Waste Prevention, Production Subject to Royalties, and Resource Conservation, 73588-73620 [2022-25345]

Download as PDF 73588 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules DEPARTMENT OF THE INTERIOR Bureau of Land Management 43 CFR Parts 3160 and 3170 [212.LLHQ300000.L13100000.PP0000] RIN 1004–AE79 Waste Prevention, Production Subject to Royalties, and Resource Conservation Bureau of Land Management, Interior. ACTION: Proposed rule. AGENCY: The Bureau of Land Management (BLM) is proposing new regulations to reduce the waste of natural gas from venting, flaring, and leaks during oil and gas production activities on Federal and Indian leases. The proposed regulations would be codified in the Code of Federal Regulations and would replace the BLM’s current requirements governing venting and flaring, which are more than four decades old. DATES: Send your comments on this proposed rule to the BLM on or before January 30, 2023. The BLM is not obligated to consider any comments received after this date in making its decision on the final rule. If you wish to comment on the information collection requirements in this proposed rule, please note that the Office of Management and Budget (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 proposed rule in the Federal Register. Therefore, comments should be submitted to OMB by December 30, 2022. ADDRESSES: Mail, personal, or messenger delivery: U.S. Department of the Interior, Director (630), Bureau of Land Management, 1849 C St. NW, Room 5646, Washington, DC 20240, Attention: 1004–AE79. Federal eRulemaking Portal: https:// www.regulations.gov. In the Searchbox, enter ‘‘RIN 1004–AE79 and click the ‘‘Search’’ button. Follow the instructions at this website. For Comments on InformationCollection Requirements: Written comments and recommendations for the information collection requirements should be sent within 30 days of publication of this notice to www.reginfo.gov/public/do/PRAMain. Find this particular information collection by selecting ‘‘Currently under Review—Open for Public Comments’’ or lotter on DSK11XQN23PROD with PROPOSALS2 SUMMARY: VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 by using the search function. You may also provide a copy of your comments to the BLM’s Information Collection Clearance Officer to the above address with ‘‘Attention PRA Office,’’ or by email to BLM_HQ_PRA_Comments@ blm.gov. Please reference OMB Control Number 1004–0211 and RIN 1004–AE79 in the subject line of your comments. FOR FURTHER INFORMATION CONTACT: Lonny Bagley, Acting Division Chief, Fluid Minerals Division, telephone: 307–622–6956, or email: lbagley@ 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 email: fbremner@blm.gov. Individuals in the United States who are deaf, deafblind, hard of hearing, or have a speech disability may dial 711 (TTY, TDD, or TeleBraille) to access telecommunications relay services for contacting Mr. Bagley. Individuals outside the United States should use the relay services offered within their country to make international calls to the point-of-contact in the United States. SUPPLEMENTARY INFORMATION: I. Executive Summary II. Public Comment Procedures III. Background IV. Section-by-Section Discussion V. Procedural Matters I. Executive Summary This proposed regulation aims to reduce the waste of natural gas from oil and gas leases administered by the BLM. This gas is lost during oil and gas exploration and production activities through venting, flaring, and leaks. Although some losses of gas may be unavoidable, the law requires that operators take reasonable steps to prevent the waste of gas through venting, flaring and leakage. The proposed rule describes the reasonable steps that operators of Federal and Indian oil and gas leases must take to avoid the waste of natural gas. The proposed rule would also ensure that, when Federal or Indian gas is wasted, the public and Indian mineral owners are compensated through royalty payments. The BLM conducts a Federal onshore oil and gas leasing program pursuant to the requirements of various statutes, including the Mineral Leasing Act (MLA), the Federal Oil and Gas Royalty Management Act (FOGRMA), the Inflation Reduction Act of 2022, and the Federal Land Policy and Management Act (FLPMA). The MLA requires lessees to ‘‘use all reasonable precautions to PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 prevent waste of oil or gas developed in the land,’’ 1 and further requires oil and gas lessees to observe ‘‘such rules . . . for the prevention of undue waste as may be prescribed by [the] Secretary.’’ 2 Under FOGRMA, oil and gas lessees are liable for royalty payments on gas wasted from the lease site.3 In addition, as discussed further later, a provision of the Inflation Reduction Act (‘‘IRA’’), Public Law 117–169, provides that, for leases issued after August 16, 2022, royalties are owed on all gas produced from Federal land, subject to certain exceptions for gas lost during emergency situations, gas used for the benefit of lease operations, and gas that is ‘‘unavoidably lost.’’ FLPMA authorizes the BLM to ‘‘regulate’’ the ‘‘use, occupancy, and development’’ of the public lands via ‘‘published rules,’’ while mandating that the Secretary, ‘‘[i]n managing the public lands . . . shall, by regulation or otherwise, take any action necessary to prevent unnecessary or undue degradation of the lands.’’ In addition to managing the leasing and production of oil and gas from Federal lands, the BLM also oversees operations on many Indian and Tribal oil and gas leases pursuant to a delegation of authority from the Secretary of the Interior.4 The Secretary’s management and regulation of Indian mineral interests carries with it the duty to act as a trustee for the benefit of the Indian mineral owners. This proposed rule would replace the BLM’s current requirements governing venting and flaring, which are contained in Notice to Lessees and Operators of Onshore Federal and Indian Oil and Gas Leases: Royalty or Compensation for Oil and Gas Lost (‘‘NTL–4A’’).5 NTL–4A was issued more than 40 years ago and its policies and requirements have become outdated. To begin, NTL–4A is ill-suited to address the large volume of flaring associated with the rapid development of unconventional tight oil and gas resources that has occurred in recent years. In addition, NTL–4A does not account for technological and operational advancements that can reduce losses of gas from oil storage tanks, pneumatic equipment, and equipment leaks. In 2016, the BLM issued a final rule replacing NTL–4A with new regulations intended to reduce the waste of gas from 1 30 U.S.C. 225. U.S.C. 187. 3 30 U.S.C. 1756. 4 Department of the Interior, Departmental Manual, 235 DM 1.1K. 5 44 FR 76600 (Dec. 27, 1979). 2 30 E:\FR\FM\30NOP2.SGM 30NOP2 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 venting, flaring, and leaks.6 However, industry groups and a set of States immediately challenged that rule in Federal court, and the BLM never fully implemented the rule due to that litigation.7 In September 2018, the BLM issued a final rule effectively rescinding the 2016 Rule.8 Environmental groups and a different set of States then challenged that rule in Federal court. Eventually, a U.S. District Court vacated the 2018 rescission of the 2016 Rule on various grounds, including that the resulting regulatory regime would fail to meet the BLM’s statutory mandate to prevent waste.9 Then a different U.S. District Court vacated the 2016 Rule on the grounds that, among other things: (1) the MLA’s ‘‘delegation of authority does not allow and was not intended to authorize the enactment of rules justified primarily upon the ancillary benefit of a reduction in air pollution’’; and (2) ‘‘BLM acted arbitrarily and capriciously in failing to fully assess the impacts of the [2016 Rule] on marginal wells, failing to adequately explain and support the [2016 Rule’s] capture requirements, and failing to separately consider the domestic costs and benefits of the [2016 Rule].’’ 10 The end result of these rulemakings and court decisions is that NTL–4A continues to govern venting and flaring from BLM-managed oil and gas leases. These recent rulemakings and the related litigation have provided the BLM with two important lessons. First, there are opportunities for the BLM to reduce the waste of natural gas through improved regulatory requirements pertaining to venting, flaring, and leaks. Second, courts disagreed as to whether the BLM’s regulatory authority allows for all of the 2016 Rule provisions. The BLM, therefore, has chosen an approach that seeks to improve upon NTL–4A in a variety of significant ways while eschewing certain elements of the 2016 Rule that were the focus of an unfavorable court ruling. In brief, the primary components of this proposed rule are as follows: • The proposed rule would establish the general rule that ‘‘operators must use all reasonable precautions to prevent the waste of oil or gas developed from the lease.’’ It notes that the BLM may specify reasonable measures to prevent waste as conditions of approval of an Application for Permit 6 81 FR 83008 (Nov. 18, 2016). Wyoming v. U.S. Dept. of the Interior, 493 F. Supp. 3d 1046, 1052–1057 (D. Wyo. 2020). 8 83 FR 49184 (Sept. 28, 2018). 9 California v. Bernhardt, 472 F. Supp. 3d 573 (N.D. Cal. 2020). 10 See Wyoming v. U.S. Dept. of the Interior, 493 F. Supp. 3d 1046, 1086–87 (D. Wyo. 2020). 7 See VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 to Drill and, after an Application for Permit to Drill is approved, the BLM may order an operator to implement, within a reasonable time, additional reasonable measures to prevent waste at ongoing exploration and production operations. Reasonable measures to prevent waste may reflect factors including, but not limited to, relevant advances in technology and changes in industry practice. • The proposed rule would require operators to submit a waste minimization plan with all applications for permits to drill oil wells. This plan would provide the BLM with information on anticipated associated gas production, the operator’s capacity to capture that gas production for sale or use, and other steps the operator commits to take to reduce or eliminate gas losses. Where the available information indicates that the plan does not take reasonable steps to avoid wasting gas, the BLM may delay action on the permit until the operator adequately addresses the plan’s deficiencies to the BLM’s satisfaction. • The proposed rule would recognize, and clarify, that oil or gas can be ‘‘unavoidably lost’’ in connection with certain oil and gas operations. Unavoidably lost oil or gas will not be considered wasted and therefore not be subjected to royalty payments. In particular, if the operator has not been negligent; has taken ‘‘prudent and reasonable steps to avoid waste;’’ complied fully with applicable laws, lease terms, regulations, provisions of a previously approved operating plan, and other written orders of the BLM; and the loss is within the time or volume limits applicable to the particular situation; then the lost oil or gas will qualify as ‘‘unavoidably lost’’ waste gas for which no royalties are owed. • The proposed rule would lay out a number of specific circumstances in which lost oil or gas would be considered ‘‘unavoidably lost,’’ including during well completions, production testing, and emergencies. The proposed rule would also establish a monthly volume limit on royalty-free flaring due to pipeline capacity constraints, midstream processing failures, or other similar events that may prevent produced gas from being transported to market. • The proposed rule would include a number of specific affirmative obligations that operators must take to avoid wasting oil or gas. In particular: Æ For certain operators on Federal or Indian leases, or Indian Mineral Development Act (IMDA) agreements, the proposed rule would prohibit the PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 73589 use of natural-gas-activated pneumatic controllers or pneumatic diaphragm pumps with a bleed rate that exceeds 6 standard cubic feet (scf)/hour. Æ The proposed rule would, where technically and economically feasible, require oil storage tanks on Federal or Indian leases to be equipped with a vapor recovery system or other mechanism that avoids the loss of natural gas from the tank. Æ The proposed rule would require operators on Federal or Indian leases to maintain a leak detection and repair (LDAR) program designed to prevent the unreasonable and undue waste of Federal or Indian gas. An operator’s LDAR program must provide for regular inspections of all oil and gas production, processing, treatment, storage, and measurement equipment on the lease site. The requirements of this proposed rule are explained in detail in sections III and IV that follow. As detailed in the Regulatory Impact Analysis (RIA) prepared for this proposed rule, the BLM estimates that this rule would have the following economic impacts: • Costs to industry of around $122 million per year (annualized at 7 percent); • Benefits to industry in recovered gas of $55 million per year (annualized at 7 percent); • Increases in royalty revenues from recovered and flared gas of $39 million per year; and • Benefits to society of $427 million per year from reduced greenhouse gas emissions. 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, explain the reason for any changes you recommend, and include any supporting documentation. 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 previously (see ADDRESSES). Comments, including names and street addresses of respondents, will be E:\FR\FM\30NOP2.SGM 30NOP2 73590 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules 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 DATES and ADDRESSES sections. Please note that due to COVID–19, electronic submission of comments is recommended. III. Background A. Waste of Natural Gas During the Development of Federal and Indian Oil and Gas Resources The BLM is responsible for managing more than 245 million acres of land and 700 million acres of subsurface mineral estate—the latter being nearly a third of the nation’s total land mass. The BLM maintains a program for leasing these lands for oil and gas development and regulates oil and gas production operations on Federal leases. While the BLM does not manage the leasing of Indian and Tribal lands for oil and gas production, the BLM does regulate oil and gas operations on many Indian and Tribal leases as part of its Tribal trust responsibilities. The BLM’s onshore oil and gas management program is a major contributor to the nation’s oil and gas production. Domestic production from 88,887 Federal onshore oil and gas wells 11 accounts for approximately 8 percent of the Nation’s natural gas supply and 9 percent of its oil.12 In Fiscal Year (FY) 2021, operators produced 473 million barrels of oil and 3.65 trillion cubic feet (Tcf) of natural gas from onshore Federal and Indian oil and gas leases. The production of this oil and gas generated more than $4.2 billion in royalties. Approximately $3.2 billion of these royalties were split between the United States and the States in which the production occurred. Approximately $1 billion of these royalties went directly to Tribes and Indian allottees for production from Indian lands.13 In recent years, the United States has experienced a significant increase in oil and natural gas production due to technological advances, such as hydraulic fracturing combined with directional drilling. This increase in production has been accompanied by a significant waste of natural gas through venting and flaring. As the following graph illustrates, the amount of venting and flaring from Federal and Indian leases has increased dramatically from the 1990s to the 2010s, and the upward trend in flaring suggests that it will continue to be a problem in the coming years. Between 1990 and 2000, the total venting and flaring reported by Federal and Indian onshore lessees averaged approximately 11 billion cubic feet (Bcf) per year. Between 2010 and 2020, in contrast, the total venting and flaring reported by Federal and Indian onshore lessees averaged approximately 44.2 Bcf per year.14 - -1 I Reported Venting and Flaring From Onshore Federal and Indian leases 1.00,000,000 _. V > ··-·-- ··-- ---·-- 90,C00,000 80,000,000 ·-·------•-.> ··-•·---·--· I l ··-----· ·---------------~- . I l t ! 70,000,000 'ti 2 60,000,000 50,000,000 0 .-l N m <ot IJ'l II> 1' CIC 0\ 0 sssssssssss NNNNNNNNNNN I Years 1 \'.'!'~!t~~~'.!'~e'·~~:~-!!1"~:,.,~~~..!~t~.:!!'-':!!~~~~~~.~,~,,,~\!t'.~\~~·~~~-'!!.~~:·~~·~~1!:'~.~~~~,: ~~·":~''!J~:~,.,,'t~'~~"';!'~~~~·~ Assuming a $3 per thousand cubic feet (Mcf) price of gas,15 the Federal and Indian gas that was vented and flared from 2010 to 2020 would be valued at $1.46 billion. The BLM notes that vented and flared volumes have not 11 BLM Public Lands Statistics, Table 9 (FY 2021 data), available at https://www.blm.gov/programsenergy-and-minerals-oil-and-gas-oil-and-gasstatistics. 12 Bureau of Land Management Budget Justifications and Performance Information Fiscal Year 2023, p. V–79, available at https:// www.doi.gov/sites/doi.gov/files/fy2023-blmgreenbook.pdf. 13 Production and revenue number derived from data maintained by the Office of Natural Resources Revenue at https://revenuedata.doi.gov/. 14 BLM analysis of ONRR Oil and Gas Operations Report Part B (OGOR–B) data provided for 1990– 2000 and 2010–2020. 15 The average annual Henry Hub spot price for natural gas from 2010 through 2020 was $3.19. U.S. Energy Information Administration (EIA), Henry Hub Natural Gas Spot Price, available at https:// www.eia.gov/dnav/ng/hist/rngwhhda.htm. VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 E:\FR\FM\30NOP2.SGM 30NOP2 EP30NO22.000</GPH> lotter on DSK11XQN23PROD with PROPOSALS2 1 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules increased linearly with production. According to data maintained by the Office of Natural Resources Revenue (ONRR), the average volume of vented and flared gas as a percentage of total gas production was 0.42 percent from 1990–2000. From 2010–2020, however, vented and flared gas averaged 1.07 percent of total gas production. This metric indicates a 157 percent increase in the waste of gas during oil and gas production from Federal and Indian lands. Furthermore, the average amount of vented and flared gas (Mcf) per barrel 73591 (bbl) of oil production was 0.8148 Mcf/ bbl from 1990 to 2000, while it rose to 1.6418 Mcf/bbl from 2010 to 2020—a 102 percent increase in the waste of gas per barrel of oil produced. Vented/flared gas a Percentage of Tota! Gas Production{Annual Average) 1.20% 1990-2000 16 Alvarez, et al., ‘‘Assessment of methane emissions from the U.S. oil and gas supply chain,’’ Science 361 (2018); see also 81 FR 83015–17. 17 EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2019 at 3–73 (2019). 18 Zhang, et al., ‘‘Quantifying methane emissions from the largest oil-producing basin in the United States from space,’’ Science Advances 6 (2020). VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 Excessive venting, flaring, and leaks by Federal oil and gas lessees is wasting valuable publicly owned resources that could be put to productive use, and depriving American taxpayers, Tribes, and States of substantial royalty revenues. In addition, the wasted gas may harm local communities and surrounding areas through visual and noise impacts from flaring, while also contributing to local and regional exposure to smog and other harmful air pollutants such as small particulates and benzene. Vented or leaked gas also contributes to climate change, because the primary constituent of natural gas is methane, an especially powerful greenhouse gas, with climate impacts roughly 28–36 times those of carbon dioxide (CO2), if measured over a 100year period, or 84 times those of CO2 if measured over a 20-year period.19 Thus, regulatory measures that encourage operators to conserve gas and avoid waste could also significantly benefit public health and the environment as well as provide additional benefits to local communities.20 To be clear, as the BLM has consistently recognized during its many decades of implementing the MLA, not 19 See Intergovernmental Panel on Climate Change, Climate Change 2013: The Physical Science Basis, Chapter 8, Anthropogenic and Natural Radiative Forcing, at 714 (Table 8.7), available at https://www.ipcc.ch/pdf/assessment-report/ar5/ wg1/WG1AR5_Chapter08_FINAL.pdf. 20 The BLM notes that the BLM did not rely on such ancillary benefits in developing or selecting the waste prevention/resource conservation provisions presented in this proposed rule. Rather, with the exception of the safety provisions in proposed § 3179.6, the requirements of this proposed rule are independently justified as reasonable measures to prevent waste that would be expected of a prudent operator, regardless of ancillary benefits to public health or the environment. PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 every loss of natural gas during oil and gas production constitutes waste under the MLA. Indeed, some amount of venting and flaring is unavoidable and expected to occur during oil and gas exploration and production operations. For example, an operator may need to flare gas on a short-term basis as part of drilling operations, well completion, or production testing, among other situations. Longer-term flaring may occur in exceptional circumstances, which might include the drilling of and production from a wildcat well in a new field, where gas pipelines have not yet been built due to a lack of information regarding expected gas production.21 In some fields, the overall quantity of gas produced may be so small that the development of gas pipeline infrastructure may not be economically justified. Although at least some venting or flaring may be unavoidable (and thus not wasteful under the relevant statutes) under some circumstances, operators have an affirmative obligation under the law to use reasonable precautions to prevent the waste of oil or gas developed from a lease. Measures that are considered reasonable to prevent waste may shift over time with advances in technology and changes in industry practice. Further, operators’ immediate economic interests may not always be served by minimizing the loss of natural gas, and BLM regulation is necessary to discourage operators from venting or flaring more gas than is operationally necessary. A prime example is the 21 The BLM notes that, even in such exceptional circumstances, operators should be expected to take measures to avoid excessive flaring and this proposed rule would place limitations on royaltyfree flaring from exploratory (wildcat) wells. E:\FR\FM\30NOP2.SGM 30NOP2 EP30NO22.001</GPH> lotter on DSK11XQN23PROD with PROPOSALS2 In addition to the venting and flaring tracked by the ONRR, recent studies have identified three other major sources of gas losses during the oil and gas production process: emissions from natural-gas-activated pneumatic equipment, venting from oil storage tanks, and equipment leaks.16 The Environmental Protection Agency (EPA) estimates that, overall, 36.2 Bcf of methane was emitted from pneumatic controllers and 4.9 Bcf of methane was emitted from equipment leaks at upstream oil and gas production sites in the United States in 2019.17 The BLM estimates that 13 Bcf of natural gas was lost from pneumatic devices on Federal and Indian lands in 2019. The BLM estimates that an additional 0.86 Bcf of gas was lost due to equipment leaks from Federal natural gas production operations not subject to existing State or EPA leak detection and repair requirements. Notably, the problem of leakage appears to be exacerbated in areas where there is insufficient infrastructure for natural gas gathering, processing, and transportation 18—a known issue in basins such as the Permian and Bakken, where substantial BLM-managed oil and gas production occurs. Finally, the BLM estimates that 17.9 Bcf of natural gas was emitted from storage tanks on Federal and Indian lands in 2019. These losses from pneumatic equipment, leaks and storage tanks would be valued at $53.7 million dollars (at $3/Mcf) in 2019. 2010-2020 73592 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 flaring of oil-well gas due to pipeline capacity constraints. Oil wells in certain fields are known to produce relatively large volumes of associated gas. Accordingly, natural-gas-capture infrastructure—including pipelines— has been built out in those fields and operators are expected to capture and sell the associated gas they produce. However, it is not uncommon for the rate of oil-well development to outpace the capacity of the related gas-capture infrastructure. When the existing gascapture infrastructure is overwhelmed, an operator is faced with a choice: flare the associated gas in order to continue oil production unabated, or curtail oil production in order to conserve the associated gas. Absent clear requirements, an operator might conclude that the former course of action best serves its immediate economic interests by providing immediate revenue from the relatively more valuable production stream. But the latter course of action may often best serve the public’s interest by maximizing overall energy production (considering both production streams) and royalty revenues. (This proposed rule would incentivize better communication and coordination among operators and midstream companies, which is expected to result in more deliberate development with greater volumes of production sent to market in the long run.) Similar to the problem of inadequate pipelines, maximizing the recovery of gas by investing in vapor-recovery units for oil storage tanks, upgrading pneumatic equipment, and regularly inspecting for leaks may not always maximize the operator’s profits, especially when the operator examines the investment on a short time horizon. It is in these circumstances—where an operator’s interest in maximizing profits diverges from the public’s interest in maximizing resource recovery—that BLM regulation is necessary and appropriate to ensure that operators take reasonable measures to prevent waste. B. Legal Authority Pursuant to a delegation of Secretarial authority, the BLM is authorized to regulate oil and gas exploration and production activities on Federal and Indian lands under a variety of statutes, including the MLA, the Mineral Leasing Act for Acquired Lands (MLAAL), the IRA, FOGRMA, FLPMA, the Indian Mineral Leasing Act of 1938, the IMDA, and the Act of March 3, 1909.22 These 22 Mineral Leasing Act, 30 U.S.C. 188–287; Mineral Leasing Act for Acquired Lands, 30 U.S.C. 351–360; Federal Oil and Gas Royalty Management VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 statutes authorize the Secretary of the Interior to promulgate such rules and regulations as may be necessary to carry out the statutes’ various purposes.23 1. Authority Regarding the Waste of Natural Gas The MLA rests on the fundamental principle that the public should benefit from mineral production on public lands.24 An important means of ensuring that the public benefits from mineral production on public lands is minimizing and deterring the waste of oil and gas produced from the Federal mineral estate. To this end, the MLA requires that oil and gas lessees ‘‘use all reasonable precautions to prevent waste of oil or gas developed in the land.’’ 25 The MLA requires lessees to exercise ‘‘reasonable diligence, skill, and care’’ in their operations and also requires oil and gas lessees to observe ‘‘such rules . . . for the prevention of undue waste as may be prescribed by [the] Secretary.’’ 26 Lessees are not only responsible for taking measures to prevent waste, but also for making royalty payments on wasted oil and gas when waste does occur, elaborating on the MLA’s assessment of royalties on all production ‘‘removed or sold from the lease,’’ 27 FOGRMA expressly made lessees ‘‘liable for royalty payments on oil or gas lost or wasted from a lease site 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 [FOGRMA] or any mineral leasing law.’’ 28 In addition, on August 16, 2022, President Biden signed the IRA into law. Public Law 117–169. Section 50263 of the IRA, which is entitled, ‘‘Royalties on All Extracted Methane,’’ provides that, for leases issued after August 16, 2022, royalties are owed on all gas produced from Federal land, including gas that is consumed or lost by venting, flaring, or negligent releases through Act, 30 U.S.C. 1701–1758; Federal Land Policy and Management Act of 1976, 43 U.S.C. 1701–1785; Indian Mineral Leasing Act of 1938, 25 U.S.C. 396a–g; Indian Mineral Development Act of 1982, 25 U.S.C. 2101–2108; Act of March 3, 1909, 25 U.S.C. 396. 23 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. 24 See, e.g., California Co. v. Udall, 296 F.2d 384, 388 (D.C. 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’’). 25 30 U.S.C. 225. 26 30 U.S.C. 187. 27 30 U.S.C. 226(b). 28 30 U.S.C. 1756. PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 any equipment during upstream operations. Section 50263 further provides three exceptions to the general obligation to pay royalties on produced gas, namely: (1) gas that is vented or flared for not longer than 48 hours in an emergency situation that poses a danger to human health, safety, or the environment; (2) gas used or consumed within a lease, unit, or communitized area for the benefit of the lease, unit, or communitized area; and (3) gas that is unavoidably lost. The BLM’s authority to regulate the waste of Federal oil and gas is not limited to operations that occur on Federal lands, but also extends to operations on non-Federal lands where Federal oil and gas is produced under a unit or communitization agreement (CA). ‘‘For the purpose of more properly conserving the natural resources of any oil or gas pool, field, or like area,’’ the MLA authorizes lessees to operate their leases under a cooperative or unit plan of development and operation, if the Secretary of the Interior determines such an arrangement to be necessary or advisable in the public interest.29 The Secretary is authorized, with the consent of the lessees involved, to establish or alter drilling, producing, and royalty requirements and to make such regulations with respect to the leases as she may deem necessary and proper to protect the public interest.30 The MLA states that a cooperative or unit plan of development may contain a provision authorizing the Secretary to regulate the rate of development and the rate of production.31 Accordingly, the BLM’s standard form unit agreement provides that the BLM may regulate the quantity and rate of production in the interest of conservation.32 The BLM’s standard form CA provides that the BLM ‘‘shall have the right of supervision over all fee and state mineral operations within the communitized area to the extent necessary to monitor production and measurement, and to assure that no avoidable loss of hydrocarbons occurs . . . .’’ 33 As noted earlier, FOGRMA authorizes the BLM to assess royalties on gas lost or wasted from a ‘‘lease site.’’ The term ‘‘lease site’’ is broadly defined in FOGRMA,34 extending the BLM’s 29 30 U.S.C. 226(m). 30 Id.. 31 Id.. 32 43 CFR 3186.1, ¶ 21. ‘‘BLM Manual 3160–9—Communitization,’’ Appendix 1, ¶ 12. 34 See 30 U.S.C. 1702(6); Maralex Resources, Inc. v. Bernhardt, 913 F.3d 1189, 1200 (10th Cir. 2019) (‘‘the statutory definition of ‘lease site’ necessarily includes any lands, including privately-owned lands, on which [production] of oil or gas is 33 See E:\FR\FM\30NOP2.SGM 30NOP2 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules authority to assess royalties on wasted gas to the Federal or Indian portion of gas wasted from operations on nonFederal tracts committed to a Federal unit or communitization agreement. Thus, even where the production of Federal oil and gas occurs on State- or privately owned tracts, the BLM maintains the authority to regulate the waste of Federal minerals from operations on those lands by requiring royalty payments and setting appropriate rates of development and production.35 lotter on DSK11XQN23PROD with PROPOSALS2 2. Authority Regarding Environmental Impacts to the Public Lands In addition to ensuring that the public receives a pecuniary benefit from oil and gas production from public lands, the BLM is also tasked with regulating the physical impacts of oil and gas development on public lands. The MLA directs the Secretary to ‘‘regulate all surface-disturbing activities conducted pursuant to any lease’’ and to ‘‘determine reclamation and other actions as required in the interest of conservation of surface resources.’’ 36 The MLA requires oil and gas leases to include provisions ‘‘for the protection of the interests of the United States . . . and for the safeguarding of the public welfare,’’ which includes lease terms for the prevention of environmental harm.37 The Secretary may suspend occurring pursuant to a communitization agreement’’). Additionally, FOGRMA defines ‘‘oil and gas’’ broadly to mean ‘‘any oil or gas originating from, or allocated to, the Outer Continental Shelf, Federal, or Indian lands.’’ 30 U.S.C. 1702(9) (emphasis added). 35 This conclusion is consistent with the assessment of the BLM’s authority expressed by the court that vacated the 2016 Waste Prevention Rule. See Wyoming v. U.S. Dept. of the Interior, 493 F. Supp. 3d 1046, 1081–85 (D. Wyo. 2020). 36 30 U.S.C. 226(g). 37 See Natural Resources Defense Council, Inc. v. Berklund, 458 F. Supp. 925, 936 n.17 (D.D.C. 1978). The BLM acknowledges that the court that vacated the 2016 Waste Prevention Rule stated that ‘‘it is not a reasonable interpretation of BLM’s general authority under the MLA to ‘safeguard[ ] the public welfare’ as empowering the agency to regulate air emissions, particularly when Congress expressly delegated such authority to the EPA under the [Clean Air Act].’’ Wyoming, 493 F. Supp. 3d at 1067. The BLM further notes that the court that vacated the BLM’s rescission of the 2016 Waste Prevention Rule found that the rescission failed to satisfy the BLM’s ‘‘statutory obligation’’ to ‘‘safeguard[] the public welfare,’’ and stated that the MLA’s ‘‘public welfare’’ provision supports BLM’s consideration of air emissions in promulgating its waste prevention regulations. See California v. Bernhardt, 472 F. Supp. 3d 573, 616 (N.D. Cal. 2020). The BLM need not elaborate on the meaning of the MLA’s ‘‘public welfare’’ provision in this rulemaking, as the BLM is proposing requirements that are independently justified as waste prevention measures and are not proposed for environmental purposes. The one exception is proposed § 3179.6, which does serve an environmental purpose, but is an exercise of the Secretary’s authority to prescribe VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 lease operations ‘‘in the interest of conservation of natural resources,’’ a phrase that encompasses not just conservation of mineral deposits, but also preventing environmental harm.38 The Secretary also may refuse to lease lands in order to protect the public’s interest in other natural resources and the environment.39 The MLA additionally requires oil and gas leases to contain ‘‘a provision that such rules for the safety and welfare of the miners . . . as may be prescribed by the Secretary shall be observed . . . .’’ 40 Accordingly, the BLM’s regulations governing oil and gas operations on the public lands have long required operators to conduct operations in a manner that is protective of natural resources, environmental quality, and public health and safety.41 FLPMA authorizes the BLM to ‘‘regulate’’ the ‘‘use, occupancy, and development’’ of the public lands via ‘‘published rules.’’ 42 FLPMA also mandates that the Secretary, ‘‘[i]n managing the public lands . . . shall, by regulation or otherwise, take any action necessary to prevent unnecessary or undue degradation of the lands.’’ 43 FLPMA expressly declares a policy that the BLM should balance the need for domestic sources of minerals against the need to ‘‘protect the quality of scientific, scenic, historical, ecological, environmental, air and atmospheric, water resources, and archeological values; . . . [and] provide for outdoor recreation and human occupancy and use.’’ 44 FLPMA requires the BLM to manage public lands under principles of multiple use and sustained yield.45 The statutory definition of ‘‘multiple use’’ explicitly includes the consideration of environmental resources. ‘‘Multiple use’’ is a ‘‘combination of balanced and diverse resource uses that takes into account the long-term needs of future generations for renewable and nonrenewable resources . . . .’’ 46 ‘‘Multiple use’’ also requires resources to be managed in a ‘‘harmonious and coordinated’’ manner ‘‘without ‘‘rules for the safety and welfare of the miners’’ under 30 U.S.C. 187. 38 30 U.S.C. 209; see also, e.g., Copper Valley Machine Works v. Andrus, 653 F.2d 595, 601 & nn.7–8 (D.C. Cir. 1981); Hoyl v. Babbitt, 129 F.3d 1377, 1380 (10th Cir. 1997); Getty Oil Co. v. Clark, 614 F. Supp. 904, 916 (D. Wyo. 1985). 39 Udall v. Tallman, 380 U.S. 1, 4 (1965); Duesing v. Udall, 350 F.2d 748, 751–52 (1965). 40 30 U.S.C. 187. 41 See 43 CFR 3162.5–1, 3162.5–3. 42 43 U.S.C. 1732(b). 43 Id. 44 Id. at 1701(a)(8). 45 Id. at 1702(c), 1732(a). 46 43 U.S.C. 1702(c). PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 73593 permanent impairment to the productivity of the land and the quality of the environment.’’ 47 Significantly, FLPMA directs the Secretary to consider ‘‘the relative values of the resources and not necessarily . . . the combination of uses that will give the greatest economic return or the greatest unit output.’’ 48 3. Indian Oil and Gas Production The Secretary’s management and regulation of Indian mineral interests carries with it the duty to act as a trustee for the benefit of the Indian mineral owners.49 Congress has directed the Secretary to ‘‘aggressively carry out [her] trust responsibility in the administration of Indian oil and gas.’’ 50 In furtherance of her trust obligations, the Secretary has delegated regulatory authority for administering operations on Indian oil and gas leases to the BLM,51 which has developed specialized expertise through regulating the production of oil and gas from public lands administered by the Department. In choosing from among reasonable regulatory alternatives for Indian mineral development, the BLM is obligated to adopt the alternative that is in the best interest of the Tribe and individual Indian mineral owners.52 What is in the best interest of the Tribe and individual Indian mineral owners is determined by a consideration of all relevant factors, including economic considerations as well as potential environmental and social effects.53 C. Regulatory History The BLM has a long history of regulating venting and flaring from onshore oil and gas operations. This section summarizes the BLM’s historic practices, as well as the BLM’s experience in two recent rulemakings related to venting and flaring. 1. Early Regulation of Surface Waste of Gas The Department of the Interior has maintained regulations addressing the waste of gas through venting and flaring from onshore oil and gas leases since 1938. At that time, the Department’s regulations required the United States to be compensated ‘‘at full value’’ for ‘‘all 47 Id. 48 Id. 49 See Woods Petroleum Corp. v. Department of Interior, 47 F.3d 1032, 1038 (10th Cir. 1995) (en banc). 50 30 U.S.C. 1701(a)(4). 51 235 DM 1.1.K. 52 See Jicarilla Apache Tribe v. Supron Energy Corp., 728 F.2d 1555, 1567 (10th Cir. 1984) (Seymour, J., concurring in part and dissenting in part), adopted as majority opinion as modified en banc, 782 F.2d 855 (10th Cir. 1986). 53 See 25 CFR 211.3. E:\FR\FM\30NOP2.SGM 30NOP2 73594 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules gas wasted by blowing, release, escape into the air, or otherwise,’’ except where such disposal was authorized under the laws of the United States and the State in which it occurred.54 The regulations further provided that the production of oil or gas from the lease was to be restricted to such amounts as could be put to beneficial use and that, in order to avoid the excessive production of oil or gas, the Secretary could limit the rate of production based on the market demand for oil or the market demand for gas.55 By 1942, the Department’s regulations contained a definition of ‘‘waste of oil or gas.’’ This definition included the ‘‘physical waste of oil or gas,’’ which was defined as ‘‘the loss or destruction of oil or gas after recovery thereof such as to prevent proper utilization and beneficial use thereof, and the loss of oil or gas prior to recovery thereof by isolation or entrapment, by migration, by premature release of natural gas from solution in oil, or in any other manner such as to render impracticable the recovery of such oil or gas.’’ 56 The regulations stated that a lessee was ‘‘obligated to prevent the waste of oil or gas’’ and, in order to avoid the physical waste of gas, the lessee was required to ‘‘consume it beneficially or market it or return it to the productive formation.’’ 57 The regulations stated that ‘‘unavoidably lost’’ gas was not subject to royalty, though the regulations did not define ‘‘unavoidably lost.’’ 58 In 1974, the Secretary issued NTL–4, which established the following policy for royalties on gas production: lotter on DSK11XQN23PROD with PROPOSALS2 Gas production subject to royalty shall include (1) that gas (both dry and casinghead) which is produced and sold either on a lease basis or that which is allocated to a lease under the terms of an approved communitization or unitization agreement; (2) that gas which is vented or flared in well tests (drill-stem, completion, or production) on a lease, communitized tract, or unitized area; and (3) that gas which is otherwise vented or flared on a lease, communitized tract, or unitized area with the prior written authorization of the Area Oil and Gas Supervisor (Supervisor). NTL–4 thus effectively required onshore oil and gas lessees to pay royalties on all gas produced, including gas that was unavoidably lost or used for production purposes. Various oil and gas companies sought judicial review of NTL–4. In 1978, the U.S. District Court for the District of Wyoming overturned NTL–4, holding 54 30 CFR 221.5(h) (1938). at 221.27. 56 30 CFR 221.6(n) (1942). 57 Id. at 221.35. 58 Id. at 221.44. that the MLA does not authorize the collection of royalties on gas production that is unavoidably lost or used in lease operations.59 2. NTL–4A From January 1980 to January 2017, the Department of the Interior’s instructions governing the venting and flaring of gas from onshore oil and gas leases were contained in ‘‘Notice to Lessees and Operators of Onshore Federal and Indian Oil and Gas Leases: Royalty or Compensation for Oil and Gas Lost’’ (‘‘NTL–4A’’).60 NTL–4A was issued by the U.S. Geological Survey (USGS), which was the Interior bureau tasked with oversight of Federal onshore oil and gas production at the time. Under NTL–4A, operators were required to pay royalties on ‘‘avoidably lost’’ gas—i.e., gas lost due to the operator’s negligence, failure to take reasonable precautions to prevent or control the loss, or failure to comply with lease terms, regulations, or BLM orders. NTL–4A expressly authorized royalty-free venting and flaring ‘‘on a short-term basis’’ during emergencies, well purging and evaluation tests, initial production tests, and routine and special well tests. NTL–4A prohibited the flaring of gas from gas wells under any other circumstances. For gas produced from oil wells, however, NTL–4A authorized (but did not mandate) the BLM to approve flaring where conservation of the gas was not ‘‘economically justified’’ because it would ‘‘lead to the premature abandonment of recoverable oil reserves and ultimately to a greater loss of equivalent energy than would be recovered if the venting or flaring were permitted to continue.’’ NTL–4A stated that, ‘‘when evaluating the feasibility of requiring conservation of the gas, the total leasehold production, including oil and gas, as well as the economics of a field-wide plan,’’ must be considered. Finally, under NTL–4A, the loss of gas vapors from storage tanks was considered ‘‘unavoidably lost,’’ unless the BLM ‘‘determine[d] that the recovery of such vapors would be warranted.’’ Soon after issuing NTL–4A, the USGS issued guidelines and procedures for implementing NTL–4A, which were published in the Conservation Division Manual (CDM) Part 644, Chapter 5. Among other things, the CDM provided guidance regarding applications to flare oil-well gas based on economics. Specifically, the CDM addressed how to 55 Id. VerDate Sep<11>2014 17:25 Nov 29, 2022 59 Marathon Oil Co. v. Andrus, 452 F. Supp. 548, 553 (D. Wyo. 1978). 60 44 FR 76,600 (Dec. 27, 1979). Jkt 259001 PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 respond to a lessee’s contention ‘‘that reserves of casinghead gas are inadequate to support the installation of facilities for gas collection and sale.’’ The CDM explained that ‘‘[f]rom an economic basis, all leasehold production must be considered; the major concern is profitable operation of the lease, not just profitable disposition of the gas.’’ The CDM further explained that the ‘‘economics of conserving gas must be on a field-wide basis, and the Supervisor must consider the feasibility of a joint operation between all other lessees/operators in the field or area.’’ Thus, the economic standard for obtaining approval to flare oil-well gas under NTL–4A was intended to be a demanding one. The fact that the capture and sale of oil-well gas from an individual lease would not pay for itself was not sufficient to justify royalty-free flaring of the gas. The CDM also provided guidance for venting and flaring situations involving both Federal and non-Federal lands. In such cases, the BLM was directed to contact the appropriate State agency in order to work jointly to effect optimum gas conservation. However, where such a cooperative effort was not possible, the BLM was directed to ‘‘proceed unilaterally to take action to prevent unnecessary venting or flaring from Federal lands.’’ Under the plain terms of NTL–4A, flaring without prior approval (outside of the short-term circumstances specified in Sections II and III of NTL– 4A) constituted a royalty-bearing loss of gas, regardless of the economic circumstances. The BLM originally applied NTL–4A to that effect, and this practice was upheld by the Interior Board of Land Appeals. See Lomax Exploration Co., 105 IBLA 1 (1988). However, the BLM changed this policy in Instruction Memorandum No. 87–652 (Aug. 17, 1987), which required the BLM to give an operator an opportunity to demonstrate, after the fact, that capturing the gas was not economically justified. See Ladd Petroleum Corp., 107 IBLA 5 (1989). The number of applications for royalty-free flaring received by the BLM increased dramatically between 2005 and 2016: in 2005, the BLM received just 50 applications to vent or flare gas, while in 2015 it received 4,181 flaring applications, with another 3,539 flaring applications submitted in 2016. (Both the 2016 Waste Prevention Rule and the 2018 Revision Rule dispensed with case-by-case flaring approvals, and so post-2016 flaring application data does not provide a useful comparison.) Most of the applications to flare royalty-free were submitted to the New Mexico and E:\FR\FM\30NOP2.SGM 30NOP2 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 Montana-Dakotas State Offices, which oversee Federal and Indian mineral interests in unconventional plays where oil production is accompanied by large volumes of associated gas. Notably, the vast majority of these applications involved wells that were connected to a gas pipeline but flared due to pipeline capacity constraints. 3. 2016 Waste Prevention Rule On November 18, 2016, the BLM issued a final rule intended to reduce the waste of Federal and Indian gas through venting, flaring, and leaks (‘‘Waste Prevention Rule’’).61 The Waste Prevention Rule replaced NTL–4A and became effective on January 17, 2017. The BLM’s development of the Waste Prevention Rule was prompted by a combination of factors, including the substantial increase in flaring over the previous decade, the growing number of applications to flare royalty-free, new information regarding the quantities of gas lost through venting and leaks, and concerns expressed by oversight entities such as the U.S. Government Accountability Office (GAO).62 The Waste Prevention Rule applied to all onshore Federal and Indian oil and gas leases, units, and communitized areas. The key components of the Waste Prevention Rule were: • A requirement that applications for permits to drill (APDs) be accompanied by a ‘‘waste minimization plan’’ that would detail anticipated gas production and opportunities to conserve the gas; • A provision specifying the various circumstances under which a loss of oil or gas would be ‘‘avoidably lost,’’ and therefore royalty-bearing; • A requirement that operators capture (rather than flare) a certain percentage of the gas they produce; • Equipment requirements for pneumatic controllers, pneumatic diaphragm pumps, and storage vessels (tanks); and • LDAR provisions requiring semiannual lease site inspections, the use of specified instruments and methods, and recordkeeping and reporting. The rule’s ‘‘capture percentage’’ requirements were intended to address the routine flaring of gas from oil wells. The rule required an operator to capture, rather than flare, a certain percentage of the gas produced from the 61 81 FR 83008 (Nov. 18, 2016). FR 83014–83017; GAO, ‘‘Federal Oil and Gas Leases—Opportunities Exist to Capture Vented and Flared Gas, Which Would Increase Royalty Payments and Reduce Greenhouse Gases’’ (Oct. 2010); GAO, ‘‘OIL AND GAS—Interior Could Do More to Account for and Manage Natural Gas Emissions’’ (July 2016). 62 81 VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 operator’s ‘‘development oil wells.’’ The required capture percentage would increase over a 10-year period, starting at 85 percent in 2018 and ultimately reaching 98 percent in 2026. Gas flared in excess of the capture requirements would be royalty bearing. The BLM recognized that the EPA had promulgated emissions limitations for pneumatic equipment and storage tanks as well as LDAR requirements for new and modified sources in the oil and gas production sector pursuant to its authority under the Clean Air Act. The BLM further recognized that these analogous EPA requirements would have the effect of reducing the waste of gas from leases subject to those requirements. So, in order to avoid unnecessary duplication or conflict, the Waste Prevention Rule allowed for operators to comply with the analogous EPA regulations as an alternative means of compliance with the BLM’s requirements.63 The capture percentage, pneumatic equipment, storage tanks, and LDAR requirements were each subject to phase-in periods, and the rule allowed operators to obtain exemptions or reduced requirements where compliance would ‘‘cause the operator to cease production and abandon significant recoverable oil reserves under the lease.’’ The BLM’s RIA for the Waste Prevention Rule estimated that the rule would impose costs of between $110 million and $275 million per year, while generating benefits of between $20 million and $157 million per year worth of additional gas captured and between $189 million and $247 million per year in quantified social benefits (in the form of forgone methane emissions). Industry groups and certain States 64 filed petitions for judicial review of the Waste Prevention Rule in the U.S. District Court for the District of Wyoming. Wyoming v. DOI, Case No. 2:16–cv–00285–SWS (D. Wyo.). A coalition of environmental groups and other States intervened in the case in defense of the rule. Following the change in Administration in January 2017, the litigation was effectively paused in response to the BLM’s administrative actions to suspend the rule. After those actions were invalidated by a different court, the Wyoming court stayed implementation of the capture percentage, pneumatic equipment, storage tank, and LDAR requirements, and stayed the litigation pending finalization of the BLM’s 83 FR 83018–19, 83085–89. States of North Dakota, Texas, Wyoming, and Montana joined the litigation in opposition to the rule. 73595 voluntary revision of the Waste Prevention Rule. 4. 2018 Revision of Waste Prevention Rule On September 28, 2018, the BLM issued a final rule substantially revising the Waste Prevention Rule (‘‘Revision Rule’’).65 In the Revision Rule, the BLM rescinded the waste minimization plan, gas capture percentage, pneumatic equipment, storage tank, and LDAR requirements of the 2016 Rule. The BLM also revised the remaining provisions of the rule to largely reflect the language of NTL–4A. Finally, the BLM established a new policy of deferring to State regulations for determining when the routine flaring of oil-well gas is royaltyfree. In the Revision Rule, the BLM stated that the Waste Prevention Rule exceeded the BLM’s statutory authority by imposing requirements with compliance costs that exceed the value of the gas that would be conserved, thus violating the ‘‘prudent operator’’ standard implicitly incorporated into the MLA when it was adopted in 1920. The BLM also stated that the 2016 Rule created a risk of premature shut-ins of marginal wells, as the compliance costs associated with the 2016 Rule would represent a significant proportion of a marginal well’s revenue. Contrary to what the BLM had found in 2016, the BLM stated in the Revision Rule that existing State flaring regulations provided sufficient assurance against excessive flaring. The RIA for the Revision Rule found that the economic benefits of the Revision Rule (i.e., reduced compliance costs) would significantly outweigh its economic costs (i.e., forgone gas production and additional methane emissions). This result was based in large part on the use of a ‘‘domestic’’ social cost of methane metric that was not based on the best available science 66 and drastically reduced the monetized climate benefits of the 2016 Rule relative to what had been estimated in the RIA for the 2016 Rule. 5. Judicial Review of the Revision Rule In September of 2018, a coalition of environmental groups and the States of California and New Mexico filed lawsuits challenging the Revision Rule in the U.S. District Court for the Northern District of California. On July 15, 2020, the district court ruled in favor of the plaintiffs. California v. Bernhardt, 63 See 64 The PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 65 83 FR 49184 (Sept. 28, 2018). California v. Bernhardt, 472 F. Supp. 3d 573, 611 (N.D. Cal. 2020). 66 See E:\FR\FM\30NOP2.SGM 30NOP2 73596 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 472 F. Supp. 3d 573 (N.D. Cal. 2020). The court’s key findings were: • The BLM’s interpretation of its statutory authority in the Revision Rule was unjustifiably limited, failed to require lessees to use all reasonable precautions to prevent waste, and failed to meet the BLM’s statutory mandate to protect the public welfare; • The BLM’s decision to defer to State flaring regulations was not supported by sufficient analysis or record evidence; • The record did not support the BLM’s claims that the 2016 Rule posed excessive regulatory burdens and that the 2016 Rule’s costs outweighed its benefits; and • The BLM’s cost-benefit analysis underlying the rule was flawed for a variety of reasons, including that the use of a ‘‘domestic’’ social cost of methane was unreasonable and not based on the best available science. The court ordered that the Revision Rule be vacated in its entirety. However, the court stayed vacatur until October 13, 2020. 