 2016 final rule on waste prevention and is a deregulatory action.
As such, we estimate that it would result in a reduction of compliance
costs for operators of oil and gas leases on Federal and Indian lands.
Therefore, it is likely that the impact, if any, on employment would be
positive.
In the RIA for the 2016 final rule, the BLM concluded that the
requirements were not expected to impact the employment within the oil
and gas extraction, drilling oil and gas wells, and support activities
industries, in any material way. This determination was based on
several reasons. First, the estimated incremental gas production
represented only a small fraction of the U.S. natural gas production
volumes. Second, the estimated compliance costs represented only a
small fraction of the annual net incomes of companies likely to be
impacted. Third, for those operations that would have been impacted,
the 2016 final rule had provisions that would exempt these operations
from compliance to the extent that the compliance costs would force the
operator to shut in production. Based on these factors, the BLM
determined that the 2016 final rule would not alter the investment or
employment decisions of firms or significantly adversely impact
employment. The RIA also noted that the requirements would necessitate
the one-time installation or replacement of equipment and the ongoing
implementation of an LDAR program, both of which would require labor.
We do not believe that the proposed rule would substantially alter
the investment or employment decisions of firms. By removing or
revising the requirements of the 2016 final rule, the BLM would
alleviate the associated compliance burdens on operators. The
investment and labor necessary to comply with the 2016 rule would not
be needed. We do not believe that the cost savings in themselves would
be substantial enough to substantially alter the investment or
employment decisions of firms. We also recognize that there may be a
small positive impact on investment and employment due to the reduction
in compliance burdens if the output effects dominate. The magnitude of
the reductions would be relatively small but could carry
competitiveness impacts, specifically on marginal wells on Federal
lands, deterring investment. In sum, the effect on investment and
employment of this rule remains unknown.
Small Business Impacts
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. We conclude that
small entities represent the majority of entities operating in the
onshore crude oil and natural gas extraction industry and, therefore,
the proposed rule would impact a substantial number of small entities.
To examine the economic impact of the rule on small entities, the BLM
performed a screening analysis on a sample of potentially affected
small entities, comparing the reduction of compliance costs to entity
profit margins. This screening analysis showed that the estimated per-
entity reduction in compliance costs would result in an average
increase in profit margin of 0.19 percentage points (based on the 2014
company data).\27\
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\27\ Average commodity price in 2014 was higher than subsequent
years; therefore, the result in profit margin may not be
representative of the increase in profit margin as a result of the
updated rulemaking.
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The BLM also notes that most of the emissions-based requirements in
the 2016 final rule (including LDAR, pneumatic controllers, pneumatic
pumps, and liquids unloading requirements) would impose a particular
burden on marginal or low-producing wells.\28\ There is concern that
those wells would not be able to be operated profitably with the
additional compliance costs imposed by the 2016 final rule. While the
2016 final rule allows for exemptions when compliance would impose such
costs that the operator would cease production and abandon significant
recoverable reserves, due to the prevalence of marginal and low-
producing wells, the BLM expects that many exemptions would be
warranted, making the burdens imposed by the exemption process, in
itself, excessive. The prospect of either shutting-in a marginal well
or assuming unwarranted administrative burdens to avoid compliance
costs potentially represents a substantial loss of income for companies
operating marginal wells. The BLM's proposal would rescind or revise
these requirements in the 2016 final rule, thus reducing compliance
costs for all wells, including marginal wells, and reducing the
potential economic harm to small businesses.
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\28\ As explained previously, the IOGCC defines a marginal well
as one that produces 10 barrels of oil or 60 Mcf of natural gas per
day or less and reports that about 69.1 and 75.9 percent of the
nation's operating oil and gas wells, respectively, are marginal.
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Impacts Associated With Oil and Gas Operations on Tribal Lands
The proposed rule would apply to oil and gas operations on both
Federal and Indian leases. In the RIA, the BLM estimates the impacts
associated with operations on Indian leases, as well as royalty
implications for tribal governments. We estimate these impacts by
scaling down the total impacts by the share of oil wells on Indian
lands and the share of gas wells on Indian Lands. Please reference the
RIA at section 4.4.5 for a full explanation of the estimated impacts.
V. Procedural Matters
Regulatory Planning and Review (E.O. 12866, E.O. 13563)
Executive Order 12866 provides that the Office of Information and
Regulatory Affairs within the Office of Management and Budget (OMB)
will review all significant rules. The Office of Information and
Regulatory Affairs 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 rescind or revise portions of the BLM's
2016 final rule. We have developed this proposed rule in a manner
consistent with the requirements in Executive Order 12866 and Executive
Order 13563. The BLM reviewed the requirements of the
[[Page 7941]]
proposed rule and determined that it will 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-AE53'', click the ``Search'' button, open the Docket
Folder, and look under Supporting Documents.
