Waste Prevention, Production Subject to Royalties, and Resource Conservation; Rescission or Revision of Certain Requirements, 7924-7948 [2018-03144]
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Federal Register / Vol. 83, No. 36 / Thursday, February 22, 2018 / Proposed Rules
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
Bureau of Land Management,
Interior.
ACTION: Proposed rule.
AGENCY:
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-
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SUMMARY:
COLLECTION ACTIVITIES
Fax: Office of Management and
Budget (OMB), Office of Information
and Regulatory Affairs, Desk Officer for
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the Department of the Interior, fax 202–
395–5806.
Electronic mail: OIRA_Submission@
omb.eop.gov.
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 ccook@blm.gov, 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 fbremner@blm.gov. 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.
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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
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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.
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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.
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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.
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 onsite. The 2016 final rule became
effective on January 17, 2017, with some
requirements taking effect immediately,
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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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,
3 IOGCC, ‘‘Marginal Wells: Fuel for Economic
Growth. 2015 Report.’’ Available on the web at
https://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.
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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
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
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-andminerals/oil-and-gas/oil-and-gas-statistics.
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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,
7 81
FR 6616, 6633–34 (Feb. 8, 2016).
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).
8 Colorado
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and require vapor recovery from tanks
under certain circumstances.10
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,
10 CAL.
CODE REGS.
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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
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.
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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.
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 BLMadministered 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
15 30
U.S.C. 1756.
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’’).
18 81 FR 83008, 83009, 83017 (Nov. 18, 2016).
16 43
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compliance costs well in excess of the
value of the resource to be conserved.
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 (§ 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
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regulations at 40 CFR part 60, subparts
OOOO and OOOOa. Specifically, these
emissions-targeting provisions of the
2016 final rule are §§ 3179.102,
3179.201, 3179.202, and 3179.203, and
§§ 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.
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
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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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.
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
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.
22 Osborne, J., ‘‘Oil companies clamping down on
methane leaks,’’ Houston Chronicle (Dec. 6, 2017);
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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 royaltyfree 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 § 3178.5 is appropriate. The BLM
would like to know whether the
incremental royalty accountability
offered by prior BLM approval justifies
the requirement in § 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
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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
American Petroleum Institute, ‘‘Natural Gas, Oil
Industry Launch Environmental Partnership to
Accelerate Reductions in Methane, VOCs,’’
available at https://www.api.org/news-policy-andissues/news/2017/12/04/natural-gas-oilenvironmental-partnership-accelerate-reductionsmethane-vocs.
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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 wasteminimization 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 wasteminimization 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 § 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
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7929
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 § 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 § 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 § 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 § 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
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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 countywide 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 royaltyfree 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 § 3179.12
(providing for coordination with States
and tribes when any requirement would
adversely impact production from nonFederal 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
§ 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), § 3179.7 would allow the operator to
flare gas from a Federal well in order to
produce more gas from a nearby nonFederal 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
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wells. A small operator with only a few
wells in an area with inadequate gascapture infrastructure would likely be
faced with curtailing production or
violating § 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 royaltyfree 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 § 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 § 3179.7. In order to
obtain this lower capture requirement,
an operator must demonstrate that the
applicable capture percentage under
§ 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 § 3179.7, the BLM is
also proposing to rescind the
mechanism for obtaining a lower
capture requirement. If § 3179.7 is
rescinded, there is no need for § 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, § 3179.11 was intended to
clarify how the BLM may exercise
existing authorities in addressing the
waste of gas. However, the BLM
understands that § 3179.11 could easily
be misread to indicate that the BLM has
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plenary authority to curtail production
or delay or condition APDs regardless of
the circumstances. Because § 3179.11 is
unnecessary and is susceptible to
misinterpretation, the BLM is proposing
to rescind § 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 nonFederal 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 nonIndian oil and gas. The BLM is
proposing to rescind § 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 § 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 § 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
§ 3179.101 because it would be
duplicative under revised subpart 3179.
In essence, § 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 § 3179.6(b). Current
§ 3179.101(b) states that where gas is
lost during a loss of well control, the
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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 § 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 § 3179.102 addresses gas that
reaches the surface during wellcompletion, post-completion, and fluidrecovery 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 § 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 § 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 § 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 § 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 § 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 § 3179.102, the BLM
has concluded that § 3179.102 is
duplicative and unnecessary. In the
2016 final rule, the BLM recognized the
duplicative nature of § 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
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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
§ 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 § 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
§ 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
23 EPA. Inventory of U.S. Greenhouse Gas
Emissions and Sinks: 1990–2015 (published April
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CFR part 60, subparts OOOO and
OOOOa that require new, modified, or
reconstructed continuous bleed
controllers to be low-bleed.