6. Judicial Review of the 2016 Waste Prevention Rule Following the California v. Bernhardt decision, the district court in Wyoming lifted the stay on the litigation over the Waste Prevention Rule. In the briefing, the Department confessed error on the grounds that the BLM exceeded its statutory authority and was ‘‘arbitrary and capricious’’ in promulgating the rule. In October 2020, the district court ruled in favor of the plaintiffs, finding that the BLM had exceeded its statutory authority and had been arbitrary and capricious in promulgating the Waste Prevention Rule. Wyoming v. DOI, 493 F. Supp. 3d 1046 (D. Wyo. 2020). Specifically, the court found that the Waste Prevention Rule was essentially an air quality regulation and that the BLM had usurped the authority to regulate air emissions that Congress had granted to EPA and the States in the Clean Air Act. The court found that the rule was not independently justified as a waste-prevention measure under the MLA. Rather, in the court’s view, the record reflected that the BLM’s primary concern was regulating methane emissions from existing oil and gas sources. The court faulted the BLM’s rulemaking for imposing requirements beyond what could be expected of a ‘‘prudent operator’’ that develops the lease for the mutual profit of lessee and lessor. Finally, the court faulted the BLM for applying air quality regulations—as opposed to wasteprevention regulations—to unit and CA operations on non-Federal lands. The court ordered that the Waste Prevention VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 Rule be vacated, thereby reinstating NTL–4A as the BLM’s standard for managing venting and flaring from Federal oil and gas leases. 7. The Inflation Reduction Act As discussed earlier, on August 16, 2022, President Biden signed the IRA into law. Public Law 117–169. The IRA is designed to ‘‘make a historic down payment on deficit reduction to fight inflation, invest in domestic energy production and manufacturing, and reduce carbon emissions by roughly 40 percent by 2030.’’ Summary: The Inflation Reduction Act of 2022, available at https:// www.democrats.senate.gov/imo/media/ doc/inflation_reduction_act_one_page_ summary.pdf. The Act authorizes, among other things, massive and unprecedented investments to enhance energy security and combat the climate crisis. Of particular relevance here, the IRA contains a suite of provisions addressing onshore and offshore oil and gas development under Federal leases. For example, Section 50265 requires, inter alia, the Department to maintain a certain level of onshore oil and gas leasing activity as a prerequisite to approving renewable energy rights-ofway on Federal lands. Importantly, that provision of the IRA is accompanied by other provisions that serve to ensure that lessees pay fair and appropriate compensation to the Federal Government in exchange for the opportunity to conduct their industrial activities under Federal leases. One such provision of the Act is Section 50263, which is entitled, ‘‘Royalties on All Extracted Methane.’’ Consistent with the MLA’s assessment of royalties on all gas ‘‘removed or sold from the lease’’ 67 and FOGRMA’s requirement that lessees pay royalties on lost or wasted gas,68 Section 50263 of the IRA provides that, for leases issued after the date of enactment of the Act, royalties are owed on all gas produced from Federal land, including gas that is consumed or lost by venting, flaring, or negligent releases through any equipment during upstream operations. Section 50263 further provides three exceptions to the general obligation to pay royalties on produced gas, namely: (1) gas that is vented or flared for not longer than 48 hours in an emergency situation that poses a danger to human health, safety, or the environment; (2) gas used or consumed within a lease, unit, or communitized area for the benefit of the lease, unit, or 67 30 68 30 PO 00000 U.S.C. 226(b). U.S.C. 1756. Frm 00010 Fmt 4701 communitized area; and (3) gas that is unavoidably lost. The BLM has for decades assessed royalties on upstream production and has exempted from royalties gas lost in emergency situations, ‘‘beneficial use’’ gas, and ‘‘unavoidably lost’’ gas. IRA Section 50263 is consistent with the BLM’s prior agency practice regarding emergency situations and the unavoidable loss of gas, and it provides additional support for the approach set forth in this proposed rule. Importantly, IRA Section 50263 confirms that the concepts of ‘‘avoidable’’ and ‘‘unavoidable’’ loss are appropriate for assessing royalties. Section 50263 also confirms that the BLM’s pecuniary interest in regulating losses extends to those from upstream equipment. But the IRA leaves certain questions open, such as what losses qualify as ‘‘unavoidably lost’’ and what qualifies as an ‘‘emergency situation.’’ Congress thus has left it to the BLM, as an exercise of the agency’s expertise and judgment, to determine answers to the specific questions the IRA leaves open. As set forth later, this proposed rule addresses these issues in a manner that is consistent with the IRA’s focus (and the MLA’s and FOGRMA’s pre-existing emphasis) on ensuring that Federal lessees pay fair and appropriate compensation to the Federal Government in exchange for the opportunity to conduct their industrial activities under Federal leases. D. A New Approach The BLM has authority under the MLA to promulgate such rules and regulations as may be necessary ‘‘for the prevention of undue waste’’ 69 and to ensure that lessees ‘‘use all reasonable precautions to prevent waste of oil or gas.’’ 70 For many years, the BLM has implemented this authority through restrictions on the venting and flaring of gas from onshore Federal oil and gas leases. However, as illustrated by the judicial decisions noted previously, courts have disagreed (prior to enactment of the IRA) as to the full scope of the BLM’s authority to regulate venting and flaring. Requirements that one court might consider necessary for the BLM to meet its statutory mandates might be seen as regulatory overreach by another court. In this proposed rulemaking, the BLM has chosen to focus on improving upon NTL–4A in a variety of ways without advancing elements of the 2016 Waste Prevention 69 30 70 30 Sfmt 4702 E:\FR\FM\30NOP2.SGM U.S.C. 187. U.S.C. 225. 30NOP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules Rule that were the subject of certain judicial criticism. As explained in more detail later and in the section-by-section discussion, this proposed rule would make substantial improvements in addressing the waste of Federal and Indian gas while also addressing the criticisms of the 2016 Rule that were raised by the Wyoming court. First, the proposed requirements more clearly constitute reasonable waste prevention measures that should be expected of a prudent operator. The proposed requirements should impose fewer overall costs than those of the 2016 Rule and would ensure either actual conservation of gas that would otherwise be wasted or compensation to the public and Indian mineral owners through royalty payments when gas is wasted. (This contrasts with certain provisions in the 2016 Rule that would have reduced pollution—but not necessarily reduced waste—by allowing operators to comply with analogous EPA standards in place of the BLM requirements.) Second, in order to address the Wyoming court’s concern with the BLM’s limited authority regarding unit and CA operations on non-Federal/Indian lands, certain requirements in this proposed rule are narrower in scope than similar requirements in the 2016 Rule. Specifically, the proposed rule’s requirements pertaining to safety, pneumatic equipment, storage tanks, and leak detection and repair would apply only to operations on a Federal or Indian lease. Third, the proposed requirements are consistent with the ‘‘prudent operator’’ standard as that term has been applied in the oil and gas jurisprudence. Fourth, the proposed rule was developed with an eye towards avoiding excessive compliance burdens on marginal wells. Finally, the BLM is expressly excluding the social cost of greenhouse gases from the considerations underpinning any of the proposed waste prevention requirements, thereby addressing the Wyoming court’s concern that the 2016 Rule was inappropriately supported by ‘‘climate change benefits.’’ The provisions of this proposed rule serve straightforward waste prevention objectives by promoting gas conservation. In order to avoid situations where oil-well development outpaces the capacity of the available gas capture infrastructure, the BLM is proposing to require operators to submit a waste minimization plan with oil-well APDs and is also proposing to establish a process for delaying action on an APD where undue waste of Federal gas is expected to result from approving the permit. The BLM recognizes that not all VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 venting and flaring can be prevented. In the circumstances in which some venting or flaring cannot be prevented (e.g., initial production tests or emergencies), the BLM is proposing to set appropriate time or volume limits on royalty-free venting or flaring. The BLM is proposing to address the problem of intermittent flaring due to pipeline capacity constraints by setting a monthly volume limit on royalty-free flaring caused by inadequate capture infrastructure. Requiring royalty payments on venting and flaring that exceeds the appropriate volume limits would both discourage waste and ensure that Federal and Indian royalty revenues are not harmed by an operator’s wasteful practices. The BLM estimates that the royalty-free flaring limits of the proposed rule would generate $32.9 million a year in additional royalties. See section 7.6 of the RIA for more information. This proposed rule also contains provisions intended to reduce losses of natural gas from pneumatic equipment, oil storage tanks, and equipment leaks. Unlike the 2016 Waste Prevention Rule—which extended these requirements to State and private lands in certain situations 71—the requirements now proposed by the BLM would apply only to operations on Federal or Indian lands, where the BLM has express authority and responsibility to regulate both for the prevention of waste and for the protection of the environment. These requirements would not apply to operations that occur on State or private tracts committed to a Federal unit or CA. The BLM estimates that the requirements of this proposed rule regarding pneumatic equipment, oil storage tanks, and LDAR would result in the conservation of up to 15.3 Bcf of gas each year. The BLM acknowledges that the contents of this proposed rule may differ in some regards from the Revision Rule’s unnecessarily narrow interpretation of the BLM’s statutory authority and the similarly narrow interpretation reflected in the confession of error related to the 2016 Waste Prevention Rule.72 Consistent with the BLM’s understanding of its authority prior to 2018, the BLM has reconsidered the relevant conclusions of the Revision Rule and its related confession of error and now rejects those conclusions for the following reasons. To begin, nothing in the MLA’s plain text, which requires lessees to take ‘‘all reasonable precautions to prevent 71 Cf. Wyoming v. DOI, 493 F. Supp. 3d 1046, 1083–85 (D. Wyo. 2020). 72 See 83 FR 49185–86. PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 73597 waste’’ and to abide by rules and regulations issued ‘‘for the prevention of undue waste,’’ suggests that the BLM’s authority is limited to the promulgation of rules that effectively pay for themselves (as measured by balancing compliance costs against the value of the recovered gas). Consistent with this text, the BLM’s longstanding policy governing venting and flaring has assessed the economic feasibility of gas conservation in the context of ‘‘the total leasehold production, including oil and gas, as well as the economics of a fieldwide plan.’’ See supra, Part III.C.2. As the CDM made clear, the BLM’s concern under the MLA for nearly four decades prior to the Revision Rule was ‘‘profitable operation of the lease, not just profitable disposition of the gas.’’ Despite suggestions to the contrary in the 2018 Revision Rule, the BLM’s longstanding emphasis on overall ultimate resource recovery, not lessee profits vis-a`-vis wasted gas, is entirely consistent with the ‘‘prudent operator’’ standard in oil and gas law. While the prudent operator standard rests on an expectation of ‘‘mutually profitable development of the lease’s mineral resources,’’ 73 it does not follow that lessees can maximize their profit by wasting recoverable hydrocarbon resources without regard for the lessor’s lost royalty revenues or the lessor’s interest in conserving the gas for future disposition. To the contrary, lessees have an obligation of reasonable diligence in the development of the leased resources, rooted in due regard for the interests of both the lessee and the lessor.74 And in the MLA, FOGRMA, and the IRA, Congress enshrined the United States’ interest, as a mineral lessor, in avoiding waste and maximizing royalty revenues.75 The 73 Wyoming v. DOI, 493 F. Supp. 3d 1046, 1072 (D. Wyo. 2020). 74 See id.; see also Sinclair Oil & Gas Co. v. Bishop, 441 P.2d 436, 447 (Okla. 1967) (‘‘Necessarily, we determine the lessee was acting prudently when he ascertained that it was illegal and improper to flare gas in the quantities shown by the evidence, in order to produce the unallocated allowable of oil.’’); Tr. Co. of Chicago v. Samedan Oil Corp., 192 F.2d 282, 284 (10th Cir. 1951) (‘‘A first consideration is the precept that a prudent operator may not act only for his self interest. He must not forget that the primary consideration to the lessor for the lease is royalty from the production of the lease free of cost of development and operation.’’). 75 See 30 U.S.C. 187, 225, 226(m), 1756; see also California Co. v. Udall, 296 F.2d 384, 388 (DC Cir. 1961) (‘‘[The Secretary] has a responsibility to insure that these resources are not physically wasted and that their extraction accords with prudent principles of conservation. To protect the public’s royalty interest he may determine that minerals are being sold at less than reasonable value. Under existing regulations he can restrict a lessee’s production to an amount commensurate E:\FR\FM\30NOP2.SGM Continued 30NOP2 73598 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 BLM, in managing oil and gas resources on behalf of the United States, may value more production—considering both oil and gas production—over a longer time period more highly than does an operator, who might be more focused on generating near-term profits. None of the authorities previously relied upon by the BLM to interpret the ‘‘prudent operator’’ standard foreclose any Secretarial action that might marginally affect lessee profits.76 In contrast to NTL–4A, this proposed rule would not allow operators to request that flared oil-well gas be deemed royalty-free based on case-bycase economic assessments. There are a number of reasons for this change. In the first instance, there is no statutory requirement that the public forgo royalties on wasted gas based on an operator’s individual economic circumstances. Although it was the BLM’s practice to engage in case-by-case economic assessments under NTL–4A, that approach is no longer appropriate, as the practical realities of oilfield development have changed dramatically since 1980. As the U.S. Department of Energy explained in a recent report, ‘‘flaring has become more of an issue with the rapid development of unconventional tight oil and gas resources over the past two decades’’ that has ‘‘brought online hydrocarbon resources that vary in their characteristics and proportions of natural gas, natural gas liquids and crude oil.’’ 77 As explained earlier, the BLM has witnessed a massive increase in the amount of venting and flaring from the 1990’s to the 2010’s. The average amount of annual venting and flaring from Federal and Indian leases between 1990 and 2000 was 11 Bcf but quadrupled to an average of 44.2 Bcf per year, between 2010 and 2020; and, as noted earlier, the upward trend in flaring suggests it will continue to be a problem in the coming years. The related increase in the number of royalty-free flaring applications—from 50 in 2005 to 4,181 in 2015—has created a significant administrative burden for the BLM as well as an estimated information collection burden of with market demand, and thus protect the public’s royalty interest by preventing depression of the market.’’). 76 Cf. California v. Bernhardt, 472 F. Supp. 3d 573, 596 (N.D. Cal. 2020) (‘‘The statutory language demonstrates on its face that any consideration of waste management limited to the economics of individual well-operators would ignore express statutory mandates concerning BLM’s public welfare obligations.’’). 77 U.S. Department of Energy, Office of Fossil Energy, Office of Oil and Natural Gas, ‘‘Natural Gas Flaring and Venting: State and Federal Regulatory Overview, Trends, and Impacts’’ (June 2019). VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 approximately 33,488 total annual burden hours potentially incurred by operators, and significant uncertainty for operators as hundreds of applications wait to be processed. Finally, it is important to note that the bulk of the recent royalty-free flaring applications have concerned flaring from wells that are actually connected to pipeline infrastructure. Although the capacity of that infrastructure may be overwhelmed from time to time, these are not the situations that the NTL–4A economic standard was designed to accommodate. The purpose of the economic inquiry under NTL–4A was to determine whether the volumes of associated gas production would make the installation of gas-capture infrastructure economically viable. Where the gas-capture infrastructure has already been built out, its economic viability is not in question. One of the primary concerns underlying the BLM’s promulgation of the Revision Rule in 2018 was the compliance burden on ‘‘marginal wells,’’ i.e., wells that produce approximately 10 barrels of oil or 60 Mcf of natural gas per day or less.78 The court that vacated the Revision Rule rejected that concern as unfounded.79 However, the court that vacated the Waste Prevention Rule faulted the BLM for failing to adequately assess the impact of that rule on marginal wells.80 The BLM does not wish to impose requirements that inadvertently cause recoverable oil or gas resources to be stranded due to premature lease abandonment. Simultaneously, even the operators of marginal wells are capable of taking reasonable precautions to prevent waste, as they must under the MLA. (For example, there is no real risk of premature abandonment by requiring the operator of a marginal gas well to minimize the loss of gas during liquids unloading operations, as required in this proposed rule.) The BLM developed this proposed rule to avoid excessive compliance burdens on marginal wells when balanced against the need to reduce waste. In the Revision Rule, the BLM noted that the provisions of the 2016 Waste Prevention Rule that placed a particular burden on marginal wells were those pertaining to pneumatic controllers, pneumatic diaphragm pumps, and LDAR. In this proposed rule, the requirements for pneumatic equipment would apply only where a 78 83 FR 49187. v. Bernhardt, 472 F. Supp. 3d 573, 606 (N.D. Cal. 2020). 80 Wyoming v. DOI, 493 F. Supp. 3d 1046, 1075– 78 (D. Wyo. 2020). 79 California PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 lease, unit PA, or CA is producing a quantity of oil or gas (120 Mcf of gas or 20 barrels of oil per month) that would offset the compliance costs within a reasonable payout period. And, as explained in more detail in the following section-by-section discussion, the LDAR provisions of this proposed rule are more flexible than those in the 2016 Waste Prevention Rule, reducing the potential burden on marginal wells. The BLM requests comment on the proposed approach to marginal wells, the point at which additional regulatory burdens might result in stranded resources from marginal wells, and whether the proposed rule is sufficient to prevent avoidable waste from marginal wells. The BLM acknowledges that, in the Revision Rule, the BLM asserted that additional restrictions on flaring were unnecessary because the States with the most significant BLM-managed oil and gas production maintain regulatory restrictions on flaring from oil wells, and that these State regulations ‘‘provide[d] a reasonable assurance . . . that the waste of associated gas will be controlled.’’ 81 This assertion was in direct conflict with the BLM’s prior findings during the promulgation of the 2016 Waste Prevention Rule, and a U.S. District Court found that the BLM’s decision to rely on State flaring regulations was unjustified based on the record evidence.82 For this rulemaking, the BLM analyzed the State regulations governing flaring, venting, and leaks in the 10 States responsible for 99 percent of Federal oil and gas production: New Mexico, Wyoming, Colorado, North Dakota, Utah, California, Montana, Texas, Alaska, and Oklahoma. Summaries of these regulations were collected in a table that is available in the docket for this rulemaking at www.regulations.gov. While there have been notable advancements in some States since the promulgation of the 2016 Waste Prevention Rule—for example, new comprehensive flaring regulations have since been adopted in New Mexico and Colorado, and new requirements for storage tanks, pneumatic equipment, and LDAR have been adopted in Colorado and Utah— State regulations vary widely in their scope and stringency.83 And, 81 83 FR 49202. v. Bernhardt, 472 F. Supp. 3d 573, 601–04 (N.D. Cal. 2020). 83 Examples of variations among State regulations include the following. Unlike other States, (1) the States of New Mexico, North Dakota, Montana, Texas, Alaska, and Oklahoma do not have regulations to control losses of gas from pneumatic equipment; (2) Texas’ requirements to inspect for 82 California E:\FR\FM\30NOP2.SGM 30NOP2 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 importantly, many of the State flaring regulations reserve substantial discretion to the States to authorize additional flaring.84 That discretion creates significant uncertainty about the extent to which the BLM could rely on those regulations to protect the interests of the United States and Indian mineral owners in minimizing waste and maximizing royalty revenues. For example, the BLM’s review of State regulations revealed that North Dakota’s flaring rules were modified in recent years in a manner allowing for more flaring within the State’s gascapture-percentage requirements. Operators in the Bakken, Bakken/Three Forks, and Three Forks pools are currently subject to a 91 percent gas capture requirement under North Dakota Industrial Commission (NDIC) Order 24655. However, the NDIC’s current Policy/Guidance 85 for Order 24655 identifies a number of circumstances under which flared volumes will not be counted against the operator’s capture percentage. These circumstances (referred to as ‘‘variances’’ by the NDIC) include flaring due to ‘‘force majeure’’ events, flaring due to new wells being connected to the same gas infrastructure system, and right-of-way delays. Thus, it appears that many flaring events that are rooted in inadequate gas-capture infrastructure will not count against an operator’s gas-capture percentage under NDIC Order 24655. The BLM notes that in 2019—when NDIC Order 24655 ostensibly imposed an 88 percent capture requirement on operators—19 percent of total natural gas production in North Dakota was flared.86 North Dakota is a major source of Federal oil and gas production, producing approximately 89 Bcf of Federal gas and 45 million barrels of Federal oil in 2019. In addition to State regulation, the BLM recognizes that the EPA maintains regulations governing VOCs and/or methane emissions from certain aspects of oil and gas production operations at 40 CFR part 60, subparts OOOO and OOOOa, and that these regulations can have the co-benefit of reducing the waste of gas during production activities. Specifically, EPA’s and repair leaks are focused on storage tanks; (3) Alaska does not maintain LDAR requirements; and (4) Wyoming’s requirements for tanks, pneumatic equipment, and LDAR are limited to the Upper Green River Basin ozone nonattainment area. 84 These States are: Wyoming, Utah, Montana, Texas, and Oklahoma. 85 NDIC Order 24665 Policy/Guidance Version 09–22–2020. 86 EIA, ‘‘Natural gas venting and flaring in North Dakota and Texas increased in 2019’’ (Dec. 8, 2020), available at https://www.eia.gov/todayinenergy/ detail.php?id=46176. VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 73599 regulations require: (1) operators to capture or flare gas that reaches the surface during well completion operations with hydraulic fracturing; (2) operators of storage tanks (at facilities constructed, modified, or reconstructed after August 23, 2011) with potential VOC emissions of 6 tons or more per year to control those emissions (including through combustion); (3) pneumatic controllers (at facilities constructed, modified or reconstructed after October 15, 2013) to be low-bleed (i.e., bleed rate less than 6 standard cubic feet/hour) or no-bleed at onshore natural gas processing plants; (4) emissions from pneumatic pumps (at facilities that were constructed, modified, or reconstructed after September 18, 2015) to be routed to a control device or process; and (5) operators of well sites constructed, modified, or reconstructed after September 18, 2015, to develop and implement a leak-monitoring plan involving instrument-based leak detection and semi-annual inspections. Although operator compliance with these EPA requirements can reduce the waste of natural gas from Federal and Indian leases, they do not supplant the need for BLM standards for the following reasons. First, the EPA’s requirements for storage tanks, pneumatic equipment, and LDAR apply only to emissions sources that were constructed, modified, or reconstructed after August 23, 2011, or later, depending on the requirement. Thus, relying on EPA’s requirements would ignore wasteful practices at many 87 well sites producing Federal and Indian gas.88 Second, EPA’s requirements are not a substitute for BLM standards because EPA’s requirements are focused on controlling methane and VOC emissions, rather than conserving natural gas, and compliance with the EPA’s standards will not always reduce the waste of natural gas. For example, an operator can comply with EPA’s current requirements for storage tanks and pneumatic pumps by routing the emissions to combustion (i.e., flaring) and therefore eliminating venting from the tanks and pumps altogether—a process that results in the same loss of gas as venting the gas from the tank or pump. Based on its review and analysis of State and EPA regulations, the BLM finds that it is necessary to establish a uniform standard governing the wasteful losses of Federal and Indian gas through venting, flaring, and leaks.89 The BLM cannot rely on a patchwork of State and EPA regulations to ensure that operators of Federal oil and gas leases consistently meet the waste prevention mandates of the MLA, that the American public receives a fair return for the development of the Federal mineral estate, and that the Department’s trust responsibility to Indian mineral owners is satisfied. The BLM acknowledges that this is a change in position from what the BLM stated in the Revision Rule regarding analogous State and EPA regulations. The RIA 90 for this rule calculates that this rule would cost operators $122 million a year, using a 7 percent discount rate, for the next 10 years ($110 million a year using a 3 percent discount rate) while generating benefits to operators of approximately $54.2 million a year, using a 7 percent discount rate, in the form of 15.3 Bcf of additional captured gas ($54.8 million using a 3 percent discount rate). The RIA estimates that this proposed rule would generate $39 million a year in additional royalties. The BLM acknowledges that the costs of this rule 87 The BLM estimates that approximately 39% of BLM-managed well sites are not covered by the EPA requirements. 88 The BLM recognizes that the EPA has proposed to revise new source performance standards for new, modified, and reconstructed oil and gas sources and has proposed emissions guidelines for existing oil and gas sources. See 86 FR 63110 (Nov 15, 2021). The BLM cannot presuppose the outcome of that rulemaking process. Cf. California v. Bernhardt, 472 F. Supp. 3d 573, 625 (N.D. Cal. 2020) (‘‘BLM was not required to prejudge the outcome of that proposed rulemaking in its EA.’’). However, the BLM will maintain an awareness of developments in EPA’s regulations and will make adjustments to the final rule as appropriate. The BLM further notes that, under the Clean Air Act, once the EPA finalizes the new emission guidelines, States with one or more existing sources must develop and submit State plans to the EPA for approval. Under this statutory structure, State plans that would implement new emissions guidelines for existing sources would likely not go into effect until some period of time after such guidelines are finalized. 89 The BLM acknowledges that the court in Wyoming questioned what it described as the BLM’s authority to ‘‘hijack’’ cooperative federalism under the Clean Air Act ‘‘under the guise of waste management.’’ Wyoming, 493 F. Supp. 3d 1046, 1066 (D. Wyo. 2020). However, as noted elsewhere, this proposed rule is justified not by any ancillary effects on air quality or climate change, but solely on the basis of waste prevention—an arena where the BLM has independent statutory authority to regulate. See Wyoming, 493 F. Supp. 3d at 1063 (‘‘The terms of the MLA and FOGRMA make clear that Congress intended the Secretary, through the BLM, to exercise rulemaking authority to prevent the waste of Federal and Indian mineral resources and to ensure the proper payment of royalties to Federal, State, and Tribal governments.’’). On its own terms, therefore, the Wyoming court’s reference to cooperative federalism under the Clean Air Act is therefore inapplicable to this proposal. 90 The cost-benefit analysis contained in the RIA was generated to comply with Executive Order 12866 and is not required by the statutes authorizing the BLM to regulate for the prevention of waste from oil and gas leases. PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 E:\FR\FM\30NOP2.SGM 30NOP2 73600 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules to operators will outweigh the benefits in terms of the monetized market value of the gas conserved. The BLM notes that the statutory provisions authorizing the BLM to regulate oil and gas operations for the prevention of waste do not impose a net-benefit requirement. The reduced methane emissions associated with the proposed rule would provide a monetized benefit to society (in the form of avoided climate damages) of $427 million a year over the same time frame, leading to an overall net monetized benefit from the rule of $359 million a year, as well as additional unquantified benefits (see section 7.2 of the RIA regarding unquantified benefits). The basis for the BLM’s estimates of social benefits from reduced methane emissions—namely, the social cost of greenhouse gases (SC– GHG)—is explained in detail in Section 7 of the RIA. To be clear, although the BLM is reporting its estimates of the social benefits of reduced methane emissions here and in the RIA, the purpose of that reporting is solely to provide the most complete and transparent accounting of the costs and benefits of the proposed rule for the public’s awareness and consideration. The requirements of this proposed rule reflect reasonable measures to avoid waste that could be expected of a prudent operator, irrespective of any impacts with respect to climate change. IV. Section-by-Section Discussion of Proposed Rule lotter on DSK11XQN23PROD with PROPOSALS2 A. 43 CFR Part 3160—Onshore Oil and Gas Operations Section 3162.3–1 Drilling Applications and Plans Existing § 3162.3–1 contains the BLM’s longstanding requirement that operators must submit an APD prior to conducting any drilling operations on a Federal or Indian oil and gas lease. No drilling operations may be commenced prior to the BLM’s approval of the APD. This proposed rule would add two new paragraphs to § 3162.3–1 that are intended to help operators and the BLM avoid situations where substantial volumes of natural gas are flared due to inadequate gas capture infrastructure. Proposed § 3162.3–1(j) would require an APD for an oil well to be accompanied by a plan to minimize the waste of natural gas from that well. This ‘‘waste minimization plan’’ would demonstrate how the operator plans to capture associated gas upon the start of oil production, or as soon thereafter as reasonably possible, and would also explain why any delay in capture of the associated gas would be necessary. The VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 waste minimization plan would contain certain information that would provide the BLM with a more complete picture of the consequences of approving the APD in terms of wasted natural gas. Specifically, the waste minimization plan would be required to include the following information: the anticipated completion date of the well; a description of the anticipated production of both oil and associated gas; a certification that the operator has informed at least one midstream processing company of the operator’s production plans; and information regarding the gas pipeline to which the operator plans to connect. If an operator cannot identify a gas pipeline with sufficient capacity to accommodate the anticipated associated gas production, the waste minimization plan would be required to also include: a gas-pipelinesystem map showing the existing pipelines within 20 miles of the well and the location of the closest gas processing plant; information about the operator’s flaring from other wells in the vicinity; and a detailed evaluation of opportunities for alternative on-site capture approaches, such as compression of the gas, removal of NGLs, or electricity generation. Finally, the operator would also be required to include any other information demonstrating the operator’s plans to avoid the waste of gas production from any source, including pneumatic equipment, storage tanks, and leaks. The contents of the operator’s waste minimization plan would provide the BLM with the information necessary to understand how much associated gas would be lost to flaring if the oil-well APD were approved, and whether such loss of gas would be reasonable under the circumstances. If the available information demonstrates that approving the APD could result in the unreasonable and undue waste of Federal or Indian gas, proposed § 3162.3–1(k) would expressly authorize the BLM to take one of the following actions on the APD. First, the BLM could approve the APD subject to conditions for gas capture and/or royalty payments on vented and flared gas. Second, the BLM could defer action on the APD in the interest of preventing waste. If the BLM were to defer action on the APD under proposed § 3162.3– 1(k)(2), the BLM would notify the applicant and specify steps that the applicant could take for the APD to be issued. If the potential for unreasonable and undue waste is not addressed within 2 years of the applicant’s receipt of the notice, the BLM could deny the APD. The BLM notes that this proposed PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 process is based on the requirements for APD processing in the MLA (30 U.S.C. 226(p)) and is consistent with the APD processing provisions of Onshore Order Number 1. The BLM seeks comment on its definition of ‘‘unreasonable and undue waste’’ (see discussion of § 3179.3 later) and whether or to what extent the final rule (or implementing guidance) should spell out in additional detail how the BLM expects to make decisions to defer or deny an APD due to concerns regarding excessive waste of associated gas. The BLM believes that the proposed amendments to § 3162.3–1 would help to reduce the waste of associated gas from oil wells for the following reasons. First, the requirement to submit a waste minimization plan would force operators to think critically about opportunities for gas capture before the well is drilled. Second, the information provided in the proposed waste minimization plan would help the BLM make better decisions about which APDs should be approved and under what conditions. Finally, the express authorization for the BLM to defer—and potentially deny—an APD would incentivize operators to tailor their development plans to the available gascapture infrastructure and avoid the waste of public, Tribal, and allotteeowned gas. The BLM notes that some States have already incorporated concepts similar to the proposed waste minimization plan requirement into their regulations governing flaring. In New Mexico, operators must submit a ‘‘natural gas management plan’’ with any APD that describes the actions the operator will take to ensure that it will meet New Mexico’s gas-capture requirements. In Wyoming, an operator’s application for authorization to flare must include, among other information, a gas-capture plan identifying gas gathering and transportation facilities in the area, the name of gas gatherers providing ‘‘gas take-away capacity,’’ and information on the gas gathering line to which the operator proposes to connect. In Colorado, an operator must either commit to connecting to a gathering system by the commencement of production or submit a gas-capture plan containing information about the closest or contracted natural-gas gathering system and describing the operator’s plan for connecting to the gas-gathering system or otherwise putting the gas to beneficial use. In North Dakota, an operator that has failed to meet its gascapture requirements in any of the previous 3 months must submit a gascapture plan with any application for a permit to drill. These existing, State- E:\FR\FM\30NOP2.SGM 30NOP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules level gas-capture planning requirements demonstrate that operators have the capacity to comply with the BLM’s proposed waste minimization plan requirement and that the proposed requirement is consistent with the regulatory practices of other traditional oil and gas resource conservation agencies. To be clear, these State requirements do not obviate the need for a waste minimization plan requirement in the BLM’s regulations. In the first instance, many States (including Utah, Montana, Texas, and Oklahoma) in which the BLM manages oil and gas drilling and production do not have analogous planning requirements. Second, the gas capture plan requirements in Wyoming and North Dakota are only triggered after flaring is demonstrated to be a problem at the well, and therefore do not address flaring at the well permitting stage. Finally, none of the State gas capture plan requirements require the operator to submit the plans to the BLM and, therefore, do not provide the BLM, in its capacity as regulator of the Federal mineral estate, with an opportunity to render its own determinations regarding potential waste when processing an APD. The BLM acknowledges that the BLM’s proposal to require waste minimization plans with oil-well APDs constitutes a change from the position the BLM articulated in the 2018 Revision Rule. See 83 FR 49184, 49191– 92 (Sept. 28, 2018). For the reasons discussed earlier, the BLM has concluded that many assertions made in the Revision Rule are not supported by contemporary data, and the proposed waste minimization plan requirement; would facilitate less wasteful development; would not be unnecessarily duplicative of existing State requirements; and would not impose an undue administrative burden on operators. The proposed additions to § 3162.3–1 would reduce the waste of Federal and Indian gas by allowing the BLM to make better-informed decisions when processing oil-well APDs. In effect, the BLM would be able to more swiftly approve wells that pose the least risk of waste, while deferring approval of APDs for wells that lack access to the necessary gas-capture infrastructure and that would therefore result in waste. The BLM is not alone in recognizing the potential benefits of the proposed waste minimization plan requirement. In a recent report, the GAO analyzed Statelevel gas capture plan requirements and recommended that the BLM ‘‘consider whether to require gas capture plans that are similar to what States require, VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 including gas capture percentage targets, from operators on federal lands.’’ 91 (As discussed later in the section-by-section discussion of proposed § 3179.8, the BLM has decided not to use gas-capture percentage targets in this proposed rule.) Although the proposal discussed here pertains specifically to the permitting stage of oil and gas development, information regarding the capacity of available gas-capture infrastructure helps the BLM make better decisions at the leasing stage as well. The BLM currently has the discretion to offer, or not offer, parcels for lease based on waste/conservation considerations,92 and the proposed waste minimization plans could provide an efficient (though not exclusive) means of collecting additional information regarding the location of adequate gas capture infrastructure that would be relevant for lease sale decisions. The BLM requests comment on how it can improve its processes pertaining to the leasing stage of development so as to minimize the waste of natural gas during later stages of development. B. 43 CFR Part 3170—Onshore Oil and Gas Production Subpart 3179—Waste Prevention and Resource Conservation Section 3179.1 Purpose Proposed § 3179.1 would state that the purpose of subpart 3179 is to implement and carry out the purposes of statutes relating to prevention of waste from Federal and Indian oil and gas leases, conservation of surface resources, and management of the public lands for multiple use and sustained yield, including Section 50263 of the Inflation Reduction Act. These statutes are discussed in detail in Section III.B of this preamble. Section 3179.1 would also clarify that subpart 3179 would supersede those portions of NTL–4A pertaining to, among other things, flaring and venting of produced gas, unavoidably and avoidably lost gas, and waste prevention. Subpart 3178 has already superseded the portions of NTL–4A pertaining to oil or gas used for beneficial purposes (see 43 CFR 3178.1). Thus, if proposed subpart 3179 is ultimately adopted, NTL–4A will have been superseded in its entirety. 91 GAO, OIL AND GAS: Federal Actions Needed to Address Methane Emissions from Oil and Gas Development (April 2022) (GAO–22–104759). 92 See, e.g., Western Energy Alliance v. Salazar, 709 F.3d 1040, 1044 (10th Cir. 2013) (MLA ‘‘vest[s] the Secretary with considerable discretion to determine which lands will be leased’’). PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 73601 Section 3179.2 Scope Section 3179.2 identifies the operations to which the various provisions of proposed subpart 3179 would apply. Paragraph (a) states that, in general, the provisions of proposed subpart 3179 would apply to: (1) all onshore Federal and Indian (other than Osage Tribe) oil and gas leases, units, and communitized areas; (2) Indian Mineral Development Act oil and gas agreements; (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; and (4) wells, equipment, and operations on State or private tracts that are committed to a federally approved unit or CA. Paragraph (b) states that certain provisions in proposed subpart 3179 would apply only to operations and production equipment located on a Federal or Indian oil and gas lease, and would not apply to operations on State or private tracts, even where such tracts have been committed to a federally approved unit or CA (sometimes referred to as ‘‘mixed-ownership’’ units or CAs). The provisions of subpart 3179 subject to this more limited scope are those provisions pertaining to safety (proposed § 3179.6), pneumatic equipment (proposed § 3179.201), storage tanks (proposed § 3179.203), and LDAR (proposed §§ 3179.301 through 303). As mentioned in Section III.D, proposed § 3179.2(b) responds to a question regarding the BLM’s authority raised by the court that vacated the 2016 Waste Prevention Rule. Specifically, that court stated that the MLA ‘‘does not provide broad authorization for the BLM to impose comprehensive Federal regulations similar to those applicable to operations on Federal lands on State or privately owned tracts or interests.’’ 93 Rather, in that court’s view, the BLM’s authority to regulate unit or CA operations on State and private tracts under the MLA and FOGRMA is limited to rates of development and matters directly relevant to the BLM’s proprietary interest in the Federal minerals.94 The BLM maintains that the requirements proposed herein related to pneumatic equipment, storage tanks, and LDAR serve a legitimate waste-prevention purpose by requiring interventions that would lead to the conservation of natural gas and, therefore, to additional royalties allocable to the United States 93 Wyoming v. DOI, 493 F. Supp. 3d 1046, 1082 (D. Wyo. 2020). 94 Id. at 1082–83. E:\FR\FM\30NOP2.SGM 30NOP2 73602 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 or Indian mineral owners in a mixedownership unit or CA. In this rulemaking, however, the BLM has chosen to limit the scope of these provisions to operations on Federal or Indian leases. Other provisions that have a more direct impact on royalty revenues—such as the limits on royaltyfree flaring in proposed §§ 3179.4, 3179.8, 3179.102, 3179.103, 3179.104, and 3179.105, and the measurement and reporting requirements of proposed § 3179.9—would apply to all operations producing Federal or Indian gas, whether on lease or as part of a mixedownership unit or CA. The BLM requests comment on its proposed approach to balancing its resource conservation objectives. Section 3179.3 Definitions and Acronyms This proposed section contains definitions for 13 terms that are used in subpart 3179: ‘‘automatic ignition system;’’ ‘‘capture;’’ ‘‘compressor station;’’ ‘‘gas-to-oil ratio;’’ ‘‘gas well;’’ ‘‘high-pressure flare;’’ ‘‘leak;’’ ‘‘liquids unloading;’’ ‘‘lost oil or lost gas;’’ ‘‘lowpressure flare;’’ ‘‘pneumatic controller;’’ ‘‘storage vessel;’’ and ‘‘unreasonable and undue waste of gas.’’ Some defined terms would have a particular meaning in this proposed rule. Other defined terms may be familiar to many readers, but we include their definitions in the proposed regulatory text to enhance the clarity of the rule. The proposed rule would define ‘‘unreasonable and undue waste of gas’’ to mean a frequent or ongoing loss of gas that could be avoided without causing an ultimately greater loss of equivalent total energy than would occur if the loss of gas were to continue unabated. The intent of this definition is to clarify that the goal of waste prevention is maximizing the overall recovery of energy resources. To illustrate, the longterm flaring of associated gas from an oil well would constitute ‘‘unreasonable and undue waste of gas’’ if the operator could avoid or reduce the flaring by curtailing production in the near-term and producing an equal or greater amount of total energy resources (considering both oil and gas production) from the well in the long term. Thus, this proposed definition incorporates the fundamental concept of waste contained in NTL–4A. The phrase ‘‘frequent or ongoing loss’’ is intended to exclude one-off events such as an unanticipated equipment failure or a specific operation, like liquids unloading, that involves some venting or flaring of a limited duration. The phrase ‘‘total equivalent energy’’ compares the total expected energy VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 production from the well with capture required to the total expected energy production from the well without capture, considering both production streams (oil and gas). Expected gas production is converted to barrels of oil equivalent to allow for an ‘‘apples to apples’’ comparison. In brief, if the gas that would otherwise be lost could be conserved without stranding more energy resources in the ground (i.e., without creating more waste overall), the operator should be expected to take the necessary measures to conserve that gas. The BLM seeks comment on this definition of ‘‘unreasonable and undue waste of gas.’’ The phrase ‘‘unreasonable and undue waste of gas’’ appears in proposed §§ 3162.3–1(k), 3179.8, and 3179.301, which pertain to APD processing, oilwell gas flaring, and LDAR, respectively. As explained elsewhere in this section-by-section analysis, proposed §§ 3162.3–1(k), 3179.8, and 3179.301 each authorize the BLM to take some discretionary action based on its view of the ‘‘unreasonable and undue waste of gas.’’ This definition would establish parameters on the exercise of that discretion. The BLM seeks comment on the following alternative definition: ‘‘Unreasonable and undue waste of gas’’ means a frequent or ongoing loss of substantial quantities of gas that could reasonably be avoided if the operator were to take prudent steps to plan for and manage anticipated production of both oil and associated gas from its operation, including, where appropriate, coordination with other nearby operations. The BLM also seeks comment on the inter-relation and interaction of the ‘‘unreasonable and undue waste’’ concept with the ‘‘avoidable/ unavoidable loss’’ concept detailed later. The BLM views ‘‘avoidable/ unavoidable loss’’ primarily as a means of determining when royalties must be paid on lost gas, while the concept of ‘‘unreasonable and undue waste’’ would inform BLM decision-making with respect to other, more complicated waste prevention measures, such as delaying or denying a permit to drill or ordering a well to be shut-in due to excessive flaring. The BLM requests comment on whether the BLM should be considering other ways to view the inter-relation and interaction of these two concepts. Section 3179.4 Determining When the Loss of Oil or Gas Is Avoidable or Unavoidable This proposed section would specify when lost oil or gas would be classified PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 as ‘‘unavoidably lost’’ (i.e., when it is royalty free) and when it would be classified as ‘‘avoidably lost’’ (i.e., when it is royalty bearing). NTL–4A contains similar provisions addressing when oil or gas is ‘‘avoidably lost’’ or ‘‘unavoidably lost.’’ However, these NTL–4A provisions have been subject to interpretation and have not always been applied consistently. In order to address this deficiency in NTL–4A, this proposed rule would deem losses from specified operations and sources to be ‘‘unavoidably lost’’ when the operator has not been negligent, has not violated laws, regulations, lease terms or orders, and has taken prudent and reasonable steps to avoid waste. Any oil or gas that is not categorized as unavoidably lost would be considered ‘‘avoidably lost,’’ and therefore royalty-bearing. The listed operations and sources that may constitute an unavoidable loss under this proposed rule include: well drilling; well completions and related operations; initial production tests; subsequent well tests; emergencies; downhole well maintenance and liquids unloading; facility and pipeline maintenance; and flaring due to pipeline capacity constraints, midstream processing failures, or other similar events. Notably, the proposed rule would apply reasonable time and/ or volume limitations on royalty-free flaring attributable to many of these operations and sources. See the discussion of proposed §§ 3179.8, 3179.102, 3179.103., 3179.104, and 3179.105 later in this preamble. The BLM requests comment on whether the definition of ‘‘unavoidably lost’’ can be more narrowly defined than as proposed. Section 3179.5 When Lost Production Is Subject to Royalty This section would state that royalty is due on all ‘‘avoidably lost’’ gas, and that no royalty is due on ‘‘unavoidably lost’’ gas. Section 3179.6 Safety Proposed § 3179.6 contains provisions intended to ensure safety at the well site. First, proposed § 3179.6(a) would require that gas that cannot be captured must be flared (rather than vented), except under certain specified circumstances. It is generally safer to combust gas rather than to allow it to vent into the surrounding air due to the gas’ explosiveness and the risks to workers from hypoxia and exposure to various associated pollutants.95 The 95 NIOSH–OSHA Hazard Alert, ‘‘Health and Safety Risks for Workers Involved in Manual Tank Gauging and Sampling at Oil and Gas Extraction E:\FR\FM\30NOP2.SGM 30NOP2 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules preference for flaring over venting is well-established in oilfield operations. Indeed, the USGS implementing guidance for NTL–4A stated that, ‘‘[b]ecause of safety requirements, gas which cannot be beneficially used or sold must normally be flared, not vented.’’ CDM, 644.5.3G (June 1980). Operators would be allowed to vent gas when flaring is technically infeasible, under emergency conditions, and when gas is vented through the normal operation of pneumatic equipment, among other circumstances. Proposed § 3179.6(b) would require flares or combustion devices be equipped with automatic ignition systems. There is no similar requirement in NTL–4A. Under proposed § 3179.6(b), the BLM would be authorized to issue an immediate assessment of $1,000 upon discovering a flare that is not lit. Finally, proposed § 3179.6(c) would require that flares be placed a sufficient distance from the tank battery containment or other significant structures or objects so as not to create a safety hazard. NTL–4A does not contain similar flare location requirements. Section 3179.7 Gas-Well Gas This section states that gas-well gas cannot be flared or vented unless it is unavoidably lost under proposed § 3179.4(b). Currently, gas-well gas is prohibited from being vented or flared under NTL–4A unless it qualifies as ‘‘unavoidably lost’’ or is specially authorized by the BLM. Unlike oil wells, the primary purpose of a gas well is the production and sale of gas. Therefore, consistent with longstanding BLM policy, gas-well gas should not be vented or flared except in narrow circumstances. lotter on DSK11XQN23PROD with PROPOSALS2 Section 3179.8 Oil-Well Gas Proposed § 3179.8 would establish a new policy governing the flaring of associated gas from oil wells. Most of the flaring from BLM-managed oil and gas leases occurs at oil wells that are connected to a gas pipeline with insufficient takeaway capacity for the well(s) connected to the pipeline. When the gas pipeline associated with an oil well becomes overwhelmed, the well is ‘‘kicked off’’ the pipeline and the operator is faced with a choice: flare the associated gas in order to continue oil production unabated, or curtail oil production in order to conserve the associated gas. At this point, the Sites,’’ February 2016, available at https:// www.osha.gov/sites/default/files/publications/ OSHA3843.pdf. VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 interests of the operator and the lessor (either the United States or the Indian mineral owner) may diverge. Specifically, the operator may wish to continue oil production unabated, sacrificing the associated gas production for near-term revenues from the oil production. When an operator chooses this course of action, proposed § 3179.8(a) would ensure that the financial interests of the public and Indian mineral owners are not unduly compromised. Under proposed § 3179.8(a), when oil-well gas must be flared due to pipeline capacity constraints, midstream processing failures, or other similar events that prevent produced gas from being transported through the connected pipeline, a maximum of 1,050 Mcf per month (per lease, unit, or CA) of such flared gas would be considered a royalty-free ‘‘unavoidable loss.’’ The operator would owe royalties on flaring beyond that limit. The proposed monthly volume limit on royalty-free flaring due to pipeline capacity constraints replaces the caseby-case flaring approval process of NTL–4A. Under NTL–4A, an operator could seek BLM approval to flare where conservation of the gas was not ‘‘economically justified.’’ 96 As the rapid development of unconventional tight oil and gas resources resulted in more flaring due to midstream problems such as pipeline capacity constraints, many operators began to submit applications arguing that the flaring was justified under the economic circumstances and should therefore be royalty free.97 The BLM has never taken the position that long-term flaring due to pipeline capacity constraints is economically justified. Furthermore, the BLM does not believe that the economic test in NTL–4A was intended to accommodate situations where large volumes of associated gas are flared in order to maximize an individual operator’s nearterm profits. Rather, as explained in detail previously, the economic standard in NTL–4A looked to ‘‘the total leasehold production, including oil and gas, as well as the economics of a field96 See Section III.C.2 of this preamble for additional detail on this process and the applicable standard. 