Reducing Regulation and Controlling Regulatory Costs (E.O. 13771)
This proposed rule is expected to be an E.O. 13771 deregulatory
action. Details on the estimated cost savings of this proposed rule can
be found in the rule's RIA.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA)
generally 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 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 estimates that it would
generate cost savings of about $69,000 per entity per year. These
estimated cost savings would provide relief to small operators which,
the BLM notes, represent the overwhelming majority of operators of
Federal and Indian leases.
For the purpose of carrying out its review pursuant to the RFA, the
BLM believes that 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 therefore not required. In making a ``significant''
determination under the RFA, BLM used an estimated per-entity cost
savings to conduct a screening analysis. The analysis shows that the
average reduction in compliance costs associated with this proposed
rule are a small enough percentage of the profit margin for small
entities, so as not be considered ``significant'' under the RFA.
Details on this determination can be found in the RIA for the
proposed rule.
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. This proposed rule:
(a) Would have an annual effect on the economy of $100 million or
more.
(b) Would not cause a major increase in costs or prices for
consumers, individual industries, Federal, State, or local government
agencies, or geographic regions.
(c) Would not have a significant adverse effects on competition,
employment, investment, productivity, innovation, or the ability of
U.S.-based enterprises to compete with foreign-based enterprises.
Unfunded Mandates Reform Act (UMRA)
This proposed rule would not impose an unfunded mandate on State,
local, or tribal governments, or the private sector of $100 million or
more per year. 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. It would rescind or revise requirements
that would otherwise apply to the private sector. A statement
containing the information required by the Unfunded Mandates Reform Act
(UMRA) (2 U.S.C. 1531 et seq.) is 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.
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
rescind or revise many of the requirements placed on operators by the
2016 final rule. Operators would not have to undertake the associated
compliance activities, either operational or administrative. 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.
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 does not
directly impact the States. Therefore, in accordance with Executive
Order 13132, the BLM has determined that this proposed rule does not
have sufficient federalism implications to warrant preparation of a
Federalism Assessment.
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
[[Page 7942]]
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.
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. We have evaluated this proposed rule under the
Department's consultation policy and under the criteria in Executive
Order 13175 and have identified substantial direct effects on federally
recognized Indian tribes that would result from this proposed rule.
Under this proposed rule, oil and gas operations on tribal and allotted
lands would no longer be subject to many of the requirements placed on
operators by the 2016 final rule.
The BLM believes that revising the requirements of subpart 3179
would prevent Indian lands from being viewed as less attractive to oil
and gas operators than non-Indian lands due to unnecessary and
burdensome compliance costs, thereby preventing economic harm to tribes
and allottees. The BLM is conducting tribal outreach which it believes
is appropriate given that the proposed rule would remove many of the
compliance burdens of the 2016 final rule, defer to tribal laws,
regulations, rules, and orders, with respect to oil-well gas flaring
from Indian leases, and otherwise revise subpart 3179 in a manner that
aligns it with NTL-4A. The BLM notified tribes of the action and
requested feedback and comment through the respective BLM State Office
Directors. Future tribal consultation may occur on an ongoing basis.
Paperwork Reduction Act
1. Overview
The Paperwork Reduction Act (PRA) (44 U.S.C. 3501-3521) provides
that an agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information, unless it displays a
currently valid control number. 44 U.S.C. 3512. Collections of
information include requests and requirements that an individual,
partnership, or corporation obtain information, and report it to a
Federal agency. 44 U.S.C. 3502(3); 5 CFR 1320.3(c) and (k).
OMB approved 24 information collection activities in a final rule
pertaining to waste prevention and assigned control number 1004-0211 to
those activities. See ``Waste Prevention, Production Subject to
Royalties, and Resource Conservation,'' Final Rule, 81 FR 83008 (Nov.
18, 2016). In the Notice of Action approving the 24 information
collection activities in the 2016 final rule, OMB announced that the
control number will expire on January 31, 2018. The Notice of Action
also included terms of clearance.
On October 5, 2017, the BLM proposed a rule that would suspend or
delay several regulations in the 2016 final rule. In that proposed
rule, the BLM requested the extension of control number 1004-0211 until
January 31, 2019, including the 24 information collection activities in
the 2016 final rule. The BLM invited public comment on the proposed
extension of control no. 1004-0211. The BLM also submitted the
information collection request for this proposed rule to OMB for review
in accordance with the PRA.
The BLM finalized that rule on December 8, 2017. See 82 FR 58050.