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
§ 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 § 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,
§ 3179.202 requires that the operator
either replace the pump with a zeroemissions 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
2017). Annex 3. Data are available in Table 3.5–5
and Table 3.6–7.
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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 lowpressure 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 lowpressure combustion device. Under
§ 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 § 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
§ 3179.202 in its entirety. The BLM is
concerned that the costs of compliance
with § 3179.202 outweigh the value of
its conservation effects. The BLM
estimates that § 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 § 3179.202 in its
entirety.
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
§ 3179.203 in its entirety. The BLM is
concerned that the costs of compliance
with § 3179.203 outweigh the value of
its conservation effects. The BLM
estimates that § 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 § 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
§ 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
§ 3179.203, the BLM is proposing to
rescind § 3179.203 in its entirety.
Finally, we note that, even if § 3179.203
is rescinded as proposed, the BLM
would retain the authority to impose
royalties on vapor losses from storage
vessels under proposed
§ 3179.4(b)(2)(vii) when the BLM
determines that recovery of the vapors
is warranted.
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), § 3179.203 requires
operators to route all gas vapor from the
vessels to a sales line. Alternatively, the
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
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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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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 § 3179.304 prescribes
the time frames for repairing leaks
found during inspections. Finally,
§ 3179.305 requires operators to
maintain records of their LDAR
activities and submit an annual report to
the BLM. Pursuant to § 3179.301(f) (as
amended by the 2017 Suspension Rule),
operators must begin to comply with the
LDAR requirements of §§ 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
§§ 3179.301 to 3179.305 in their
entirety. The BLM is concerned that the
costs of compliance with §§ 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
§§ 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
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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
§ 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 § 3179.201.
2. Revised Subpart 3179
With this proposed rule, the BLM
would revise subpart 3179, as follows:
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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 § 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 § 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
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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 § 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 § 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 § 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
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(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 § 3179.4 describes the
circumstances under which lost oil or
gas would be classified as ‘‘avoidably
lost’’ or ‘‘unavoidably lost.’’ Under
proposed § 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
§ 3179.4 includes concepts from both
existing § 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 § 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
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in existing § 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 § 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
§ 3179.4(b)(2)(i) through (vi) are the
same as paragraphs (a)(1)(i) through (vi)
in existing § 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
§ 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
§ 3178.4(a)(3).
Proposed paragraph (b)(2)(vii) is
similar to existing § 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 lowpressure production vessel would be
unavoidably lost, unless the BLM
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determines that recovery of the vapors
is warranted. Changing the phrase
‘‘operating losses’’ (as used in existing
§ 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 § 3179.4(b)(2)(viii) is the
same as existing § 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 § 3179.104 is an
operation from which lost gas is
considered ‘‘unavoidably lost.’’
The proposed revision does not retain
existing § 3179.4(a)(1)(x), which
classifies leaks as unavoidable losses
when the operator has complied with
the LDAR requirements in existing
§§ 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
§ 3179.4(b) to provide clarity to the
BLM’s position that leaks are considered
unavoidably lost.
Proposed § 3179.4(b)(2)(ix) is the
same as existing § 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 § 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 § 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
§ 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,
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would no longer be royalty free if the
operator failed to meet the gas capture
requirements imposed by existing
§ 3179.7 and the flared gas thus became
royalty-bearing ‘‘excess flared gas.’’
Because the BLM is proposing to
rescind § 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 § 3179.201,
which is discussed in more detail
below.
Proposed § 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 § 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
§ 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
§ 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 § 3179.6(a) is the same as
the existing § 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 § 3179.4(b). This same
restriction on the flaring of gas-well gas
was included in NTL–4A.
Both proposed and existing
§ 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
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gas due to safety concerns. Proposed
§ 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 § 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 § 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 § 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
§ 3179.4(b)(vii) and to remove the crossreference to the storage tank
requirements in existing § 3179.203,
which the BLM is proposing to rescind.
The fifth flaring exception, listed in
proposed § 3179.6(b)(5), would apply to
gas that is vented during downhole well
maintenance or liquids unloading
activities. This is similar to existing
§ 3179.6(b)(5), except that the proposed
rule would remove the cross reference
to existing § 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
§ 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
§ 3179.6(b)(6), which applies when gas
is vented through a leak, provided that
the operator has complied with the
LDAR requirements in §§ 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 § 3179.6(b)(6), is identical to
the exception listed in existing
§ 3179.6(b)(7). This exception would
allow gas venting that is necessary to
allow non-routine facility and pipeline
maintenance to be performed.