97 See, e.g., Petro-Hunt, LLC, 197 IBLA 100, 105– 106 (‘‘Petro-Hunt stated that ‘[t]he flaring at issue was primarily the result of, among other things, force majeure events, maintenance, and/or capacity issues in the third-party gas gathering and processing system, a common cause of flaring in the Williston Basin.’ It argued that ‘[w]hile [it] could have prevented flaring by shutting-in its productive oil wells and refusing to continue developing the field, such actions would not have been reasonable’ because ‘there are vast discrepancies in value between produced oil and gas.’ ’’). PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 73603 wide plan,’’ when evaluating the feasibility of conserving the associated gas, and this standard did not envision that operators could use a pipeline constraint as an economic justification for long-term flaring. Finally, the drastic increase in flaring applications under NTL–4A demonstrates that the case-bycase application process is not a sustainable approach for evaluating the appropriateness of flaring. Therefore, the BLM is proposing to set a volume limit that will accommodate any truly unavoidable losses due to midstream failures while ensuring that royalties are paid when an operator makes the business decision to flare gas in order to continue producing oil. In order to determine the appropriate monthly volume limit on royalty-free flaring due to midstream constraints, the BLM examined flaring data reported to ONRR for the years 2015–2019. Based on that data, the BLM determined that a limit of 1,050 Mcf per month would impact the 20 percent of flaring operations responsible for 95 percent of the reported flaring volumes. Thus, the proposed limit targets only those operators that generate the vast majority of the flaring. The BLM estimates that the proposed 1,050 Mcf per month limit would make approximately 85 percent of flared volumes royalty-bearing and generate an average of nearly $33 million in royalty revenues each year. The BLM examined limits lower than 1,050 Mcf per month, but found diminishing returns in terms of additional royalties relative to the number of operations impacted. In most cases, payment of royalties on flared associated gas would be sufficient to protect the proprietary interests of the United States and Indian mineral owners. However, because the incentive to flare is strongest where the price of gas (and, therefore, the royalty value of the gas) is lowest with respect to the price of oil, the BLM must be prepared for the possibility of egregious cases where the volume of flaring is unacceptable even in the face of royalty payments. In order to protect the public interest in such cases, paragraphs (b) and (c) of proposed § 3179.8 would establish a process whereby the BLM could, under a narrow set of circumstances, order an operator to curtail or shut-in production as necessary to avoid the unreasonable waste of Federal or Indian gas. The BLM is proposing to limit shut-in or curtailment orders under this section to situations where the operator had reported flaring in excess of 4,000 Mcf per month for 3 consecutive months and the BLM confirms that flaring is ongoing. According to ONRR data, only E:\FR\FM\30NOP2.SGM 30NOP2 lotter on DSK11XQN23PROD with PROPOSALS2 73604 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules 3 percent of reporting units had 3 consecutive months of more than 4,000 Mcf of flaring. However, this 3 percent accounted for approximately 16 percent of the total flaring in 2019. The proposed standard for shut-in or curtailment orders is based on flaring over a consecutive 3-month period to account for the fact that flaring is often at its highest levels during the first months of a well’s life and can taper off to substantially lower levels soon thereafter. One reason for this phenomenon is that facilities are often designed to accommodate long-term production levels, as opposed to the high levels of gas production experienced in the initial months of production. The purpose of the 3-month time frame is to focus shut-in and curtailment orders on wells most likely to flare large volumes for longer periods. The BLM requests comment on the proposed standard for shut-in or curtailment orders, including the volume threshold and the 3-month time frame. If a shut-in or curtailment order would adversely affect production of oil or gas from non-Federal and non-Indian mineral interests (e.g., State or private leases in a mixed-ownership unit or CA), the BLM is proposing to issue such an order only where the BLM is authorized to regulate the rate of production under the governing unit or communitization agreement. In the absence of such authorization, the BLM would contact the State regulatory authority having jurisdiction over the oil and gas production from the nonFederal and non-Indian interests and request that that entity take appropriate action to limit the waste of gas. The BLM requests comment on this proposed approach to regulating the flaring of associated gas from oil wells. Specifically, the BLM would like comment on whether the proposed volume thresholds are appropriate, whether the proposed limit on royaltyfree flaring in proposed § 3179.8(a) should cover sources of flaring besides midstream constraints, and whether shut-in or curtailment orders under proposed § 3179.8(b) can or should be applied more broadly (e.g., for lower volumes of flaring, over a shorter time frame, or using a different standard for impacting non-Federal production). The BLM also invites comment on alternative approaches to regulating flaring, such as the capture percentage regimes employed by New Mexico and North Dakota. The BLM has not proposed capture percentage requirements similar to those in the 2016 Rule because such requirements would appear to be more difficult for VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 the BLM to implement and enforce (due to the relative complexity of the calculations) and not necessarily more effective at controlling waste or ensuring appropriate royalty payments as opposed to the provisions proposed herein. Section 3179.9 Measuring and Reporting Volumes of Gas Vented and Flared Under proposed § 3179.9(a), operators would be required to estimate (using estimation protocols) or measure (using a metering device) all flared and vented gas, whether royalty-bearing or royaltyfree. Operators would also be required to report all volumes vented or flared under applicable ONRR reporting requirements. Proposed paragraph (b) would require operators to use an orifice meter for any flare that is flaring at a rate of 1,050 Mcf per month or higher. The meter would be required to conform to the requirements of 43 CFR subpart 3175 for a low-volume facility measurement point (FMP), but with lesser requirements for plate inspection, EGM verification, determination of heating value, and overall measurement uncertainty. The proposed section would establish the timeframe for installation of the required meter (6 months after the effective date of the final rule) and would establish special requirements relating to the location of the meter. The BLM requests comment on whether operators should be required to document compliance with proposed paragraph (b) and provide that documentation to the BLM on a regular or as-needed basis. Proposed paragraph (c) would provide the requirements for flares not covered by paragraph (b). This section would allow those flared volumes to be measured per the requirements of paragraph (b), estimated utilizing sampling and compositional analysis that complies with the requirements of proposed § 3179.203(c), or estimated using another method that has been approved by the BLM. Proposed paragraph (d) would address situations where a flare is combusting gas that is combined across multiple leases, unit PAs, or communitized areas. This proposed paragraph would allow the operator to measure or estimate the gas at a single point at the flare but would require the operator to use an allocation method approved by the BLM to allocate the quantities of flared gas to each lease, unit PA, or communitized area. Paragraph (e) would clarify that flare meters are not FMPs for the purposes of PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 the BLM’s gas measurement regulations at 43 CFR subpart 3175. Section 3179.10 Determinations Regarding Royalty-Free Flaring This proposed section would provide for a transition period for operators that are operating under existing approvals for royalty-free flaring as of the effective date of the final rule. Proposed paragraph (a) states those operators could continue to flare royalty-free pursuant to such approvals for 6 months after the effective date of the rule. Paragraph (b) would clarify that nothing in proposed subpart 3179 would alter the royalty-bearing status of flaring that occurred prior to the effective date of the final rule or the BLM’s authority to determine that status and collect appropriate back-royalties. Section 3179.11 Incorporation by Reference (IBR) The proposed rule would incorporate two industry standards without republishing the standards in their entirety in the CFR, a practice known as incorporation by reference. These standards were developed through a consensus process, facilitated by the Gas Processors Association (GPA) Midstream, with input from the oil and gas industry. The BLM has reviewed these standards and determined that they would further the purposes of § 3179.203 of this proposed rule. These standards reflect the industry-accepted standards for compositional analysis for samples under pressure where the sample is expected to have C10+ components. Under § 3179.203, pressurized samples from the last pressurized vessel upstream of the storage tank would be used to determine whether the volumes of gas lost from the storage tank are of sufficient quantity and quality to justify the installation of a vapor recovery unit. The legal effect of incorporation by reference is that the incorporated standards become regulatory requirements. This proposed rule would incorporate the specific versions of the standards listed. The standards referenced in this section would be incorporated in their entirety. The proposed incorporation of industry standards follows the requirements found in 1 CFR part 51. The industry standards can be incorporated by reference pursuant to 1 CFR 51.7 because, among other things, they would substantially reduce the volume of material published in the Federal Register; the standards are published, bound, numbered, and organized; and the standards proposed for incorporation are readily available to the general public through purchase E:\FR\FM\30NOP2.SGM 30NOP2 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 from the standards organization or through inspection at any BLM office with oil and gas administrative responsibilities. 1 CFR 51.7(a)(3) and (4). The language of incorporation in proposed 43 CFR 3179.11 meets the requirements of 1 CFR 51.9. All of the GPA Midstream materials for which the BLM is seeking incorporation by reference are available for inspection at the Bureau of Land Management, Division of Fluid Minerals, 301 Dinosaur Trail, Santa Fe, NM 87505, telephone 505–954–2000; and at all BLM offices with jurisdiction over oil and gas activities. The GPA materials are also available for inspection and purchase from GPA Midstream, 6060 American Plaza, Suite 700, Tulsa, OK 74135; telephone 918– 493–3872. The following describes the GPA standards that the BLM proposes to incorporate by reference into this rule: GPA 2286–14, Method for the Extended Analysis for Natural Gas and Similar Gaseous Mixtures by Temperature Program Gas Chromatography, Revised 2014 (‘‘GPA 2286’’). This standard covers the methods for determination of natural gas chemical composition when specifics of heavier fractions up to C14 is needed or required. GPA 2186–14, Method for the Extended Analysis of Hydrocarbon Liquid Mixtures Containing Nitrogen and Carbon Dioxide by Temperature Programmed Gas Chromatography, Revised 2014 (‘‘GPA 2186’’). This standard covers the methods for determination of natural gas chemical composition when specifics of heavier fractions up to C10 is needed or required. § 3179.12 Reasonable Precautions To Prevent Waste Proposed § 3179.12 would further implement the BLM’s authority to prevent waste. Paragraph (a) is a nearly verbatim recitation of the MLA’s requirement that operators must use all reasonable precautions to prevent the waste of oil or gas developed from the lease. See 30 U.S.C. 225. Paragraph (b) would reiterate the BLM’s existing authority to specify certain reasonable precautions to prevent waste as conditions of approval (COA) of an APD. See 43 CFR 3162.3–1(h)(1). Paragraph (c) would authorize the Authorized Officer to order an operator to implement, within a reasonable time, other measures to prevent waste at ongoing operations. Finally, paragraph (d) would recognize that the reasonable precautions to prevent waste may evolve over time and would clarify that VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 such reasonable precautions are not therefore limited to the waste prevention standards and requirements reflected elsewhere in the BLM’s regulations. For example, under proposed § 3179.12, the BLM could impose a COA on an APD requiring the operator to use a particular instrument to detect leaks as part of its LDAR program if, due to technological advancements, changes in common industry practice, or other appropriate considerations, the failure to employ the specified instrument would constitute a failure to use all reasonable precautions to prevent waste. The BLM seeks comments on this section, specifically whether and to what extent the standards described in proposed paragraphs (c) and (d) provide the BLM with the appropriate flexibility to prevent waste. Flaring and Venting Gas During Drilling and Production Operations Section 3179.101 Well Drilling This proposed section would address gas that is lost as a result of loss of well control. Gas lost as a result of a loss of well control during drilling would be classified as unavoidably lost and royalty-free, unless the loss of well control was due to operator negligence, in which case it would be avoidably lost and subject to royalties (see proposed § 3179.4(b)(1)). If there is a loss of well control, the BLM would determine whether it was due to operator negligence, and if so, the BLM would notify the operator in writing. Section 3179.102 Well Completion and Related Operations This proposed section would address gas that reaches the surface during well completions, post-completion and fluid recovery operations, and re-fracturing. Proposed paragraph (a) provides that, for new completions, up to 10,000 Mcf of gas that reaches the surface may be flared royalty-free. This would cover the operations of well completion, postcompletion, and fluid recovery operations. Proposed paragraph (b) provides that, for refracturing of existing completions at a well connected to a pipeline, up to 5,000 Mcf of gas that reaches the surface may be flared royalty-free. This would cover the operations of well completion, post-completion, and fluid-recovery operations. Under the 2016 Waste Prevention Rule, royalty-free flaring during well completions and related operations was limited to 20,000 Mcf or up to 30 days, whichever occurred first. Upon further investigation, including post-2016 PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 73605 consultation with certain operators, the BLM believes that prudent operators conducting new completion operations are likely able to capture gas production before flaring more than 10,000 Mcf of gas. Specifically, the BLM understands from its conversations with mid-size operators that the flowback process has changed considerably over the past few years, and that it is now standard practice to connect to a gas sales line as soon as possible. The BLM understands that many operators are not using temporary production equipment, but rather production is flowing directly to permanent production facilities after completion, thereby substantially reducing the need for flaring. In addition, the BLM believes that a lower volume limit is appropriate for refractured wells because, though those wells would have some need for flaring, they should already have an established and available means of capture (e.g., a pipeline to sales). Section 3179.103 Initial Production Testing This proposed section would clarify the limits on royalty-free flaring during a well’s initial production test. This section is essentially the same as the 2016 Waste Prevention Rule provision governing royalty-free flaring during initial production testing. The BLM is proposing to adopt these limits rather than retaining the more liberal limits reflected in NTL–4A and the 2018 Revision Rule (which set a 30-day or 50,000 Mcf limit, subject to extensions) because the BLM believes the proposed limits would accommodate any truly unavoidable flaring during production testing while better protecting the public’s and Indian mineral owners’ interests in obtaining royalties on the extracted gas. Based on consultations with BLM State and Field Offices regarding their experiences with production testing, the BLM believes that it would be rare for operators to exceed the royalty-free flaring limits proposed in this section. Proposed paragraph (a) would provide that gas could be flared royalty-free during initial production testing for up to 30 days or 20,000 Mcf of flared gas, whichever occurs first. Volumes flared during well completion would count against the 20,000 Mcf limit. Additionally, royalty-free flaring would end when oil production begins, even if the 30-day or 20,000 Mcf limit had not been reached. Paragraph (b) would allow the BLM to approve royalty-free flaring during a longer testing period of up to 60 additional days if there are testing delays due to well or equipment E:\FR\FM\30NOP2.SGM 30NOP2 73606 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules problems or a need for additional testing to develop adequate reservoir information. Paragraph (c) would allow the BLM to increase the royalty-free flaring volume specified in paragraph (a)(2) by up to 30,000 additional Mcf if the well is an exploratory well in a remote location that would require additional testing related to the development of pipeline infrastructure. Paragraph (d) would allow a 90-day (rather than 30-day) period for royaltyfree flaring during the variable and timeintensive dewatering and initial evaluation of an exploratory coalbed methane well. In addition, the BLM could approve up to two extensions of 90 days each to allow for more time to dewater and evaluate the coalbed methane well. Paragraph (e) would clarify that the operator would have to transmit a request for a longer test period under paragraphs (b), (c), or (d) of this proposed section through a Sundry Notice. lotter on DSK11XQN23PROD with PROPOSALS2 Section 3179.104 Subsequent Well Tests The proposed requirement in this section is essentially the same as NTL– 4A’s requirement regarding subsequent well tests. It would limit royalty-free flaring during production tests after the initial production test to 24 hours, unless the BLM approves or requires a longer test period. The operator would be required to transmit its request for a longer test period through a Sundry Notice. Section 3179.105 Emergencies Under proposed § 3179.4(b)(6), and consistent with IRA Section 50263, gas lost during an ‘‘emergency situation’’ would be royalty-free. Proposed § 3179.105 would serve to clearly define what constitutes ‘‘an emergency situation,’’ specify circumstances that do not constitute an emergency situation, and place a time limit on royalty-free venting or flaring. Proposed § 3179.105(a) would allow an operator to flare or, if flaring is not feasible due to the emergency situation, vent gas royalty-free under § 3179.4(b)(6) of this subpart for no longer than 48 hours during an emergency situation. IRA Section 50263 does not define what is an ‘‘emergency situation that poses a danger to human health, safety, and the environment.’’ The BLM is proposing to implement the statute in a way that is reasonable in light of its longstanding authority under the MLA and FOGRMA and its experience implementing those authorities (and is also proposing to VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 make the same provision governing emergency situations applicable on Indian lands). Specifically, § 3179.105(a) would define an ‘‘emergency situation’’ as a temporary, infrequent, and unavoidable situation in which the loss of gas is necessary to avoid a danger to human health, safety, or the environment. Although NTL–4A limited royalty-free losses to 24 hours per ‘‘emergency’’ incident (except where otherwise approved by the BLM), this rule would implement a 48-hour limit (not subject to discretionary extensions) to reflect the time constraint contained in Section 50263 of the IRA. Proposed § 3179.105(b) would clarify that the following circumstances do not constitute ‘‘emergencies’’ for the purposes of royalty assessment: (1) recurring equipment failures; (2) the operator’s failure to install appropriate equipment of a sufficient capacity to accommodate production conditions; (3) the 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; (4) scheduled maintenance; and (5) operator negligence. Proposed § 3179.105(c) would require an operator to file a report to the BLM for any emergency situation that requires the operator to vent or flare beyond the timeframe authorized under paragraph (a). To be clear, proposed § 3179.105 would not prohibit an operator from engaging in venting or flaring when the operator deems it operationally necessary to do so. The BLM is not attempting to substitute its judgment for that of the operator with respect to the management of emergencies. Rather, the purpose of proposed § 3179.105 is to safeguard the public interest in royalty revenues by ensuring that a royalty-free flaring exception for ‘‘emergencies’’ is limited to events that are truly out of the operator’s control and could not have been avoided through more careful management. Conservation of Gas From Equipment, Storage Vessels, and During Well Maintenance Operations Section 3179.201 Pneumatic Controllers and Pneumatic Diaphragm Pumps Under proposed § 3179.201, an operator of a lease, unit participating area (PA), or CA producing at least 120 Mcf of gas or 20 barrels of oil per month would be prohibited from using naturalgas-activated pneumatic controllers or pneumatic diaphragm pumps with a bleed rate that exceeds 6 scf/hour. In effect, this would require operators to PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 use ‘‘low-bleed’’ pneumatic equipment or pneumatic equipment that does not bleed natural gas, such as air-activated pneumatic equipment. Prudent operators should be expected to employ less wasteful technologies where it is economically feasible to do so. Thus, the proposed prohibition on the use of higher-bleed natural-gasactivated pneumatic equipment is limited to operations producing amounts of oil or gas that would render the adoption of these less wasteful technologies economically feasible. Specifically, the BLM chose production thresholds of oil and gas that would pay for the installation of a low-bleed pneumatic controller (estimated to be about $2,200) in a period of less than 1 year (around 10 months). The BLM understands that it is unlikely that an operator of a lease, unit, or CA producing only 120 Mcf of gas or 20 barrels of oil per month could re-direct the entirety of its revenues for 10 months towards paying for upgrading its pneumatic equipment. However, the BLM expects that the life of such a lease, unit, or CA would extend well beyond 10 months and that the cost of the required equipment could be financed over a longer period. The more a lease, unit, or CA is producing above 120 Mcf of gas or 20 barrels of oil per month, the more revenue will be available to subsidize the new equipment. In a prior rulemaking, the BLM found that low-bleed continuous pneumatic controllers are already very common in the petroleum and natural gas production sector, and that lowbleed continuous pneumatic controllers have the potential to generate revenue for operators as gas that would otherwise be vented is captured and sold. See 83 FR 49184, 49195 (Sept. 28, 2018). In order to temper the potentially disruptive effect of this new requirement on existing operations, proposed § 3179.201(b) would set a compliance deadline of 1 year after the effective date of the final rule. The RIA estimates that operators would need to replace up to 53,213 pneumatic devices to meet the conditions of this rule. It is estimated that such replacements would conserve about 5.93 Bcf of gas a year. The proposed requirement is expected to cost operators up to $15.6 million dollars a year while generating $21 million in benefits from increased gas sales each year. Although the private benefits to industry would exceed the costs to industry—thereby indicating that operators should adopt this technology even in the absence of a regulation requiring them to do so—the BLM finds this requirement necessary E:\FR\FM\30NOP2.SGM 30NOP2 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 because, in the BLM’s experience, operators do not typically replace functional equipment, nor do they typically replace malfunctioning equipment unless the repair costs exceed the purchase price of new equipment. There would be an added benefit to society of $165 million a year in the value of reduced methane emissions. The BLM also notes that the reduced emissions of natural gas would reduce emissions of other pollutants (e.g., VOCs and hazardous air pollutants), though the BLM has not quantified or monetized the benefits to society associated with reducing those pollutants. The BLM requests comment on appropriate methodologies for quantifying and monetizing these benefits. The BLM considered requiring the use of no-bleed, air-activated devices instead of gas-activated equipment, but based on the information at our disposal, the BLM currently proposes that the higher price of the air-activated equipment may not be consistent with our statutory focus on waste reduction, considering the marginal increase in gas capture relative to the lower cost and effective low-bleed devices.98 The BLM also considered different production thresholds at which the requirements would be imposed but found the proposed thresholds to provide the best balance of gas conservation and economic feasibility. The BLM requests comment on the proposed approach to pneumatic equipment on Federal and Indian leases, including the estimated costs and benefits, appropriate production thresholds for these requirements, and the economic and technical feasibility of alternative approaches (such as requiring no-bleed equipment). Section 3179.203 Oil Storage Vessels Storage vessels or tanks are used onsite to store produced hydrocarbons and other fluids. In most cases, an operator will direct recovered fluids from the well to a separator, with the hydrocarbons then directed to the storage tanks. During storage, light hydrocarbons dissolved in the crude oil or condensate vaporize and collect in the space between the tank liquids and the tank roof. These vapors are often vented to the atmosphere when the liquid level in the tank subsequently fluctuates. Proposed § 3179.203 would establish new requirements that would limit the loss of natural gas from oil storage vessels. Paragraph (a) would require the 98 See Section 7.11 of the RIA for detailed discussion of this analysis. VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 thief hatch on a storage tank to remain closed, except as necessary to conduct production and measurement operations. Paragraph (a) would require the BLM to issue a $1,000 immediate assessment upon discovering a thief hatch that has been left open and unattended. Under proposed § 3179.203(b), all oil storage vessels would be required to be equipped with a vapor-recovery system or other mechanism that avoids the intentional loss of natural gas from the vessel, unless the operator is able to establish that it would be technically or economically infeasible. In order to temper the disruptive effect of this new requirement on existing operations, proposed § 3179.203(b) would set a compliance deadline of 1 year after the effective date of the final rule. The proposed rule does not contain a definition or formula for determining economic feasibility for the purposes of § 3179.203(b). The BLM oversees a wide variety of production scenarios—from multi-well facilities operated by large companies to individual ‘‘stripper wells’’ operated by very small companies—and recognizes that the economic feasibility (from a wasteprevention perspective) of a vaporrecovery system will depend on a variety of factors, such as the oil gravity and the production rate. The BLM would, therefore, like to retain flexibility in making this determination. To be clear, flexibility does not indicate unrestrained discretion. Were the BLM to order an operator to install a vaporrecovery unit or other mechanism to capture gas from a storage vessel, traditional administrative law principles would require the BLM to explain why the ‘‘technically or economically infeasible’’ exemption does not apply. The BLM requests comment on this approach, and specifically requests comment on whether, and how, economic feasibility should be defined for this section. Under proposed § 3179.203(c), where an operator has not equipped a storage vessel with a vapor-recovery system or other appropriate mechanism, the operator would be required to submit an annual compositional analysis of production flowing to the storage vessel. Proposed § 3179.203(c) would contain technical sampling and analysis requirements intended to ensure the accuracy of the compositional analysis submitted by the operator. The purpose of the compositional-analysis requirement would be to demonstrate that installing a vapor-recovery system (or other similar mechanism) is, in fact, technically or economically infeasible. The compositional analysis would allow PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 73607 the operator and the BLM to estimate the quantity and quality of natural gas emitted from the storage tank, which would in turn indicate the value and volume of the gas to be recovered, and therefore the economic feasibility of a vapor-recovery system. The BLM estimates that each annual compositional analysis report would cost approximately $500. The BLM requests comment on this approach to ensuring that operators take all reasonable measures to conserve natural gas from oil storage tanks, and the BLM invites comment on alternative approaches. Specifically, the BLM is interested in alternative standards for requiring vapor recovery, which might include using the tank’s throughput (the volume of oil stored in the tank over a period of time) as an indicator of when vapor recovery should be required. Proposed § 3179.203(d) would generally require gas released from an oil storage vessel to be flared rather than vented. This paragraph would also make clear that an operator may commingle vapors from multiple storage vessels to a single flare without the need for prior BLM approval. The RIA estimates that operators would need to install up to 2,774 vapor recovery units on existing storage tanks to meet the conditions of this rule. It is estimated that this would conserve about 9 Bcf of gas a year. The proposed requirement is expected to cost operators up to $93 million dollars a year while generating $33 million in benefits from increased gas sales each year. There would be an added benefit to society of $253 million per year in the value of reduced methane emissions. The BLM also notes that the reduced emissions of natural gas would reduce emissions of other pollutants (e.g., VOCs and hazardous air pollutants), though the BLM has not quantified or monetized the benefits to society associated with reducing those pollutants. The BLM requests comment on appropriate methodologies for quantifying and monetizing these benefits. Section 3179.204 Downhole Well Maintenance and Liquids Unloading In producing gas wells, fluids may accumulate in the wellbore and impede the flow of gas, sometimes halting production itself. Gas wells generally have sufficient pressure to produce both formation fluids and gas early on, but, as production continues and reservoir pressure declines, the gas velocity in the production tubing may not be sufficient to lift the formation fluids. When this occurs, liquids (hydrocarbons and salinized water) may accumulate in the E:\FR\FM\30NOP2.SGM 30NOP2 73608 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules tubing, causing a further drop in pressure, slowed gas velocity, and raised pressure at the perforations. When the bottom-hole pressure becomes static, gas flow stops, and all liquids accumulate at the bottom of the tubing. In order to return the flow of gas, operators will engage in ‘‘liquids unloading,’’ which will often involve venting. This proposed section would establish limits on royalty-free venting and flaring during downhole well maintenance and liquids unloading in order to prevent waste. This section would impose a 24-hour limit on royalty-free venting or flaring for each event, and the 24-hours of royalty-free venting or flaring would only be available if the operator employs best practices that prevent or minimize vented gas and the need for well venting. For wells equipped with a plunger lift system or an automated well control system, the operator would be required to optimize the operation of the system to prevent or minimize gas losses. During any liquids unloading by manual well purging, the person conducting the well purging would be required to be present on-site to minimize, to the maximum extent practicable, any venting to the atmosphere. lotter on DSK11XQN23PROD with PROPOSALS2 Section 3179.205 Size of Production Equipment This proposed section would state that the equipment used for production and processing would be required to be appropriately sized to handle the expected volumes produced at the lease site. For example, production equipment would be required to be sized to provide for the proper retention time of fluid flows, which has a direct impact on the gas-oil ratio of the fluid as it enters the storage tank. Undersizing of the separator equipment can result in a higher quantity of gas remaining entrained in the fluid. That, in turn, can be the source of unnecessary losses of natural gas, since the gas will be released when the fluid weathers in the tank. Leak Detection and Repair (LDAR) This proposed rule would require operators on Federal and Indian leases to maintain LDAR programs in order to minimize the waste of Federal and Indian gas. The 2016 Waste Prevention Rule also contained LDAR requirements, though those requirements were more stringent, less flexible, and more costly for operators than the requirements put forward in this proposed rule. Although the LDAR requirements of the 2016 Rule were VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 expected to result in higher reductions in lost gas than the requirements proposed today, they were also heavily criticized by the court that vacated the 2016 Rule and contributed to that court’s finding that the BLM had been arbitrary and capricious in promulgating the rule.99 The 2016 Rule broadly imposed strict LDAR requirements and invited operators to seek reductions in their obligations based on site-specific economic circumstances. This proposed rule, in contrast, would establish some basic parameters (such as the time frame for repairs) while providing substantial flexibility for operators to tailor their LDAR programs to their operations. Simultaneously, operators would not be permitted to seek exemptions based on site-specific economic considerations. The BLM has concluded that even the operators of marginal wells could be expected to take reasonable measures to identify and repair leaks. The RIA estimates that this provision of the rule would only affect 2,178 well sites (or, around 2.2 percent of Federal well sites and 0.2 percent of the total well sites in the U.S.) due to existing State or EPA rules that meet or exceed the BLM’s proposed standards. It is estimated that the proposed requirements would conserve about 0.3 Bcf of gas a year. It is expected to cost operators up to $2.8 million dollars a year while generating $.98 million per year in benefits from increased gas sales. There would also be an added benefit to society of $8.5 million a year in reduced methane emissions. The BLM also notes that the reduced emissions of natural gas would reduce emissions of other pollutants (e.g., VOCs and hazardous air pollutants), though the BLM has not quantified or monetized the benefits to society associated with reducing those pollutants. The BLM requests comment on appropriate methodologies for quantifying and monetizing these benefits. The LDAR requirements of the proposed rule are explained in more detail as follows. Section 3179.301 Leak Detection and Repair Program This proposed section would require an operator to maintain an LDAR program designed to prevent the unreasonable and undue waste of Federal or Indian gas. The program would be required to include regular inspections of all oil and gas production, processing, treatment, storage, and measurement equipment on the lease site. Within 6 months of the effective date of the final rule, the 99 See Wyoming v. DOI, 493 F. Supp. 3d 1046, 1075–77 (D. Wyo. 2020). PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 operator of an existing lease would be required to submit a Sundry Notice to the BLM describing the operator’s LDAR program. For leases issued after the effective date of the final rule, the operator would be required to submit the Sundry Notice within 6 months of the lease’s issuance. The BLM would then review the operator’s description of its LDAR program to determine whether the program is adequate to prevent the unreasonable and undue waste of gas, in light of all the circumstances at the lease site, including the variety of equipment at the lease site and the quantities of production that might support a more robust LDAR program. That is, a large, multi-well lease site with many pieces of equipment and substantial revenues from production might warrant a more vigorous LDAR program than a single marginal well for which additional regulatory burdens might risk a premature shut in. The LDAR program would need to provide for regular inspections (at least annually), and would not require any specific LDAR process or equipment to be used. The BLM would then notify the operator if the BLM deems the LDAR program to be inadequate. The notification would explain the basis for the BLM’s determination, identify the plan’s inadequacies, describe any additional measures necessary to address the inadequacies, and provide a reasonable time frame for the submission of a revised LDAR program. This proposed section would require that LDAR inspections occur at least annually. For existing operations, the first inspection would be required within 1 year of the effective date of the final rule. For future leases and operations, the operator would be required to conduct the initial inspection within 1 year of the commencement of operations. In developing the proposed rule, the BLM considered requiring semi-annual— rather than annual—inspections, but this proposed rule finds, based on the information at our disposal as well as our judgment and assumptions about costs over time, that the additional compliance costs increased out of proportion with the additional gas to be saved by the more frequent inspections. This is based on evidence that leaks do not arise on a consistent basis such that twice as many inspections may not necessarily catch twice as many leaks or conserve twice as much leaked gas. So, while there is a risk of more leaks being undetected for longer, annual inspections appeared to be a more costeffective (with respect to gas conservation) basic requirement than E:\FR\FM\30NOP2.SGM 30NOP2 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules semi-annual inspections in the long run. To be clear, the BLM is judging the costeffectiveness of the proposed requirements in terms of gas conservation only. The BLM recognizes that the EPA has set, and is in the process of promulgating, different (though not incompatible) LDAR standards based on a different view of cost-effectiveness.100 Any divergence between the BLM and EPA on LDAR standards (or those pertaining to pneumatic equipment or storage vessels) is due to the fact that the BLM and the EPA regulate these matters under different statutory authorities and for different purposes. The BLM requests comment on alternative approaches, including whether required LDAR inspections should be more frequent, in line with the requirements of some States and EPA, as well as data on likely costs and benefits over time. The BLM notes that the proposed rule envisions operators submitting LDAR program documents on a lease-by-lease basis. The BLM requests comment on alternative approaches, such as allowing operators to submit a document detailing a program that would apply to its operations across multiple leases or even to all of its operations on BLMmanaged lands. lotter on DSK11XQN23PROD with PROPOSALS2 Section 3179.302 Repairing Leaks This proposed section would require operators to repair any leak as soon as practicable, and no later than 30 calendar days after discovery of the leak, unless there is good cause for repair to take longer. This proposed section of the rule would require the operator to notify the BLM by Sundry Notice if there is good cause to delay the repairs beyond 30 days, and to complete the repair at the earliest opportunity, but in no event longer than 2 years after discovery. The operator would also be required to conduct a follow-up inspection within 30 days after the repair to verify the effectiveness of the repair, and to make additional repairs within 15 days if the previous repair was not effective. The operator would be required to follow this repair and follow-up process until the repair is effective. Section 3179.303 Leak Detection Inspection Recordkeeping and Reporting This proposed section would require operators to maintain records of LDAR inspections and repairs, including the date and location of required inspections, the methods used to 100 See 86 FR 63154. VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 identify leaks, the equipment where the leaks were found, the dates of repairs, and the dates of follow-up inspections. These records would be required to be made available to the BLM upon request. Audio, visual, or olfactory (AVO) inspections would only have to be documented if the operator finds a leak requiring repair. Paragraph (b) of the section would require operators to submit to the BLM, by March 31 of each calendar year, an annual summary report on the previous year’s LDAR inspection activities. The BLM plans to make these reports available to the public, subject to any protections for confidential business information. State or Tribal Variances Section 3179.401 State or Tribal Requests for Variances From the Requirements of This Subpart Proposed § 3179.401 would reinstate the State or Tribal variance provision from the 2016 Waste Prevention Rule.101 Under this section, States and Tribes would be able to request a variance under which analogous State or Tribal rules would apply in place of some or all of the requirements of subpart 3179. The State or Tribe’s variance request would be required to: identify the subpart 3179 provision(s) for which the variance is requested; identify the State, local, or Tribal rules that would be applied instead; explain why the variance is needed; and, demonstrate how the State, local, or Tribal rules would be as effective as the subpart 3179 provisions in terms of reducing waste, reducing environmental impacts, assuring appropriate royalty payments, and ensuring the safe and responsible production of oil and gas. The BLM State Director would be authorized to approve the variance request or approve it subject to conditions, after considering all relevant factors. This decision would be entirely at the BLM’s discretion and would not be subject to administrative appeals under 43 CFR part 4. If the BLM were to approve a variance, the State or Tribe that requested the variance would be obligated to notify the BLM of any substantive amendments, revisions, or 101 The BLM chose not to include a similar State variance provision in the 2018 Revision Rule, concluding that the provision in the 2016 Waste Prevention Rule was no longer necessary in light of the predominance State regulations in the Revision Rule. 83 FR 49197. This proposed rule would not defer to State regulations to the same extent as the Revision Rule, and so a variance provision—i.e., a provision providing for appropriate State and Tribal flexibility—is therefore a relevant consideration in this rulemaking. At the final rule stage, the BLM will assess whether the proposed variance provision is ‘‘too restrictive’’ in light of comments from States, Tribes, and other stakeholders. PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 73609 other changes to the State, local, or Tribal rules to be applied under the variance. Finally, if the BLM were to approve a variance under this section, the BLM would be authorized to enforce the State, local, or Tribal rules applied under the variance as if they were contained in the BLM’s regulations. Before including a variance provision in the final rule, the BLM is seeking to confirm that such variances would be both useful and practical. Operators on Federal and Indian lands are already required to adhere to other applicable State, Tribal, and local laws and regulations, so applying for a variance on the basis that a State, Tribal, or local rule would provide increased protection for the taxpayer or lower levels of waste through, for example, lower allowable monthly flaring volumes, would be unnecessary and a burden for States and Tribes that would apply for the variance provision, and a potential source of confusion for operators. To put it another way, operators in States or on Tribal lands that have more stringent standards than those contained in this proposed rule would be required to conform to the more stringent State or Tribal standards in any event, regardless of whether the State or Tribe receives a variance under the provision of the proposed rule. Such situations routinely arise in the context of other BLM oil and gas operational regulations, which raises questions about the usefulness or need of the variance provision contained in this proposed rule. The BLM believes that alignment of data collection processes or other potential areas of regulatory duplication, such as through a common reporting form that could be submitted to both the State or Tribal regulatory agency and the BLM, could bring greater efficiencies for both operators and regulators, but believes that a memorandum of understanding (MOU) between the BLM and a State or Tribe could more efficiently achieve many of those goals without the need for a State or Tribal variance. The BLM requests that commenters provide specific examples of situations where the variance provision in proposed § 3179.401 would improve on existing practices and administrative tools, such as MOUs, in terms of providing better environmental protection, better protecting taxpayer and lessor interests, achieving better administrative efficiencies, and reducing burdens on operators. E:\FR\FM\30NOP2.SGM 30NOP2 73610 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules V. Procedural Matters A. Regulatory Planning and Review (E.O. 12866, E.O. 13563) Executive Order 12866 provides that the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget (OMB) will review all significant rules. The OIRA 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 replace the BLM’s current rules governing venting and flaring, which are contained in NTL–4A. We have developed this proposed rule in a manner consistent with the requirements in Executive Order 12866 and Executive Order 13563. The monetized costs and benefits of this rule can be seen on the following table along with the transfer payments this rule would provide in the form of increased royalties from increased gas sales. The total monetized Net Benefit on an annualized basis is $359 million at a 7 percent discount rate and $372 million at a 3 percent discount rate. Additional unquantified benefits from reduced emissions of VOCs and hazardous air pollutants are discussed further in the RIA. The BLM reiterates that, while it has included benefits associated with the social cost of greenhouse gases in this particular presentation of costs and benefits and in the RIA, this was done to respond to Executive Orders 12866 and 13563 and in order to present as complete a picture as possible of the total costs and benefits of the proposed rule for the public. Climate benefits derived from foregone emissions were not a factor in the decision to propose any of the individual waste prevention requirements in this proposed rule. COSTS AND BENEFITS SUMMARY [2022–2031] 7% Discount rate lotter on DSK11XQN23PROD with PROPOSALS2 NPV ($MM) 3% Discount rate Annualized ($MM) NPV ($MM) Annualized ($MM) Costs: Measurements .......................................................................................... Tanks ........................................................................................................ Pneumatics ............................................................................................... LDAR ........................................................................................................ Administrative Burdens ............................................................................. $9.99 657.75 109.79 20.16 58.61 $1.42 93.65 15.63 2.87 8.34 $11.13 716.74 114.06 24.48 71.18 $1.31 84.02 13.37 2.87 8.34 Total Cost .......................................................................................... 856.30 121.92 937.59 109.91 Benefits: Tanks ........................................................................................................ Pneumatics ............................................................................................... LDAR ........................................................................................................ 2,386.70 1,558.34 79.37 285.48 186.40 9.48 2,438.33 1,592.05 80.94 285.85 186.64 9.49 Total Benefits .................................................................................... 4,024.41 481.36 4,111.32 481.97 Net Benefits ....................................................................................... 3,168.10 359.44 3,173.72 372.06 Transfer Payments ............................................................................ 274.10 39.03 336.66 39.47 The BLM reviewed the requirements of the proposed rule and determined that it would 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–AE79’’, click the ‘‘Search’’ button, open the Docket Folder, and look under Supporting Documents. VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 B. Regulatory Flexibility Act The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 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 PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 governmental jurisdictions, and small not-for-profit enterprises. 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 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 has determined that, although the proposed rule would likely affect a substantial number of small entities, E:\FR\FM\30NOP2.SGM 30NOP2 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules that effect would not be significant. The basis for this determination is explained in more detail in the RIA. In brief, the per-entity, annualized compliance costs associated with this proposed rule are estimated to represent only a small fraction of the annual net incomes of the companies likely to be impacted. Because 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 not required. Nonetheless, in an effort to be thorough and in recognition of the substantial number of ‘‘small entities’’ operating Federal and Indian oil and gas leases, the BLM conducted an initial regulatory flexibility analysis, which is detailed in the RIA. The Secretary of the Interior certifies under 5 U.S.C. 605(b) that this rule would not have a significant economic impact on a substantial number of small entities. lotter on DSK11XQN23PROD with PROPOSALS2 C. 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, because it is estimated that the rule would have an annual economic impact of $100 million or more. As noted earlier, the RIA that the BLM produced for this rule calculates that this rule would cost operators $122 million per year (using a 7 percent discount rate) for the next 10 years, while generating benefits to operators of approximately $54 million a year (using a 7 percent discount rate) in the form of 15.3 Bcf of additional captured gas. The reduced methane emissions associated with the proposed rule would provide a benefit to society of $427 million a year over the same time frame, leading to a net benefit from the rule of $359 million a year. D. Unfunded Mandates Reform Act (UMRA) 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. The proposed rule would revise requirements that would otherwise apply to the private sector participating in a voluntary Federal program. The costs that the proposed rule would impose on the private sector are below the monetary threshold established at 2 U.S.C. 1532(a). A statement containing the information required by the Unfunded Mandates Reform Act (UMRA) (2 U.S.C. 1531 et seq.) is therefore not required for the VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 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. E. 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 replace the BLM’s current rules governing venting and flaring, which are contained in NTL–4A. 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. F. 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 would not directly impact the States. Therefore, in accordance with Executive Order 13132, the BLM has determined that this proposed rule would not have sufficient federalism implications to warrant preparation of a Federalism Assessment. PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 73611 G. 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 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. H. 