OMB approved the information collection activities in the rule with an
expiration date of December 31, 2020, and with a Term of Clearance that
maintains the effectiveness of the Terms of Clearance associated with
the 2016 final rule. That Term of Clearance requires the BLM to submit
to the Office of Information and Regulatory Affairs draft guidance to
implement the collection of information requirements of the 2016 final
rule no later than 3 months after January 17, 2019.
This proposed rule would not modify any regulations in 43 CFR
subpart 3178. Accordingly, the BLM requests continuation of the
information collection activity at 43 CFR 3178.5, 3178.7, 3178.8, and
3178.9 (``Request for Approval for Royalty-Free Uses On-Lease or Off-
Lease'').
The proposed rule would remove the information collection activity
at 43 CFR 3162.3-1(j) (``Plan to Minimize Waste of Natural Gas''). The
proposed rule also would remove or revise many regulations and
information collection activities in 43 CFR subpart 3179. As a result,
the BLM now requests revision of control number 1004-0211 to include:
The information collection activities in this proposed
rule; and
The information collection activity entitled ``Request for
Approval for Royalty-Free Uses On-Lease or Off-Lease.''
The BLM requests comments on the following subjects:
Whether the collection of information is necessary for the
proper functioning of the BLM, including whether the information will
have practical utility;
The accuracy of the BLM's estimate of the burden of
collecting the information, including the validity of the methodology
and assumptions used;
The quality, utility, and clarity of the information to be
collected; and
How to minimize the information collection burden on those
who are to respond, including the use of appropriate automated,
electronic, mechanical, or other forms of information technology.
If you want to comment on the information collection requirements
of this proposed rule, please send your comments directly to OMB, with
a copy to the BLM, as directed in the ADDRESSES section of this
preamble. Please identify your comments with ``OMB Control Number 1004-
0211.'' OMB is required to make a decision concerning the collection of
information contained in this proposed rule between 30 to 60 days after
publication of this document in the Federal Register. Therefore, a
comment to OMB is best assured of having its full effect if OMB
receives it by March 26, 2018.
2. Summary of Information Collection Activities
Title: Waste Prevention, Production Subject to Royalties, and
Resource Conservation (43 CFR parts 3160 and 3170).
OMB Control Number: 1004-0211.
Form: Form 3160-5, Sundry Notices and Reports on Wells.
Description of Respondents: Holders of Federal and Indian (except
Osage Tribe) oil and gas leases, those who belong to Federally approved
units or communitized areas, and those who are parties to oil and gas
agreements under the Indian Mineral Development Act, 25 U.S.C. 2101-
2108.
Respondents' Obligation: Required to obtain or retain a benefit.
Frequency of Collection: On occasion.
Abstract: The BLM requests that control number 1004-0211 be revised
to include the information collection activities in this proposed rule,
as well as the information collection activity in 43 CFR subpart 3178
that was in the 2016 final rule. The BLM also requests the removal of
the information collection activity in 43 CFR 3162.3-1(j) that was in
the 2016 final rule, and the removal or revision of the information
collection activities that were in 43 CFR subpart 3179 of the 2016
final rule.
Estimated Number of Responses: 1,075.
[[Page 7943]]
Estimated Total Annual Burden Hours: 4,010.
Estimated Total Non-Hour Cost: None.
3. Information Collection Request
A. The BLM requests that OMB control number 1004-0211 continue to
include the following information collection activity that was included
at 43 CFR subpart 3178 of the 2016 final rule:
Request for Approval for Royalty-Free Uses On-Lease or Off-Lease (43
CFR 3178.5, 3178.7, 3178.8, and 3178.9)
Section 3178.5 requires submission of a Sundry Notice (Form 3160-5)
to request prior written BLM approval for use of gas royalty free for
the following operations and production purposes on the lease, unit or
communitized area:
Using oil or gas that an operator removes from the
pipeline at a location downstream of the facility measurement point
(FMP);
Removal of gas initially from a lease, unit PA, or
communitized area for treatment or processing because of particular
physical characteristics of the gas, prior to use on the lease, unit PA
or communitized area; and
Any other type of use of produced oil or gas for
operations and production purposes pursuant to Sec. 3178.3 that is not
identified in Sec. 3178.4.
Section 3178.7 requires submission of a Sundry Notice (Form 3160-5)
to request prior written BLM approval for off-lease royalty-free uses
in the following circumstances:
The equipment or facility in which the operation is
conducted is located off the lease, unit, or communitized area for
engineering, economic, resource-protection, or physical-accessibility
reasons; and
The operations are conducted upstream of the FMP.
Section 3178.8 requires that an operator measure or estimate the
volume of royalty-free gas used in operations upstream of the FMP. In
general, the operator is free to choose whether to measure or estimate,
with the exception that the operator must in all cases measure the
following volumes:
Royalty-free gas removed downstream of the FMP and used
pursuant to Sec. Sec. 3178.4 through 3178.7; and
Royalty-free oil used pursuant to Sec. Sec. 3178.4
through 3178.7.
