Consistent with President Obama’s “Climate Action Plan,” the Bureau of Land Management (BLM) recently released proposed rules intended to significantly curb emissions from new and existing oil and gas production wells on federal and tribal lands. In total, BLM proposes to cut natural gas emissions (from both intentional and unintentional releases) associated with oil and gas wells on all federal public lands by 50%. This will be accomplished through modernizing the current regulations (which are over 30 years old) by requiring operators to adopt best practices and updated technologies.
In the 30 years since the current regulations were adopted, the U.S. has become the world’s largest producer of natural gas and crude oil, and in the process methane emissions from oil and gas production sites have correspondingly increased. According to EPA, oil and gas methane emissions from federal and tribal lands account for 4 percent of total domestic methane emissions, which represent a small percentage of the country’s total greenhouse gas (GHG) emissions, but are considered many times more harmful than other constituents. BLM estimates that the amount of natural gas wasted during venting, flaring and leaks from 2009 through 2014 could have powered more than 4 million homes. Further, in 2010 the Government Accountability Office estimated that States, tribes, and federal taxpayers are losing an estimated $23 million annually in royalties from wasted emissions.
Under the Mineral Leasing Act, BLM is tasked with requiring that operators “use all reasonable precautions to prevent waste of oil or gas.” In this proposal, the Bureau proposes to curb methane waste by: (1) limiting routine gas flaring from production wells through reductions that would be phased in over 3 years; (2) requiring pre-drilling plans for the capture of natural gas; (3) require operators use an instrument-based leak detection program to locate and repair leaks through biannual inspections; and (4) almost entirely eliminate venting except in limited circumstances for emergencies and certain equipment. The regulations would apply throughout the supply chain to include increased reporting requirements, replacement of outdated components, and installation of pneumatic controls.
Various aspects of the proposal, such as leak detection and limiting venting and flaring, borrow from existing requirements in Colorado and Wyoming, as well as EPA proposed rules published last August. Toward that end, BLM noted that it is coordinating closely with EPA on the rulemaking to ensure that the two agency proposals are complimentary and avoid duplication. While EPA’s proposed rules are directed at air pollution and focus on new sources, BLM’s proposal is directed at waste prevention. As a result, EPA’s proposal would apply to new or modified oil and gas wells (and be voluntary for existing infrastructure), whereas BLM’s proposal would apply to all new and existing wells on federal or tribal lands. In addition, BLM’s proposal would revise current regulations to provide BLM with flexibility to raise the royalty rate for onshore oil and gas production leases, although no hike is currently planned. Under current regulations, BLM has no authority to raise the rate as conditions change.
Industry groups have argued that the BLM regulations are unnecessary, duplicative, and harmful because they would lead to less federal revenue, fewer jobs, increased consumer costs and less energy security. According to an industry group, the Western Energy Alliance, oil and natural gas producers have voluntarily decreased methane emissions by 21% since 1990 through gas capture and reduced leakage rates, even as natural gas production increased by 47%. Further, BLM’s statutory authority to issue the methane rule has already been questioned by the Western Energy Alliance and it is expected that a final rule may be subject to challenge.
Comments are due within 60 days of the publication of the proposed rule in the Federal Register (which is forthcoming), but BLM hopes to issue a final rule by the end of 2016. The Bureau plans to hold a series of meetings on the rule in February and March. The proposed rule comes on the heels of the Department of the Interior’s decision to halt new leases for coal mining on public lands and to reform the program for leasing federal lands to coal companies.