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. The BLM evaluated this proposed rule under the Department’s consultation policy and under the criteria in Executive Order 13175 to identify possible effects of the rule on federally recognized Indian Tribes. Since the BLM approves proposed operations on all Indian (except Osage Tribe) onshore oil and gas leases, the proposed rule has the potential to affect Indian Tribes. In August of 2021, the BLM sent a letter to each registered Tribe informing them of certain rulemaking efforts, including the development of this proposed rule. The letter offered Tribes the opportunity for individual government-to-government consultation regarding the proposed rule. The opportunity for Tribal consultation will remain open throughout the rulemaking process. I. Paperwork Reduction Act 1. Overview The Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq.) generally provides that an agency may not conduct or sponsor a collection of information, and, notwithstanding any other provision of law, a person is not required to respond to collection of information unless it has been approved by the Office of Management and Budget (OMB) and displays a currently valid OMB Control Number. The existing information collections requirements contained in 43 CFR parts 3160, and 3170 have been approved by OMB under OMB Control Numbers 1004–0137 and 1004–0211. This proposed rule contains new information collection (IC) requirements for BLM regulations, and a submission E:\FR\FM\30NOP2.SGM 30NOP2 73612 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules to OMB for review under the PRA as outlined in the PRA implementing regulations at 5 CFR 1320.11. The IC requirements are necessary to assist the BLM in preventing venting, flaring, and leaks that waste the public’s resources and assets. Respondents are holders of Federal and Indian oil and gas leases. The information collection requirements are outlined in the BLM’s waste prevention standards as well as on BLM Form 3160–5 (Sundry Notices and Reports on Wells). Form 3160–5 is used broadly for onshore oil and gas operations and production purposes under 43 CFR parts 3160 and 3170 and is approved under OMB control number 1004–0137. This proposed rule would not introduce any changes to Form 3160–5 and the form will continue to be approved under OMB control number 1004–0137; however, this information collection request (ICR) seeks to include burdens specific to the use of Form 3160–5 in regard to the proposed waste prevention standard subject to this proposed rule. The proposed rule contains the following new and revised IC requirements. lotter on DSK11XQN23PROD with PROPOSALS2 2. Effects on Existing Information Collections Requirements Existing § 3162.3–1 Drilling Applications and Plans (Application for Permit To Drill Oil Well and Waste Minimization Plan) Currently, the BLM does not have a mechanism whereby to factor waste into the decision-making process on an APD. As with the 2016 Waste Prevention Rule, operators would be required to submit a ‘‘waste minimization plan’’ with an APD for an oil well. The waste minimization plan would disclose anticipated gas production and the capacity of the extant infrastructure to capture the gas. The BLM’s onshore oil and gas operations and production regulations (43 CFR 3162.3–1(a) through (i)) currently provide that each well shall be drilled in conformity with an acceptable well-spacing program and that the operator shall submit to the authorized officer for approval an APD for each well. The APD is currently approved under OMB control number 1004–0137. This proposed would not introduce any changes to this requirement. This proposed rule would, however, add § 3162.3–1(j), which would require that when submitting an APD for an oil well, the operator must also submit a plan to minimize waste of natural gas from that well. The waste minimization plan would need to demonstrate how the operator plans to capture associated gas upon the start of oil production, or VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 as soon thereafter as reasonably possible, including an explanation of why any delay in the capture of the associated gas would be necessary. Request for Approval for Royalty-Free Uses On-Lease or Off-Lease (43 CFR 3178.5, 3178.7, 3178.8, and 3178.9) Sections 3178.5, 3178.7, 3178.8, and 3178.9 of the BLM’s current regulations require submission of a Sundry Notice (Form 3160–5) to request prior written BLM approval for use of gas royalty-free for operations and production purposes on the lease, unit or communitized area. This proposed rule would not change this existing requirement. 3. New Information Collection Requirements This proposed rule would add a new subpart to the BLM’s waste prevention standards. The proposed new subpart 3179 would add new information collection requirements as discussed later. The purpose of this subpart would be to implement and carry out the purposes of statutes relating to prevention of waste from covered Federal and Indian oil and gas leases by enhancing conservation of surface resources, particularly in regard to flaring and venting of produced gas, unavoidably and avoidably lost gas, and waste prevention. Proposed § 3179.4 Determining When the Loss of Oil or Gas Is Avoidable or Unavoidable (Notifying BLM Prior to Flaring) Proposed § 3179.4(b)(13) would require that an operator notify the BLM through a Sundry Notice (Form 3160–5) prior to the flaring of gas from which at least 50 percent of NGLs have been removed and captured for market, if the operator wishes such flaring to qualify for royalty-free treatment. Proposed § 3179.9 Measuring and Reporting Volumes of Gas Vented and Flared Proposed § 3179.9(a) of this proposed rule would require operators to measure or estimate all volumes of gas vented or flared from wells, facilities, and equipment on a lease, unit, or CA and report those volumes to ONRR. The burden associated with the reporting of volumes of gas vented or flared is accounted for under ONRR’s OMB control number 1012–0004, 30 CFR Parts 1210 and 1212, Royalty and Production Reporting, using Form ONRR–4054, Oil and Gas Operations Report. This proposed rule would not change this existing reporting requirement. Section 3179.9(b) of the proposed rule would introduce PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 inspection and measurement requirements for all high-pressure flares flaring 1,050 Mcf per month or more. Furthermore, as applicable, the orifice plate for the meter must be pulled and inspected at least once a year and the meter must be verified at least once a year. Proposed § 3179.103 Initial Production Testing and § 3179.104 Subsequent Well Tests (Requests for Longer Test Period or Increase Limit) This proposed rule would allow royalty-free flaring during initial production testing until one of the following occurs: (1) the operator determines that it has obtained adequate reservoir information; (2) 30 days have passed since beginning of the production test; (3) 20,000 Mcf of gas have been flared; or (4) oil production begins. Proposed § 3179.103 would allow an operator to flare gas for 30 days since the beginning of the production test under certain conditions and specified limits. Proposed § 3179.104 would permit an operator to flare gas for no more than 24 hours during well tests subsequent to the initial production test. An operator would be required to submit its request for a longer test periods or increased limits using a Sundry Notice. Proposed § 3179.105 Emergencies (Reporting Volumes Flared or Vented Beyond Timeframes) This proposed rule would allow for royalty-free flaring during an emergency situation that poses a danger to human health, safety, or the environment. This proposed rule defines ‘‘emergency situation’’ in a manner that emphasizes its temporary and unavoidable nature. This proposed rule would place a 48hour limit on the royalty-free emergency flaring and specify circumstances that would not constitute an emergency. Proposed § 3179.105 would allow an operator to flare or, if flaring is not feasible given the emergency situation, vent gas royalty-free under proposed § 3179.4(b)(6) of this subpart during an emergency. Within 45 days of the start of the emergency situation, the operator would be required to estimate and report to the BLM on a Sundry Notice the volumes flared or vented beyond the timeframes specified in proposed § 3179.105(b). Proposed § 3179.203 Oil Storage Vessels (Composition Analysis) Proposed § 3179.203(b) would require tanks to be equipped with a vapor recovery system or other mechanism that avoids the intentional loss of gas from the tank unless it is technically or E:\FR\FM\30NOP2.SGM 30NOP2 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules economically infeasible. If an operator does not equip a tank with vapor recovery, the operator would be required to submit an annual compositional analysis based on samples of production flowing to the tank. The purpose of the compositional analysis would be to show whether installation of vapor recovery is feasible. These requirements would only apply to operations on Federal or Indian lands. Additionally, this section of this proposed rule would require that the compositional analysis be based on pressurized samples and that the compositional analysis must show the expected emissions from the storage vessel at 60 degrees Fahrenheit and 14.73 psia. Proposed § 3179.301 Leak Detection and Repair (LDAR) Program This proposed rule would require an operator to maintain an LDAR program designed to prevent the unreasonable and undue waste of Federal or Indian gas. The LDAR program would have to provide for regular (at least annual) inspections of all oil and gas production, processing, treatment, storage, and measurement equipment on the lease site. Operators would submit their LDAR programs for BLM review, and the BLM would notify the operator if its program was determined to be inadequate. Operators would be required to submit an annual report on inspections and repairs. Proposed § 3179.301(b) would require that the operator of a Federal or Indian lease must submit a Sundry Notice to the BLM describing the operator’s leak detection and repair program for the lease site, including the frequency of inspections and any instruments to be used for leak detection. Proposed § 3179.302 Repairing Leaks (Notifying the BLM for Delaying a Leak Repair) lotter on DSK11XQN23PROD with PROPOSALS2 Proposed § 3179.302(b) would require that if there is good cause for delaying the repair beyond 30 calendar days, the operator must notify the BLM of the cause by Sundry Notice. Proposed § 3179.303 Leak Detection Inspection Recordkeeping and Reporting Operators would be required to keep records of inspections and repairs and submit those records to the BLM upon request and to maintain such records for the period required under 43 CFR 3162.4–1(d). VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 Proposed § 3179.401 State or Tribal Requests for Variances From the Requirements of This Subpart This proposed rule would include the State or Tribal variances provision from the 2016 Rule. In essence, this provision would allow States and Tribes to submit a request to the BLM to have analogous State or Tribal regulations apply in place of the BLM’s. Section 3179.401(e) of the proposed rule would require that if the BLM approves a variance under this section, the State or Tribe that requested the variance must notify the BLM in writing in a timely manner of any substantive amendments, revisions, or other changes to the State, local or Tribal regulation(s) or rule(s) to be applied under the variance. The purpose of this section and the associated information collection requirements is to reduce regulatory burden and duplication where a State or Tribal government has implemented regulations that are demonstrated to be at least as effective as the BLM’s regulatory waste prevention requirements. The information collection requirements of this section are intended to assist the BLM in making appropriate determinations regarding the variances contemplated in proposed § 3179.401. In order to comply with the proposed information collection requirements, the BLM believes that some operators may need to purchase and install new equipment in order to collect, maintain, and report the required information. These one-time cost burdens for operators that may need to install new orifice meters and/or vapor recovery systems would be a result of the proposed rule. D. Public Information Collection Burdens by Information Collection Currently, there are 50 respondents, 50 responses, 400 annual burden hours, and $0 non-hour cost burdens approved under OMB Control Number 1004–0211. These burdens pertain to a Request for Approval for Royalty-Free Uses OnLease or Off-Lease (43 CFR 3178.5, 3178.7, 3178.8, and 3178.9) which is not addressed in this proposed rule. The BLM projects that the information collections as contained in this proposed rule would result in the following additional new burdens: 552 new respondents; 48,337 new annual responses; 117,410 new burden hours and $1,050,000 new non-hour cost burden. The new total estimated burdens for the existing information collection and for the proposed new information collections under this OMB Control Number are listed as follows. PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 73613 Title: Waste Prevention, Production Subject to Royalties, and Resource Conservation (43 CFR parts 3160, 3170, and 3179). OMB Control Number: 1004–0211. Form Number: 3160–5 (OMB Control Number 1004–0137). Type of Review: Revision of a currently approved collection. Description of Respondents: Federal and Indian leases, as well as State and private tracts committed to a federally approved lease, unit, or communitized area. Estimated Number of Respondents: 602. Estimated Number of Annual Responses: 48,337. Estimated Completion Time per Response: Varies from 1 hour to 8 hours depending on activity. Estimated Total Annual Burden Hours: 117,410. Respondents’ Obligation: Required to obtain or retain a benefit. Frequency of Collection: On occasion, Annually, Monthly, or one-time depending on activity. Estimated Total Non-Hour Cost: $1,050,000. As part of our continuing effort to reduce paperwork and respondent burdens, we invite the public and other Federal agencies to comment on any aspect of this information collection, including: (1) Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) The accuracy of our estimate of the burden for this collection of information, including the validity of the methodology and assumptions used; (3) Ways to enhance the quality, utility, and clarity of the information to be collected; and (4) Ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of response. In accordance with the PRA and the PRA implementing regulations at 5 CFR 1320.11, the BLM has submitted an ICR to OMB for the new and revised ICs in this proposed rule. If you wish to comment on the IC requirements in this proposed rule, please see the DATES and ADDRESSES sections earlier. J. National Environmental Policy Act The BLM has prepared a draft EA to determine whether this proposed rule E:\FR\FM\30NOP2.SGM 30NOP2 73614 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 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.). The draft EA will be shared with the public during the public comment period on the proposed rule. The BLM will respond to substantive comments on the EA. 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–AE79’’, 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 earlier. K. Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use (Executive Order 13211) Under Executive Order 13211, agencies are required to prepare and submit to OMB a Statement of Energy Effects for significant energy actions. This statement is to include a detailed statement of ‘‘any adverse effects on energy supply, distribution, or use (including a shortfall in supply, price increases, and increase use of foreign supplies)’’ for the action and reasonable alternatives and their effects. 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 proposed rulemaking, and notices of proposed 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 (OIRA) as a significant energy action.’’ Since the compliance costs for this rule would represent a small fraction of company net incomes, the BLM has concluded that the rule is unlikely to impact the investment decisions of VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 firms. See Section 9 of the BLM’s RIA. Also, any incremental production of gas estimated to result from the rule’s enactment would constitute a small fraction of total U.S. gas production, and any potential and temporary deferred production of oil would likewise constitute a small fraction of total U.S. oil production. For these reasons, we do not expect that the proposed rule would significantly impact the supply, distribution, or use of energy. As such, the rulemaking is not a ‘‘significant energy action’’ as defined in Executive Order 13211. L. Clarity of This Regulation (Executive Orders 12866, 12988, and 13563) 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 proposed 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 final rule are: Amanda Eagle, Petroleum Engineer, Santa Fe, NM; Beth Poindexter, Petroleum Engineer, Santa Fe, NM (now retired); and Christopher Rhymes, Attorney Advisor, Office of the Solicitor, Department of the Interior. Technical support provided by: Tyson Sackett, Economist, Cheyenne, WY; Scott Rickard, Economist, Billings, MT; Janna Simonsen, Senior Natural Resources Specialist, Santa Fe, NM; and Barbara Sterling, Senior Natural Resources Specialist, BLM Colorado State Office (now retired). Assisted by: Stormy Phillips, Petroleum Engineer, Tulsa, OK (Contractor); Casey Hodges, Petroleum Engineer, Granby, CO (Contractor); and Senior Regulatory Analysts Faith Bremner and Darrin King of the BLM Washington Office. PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 List of Subjects 43 CFR Part 3160 Administrative practice and procedure, Government contracts, Indians-lands, Mineral royalties, Oil and gas exploration, Penalties, Public landsmineral resources, Reporting and recordkeeping requirements. 43 CFR Part 3170 Administrative practice and procedure, Flaring, Immediate assessments, Incorporation by reference, Indians-lands, Mineral royalties, Oil and gas exploration, Oil and gas measurement, Public lands—mineral resources, Reporting and record keeping requirements, Royalty-free use, Venting. For the reasons set out in the preamble, the Bureau of Land Management proposes to amend 43 CFR parts 3160 and 3170 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; 43 U.S.C. 1732(b), 1733, 1740; and Sec. 107, Pub. L. 114–74, 129 Stat. 599, unless otherwise noted. 2. Amend § 3162.3–1 by adding paragraphs (j) and (k) to read as follows: ■ § 3162.3–1 Drilling applications and plans. * * * * * (j) When submitting an Application for Permit to Drill an oil well, the operator must also submit a plan to minimize waste of natural gas from that well. The waste minimization plan must demonstrate how the operator plans to capture associated gas upon the start of oil production, or as soon thereafter as reasonably possible, including an explanation of why any delay in capture of the associated gas would be necessary. The BLM may deny an Application for Permit to Drill if the operator fails to submit a complete and adequate waste minimization plan. The waste minimization plan must include the following information: (1) The anticipated completion date of the proposed well(s); (2) A description of anticipated production, including: (i) The anticipated date of first production; (ii) The expected oil and gas production rates and duration from the proposed well. If the proposed well is on a multi-well pad, the plan must include the total expected production for all wells being completed; E:\FR\FM\30NOP2.SGM 30NOP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules (iii) The expected production decline curve of both oil and gas from the proposed well; and (iv) The expected Btu value for gas production from the proposed well. (3) 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; (4) Identification of a gas pipeline to which the operator plans to connect that has sufficient capacity to accommodate the anticipated production of the proposed well(s), and information on the pipeline, including, to the extent that the operator can obtain it, the following information: (i) Maximum current daily capacity of the pipeline; (ii) Current throughput of the pipeline; (iii) Anticipated daily capacity of the pipeline at the anticipated date of first gas sales from the proposed well; (iv) Anticipated throughput of the pipeline at the anticipated date of first gas sales from the proposed well; and (v) Any plans known to the operator for expansion of pipeline capacity for the area that includes the proposed well; (5) If an operator cannot identify a gas pipeline with sufficient capacity to accommodate the anticipated production of the proposed well(s), the waste minimization plan must also include: (i) A gas-pipeline-system location map of sufficient detail, size, and scale to show the field in which the proposed well will be located, and all existing gas trunklines within 20 miles of the well. The map must also contain: (A) The name and location of the gas processing plant(s) closest to the proposed well(s), and the name and location of the intended destination processing plant, if different; (B) The name and location of the operator of each gas trunkline within 20 miles of the proposed well; (C) The proposed route and tie-in point that connects or could connect the subject well to an existing gas trunkline; (ii) The total volume of produced gas, and percentage of total produced gas, that the operator is currently flaring or venting from wells in the same field and any wells within a 20-mile radius of that field; and (iii) A detailed evaluation, including estimates of costs and returns, of opportunities for on-site capture approaches, such as compression or liquefaction of natural gas, removal of VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 natural gas liquids, or generation of electricity from gas. (6) Any other information demonstrating the operator’s plans to avoid the waste of gas production from any source, including, as appropriate, from pneumatic equipment, storage tanks, and leaks. (k) Where the available information indicates that drilling an oil well could result in the unreasonable and undue waste of Federal or Indian gas (as defined in § 3179.4), the BLM may take one of the following actions: (1) Approve the application subject to conditions for gas capture and/or royalty payments on vented or flared gas; or (2) Defer action on the permit in the interest of preventing waste. The BLM will notify the applicant that its application, if approved, could result in unreasonable and undue waste of Federal or Indian gas and specify any steps the applicant could take for the permit to be issued. If the applicant does not address the potential for unreasonable and undue waste to the BLM’s satisfaction within 2 years of the applicant’s receipt of the BLM’s initial notice under this paragraph, the BLM may deny the permit. 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. 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 Safety. 3179.7 Gas-well gas. 3179.8 Oil-well gas. 3179.9 Measuring and reporting volumes of gas vented and flared. 3179.10 Determinations regarding royaltyfree flaring. 3179.11 Incorporation by Reference (IBR). 3179.12 Reasonable precautions to prevent waste. Flaring and Venting Gas During Drilling and Production Operations 3179.101 Well drilling. 3179.102 Well completion and related operations. 3179.103 Initial production testing. 3179.104 Subsequent well tests. PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 3179.105 73615 Emergencies. Gas Flared or Vented From Equipment and During Well Maintenance Operations 3179.201 Pneumatic controllers and pneumatic diaphragm pumps. 3179.203 Oil storage vessels. 3179.204 Downhole well maintenance and liquids unloading. 3179.205 Size of production equipment. Leak Detection and Repair (LDAR) 3179.301 Leak detection and repair program. 3179.302 Repairing leaks. 3179.303 Leak detection inspection recordkeeping and reporting. State or Tribal Variances 3179.401 State or Tribal requests for variances from the requirements of this subpart. 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) oil and gas 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. § 3179.2 Scope. (a) Except as provided in provided in paragraph (b), this subpart applies to: (1) All onshore Federal and Indian (other than Osage Tribe) oil and gas leases, units, and communitized areas; (2) 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; (3) Leases and other business agreements and contracts for the development of Tribal energy resources under a Tribal Energy Resource Agreement (TERA) entered into with the Secretary, unless specifically excluded in the lease, other business agreement, or TERA; (4) Wells, equipment, and operations on State or private tracts that are committed to a federally approved unit or communitization agreement defined by or established under 43 CFR subpart 3105 or 43 CFR part 3180. (b) Sections 3179.6, 3179.201, 3179.203, and 3179.301–.303 of this E:\FR\FM\30NOP2.SGM 30NOP2 73616 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules subpart apply only to operations and production equipment located on a Federal or Indian oil and gas lease. They do not apply to operations and production equipment on State or private tracts, even where those tracts are committed to a federally approved unit or communitization agreement. (c) For purposes of this subpart, the term ‘‘lease’’ also includes IMDA agreements. lotter on DSK11XQN23PROD with PROPOSALS2 § 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 reinjection and royalty-free on-site uses pursuant to subpart 3178. Compressor station means any permanent combination of one or more compressors that move natural gas at increased pressure through gathering or transmission pipelines, or into or out of storage. This includes, but is not limited to, gathering and boosting stations and transmission compressor stations. The combination of one or more compressors located at a well site, or located at an onshore natural gas processing plant, is not a compressor station. 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. Unless more specific British thermal unit (Btu) values are available, a well with a gasto-oil ratio greater than 6,000 standard cubic feet (scf) of gas per barrel of oil is a gas well. High-pressure flare means an open-air flare stack or flare pit designed for the combustion of natural gas leaving a pressurized production vessel (such as a separator or heater-treater) that is not a storage vessel. Leak means a release of natural gas from a component that is not associated with normal operation of the component, when such release is: (1) A hydrocarbon emission detected by use of an optical-gas-imaging instrument; (2) At least 500 ppm of hydrocarbon detected using a portable analyzer or other instrument that can measure the quantity of the release; or VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 (3) A hydrocarbon emission detected via visible bubbles detected using soap solution. Releases due to normal operation of equipment intended to vent as part of normal operations, such as gas-driven pneumatic controllers and safety-release devices, are not considered leaks unless the releases exceed the quantities and frequencies expected during normal operations. Releases due to operator errors or equipment malfunctions or from control equipment at levels that exceed applicable regulatory requirements, such as releases from a thief hatch left open, a leaking vapor recovery unit, or an improperly sized combustor, are considered leaks. 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. Low-pressure flare means any flare that does not meet the definition of high-pressure flare. Pneumatic controller means an automated instrument used for maintaining a process condition, such as liquid level, pressure, delta-pressure, or temperature. Storage vessel means a tank or other vessel that contains an accumulation of crude oil, condensate, intermediate hydrocarbon liquids, or produced water, and that is constructed primarily of nonearthen materials (such as wood, concrete, steel, fiberglass, or plastic) that provides structural support. A wellcompletion vessel that receives recovered liquids from a well after startup of production following flowback, for a period that exceeds 60 days, is considered a storage vessel under this subpart, unless the storage of the recovered liquids in the vessel is governed by § 3162.3–3 of this title. For purposes of this subpart, the following are not considered storage vessels: (1) Vessels that are skid-mounted or permanently attached to something that is mobile (such as trucks, railcars, barges or ships), and are intended to be located at a site for less than 180 consecutive days. This exclusion does not apply to well-completion vessels or to storage vessels that are located at a site for at least 180 consecutive days. (2) Process vessels, such as surgecontrol vessels, bottoms receivers, or knockout vessels. (3) Pressure vessels designed to operate in excess of 15 psig and without emissions to the atmosphere. PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 (4) Tanks holding hydraulic-fracturing fluid prior to implementation of an approved permanent disposal plan under Onshore Oil and Gas Order No. 7. Unreasonable and undue waste of gas means a frequent or ongoing loss of gas that could be avoided without causing an ultimately greater loss of equivalent total energy than would occur if the loss of gas were to continue unabated. § 3179.4 Determining when the loss of oil or gas is avoidable or unavoidable. For purposes of this subpart: (a) Lost oil is ‘‘unavoidably lost’’ if the operator has not been negligent; the operator has taken prudent and reasonable steps to avoid waste; and the operator has complied fully with applicable laws, lease terms, regulations, provisions of a previously approved operating plan, and other written orders of the BLM. (b) Lost gas is ‘‘unavoidably lost’’ if the operator has not been negligent; the operator has taken prudent and reasonable steps to avoid waste; the operator has complied fully with applicable laws, lease terms, regulations, provisions of a previously approved operating plan, and other written orders of the BLM; and the gas is lost from the following operations or sources: (1) Well drilling; (2) Well completion and related operations, subject to the limitations in § 3179.102; (3) Initial production tests, subject to the limitations in § 3179.103; (4) Subsequent well tests, subject to the limitations in § 3179.104; (5) Exploratory coalbed methane well dewatering; (6) Emergency situations, subject to the limitations in § 3179.105; (7) Normal operating losses from a natural-gas-activated pneumatic controller or pump; (8) Normal operating losses from a storage vessel or other low-pressure production vessel that is in compliance with § 3179.203 and § 3174.5(b); (9) Well venting in the course of downhole well maintenance and/or liquids unloading performed in compliance with § 3179.204; (10) Leaks, when the operator has complied with the leak detection and repair requirements in §§ 3179.301 and 302; (11) Facility and pipeline maintenance, such as when an operator must blow-down and depressurize equipment to perform maintenance or repairs; (12) Pipeline capacity constraints, midstream processing failures, or other E:\FR\FM\30NOP2.SGM 30NOP2 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules similar events that prevent oil-well gas from being transported through the connected pipeline, subject to the limitations in § 3179.8; (13) Flaring of gas from which at least 50 percent of natural gas liquids have been removed and captured for market, if the operator has notified the BLM through a Sundry Notices and Report on Wells, Form 3160–5 (Sundry Notice) that the operator is conducting such capture and the inlet of the equipment used to remove the natural gas liquids will be an FMP; (14) Flaring of gas from a well that is not connected to a gas pipeline, to the extent that such flaring was authorized by the BLM in the approval of the Application for Permit to Drill. (c) Lost oil or gas that is not ‘‘unavoidably lost’’ as defined in paragraphs (a) and (b) of this section is ‘‘avoidably lost.’’ § 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. lotter on DSK11XQN23PROD with PROPOSALS2 § 3179.6 Safety. (a) The operator must flare, rather than vent, any gas that is not captured, except: (1) When flaring the gas is technically infeasible, such as when volumes are too small to flare; (2) Under emergency conditions, 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 the gas is vented from a storage vessel, provided that § 3179.203 does not require the capture or flaring of the gas; (5) When the gas is vented during downhole well maintenance or liquids unloading activities performed in compliance with § 3179.204; (6) When the gas is vented through a leak; (7) When venting is necessary to allow non-routine facility and pipeline maintenance, such as when an operator must, upon occasion, blow-down and depressurize equipment to perform maintenance or repairs; or (8) When a release of gas is necessary and flaring is prohibited by Federal, State, local, or Tribal law or regulation, or enforceable permit term. (b) All flares or combustion devices must be equipped with an automatic ignition system. Upon discovery of a flare that is not lit, the BLM may subject the operator to an immediate assessment of $1,000 per violation. VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 (c) The flare must be placed a sufficient distance from the tank battery containment area and any other significant structures or objects so that the flare does not create a safety hazard. The prevailing wind direction must be taken into consideration when locating the flare. § 3179.7 Gas-well gas. Gas well gas may not be flared or vented, except where it is unavoidably lost pursuant to § 3179.4(b). § 3179.8 Oil-well gas. (a) Where oil-well gas must be flared due to pipeline capacity constraints, midstream processing failures, or other similar events that prevent produced gas from being transported through the connected pipeline, up to 1,050 Mcf per month, per lease, unit, or CA, of such flared gas will be considered ‘‘unavoidably lost’’ for the purposes of §§ 3179.4(b)(12) and 3179.5. (b) Where substantial volumes of oilwell gas are flared, resulting in the unreasonable and undue waste of Federal or Indian gas, the BLM may order the operator to curtail or shut-in production as necessary to avoid the unreasonable and undue waste of Federal or Indian gas. The BLM will not issue a shut-in or curtailment order under this paragraph unless the operator has reported flaring in excess of 4,000 Mcf per month for 3 consecutive months and the BLM confirms that flaring is ongoing. (c) If a BLM order under paragraph (b) of this section would adversely affect production of oil or gas from nonFederal and non-Indian mineral interests (e.g., production allocated to a mix of Federal, State, Indian, and private leases under a unit agreement), the BLM may issue such an order only to the extent that the BLM is authorized to regulate the rate of production under the governing unit or communitization agreement. In the absence of such authorization, the BLM will contact the State regulatory authority having jurisdiction over the oil and gas production from the non-Federal and non-Indian interests and request that that entity take appropriate action to limit the waste of gas. § 3179.9 Measuring and reporting volumes of gas vented and flared. (a) The operator must measure or estimate all volumes of gas vented or flared from wells, facilities, and equipment on a lease, unit PA, or communitized area and report those volumes under applicable Office of Natural Resources Revenue (ONRR) reporting requirements (see the ONRR PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 73617 Minerals Revenue Reporter Handbook for details on reporting vented and flared volumes). (b) The following requirements apply to all high-pressure flares flaring 1,050 Mcf per month or more: (1) Flaring from all high-pressured flares must be measured by orifice meters. Starting on [DATE 6 MONTHS AFTER THE EFFECTIVE DATE OF THE FINAL RULE], an appropriate meter must be installed at all high-pressure flares. (2) The orifice plate for the meter must be pulled and inspected at least once a year. (3) The meter must be verified at least once a year. (4) The quality of the flared gas must be determined at least once a year. (A) A C6+ analysis must be performed for any gas samples used in determining the quality of the flared gas. (B) The gas sample must be taken from one of the following locations: (i) At the flare meter; (ii) At the gas FMP, if there is a gas FMP at the well site and the gas composition is the same as that of the flare-meter gas; or (iii) At another location approved by the BLM. (5) Measurement at the high-pressure flare must achieve an overall measurement uncertainty within ±5 percent. (6) The operator must take radiant heat from the flare into consideration when determining the placement of the flare meter. (7) Except as otherwise specified in this paragraph, measurement from highpressure flares must meet the measurement requirements for a lowvolume FMP under subpart 3175 of this part. (c) For all other flares, the operator must: (1) Measure flared volumes in accordance with paragraph (b) of this section; (2) Estimate flared volumes utilizing sampling and compositional analysis conducted pursuant to, or consistent with, § 3179.203(c); or (3) Estimate flared volumes using another method approved by the BLM. (d) If a flare is combusting gas that is combined across multiple leases, unit PAs, or communitized areas, the operator may measure or estimate the gas at a single point at the flare but must use an allocation method approved by the BLM to allocate the quantities of flared gas to each lease, unit PA, or communitized area. (e) Measurement points for flared volumes are not FMPs for the purposes of subpart 3175 of this part. E:\FR\FM\30NOP2.SGM 30NOP2 73618 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules § 3179.10 Determinations regarding royalty-free flaring. (a) Approvals to flare royalty free, which are in effect as of the effective date of this rule, will continue in effect until [DATE 6 MONTHS AFTER THE EFFECTIVE DATE OF THE FINAL RULE]. From this date forward, the royalty-bearing status of all flaring will be determined according to the provisions of this subpart. (b) The provisions of this subpart do not affect any determination made by the BLM before or after [EFFECTIVE DATE OF THE FINAL RULE], with respect to the royalty-bearing status of flaring that occurred prior to [EFFECTIVE DATE OF THE FINAL RULE]. lotter on DSK11XQN23PROD with PROPOSALS2 § 3179.11 (IBR). Incorporation by Reference Certain material is incorporated by reference into this subpart with the approval of the Director of the Federal Register under 5 U.S.C. 552(a) and 1 CFR part 51. To enforce any edition other than that specified in this section, the BLM must publish a rule in the Federal Register, and the material must be reasonably available to the public. All approved incorporation by reference (IBR) material is available for inspection at the Bureau of Land Management (BLM) and at the National Archives and Records Administration (NARA). Contact Amanda Eagle with the BLM at: Division of Fluid Minerals, 301 Dinosaur Trail, Santa Fe, NM 87505, telephone 505–954–2016; email aeagle@ blm.gov; https://www.blm.gov/ programs/energy-and-minerals/oil-andgas. The approved material is also available for inspection at all BLM offices with jurisdiction over oil and gas activities. For information on inspecting this material at NARA, visit www.archives.gov/federal-register/cfr/ ibr-locations.html or email fr.inspection@nara.gov. The material may be obtained from the following source: (a) GPA Midstream Association (GPA), 6060 American Plaza, Suite 700, Tulsa, OK 74135; telephone 918–493– 3872. (1) GPA Midstream Standard 2286– 14, Method for the Extended Analysis for Natural Gas and Similar Gaseous Mixtures by Temperature Program Gas Chromatography, Revised 2014 (‘‘GPA 2286’’), IBR approved for § 3179.203(c). (2) GPA Midstream Standard 2186– 14, Method for the Extended Analysis of Hydrocarbon Liquid Mixtures Containing Nitrogen and Carbon Dioxide by Temperature Programmed Gas Chromatography, Revised 2014 VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 (‘‘GPA 2186’’), IBR approved for § 3179.203(c). (b) [Reserved] § 3179.12 Reasonable precautions to prevent waste. (a) Operators must use all reasonable precautions to prevent the waste of oil or gas developed from the lease. (b) The Authorized Officer may specify reasonable measures to prevent waste as conditions of approval of an Application for Permit to Drill. (c) After an Application for Permit to Drill is approved, the Authorized Officer may order an operator to implement, within a reasonable time, additional reasonable measures to prevent waste at ongoing exploration and production operations. (d) Reasonable measures to prevent waste may reflect factors including but not limited to relevant advances in technology and changes in industry practice. Flaring and Venting Gas During Drilling and Production Operations § 3179.101 Well drilling. If, during drilling, gas is lost as a result of loss of well control, the BLM will make a determination as to whether the loss of well control was due to operator negligence. Such gas is avoidably lost if the BLM determines that the loss of well control was due to operator negligence. The BLM will notify the operator in writing when it makes a determination that gas was lost due to operator negligence. § 3179.102 Well completion and related operations. (a) When a new completion is in the process of being hydraulically fractured, up to 10,000 Mcf of gas that reaches the surface during well completion, postcompletion, and fluid recovery operations may be flared royalty-free. (b) When an existing completion is refractured and the well is connected to a gas pipeline, up to 5,000 Mcf of gas that reaches the surface during well completion, post-completion, and fluid recovery operations may be flared royalty-free. § 3179.103 Initial production testing. (a) Gas flared during a well’s initial production test is royalty-free under §§ 3179.4(b)(3) and 3179.5(b) of this subpart until one of the following occurs: (1) The operator determines that it has obtained adequate reservoir information for the well; (2) 30 days have passed since the beginning of the production test, except as provided in paragraphs (b) and (d) of this section; PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 (3) The operator has flared 20,000 Mcf of gas, including volumes flared under § 3179.102(a), except as provided in paragraph (c) of this section; or (4) Oil production begins. (b) The BLM may extend the period specified in paragraph (a)(2) of this section, not to exceed an additional 60 days, based on testing delays caused by well or equipment problems or if there is a need for further testing to develop adequate reservoir information. (c) The BLM may increase the limit specified in paragraph (a)(3) of this section by up to an additional 30,000 Mcf of gas for exploratory oil wells in remote locations where additional testing is needed in advance of development of pipeline infrastructure. (d) During the dewatering and initial evaluation of an exploratory coalbed methane well, the 30-day period specified in paragraph (a)(2) of this section is extended to 90 days. The BLM may approve up to two extensions of this evaluation period, of up to 90 days each. (e) The operator must submit its request for a longer test period or increased limit under paragraphs (b), (c), or (d) of this section using a Sundry Notice. § 3179.104 Subsequent well tests. During well tests subsequent to the initial production test, the operator may flare gas royalty free under § 3179.4(b)(4) for no more than 24 hours, unless the BLM approves or requires a longer period. The operator must submit any request for a longer period under this section using a Sundry Notice. § 3179.105 Emergencies. (a) An operator may flare or, if flaring is not feasible due to the emergency situation, vent gas royalty-free under § 3179.4(b)(6) of this subpart for no longer than 48 hours during an emergency situation. For purposes of this subpart, an ‘‘emergency situation’’ is a temporary, infrequent, and unavoidable situation in which the loss of gas is necessary to avoid a danger to human health, safety, or the environment. (b) The following examples do not constitute emergency situations for the purposes of royalty assessment: (1) Recurring failures within a single piece of equipment; (2) The operator’s failure to install appropriate equipment of a sufficient capacity to accommodate the production conditions; (3) Failure to limit production when the production rate exceeds the capacity of the related equipment, pipeline, or E:\FR\FM\30NOP2.SGM 30NOP2 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules gas plant, or exceeds sales contract volumes of oil or gas; (4) Scheduled maintenance; or (5) A situation caused by operator negligence. (c) 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. Gas Flared or Vented From Equipment and During Well Maintenance Operations § 3179.201 Pneumatic controllers and pneumatic diaphragm pumps. (a) Where a lease, unit PA, or CA is producing at least 120 Mcf of gas or 20 barrels of oil per month, the operator may not use a natural-gas-activated pneumatic controller or pneumatic diaphragm pump with a bleed rate that exceeds 6 scf per hour. (b) Operators must comply with paragraph (a) of this section beginning on [DATE 1 YEAR AFTER THE EFFECTIVE DATE OF THE FINAL RULE]. lotter on DSK11XQN23PROD with PROPOSALS2 § 3179.203 Oil storage vessels. (a) The thief hatch on a storage vessel may be open only to the extent necessary to conduct production and measurement operations. Upon discovery of a thief hatch that has been left open and unattended, the BLM will impose an immediate assessment of $1,000 on the operator. (b) Beginning on [DATE 1 YEAR AFTER THE EFFECTIVE DATE OF THE FINAL RULE], all oil storage vessels must be equipped with a vapor-recovery system or other mechanism that avoids the intentional loss of natural gas from the vessel, unless the operator determines that equipping the storage vessel with a vapor-recovery system or other appropriate mechanism is technically or economically infeasible. (c) Where an operator has not equipped a storage vessel with a vapor recovery system or other appropriate mechanism under paragraph (b) of this section, the operator, using a Sundry Notice, must submit an annual compositional analysis of production flowing to the storage vessel. (1) The compositional analysis must be based on pressurized samples taken downstream of the last pressurized vessel and upstream of the last pressure reduction (e.g., a valve) prior to the oil flowing into the storage vessel. (2) The compositional analysis must show the expected emissions from the storage vessel at 60 degrees Fahrenheit and 14.73 psia. VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 (3) The following sampling requirements apply: (i) Samples must be collected from a sample probe located downstream of the last pressurized vessel at least 2 feet below the gas-liquid interface of the vessel on the oil discharge, and upstream of the last pressure reduction prior to oil flowing into the storage vessel. (ii) Samples must be collected in constant pressure (CP) cylinders. (iii) Samples must be collected at a rate between 100 ml/minute and 60 ml/ minute. (iv) Samples must be collected within 30 minutes of the well cycle completion for intermittent flow. (v) Samples must indicate the pressure and temperature at the sample probe at the time of sampling. The equipment used to measure pressure and temperature must be certified to NIST within ±0.5 psi and ±1 degree Fahrenheit. (4) The following analysis requirements apply: (i) Flash-gas compositional analysis must be consistent with GPA 2286 (incorporated by reference, see § 3179.11). (ii) Dead oil composition analysis must be consistent with GPA 2186 (incorporated by reference, see § 3179.11). (d) Where practical and safe, gas released from an oil storage vessel must be flared rather than vented. An operator may commingle vapors from multiple storage vessels to a single flare without prior approval from the BLM. § 3179.204 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 per event, 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. PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 73619 (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. § 3179.205 Size of production equipment. Production and processing equipment must be of sufficient size to accommodate the volumes of production expected to occur at the lease site. Leak Detection and Repair (LDAR) § 3179.301 program. Leak detection and repair (a) Pursuant to paragraph (b) of this section, the operator must maintain a leak detection and repair (LDAR) program designed to prevent the unreasonable and undue waste of Federal or Indian gas. The LDAR program must provide for regular inspections of all oil and gas production, processing, treatment, storage, and measurement equipment on the lease site. (b) The operator of a Federal or Indian lease must submit a Sundry Notice to the BLM describing the operator’s LDAR program for the lease site, including the frequency of inspections and any instruments to be used for leak detection. The BLM will review the operator’s LDAR program and notify the operator if the BLM deems the program to be inadequate. The notification will explain the basis for the BLM’s determination, identify the plan’s inadequacies, describe any additional measures that could address the inadequacies, and provide a reasonable time frame in which the operator must submit a revised LDAR program to the BLM for review. For leases in effect on [EFFECTIVE DATE OF THE FINAL RULE], the operator must submit the Sundry Notice describing the operator’s LDAR program no later than [6 MONTHS AFTER THE EFFECTIVE DATE OF THE FINAL RULE]. For leases issued after [EFFECTIVE DATE OF THE FINAL RULE], the operator must submit the Sundry Notice describing the operator’s LDAR program within six months of the lease’s issuance. E:\FR\FM\30NOP2.SGM 30NOP2 73620 Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / Proposed Rules (c) LDAR inspections must occur on an annual basis, if not more frequently. For leases in effect on [EFFECTIVE DATE OF THE FINAL RULE] and on which operations have commenced, the operator must conduct an initial inspection within 1 year of [EFFECTIVE DATE OF THE FINAL RULE]. For other leases, the operator must conduct an initial inspection within one year of the commencement of operations. § 3179.302 Repairing leaks. (a) The operator must repair any leak as soon as practicable, and in no event later than 30 calendar days after discovery, unless good cause exists to delay the repair for a longer period. Good cause for delay of repair exists if the repair (including replacement) is technically infeasible (including unavailability of parts that have been ordered), would require a pipeline blowdown, a compressor station shutdown, or a well shut-in, or would be unsafe to conduct during operation of the unit. (b) If there is good cause for delaying the repair beyond 30 calendar days, the operator must notify the BLM of the cause by Sundry Notice and must complete the repair at the earliest opportunity, such as during the next compressor station shutdown, well shut-in, or pipeline blowdown. In no case will the BLM approve a delay of more than 2 years. (c) Not later than 30 calendar days after completion of a repair, the operator must verify the effectiveness of the repair by conducting a follow-up inspection using an appropriate instrument or a soap bubble test under Section 8.3.3 of EPA Method 21— Determination of Volatile Organic Compound Leaks (40 CFR Appendix A– 7 to part 60). (d) If the repair is not effective, the operator must complete additional repairs within 15 calendar days and conduct follow-up inspections and repairs until the leak is repaired. lotter on DSK11XQN23PROD with PROPOSALS2 § 3179.303 Leak detection inspection recordkeeping and reporting. (a) The operator must maintain the following records for the period required under § 3162.4–1(d) of this title and make them available to the BLM upon request: (1) For each inspection required under § 3179.301 of this subpart, documentation of: (i) The date of the inspection; and (ii) The site where the inspection was conducted; (2) The monitoring method(s) used to determine the presence of leaks; VerDate Sep<11>2014 17:25 Nov 29, 2022 Jkt 259001 (3) A list of leak components on which leaks were found; (4) The date each leak was repaired; and (5) The date and result of the followup inspection(s) required under § 3179.302(c) of this subpart. (b) By March 31 of each calendar year, the operator must provide to the BLM an annual summary report on the previous year’s inspection activities that includes: (1) The number of sites inspected; (2) The total number of leaks identified, categorized by the type of component; (3) The total number of leaks repaired; (4) The total number of leaks that were not repaired as of December 31 of the previous calendar year due to good cause and an estimated date of repair for each leak. (c) Audio/visual/olfactory (AVO) checks are not required to be documented unless they find a leak requiring repair. State or Tribal Variances § 3179.401 State or Tribal requests for variances from the requirements of this subpart. (a)(1) At the request of a State (for Federal land) or a Tribe (for Indian lands), the BLM State Director may grant a variance, from any provision(s) of this subpart, that would apply to all Federal leases, units, or communitized areas within a State or to all Tribal leases, IMDAs, units, or communitized areas within the Tribe’s lands, or to specific fields or basins within the State or Tribe’s lands, if the BLM finds that the variance would meet the criteria in paragraph (b) of this section. (2) A State or Tribal variance request must: (i) Identify the provision(s) of this subpart from which the State or Tribe is requesting the variance; (ii) Identify the State, local, or Tribal regulation(s) or rule(s) that would be applied in place of the provision(s) of this subpart; (iii) Explain why the variance is needed; and (iv) Demonstrate how the State, local, or Tribal regulation(s) or rule(s) would perform at least equally well to reduce waste of oil and gas, reduce environmental impacts from venting and/or flaring of gas, assure appropriate royalty payments to the United States or to the beneficial Indian owners, and ensure the safe and responsible production of oil and gas, compared to the particular regulatory provision(s) PO 00000 Frm 00034 Fmt 4701 Sfmt 9990 from which the State or Tribe is requesting the variance. (b) The BLM State Director, after considering all relevant factors, may approve the request for a variance, or approve it with one or more conditions, only if the BLM determines that the State, local or Tribal regulation(s) or rule(s) would perform at least equally well in terms of reducing waste of oil and gas, reducing environmental impacts from venting and/or flaring of gas, assuring appropriate royalty payments to the United States or to the beneficial Indian owners, and ensuring the safe and responsible production of oil and gas, compared to the particular regulatory provision(s) from which the State or Tribe is requesting the variance, and would be consistent with the terms of the affected Federal or Indian leases and applicable statutes. The BLM’s decision to grant or deny the variance will be in writing and is discretionary. The decision on a variance request is not subject to administrative appeals under 43 CFR part 4. (c) A variance from any particular regulatory requirement of this subpart does not constitute a variance from provisions of any other regulations, laws, or orders. (d) The BLM reserves the right to rescind a variance or modify any condition of approval, in which case the BLM will provide notice to the affected State or Tribe. (e) If the BLM approves a variance under this section, the State or Tribe that requested the variance must notify the BLM in writing and in a timely manner of any substantive amendments, revisions, or other changes to the State, local or Tribal regulation(s) or rule(s) to be applied under the variance. (f) If the BLM approves a variance under this section, the State, local or Tribal regulation(s) or rule(s) to be applied under the variance, including any changes to the regulation(s) or rule(s) described in paragraph (e) of this section, may be enforced by the BLM as if the regulation(s) or rule(s) were provided for in this subpart. The State, locality, or Tribes’ own authority to enforce its regulation(s) or rule(s) to be applied under the variance is not to be affected by the BLM’s approval of a variance. Laura Daniel-Davis, Principal Deputy Assistant Secretary, Land and Minerals Management. [FR Doc. 2022–25345 Filed 11–29–22; 8:45 am] BILLING CODE 4310–84–P E:\FR\FM\30NOP2.SGM 30NOP2