If oil is used on the lease, unit or communitized area, it is most
likely to be removed from a storage tank on the lease, unit or
communitized area. Thus, this regulation also requires the operator to
document the removal of the oil from the tank or pipeline.
Section 3178.8(e) requires that operators use best available
information to estimate gas volumes, where estimation is allowed. For
both oil and gas, the operator must report the volumes measured or
estimated, as applicable, under ONRR reporting requirements. As
revisions to Onshore Oil and Gas Orders No. 4 and 5 have now been
finalized as 43 CFR subparts 3174 and 3175, respectively, the final
rule text now references Sec. 3173.12, as well as Sec. 3178.4 through
Sec. 3178.7 to clarify that royalty-free use must adhere to the
provisions in those sections.
Section 3178.9 requires the following additional information in a
request for prior approval of royalty-free use under Sec. 3178.5, or
for prior approval of off-lease royalty-free use under Sec. 3178.7:
A complete description of the operation to be conducted,
including the location of all facilities and equipment involved in the
operation and the location of the FMP;
The volume of oil or gas that the operator expects will be
used in the operation and the method of measuring or estimating that
volume;
If the volume expected to be used will be estimated, the
basis for the estimate (e.g., equipment manufacturer's published
consumption or usage rates); and
The proposed disposition of the oil or gas used (e.g.,
whether gas used would be consumed as fuel, vented through use of a
gas-activated pneumatic controller, returned to the reservoir, or
disposed by some other method).
B. The BLM requests the revision of the following information
collection activities in accordance with this proposed rule:
Request for Extension of Royalty-Free Flaring During Initial Production
Testing (43 CFR 3179.101)
A regulation in the 2016 final rule, 43 CFR 3179.103, allows gas to
be flared royalty free during initial production testing. The
regulation lists specific volume and time limits for such testing. An
operator may seek an extension of those limits on royalty-free flaring
by submitting a Sundry Notice (Form 3160-5) to the BLM.
A regulation in this proposed rule, 43 CFR 3179.101, would be
similar to the 2016 final rule in addressing the royalty-free treatment
of gas volumes flared during initial production testing. 43 CFR
3179.101 in this proposed rule would provide that gas flared during the
initial production test of each completed interval in a well is royalty
free until one of the following occurs:
The operator determines that it has obtained adequate
reservoir information;
30 days have passed since the beginning of the production
test, unless the BLM approves a longer test period; or
The operator has flared 50 MMcf of gas.
Section 3179.101 of this proposed rule would also provide that an
operator may request a longer test period by submitting a Sundry
Notice.
Request for Extension of Royalty-Free Flaring During Subsequent Well
Testing (43 CFR 3179.102)
A regulation in the 2016 final rule, 43 CFR 3179.104, allows gas to
be flared royalty free for no more than 24 hours during well tests
subsequent to the initial production test. That regulation allows an
operator to seek authorization to flare royalty free for a longer
period by submitting a Sundry Notice (Form 3160-5) to the BLM.
A regulation in this proposed rule, 43 CFR 3179.102, is
substantively identical to 43 CFR 3179.104 in the 2016 final rule.
Accordingly, the BLM requests that the information collection activity
at 43 CFR 3179.102 of this proposed rule replace the activity at 43 CFR
3179.104 of the 2016 final rule.
Emergencies (43 CFR 3179.103)
A regulation in the 2016 final rule, 43 CFR 3179.105, allows an
operator to flare gas royalty free during a temporary, short-term,
infrequent, and unavoidable emergency. A regulation in this proposed
rule, at 43 CFR 3179.103, is almost identical to 43 CFR 3179.105 of the
2016 final rule. The BLM thus requests that the information collection
activity entitled, ``Reporting of Venting or Flaring (43 CFR
3179.105)'' be re-named ``Emergencies (43 CFR 3179.103).''
As provided at 43 CFR 3179.103(a) of this proposed rule, gas flared
or vented during an emergency would be royalty free for a period not to
exceed 24 hours, unless the BLM determines that emergency conditions
exist necessitating venting or flaring for a longer period. Section
3179.103(d) of this proposed rule would require the operator to report
to the BLM on a Sundry Notice, within 45 days of the start of an
emergency, the estimated volumes flared or vented beyond the timeframe
specified in paragraph (a).
As defined at 43 CFR 3179.103(b) of this proposed rule, an
``emergency'' for purposes of 43 CFR subpart 3179 would be a temporary,
infrequent and unavoidable situation in which the loss of gas or oil is
uncontrollable or necessary to avoid risk of an immediate
[[Page 7944]]
and substantial adverse impact on safety, public health, or the
environment, and is not due to operator negligence.