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The seventh flaring exception, listed
in proposed § 3179.6(b)(7), is identical
to the exception listed in existing
§ 3179.6(b)(8). This exception would
allow venting when a release of gas is
unavoidable under § 3179.4, and
Federal, State, local, or tribal law,
regulation, or enforceable permit terms
prohibit flaring.
Proposed § 3179.6(c) is identical to
existing § 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 3179.101
Testing
Initial Production
Proposed § 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 § 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 § 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 royaltyfree initial production testing. Existing
§ 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 § 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 § 3179.103, similar to
proposed § 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
§ 3179.103 provides additional time for
dewatering and testing exploratory
coalbed methane wells. Under existing
§ 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
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longer test period was authorized by the
State and accepted by the BLM.
The volume and duration limits in
proposed § 3179.101 are similar to those
in existing § 3179.103. Both sections
allow 30 days from the start of the test,
and both allow for extensions of time.
However, existing § 3179.103 limits an
extension to no more than 60 days,
whereas proposed § 3179.101 does not
specify an extension limit. Proposed
§ 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
§ 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 § 3179.103 is
the most notable difference between it
and this proposed rule with regard to
the initial production testing. Existing
§ 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 § 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 3179.102 Subsequent Well
Tests
Proposed § 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
§ 3179.102(b) provides that the operator
may request a longer test period and
must submit its request using a Sundry
Notice. Proposed § 3179.102 is
functionally identical to existing
§ 3179.104.
NTL–4A included royalty-free
provisions for ‘‘evaluation tests’’ and for
‘‘routine or special well tests.’’ Because
NTL–4A also contained specific
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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 § 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 § 3179.102 improves upon
NTL–4A by making the requirements for
subsequent well tests more clear.
43 CFR 3179.103 Emergencies
Under proposed § 3179.4(b)(2)(vi),
royalty is not due on gas that is lost
during an emergency. Proposed
§ 3179.103 describes the conditions that
constitute an emergency, and lists
circumstances that do not constitute an
emergency. As provided in proposed
§ 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 § 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
§ 3179.103 are nearly identical to those
in existing § 3179.105. The most notable
change from the 2016 final rule is in
describing those things that do not
constitute an emergency. Where existing
§ 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 § 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
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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 § 3179.105 and
proposed § 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 § 3179.4(b)(2)(viii),
gas lost in the course of downhole well
maintenance and/or liquids unloading
performed in compliance with proposed
§ 3179.104 is royalty free. Proposed
§ 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 § 3179.104(a) also states that
gas vented from a plunger lift system
and/or an automated well control
system is royalty free. Proposed
§ 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 § 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 § 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 § 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 § 3179.104(e) is
identical to existing § 3179.204(g).
Existing § 3179.204 requires the
operator to ‘‘minimize vented gas’’ in
liquids unloading operations, but does
not impose volume or duration limits.
As with proposed § 3179.104, existing
§ 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
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the event. Existing § 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 § 3179.204 and
proposed § 3179.104 is that existing
§ 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 § 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
§ 3179.104 and existing § 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
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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 § 3179.204 are unnecessary and
unduly burdensome. In particular, the
reporting requirement of existing
§ 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 § 3179.204.
As mentioned above, proposed
§ 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
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43 CFR 3179.201
Oil Well Gas
Proposed § 3179.201 would govern
the routine flaring of associated gas from
oil wells. The requirements of proposed
§ 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 §§ 3179.101 through 3179.104.
Proposed § 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
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‘‘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.
It is the intent of proposed
§ 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
§ 3179.201(a) achieves that intent.
Proposed § 3179.201(b) exclusively
addresses oil-well gas production from
25 These States are: New Mexico, Wyoming,
Colorado, Utah, Montana, Texas, and Oklahoma.
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7937
an Indian lease. Vented or flared oilwell gas from an Indian lease will be
treated as royalty free pursuant to
proposed § 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 § 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.
As under NTL–4A, the evaluation
report required under proposed
§ 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 § 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
26 Available at https://www.ntc.blm.gov/krc/
uploads/172/NTL-4A%20Royalty
%20or%20Compensation%20for%20Oil%20
and%20Gas%20Lost.pdf.
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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
§ 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
§ 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 § 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 § 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 § 3179.201(a), or the BLM
requires an updated evaluation report
and determines to amend or revoke its
approval. Existing § 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 § 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).