Agencies

[Federal Register Volume 87, Number 229 (Wednesday, November 30, 2022)]
[Proposed Rules]
[Pages 73588-73620]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25345]



[[Page 73587]]

Vol. 87

Wednesday,

No. 229

November 30, 2022

Part II





 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 
Conservations; Proposed Rule

Federal Register / Vol. 87, No. 229 / Wednesday, November 30, 2022 / 
Proposed Rules

[[Page 73588]]


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DEPARTMENT OF THE INTERIOR

Bureau of Land Management

43 CFR Parts 3160 and 3170

[212.LLHQ300000.L13100000.PP0000]
RIN 1004-AE79


Waste Prevention, Production Subject to Royalties, and Resource 
Conservation

AGENCY: Bureau of Land Management, Interior.

ACTION: Proposed rule.

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SUMMARY: The Bureau of Land Management (BLM) is proposing new 
regulations to reduce the waste of natural gas from venting, flaring, 
and leaks during oil and gas production activities on Federal and 
Indian leases. The proposed regulations would be codified in the Code 
of Federal Regulations and would replace the BLM's current requirements 
governing venting and flaring, which are more than four decades old.

DATES: Send your comments on this proposed rule to the BLM on or before 
January 30, 2023. The BLM is not obligated to consider any comments 
received after this date in making its decision on the final rule.
    If you wish to comment on the information collection requirements 
in this proposed rule, please note that the Office of Management and 
Budget (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 proposed rule in the Federal Register. 
Therefore, comments should be submitted to OMB by December 30, 2022.

ADDRESSES: 
    Mail, personal, or messenger delivery: U.S. Department of the 
Interior, Director (630), Bureau of Land Management, 1849 C St. NW, 
Room 5646, Washington, DC 20240, Attention: 1004-AE79.
    Federal eRulemaking Portal: https://www.regulations.gov. In the 
Searchbox, enter ``RIN 1004-AE79 and click the ``Search'' button. 
Follow the instructions at this website.
    For Comments on Information-Collection Requirements: Written 
comments and recommendations for the information collection 
requirements should be sent within 30 days of publication of this 
notice to www.reginfo.gov/public/do/PRAMain. Find this particular 
information collection by selecting ``Currently under Review--Open for 
Public Comments'' or by using the search function. You may also provide 
a copy of your comments to the BLM's Information Collection Clearance 
Officer to the above address with ``Attention PRA Office,'' or by email 
to [email protected]. Please reference OMB Control Number 
1004-0211 and RIN 1004-AE79 in the subject line of your comments.

FOR FURTHER INFORMATION CONTACT: Lonny Bagley, Acting Division Chief, 
Fluid Minerals Division, telephone: 307-622-6956, or email: 
[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 email: [email protected]. Individuals in the United States 
who are deaf, deafblind, hard of hearing, or have a speech disability 
may dial 711 (TTY, TDD, or TeleBraille) to access telecommunications 
relay services for contacting Mr. Bagley. Individuals outside the 
United States should use the relay services offered within their 
country to make international calls to the point-of-contact in the 
United States.

SUPPLEMENTARY INFORMATION:
I. Executive Summary
II. Public Comment Procedures
III. Background
IV. Section-by-Section Discussion
V. Procedural Matters

I. Executive Summary

    This proposed regulation aims to reduce the waste of natural gas 
from oil and gas leases administered by the BLM. This gas is lost 
during oil and gas exploration and production activities through 
venting, flaring, and leaks. Although some losses of gas may be 
unavoidable, the law requires that operators take reasonable steps to 
prevent the waste of gas through venting, flaring and leakage. The 
proposed rule describes the reasonable steps that operators of Federal 
and Indian oil and gas leases must take to avoid the waste of natural 
gas. The proposed rule would also ensure that, when Federal or Indian 
gas is wasted, the public and Indian mineral owners are compensated 
through royalty payments.
    The BLM conducts a Federal onshore oil and gas leasing program 
pursuant to the requirements of various statutes, including the Mineral 
Leasing Act (MLA), the Federal Oil and Gas Royalty Management Act 
(FOGRMA), the Inflation Reduction Act of 2022, and the Federal Land 
Policy and Management Act (FLPMA). The MLA requires lessees to ``use 
all reasonable precautions to prevent waste of oil or gas developed in 
the land,'' \1\ and further requires oil and gas lessees to observe 
``such rules . . . for the prevention of undue waste as may be 
prescribed by [the] Secretary.'' \2\ Under FOGRMA, oil and gas lessees 
are liable for royalty payments on gas wasted from the lease site.\3\ 
In addition, as discussed further later, a provision of the Inflation 
Reduction Act (``IRA''), Public Law 117-169, provides that, for leases 
issued after August 16, 2022, royalties are owed on all gas produced 
from Federal land, subject to certain exceptions for gas lost during 
emergency situations, gas used for the benefit of lease operations, and 
gas that is ``unavoidably lost.'' FLPMA authorizes the BLM to 
``regulate'' the ``use, occupancy, and development'' of the public 
lands via ``published rules,'' while mandating that the Secretary, 
``[i]n managing the public lands . . . shall, by regulation or 
otherwise, take any action necessary to prevent unnecessary or undue 
degradation of the lands.''
---------------------------------------------------------------------------

    \1\ 30 U.S.C. 225.
    \2\ 30 U.S.C. 187.
    \3\ 30 U.S.C. 1756.
---------------------------------------------------------------------------

    In addition to managing the leasing and production of oil and gas 
from Federal lands, the BLM also oversees operations on many Indian and 
Tribal oil and gas leases pursuant to a delegation of authority from 
the Secretary of the Interior.\4\ The Secretary's management and 
regulation of Indian mineral interests carries with it the duty to act 
as a trustee for the benefit of the Indian mineral owners.
---------------------------------------------------------------------------

    \4\ Department of the Interior, Departmental Manual, 235 DM 
1.1K.
---------------------------------------------------------------------------

    This proposed rule would replace the BLM's current requirements 
governing venting and flaring, which are contained in Notice to Lessees 
and Operators of Onshore Federal and Indian Oil and Gas Leases: Royalty 
or Compensation for Oil and Gas Lost (``NTL-4A'').\5\ NTL-4A was issued 
more than 40 years ago and its policies and requirements have become 
outdated. To begin, NTL-4A is ill-suited to address the large volume of 
flaring associated with the rapid development of unconventional tight 
oil and gas resources that has occurred in recent years. In addition, 
NTL-4A does not account for technological and operational advancements 
that can reduce losses of gas from oil storage tanks, pneumatic 
equipment, and equipment leaks.
---------------------------------------------------------------------------

    \5\ 44 FR 76600 (Dec. 27, 1979).
---------------------------------------------------------------------------

    In 2016, the BLM issued a final rule replacing NTL-4A with new 
regulations intended to reduce the waste of gas from

[[Page 73589]]

venting, flaring, and leaks.\6\ However, industry groups and a set of 
States immediately challenged that rule in Federal court, and the BLM 
never fully implemented the rule due to that litigation.\7\ In 
September 2018, the BLM issued a final rule effectively rescinding the 
2016 Rule.\8\ Environmental groups and a different set of States then 
challenged that rule in Federal court. Eventually, a U.S. District 
Court vacated the 2018 rescission of the 2016 Rule on various grounds, 
including that the resulting regulatory regime would fail to meet the 
BLM's statutory mandate to prevent waste.\9\ Then a different U.S. 
District Court vacated the 2016 Rule on the grounds that, among other 
things: (1) the MLA's ``delegation of authority does not allow and was 
not intended to authorize the enactment of rules justified primarily 
upon the ancillary benefit of a reduction in air pollution''; and (2) 
``BLM acted arbitrarily and capriciously in failing to fully assess the 
impacts of the [2016 Rule] on marginal wells, failing to adequately 
explain and support the [2016 Rule's] capture requirements, and failing 
to separately consider the domestic costs and benefits of the [2016 
Rule].'' \10\ The end result of these rulemakings and court decisions 
is that NTL-4A continues to govern venting and flaring from BLM-managed 
oil and gas leases.
---------------------------------------------------------------------------

    \6\ 81 FR 83008 (Nov. 18, 2016).
    \7\ See Wyoming v. U.S. Dept. of the Interior, 493 F. Supp. 3d 
1046, 1052-1057 (D. Wyo. 2020).
    \8\ 83 FR 49184 (Sept. 28, 2018).
    \9\ California v. Bernhardt, 472 F. Supp. 3d 573 (N.D. Cal. 
2020).
    \10\ See Wyoming v. U.S. Dept. of the Interior, 493 F. Supp. 3d 
1046, 1086-87 (D. Wyo. 2020).
---------------------------------------------------------------------------

    These recent rulemakings and the related litigation have provided 
the BLM with two important lessons. First, there are opportunities for 
the BLM to reduce the waste of natural gas through improved regulatory 
requirements pertaining to venting, flaring, and leaks. Second, courts 
disagreed as to whether the BLM's regulatory authority allows for all 
of the 2016 Rule provisions. The BLM, therefore, has chosen an approach 
that seeks to improve upon NTL-4A in a variety of significant ways 
while eschewing certain elements of the 2016 Rule that were the focus 
of an unfavorable court ruling.
    In brief, the primary components of this proposed rule are as 
follows:
     The proposed rule would establish the general rule that 
``operators must use all reasonable precautions to prevent the waste of 
oil or gas developed from the lease.'' It notes that the BLM may 
specify reasonable measures to prevent waste as conditions of approval 
of an Application for Permit to Drill and, after an Application for 
Permit to Drill is approved, the BLM may order an operator to 
implement, within a reasonable time, additional reasonable measures to 
prevent waste at ongoing exploration and production operations. 
Reasonable measures to prevent waste may reflect factors including, but 
not limited to, relevant advances in technology and changes in industry 
practice.
     The proposed rule would require operators to submit a 
waste minimization plan with all applications for permits to drill oil 
wells. This plan would provide the BLM with information on anticipated 
associated gas production, the operator's capacity to capture that gas 
production for sale or use, and other steps the operator commits to 
take to reduce or eliminate gas losses. Where the available information 
indicates that the plan does not take reasonable steps to avoid wasting 
gas, the BLM may delay action on the permit until the operator 
adequately addresses the plan's deficiencies to the BLM's satisfaction.
     The proposed rule would recognize, and clarify, that oil 
or gas can be ``unavoidably lost'' in connection with certain oil and 
gas operations. Unavoidably lost oil or gas will not be considered 
wasted and therefore not be subjected to royalty payments. In 
particular, if the operator has not been negligent; has taken ``prudent 
and reasonable steps to avoid waste;'' complied fully with applicable 
laws, lease terms, regulations, provisions of a previously approved 
operating plan, and other written orders of the BLM; and the loss is 
within the time or volume limits applicable to the particular 
situation; then the lost oil or gas will qualify as ``unavoidably 
lost'' waste gas for which no royalties are owed.
     The proposed rule would lay out a number of specific 
circumstances in which lost oil or gas would be considered 
``unavoidably lost,'' including during well completions, production 
testing, and emergencies. The proposed rule would also establish a 
monthly volume limit on royalty-free flaring due to pipeline capacity 
constraints, midstream processing failures, or other similar events 
that may prevent produced gas from being transported to market.
     The proposed rule would include a number of specific 
affirmative obligations that operators must take to avoid wasting oil 
or gas. In particular:
    [cir] For certain operators on Federal or Indian leases, or Indian 
Mineral Development Act (IMDA) agreements, the proposed rule would 
prohibit the use of natural-gas-activated pneumatic controllers or 
pneumatic diaphragm pumps with a bleed rate that exceeds 6 standard 
cubic feet (scf)/hour.
    [cir] The proposed rule would, where technically and economically 
feasible, require oil storage tanks on Federal or Indian leases to be 
equipped with a vapor recovery system or other mechanism that avoids 
the loss of natural gas from the tank.
    [cir] The proposed rule would require operators on Federal or 
Indian leases to maintain a leak detection and repair (LDAR) program 
designed to prevent the unreasonable and undue waste of Federal or 
Indian gas. An operator's LDAR program must provide for regular 
inspections of all oil and gas production, processing, treatment, 
storage, and measurement equipment on the lease site.
    The requirements of this proposed rule are explained in detail in 
sections III and IV that follow.
    As detailed in the Regulatory Impact Analysis (RIA) prepared for 
this proposed rule, the BLM estimates that this rule would have the 
following economic impacts:
     Costs to industry of around $122 million per year 
(annualized at 7 percent);
     Benefits to industry in recovered gas of $55 million per 
year (annualized at 7 percent);
     Increases in royalty revenues from recovered and flared 
gas of $39 million per year; and
     Benefits to society of $427 million per year from reduced 
greenhouse gas emissions.

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, 
explain the reason for any changes you recommend, and include any 
supporting documentation. 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 previously (see ADDRESSES).
    Comments, including names and street addresses of respondents, will 
be

[[Page 73590]]

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 DATES and ADDRESSES sections. Please note that due to 
COVID-19, electronic submission of comments is recommended.

III. Background

A. Waste of Natural Gas During the Development of Federal and Indian 
Oil and Gas Resources

    The BLM is responsible for managing more than 245 million acres of 
land and 700 million acres of subsurface mineral estate--the latter 
being nearly a third of the nation's total land mass. The BLM maintains 
a program for leasing these lands for oil and gas development and 
regulates oil and gas production operations on Federal leases. While 
the BLM does not manage the leasing of Indian and Tribal lands for oil 
and gas production, the BLM does regulate oil and gas operations on 
many Indian and Tribal leases as part of its Tribal trust 
responsibilities.
    The BLM's onshore oil and gas management program is a major 
contributor to the nation's oil and gas production. Domestic production 
from 88,887 Federal onshore oil and gas wells \11\ accounts for 
approximately 8 percent of the Nation's natural gas supply and 9 
percent of its oil.\12\ In Fiscal Year (FY) 2021, operators produced 
473 million barrels of oil and 3.65 trillion cubic feet (Tcf) of 
natural gas from onshore Federal and Indian oil and gas leases. The 
production of this oil and gas generated more than $4.2 billion in 
royalties. Approximately $3.2 billion of these royalties were split 
between the United States and the States in which the production 
occurred. Approximately $1 billion of these royalties went directly to 
Tribes and Indian allottees for production from Indian lands.\13\
---------------------------------------------------------------------------

    \11\ BLM Public Lands Statistics, Table 9 (FY 2021 data), 
available at https://www.blm.gov/programs-energy-and-minerals-oil-and-gas-oil-and-gas-statistics.
    \12\ Bureau of Land Management Budget Justifications and 
Performance Information Fiscal Year 2023, p. V-79, available at 
https://www.doi.gov/sites/doi.gov/files/fy2023-blm-greenbook.pdf.
    \13\ Production and revenue number derived from data maintained 
by the Office of Natural Resources Revenue at https://revenuedata.doi.gov/.
---------------------------------------------------------------------------

    In recent years, the United States has experienced a significant 
increase in oil and natural gas production due to technological 
advances, such as hydraulic fracturing combined with directional 
drilling. This increase in production has been accompanied by a 
significant waste of natural gas through venting and flaring. As the 
following graph illustrates, the amount of venting and flaring from 
Federal and Indian leases has increased dramatically from the 1990s to 
the 2010s, and the upward trend in flaring suggests that it will 
continue to be a problem in the coming years. Between 1990 and 2000, 
the total venting and flaring reported by Federal and Indian onshore 
lessees averaged approximately 11 billion cubic feet (Bcf) per year. 
Between 2010 and 2020, in contrast, the total venting and flaring 
reported by Federal and Indian onshore lessees averaged approximately 
44.2 Bcf per year.\14\
---------------------------------------------------------------------------

    \14\ BLM analysis of ONRR Oil and Gas Operations Report Part B 
(OGOR-B) data provided for 1990-2000 and 2010-2020.
[GRAPHIC] [TIFF OMITTED] TP30NO22.000

    Assuming a $3 per thousand cubic feet (Mcf) price of gas,\15\ the 
Federal and Indian gas that was vented and flared from 2010 to 2020 
would be valued at $1.46 billion. The BLM notes that vented and flared 
volumes have not

[[Page 73591]]

increased linearly with production. According to data maintained by the 
Office of Natural Resources Revenue (ONRR), the average volume of 
vented and flared gas as a percentage of total gas production was 0.42 
percent from 1990-2000. From 2010-2020, however, vented and flared gas 
averaged 1.07 percent of total gas production. This metric indicates a 
157 percent increase in the waste of gas during oil and gas production 
from Federal and Indian lands. Furthermore, the average amount of 
vented and flared gas (Mcf) per barrel (bbl) of oil production was 
0.8148 Mcf/bbl from 1990 to 2000, while it rose to 1.6418 Mcf/bbl from 
2010 to 2020--a 102 percent increase in the waste of gas per barrel of 
oil produced.
---------------------------------------------------------------------------

    \15\ The average annual Henry Hub spot price for natural gas 
from 2010 through 2020 was $3.19. U.S. Energy Information 
Administration (EIA), Henry Hub Natural Gas Spot Price, available at 
https://www.eia.gov/dnav/ng/hist/rngwhhda.htm.
[GRAPHIC] [TIFF OMITTED] TP30NO22.001

    In addition to the venting and flaring tracked by the ONRR, recent 
studies have identified three other major sources of gas losses during 
the oil and gas production process: emissions from natural-gas-
activated pneumatic equipment, venting from oil storage tanks, and 
equipment leaks.\16\ The Environmental Protection Agency (EPA) 
estimates that, overall, 36.2 Bcf of methane was emitted from pneumatic 
controllers and 4.9 Bcf of methane was emitted from equipment leaks at 
upstream oil and gas production sites in the United States in 2019.\17\ 
The BLM estimates that 13 Bcf of natural gas was lost from pneumatic 
devices on Federal and Indian lands in 2019. The BLM estimates that an 
additional 0.86 Bcf of gas was lost due to equipment leaks from Federal 
natural gas production operations not subject to existing State or EPA 
leak detection and repair requirements. Notably, the problem of leakage 
appears to be exacerbated in areas where there is insufficient 
infrastructure for natural gas gathering, processing, and 
transportation \18\--a known issue in basins such as the Permian and 
Bakken, where substantial BLM-managed oil and gas production occurs. 
Finally, the BLM estimates that 17.9 Bcf of natural gas was emitted 
from storage tanks on Federal and Indian lands in 2019. These losses 
from pneumatic equipment, leaks and storage tanks would be valued at 
$53.7 million dollars (at $3/Mcf) in 2019.
---------------------------------------------------------------------------

    \16\ Alvarez, et al., ``Assessment of methane emissions from the 
U.S. oil and gas supply chain,'' Science 361 (2018); see also 81 FR 
83015-17.
    \17\ EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 
1990-2019 at 3-73 (2019).
    \18\ Zhang, et al., ``Quantifying methane emissions from the 
largest oil-producing basin in the United States from space,'' 
Science Advances 6 (2020).
---------------------------------------------------------------------------

    Excessive venting, flaring, and leaks by Federal oil and gas 
lessees is wasting valuable publicly owned resources that could be put 
to productive use, and depriving American taxpayers, Tribes, and States 
of substantial royalty revenues. In addition, the wasted gas may harm 
local communities and surrounding areas through visual and noise 
impacts from flaring, while also contributing to local and regional 
exposure to smog and other harmful air pollutants such as small 
particulates and benzene. Vented or leaked gas also contributes to 
climate change, because the primary constituent of natural gas is 
methane, an especially powerful greenhouse gas, with climate impacts 
roughly 28-36 times those of carbon dioxide (CO2), if 
measured over a 100-year period, or 84 times those of CO2 if 
measured over a 20-year period.\19\ Thus, regulatory measures that 
encourage operators to conserve gas and avoid waste could also 
significantly benefit public health and the environment as well as 
provide additional benefits to local communities.\20\
---------------------------------------------------------------------------

    \19\ See Intergovernmental Panel on Climate Change, Climate 
Change 2013: The Physical Science Basis, Chapter 8, Anthropogenic 
and Natural Radiative Forcing, at 714 (Table 8.7), available at 
https://www.ipcc.ch/pdf/assessment-report/ar5/wg1/WG1AR5_Chapter08_FINAL.pdf.
    \20\ The BLM notes that the BLM did not rely on such ancillary 
benefits in developing or selecting the waste prevention/resource 
conservation provisions presented in this proposed rule. Rather, 
with the exception of the safety provisions in proposed Sec.  
3179.6, the requirements of this proposed rule are independently 
justified as reasonable measures to prevent waste that would be 
expected of a prudent operator, regardless of ancillary benefits to 
public health or the environment.
---------------------------------------------------------------------------

    To be clear, as the BLM has consistently recognized during its many 
decades of implementing the MLA, not every loss of natural gas during 
oil and gas production constitutes waste under the MLA. Indeed, some 
amount of venting and flaring is unavoidable and expected to occur 
during oil and gas exploration and production operations. For example, 
an operator may need to flare gas on a short-term basis as part of 
drilling operations, well completion, or production testing, among 
other situations. Longer-term flaring may occur in exceptional 
circumstances, which might include the drilling of and production from 
a wildcat well in a new field, where gas pipelines have not yet been 
built due to a lack of information regarding expected gas 
production.\21\ In some fields, the overall quantity of gas produced 
may be so small that the development of gas pipeline infrastructure may 
not be economically justified.
---------------------------------------------------------------------------

    \21\ The BLM notes that, even in such exceptional circumstances, 
operators should be expected to take measures to avoid excessive 
flaring and this proposed rule would place limitations on royalty-
free flaring from exploratory (wildcat) wells.
---------------------------------------------------------------------------

    Although at least some venting or flaring may be unavoidable (and 
thus not wasteful under the relevant statutes) under some 
circumstances, operators have an affirmative obligation under the law 
to use reasonable precautions to prevent the waste of oil or gas 
developed from a lease. Measures that are considered reasonable to 
prevent waste may shift over time with advances in technology and 
changes in industry practice.
    Further, operators' immediate economic interests may not always be 
served by minimizing the loss of natural gas, and BLM regulation is 
necessary to discourage operators from venting or flaring more gas than 
is operationally necessary. A prime example is the

[[Page 73592]]

flaring of oil-well gas due to pipeline capacity constraints. Oil wells 
in certain fields are known to produce relatively large volumes of 
associated gas. Accordingly, natural-gas-capture infrastructure--
including pipelines--has been built out in those fields and operators 
are expected to capture and sell the associated gas they produce. 
However, it is not uncommon for the rate of oil-well development to 
outpace the capacity of the related gas-capture infrastructure. When 
the existing gas-capture infrastructure is overwhelmed, an operator is 
faced with a choice: flare the associated gas in order to continue oil 
production unabated, or curtail oil production in order to conserve the 
associated gas. Absent clear requirements, an operator might conclude 
that the former course of action best serves its immediate economic 
interests by providing immediate revenue from the relatively more 
valuable production stream. But the latter course of action may often 
best serve the public's interest by maximizing overall energy 
production (considering both production streams) and royalty revenues. 
(This proposed rule would incentivize better communication and 
coordination among operators and midstream companies, which is expected 
to result in more deliberate development with greater volumes of 
production sent to market in the long run.) Similar to the problem of 
inadequate pipelines, maximizing the recovery of gas by investing in 
vapor-recovery units for oil storage tanks, upgrading pneumatic 
equipment, and regularly inspecting for leaks may not always maximize 
the operator's profits, especially when the operator examines the 
investment on a short time horizon. It is in these circumstances--where 
an operator's interest in maximizing profits diverges from the public's 
interest in maximizing resource recovery--that BLM regulation is 
necessary and appropriate to ensure that operators take reasonable 
measures to prevent waste.

B. Legal Authority

    Pursuant to a delegation of Secretarial authority, the BLM is 
authorized to regulate oil and gas exploration and production 
activities on Federal and Indian lands under a variety of statutes, 
including the MLA, the Mineral Leasing Act for Acquired Lands (MLAAL), 
the IRA, FOGRMA, FLPMA, the Indian Mineral Leasing Act of 1938, the 
IMDA, and the Act of March 3, 1909.\22\ 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.\23\
---------------------------------------------------------------------------

    \22\ Mineral Leasing Act, 30 U.S.C. 188-287; Mineral Leasing Act 
for Acquired Lands, 30 U.S.C. 351-360; Federal Oil and Gas Royalty 
Management Act, 30 U.S.C. 1701-1758; Federal Land Policy and 
Management Act of 1976, 43 U.S.C. 1701-1785; Indian Mineral Leasing 
Act of 1938, 25 U.S.C. 396a-g; Indian Mineral Development Act of 
1982, 25 U.S.C. 2101-2108; Act of March 3, 1909, 25 U.S.C. 396.
    \23\ 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.
---------------------------------------------------------------------------

1. Authority Regarding the Waste of Natural Gas
    The MLA rests on the fundamental principle that the public should 
benefit from mineral production on public lands.\24\ An important means 
of ensuring that the public benefits from mineral production on public 
lands is minimizing and deterring the waste of oil and gas produced 
from the Federal mineral estate. To this end, the MLA requires that oil 
and gas lessees ``use all reasonable precautions to prevent waste of 
oil or gas developed in the land.'' \25\ The MLA requires lessees to 
exercise ``reasonable diligence, skill, and care'' in their operations 
and also requires oil and gas lessees to observe ``such rules . . . for 
the prevention of undue waste as may be prescribed by [the] 
Secretary.'' \26\ Lessees are not only responsible for taking measures 
to prevent waste, but also for making royalty payments on wasted oil 
and gas when waste does occur, elaborating on the MLA's assessment of 
royalties on all production ``removed or sold from the lease,'' \27\ 
FOGRMA expressly made lessees ``liable for royalty payments on oil or 
gas lost or wasted from a lease site 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 [FOGRMA] or any mineral leasing law.'' \28\
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    \24\ See, e.g., California Co. v. Udall, 296 F.2d 384, 388 (D.C. 
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'').
    \25\ 30 U.S.C. 225.
    \26\ 30 U.S.C. 187.
    \27\ 30 U.S.C. 226(b).
    \28\ 30 U.S.C. 1756.
---------------------------------------------------------------------------

    In addition, on August 16, 2022, President Biden signed the IRA 
into law. Public Law 117-169. Section 50263 of the IRA, which is 
entitled, ``Royalties on All Extracted Methane,'' provides that, for 
leases issued after August 16, 2022, royalties are owed on all gas 
produced from Federal land, including gas that is consumed or lost by 
venting, flaring, or negligent releases through any equipment during 
upstream operations. Section 50263 further provides three exceptions to 
the general obligation to pay royalties on produced gas, namely: (1) 
gas that is vented or flared for not longer than 48 hours in an 
emergency situation that poses a danger to human health, safety, or the 
environment; (2) gas used or consumed within a lease, unit, or 
communitized area for the benefit of the lease, unit, or communitized 
area; and (3) gas that is unavoidably lost.
    The BLM's authority to regulate the waste of Federal oil and gas is 
not limited to operations that occur on Federal lands, but also extends 
to operations on non-Federal lands where Federal oil and gas is 
produced under a unit or communitization agreement (CA). ``For the 
purpose of more properly conserving the natural resources of any oil or 
gas pool, field, or like area,'' the MLA authorizes lessees to operate 
their leases under a cooperative or unit plan of development and 
operation, if the Secretary of the Interior determines such an 
arrangement to be necessary or advisable in the public interest.\29\ 
The Secretary is authorized, with the consent of the lessees involved, 
to establish or alter drilling, producing, and royalty requirements and 
to make such regulations with respect to the leases as she may deem 
necessary and proper to protect the public interest.\30\ The MLA states 
that a cooperative or unit plan of development may contain a provision 
authorizing the Secretary to regulate the rate of development and the 
rate of production.\31\ Accordingly, the BLM's standard form unit 
agreement provides that the BLM may regulate the quantity and rate of 
production in the interest of conservation.\32\ The BLM's standard form 
CA provides that the BLM ``shall have the right of supervision over all 
fee and state mineral operations within the communitized area to the 
extent necessary to monitor production and measurement, and to assure 
that no avoidable loss of hydrocarbons occurs . . . .'' \33\ As noted 
earlier, FOGRMA authorizes the BLM to assess royalties on gas lost or 
wasted from a ``lease site.'' The term ``lease site'' is broadly 
defined in FOGRMA,\34\ extending the BLM's

[[Page 73593]]

authority to assess royalties on wasted gas to the Federal or Indian 
portion of gas wasted from operations on non-Federal tracts committed 
to a Federal unit or communitization agreement. Thus, even where the 
production of Federal oil and gas occurs on State- or privately owned 
tracts, the BLM maintains the authority to regulate the waste of 
Federal minerals from operations on those lands by requiring royalty 
payments and setting appropriate rates of development and 
production.\35\
---------------------------------------------------------------------------

    \29\ 30 U.S.C. 226(m).
    \30\ Id..
    \31\ Id..
    \32\ 43 CFR 3186.1, ] 21.
    \33\ See ``BLM Manual 3160-9--Communitization,'' Appendix 1, ] 
12.
    \34\ See 30 U.S.C. 1702(6); Maralex Resources, Inc. v. 
Bernhardt, 913 F.3d 1189, 1200 (10th Cir. 2019) (``the statutory 
definition of `lease site' necessarily includes any lands, including 
privately-owned lands, on which [production] of oil or gas is 
occurring pursuant to a communitization agreement''). Additionally, 
FOGRMA defines ``oil and gas'' broadly to mean ``any oil or gas 
originating from, or allocated to, the Outer Continental Shelf, 
Federal, or Indian lands.'' 30 U.S.C. 1702(9) (emphasis added).
    \35\ This conclusion is consistent with the assessment of the 
BLM's authority expressed by the court that vacated the 2016 Waste 
Prevention Rule. See Wyoming v. U.S. Dept. of the Interior, 493 F. 
Supp. 3d 1046, 1081-85 (D. Wyo. 2020).
---------------------------------------------------------------------------

2. Authority Regarding Environmental Impacts to the Public Lands
    In addition to ensuring that the public receives a pecuniary 
benefit from oil and gas production from public lands, the BLM is also 
tasked with regulating the physical impacts of oil and gas development 
on public lands. The MLA directs the Secretary to ``regulate all 
surface-disturbing activities conducted pursuant to any lease'' and to 
``determine reclamation and other actions as required in the interest 
of conservation of surface resources.'' \36\ The MLA requires oil and 
gas leases to include provisions ``for the protection of the interests 
of the United States . . . and for the safeguarding of the public 
welfare,'' which includes lease terms for the prevention of 
environmental harm.\37\ The Secretary may suspend lease operations ``in 
the interest of conservation of natural resources,'' a phrase that 
encompasses not just conservation of mineral deposits, but also 
preventing environmental harm.\38\ The Secretary also may refuse to 
lease lands in order to protect the public's interest in other natural 
resources and the environment.\39\ The MLA additionally requires oil 
and gas leases to contain ``a provision that such rules for the safety 
and welfare of the miners . . . as may be prescribed by the Secretary 
shall be observed . . . .'' \40\ Accordingly, the BLM's regulations 
governing oil and gas operations on the public lands have long required 
operators to conduct operations in a manner that is protective of 
natural resources, environmental quality, and public health and 
safety.\41\
---------------------------------------------------------------------------

    \36\ 30 U.S.C. 226(g).
    \37\ See Natural Resources Defense Council, Inc. v. Berklund, 
458 F. Supp. 925, 936 n.17 (D.D.C. 1978). The BLM acknowledges that 
the court that vacated the 2016 Waste Prevention Rule stated that 
``it is not a reasonable interpretation of BLM's general authority 
under the MLA to `safeguard[ ] the public welfare' as empowering the 
agency to regulate air emissions, particularly when Congress 
expressly delegated such authority to the EPA under the [Clean Air 
Act].'' Wyoming, 493 F. Supp. 3d at 1067. The BLM further notes that 
the court that vacated the BLM's rescission of the 2016 Waste 
Prevention Rule found that the rescission failed to satisfy the 
BLM's ``statutory obligation'' to ``safeguard[] the public 
welfare,'' and stated that the MLA's ``public welfare'' provision 
supports BLM's consideration of air emissions in promulgating its 
waste prevention regulations. See California v. Bernhardt, 472 F. 
Supp. 3d 573, 616 (N.D. Cal. 2020). The BLM need not elaborate on 
the meaning of the MLA's ``public welfare'' provision in this 
rulemaking, as the BLM is proposing requirements that are 
independently justified as waste prevention measures and are not 
proposed for environmental purposes. The one exception is proposed 
Sec.  3179.6, which does serve an environmental purpose, but is an 
exercise of the Secretary's authority to prescribe ``rules for the 
safety and welfare of the miners'' under 30 U.S.C. 187.
    \38\ 30 U.S.C. 209; see also, e.g., Copper Valley Machine Works 
v. Andrus, 653 F.2d 595, 601 & nn.7-8 (D.C. Cir. 1981); Hoyl v. 
Babbitt, 129 F.3d 1377, 1380 (10th Cir. 1997); Getty Oil Co. v. 
Clark, 614 F. Supp. 904, 916 (D. Wyo. 1985).
    \39\ Udall v. Tallman, 380 U.S. 1, 4 (1965); Duesing v. Udall, 
350 F.2d 748, 751-52 (1965).
    \40\ 30 U.S.C. 187.
    \41\ See 43 CFR 3162.5-1, 3162.5-3.
---------------------------------------------------------------------------

    FLPMA authorizes the BLM to ``regulate'' the ``use, occupancy, and 
development'' of the public lands via ``published rules.'' \42\ FLPMA 
also mandates that the Secretary, ``[i]n managing the public lands . . 
. shall, by regulation or otherwise, take any action necessary to 
prevent unnecessary or undue degradation of the lands.'' \43\ FLPMA 
expressly declares a policy that the BLM should balance the need for 
domestic sources of minerals against the need to ``protect the quality 
of scientific, scenic, historical, ecological, environmental, air and 
atmospheric, water resources, and archeological values; . . . [and] 
provide for outdoor recreation and human occupancy and use.'' \44\
---------------------------------------------------------------------------

    \42\ 43 U.S.C. 1732(b).
    \43\ Id.
    \44\ Id. at 1701(a)(8).
---------------------------------------------------------------------------

    FLPMA requires the BLM to manage public lands under principles of 
multiple use and sustained yield.\45\ The statutory definition of 
``multiple use'' explicitly includes the consideration of environmental 
resources. ``Multiple use'' is a ``combination of balanced and diverse 
resource uses that takes into account the long-term needs of future 
generations for renewable and nonrenewable resources . . . .'' \46\ 
``Multiple use'' also requires resources to be managed in a 
``harmonious and coordinated'' manner ``without permanent impairment to 
the productivity of the land and the quality of the environment.'' \47\ 
Significantly, FLPMA directs the Secretary to consider ``the relative 
values of the resources and not necessarily . . . the combination of 
uses that will give the greatest economic return or the greatest unit 
output.'' \48\
---------------------------------------------------------------------------

    \45\ Id. at 1702(c), 1732(a).
    \46\ 43 U.S.C. 1702(c).
    \47\ Id.
    \48\ Id.
---------------------------------------------------------------------------

3. Indian Oil and Gas Production
    The Secretary's management and regulation of Indian mineral 
interests carries with it the duty to act as a trustee for the benefit 
of the Indian mineral owners.\49\ Congress has directed the Secretary 
to ``aggressively carry out [her] trust responsibility in the 
administration of Indian oil and gas.'' \50\ In furtherance of her 
trust obligations, the Secretary has delegated regulatory authority for 
administering operations on Indian oil and gas leases to the BLM,\51\ 
which has developed specialized expertise through regulating the 
production of oil and gas from public lands administered by the 
Department. In choosing from among reasonable regulatory alternatives 
for Indian mineral development, the BLM is obligated to adopt the 
alternative that is in the best interest of the Tribe and individual 
Indian mineral owners.\52\ What is in the best interest of the Tribe 
and individual Indian mineral owners is determined by a consideration 
of all relevant factors, including economic considerations as well as 
potential environmental and social effects.\53\
---------------------------------------------------------------------------

    \49\ See Woods Petroleum Corp. v. Department of Interior, 47 
F.3d 1032, 1038 (10th Cir. 1995) (en banc).
    \50\ 30 U.S.C. 1701(a)(4).
    \51\ 235 DM 1.1.K.
    \52\ See Jicarilla Apache Tribe v. Supron Energy Corp., 728 F.2d 
1555, 1567 (10th Cir. 1984) (Seymour, J., concurring in part and 
dissenting in part), adopted as majority opinion as modified en 
banc, 782 F.2d 855 (10th Cir. 1986).
    \53\ See 25 CFR 211.3.
---------------------------------------------------------------------------

C. Regulatory History

    The BLM has a long history of regulating venting and flaring from 
onshore oil and gas operations. This section summarizes the BLM's 
historic practices, as well as the BLM's experience in two recent 
rulemakings related to venting and flaring.
1. Early Regulation of Surface Waste of Gas
    The Department of the Interior has maintained regulations 
addressing the waste of gas through venting and flaring from onshore 
oil and gas leases since 1938. At that time, the Department's 
regulations required the United States to be compensated ``at full 
value'' for ``all

[[Page 73594]]

gas wasted by blowing, release, escape into the air, or otherwise,'' 
except where such disposal was authorized under the laws of the United 
States and the State in which it occurred.\54\ The regulations further 
provided that the production of oil or gas from the lease was to be 
restricted to such amounts as could be put to beneficial use and that, 
in order to avoid the excessive production of oil or gas, the Secretary 
could limit the rate of production based on the market demand for oil 
or the market demand for gas.\55\
---------------------------------------------------------------------------

    \54\ 30 CFR 221.5(h) (1938).
    \55\ Id. at 221.27.
---------------------------------------------------------------------------

    By 1942, the Department's regulations contained a definition of 
``waste of oil or gas.'' This definition included the ``physical waste 
of oil or gas,'' which was defined as ``the loss or destruction of oil 
or gas after recovery thereof such as to prevent proper utilization and 
beneficial use thereof, and the loss of oil or gas prior to recovery 
thereof by isolation or entrapment, by migration, by premature release 
of natural gas from solution in oil, or in any other manner such as to 
render impracticable the recovery of such oil or gas.'' \56\ The 
regulations stated that a lessee was ``obligated to prevent the waste 
of oil or gas'' and, in order to avoid the physical waste of gas, the 
lessee was required to ``consume it beneficially or market it or return 
it to the productive formation.'' \57\ The regulations stated that 
``unavoidably lost'' gas was not subject to royalty, though the 
regulations did not define ``unavoidably lost.'' \58\
---------------------------------------------------------------------------

    \56\ 30 CFR 221.6(n) (1942).
    \57\ Id. at 221.35.
    \58\ Id. at 221.44.
---------------------------------------------------------------------------

    In 1974, the Secretary issued NTL-4, which established the 
following policy for royalties on gas production:

    Gas production subject to royalty shall include (1) that gas 
(both dry and casing-head) which is produced and sold either on a 
lease basis or that which is allocated to a lease under the terms of 
an approved communitization or unitization agreement; (2) that gas 
which is vented or flared in well tests (drill-stem, completion, or 
production) on a lease, communitized tract, or unitized area; and 
(3) that gas which is otherwise vented or flared on a lease, 
communitized tract, or unitized area with the prior written 
authorization of the Area Oil and Gas Supervisor (Supervisor).
    NTL-4 thus effectively required onshore oil and gas lessees to pay 
royalties on all gas produced, including gas that was unavoidably lost 
or used for production purposes. Various oil and gas companies sought 
judicial review of NTL-4. In 1978, the U.S. District Court for the 
District of Wyoming overturned NTL-4, holding that the MLA does not 
authorize the collection of royalties on gas production that is 
unavoidably lost or used in lease operations.\59\
---------------------------------------------------------------------------

    \59\ Marathon Oil Co. v. Andrus, 452 F. Supp. 548, 553 (D. Wyo. 
1978).