As provided at 43 CFR 3179.103(c) of this proposed rule, the
following events would not constitute emergencies for the purposes of
royalty assessment:
The operator's failure to install appropriate equipment of
a sufficient capacity to accommodate the production conditions;
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;
Scheduled maintenance;
A situation caused by operator negligence, including
recurring equipment failures; or
A situation on a lease, unit, or communitized area that
has already experienced 3 or more emergencies within the past 30 days,
unless the BLM determines that the occurrence of more than 3
emergencies within the 30 day period could not have been anticipated
and was beyond the operator's control.
C. The BLM requests the removal of the following information
collection activities in accordance with this proposed rule:
1. ``Plan to Minimize Waste of Natural Gas'';
2. ``Notification of Choice to Comply on County- or State-wide
Basis'';
3. ``Request for Approval of Alternative Capture Requirement'';
4. ``Request for Exemption from Well Completion Requirements'';
5. ``Notification of Functional Needs for a Pneumatic Controller'';
6. ``Showing that Cost of Compliance Would Cause Cessation of
Production and Abandonment of Oil Reserves (Pneumatic Controller)'';
7. ``Showing in Support of Replacement of Pneumatic Controller
within 3 Years'';
8. ``Showing that a Pneumatic Diaphragm Pump was Operated on Fewer
than 90 Individual Days in the Prior Calendar Year'';
9. ``Notification of Functional Needs for a Pneumatic Diaphragm
Pump'';
10. ``Showing that Cost of Compliance Would Cause Cessation of
Production and Abandonment of Oil Reserves (Pneumatic Diaphragm
Pump)'';
11. ``Showing in Support of Replacement of Pneumatic Diaphragm Pump
within 3 Years'';
12. ``Storage Vessels'';
13. ``Downhole Well Maintenance and Liquids Unloading--
Documentation and Reporting'';
14. ``Downhole Well Maintenance and Liquids Unloading--Notification
of Excessive Duration or Volume'';
15. ``Leak Detection--Compliance with EPA Regulations'';
16. ``Leak Detection--Request to Use an Alternative Monitoring
Device and Protocol'';
17. ``Leak Detection--Operator Request to Use an Alternative Leak
Detection Program'';
18. ``Leak Detection--Operator Request for Exemption Allowing Use
of an Alternative Leak-Detection Program that Does Not Meet Specified
Criteria'';
19. ``Leak Detection--Notification of Delay in Repairing Leaks'';
20. ``Leak Detection--Inspection Recordkeeping and Reporting''; and
21. ``Leak Detection--Annual Reporting of Inspections.''
D. The BLM requests the addition of following information
collection activity, in accordance with this proposed rule:
Oil-Well Gas (43 CFR 3179.201)
A regulation in this proposed rule, 43 CFR 3179.201, would provide
that, except as otherwise provided in 43 CFR subpart 3179, oil-well gas
may not be vented or flared royalty free unless BLM approves such
action in writing. The BLM would be authorized to approve an
application for royalty-free venting or flaring of oil-well gas upon
determining that royalty-free venting or flaring is justified by the
operator's submission of either:
(1) An evaluation report supported by engineering, geologic, and
economic data that demonstrates to the BLM's satisfaction that the
expenditures necessary to market or beneficially use such gas are not
economically justified; or
(2) An action plan showing how the operator will minimize the
venting or flaring of the gas within 1 year or within a greater amount
of time if the operator justifies an extended deadline. If the operator
fails to implement the action plan, the gas vented or flared during the
time covered by the action plan would be subject to royalty.
The data in the evaluation report that is mentioned above would
need to include:
The applicant's estimates of the volumes of oil and gas
that would be produced to the economic limit if the application to vent
or flare were approved; and
The volumes of the oil and gas that would be produced if
the applicant were required to market or use the gas.
The BLM would be authorized to require the operator to provide an
updated evaluation report as additional development occurs or economic
conditions improve. In addition, the BLM would be authorized to
determine that gas is avoidably lost and therefore subject to royalty
if flaring exceeds 10 MMcf per well during any month.
4. Burden Estimates
This proposed rule would result in the following adjustments in
hour or cost burden that result from the review of the proposed rule
under Executive Order 12866:
1. The hours per response for Request for Approval for Royalty-Free
Uses On-Lease or Off-Lease would be increased from 4 to 8.
2. The number of responses for ``Request for Extension of Royalty-
Free Flaring During Initial Well Testing'' would be increased from 500
to 750.
Program changes in this proposed rule would result in 62,125 fewer
responses than in the 2016 final rule (1,075 responses minus 63,200
responses) and 78,160 fewer burden hours than in the 2016 final rule
(4,010 responses minus 82,170 responses. The program changes and their
reasons are itemized in Tables 15-1 and 15-2 of the supporting
statement.