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Measurement and Reporting
Responsibilities
protocol when the volume of flared gas
exceeds 50 Mcf per day.
43 CFR 3179.301 Measuring and
Reporting Volumes of Gas Vented and
Flared
C. Summary of Estimated Impacts
Proposed § 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
§ 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 § 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 § 3179.301(c)
would help to ensure accuracy and
accountability in situations in which
high volumes of royalty-bearing gas are
being flared.
Proposed § 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 § 3179.301 is essentially the
same as existing § 3179.9. The main
difference between the two is that
existing § 3179.9 requires measurement
or calculation under a particular
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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.
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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 10year 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).
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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
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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
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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
(§§ 3179.7–3179.8) and the
measurement/metering requirements
(§ 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.
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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
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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
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 lowproducing 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
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.
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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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.
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
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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.
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.
daltland on DSKBBV9HB2PROD with PROPOSALS2
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.
Small Business Regulatory Enforcement
Fairness Act
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
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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 foreignbased 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.
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7941
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
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Federal Register / Vol. 83, No. 36 / Thursday, February 22, 2018 / Proposed Rules
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
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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).
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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 OnLease 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 OffLease.’’
The BLM requests comments on the
following subjects:
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• 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.
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Estimated Total Annual Burden
Hours: 4,010.
Estimated Total Non-Hour Cost:
None.
daltland on DSKBBV9HB2PROD with PROPOSALS2
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 § 3178.3 that is not
identified in § 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, resourceprotection, 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 §§ 3178.4 through 3178.7;
and
• Royalty-free oil used pursuant to
§§ 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
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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 § 3173.12, as
well as § 3178.4 through § 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
§ 3178.5, or for prior approval of offlease royalty-free use under § 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:
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• 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 renamed ‘‘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
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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 OnLease 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:
daltland on DSKBBV9HB2PROD with PROPOSALS2
Type of response
Number of
responses
Hours per
response
Total hours
(column B ×
column C)
A
B
C
D
Request for Approval for Royalty-Free Uses On-Lease or Off-Lease, 43 CFR 3178.5, 3178.7,
3178.8, and 3178.9, Form 3160–5 ..........................................................................................
Request for Extension of Royalty-Free Flaring During Initial Production Testing, 43 CFR
3179.101, Form 3160–5 ...........................................................................................................
Request for Extension of Royalty-Free Flaring During Subsequent Well Testing, 43 CFR
3179.102, Form 3160–5 ...........................................................................................................
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50
8
400
750
2
1,500
5
2
10
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Type of response
Number of
responses
Hours per
response
Total hours
(column B ×
column C)
A
B
C
D
Emergencies, 43 CFR 3179.103, Form 3160–5 .........................................................................
Oil-Well Gas, 43 CFR 3179.201 ..................................................................................................
250
20
2
80
500
1,600
Totals ....................................................................................................................................
1,075
........................
4,010
daltland on DSKBBV9HB2PROD with PROPOSALS2
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.’’
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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
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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
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.
§ 3162.3–1
[Amended]
2. Amend § 3162.3–1 by removing
paragraph (j).
■
PART 3170—ONSHORE OIL AND GAS
PRODUCTION
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.
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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
§ 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.
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§ 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
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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.
§ 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.
§ 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
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(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 § 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
§ 3179.4(a)(2):
(i) Well drilling;
(ii) Well completion and related
operations;
(iii) Initial production tests, subject to
the limitations in § 3179.101;
(iv) Subsequent well tests, subject to
the limitations in § 3179.102;
(v) Exploratory coalbed methane well
dewatering;
(vi) Emergencies, subject to the
limitations in § 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 § 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.
§ 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.
§ 3179.6
Venting limitations.
(a) Gas well gas may not be flared or
vented, except where it is unavoidably
lost pursuant to § 3179.4(b).
(b) The operator must flare, rather
than vent, any gas that is not captured,
except:
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(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 § 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 gasactivated 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 § 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
§ 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.
daltland on DSKBBV9HB2PROD with PROPOSALS2
§ 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.
§ 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
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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.
§ 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
PO 00000
Frm 00025
Fmt 4701
Sfmt 4702
7947
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
§ 3179.201
Oil-well gas.
(a) Except as provided in §§ 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:
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daltland on DSKBBV9HB2PROD with PROPOSALS2
(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
VerDate Sep<11>2014
21:40 Feb 21, 2018
Jkt 244001
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
§ 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
PO 00000
Frm 00026
Fmt 4701
Sfmt 9990
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
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[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
[[Page 7926]]
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 https://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.
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\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.
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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\
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\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 https://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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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