2. NTL-4A
    From January 1980 to January 2017, the Department of the Interior's 
instructions governing the venting and flaring of gas from onshore oil 
and gas leases were contained in ``Notice to Lessees and Operators of 
Onshore Federal and Indian Oil and Gas Leases: Royalty or Compensation 
for Oil and Gas Lost'' (``NTL-4A'').\60\ NTL-4A was issued by the U.S. 
Geological Survey (USGS), which was the Interior bureau tasked with 
oversight of Federal onshore oil and gas production at the time.
---------------------------------------------------------------------------

    \60\ 44 FR 76,600 (Dec. 27, 1979).
---------------------------------------------------------------------------

    Under NTL-4A, operators were required to pay royalties on 
``avoidably lost'' gas--i.e., gas lost due to the operator's 
negligence, failure to take reasonable precautions to prevent or 
control the loss, or failure to comply with lease terms, regulations, 
or BLM orders. NTL-4A expressly authorized royalty-free venting and 
flaring ``on a short-term basis'' during emergencies, well purging and 
evaluation tests, initial production tests, and routine and special 
well tests. NTL-4A prohibited the flaring of gas from gas wells under 
any other circumstances. For gas produced from oil wells, however, NTL-
4A authorized (but did not mandate) the BLM to approve flaring where 
conservation of the gas was not ``economically justified'' because it 
would ``lead to the premature abandonment of recoverable oil reserves 
and ultimately to a greater loss of equivalent energy than would be 
recovered if the venting or flaring were permitted to continue.'' NTL-
4A stated that, ``when evaluating the feasibility of requiring 
conservation of the gas, the total leasehold production, including oil 
and gas, as well as the economics of a field-wide plan,'' must be 
considered. Finally, under NTL-4A, the loss of gas vapors from storage 
tanks was considered ``unavoidably lost,'' unless the BLM 
``determine[d] that the recovery of such vapors would be warranted.''
    Soon after issuing NTL-4A, the USGS issued guidelines and 
procedures for implementing NTL-4A, which were published in the 
Conservation Division Manual (CDM) Part 644, Chapter 5. Among other 
things, the CDM provided guidance regarding applications to flare oil-
well gas based on economics. Specifically, the CDM addressed how to 
respond to a lessee's contention ``that reserves of casinghead gas are 
inadequate to support the installation of facilities for gas collection 
and sale.'' The CDM explained that ``[f]rom an economic basis, all 
leasehold production must be considered; the major concern is 
profitable operation of the lease, not just profitable disposition of 
the gas.'' The CDM further explained that the ``economics of conserving 
gas must be on a field-wide basis, and the Supervisor must consider the 
feasibility of a joint operation between all other lessees/operators in 
the field or area.'' Thus, the economic standard for obtaining approval 
to flare oil-well gas under NTL-4A was intended to be a demanding one. 
The fact that the capture and sale of oil-well gas from an individual 
lease would not pay for itself was not sufficient to justify royalty-
free flaring of the gas.
    The CDM also provided guidance for venting and flaring situations 
involving both Federal and non-Federal lands. In such cases, the BLM 
was directed to contact the appropriate State agency in order to work 
jointly to effect optimum gas conservation. However, where such a 
cooperative effort was not possible, the BLM was directed to ``proceed 
unilaterally to take action to prevent unnecessary venting or flaring 
from Federal lands.''
    Under the plain terms of NTL-4A, flaring without prior approval 
(outside of the short-term circumstances specified in Sections II and 
III of NTL-4A) constituted a royalty-bearing loss of gas, regardless of 
the economic circumstances. The BLM originally applied NTL-4A to that 
effect, and this practice was upheld by the Interior Board of Land 
Appeals. See Lomax Exploration Co., 105 IBLA 1 (1988). However, the BLM 
changed this policy in Instruction Memorandum No. 87-652 (Aug. 17, 
1987), which required the BLM to give an operator an opportunity to 
demonstrate, after the fact, that capturing the gas was not 
economically justified. See Ladd Petroleum Corp., 107 IBLA 5 (1989).
    The number of applications for royalty-free flaring received by the 
BLM increased dramatically between 2005 and 2016: in 2005, the BLM 
received just 50 applications to vent or flare gas, while in 2015 it 
received 4,181 flaring applications, with another 3,539 flaring 
applications submitted in 2016. (Both the 2016 Waste Prevention Rule 
and the 2018 Revision Rule dispensed with case-by-case flaring 
approvals, and so post-2016 flaring application data does not provide a 
useful comparison.) Most of the applications to flare royalty-free were 
submitted to the New Mexico and

[[Page 73595]]

Montana-Dakotas State Offices, which oversee Federal and Indian mineral 
interests in unconventional plays where oil production is accompanied 
by large volumes of associated gas. Notably, the vast majority of these 
applications involved wells that were connected to a gas pipeline but 
flared due to pipeline capacity constraints.
3. 2016 Waste Prevention Rule
    On November 18, 2016, the BLM issued a final rule intended to 
reduce the waste of Federal and Indian gas through venting, flaring, 
and leaks (``Waste Prevention Rule'').\61\ The Waste Prevention Rule 
replaced NTL-4A and became effective on January 17, 2017. The BLM's 
development of the Waste Prevention Rule was prompted by a combination 
of factors, including the substantial increase in flaring over the 
previous decade, the growing number of applications to flare royalty-
free, new information regarding the quantities of gas lost through 
venting and leaks, and concerns expressed by oversight entities such as 
the U.S. Government Accountability Office (GAO).\62\
---------------------------------------------------------------------------

    \61\ 81 FR 83008 (Nov. 18, 2016).
    \62\ 81 FR 83014-83017; GAO, ``Federal Oil and Gas Leases--
Opportunities Exist to Capture Vented and Flared Gas, Which Would 
Increase Royalty Payments and Reduce Greenhouse Gases'' (Oct. 2010); 
GAO, ``OIL AND GAS--Interior Could Do More to Account for and Manage 
Natural Gas Emissions'' (July 2016).
---------------------------------------------------------------------------

    The Waste Prevention Rule applied to all onshore Federal and Indian 
oil and gas leases, units, and communitized areas. The key components 
of the Waste Prevention Rule were:
     A requirement that applications for permits to drill 
(APDs) be accompanied by a ``waste minimization plan'' that would 
detail anticipated gas production and opportunities to conserve the 
gas;
     A provision specifying the various circumstances under 
which a loss of oil or gas would be ``avoidably lost,'' and therefore 
royalty-bearing;
     A requirement that operators capture (rather than flare) a 
certain percentage of the gas they produce;
     Equipment requirements for pneumatic controllers, 
pneumatic diaphragm pumps, and storage vessels (tanks); and
     LDAR provisions requiring semiannual lease site 
inspections, the use of specified instruments and methods, and 
recordkeeping and reporting.
    The rule's ``capture percentage'' requirements were intended to 
address the routine flaring of gas from oil wells. The rule required an 
operator to capture, rather than flare, a certain percentage of the gas 
produced from the operator's ``development oil wells.'' The required 
capture percentage would increase over a 10-year period, starting at 85 
percent in 2018 and ultimately reaching 98 percent in 2026. Gas flared 
in excess of the capture requirements would be royalty bearing.
    The BLM recognized that the EPA had promulgated emissions 
limitations for pneumatic equipment and storage tanks as well as LDAR 
requirements for new and modified sources in the oil and gas production 
sector pursuant to its authority under the Clean Air Act. The BLM 
further recognized that these analogous EPA requirements would have the 
effect of reducing the waste of gas from leases subject to those 
requirements. So, in order to avoid unnecessary duplication or 
conflict, the Waste Prevention Rule allowed for operators to comply 
with the analogous EPA regulations as an alternative means of 
compliance with the BLM's requirements.\63\
---------------------------------------------------------------------------

    \63\ See 83 FR 83018-19, 83085-89.
---------------------------------------------------------------------------

    The capture percentage, pneumatic equipment, storage tanks, and 
LDAR requirements were each subject to phase-in periods, and the rule 
allowed operators to obtain exemptions or reduced requirements where 
compliance would ``cause the operator to cease production and abandon 
significant recoverable oil reserves under the lease.'' The BLM's RIA 
for the Waste Prevention Rule estimated that the rule would impose 
costs of between $110 million and $275 million per year, while 
generating benefits of between $20 million and $157 million per year 
worth of additional gas captured and between $189 million and $247 
million per year in quantified social benefits (in the form of forgone 
methane emissions).
    Industry groups and certain States \64\ filed petitions for 
judicial review of the Waste Prevention Rule in the U.S. District Court 
for the District of Wyoming. Wyoming v. DOI, Case No. 2:16-cv-00285-SWS 
(D. Wyo.). A coalition of environmental groups and other States 
intervened in the case in defense of the rule. Following the change in 
Administration in January 2017, the litigation was effectively paused 
in response to the BLM's administrative actions to suspend the rule. 
After those actions were invalidated by a different court, the Wyoming 
court stayed implementation of the capture percentage, pneumatic 
equipment, storage tank, and LDAR requirements, and stayed the 
litigation pending finalization of the BLM's voluntary revision of the 
Waste Prevention Rule.
---------------------------------------------------------------------------

    \64\ The States of North Dakota, Texas, Wyoming, and Montana 
joined the litigation in opposition to the rule.
---------------------------------------------------------------------------

4. 2018 Revision of Waste Prevention Rule
    On September 28, 2018, the BLM issued a final rule substantially 
revising the Waste Prevention Rule (``Revision Rule'').\65\ In the 
Revision Rule, the BLM rescinded the waste minimization plan, gas 
capture percentage, pneumatic equipment, storage tank, and LDAR 
requirements of the 2016 Rule. The BLM also revised the remaining 
provisions of the rule to largely reflect the language of NTL-4A. 
Finally, the BLM established a new policy of deferring to State 
regulations for determining when the routine flaring of oil-well gas is 
royalty-free.
---------------------------------------------------------------------------

    \65\ 83 FR 49184 (Sept. 28, 2018).
---------------------------------------------------------------------------

    In the Revision Rule, the BLM stated that the Waste Prevention Rule 
exceeded the BLM's statutory authority by imposing requirements with 
compliance costs that exceed the value of the gas that would be 
conserved, thus violating the ``prudent operator'' standard implicitly 
incorporated into the MLA when it was adopted in 1920. The BLM also 
stated that the 2016 Rule created a risk of premature shut-ins of 
marginal wells, as the compliance costs associated with the 2016 Rule 
would represent a significant proportion of a marginal well's revenue. 
Contrary to what the BLM had found in 2016, the BLM stated in the 
Revision Rule that existing State flaring regulations provided 
sufficient assurance against excessive flaring.
    The RIA for the Revision Rule found that the economic benefits of 
the Revision Rule (i.e., reduced compliance costs) would significantly 
outweigh its economic costs (i.e., forgone gas production and 
additional methane emissions). This result was based in large part on 
the use of a ``domestic'' social cost of methane metric that was not 
based on the best available science \66\ and drastically reduced the 
monetized climate benefits of the 2016 Rule relative to what had been 
estimated in the RIA for the 2016 Rule.
---------------------------------------------------------------------------

    \66\ See California v. Bernhardt, 472 F. Supp. 3d 573, 611 (N.D. 
Cal. 2020).
---------------------------------------------------------------------------

5. Judicial Review of the Revision Rule
    In September of 2018, a coalition of environmental groups and the 
States of California and New Mexico filed lawsuits challenging the 
Revision Rule in the U.S. District Court for the Northern District of 
California. On July 15, 2020, the district court ruled in favor of the 
plaintiffs. California v. Bernhardt,

[[Page 73596]]

472 F. Supp. 3d 573 (N.D. Cal. 2020). The court's key findings were:
     The BLM's interpretation of its statutory authority in the 
Revision Rule was unjustifiably limited, failed to require lessees to 
use all reasonable precautions to prevent waste, and failed to meet the 
BLM's statutory mandate to protect the public welfare;
     The BLM's decision to defer to State flaring regulations 
was not supported by sufficient analysis or record evidence;
     The record did not support the BLM's claims that the 2016 
Rule posed excessive regulatory burdens and that the 2016 Rule's costs 
outweighed its benefits; and
     The BLM's cost-benefit analysis underlying the rule was 
flawed for a variety of reasons, including that the use of a 
``domestic'' social cost of methane was unreasonable and not based on 
the best available science.
    The court ordered that the Revision Rule be vacated in its 
entirety. However, the court stayed vacatur until October 13, 2020.
6. Judicial Review of the 2016 Waste Prevention Rule
    Following the California v. Bernhardt decision, the district court 
in Wyoming lifted the stay on the litigation over the Waste Prevention 
Rule. In the briefing, the Department confessed error on the grounds 
that the BLM exceeded its statutory authority and was ``arbitrary and 
capricious'' in promulgating the rule. In October 2020, the district 
court ruled in favor of the plaintiffs, finding that the BLM had 
exceeded its statutory authority and had been arbitrary and capricious 
in promulgating the Waste Prevention Rule. Wyoming v. DOI, 493 F. Supp. 
3d 1046 (D. Wyo. 2020). Specifically, the court found that the Waste 
Prevention Rule was essentially an air quality regulation and that the 
BLM had usurped the authority to regulate air emissions that Congress 
had granted to EPA and the States in the Clean Air Act. The court found 
that the rule was not independently justified as a waste-prevention 
measure under the MLA. Rather, in the court's view, the record 
reflected that the BLM's primary concern was regulating methane 
emissions from existing oil and gas sources. The court faulted the 
BLM's rulemaking for imposing requirements beyond what could be 
expected of a ``prudent operator'' that develops the lease for the 
mutual profit of lessee and lessor. Finally, the court faulted the BLM 
for applying air quality regulations--as opposed to waste-prevention 
regulations--to unit and CA operations on non-Federal lands. The court 
ordered that the Waste Prevention Rule be vacated, thereby reinstating 
NTL-4A as the BLM's standard for managing venting and flaring from 
Federal oil and gas leases.
7. The Inflation Reduction Act
    As discussed earlier, on August 16, 2022, President Biden signed 
the IRA into law. Public Law 117-169. The IRA is designed to ``make a 
historic down payment on deficit reduction to fight inflation, invest 
in domestic energy production and manufacturing, and reduce carbon 
emissions by roughly 40 percent by 2030.'' Summary: The Inflation 
Reduction Act of 2022, available at https://www.democrats.senate.gov/imo/media/doc/inflation_reduction_act_one_page_summary.pdf. The Act 
authorizes, among other things, massive and unprecedented investments 
to enhance energy security and combat the climate crisis.
    Of particular relevance here, the IRA contains a suite of 
provisions addressing onshore and offshore oil and gas development 
under Federal leases. For example, Section 50265 requires, inter alia, 
the Department to maintain a certain level of onshore oil and gas 
leasing activity as a prerequisite to approving renewable energy 
rights-of-way on Federal lands. Importantly, that provision of the IRA 
is accompanied by other provisions that serve to ensure that lessees 
pay fair and appropriate compensation to the Federal Government in 
exchange for the opportunity to conduct their industrial activities 
under Federal leases.
    One such provision of the Act is Section 50263, which is entitled, 
``Royalties on All Extracted Methane.'' Consistent with the MLA's 
assessment of royalties on all gas ``removed or sold from the lease'' 
\67\ and FOGRMA's requirement that lessees pay royalties on lost or 
wasted gas,\68\ Section 50263 of the IRA provides that, for leases 
issued after the date of enactment of the Act, royalties are owed on 
all gas produced from Federal land, including gas that is consumed or 
lost by venting, flaring, or negligent releases through any equipment 
during upstream operations. Section 50263 further provides three 
exceptions to the general obligation to pay royalties on produced gas, 
namely: (1) gas that is vented or flared for not longer than 48 hours 
in an emergency situation that poses a danger to human health, safety, 
or the environment; (2) gas used or consumed within a lease, unit, or 
communitized area for the benefit of the lease, unit, or communitized 
area; and (3) gas that is unavoidably lost.
---------------------------------------------------------------------------

    \67\ 30 U.S.C. 226(b).
    \68\ 30 U.S.C. 1756.
---------------------------------------------------------------------------

    The BLM has for decades assessed royalties on upstream production 
and has exempted from royalties gas lost in emergency situations, 
``beneficial use'' gas, and ``unavoidably lost'' gas. IRA Section 50263 
is consistent with the BLM's prior agency practice regarding emergency 
situations and the unavoidable loss of gas, and it provides additional 
support for the approach set forth in this proposed rule. Importantly, 
IRA Section 50263 confirms that the concepts of ``avoidable'' and 
``unavoidable'' loss are appropriate for assessing royalties. Section 
50263 also confirms that the BLM's pecuniary interest in regulating 
losses extends to those from upstream equipment. But the IRA leaves 
certain questions open, such as what losses qualify as ``unavoidably 
lost'' and what qualifies as an ``emergency situation.'' Congress thus 
has left it to the BLM, as an exercise of the agency's expertise and 
judgment, to determine answers to the specific questions the IRA leaves 
open. As set forth later, this proposed rule addresses these issues in 
a manner that is consistent with the IRA's focus (and the MLA's and 
FOGRMA's pre-existing emphasis) on ensuring that Federal lessees pay 
fair and appropriate compensation to the Federal Government in exchange 
for the opportunity to conduct their industrial activities under 
Federal leases.

D. A New Approach

    The BLM has authority under the MLA to promulgate such rules and 
regulations as may be necessary ``for the prevention of undue waste'' 
\69\ and to ensure that lessees ``use all reasonable precautions to 
prevent waste of oil or gas.'' \70\ For many years, the BLM has 
implemented this authority through restrictions on the venting and 
flaring of gas from onshore Federal oil and gas leases. However, as 
illustrated by the judicial decisions noted previously, courts have 
disagreed (prior to enactment of the IRA) as to the full scope of the 
BLM's authority to regulate venting and flaring. Requirements that one 
court might consider necessary for the BLM to meet its statutory 
mandates might be seen as regulatory overreach by another court. In 
this proposed rulemaking, the BLM has chosen to focus on improving upon 
NTL-4A in a variety of ways without advancing elements of the 2016 
Waste Prevention

[[Page 73597]]

Rule that were the subject of certain judicial criticism.
---------------------------------------------------------------------------

    \69\ 30 U.S.C. 187.
    \70\ 30 U.S.C. 225.
---------------------------------------------------------------------------

    As explained in more detail later and in the section-by-section 
discussion, this proposed rule would make substantial improvements in 
addressing the waste of Federal and Indian gas while also addressing 
the criticisms of the 2016 Rule that were raised by the Wyoming court. 
First, the proposed requirements more clearly constitute reasonable 
waste prevention measures that should be expected of a prudent 
operator. The proposed requirements should impose fewer overall costs 
than those of the 2016 Rule and would ensure either actual conservation 
of gas that would otherwise be wasted or compensation to the public and 
Indian mineral owners through royalty payments when gas is wasted. 
(This contrasts with certain provisions in the 2016 Rule that would 
have reduced pollution--but not necessarily reduced waste--by allowing 
operators to comply with analogous EPA standards in place of the BLM 
requirements.) Second, in order to address the Wyoming court's concern 
with the BLM's limited authority regarding unit and CA operations on 
non-Federal/Indian lands, certain requirements in this proposed rule 
are narrower in scope than similar requirements in the 2016 Rule. 
Specifically, the proposed rule's requirements pertaining to safety, 
pneumatic equipment, storage tanks, and leak detection and repair would 
apply only to operations on a Federal or Indian lease. Third, the 
proposed requirements are consistent with the ``prudent operator'' 
standard as that term has been applied in the oil and gas 
jurisprudence. Fourth, the proposed rule was developed with an eye 
towards avoiding excessive compliance burdens on marginal wells. 
Finally, the BLM is expressly excluding the social cost of greenhouse 
gases from the considerations underpinning any of the proposed waste 
prevention requirements, thereby addressing the Wyoming court's concern 
that the 2016 Rule was inappropriately supported by ``climate change 
benefits.''
    The provisions of this proposed rule serve straightforward waste 
prevention objectives by promoting gas conservation. In order to avoid 
situations where oil-well development outpaces the capacity of the 
available gas capture infrastructure, the BLM is proposing to require 
operators to submit a waste minimization plan with oil-well APDs and is 
also proposing to establish a process for delaying action on an APD 
where undue waste of Federal gas is expected to result from approving 
the permit. The BLM recognizes that not all venting and flaring can be 
prevented. In the circumstances in which some venting or flaring cannot 
be prevented (e.g., initial production tests or emergencies), the BLM 
is proposing to set appropriate time or volume limits on royalty-free 
venting or flaring. The BLM is proposing to address the problem of 
intermittent flaring due to pipeline capacity constraints by setting a 
monthly volume limit on royalty-free flaring caused by inadequate 
capture infrastructure. Requiring royalty payments on venting and 
flaring that exceeds the appropriate volume limits would both 
discourage waste and ensure that Federal and Indian royalty revenues 
are not harmed by an operator's wasteful practices. The BLM estimates 
that the royalty-free flaring limits of the proposed rule would 
generate $32.9 million a year in additional royalties. See section 7.6 
of the RIA for more information.
    This proposed rule also contains provisions intended to reduce 
losses of natural gas from pneumatic equipment, oil storage tanks, and 
equipment leaks. Unlike the 2016 Waste Prevention Rule--which extended 
these requirements to State and private lands in certain situations 
\71\--the requirements now proposed by the BLM would apply only to 
operations on Federal or Indian lands, where the BLM has express 
authority and responsibility to regulate both for the prevention of 
waste and for the protection of the environment. These requirements 
would not apply to operations that occur on State or private tracts 
committed to a Federal unit or CA. The BLM estimates that the 
requirements of this proposed rule regarding pneumatic equipment, oil 
storage tanks, and LDAR would result in the conservation of up to 15.3 
Bcf of gas each year.
---------------------------------------------------------------------------

    \71\ Cf. Wyoming v. DOI, 493 F. Supp. 3d 1046, 1083-85 (D. Wyo. 
2020).
---------------------------------------------------------------------------

    The BLM acknowledges that the contents of this proposed rule may 
differ in some regards from the Revision Rule's unnecessarily narrow 
interpretation of the BLM's statutory authority and the similarly 
narrow interpretation reflected in the confession of error related to 
the 2016 Waste Prevention Rule.\72\ Consistent with the BLM's 
understanding of its authority prior to 2018, the BLM has reconsidered 
the relevant conclusions of the Revision Rule and its related 
confession of error and now rejects those conclusions for the following 
reasons. To begin, nothing in the MLA's plain text, which requires 
lessees to take ``all reasonable precautions to prevent waste'' and to 
abide by rules and regulations issued ``for the prevention of undue 
waste,'' suggests that the BLM's authority is limited to the 
promulgation of rules that effectively pay for themselves (as measured 
by balancing compliance costs against the value of the recovered gas). 
Consistent with this text, the BLM's longstanding policy governing 
venting and flaring has assessed the economic feasibility of gas 
conservation in the context of ``the total leasehold production, 
including oil and gas, as well as the economics of a field-wide plan.'' 
See supra, Part III.C.2. As the CDM made clear, the BLM's concern under 
the MLA for nearly four decades prior to the Revision Rule was 
``profitable operation of the lease, not just profitable disposition of 
the gas.''
---------------------------------------------------------------------------

    \72\ See 83 FR 49185-86.
---------------------------------------------------------------------------

    Despite suggestions to the contrary in the 2018 Revision Rule, the 
BLM's longstanding emphasis on overall ultimate resource recovery, not 
lessee profits vis-[agrave]-vis wasted gas, is entirely consistent with 
the ``prudent operator'' standard in oil and gas law. While the prudent 
operator standard rests on an expectation of ``mutually profitable 
development of the lease's mineral resources,'' \73\ it does not follow 
that lessees can maximize their profit by wasting recoverable 
hydrocarbon resources without regard for the lessor's lost royalty 
revenues or the lessor's interest in conserving the gas for future 
disposition. To the contrary, lessees have an obligation of reasonable 
diligence in the development of the leased resources, rooted in due 
regard for the interests of both the lessee and the lessor.\74\ And in 
the MLA, FOGRMA, and the IRA, Congress enshrined the United States' 
interest, as a mineral lessor, in avoiding waste and maximizing royalty 
revenues.\75\ The

[[Page 73598]]

BLM, in managing oil and gas resources on behalf of the United States, 
may value more production--considering both oil and gas production--
over a longer time period more highly than does an operator, who might 
be more focused on generating near-term profits. None of the 
authorities previously relied upon by the BLM to interpret the 
``prudent operator'' standard foreclose any Secretarial action that 
might marginally affect lessee profits.\76\
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    \73\ Wyoming v. DOI, 493 F. Supp. 3d 1046, 1072 (D. Wyo. 2020).
    \74\ See id.; see also Sinclair Oil & Gas Co. v. Bishop, 441 
P.2d 436, 447 (Okla. 1967) (``Necessarily, we determine the lessee 
was acting prudently when he ascertained that it was illegal and 
improper to flare gas in the quantities shown by the evidence, in 
order to produce the unallocated allowable of oil.''); Tr. Co. of 
Chicago v. Samedan Oil Corp., 192 F.2d 282, 284 (10th Cir. 1951) 
(``A first consideration is the precept that a prudent operator may 
not act only for his self interest. He must not forget that the 
primary consideration to the lessor for the lease is royalty from 
the production of the lease free of cost of development and 
operation.'').
    \75\ See 30 U.S.C. 187, 225, 226(m), 1756; see also California 
Co. v. Udall, 296 F.2d 384, 388 (DC Cir. 1961) (``[The Secretary] 
has a responsibility to insure that these resources are not 
physically wasted and that their extraction accords with prudent 
principles of conservation. To protect the public's royalty interest 
he may determine that minerals are being sold at less than 
reasonable value. Under existing regulations he can restrict a 
lessee's production to an amount commensurate with market demand, 
and thus protect the public's royalty interest by preventing 
depression of the market.'').
    \76\ Cf. California v. Bernhardt, 472 F. Supp. 3d 573, 596 (N.D. 
Cal. 2020) (``The statutory language demonstrates on its face that 
any consideration of waste management limited to the economics of 
individual well-operators would ignore express statutory mandates 
concerning BLM's public welfare obligations.'').
---------------------------------------------------------------------------

    In contrast to NTL-4A, this proposed rule would not allow operators 
to request that flared oil-well gas be deemed royalty-free based on 
case-by-case economic assessments. There are a number of reasons for 
this change. In the first instance, there is no statutory requirement 
that the public forgo royalties on wasted gas based on an operator's 
individual economic circumstances. Although it was the BLM's practice 
to engage in case-by-case economic assessments under NTL-4A, that 
approach is no longer appropriate, as the practical realities of 
oilfield development have changed dramatically since 1980. As the U.S. 
Department of Energy explained in a recent report, ``flaring has become 
more of an issue with the rapid development of unconventional tight oil 
and gas resources over the past two decades'' that has ``brought online 
hydrocarbon resources that vary in their characteristics and 
proportions of natural gas, natural gas liquids and crude oil.'' \77\ 
As explained earlier, the BLM has witnessed a massive increase in the 
amount of venting and flaring from the 1990's to the 2010's. The 
average amount of annual venting and flaring from Federal and Indian 
leases between 1990 and 2000 was 11 Bcf but quadrupled to an average of 
44.2 Bcf per year, between 2010 and 2020; and, as noted earlier, the 
upward trend in flaring suggests it will continue to be a problem in 
the coming years. The related increase in the number of royalty-free 
flaring applications--from 50 in 2005 to 4,181 in 2015--has created a 
significant administrative burden for the BLM as well as an estimated 
information collection burden of approximately 33,488 total annual 
burden hours potentially incurred by operators, and significant 
uncertainty for operators as hundreds of applications wait to be 
processed. Finally, it is important to note that the bulk of the recent 
royalty-free flaring applications have concerned flaring from wells 
that are actually connected to pipeline infrastructure. Although the 
capacity of that infrastructure may be overwhelmed from time to time, 
these are not the situations that the NTL-4A economic standard was 
designed to accommodate. The purpose of the economic inquiry under NTL-
4A was to determine whether the volumes of associated gas production 
would make the installation of gas-capture infrastructure economically 
viable. Where the gas-capture infrastructure has already been built 
out, its economic viability is not in question.
---------------------------------------------------------------------------

    \77\ U.S. Department of Energy, Office of Fossil Energy, Office 
of Oil and Natural Gas, ``Natural Gas Flaring and Venting: State and 
Federal Regulatory Overview, Trends, and Impacts'' (June 2019).
---------------------------------------------------------------------------

    One of the primary concerns underlying the BLM's promulgation of 
the Revision Rule in 2018 was the compliance burden on ``marginal 
wells,'' i.e., wells that produce approximately 10 barrels of oil or 60 
Mcf of natural gas per day or less.\78\ The court that vacated the 
Revision Rule rejected that concern as unfounded.\79\ However, the 
court that vacated the Waste Prevention Rule faulted the BLM for 
failing to adequately assess the impact of that rule on marginal 
wells.\80\ The BLM does not wish to impose requirements that 
inadvertently cause recoverable oil or gas resources to be stranded due 
to premature lease abandonment. Simultaneously, even the operators of 
marginal wells are capable of taking reasonable precautions to prevent 
waste, as they must under the MLA. (For example, there is no real risk 
of premature abandonment by requiring the operator of a marginal gas 
well to minimize the loss of gas during liquids unloading operations, 
as required in this proposed rule.)
---------------------------------------------------------------------------

    \78\ 83 FR 49187.
    \79\ California v. Bernhardt, 472 F. Supp. 3d 573, 606 (N.D. 
Cal. 2020).
    \80\ Wyoming v. DOI, 493 F. Supp. 3d 1046, 1075-78 (D. Wyo. 
2020).
---------------------------------------------------------------------------

    The BLM developed this proposed rule to avoid excessive compliance 
burdens on marginal wells when balanced against the need to reduce 
waste. In the Revision Rule, the BLM noted that the provisions of the 
2016 Waste Prevention Rule that placed a particular burden on marginal 
wells were those pertaining to pneumatic controllers, pneumatic 
diaphragm pumps, and LDAR. In this proposed rule, the requirements for 
pneumatic equipment would apply only where a lease, unit PA, or CA is 
producing a quantity of oil or gas (120 Mcf of gas or 20 barrels of oil 
per month) that would offset the compliance costs within a reasonable 
payout period. And, as explained in more detail in the following 
section-by-section discussion, the LDAR provisions of this proposed 
rule are more flexible than those in the 2016 Waste Prevention Rule, 
reducing the potential burden on marginal wells. The BLM requests 
comment on the proposed approach to marginal wells, the point at which 
additional regulatory burdens might result in stranded resources from 
marginal wells, and whether the proposed rule is sufficient to prevent 
avoidable waste from marginal wells.
    The BLM acknowledges that, in the Revision Rule, the BLM asserted 
that additional restrictions on flaring were unnecessary because the 
States with the most significant BLM-managed oil and gas production 
maintain regulatory restrictions on flaring from oil wells, and that 
these State regulations ``provide[d] a reasonable assurance . . . that 
the waste of associated gas will be controlled.'' \81\ This assertion 
was in direct conflict with the BLM's prior findings during the 
promulgation of the 2016 Waste Prevention Rule, and a U.S. District 
Court found that the BLM's decision to rely on State flaring 
regulations was unjustified based on the record evidence.\82\
---------------------------------------------------------------------------

    \81\ 83 FR 49202.
    \82\ California v. Bernhardt, 472 F. Supp. 3d 573, 601-04 (N.D. 
Cal. 2020).
---------------------------------------------------------------------------

    For this rulemaking, the BLM analyzed the State regulations 
governing flaring, venting, and leaks in the 10 States responsible for 
99 percent of Federal oil and gas production: New Mexico, Wyoming, 
Colorado, North Dakota, Utah, California, Montana, Texas, Alaska, and 
Oklahoma. Summaries of these regulations were collected in a table that 
is available in the docket for this rulemaking at www.regulations.gov. 
While there have been notable advancements in some States since the 
promulgation of the 2016 Waste Prevention Rule--for example, new 
comprehensive flaring regulations have since been adopted in New Mexico 
and Colorado, and new requirements for storage tanks, pneumatic 
equipment, and LDAR have been adopted in Colorado and Utah--State 
regulations vary widely in their scope and stringency.\83\ And,

[[Page 73599]]

importantly, many of the State flaring regulations reserve substantial 
discretion to the States to authorize additional flaring.\84\ That 
discretion creates significant uncertainty about the extent to which 
the BLM could rely on those regulations to protect the interests of the 
United States and Indian mineral owners in minimizing waste and 
maximizing royalty revenues.
---------------------------------------------------------------------------

    \83\ Examples of variations among State regulations include the 
following. Unlike other States, (1) the States of New Mexico, North 
Dakota, Montana, Texas, Alaska, and Oklahoma do not have regulations 
to control losses of gas from pneumatic equipment; (2) Texas' 
requirements to inspect for and repair leaks are focused on storage 
tanks; (3) Alaska does not maintain LDAR requirements; and (4) 
Wyoming's requirements for tanks, pneumatic equipment, and LDAR are 
limited to the Upper Green River Basin ozone nonattainment area.
    \84\ These States are: Wyoming, Utah, Montana, Texas, and 
Oklahoma.
---------------------------------------------------------------------------

    For example, the BLM's review of State regulations revealed that 
North Dakota's flaring rules were modified in recent years in a manner 
allowing for more flaring within the State's gas-capture-percentage 
requirements. Operators in the Bakken, Bakken/Three Forks, and Three 
Forks pools are currently subject to a 91 percent gas capture 
requirement under North Dakota Industrial Commission (NDIC) Order 
24655. However, the NDIC's current Policy/Guidance \85\ for Order 24655 
identifies a number of circumstances under which flared volumes will 
not be counted against the operator's capture percentage. These 
circumstances (referred to as ``variances'' by the NDIC) include 
flaring due to ``force majeure'' events, flaring due to new wells being 
connected to the same gas infrastructure system, and right-of-way 
delays. Thus, it appears that many flaring events that are rooted in 
inadequate gas-capture infrastructure will not count against an 
operator's gas-capture percentage under NDIC Order 24655. The BLM notes 
that in 2019--when NDIC Order 24655 ostensibly imposed an 88 percent 
capture requirement on operators--19 percent of total natural gas 
production in North Dakota was flared.\86\ North Dakota is a major 
source of Federal oil and gas production, producing approximately 89 
Bcf of Federal gas and 45 million barrels of Federal oil in 2019.
---------------------------------------------------------------------------

    \85\ NDIC Order 24665 Policy/Guidance Version 09-22-2020.
    \86\ EIA, ``Natural gas venting and flaring in North Dakota and 
Texas increased in 2019'' (Dec. 8, 2020), available at https://www.eia.gov/todayinenergy/detail.php?id=46176.
---------------------------------------------------------------------------

    In addition to State regulation, the BLM recognizes that the EPA 
maintains regulations governing VOCs and/or methane emissions from 
certain aspects of oil and gas production operations at 40 CFR part 60, 
subparts OOOO and OOOOa, and that these regulations can have the co-
benefit of reducing the waste of gas during production activities. 
Specifically, EPA's regulations require: (1) operators to capture or 
flare gas that reaches the surface during well completion operations 
with hydraulic fracturing; (2) operators of storage tanks (at 
facilities constructed, modified, or reconstructed after August 23, 
2011) with potential VOC emissions of 6 tons or more per year to 
control those emissions (including through combustion); (3) pneumatic 
controllers (at facilities constructed, modified or reconstructed after 
October 15, 2013) to be low-bleed (i.e., bleed rate less than 6 
standard cubic feet/hour) or no-bleed at onshore natural gas processing 
plants; (4) emissions from pneumatic pumps (at facilities that were 
constructed, modified, or reconstructed after September 18, 2015) to be 
routed to a control device or process; and (5) operators of well sites 
constructed, modified, or reconstructed after September 18, 2015, to 
develop and implement a leak-monitoring plan involving instrument-based 
leak detection and semi-annual inspections.
    Although operator compliance with these EPA requirements can reduce 
the waste of natural gas from Federal and Indian leases, they do not 
supplant the need for BLM standards for the following reasons. First, 
the EPA's requirements for storage tanks, pneumatic equipment, and LDAR 
apply only to emissions sources that were constructed, modified, or 
reconstructed after August 23, 2011, or later, depending on the 
requirement. Thus, relying on EPA's requirements would ignore wasteful 
practices at many \87\ well sites producing Federal and Indian gas.\88\ 
Second, EPA's requirements are not a substitute for BLM standards 
because EPA's requirements are focused on controlling methane and VOC 
emissions, rather than conserving natural gas, and compliance with the 
EPA's standards will not always reduce the waste of natural gas. For 
example, an operator can comply with EPA's current requirements for 
storage tanks and pneumatic pumps by routing the emissions to 
combustion (i.e., flaring) and therefore eliminating venting from the 
tanks and pumps altogether--a process that results in the same loss of 
gas as venting the gas from the tank or pump.
---------------------------------------------------------------------------

    \87\ The BLM estimates that approximately 39% of BLM-managed 
well sites are not covered by the EPA requirements.
    \88\ The BLM recognizes that the EPA has proposed to revise new 
source performance standards for new, modified, and reconstructed 
oil and gas sources and has proposed emissions guidelines for 
existing oil and gas sources. See 86 FR 63110 (Nov 15, 2021). The 
BLM cannot presuppose the outcome of that rulemaking process. Cf. 
California v. Bernhardt, 472 F. Supp. 3d 573, 625 (N.D. Cal. 2020) 
(``BLM was not required to prejudge the outcome of that proposed 
rulemaking in its EA.''). However, the BLM will maintain an 
awareness of developments in EPA's regulations and will make 
adjustments to the final rule as appropriate. The BLM further notes 
that, under the Clean Air Act, once the EPA finalizes the new 
emission guidelines, States with one or more existing sources must 
develop and submit State plans to the EPA for approval. Under this 
statutory structure, State plans that would implement new emissions 
guidelines for existing sources would likely not go into effect 
until some period of time after such guidelines are finalized.
---------------------------------------------------------------------------

    Based on its review and analysis of State and EPA regulations, the 
BLM finds that it is necessary to establish a uniform standard 
governing the wasteful losses of Federal and Indian gas through 
venting, flaring, and leaks.\89\ The BLM cannot rely on a patchwork of 
State and EPA regulations to ensure that operators of Federal oil and 
gas leases consistently meet the waste prevention mandates of the MLA, 
that the American public receives a fair return for the development of 
the Federal mineral estate, and that the Department's trust 
responsibility to Indian mineral owners is satisfied. The BLM 
acknowledges that this is a change in position from what the BLM stated 
in the Revision Rule regarding analogous State and EPA regulations.
---------------------------------------------------------------------------

    \89\ The BLM acknowledges that the court in Wyoming questioned 
what it described as the BLM's authority to ``hijack'' cooperative 
federalism under the Clean Air Act ``under the guise of waste 
management.'' Wyoming, 493 F. Supp. 3d 1046, 1066 (D. Wyo. 2020). 
However, as noted elsewhere, this proposed rule is justified not by 
any ancillary effects on air quality or climate change, but solely 
on the basis of waste prevention--an arena where the BLM has 
independent statutory authority to regulate. See Wyoming, 493 F. 
Supp. 3d at 1063 (``The terms of the MLA and FOGRMA make clear that 
Congress intended the Secretary, through the BLM, to exercise 
rulemaking authority to prevent the waste of Federal and Indian 
mineral resources and to ensure the proper payment of royalties to 
Federal, State, and Tribal governments.''). On its own terms, 
therefore, the Wyoming court's reference to cooperative federalism 
under the Clean Air Act is therefore inapplicable to this proposal.
---------------------------------------------------------------------------

    The RIA \90\ for this rule calculates that this rule would cost 
operators $122 million a year, using a 7 percent discount rate, for the 
next 10 years ($110 million a year using a 3 percent discount rate) 
while generating benefits to operators of approximately $54.2 million a 
year, using a 7 percent discount rate, in the form of 15.3 Bcf of 
additional captured gas ($54.8 million using a 3 percent discount 
rate). The RIA estimates that this proposed rule would generate $39 
million a year in additional royalties. The BLM acknowledges that the 
costs of this rule

[[Page 73600]]

to operators will outweigh the benefits in terms of the monetized 
market value of the gas conserved. The BLM notes that the statutory 
provisions authorizing the BLM to regulate oil and gas operations for 
the prevention of waste do not impose a net-benefit requirement.
---------------------------------------------------------------------------

    \90\ The cost-benefit analysis contained in the RIA was 
generated to comply with Executive Order 12866 and is not required 
by the statutes authorizing the BLM to regulate for the prevention 
of waste from oil and gas leases.
---------------------------------------------------------------------------

    The reduced methane emissions associated with the proposed rule 
would provide a monetized benefit to society (in the form of avoided 
climate damages) of $427 million a year over the same time frame, 
leading to an overall net monetized benefit from the rule of $359 
million a year, as well as additional unquantified benefits (see 
section 7.2 of the RIA regarding unquantified benefits). The basis for 
the BLM's estimates of social benefits from reduced methane emissions--
namely, the social cost of greenhouse gases (SC-GHG)--is explained in 
detail in Section 7 of the RIA. To be clear, although the BLM is 
reporting its estimates of the social benefits of reduced methane 
emissions here and in the RIA, the purpose of that reporting is solely 
to provide the most complete and transparent accounting of the costs 
and benefits of the proposed rule for the public's awareness and 
consideration. The requirements of this proposed rule reflect 
reasonable measures to avoid waste that could be expected of a prudent 
operator, irrespective of any impacts with respect to climate change.