The following table details the annual estimated hour burdens for
the information activities described above:
----------------------------------------------------------------------------------------------------------------
Total hours
Type of response Number of Hours per (column B x
responses response column C)
A B C D
----------------------------------------------------------------------------------------------------------------
Request for Approval for Royalty-Free Uses On-Lease or Off- 50 8 400
Lease, 43 CFR 3178.5, 3178.7, 3178.8, and 3178.9, Form 3160-5..
Request for Extension of Royalty-Free Flaring During Initial 750 2 1,500
Production Testing, 43 CFR 3179.101, Form 3160-5...............
Request for Extension of Royalty-Free Flaring During Subsequent 5 2 10
Well Testing, 43 CFR 3179.102, Form 3160-5.....................
[[Page 7945]]
Emergencies, 43 CFR 3179.103, Form 3160-5....................... 250 2 500
Oil-Well Gas, 43 CFR 3179.201................................... 20 80 1,600
-----------------------------------------------
Totals...................................................... 1,075 .............. 4,010
----------------------------------------------------------------------------------------------------------------
National Environmental Policy Act
The BLM has prepared a draft environmental assessment (EA) to
determine whether this proposed rule 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.). 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-AE53'', 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
above.
Actions Concerning Regulations That Significantly Affect Energy Supply,
Distribution, or Use (Executive Order 13211)
This proposed rule is not a significant energy action under the
definition in Executive Order 13211. A statement of Energy Effects is
not required.
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 rulemaking, and notices of 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 the Office of Information
and Regulatory Affairs as a significant energy action.''
The rule would rescind or revise certain requirements in the 2016
final rule and would reduce compliance burdens. The BLM determined that
the 2016 final rule would not have impacted the supply, distribution,
or use of energy. It stands to reason that a revision in a manner that
conforms 43 CFR subpart 3179 with the policies governing venting and
flaring prior to the 2016 final rule will likewise not have an impact
on the supply, distribution, or use of energy. As such, we do not
consider the proposed rule to be a ``significant energy action'' as
defined in Executive Order 13211.
Clarity of This Regulation (Executive Orders 12866)
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 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 proposed rule are: James Tichenor and
Michael Riches of the BLM Washington Office; Rebecca Hunt of the BLM
New Mexico State Office, Eric Jones of the BLM Moab, Utah Field Office;
David Mankiewicz of the BLM Farmington, New Mexico Field Office; and
Beth Poindexter of the BLM Dickinson, North Dakota Field Office;
assisted by Faith Bremner of the BLM's Division of Regulatory Affairs
and by the Department of the Interior's Office of the Solicitor.
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; Government
contracts; Incorporation by reference; Indians--lands; Mineral
royalties; Immediate assessments; Oil and gas exploration; Oil and gas
measurement; Public lands--mineral resources; Reporting and record
keeping requirements; Royalty-free use; Venting.
Dated: February 8, 2018.
Joseph R. Balash,
Assistant Secretary for Land and Minerals Management.
43 CFR Chapter II
For the reasons set out in the preamble, the Bureau of Land
Management proposes to amend 43 CFR parts 3160 and 3179 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; and 43 U.S.C. 1732(b), 1733, and 1740; and Sec. 107, Pub. L.
114-74, 129 Stat. 599, unless otherwise noted.
Sec. 3162.3-1 [Amended]
0
2. Amend Sec. 3162.3-1 by removing paragraph (j).
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.
[[Page 7946]]
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 Venting limitations.
Authorized Flaring and Venting of Gas
3179.101 Initial production testing.
3179.102 Subsequent well tests.
3179.103 Emergencies.
3179.104 Downhole well maintenance and liquids unloading.
Other Venting or Flaring
3179.201 Oil-well gas.
Measurement and Reporting Responsibilities
3179.301 Measuring and reporting volumes of gas vented and flared.
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) 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) This subpart applies to:
(1) All onshore Federal and Indian (other than Osage Tribe) oil and
gas leases, units, and communitized areas, except as otherwise provided
in this subpart;
(2) IMDA oil and gas 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 entered into with the Secretary, unless specifically excluded
in the lease, other business agreement, or Tribal Energy Resource
Agreement;
(4) Committed State or private tracts in a federally approved unit
or communitization agreement defined by or established under 43 CFR
subpart 3105 or 43 CFR part 3180; and
(5) All onshore well facilities located on a Federal or Indian
lease or a federally approved unit or communitized area.
(b) 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
injection and royalty-free on-site uses pursuant to subpart 3178.
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, as determined at the time of
well completion.
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.
Oil well means a well for which the energy equivalent of the oil
produced exceeds the energy equivalent of the gas produced, as
determined at the time of well completion.
Waste of oil or gas means any act or failure to act by the operator
that is not sanctioned by the authorized officer as necessary for
proper development and production, where compliance costs are not
greater than the monetary value of the resources they are expected to
conserve, and which results in: (1) A reduction in the quantity or
quality of oil and gas ultimately producible from a reservoir under
prudent and proper operations; or (2) avoidable surface loss of oil or
gas.
Sec. 3179.4 Determining when the loss of oil or gas is avoidable or
unavoidable.
For purposes of this subpart:
(a) Avoidably lost production means:
(1) Gas that is vented or flared without the authorization or
approval of the BLM; or
(2) Produced oil or gas that is lost when the BLM determines that
such loss occurred as a result of:
(i) Negligence on the part of the operator;
(ii) The failure of the operator to take all reasonable measures to
prevent or control the loss; or
(iii) The failure of the operator to comply fully with the
applicable lease terms and regulations, appropriate provisions of the
approved operating plan, or prior written orders of the BLM.
(b) Unavoidably lost production means:
(1) Oil or gas that is lost because of line failures, equipment
malfunctions, blowouts, fires, or other similar circumstances, except
where the BLM determines that the loss was avoidable pursuant to Sec.
3179.4(a)(2);
(2) Oil or gas that is lost from the following operations or
sources, except where the BLM determines that the loss was avoidable
pursuant to Sec. 3179.4(a)(2):
(i) Well drilling;
(ii) Well completion and related operations;
(iii) Initial production tests, subject to the limitations in Sec.
3179.101;
(iv) Subsequent well tests, subject to the limitations in Sec.
3179.102;
(v) Exploratory coalbed methane well dewatering;
(vi) Emergencies, subject to the limitations in Sec. 3179.103;
(vii) Normal gas vapor losses from a storage tank or other low
pressure production vessel, unless the BLM determines that recovery of
the gas vapors is warranted;
(viii) Well venting in the course of downhole well maintenance and/
or liquids unloading performed in compliance with Sec.
[thinsp]3179.104; or
(ix) Facility and pipeline maintenance, such as when an operator
must blow-down and depressurize equipment to perform maintenance or
repairs; or
(3) Produced gas that is flared or vented with BLM authorization or
approval.
Sec. [thinsp]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. [thinsp]3179.6 Venting limitations.
(a) Gas well gas may not be flared or vented, except where it is
unavoidably lost pursuant to Sec. [thinsp]3179.4(b).
(b) The operator must flare, rather than vent, any gas that is not
captured, except:
[[Page 7947]]
(1) When flaring the gas is technically infeasible, such as when
the gas is not readily combustible or the volumes are too small to
flare;
(2) Under emergency conditions, as defined in Sec.
[thinsp]3179.105, 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 gas vapor is vented from a storage tank or other low
pressure production vessel, unless the BLM determines that recovery of
the gas vapors is warranted;
(5) When the gas is vented during downhole well maintenance or
liquids unloading activities;
(6) When the gas venting is necessary to allow non-routine facility
and pipeline maintenance to be performed, such as when an operator
must, upon occasion, blow-down and depressurize equipment to perform
maintenance or repairs; or
(7) When a release of gas is unavoidable under Sec. [thinsp]3179.4
and flaring is prohibited by Federal, State, local or tribal law,
regulation, or enforceable permit term.
(c) For purposes of this subpart, all flares or combustion devices
must be equipped with an automatic ignition system.
Authorized Flaring and Venting of Gas
Sec. [thinsp]3179.101 Initial production testing.
(a) Gas flared during the initial production test of each completed
interval in a well is royalty free until one of the following occurs:
(1) The operator determines that it has obtained adequate reservoir
information;
(2) 30 days have passed since the beginning of the production test,
unless the BLM approves a longer test period; or
(3) The operator has flared 50 million cubic feet (MMcf) of gas.
(b) The operator may request a longer test period and must submit
its request using a Sundry Notice.
Sec. [thinsp]3179.102 Subsequent well tests.
(a) Gas flared during well tests subsequent to the initial
production test is royalty free for a period not to exceed 24 hours,
unless the BLM approves or requires a longer test period.
(b) The operator may request a longer test period and must submit
its request using a Sundry Notice.
Sec. [thinsp]3179.103 Emergencies.
(a) Gas flared or vented during an emergency is royalty free for a
period not to exceed 24 hours, unless the BLM determines that emergency
conditions exist necessitating venting or flaring for a longer period.
(b) For purposes of this subpart, an ``emergency'' is a temporary,
infrequent and unavoidable situation in which the loss of gas or oil is
uncontrollable or necessary to avoid risk of an immediate and
substantial adverse impact on safety, public health, or the
environment, and is not due to operator negligence.