IV. Section-by-Section Discussion of Proposed Rule

A. 43 CFR Part 3160--Onshore Oil and Gas Operations

Section 3162.3-1 Drilling Applications and Plans
    Existing Sec.  3162.3-1 contains the BLM's longstanding requirement 
that operators must submit an APD prior to conducting any drilling 
operations on a Federal or Indian oil and gas lease. No drilling 
operations may be commenced prior to the BLM's approval of the APD. 
This proposed rule would add two new paragraphs to Sec.  3162.3-1 that 
are intended to help operators and the BLM avoid situations where 
substantial volumes of natural gas are flared due to inadequate gas 
capture infrastructure.
    Proposed Sec.  3162.3-1(j) would require an APD for an oil well to 
be accompanied by a plan to minimize the waste of natural gas from that 
well. This ``waste minimization plan'' would demonstrate how the 
operator plans to capture associated gas upon the start of oil 
production, or as soon thereafter as reasonably possible, and would 
also explain why any delay in capture of the associated gas would be 
necessary. The waste minimization plan would contain certain 
information that would provide the BLM with a more complete picture of 
the consequences of approving the APD in terms of wasted natural gas. 
Specifically, the waste minimization plan would be required to include 
the following information: the anticipated completion date of the well; 
a description of the anticipated production of both oil and associated 
gas; a certification that the operator has informed at least one 
midstream processing company of the operator's production plans; and 
information regarding the gas pipeline to which the operator plans to 
connect. If an operator cannot identify a gas pipeline with sufficient 
capacity to accommodate the anticipated associated gas production, the 
waste minimization plan would be required to also include: a gas-
pipeline-system map showing the existing pipelines within 20 miles of 
the well and the location of the closest gas processing plant; 
information about the operator's flaring from other wells in the 
vicinity; and a detailed evaluation of opportunities for alternative 
on-site capture approaches, such as compression of the gas, removal of 
NGLs, or electricity generation. Finally, the operator would also be 
required to include any other information demonstrating the operator's 
plans to avoid the waste of gas production from any source, including 
pneumatic equipment, storage tanks, and leaks.
    The contents of the operator's waste minimization plan would 
provide the BLM with the information necessary to understand how much 
associated gas would be lost to flaring if the oil-well APD were 
approved, and whether such loss of gas would be reasonable under the 
circumstances. If the available information demonstrates that approving 
the APD could result in the unreasonable and undue waste of Federal or 
Indian gas, proposed Sec.  3162.3-1(k) would expressly authorize the 
BLM to take one of the following actions on the APD. First, the BLM 
could approve the APD subject to conditions for gas capture and/or 
royalty payments on vented and flared gas. Second, the BLM could defer 
action on the APD in the interest of preventing waste. If the BLM were 
to defer action on the APD under proposed Sec.  3162.3-1(k)(2), the BLM 
would notify the applicant and specify steps that the applicant could 
take for the APD to be issued. If the potential for unreasonable and 
undue waste is not addressed within 2 years of the applicant's receipt 
of the notice, the BLM could deny the APD. The BLM notes that this 
proposed process is based on the requirements for APD processing in the 
MLA (30 U.S.C. 226(p)) and is consistent with the APD processing 
provisions of Onshore Order Number 1. The BLM seeks comment on its 
definition of ``unreasonable and undue waste'' (see discussion of Sec.  
3179.3 later) and whether or to what extent the final rule (or 
implementing guidance) should spell out in additional detail how the 
BLM expects to make decisions to defer or deny an APD due to concerns 
regarding excessive waste of associated gas.
    The BLM believes that the proposed amendments to Sec.  3162.3-1 
would help to reduce the waste of associated gas from oil wells for the 
following reasons. First, the requirement to submit a waste 
minimization plan would force operators to think critically about 
opportunities for gas capture before the well is drilled. Second, the 
information provided in the proposed waste minimization plan would help 
the BLM make better decisions about which APDs should be approved and 
under what conditions. Finally, the express authorization for the BLM 
to defer--and potentially deny--an APD would incentivize operators to 
tailor their development plans to the available gas-capture 
infrastructure and avoid the waste of public, Tribal, and allottee-
owned gas.
    The BLM notes that some States have already incorporated concepts 
similar to the proposed waste minimization plan requirement into their 
regulations governing flaring. In New Mexico, operators must submit a 
``natural gas management plan'' with any APD that describes the actions 
the operator will take to ensure that it will meet New Mexico's gas-
capture requirements. In Wyoming, an operator's application for 
authorization to flare must include, among other information, a gas-
capture plan identifying gas gathering and transportation facilities in 
the area, the name of gas gatherers providing ``gas take-away 
capacity,'' and information on the gas gathering line to which the 
operator proposes to connect. In Colorado, an operator must either 
commit to connecting to a gathering system by the commencement of 
production or submit a gas-capture plan containing information about 
the closest or contracted natural-gas gathering system and describing 
the operator's plan for connecting to the gas-gathering system or 
otherwise putting the gas to beneficial use. In North Dakota, an 
operator that has failed to meet its gas-capture requirements in any of 
the previous 3 months must submit a gas-capture plan with any 
application for a permit to drill. These existing, State-

[[Page 73601]]

level gas-capture planning requirements demonstrate that operators have 
the capacity to comply with the BLM's proposed waste minimization plan 
requirement and that the proposed requirement is consistent with the 
regulatory practices of other traditional oil and gas resource 
conservation agencies. To be clear, these State requirements do not 
obviate the need for a waste minimization plan requirement in the BLM's 
regulations. In the first instance, many States (including Utah, 
Montana, Texas, and Oklahoma) in which the BLM manages oil and gas 
drilling and production do not have analogous planning requirements. 
Second, the gas capture plan requirements in Wyoming and North Dakota 
are only triggered after flaring is demonstrated to be a problem at the 
well, and therefore do not address flaring at the well permitting 
stage. Finally, none of the State gas capture plan requirements require 
the operator to submit the plans to the BLM and, therefore, do not 
provide the BLM, in its capacity as regulator of the Federal mineral 
estate, with an opportunity to render its own determinations regarding 
potential waste when processing an APD.
    The BLM acknowledges that the BLM's proposal to require waste 
minimization plans with oil-well APDs constitutes a change from the 
position the BLM articulated in the 2018 Revision Rule. See 83 FR 
49184, 49191-92 (Sept. 28, 2018). For the reasons discussed earlier, 
the BLM has concluded that many assertions made in the Revision Rule 
are not supported by contemporary data, and the proposed waste 
minimization plan requirement; would facilitate less wasteful 
development; would not be unnecessarily duplicative of existing State 
requirements; and would not impose an undue administrative burden on 
operators.
    The proposed additions to Sec.  3162.3-1 would reduce the waste of 
Federal and Indian gas by allowing the BLM to make better-informed 
decisions when processing oil-well APDs. In effect, the BLM would be 
able to more swiftly approve wells that pose the least risk of waste, 
while deferring approval of APDs for wells that lack access to the 
necessary gas-capture infrastructure and that would therefore result in 
waste. The BLM is not alone in recognizing the potential benefits of 
the proposed waste minimization plan requirement. In a recent report, 
the GAO analyzed State-level gas capture plan requirements and 
recommended that the BLM ``consider whether to require gas capture 
plans that are similar to what States require, including gas capture 
percentage targets, from operators on federal lands.'' \91\ (As 
discussed later in the section-by-section discussion of proposed Sec.  
3179.8, the BLM has decided not to use gas-capture percentage targets 
in this proposed rule.)
---------------------------------------------------------------------------

    \91\ GAO, OIL AND GAS: Federal Actions Needed to Address Methane 
Emissions from Oil and Gas Development (April 2022) (GAO-22-104759).
---------------------------------------------------------------------------

    Although the proposal discussed here pertains specifically to the 
permitting stage of oil and gas development, information regarding the 
capacity of available gas-capture infrastructure helps the BLM make 
better decisions at the leasing stage as well. The BLM currently has 
the discretion to offer, or not offer, parcels for lease based on 
waste/conservation considerations,\92\ and the proposed waste 
minimization plans could provide an efficient (though not exclusive) 
means of collecting additional information regarding the location of 
adequate gas capture infrastructure that would be relevant for lease 
sale decisions. The BLM requests comment on how it can improve its 
processes pertaining to the leasing stage of development so as to 
minimize the waste of natural gas during later stages of development.
---------------------------------------------------------------------------

    \92\ See, e.g., Western Energy Alliance v. Salazar, 709 F.3d 
1040, 1044 (10th Cir. 2013) (MLA ``vest[s] the Secretary with 
considerable discretion to determine which lands will be leased'').
---------------------------------------------------------------------------

B. 43 CFR Part 3170--Onshore Oil and Gas Production

Subpart 3179--Waste Prevention and Resource Conservation
Section 3179.1 Purpose
    Proposed Sec.  3179.1 would state that the purpose of subpart 3179 
is to implement and carry out the purposes of statutes relating to 
prevention of waste from Federal and Indian oil and gas leases, 
conservation of surface resources, and management of the public lands 
for multiple use and sustained yield, including Section 50263 of the 
Inflation Reduction Act. These statutes are discussed in detail in 
Section III.B of this preamble.
    Section 3179.1 would also clarify that subpart 3179 would supersede 
those portions of NTL-4A pertaining to, among other things, flaring and 
venting of produced gas, unavoidably and avoidably lost gas, and waste 
prevention. Subpart 3178 has already superseded the portions of NTL-4A 
pertaining to oil or gas used for beneficial purposes (see 43 CFR 
3178.1). Thus, if proposed subpart 3179 is ultimately adopted, NTL-4A 
will have been superseded in its entirety.
Section 3179.2 Scope
    Section 3179.2 identifies the operations to which the various 
provisions of proposed subpart 3179 would apply. Paragraph (a) states 
that, in general, the provisions of proposed subpart 3179 would apply 
to: (1) all onshore Federal and Indian (other than Osage Tribe) oil and 
gas leases, units, and communitized areas; (2) Indian Mineral 
Development Act oil and gas agreements; (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; and (4) wells, equipment, and operations on State or private 
tracts that are committed to a federally approved unit or CA.
    Paragraph (b) states that certain provisions in proposed subpart 
3179 would apply only to operations and production equipment located on 
a Federal or Indian oil and gas lease, and would not apply to 
operations on State or private tracts, even where such tracts have been 
committed to a federally approved unit or CA (sometimes referred to as 
``mixed-ownership'' units or CAs). The provisions of subpart 3179 
subject to this more limited scope are those provisions pertaining to 
safety (proposed Sec.  3179.6), pneumatic equipment (proposed Sec.  
3179.201), storage tanks (proposed Sec.  3179.203), and LDAR (proposed 
Sec. Sec.  3179.301 through 303).
    As mentioned in Section III.D, proposed Sec.  3179.2(b) responds to 
a question regarding the BLM's authority raised by the court that 
vacated the 2016 Waste Prevention Rule. Specifically, that court stated 
that the MLA ``does not provide broad authorization for the BLM to 
impose comprehensive Federal regulations similar to those applicable to 
operations on Federal lands on State or privately owned tracts or 
interests.'' \93\ Rather, in that court's view, the BLM's authority to 
regulate unit or CA operations on State and private tracts under the 
MLA and FOGRMA is limited to rates of development and matters directly 
relevant to the BLM's proprietary interest in the Federal minerals.\94\ 
The BLM maintains that the requirements proposed herein related to 
pneumatic equipment, storage tanks, and LDAR serve a legitimate waste-
prevention purpose by requiring interventions that would lead to the 
conservation of natural gas and, therefore, to additional royalties 
allocable to the United States

[[Page 73602]]

or Indian mineral owners in a mixed-ownership unit or CA. In this 
rulemaking, however, the BLM has chosen to limit the scope of these 
provisions to operations on Federal or Indian leases. Other provisions 
that have a more direct impact on royalty revenues--such as the limits 
on royalty-free flaring in proposed Sec. Sec.  3179.4, 3179.8, 
3179.102, 3179.103, 3179.104, and 3179.105, and the measurement and 
reporting requirements of proposed Sec.  3179.9--would apply to all 
operations producing Federal or Indian gas, whether on lease or as part 
of a mixed-ownership unit or CA. The BLM requests comment on its 
proposed approach to balancing its resource conservation objectives.
---------------------------------------------------------------------------

    \93\ Wyoming v. DOI, 493 F. Supp. 3d 1046, 1082 (D. Wyo. 2020).
    \94\ Id. at 1082-83.
---------------------------------------------------------------------------

Section 3179.3 Definitions and Acronyms
    This proposed section contains definitions for 13 terms that are 
used in subpart 3179: ``automatic ignition system;'' ``capture;'' 
``compressor station;'' ``gas-to-oil ratio;'' ``gas well;'' ``high-
pressure flare;'' ``leak;'' ``liquids unloading;'' ``lost oil or lost 
gas;'' ``low-pressure flare;'' ``pneumatic controller;'' ``storage 
vessel;'' and ``unreasonable and undue waste of gas.'' Some defined 
terms would have a particular meaning in this proposed rule. Other 
defined terms may be familiar to many readers, but we include their 
definitions in the proposed regulatory text to enhance the clarity of 
the rule.
    The proposed rule would define ``unreasonable and undue waste of 
gas'' to mean a frequent or ongoing loss of gas that could be avoided 
without causing an ultimately greater loss of equivalent total energy 
than would occur if the loss of gas were to continue unabated. The 
intent of this definition is to clarify that the goal of waste 
prevention is maximizing the overall recovery of energy resources. To 
illustrate, the long-term flaring of associated gas from an oil well 
would constitute ``unreasonable and undue waste of gas'' if the 
operator could avoid or reduce the flaring by curtailing production in 
the near-term and producing an equal or greater amount of total energy 
resources (considering both oil and gas production) from the well in 
the long term. Thus, this proposed definition incorporates the 
fundamental concept of waste contained in NTL-4A. The phrase ``frequent 
or ongoing loss'' is intended to exclude one-off events such as an 
unanticipated equipment failure or a specific operation, like liquids 
unloading, that involves some venting or flaring of a limited duration. 
The phrase ``total equivalent energy'' compares the total expected 
energy production from the well with capture required to the total 
expected energy production from the well without capture, considering 
both production streams (oil and gas). Expected gas production is 
converted to barrels of oil equivalent to allow for an ``apples to 
apples'' comparison. In brief, if the gas that would otherwise be lost 
could be conserved without stranding more energy resources in the 
ground (i.e., without creating more waste overall), the operator should 
be expected to take the necessary measures to conserve that gas. The 
BLM seeks comment on this definition of ``unreasonable and undue waste 
of gas.''
    The phrase ``unreasonable and undue waste of gas'' appears in 
proposed Sec. Sec.  3162.3-1(k), 3179.8, and 3179.301, which pertain to 
APD processing, oil-well gas flaring, and LDAR, respectively. As 
explained elsewhere in this section-by-section analysis, proposed 
Sec. Sec.  3162.3-1(k), 3179.8, and 3179.301 each authorize the BLM to 
take some discretionary action based on its view of the ``unreasonable 
and undue waste of gas.'' This definition would establish parameters on 
the exercise of that discretion.
    The BLM seeks comment on the following alternative definition: 
``Unreasonable and undue waste of gas'' means a frequent or ongoing 
loss of substantial quantities of gas that could reasonably be avoided 
if the operator were to take prudent steps to plan for and manage 
anticipated production of both oil and associated gas from its 
operation, including, where appropriate, coordination with other nearby 
operations.
    The BLM also seeks comment on the inter-relation and interaction of 
the ``unreasonable and undue waste'' concept with the ``avoidable/
unavoidable loss'' concept detailed later. The BLM views ``avoidable/
unavoidable loss'' primarily as a means of determining when royalties 
must be paid on lost gas, while the concept of ``unreasonable and undue 
waste'' would inform BLM decision-making with respect to other, more 
complicated waste prevention measures, such as delaying or denying a 
permit to drill or ordering a well to be shut-in due to excessive 
flaring. The BLM requests comment on whether the BLM should be 
considering other ways to view the inter-relation and interaction of 
these two concepts.
Section 3179.4 Determining When the Loss of Oil or Gas Is Avoidable or 
Unavoidable
    This proposed section would specify when lost oil or gas would be 
classified as ``unavoidably lost'' (i.e., when it is royalty free) and 
when it would be classified as ``avoidably lost'' (i.e., when it is 
royalty bearing). NTL-4A contains similar provisions addressing when 
oil or gas is ``avoidably lost'' or ``unavoidably lost.'' However, 
these NTL-4A provisions have been subject to interpretation and have 
not always been applied consistently. In order to address this 
deficiency in NTL-4A, this proposed rule would deem losses from 
specified operations and sources to be ``unavoidably lost'' when the 
operator has not been negligent, has not violated laws, regulations, 
lease terms or orders, and has taken prudent and reasonable steps to 
avoid waste. Any oil or gas that is not categorized as unavoidably lost 
would be considered ``avoidably lost,'' and therefore royalty-bearing. 
The listed operations and sources that may constitute an unavoidable 
loss under this proposed rule include: well drilling; well completions 
and related operations; initial production tests; subsequent well 
tests; emergencies; downhole well maintenance and liquids unloading; 
facility and pipeline maintenance; and flaring due to pipeline capacity 
constraints, midstream processing failures, or other similar events. 
Notably, the proposed rule would apply reasonable time and/or volume 
limitations on royalty-free flaring attributable to many of these 
operations and sources. See the discussion of proposed Sec. Sec.  
3179.8, 3179.102, 3179.103., 3179.104, and 3179.105 later in this 
preamble. The BLM requests comment on whether the definition of 
``unavoidably lost'' can be more narrowly defined than as proposed.
Section 3179.5 When Lost Production Is Subject to Royalty
    This section would state that royalty is due on all ``avoidably 
lost'' gas, and that no royalty is due on ``unavoidably lost'' gas.
Section 3179.6 Safety
    Proposed Sec.  3179.6 contains provisions intended to ensure safety 
at the well site. First, proposed Sec.  3179.6(a) would require that 
gas that cannot be captured must be flared (rather than vented), except 
under certain specified circumstances. It is generally safer to combust 
gas rather than to allow it to vent into the surrounding air due to the 
gas' explosiveness and the risks to workers from hypoxia and exposure 
to various associated pollutants.\95\ The

[[Page 73603]]

preference for flaring over venting is well-established in oilfield 
operations. Indeed, the USGS implementing guidance for NTL-4A stated 
that, ``[b]ecause of safety requirements, gas which cannot be 
beneficially used or sold must normally be flared, not vented.'' CDM, 
644.5.3G (June 1980). Operators would be allowed to vent gas when 
flaring is technically infeasible, under emergency conditions, and when 
gas is vented through the normal operation of pneumatic equipment, 
among other circumstances.
---------------------------------------------------------------------------

    \95\ NIOSH-OSHA Hazard Alert, ``Health and Safety Risks for 
Workers Involved in Manual Tank Gauging and Sampling at Oil and Gas 
Extraction Sites,'' February 2016, available at https://www.osha.gov/sites/default/files/publications/OSHA3843.pdf.
---------------------------------------------------------------------------

    Proposed Sec.  3179.6(b) would require flares or combustion devices 
be equipped with automatic ignition systems. There is no similar 
requirement in NTL-4A. Under proposed Sec.  3179.6(b), the BLM would be 
authorized to issue an immediate assessment of $1,000 upon discovering 
a flare that is not lit.
    Finally, proposed Sec.  3179.6(c) would require that flares be 
placed a sufficient distance from the tank battery containment or other 
significant structures or objects so as not to create a safety hazard. 
NTL-4A does not contain similar flare location requirements.
Section 3179.7 Gas-Well Gas
    This section states that gas-well gas cannot be flared or vented 
unless it is unavoidably lost under proposed Sec.  3179.4(b). 
Currently, gas-well gas is prohibited from being vented or flared under 
NTL-4A unless it qualifies as ``unavoidably lost'' or is specially 
authorized by the BLM. Unlike oil wells, the primary purpose of a gas 
well is the production and sale of gas. Therefore, consistent with 
longstanding BLM policy, gas-well gas should not be vented or flared 
except in narrow circumstances.
Section 3179.8 Oil-Well Gas
    Proposed Sec.  3179.8 would establish a new policy governing the 
flaring of associated gas from oil wells. Most of the flaring from BLM-
managed oil and gas leases occurs at oil wells that are connected to a 
gas pipeline with insufficient takeaway capacity for the well(s) 
connected to the pipeline. When the gas pipeline associated with an oil 
well becomes overwhelmed, the well is ``kicked off'' the pipeline and 
the operator is faced with a choice: flare the associated gas in order 
to continue oil production unabated, or curtail oil production in order 
to conserve the associated gas. At this point, the interests of the 
operator and the lessor (either the United States or the Indian mineral 
owner) may diverge. Specifically, the operator may wish to continue oil 
production unabated, sacrificing the associated gas production for 
near-term revenues from the oil production. When an operator chooses 
this course of action, proposed Sec.  3179.8(a) would ensure that the 
financial interests of the public and Indian mineral owners are not 
unduly compromised. Under proposed Sec.  3179.8(a), when oil-well gas 
must be flared due to pipeline capacity constraints, midstream 
processing failures, or other similar events that prevent produced gas 
from being transported through the connected pipeline, a maximum of 
1,050 Mcf per month (per lease, unit, or CA) of such flared gas would 
be considered a royalty-free ``unavoidable loss.'' The operator would 
owe royalties on flaring beyond that limit.
    The proposed monthly volume limit on royalty-free flaring due to 
pipeline capacity constraints replaces the case-by-case flaring 
approval process of NTL-4A. Under NTL-4A, an operator could seek BLM 
approval to flare where conservation of the gas was not ``economically 
justified.'' \96\ As the rapid development of unconventional tight oil 
and gas resources resulted in more flaring due to midstream problems 
such as pipeline capacity constraints, many operators began to submit 
applications arguing that the flaring was justified under the economic 
circumstances and should therefore be royalty free.\97\ The BLM has 
never taken the position that long-term flaring due to pipeline 
capacity constraints is economically justified. Furthermore, the BLM 
does not believe that the economic test in NTL-4A was intended to 
accommodate situations where large volumes of associated gas are flared 
in order to maximize an individual operator's near-term profits. 
Rather, as explained in detail previously, the economic standard in 
NTL-4A looked to ``the total leasehold production, including oil and 
gas, as well as the economics of a field-wide plan,'' when evaluating 
the feasibility of conserving the associated gas, and this standard did 
not envision that operators could use a pipeline constraint as an 
economic justification for long-term flaring. Finally, the drastic 
increase in flaring applications under NTL-4A demonstrates that the 
case-by-case application process is not a sustainable approach for 
evaluating the appropriateness of flaring. Therefore, the BLM is 
proposing to set a volume limit that will accommodate any truly 
unavoidable losses due to midstream failures while ensuring that 
royalties are paid when an operator makes the business decision to 
flare gas in order to continue producing oil.
---------------------------------------------------------------------------

    \96\ See Section III.C.2 of this preamble for additional detail 
on this process and the applicable standard.
    \97\ See, e.g., Petro-Hunt, LLC, 197 IBLA 100, 105-106 (``Petro-
Hunt stated that `[t]he flaring at issue was primarily the result 
of, among other things, force majeure events, maintenance, and/or 
capacity issues in the third-party gas gathering and processing 
system, a common cause of flaring in the Williston Basin.' It argued 
that `[w]hile [it] could have prevented flaring by shutting-in its 
productive oil wells and refusing to continue developing the field, 
such actions would not have been reasonable' because `there are vast 
discrepancies in value between produced oil and gas.' '').
---------------------------------------------------------------------------

    In order to determine the appropriate monthly volume limit on 
royalty-free flaring due to midstream constraints, the BLM examined 
flaring data reported to ONRR for the years 2015-2019. Based on that 
data, the BLM determined that a limit of 1,050 Mcf per month would 
impact the 20 percent of flaring operations responsible for 95 percent 
of the reported flaring volumes. Thus, the proposed limit targets only 
those operators that generate the vast majority of the flaring. The BLM 
estimates that the proposed 1,050 Mcf per month limit would make 
approximately 85 percent of flared volumes royalty-bearing and generate 
an average of nearly $33 million in royalty revenues each year. The BLM 
examined limits lower than 1,050 Mcf per month, but found diminishing 
returns in terms of additional royalties relative to the number of 
operations impacted.
    In most cases, payment of royalties on flared associated gas would 
be sufficient to protect the proprietary interests of the United States 
and Indian mineral owners. However, because the incentive to flare is 
strongest where the price of gas (and, therefore, the royalty value of 
the gas) is lowest with respect to the price of oil, the BLM must be 
prepared for the possibility of egregious cases where the volume of 
flaring is unacceptable even in the face of royalty payments. In order 
to protect the public interest in such cases, paragraphs (b) and (c) of 
proposed Sec.  3179.8 would establish a process whereby the BLM could, 
under a narrow set of circumstances, order an operator to curtail or 
shut-in production as necessary to avoid the unreasonable waste of 
Federal or Indian gas. The BLM is proposing to limit shut-in or 
curtailment orders under this section to situations where the operator 
had reported flaring in excess of 4,000 Mcf per month for 3 consecutive 
months and the BLM confirms that flaring is ongoing. According to ONRR 
data, only

[[Page 73604]]

3 percent of reporting units had 3 consecutive months of more than 
4,000 Mcf of flaring. However, this 3 percent accounted for 
approximately 16 percent of the total flaring in 2019.
    The proposed standard for shut-in or curtailment orders is based on 
flaring over a consecutive 3-month period to account for the fact that 
flaring is often at its highest levels during the first months of a 
well's life and can taper off to substantially lower levels soon 
thereafter. One reason for this phenomenon is that facilities are often 
designed to accommodate long-term production levels, as opposed to the 
high levels of gas production experienced in the initial months of 
production. The purpose of the 3-month time frame is to focus shut-in 
and curtailment orders on wells most likely to flare large volumes for 
longer periods. The BLM requests comment on the proposed standard for 
shut-in or curtailment orders, including the volume threshold and the 
3-month time frame.
    If a shut-in or curtailment order would adversely affect production 
of oil or gas from non-Federal and non-Indian mineral interests (e.g., 
State or private leases in a mixed-ownership unit or CA), the BLM is 
proposing to issue such an order only where the BLM is authorized to 
regulate the rate of production under the governing unit or 
communitization agreement. In the absence of such authorization, the 
BLM would contact the State regulatory authority having jurisdiction 
over the oil and gas production from the non-Federal and non-Indian 
interests and request that that entity take appropriate action to limit 
the waste of gas.
    The BLM requests comment on this proposed approach to regulating 
the flaring of associated gas from oil wells. Specifically, the BLM 
would like comment on whether the proposed volume thresholds are 
appropriate, whether the proposed limit on royalty-free flaring in 
proposed Sec.  3179.8(a) should cover sources of flaring besides 
midstream constraints, and whether shut-in or curtailment orders under 
proposed Sec.  3179.8(b) can or should be applied more broadly (e.g., 
for lower volumes of flaring, over a shorter time frame, or using a 
different standard for impacting non-Federal production).
    The BLM also invites comment on alternative approaches to 
regulating flaring, such as the capture percentage regimes employed by 
New Mexico and North Dakota. The BLM has not proposed capture 
percentage requirements similar to those in the 2016 Rule because such 
requirements would appear to be more difficult for the BLM to implement 
and enforce (due to the relative complexity of the calculations) and 
not necessarily more effective at controlling waste or ensuring 
appropriate royalty payments as opposed to the provisions proposed 
herein.
Section 3179.9 Measuring and Reporting Volumes of Gas Vented and Flared
    Under proposed Sec.  3179.9(a), operators would be required to 
estimate (using estimation protocols) or measure (using a metering 
device) all flared and vented gas, whether royalty-bearing or royalty-
free. Operators would also be required to report all volumes vented or 
flared under applicable ONRR reporting requirements.
    Proposed paragraph (b) would require operators to use an orifice 
meter for any flare that is flaring at a rate of 1,050 Mcf per month or 
higher. The meter would be required to conform to the requirements of 
43 CFR subpart 3175 for a low-volume facility measurement point (FMP), 
but with lesser requirements for plate inspection, EGM verification, 
determination of heating value, and overall measurement uncertainty. 
The proposed section would establish the timeframe for installation of 
the required meter (6 months after the effective date of the final 
rule) and would establish special requirements relating to the location 
of the meter. The BLM requests comment on whether operators should be 
required to document compliance with proposed paragraph (b) and provide 
that documentation to the BLM on a regular or as-needed basis.
    Proposed paragraph (c) would provide the requirements for flares 
not covered by paragraph (b). This section would allow those flared 
volumes to be measured per the requirements of paragraph (b), estimated 
utilizing sampling and compositional analysis that complies with the 
requirements of proposed Sec.  3179.203(c), or estimated using another 
method that has been approved by the BLM.
    Proposed paragraph (d) would address situations where a flare is 
combusting gas that is combined across multiple leases, unit PAs, or 
communitized areas. This proposed paragraph would allow the operator to 
measure or estimate the gas at a single point at the flare but would 
require the operator to use an allocation method approved by the BLM to 
allocate the quantities of flared gas to each lease, unit PA, or 
communitized area.
    Paragraph (e) would clarify that flare meters are not FMPs for the 
purposes of the BLM's gas measurement regulations at 43 CFR subpart 
3175.
Section 3179.10 Determinations Regarding Royalty-Free Flaring
    This proposed section would provide for a transition period for 
operators that are operating under existing approvals for royalty-free 
flaring as of the effective date of the final rule. Proposed paragraph 
(a) states those operators could continue to flare royalty-free 
pursuant to such approvals for 6 months after the effective date of the 
rule.
    Paragraph (b) would clarify that nothing in proposed subpart 3179 
would alter the royalty-bearing status of flaring that occurred prior 
to the effective date of the final rule or the BLM's authority to 
determine that status and collect appropriate back-royalties.
Section 3179.11 Incorporation by Reference (IBR)
    The proposed rule would incorporate two industry standards without 
republishing the standards in their entirety in the CFR, a practice 
known as incorporation by reference. These standards were developed 
through a consensus process, facilitated by the Gas Processors 
Association (GPA) Midstream, with input from the oil and gas industry. 
The BLM has reviewed these standards and determined that they would 
further the purposes of Sec.  3179.203 of this proposed rule. These 
standards reflect the industry-accepted standards for compositional 
analysis for samples under pressure where the sample is expected to 
have C10+ components. Under Sec.  3179.203, pressurized samples from 
the last pressurized vessel upstream of the storage tank would be used 
to determine whether the volumes of gas lost from the storage tank are 
of sufficient quantity and quality to justify the installation of a 
vapor recovery unit. The legal effect of incorporation by reference is 
that the incorporated standards become regulatory requirements. This 
proposed rule would incorporate the specific versions of the standards 
listed. The standards referenced in this section would be incorporated 
in their entirety.
    The proposed incorporation of industry standards follows the 
requirements found in 1 CFR part 51. The industry standards can be 
incorporated by reference pursuant to 1 CFR 51.7 because, among other 
things, they would substantially reduce the volume of material 
published in the Federal Register; the standards are published, bound, 
numbered, and organized; and the standards proposed for incorporation 
are readily available to the general public through purchase

[[Page 73605]]

from the standards organization or through inspection at any BLM office 
with oil and gas administrative responsibilities. 1 CFR 51.7(a)(3) and 
(4). The language of incorporation in proposed 43 CFR 3179.11 meets the 
requirements of 1 CFR 51.9.
    All of the GPA Midstream materials for which the BLM is seeking 
incorporation by reference are available for inspection at the Bureau 
of Land Management, Division of Fluid Minerals, 301 Dinosaur Trail, 
Santa Fe, NM 87505, telephone 505-954-2000; and at all BLM offices with 
jurisdiction over oil and gas activities.
    The GPA materials are also available for inspection and purchase 
from GPA Midstream, 6060 American Plaza, Suite 700, Tulsa, OK 74135; 
telephone 918-493-3872.
    The following describes the GPA standards that the BLM proposes to 
incorporate by reference into this rule:
    GPA 2286-14, Method for the Extended Analysis for Natural Gas and 
Similar Gaseous Mixtures by Temperature Program Gas Chromatography, 
Revised 2014 (``GPA 2286''). This standard covers the methods for 
determination of natural gas chemical composition when specifics of 
heavier fractions up to C14 is needed or required.
    GPA 2186-14, Method for the Extended Analysis of Hydrocarbon Liquid 
Mixtures Containing Nitrogen and Carbon Dioxide by Temperature 
Programmed Gas Chromatography, Revised 2014 (``GPA 2186''). This 
standard covers the methods for determination of natural gas chemical 
composition when specifics of heavier fractions up to C10 is needed or 
required.
Sec.  3179.12 Reasonable Precautions To Prevent Waste
    Proposed Sec.  3179.12 would further implement the BLM's authority 
to prevent waste. Paragraph (a) is a nearly verbatim recitation of the 
MLA's requirement that operators must use all reasonable precautions to 
prevent the waste of oil or gas developed from the lease. See 30 U.S.C. 
225. Paragraph (b) would reiterate the BLM's existing authority to 
specify certain reasonable precautions to prevent waste as conditions 
of approval (COA) of an APD. See 43 CFR 3162.3-1(h)(1). Paragraph (c) 
would authorize the Authorized Officer to order an operator to 
implement, within a reasonable time, other measures to prevent waste at 
ongoing operations. Finally, paragraph (d) would recognize that the 
reasonable precautions to prevent waste may evolve over time and would 
clarify that such reasonable precautions are not therefore limited to 
the waste prevention standards and requirements reflected elsewhere in 
the BLM's regulations. For example, under proposed Sec.  3179.12, the 
BLM could impose a COA on an APD requiring the operator to use a 
particular instrument to detect leaks as part of its LDAR program if, 
due to technological advancements, changes in common industry practice, 
or other appropriate considerations, the failure to employ the 
specified instrument would constitute a failure to use all reasonable 
precautions to prevent waste. The BLM seeks comments on this section, 
specifically whether and to what extent the standards described in 
proposed paragraphs (c) and (d) provide the BLM with the appropriate 
flexibility to prevent waste.
Flaring and Venting Gas During Drilling and Production Operations
Section 3179.101 Well Drilling
    This proposed section would address gas that is lost as a result of 
loss of well control. Gas lost as a result of a loss of well control 
during drilling would be classified as unavoidably lost and royalty-
free, unless the loss of well control was due to operator negligence, 
in which case it would be avoidably lost and subject to royalties (see 
proposed Sec.  3179.4(b)(1)). If there is a loss of well control, the 
BLM would determine whether it was due to operator negligence, and if 
so, the BLM would notify the operator in writing.
Section 3179.102 Well Completion and Related Operations
    This proposed section would address gas that reaches the surface 
during well completions, post-completion and fluid recovery operations, 
and re-fracturing. Proposed paragraph (a) provides that, for new 
completions, up to 10,000 Mcf of gas that reaches the surface may be 
flared royalty-free. This would cover the operations of well 
completion, post-completion, and fluid recovery operations.
    Proposed paragraph (b) provides that, for refracturing of existing 
completions at a well connected to a pipeline, up to 5,000 Mcf of gas 
that reaches the surface may be flared royalty-free. This would cover 
the operations of well completion, post-completion, and fluid-recovery 
operations.
    Under the 2016 Waste Prevention Rule, royalty-free flaring during 
well completions and related operations was limited to 20,000 Mcf or up 
to 30 days, whichever occurred first. Upon further investigation, 
including post-2016 consultation with certain operators, the BLM 
believes that prudent operators conducting new completion operations 
are likely able to capture gas production before flaring more than 
10,000 Mcf of gas. Specifically, the BLM understands from its 
conversations with mid-size operators that the flowback process has 
changed considerably over the past few years, and that it is now 
standard practice to connect to a gas sales line as soon as possible. 
The BLM understands that many operators are not using temporary 
production equipment, but rather production is flowing directly to 
permanent production facilities after completion, thereby substantially 
reducing the need for flaring. In addition, the BLM believes that a 
lower volume limit is appropriate for refractured wells because, though 
those wells would have some need for flaring, they should already have 
an established and available means of capture (e.g., a pipeline to 
sales).
Section 3179.103 Initial Production Testing
    This proposed section would clarify the limits on royalty-free 
flaring during a well's initial production test. This section is 
essentially the same as the 2016 Waste Prevention Rule provision 
governing royalty-free flaring during initial production testing. The 
BLM is proposing to adopt these limits rather than retaining the more 
liberal limits reflected in NTL-4A and the 2018 Revision Rule (which 
set a 30-day or 50,000 Mcf limit, subject to extensions) because the 
BLM believes the proposed limits would accommodate any truly 
unavoidable flaring during production testing while better protecting 
the public's and Indian mineral owners' interests in obtaining 
royalties on the extracted gas. Based on consultations with BLM State 
and Field Offices regarding their experiences with production testing, 
the BLM believes that it would be rare for operators to exceed the 
royalty-free flaring limits proposed in this section.
    Proposed paragraph (a) would provide that gas could be flared 
royalty-free during initial production testing for up to 30 days or 
20,000 Mcf of flared gas, whichever occurs first. Volumes flared during 
well completion would count against the 20,000 Mcf limit. Additionally, 
royalty-free flaring would end when oil production begins, even if the 
30-day or 20,000 Mcf limit had not been reached.
    Paragraph (b) would allow the BLM to approve royalty-free flaring 
during a longer testing period of up to 60 additional days if there are 
testing delays due to well or equipment

[[Page 73606]]

problems or a need for additional testing to develop adequate reservoir 
information.
    Paragraph (c) would allow the BLM to increase the royalty-free 
flaring volume specified in paragraph (a)(2) by up to 30,000 additional 
Mcf if the well is an exploratory well in a remote location that would 
require additional testing related to the development of pipeline 
infrastructure.
    Paragraph (d) would allow a 90-day (rather than 30-day) period for 
royalty-free flaring during the variable and time-intensive dewatering 
and initial evaluation of an exploratory coalbed methane well. In 
addition, the BLM could approve up to two extensions of 90 days each to 
allow for more time to dewater and evaluate the coalbed methane well.
    Paragraph (e) would clarify that the operator would have to 
transmit a request for a longer test period under paragraphs (b), (c), 
or (d) of this proposed section through a Sundry Notice.
Section 3179.104 Subsequent Well Tests
    The proposed requirement in this section is essentially the same as 
NTL-4A's requirement regarding subsequent well tests. It would limit 
royalty-free flaring during production tests after the initial 
production test to 24 hours, unless the BLM approves or requires a 
longer test period. The operator would be required to transmit its 
request for a longer test period through a Sundry Notice.
Section 3179.105 Emergencies
    Under proposed Sec.  3179.4(b)(6), and consistent with IRA Section 
50263, gas lost during an ``emergency situation'' would be royalty-
free. Proposed Sec.  3179.105 would serve to clearly define what 
constitutes ``an emergency situation,'' specify circumstances that do 
not constitute an emergency situation, and place a time limit on 
royalty-free venting or flaring.
    Proposed Sec.  3179.105(a) would allow an operator to flare or, if 
flaring is not feasible due to the emergency situation, vent gas 
royalty-free under Sec.  3179.4(b)(6) of this subpart for no longer 
than 48 hours during an emergency situation. IRA Section 50263 does not 
define what is an ``emergency situation that poses a danger to human 
health, safety, and the environment.'' The BLM is proposing to 
implement the statute in a way that is reasonable in light of its 
longstanding authority under the MLA and FOGRMA and its experience 
implementing those authorities (and is also proposing to make the same 
provision governing emergency situations applicable on Indian lands). 
Specifically, Sec.  3179.105(a) would define an ``emergency situation'' 
as a temporary, infrequent, and unavoidable situation in which the loss 
of gas is necessary to avoid a danger to human health, safety, or the 
environment. Although NTL-4A limited royalty-free losses to 24 hours 
per ``emergency'' incident (except where otherwise approved by the 
BLM), this rule would implement a 48-hour limit (not subject to 
discretionary extensions) to reflect the time constraint contained in 
Section 50263 of the IRA.
    Proposed Sec.  3179.105(b) would clarify that the following 
circumstances do not constitute ``emergencies'' for the purposes of 
royalty assessment: (1) recurring equipment failures; (2) the 
operator's failure to install appropriate equipment of a sufficient 
capacity to accommodate production conditions; (3) the 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; (4) scheduled maintenance; and (5) operator negligence.
    Proposed Sec.  3179.105(c) would require an operator to file a 
report to the BLM for any emergency situation that requires the 
operator to vent or flare beyond the timeframe authorized under 
paragraph (a).
    To be clear, proposed Sec.  3179.105 would not prohibit an operator 
from engaging in venting or flaring when the operator deems it 
operationally necessary to do so. The BLM is not attempting to 
substitute its judgment for that of the operator with respect to the 
management of emergencies. Rather, the purpose of proposed Sec.  
3179.105 is to safeguard the public interest in royalty revenues by 
ensuring that a royalty-free flaring exception for ``emergencies'' is 
limited to events that are truly out of the operator's control and 
could not have been avoided through more careful management.
Conservation of Gas From Equipment, Storage Vessels, and During Well 
Maintenance Operations
Section 3179.201 Pneumatic Controllers and Pneumatic Diaphragm Pumps
    Under proposed Sec.  3179.201, an operator of a lease, unit 
participating area (PA), or CA producing at least 120 Mcf of gas or 20 
barrels of oil per month would be prohibited from using natural-gas-
activated pneumatic controllers or pneumatic diaphragm pumps with a 
bleed rate that exceeds 6 scf/hour. In effect, this would require 
operators to use ``low-bleed'' pneumatic equipment or pneumatic 
equipment that does not bleed natural gas, such as air-activated 
pneumatic equipment.
    Prudent operators should be expected to employ less wasteful 
technologies where it is economically feasible to do so. Thus, the 
proposed prohibition on the use of higher-bleed natural-gas-activated 
pneumatic equipment is limited to operations producing amounts of oil 
or gas that would render the adoption of these less wasteful 
technologies economically feasible. Specifically, the BLM chose 
production thresholds of oil and gas that would pay for the 
installation of a low-bleed pneumatic controller (estimated to be about 
$2,200) in a period of less than 1 year (around 10 months). The BLM 
understands that it is unlikely that an operator of a lease, unit, or 
CA producing only 120 Mcf of gas or 20 barrels of oil per month could 
re-direct the entirety of its revenues for 10 months towards paying for 
upgrading its pneumatic equipment. However, the BLM expects that the 
life of such a lease, unit, or CA would extend well beyond 10 months 
and that the cost of the required equipment could be financed over a 
longer period. The more a lease, unit, or CA is producing above 120 Mcf 
of gas or 20 barrels of oil per month, the more revenue will be 
available to subsidize the new equipment. In a prior rulemaking, the 
BLM found that low-bleed continuous pneumatic controllers are already 
very common in the petroleum and natural gas production sector, and 
that low-bleed continuous pneumatic controllers have the potential to 
generate revenue for operators as gas that would otherwise be vented is 
captured and sold. See 83 FR 49184, 49195 (Sept. 28, 2018).
    In order to temper the potentially disruptive effect of this new 
requirement on existing operations, proposed Sec.  3179.201(b) would 
set a compliance deadline of 1 year after the effective date of the 
final rule. The RIA estimates that operators would need to replace up 
to 53,213 pneumatic devices to meet the conditions of this rule. It is 
estimated that such replacements would conserve about 5.93 Bcf of gas a 
year. The proposed requirement is expected to cost operators up to 
$15.6 million dollars a year while generating $21 million in benefits 
from increased gas sales each year. Although the private benefits to 
industry would exceed the costs to industry--thereby indicating that 
operators should adopt this technology even in the absence of a 
regulation requiring them to do so--the BLM finds this requirement 
necessary

[[Page 73607]]

because, in the BLM's experience, operators do not typically replace 
functional equipment, nor do they typically replace malfunctioning 
equipment unless the repair costs exceed the purchase price of new 
equipment. There would be an added benefit to society of $165 million a 
year in the value of reduced methane emissions. The BLM also notes that 
the reduced emissions of natural gas would reduce emissions of other 
pollutants (e.g., VOCs and hazardous air pollutants), though the BLM 
has not quantified or monetized the benefits to society associated with 
reducing those pollutants. The BLM requests comment on appropriate 
methodologies for quantifying and monetizing these benefits.
    The BLM considered requiring the use of no-bleed, air-activated 
devices instead of gas-activated equipment, but based on the 
information at our disposal, the BLM currently proposes that the higher 
price of the air-activated equipment may not be consistent with our 
statutory focus on waste reduction, considering the marginal increase 
in gas capture relative to the lower cost and effective low-bleed 
devices.\98\ The BLM also considered different production thresholds at 
which the requirements would be imposed but found the proposed 
thresholds to provide the best balance of gas conservation and economic 
feasibility. The BLM requests comment on the proposed approach to 
pneumatic equipment on Federal and Indian leases, including the 
estimated costs and benefits, appropriate production thresholds for 
these requirements, and the economic and technical feasibility of 
alternative approaches (such as requiring no-bleed equipment).
---------------------------------------------------------------------------

    \98\ See Section 7.11 of the RIA for detailed discussion of this 
analysis.
---------------------------------------------------------------------------