(c) The following do not constitute emergencies for the purposes of
royalty assessment:
(1) The operator's failure to install appropriate equipment of a
sufficient capacity to accommodate the production conditions;
(2) 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;
(3) Scheduled maintenance;
(4) A situation caused by operator negligence, including recurring
equipment failures; or
(5) A situation on a lease, unit, or communitized area that has
already experienced 3 or more emergencies within the past 30 days,
unless the BLM determines that the occurrence of more than 3
emergencies within the 30 day period could not have been anticipated
and was beyond the operator's control.
(d) 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.
Sec. [thinsp]3179.104 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, 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.
Other Venting or Flaring
Sec. [thinsp]3179.201 Oil-well gas.
(a) Except as provided in Sec. Sec. 3179.101, 3179.102, 3179.103,
and 3179.104 of this subpart, vented or flared oil-well gas is royalty
free if it is vented or flared pursuant to applicable rules,
regulations, or orders of the appropriate State regulatory agency or
tribe.
(b) With respect to production from Indian leases, vented or flared
oil-well gas will be treated as royalty free pursuant to paragraph (a)
of this section only to the extent it is consistent with the BLM's
trust responsibility.
(c) Except as otherwise provided in this subpart, oil-well gas may
not be vented or flared royalty free unless BLM approves it in writing.
The BLM may approve an application for royalty-free venting or flaring
of oil-well gas if it determines that it is justified by the operator's
submission of either:
(1) An evaluation report supported by engineering, geologic, and
economic data that demonstrates to the BLM's satisfaction that the
expenditures necessary to market or beneficially use such gas are not
economically justified. If flaring exceeds 10 MMcf per well during any
month, the BLM may determine that the gas is avoidably lost and
therefore subject to royalty; or
(2) An action plan showing how the operator will minimize the
venting or flaring of the oil-well gas within 1 year. An operator may
apply for approval of an extension of the 1-year time limit, if
justified. If the operator fails to implement the action plan, the gas
vented or flared during the time covered by the action plan will be
subject to royalty. If flaring exceeds 10 MMcf per well during any
month, the BLM may determine that the gas is avoidably lost and
therefore subject to royalty.
(d) The evaluation report in paragraph (c)(1) of this section:
[[Page 7948]]
(1) Must include all appropriate engineering, geologic, and
economic data to support the applicant's determination that marketing
or using the gas is not economically viable. The information provided
must include the applicant's estimates of the volumes of oil and gas
that would be produced to the economic limit if the application to vent
or flare were approved and the volumes of the oil and gas that would be
produced if the applicant was required to market or use the gas. When
evaluating the feasibility of marketing or using of the gas, the BLM
will determine whether the operator can economically operate the lease
if it is required to market or use the gas, considering the total
leasehold production, including both oil and gas, as well as the
economics of a field-wide plan; and
(2) The BLM may require the operator to provide an updated
evaluation report as additional development occurs or economic
conditions improve, but no more than once a year.
(e) An approval to flare royalty free, which is in effect as of the
effective date of this rule, will continue in effect unless:
(1) The approval is no longer necessary because the venting or
flaring is authorized by the applicable rules, regulations, or orders
of an appropriate State regulatory agency or tribe, as provided in
paragraph (a) of this section; or
(2) The BLM requires an updated evaluation report under paragraph
(d)(2) of this section and determines to amend or revoke its approval.
Measurement and Reporting Responsibilities
Sec. [thinsp]3179.301 Measuring and reporting volumes of gas vented
and flared.
(a) The operator must estimate or measure all volumes of lost oil
and gas, whether avoidably or unavoidably lost, from wells, facilities
and equipment on a lease, unit PA, or communitized area and report
those volumes under applicable ONRR reporting requirements.
(b) The operator may:
(1) Estimate or measure vented or flared gas in accordance with
applicable rules, regulations, or orders of the appropriate State or
tribal regulatory agency;
(2) Estimate the volume of the vented or flared gas based on the
results of a regularly performed GOR test and measured values for the
volumes of oil production and gas sales, to allow BLM to independently
verify the volume, rate, and heating value of the flared gas; or
(3) Measure the volume of the flared gas.
(c) The BLM may require the installation of additional measurement
equipment whenever it is determined that the existing methods are
inadequate to meet the purposes of this subpart.
(d) The operator may combine gas from multiple leases, unit PAs, or
communitized areas for the purpose of flaring or venting at a common
point, but must use a method approved by the BLM to allocate the
quantities of the vented or flared gas to each lease, unit PA, or
communitized area.
[FR Doc. 2018-03144 Filed 2-21-18; 8:45 am]
BILLING CODE 4310-84-P