Section 3179.203 Oil Storage Vessels
    Storage vessels or tanks are used on-site to store produced 
hydrocarbons and other fluids. In most cases, an operator will direct 
recovered fluids from the well to a separator, with the hydrocarbons 
then directed to the storage tanks. During storage, light hydrocarbons 
dissolved in the crude oil or condensate vaporize and collect in the 
space between the tank liquids and the tank roof. These vapors are 
often vented to the atmosphere when the liquid level in the tank 
subsequently fluctuates.
    Proposed Sec.  3179.203 would establish new requirements that would 
limit the loss of natural gas from oil storage vessels. Paragraph (a) 
would require the thief hatch on a storage tank to remain closed, 
except as necessary to conduct production and measurement operations. 
Paragraph (a) would require the BLM to issue a $1,000 immediate 
assessment upon discovering a thief hatch that has been left open and 
unattended.
    Under proposed Sec.  3179.203(b), all oil storage vessels would be 
required to be equipped with a vapor-recovery system or other mechanism 
that avoids the intentional loss of natural gas from the vessel, unless 
the operator is able to establish that it would be technically or 
economically infeasible. In order to temper the disruptive effect of 
this new requirement on existing operations, proposed Sec.  3179.203(b) 
would set a compliance deadline of 1 year after the effective date of 
the final rule. The proposed rule does not contain a definition or 
formula for determining economic feasibility for the purposes of Sec.  
3179.203(b). The BLM oversees a wide variety of production scenarios--
from multi-well facilities operated by large companies to individual 
``stripper wells'' operated by very small companies--and recognizes 
that the economic feasibility (from a waste-prevention perspective) of 
a vapor-recovery system will depend on a variety of factors, such as 
the oil gravity and the production rate. The BLM would, therefore, like 
to retain flexibility in making this determination. To be clear, 
flexibility does not indicate unrestrained discretion. Were the BLM to 
order an operator to install a vapor-recovery unit or other mechanism 
to capture gas from a storage vessel, traditional administrative law 
principles would require the BLM to explain why the ``technically or 
economically infeasible'' exemption does not apply. The BLM requests 
comment on this approach, and specifically requests comment on whether, 
and how, economic feasibility should be defined for this section.
    Under proposed Sec.  3179.203(c), where an operator has not 
equipped a storage vessel with a vapor-recovery system or other 
appropriate mechanism, the operator would be required to submit an 
annual compositional analysis of production flowing to the storage 
vessel. Proposed Sec.  3179.203(c) would contain technical sampling and 
analysis requirements intended to ensure the accuracy of the 
compositional analysis submitted by the operator. The purpose of the 
compositional-analysis requirement would be to demonstrate that 
installing a vapor-recovery system (or other similar mechanism) is, in 
fact, technically or economically infeasible. The compositional 
analysis would allow the operator and the BLM to estimate the quantity 
and quality of natural gas emitted from the storage tank, which would 
in turn indicate the value and volume of the gas to be recovered, and 
therefore the economic feasibility of a vapor-recovery system. The BLM 
estimates that each annual compositional analysis report would cost 
approximately $500. The BLM requests comment on this approach to 
ensuring that operators take all reasonable measures to conserve 
natural gas from oil storage tanks, and the BLM invites comment on 
alternative approaches. Specifically, the BLM is interested in 
alternative standards for requiring vapor recovery, which might include 
using the tank's throughput (the volume of oil stored in the tank over 
a period of time) as an indicator of when vapor recovery should be 
required.
    Proposed Sec.  3179.203(d) would generally require gas released 
from an oil storage vessel to be flared rather than vented. This 
paragraph would also make clear that an operator may commingle vapors 
from multiple storage vessels to a single flare without the need for 
prior BLM approval.
    The RIA estimates that operators would need to install up to 2,774 
vapor recovery units on existing storage tanks to meet the conditions 
of this rule. It is estimated that this would conserve about 9 Bcf of 
gas a year. The proposed requirement is expected to cost operators up 
to $93 million dollars a year while generating $33 million in benefits 
from increased gas sales each year. There would be an added benefit to 
society of $253 million per year in the value of reduced methane 
emissions. The BLM also notes that the reduced emissions of natural gas 
would reduce emissions of other pollutants (e.g., VOCs and hazardous 
air pollutants), though the BLM has not quantified or monetized the 
benefits to society associated with reducing those pollutants. The BLM 
requests comment on appropriate methodologies for quantifying and 
monetizing these benefits.
Section 3179.204 Downhole Well Maintenance and Liquids Unloading
    In producing gas wells, fluids may accumulate in the wellbore and 
impede the flow of gas, sometimes halting production itself. Gas wells 
generally have sufficient pressure to produce both formation fluids and 
gas early on, but, as production continues and reservoir pressure 
declines, the gas velocity in the production tubing may not be 
sufficient to lift the formation fluids. When this occurs, liquids 
(hydrocarbons and salinized water) may accumulate in the

[[Page 73608]]

tubing, causing a further drop in pressure, slowed gas velocity, and 
raised pressure at the perforations. When the bottom-hole pressure 
becomes static, gas flow stops, and all liquids accumulate at the 
bottom of the tubing. In order to return the flow of gas, operators 
will engage in ``liquids unloading,'' which will often involve venting.
    This proposed section would establish limits on royalty-free 
venting and flaring during downhole well maintenance and liquids 
unloading in order to prevent waste. This section would impose a 24-
hour limit on royalty-free venting or flaring for each event, and the 
24-hours of royalty-free venting or flaring would only be available if 
the operator employs best practices that prevent or minimize vented gas 
and the need for well venting. For wells equipped with a plunger lift 
system or an automated well control system, the operator would be 
required to optimize the operation of the system to prevent or minimize 
gas losses. During any liquids unloading by manual well purging, the 
person conducting the well purging would be required to be present on-
site to minimize, to the maximum extent practicable, any venting to the 
atmosphere.
Section 3179.205 Size of Production Equipment
    This proposed section would state that the equipment used for 
production and processing would be required to be appropriately sized 
to handle the expected volumes produced at the lease site. For example, 
production equipment would be required to be sized to provide for the 
proper retention time of fluid flows, which has a direct impact on the 
gas-oil ratio of the fluid as it enters the storage tank. Under-sizing 
of the separator equipment can result in a higher quantity of gas 
remaining entrained in the fluid. That, in turn, can be the source of 
unnecessary losses of natural gas, since the gas will be released when 
the fluid weathers in the tank.
Leak Detection and Repair (LDAR)
    This proposed rule would require operators on Federal and Indian 
leases to maintain LDAR programs in order to minimize the waste of 
Federal and Indian gas. The 2016 Waste Prevention Rule also contained 
LDAR requirements, though those requirements were more stringent, less 
flexible, and more costly for operators than the requirements put 
forward in this proposed rule. Although the LDAR requirements of the 
2016 Rule were expected to result in higher reductions in lost gas than 
the requirements proposed today, they were also heavily criticized by 
the court that vacated the 2016 Rule and contributed to that court's 
finding that the BLM had been arbitrary and capricious in promulgating 
the rule.\99\ The 2016 Rule broadly imposed strict LDAR requirements 
and invited operators to seek reductions in their obligations based on 
site-specific economic circumstances. This proposed rule, in contrast, 
would establish some basic parameters (such as the time frame for 
repairs) while providing substantial flexibility for operators to 
tailor their LDAR programs to their operations. Simultaneously, 
operators would not be permitted to seek exemptions based on site-
specific economic considerations. The BLM has concluded that even the 
operators of marginal wells could be expected to take reasonable 
measures to identify and repair leaks. The RIA estimates that this 
provision of the rule would only affect 2,178 well sites (or, around 
2.2 percent of Federal well sites and 0.2 percent of the total well 
sites in the U.S.) due to existing State or EPA rules that meet or 
exceed the BLM's proposed standards. It is estimated that the proposed 
requirements would conserve about 0.3 Bcf of gas a year. It is expected 
to cost operators up to $2.8 million dollars a year while generating 
$.98 million per year in benefits from increased gas sales. There would 
also be an added benefit to society of $8.5 million a year in reduced 
methane emissions. The BLM also notes that the reduced emissions of 
natural gas would reduce emissions of other pollutants (e.g., VOCs and 
hazardous air pollutants), though the BLM has not quantified or 
monetized the benefits to society associated with reducing those 
pollutants. The BLM requests comment on appropriate methodologies for 
quantifying and monetizing these benefits. The LDAR requirements of the 
proposed rule are explained in more detail as follows.
---------------------------------------------------------------------------

    \99\ See Wyoming v. DOI, 493 F. Supp. 3d 1046, 1075-77 (D. Wyo. 
2020).
---------------------------------------------------------------------------

Section 3179.301 Leak Detection and Repair Program
    This proposed section would require an operator to maintain an LDAR 
program designed to prevent the unreasonable and undue waste of Federal 
or Indian gas. The program would be required to include regular 
inspections of all oil and gas production, processing, treatment, 
storage, and measurement equipment on the lease site. Within 6 months 
of the effective date of the final rule, the operator of an existing 
lease would be required to submit a Sundry Notice to the BLM describing 
the operator's LDAR program. For leases issued after the effective date 
of the final rule, the operator would be required to submit the Sundry 
Notice within 6 months of the lease's issuance. The BLM would then 
review the operator's description of its LDAR program to determine 
whether the program is adequate to prevent the unreasonable and undue 
waste of gas, in light of all the circumstances at the lease site, 
including the variety of equipment at the lease site and the quantities 
of production that might support a more robust LDAR program. That is, a 
large, multi-well lease site with many pieces of equipment and 
substantial revenues from production might warrant a more vigorous LDAR 
program than a single marginal well for which additional regulatory 
burdens might risk a premature shut in. The LDAR program would need to 
provide for regular inspections (at least annually), and would not 
require any specific LDAR process or equipment to be used. The BLM 
would then notify the operator if the BLM deems the LDAR program to be 
inadequate. The notification would explain the basis for the BLM's 
determination, identify the plan's inadequacies, describe any 
additional measures necessary to address the inadequacies, and provide 
a reasonable time frame for the submission of a revised LDAR program.
    This proposed section would require that LDAR inspections occur at 
least annually. For existing operations, the first inspection would be 
required within 1 year of the effective date of the final rule. For 
future leases and operations, the operator would be required to conduct 
the initial inspection within 1 year of the commencement of operations. 
In developing the proposed rule, the BLM considered requiring semi-
annual--rather than annual--inspections, but this proposed rule finds, 
based on the information at our disposal as well as our judgment and 
assumptions about costs over time, that the additional compliance costs 
increased out of proportion with the additional gas to be saved by the 
more frequent inspections. This is based on evidence that leaks do not 
arise on a consistent basis such that twice as many inspections may not 
necessarily catch twice as many leaks or conserve twice as much leaked 
gas. So, while there is a risk of more leaks being undetected for 
longer, annual inspections appeared to be a more cost-effective (with 
respect to gas conservation) basic requirement than

[[Page 73609]]

semi-annual inspections in the long run. To be clear, the BLM is 
judging the cost-effectiveness of the proposed requirements in terms of 
gas conservation only. The BLM recognizes that the EPA has set, and is 
in the process of promulgating, different (though not incompatible) 
LDAR standards based on a different view of cost-effectiveness.\100\ 
Any divergence between the BLM and EPA on LDAR standards (or those 
pertaining to pneumatic equipment or storage vessels) is due to the 
fact that the BLM and the EPA regulate these matters under different 
statutory authorities and for different purposes.
---------------------------------------------------------------------------

    \100\ See 86 FR 63154.
---------------------------------------------------------------------------

    The BLM requests comment on alternative approaches, including 
whether required LDAR inspections should be more frequent, in line with 
the requirements of some States and EPA, as well as data on likely 
costs and benefits over time.
    The BLM notes that the proposed rule envisions operators submitting 
LDAR program documents on a lease-by-lease basis. The BLM requests 
comment on alternative approaches, such as allowing operators to submit 
a document detailing a program that would apply to its operations 
across multiple leases or even to all of its operations on BLM-managed 
lands.
Section 3179.302 Repairing Leaks
    This proposed section would require operators to repair any leak as 
soon as practicable, and no later than 30 calendar days after discovery 
of the leak, unless there is good cause for repair to take longer. This 
proposed section of the rule would require the operator to notify the 
BLM by Sundry Notice if there is good cause to delay the repairs beyond 
30 days, and to complete the repair at the earliest opportunity, but in 
no event longer than 2 years after discovery. The operator would also 
be required to conduct a follow-up inspection within 30 days after the 
repair to verify the effectiveness of the repair, and to make 
additional repairs within 15 days if the previous repair was not 
effective. The operator would be required to follow this repair and 
follow-up process until the repair is effective.
Section 3179.303 Leak Detection Inspection Recordkeeping and Reporting
    This proposed section would require operators to maintain records 
of LDAR inspections and repairs, including the date and location of 
required inspections, the methods used to identify leaks, the equipment 
where the leaks were found, the dates of repairs, and the dates of 
follow-up inspections. These records would be required to be made 
available to the BLM upon request. Audio, visual, or olfactory (AVO) 
inspections would only have to be documented if the operator finds a 
leak requiring repair. Paragraph (b) of the section would require 
operators to submit to the BLM, by March 31 of each calendar year, an 
annual summary report on the previous year's LDAR inspection 
activities. The BLM plans to make these reports available to the 
public, subject to any protections for confidential business 
information.
State or Tribal Variances
Section 3179.401 State or Tribal Requests for Variances From the 
Requirements of This Subpart
    Proposed Sec.  3179.401 would reinstate the State or Tribal 
variance provision from the 2016 Waste Prevention Rule.\101\ Under this 
section, States and Tribes would be able to request a variance under 
which analogous State or Tribal rules would apply in place of some or 
all of the requirements of subpart 3179. The State or Tribe's variance 
request would be required to: identify the subpart 3179 provision(s) 
for which the variance is requested; identify the State, local, or 
Tribal rules that would be applied instead; explain why the variance is 
needed; and, demonstrate how the State, local, or Tribal rules would be 
as effective as the subpart 3179 provisions in terms of reducing waste, 
reducing environmental impacts, assuring appropriate royalty payments, 
and ensuring the safe and responsible production of oil and gas. The 
BLM State Director would be authorized to approve the variance request 
or approve it subject to conditions, after considering all relevant 
factors. This decision would be entirely at the BLM's discretion and 
would not be subject to administrative appeals under 43 CFR part 4. If 
the BLM were to approve a variance, the State or Tribe that requested 
the variance would be obligated to notify the BLM of any substantive 
amendments, revisions, or other changes to the State, local, or Tribal 
rules to be applied under the variance. Finally, if the BLM were to 
approve a variance under this section, the BLM would be authorized to 
enforce the State, local, or Tribal rules applied under the variance as 
if they were contained in the BLM's regulations.
---------------------------------------------------------------------------

    \101\ The BLM chose not to include a similar State variance 
provision in the 2018 Revision Rule, concluding that the provision 
in the 2016 Waste Prevention Rule was no longer necessary in light 
of the predominance State regulations in the Revision Rule. 83 FR 
49197. This proposed rule would not defer to State regulations to 
the same extent as the Revision Rule, and so a variance provision--
i.e., a provision providing for appropriate State and Tribal 
flexibility--is therefore a relevant consideration in this 
rulemaking. At the final rule stage, the BLM will assess whether the 
proposed variance provision is ``too restrictive'' in light of 
comments from States, Tribes, and other stakeholders.
---------------------------------------------------------------------------

    Before including a variance provision in the final rule, the BLM is 
seeking to confirm that such variances would be both useful and 
practical. Operators on Federal and Indian lands are already required 
to adhere to other applicable State, Tribal, and local laws and 
regulations, so applying for a variance on the basis that a State, 
Tribal, or local rule would provide increased protection for the 
taxpayer or lower levels of waste through, for example, lower allowable 
monthly flaring volumes, would be unnecessary and a burden for States 
and Tribes that would apply for the variance provision, and a potential 
source of confusion for operators. To put it another way, operators in 
States or on Tribal lands that have more stringent standards than those 
contained in this proposed rule would be required to conform to the 
more stringent State or Tribal standards in any event, regardless of 
whether the State or Tribe receives a variance under the provision of 
the proposed rule. Such situations routinely arise in the context of 
other BLM oil and gas operational regulations, which raises questions 
about the usefulness or need of the variance provision contained in 
this proposed rule. The BLM believes that alignment of data collection 
processes or other potential areas of regulatory duplication, such as 
through a common reporting form that could be submitted to both the 
State or Tribal regulatory agency and the BLM, could bring greater 
efficiencies for both operators and regulators, but believes that a 
memorandum of understanding (MOU) between the BLM and a State or Tribe 
could more efficiently achieve many of those goals without the need for 
a State or Tribal variance. The BLM requests that commenters provide 
specific examples of situations where the variance provision in 
proposed Sec.  3179.401 would improve on existing practices and 
administrative tools, such as MOUs, in terms of providing better 
environmental protection, better protecting taxpayer and lessor 
interests, achieving better administrative efficiencies, and reducing 
burdens on operators.

[[Page 73610]]

V. Procedural Matters

A. Regulatory Planning and Review (E.O. 12866, E.O. 13563)

    Executive Order 12866 provides that the Office of Information and 
Regulatory Affairs (OIRA) within the Office of Management and Budget 
(OMB) will review all significant rules. The OIRA 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 replace the BLM's current rules governing 
venting and flaring, which are contained in NTL-4A. We have developed 
this proposed rule in a manner consistent with the requirements in 
Executive Order 12866 and Executive Order 13563.
    The monetized costs and benefits of this rule can be seen on the 
following table along with the transfer payments this rule would 
provide in the form of increased royalties from increased gas sales. 
The total monetized Net Benefit on an annualized basis is $359 million 
at a 7 percent discount rate and $372 million at a 3 percent discount 
rate. Additional unquantified benefits from reduced emissions of VOCs 
and hazardous air pollutants are discussed further in the RIA. The BLM 
reiterates that, while it has included benefits associated with the 
social cost of greenhouse gases in this particular presentation of 
costs and benefits and in the RIA, this was done to respond to 
Executive Orders 12866 and 13563 and in order to present as complete a 
picture as possible of the total costs and benefits of the proposed 
rule for the public. Climate benefits derived from foregone emissions 
were not a factor in the decision to propose any of the individual 
waste prevention requirements in this proposed rule.

                                           Costs and Benefits Summary
                                                   [2022-2031]
----------------------------------------------------------------------------------------------------------------
                                                         7% Discount rate                3% Discount rate
                                                 ---------------------------------------------------------------
                                                                    Annualized                      Annualized
                                                     NPV ($MM)         ($MM)         NPV ($MM)         ($MM)
----------------------------------------------------------------------------------------------------------------
Costs:
    Measurements................................           $9.99           $1.42          $11.13           $1.31
    Tanks.......................................          657.75           93.65          716.74           84.02
    Pneumatics..................................          109.79           15.63          114.06           13.37
    LDAR........................................           20.16            2.87           24.48            2.87
    Administrative Burdens......................           58.61            8.34           71.18            8.34
                                                 ---------------------------------------------------------------
        Total Cost..............................          856.30          121.92          937.59          109.91
----------------------------------------------------------------------------------------------------------------
Benefits:
    Tanks.......................................        2,386.70          285.48        2,438.33          285.85
    Pneumatics..................................        1,558.34          186.40        1,592.05          186.64
    LDAR........................................           79.37            9.48           80.94            9.49
                                                 ---------------------------------------------------------------
        Total Benefits..........................        4,024.41          481.36        4,111.32          481.97
                                                 ---------------------------------------------------------------
        Net Benefits............................        3,168.10          359.44        3,173.72          372.06
                                                 ---------------------------------------------------------------
        Transfer Payments.......................          274.10           39.03          336.66           39.47
----------------------------------------------------------------------------------------------------------------

    The BLM reviewed the requirements of the proposed rule and 
determined that it would 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-AE79'', click 
the ``Search'' button, open the Docket Folder, and look under 
Supporting Documents.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
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 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 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 has determined that, 
although the proposed rule would likely affect a substantial number of 
small entities,

[[Page 73611]]

that effect would not be significant. The basis for this determination 
is explained in more detail in the RIA. In brief, the per-entity, 
annualized compliance costs associated with this proposed rule are 
estimated to represent only a small fraction of the annual net incomes 
of the companies likely to be impacted. Because 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 not required. Nonetheless, in an 
effort to be thorough and in recognition of the substantial number of 
``small entities'' operating Federal and Indian oil and gas leases, the 
BLM conducted an initial regulatory flexibility analysis, which is 
detailed in the RIA. The Secretary of the Interior certifies under 5 
U.S.C. 605(b) that this rule would not have a significant economic 
impact on a substantial number of small entities.

C. 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, because it is estimated 
that the rule would have an annual economic impact of $100 million or 
more. As noted earlier, the RIA that the BLM produced for this rule 
calculates that this rule would cost operators $122 million per year 
(using a 7 percent discount rate) for the next 10 years, while 
generating benefits to operators of approximately $54 million a year 
(using a 7 percent discount rate) in the form of 15.3 Bcf of additional 
captured gas. The reduced methane emissions associated with the 
proposed rule would provide a benefit to society of $427 million a year 
over the same time frame, leading to a net benefit from the rule of 
$359 million a year.

D. Unfunded Mandates Reform Act (UMRA)

    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. The proposed rule would revise requirements that 
would otherwise apply to the private sector participating in a 
voluntary Federal program. The costs that the proposed rule would 
impose on the private sector are below the monetary threshold 
established at 2 U.S.C. 1532(a). A statement containing the information 
required by the Unfunded Mandates Reform Act (UMRA) (2 U.S.C. 1531 et 
seq.) is therefore 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.

E. 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 
replace the BLM's current rules governing venting and flaring, which 
are contained in NTL-4A. 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.

F. 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 would not 
directly impact the States. Therefore, in accordance with Executive 
Order 13132, the BLM has determined that this proposed rule would not 
have sufficient federalism implications to warrant preparation of a 
Federalism Assessment.

G. 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 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.

H. 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.
    The BLM evaluated this proposed rule under the Department's 
consultation policy and under the criteria in Executive Order 13175 to 
identify possible effects of the rule on federally recognized Indian 
Tribes. Since the BLM approves proposed operations on all Indian 
(except Osage Tribe) onshore oil and gas leases, the proposed rule has 
the potential to affect Indian Tribes.
    In August of 2021, the BLM sent a letter to each registered Tribe 
informing them of certain rulemaking efforts, including the development 
of this proposed rule. The letter offered Tribes the opportunity for 
individual government-to-government consultation regarding the proposed 
rule. The opportunity for Tribal consultation will remain open 
throughout the rulemaking process.

I. Paperwork Reduction Act

1. Overview
    The Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq.) 
generally provides that an agency may not conduct or sponsor a 
collection of information, and, notwithstanding any other provision of 
law, a person is not required to respond to collection of information 
unless it has been approved by the Office of Management and Budget 
(OMB) and displays a currently valid OMB Control Number. The existing 
information collections requirements contained in 43 CFR parts 3160, 
and 3170 have been approved by OMB under OMB Control Numbers 1004-0137 
and 1004-0211.
    This proposed rule contains new information collection (IC) 
requirements for BLM regulations, and a submission

[[Page 73612]]

to OMB for review under the PRA as outlined in the PRA implementing 
regulations at 5 CFR 1320.11. The IC requirements are necessary to 
assist the BLM in preventing venting, flaring, and leaks that waste the 
public's resources and assets. Respondents are holders of Federal and 
Indian oil and gas leases. The information collection requirements are 
outlined in the BLM's waste prevention standards as well as on BLM Form 
3160-5 (Sundry Notices and Reports on Wells). Form 3160-5 is used 
broadly for onshore oil and gas operations and production purposes 
under 43 CFR parts 3160 and 3170 and is approved under OMB control 
number 1004-0137. This proposed rule would not introduce any changes to 
Form 3160-5 and the form will continue to be approved under OMB control 
number 1004-0137; however, this information collection request (ICR) 
seeks to include burdens specific to the use of Form 3160-5 in regard 
to the proposed waste prevention standard subject to this proposed 
rule. The proposed rule contains the following new and revised IC 
requirements.
2. Effects on Existing Information Collections Requirements
Existing Sec.  3162.3-1 Drilling Applications and Plans (Application 
for Permit To Drill Oil Well and Waste Minimization Plan)
    Currently, the BLM does not have a mechanism whereby to factor 
waste into the decision-making process on an APD. As with the 2016 
Waste Prevention Rule, operators would be required to submit a ``waste 
minimization plan'' with an APD for an oil well. The waste minimization 
plan would disclose anticipated gas production and the capacity of the 
extant infrastructure to capture the gas. The BLM's onshore oil and gas 
operations and production regulations (43 CFR 3162.3-1(a) through (i)) 
currently provide that each well shall be drilled in conformity with an 
acceptable well-spacing program and that the operator shall submit to 
the authorized officer for approval an APD for each well. The APD is 
currently approved under OMB control number 1004-0137. This proposed 
would not introduce any changes to this requirement.
    This proposed rule would, however, add Sec.  3162.3-1(j), which 
would require that when submitting an APD for an oil well, the operator 
must also submit a plan to minimize waste of natural gas from that 
well. The waste minimization plan would need to demonstrate how the 
operator plans to capture associated gas upon the start of oil 
production, or as soon thereafter as reasonably possible, including an 
explanation of why any delay in the capture of the associated gas would 
be necessary.
Request for Approval for Royalty-Free Uses On-Lease or Off-Lease (43 
CFR 3178.5, 3178.7, 3178.8, and 3178.9)
    Sections 3178.5, 3178.7, 3178.8, and 3178.9 of the BLM's current 
regulations require submission of a Sundry Notice (Form 3160-5) to 
request prior written BLM approval for use of gas royalty-free for 
operations and production purposes on the lease, unit or communitized 
area. This proposed rule would not change this existing requirement.
3. New Information Collection Requirements
    This proposed rule would add a new subpart to the BLM's waste 
prevention standards. The proposed new subpart 3179 would add new 
information collection requirements as discussed later. The purpose of 
this subpart would be to implement and carry out the purposes of 
statutes relating to prevention of waste from covered Federal and 
Indian oil and gas leases by enhancing conservation of surface 
resources, particularly in regard to flaring and venting of produced 
gas, unavoidably and avoidably lost gas, and waste prevention.
Proposed Sec.  3179.4 Determining When the Loss of Oil or Gas Is 
Avoidable or Unavoidable (Notifying BLM Prior to Flaring)
    Proposed Sec.  3179.4(b)(13) would require that an operator notify 
the BLM through a Sundry Notice (Form 3160-5) prior to the flaring of 
gas from which at least 50 percent of NGLs have been removed and 
captured for market, if the operator wishes such flaring to qualify for 
royalty-free treatment.
Proposed Sec.  3179.9 Measuring and Reporting Volumes of Gas Vented and 
Flared
    Proposed Sec.  3179.9(a) of this proposed rule would require 
operators to measure or estimate all volumes of gas vented or flared 
from wells, facilities, and equipment on a lease, unit, or CA and 
report those volumes to ONRR. The burden associated with the reporting 
of volumes of gas vented or flared is accounted for under ONRR's OMB 
control number 1012-0004, 30 CFR Parts 1210 and 1212, Royalty and 
Production Reporting, using Form ONRR-4054, Oil and Gas Operations 
Report. This proposed rule would not change this existing reporting 
requirement. Section 3179.9(b) of the proposed rule would introduce 
inspection and measurement requirements for all high-pressure flares 
flaring 1,050 Mcf per month or more. Furthermore, as applicable, the 
orifice plate for the meter must be pulled and inspected at least once 
a year and the meter must be verified at least once a year.
Proposed Sec.  3179.103 Initial Production Testing and Sec.  3179.104 
Subsequent Well Tests (Requests for Longer Test Period or Increase 
Limit)
    This proposed rule would allow royalty-free flaring during initial 
production testing until one of the following occurs: (1) the operator 
determines that it has obtained adequate reservoir information; (2) 30 
days have passed since beginning of the production test; (3) 20,000 Mcf 
of gas have been flared; or (4) oil production begins. Proposed Sec.  
3179.103 would allow an operator to flare gas for 30 days since the 
beginning of the production test under certain conditions and specified 
limits. Proposed Sec.  3179.104 would permit an operator to flare gas 
for no more than 24 hours during well tests subsequent to the initial 
production test. An operator would be required to submit its request 
for a longer test periods or increased limits using a Sundry Notice.
Proposed Sec.  3179.105 Emergencies (Reporting Volumes Flared or Vented 
Beyond Timeframes)
    This proposed rule would allow for royalty-free flaring during an 
emergency situation that poses a danger to human health, safety, or the 
environment. This proposed rule defines ``emergency situation'' in a 
manner that emphasizes its temporary and unavoidable nature. This 
proposed rule would place a 48-hour limit on the royalty-free emergency 
flaring and specify circumstances that would not constitute an 
emergency. Proposed Sec.  3179.105 would allow an operator to flare or, 
if flaring is not feasible given the emergency situation, vent gas 
royalty-free under proposed Sec.  3179.4(b)(6) of this subpart during 
an emergency. Within 45 days of the start of the emergency situation, 
the operator would be required to estimate and report to the BLM on a 
Sundry Notice the volumes flared or vented beyond the timeframes 
specified in proposed Sec.  3179.105(b).
Proposed Sec.  3179.203 Oil Storage Vessels (Composition Analysis)
    Proposed Sec.  3179.203(b) would require tanks to be equipped with 
a vapor recovery system or other mechanism that avoids the intentional 
loss of gas from the tank unless it is technically or

[[Page 73613]]

economically infeasible. If an operator does not equip a tank with 
vapor recovery, the operator would be required to submit an annual 
compositional analysis based on samples of production flowing to the 
tank. The purpose of the compositional analysis would be to show 
whether installation of vapor recovery is feasible. These requirements 
would only apply to operations on Federal or Indian lands. 
Additionally, this section of this proposed rule would require that the 
compositional analysis be based on pressurized samples and that the 
compositional analysis must show the expected emissions from the 
storage vessel at 60 degrees Fahrenheit and 14.73 psia.
Proposed Sec.  3179.301 Leak Detection and Repair (LDAR) Program
    This proposed rule would require an operator to maintain an LDAR 
program designed to prevent the unreasonable and undue waste of Federal 
or Indian gas. The LDAR program would have to provide for regular (at 
least annual) inspections of all oil and gas production, processing, 
treatment, storage, and measurement equipment on the lease site. 
Operators would submit their LDAR programs for BLM review, and the BLM 
would notify the operator if its program was determined to be 
inadequate. Operators would be required to submit an annual report on 
inspections and repairs. Proposed Sec.  3179.301(b) would require that 
the operator of a Federal or Indian lease must submit a Sundry Notice 
to the BLM describing the operator's leak detection and repair program 
for the lease site, including the frequency of inspections and any 
instruments to be used for leak detection.
Proposed Sec.  3179.302 Repairing Leaks (Notifying the BLM for Delaying 
a Leak Repair)
    Proposed Sec.  3179.302(b) would require that if there is good 
cause for delaying the repair beyond 30 calendar days, the operator 
must notify the BLM of the cause by Sundry Notice.
Proposed Sec.  3179.303 Leak Detection Inspection Recordkeeping and 
Reporting
    Operators would be required to keep records of inspections and 
repairs and submit those records to the BLM upon request and to 
maintain such records for the period required under 43 CFR 3162.4-1(d).
Proposed Sec.  3179.401 State or Tribal Requests for Variances From the 
Requirements of This Subpart
    This proposed rule would include the State or Tribal variances 
provision from the 2016 Rule. In essence, this provision would allow 
States and Tribes to submit a request to the BLM to have analogous 
State or Tribal regulations apply in place of the BLM's. Section 
3179.401(e) of the proposed rule would require that if the BLM approves 
a variance under this section, the State or Tribe that requested the 
variance must notify the BLM in writing in a timely manner of any 
substantive amendments, revisions, or other changes to the State, local 
or Tribal regulation(s) or rule(s) to be applied under the variance. 
The purpose of this section and the associated information collection 
requirements is to reduce regulatory burden and duplication where a 
State or Tribal government has implemented regulations that are 
demonstrated to be at least as effective as the BLM's regulatory waste 
prevention requirements. The information collection requirements of 
this section are intended to assist the BLM in making appropriate 
determinations regarding the variances contemplated in proposed Sec.  
3179.401.
    In order to comply with the proposed information collection 
requirements, the BLM believes that some operators may need to purchase 
and install new equipment in order to collect, maintain, and report the 
required information. These one-time cost burdens for operators that 
may need to install new orifice meters and/or vapor recovery systems 
would be a result of the proposed rule.
D. Public Information Collection Burdens by Information Collection
    Currently, there are 50 respondents, 50 responses, 400 annual 
burden hours, and $0 non-hour cost burdens approved under OMB Control 
Number 1004-0211. These burdens pertain to a Request for Approval for 
Royalty-Free Uses On-Lease or Off-Lease (43 CFR 3178.5, 3178.7, 3178.8, 
and 3178.9) which is not addressed in this proposed rule. The BLM 
projects that the information collections as contained in this proposed 
rule would result in the following additional new burdens: 552 new 
respondents; 48,337 new annual responses; 117,410 new burden hours and 
$1,050,000 new non-hour cost burden. The new total estimated burdens 
for the existing information collection and for the proposed new 
information collections under this OMB Control Number are listed as 
follows.
    Title: Waste Prevention, Production Subject to Royalties, and 
Resource Conservation (43 CFR parts 3160, 3170, and 3179).
    OMB Control Number: 1004-0211.
    Form Number: 3160-5 (OMB Control Number 1004-0137).
    Type of Review: Revision of a currently approved collection.
    Description of Respondents: Federal and Indian leases, as well as 
State and private tracts committed to a federally approved lease, unit, 
or communitized area.
    Estimated Number of Respondents: 602.
    Estimated Number of Annual Responses: 48,337.
    Estimated Completion Time per Response: Varies from 1 hour to 8 
hours depending on activity.
    Estimated Total Annual Burden Hours: 117,410.
    Respondents' Obligation: Required to obtain or retain a benefit.
    Frequency of Collection: On occasion, Annually, Monthly, or one-
time depending on activity.
    Estimated Total Non-Hour Cost: $1,050,000.
    As part of our continuing effort to reduce paperwork and respondent 
burdens, we invite the public and other Federal agencies to comment on 
any aspect of this information collection, including:
    (1) Whether the collection of information is necessary for the 
proper performance of the functions of the agency, including whether 
the information will have practical utility;
    (2) The accuracy of our estimate of the burden for this collection 
of information, including the validity of the methodology and 
assumptions used;
    (3) Ways to enhance the quality, utility, and clarity of the 
information to be collected; and
    (4) Ways to minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., permitting 
electronic submission of response.
    In accordance with the PRA and the PRA implementing regulations at 
5 CFR 1320.11, the BLM has submitted an ICR to OMB for the new and 
revised ICs in this proposed rule. If you wish to comment on the IC 
requirements in this proposed rule, please see the DATES and ADDRESSES 
sections earlier.

J. National Environmental Policy Act

    The BLM has prepared a draft EA to determine whether this proposed 
rule

[[Page 73614]]

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.). The draft EA will be shared with the public during the 
public comment period on the proposed rule. The BLM will respond to 
substantive comments on the EA. 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-AE79'', 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 
earlier.

K. Actions Concerning Regulations That Significantly Affect Energy 
Supply, Distribution, or Use (Executive Order 13211)

    Under Executive Order 13211, agencies are required to prepare and 
submit to OMB a Statement of Energy Effects for significant energy 
actions. This statement is to include a detailed statement of ``any 
adverse effects on energy supply, distribution, or use (including a 
shortfall in supply, price increases, and increase use of foreign 
supplies)'' for the action and reasonable alternatives and their 
effects.
    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 proposed rulemaking, and notices of 
proposed 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 (OIRA) 
as a significant energy action.''
    Since the compliance costs for this rule would represent a small 
fraction of company net incomes, the BLM has concluded that the rule is 
unlikely to impact the investment decisions of firms. See Section 9 of 
the BLM's RIA. Also, any incremental production of gas estimated to 
result from the rule's enactment would constitute a small fraction of 
total U.S. gas production, and any potential and temporary deferred 
production of oil would likewise constitute a small fraction of total 
U.S. oil production. For these reasons, we do not expect that the 
proposed rule would significantly impact the supply, distribution, or 
use of energy. As such, the rulemaking is not a ``significant energy 
action'' as defined in Executive Order 13211.

L. Clarity of This Regulation (Executive Orders 12866, 12988, and 
13563)

    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 proposed 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 final rule are: Amanda Eagle, 
Petroleum Engineer, Santa Fe, NM; Beth Poindexter, Petroleum Engineer, 
Santa Fe, NM (now retired); and Christopher Rhymes, Attorney Advisor, 
Office of the Solicitor, Department of the Interior. Technical support 
provided by: Tyson Sackett, Economist, Cheyenne, WY; Scott Rickard, 
Economist, Billings, MT; Janna Simonsen, Senior Natural Resources 
Specialist, Santa Fe, NM; and Barbara Sterling, Senior Natural 
Resources Specialist, BLM Colorado State Office (now retired). Assisted 
by: Stormy Phillips, Petroleum Engineer, Tulsa, OK (Contractor); Casey 
Hodges, Petroleum Engineer, Granby, CO (Contractor); and Senior 
Regulatory Analysts Faith Bremner and Darrin King of the BLM Washington 
Office.

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, Immediate 
assessments, Incorporation by reference, Indians-lands, Mineral 
royalties, Oil and gas exploration, Oil and gas measurement, Public 
lands--mineral resources, Reporting and record keeping requirements, 
Royalty-free use, Venting.

    For the reasons set out in the preamble, the Bureau of Land 
Management proposes to amend 43 CFR parts 3160 and 3170 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; 43 U.S.C. 1732(b), 1733, 1740; and Sec. 107, Pub. L. 114-
74, 129 Stat. 599, unless otherwise noted.

0
2. Amend Sec.  3162.3-1 by adding paragraphs (j) and (k) to read as 
follows:


Sec.  3162.3-1  Drilling applications and plans.

* * * * *
    (j) When submitting an Application for Permit to Drill an oil well, 
the operator must also submit a plan to minimize waste of natural gas 
from that well. The waste minimization plan must demonstrate how the 
operator plans to capture associated gas upon the start of oil 
production, or as soon thereafter as reasonably possible, including an 
explanation of why any delay in capture of the associated gas would be 
necessary. The BLM may deny an Application for Permit to Drill if the 
operator fails to submit a complete and adequate waste minimization 
plan. The waste minimization plan must include the following 
information:
    (1) The anticipated completion date of the proposed well(s);
    (2) A description of anticipated production, including:
    (i) The anticipated date of first production;
    (ii) The expected oil and gas production rates and duration from 
the proposed well. If the proposed well is on a multi-well pad, the 
plan must include the total expected production for all wells being 
completed;

[[Page 73615]]

    (iii) The expected production decline curve of both oil and gas 
from the proposed well; and
    (iv) The expected Btu value for gas production from the proposed 
well.
    (3) 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;
    (4) Identification of a gas pipeline to which the operator plans to 
connect that has sufficient capacity to accommodate the anticipated 
production of the proposed well(s), and information on the pipeline, 
including, to the extent that the operator can obtain it, the following 
information:
    (i) Maximum current daily capacity of the pipeline;
    (ii) Current throughput of the pipeline;
    (iii) Anticipated daily capacity of the pipeline at the anticipated 
date of first gas sales from the proposed well;
    (iv) Anticipated throughput of the pipeline at the anticipated date 
of first gas sales from the proposed well; and
    (v) Any plans known to the operator for expansion of pipeline 
capacity for the area that includes the proposed well;
    (5) If an operator cannot identify a gas pipeline with sufficient 
capacity to accommodate the anticipated production of the proposed 
well(s), the waste minimization plan must also include:
    (i) A gas-pipeline-system location map of sufficient detail, size, 
and scale to show the field in which the proposed well will be located, 
and all existing gas trunklines within 20 miles of the well. The map 
must also contain:
    (A) The name and location of the gas processing plant(s) closest to 
the proposed well(s), and the name and location of the intended 
destination processing plant, if different;
    (B) The name and location of the operator of each gas trunkline 
within 20 miles of the proposed well;
    (C) The proposed route and tie-in point that connects or could 
connect the subject well to an existing gas trunkline;
    (ii) The total volume of produced gas, and percentage of total 
produced gas, that the operator is currently flaring or venting from 
wells in the same field and any wells within a 20-mile radius of that 
field; and
    (iii) A detailed evaluation, including estimates of costs and 
returns, of opportunities for on-site capture approaches, such as 
compression or liquefaction of natural gas, removal of natural gas 
liquids, or generation of electricity from gas.
    (6) Any other information demonstrating the operator's plans to 
avoid the waste of gas production from any source, including, as 
appropriate, from pneumatic equipment, storage tanks, and leaks.
    (k) Where the available information indicates that drilling an oil 
well could result in the unreasonable and undue waste of Federal or 
Indian gas (as defined in Sec.  3179.4), the BLM may take one of the 
following actions:
    (1) Approve the application subject to conditions for gas capture 
and/or royalty payments on vented or flared gas; or
    (2) Defer action on the permit in the interest of preventing waste. 
The BLM will notify the applicant that its application, if approved, 
could result in unreasonable and undue waste of Federal or Indian gas 
and specify any steps the applicant could take for the permit to be 
issued. If the applicant does not address the potential for 
unreasonable and undue waste to the BLM's satisfaction within 2 years 
of the applicant's receipt of the BLM's initial notice under this 
paragraph, the BLM may deny the permit.

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.

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 Safety.
3179.7 Gas-well gas.
3179.8 Oil-well gas.
3179.9 Measuring and reporting volumes of gas vented and flared.
3179.10 Determinations regarding royalty-free flaring.
3179.11 Incorporation by Reference (IBR).
3179.12 Reasonable precautions to prevent waste.

Flaring and Venting Gas During Drilling and Production Operations

3179.101 Well drilling.
3179.102 Well completion and related operations.
3179.103 Initial production testing.
3179.104 Subsequent well tests.
3179.105 Emergencies.

Gas Flared or Vented From Equipment and During Well Maintenance 
Operations

3179.201 Pneumatic controllers and pneumatic diaphragm pumps.
3179.203 Oil storage vessels.
3179.204 Downhole well maintenance and liquids unloading.
3179.205 Size of production equipment.

Leak Detection and Repair (LDAR)

3179.301 Leak detection and repair program.
3179.302 Repairing leaks.
3179.303 Leak detection inspection recordkeeping and reporting.

State or Tribal Variances

3179.401 State or Tribal requests for variances from the 
requirements of this subpart.

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) oil and gas 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) Except as provided in provided in paragraph (b), this subpart 
applies to:
    (1) All onshore Federal and Indian (other than Osage Tribe) oil and 
gas leases, units, and communitized areas;
    (2) 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;
    (3) Leases and other business agreements and contracts for the 
development of Tribal energy resources under a Tribal Energy Resource 
Agreement (TERA) entered into with the Secretary, unless specifically 
excluded in the lease, other business agreement, or TERA;
    (4) Wells, equipment, and operations on State or private tracts 
that are committed to a federally approved unit or communitization 
agreement defined by or established under 43 CFR subpart 3105 or 43 CFR 
part 3180.
    (b) Sections 3179.6, 3179.201, 3179.203, and 3179.301-.303 of this

[[Page 73616]]

subpart apply only to operations and production equipment located on a 
Federal or Indian oil and gas lease. They do not apply to operations 
and production equipment on State or private tracts, even where those 
tracts are committed to a federally approved unit or communitization 
agreement.
    (c) 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 
reinjection and royalty-free on-site uses pursuant to subpart 3178.
    Compressor station means any permanent combination of one or more 
compressors that move natural gas at increased pressure through 
gathering or transmission pipelines, or into or out of storage. This 
includes, but is not limited to, gathering and boosting stations and 
transmission compressor stations. The combination of one or more 
compressors located at a well site, or located at an onshore natural 
gas processing plant, is not a compressor station.
    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. Unless more specific British 
thermal unit (Btu) values are available, a well with a gas-to-oil ratio 
greater than 6,000 standard cubic feet (scf) of gas per barrel of oil 
is a gas well.
    High-pressure flare means an open-air flare stack or flare pit 
designed for the combustion of natural gas leaving a pressurized 
production vessel (such as a separator or heater-treater) that is not a 
storage vessel.
    Leak means a release of natural gas from a component that is not 
associated with normal operation of the component, when such release 
is:
    (1) A hydrocarbon emission detected by use of an optical-gas-
imaging instrument;
    (2) At least 500 ppm of hydrocarbon detected using a portable 
analyzer or other instrument that can measure the quantity of the 
release; or
    (3) A hydrocarbon emission detected via visible bubbles detected 
using soap solution.
    Releases due to normal operation of equipment intended to vent as 
part of normal operations, such as gas-driven pneumatic controllers and 
safety-release devices, are not considered leaks unless the releases 
exceed the quantities and frequencies expected during normal 
operations. Releases due to operator errors or equipment malfunctions 
or from control equipment at levels that exceed applicable regulatory 
requirements, such as releases from a thief hatch left open, a leaking 
vapor recovery unit, or an improperly sized combustor, are considered 
leaks.
    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.
    Low-pressure flare means any flare that does not meet the 
definition of high-pressure flare.
    Pneumatic controller means an automated instrument used for 
maintaining a process condition, such as liquid level, pressure, delta-
pressure, or temperature.
    Storage vessel means a tank or other vessel that contains an 
accumulation of crude oil, condensate, intermediate hydrocarbon 
liquids, or produced water, and that is constructed primarily of non-
earthen materials (such as wood, concrete, steel, fiberglass, or 
plastic) that provides structural support. A well-completion vessel 
that receives recovered liquids from a well after startup of production 
following flowback, for a period that exceeds 60 days, is considered a 
storage vessel under this subpart, unless the storage of the recovered 
liquids in the vessel is governed by Sec.  3162.3-3 of this title. For 
purposes of this subpart, the following are not considered storage 
vessels:
    (1) Vessels that are skid-mounted or permanently attached to 
something that is mobile (such as trucks, railcars, barges or ships), 
and are intended to be located at a site for less than 180 consecutive 
days. This exclusion does not apply to well-completion vessels or to 
storage vessels that are located at a site for at least 180 consecutive 
days.
    (2) Process vessels, such as surge-control vessels, bottoms 
receivers, or knockout vessels.
    (3) Pressure vessels designed to operate in excess of 15 psig and 
without emissions to the atmosphere.
    (4) Tanks holding hydraulic-fracturing fluid prior to 
implementation of an approved permanent disposal plan under Onshore Oil 
and Gas Order No. 7.
    Unreasonable and undue waste of gas means a frequent or ongoing 
loss of gas that could be avoided without causing an ultimately greater 
loss of equivalent total energy than would occur if the loss of gas 
were to continue unabated.


Sec.  3179.4  Determining when the loss of oil or gas is avoidable or 
unavoidable.

    For purposes of this subpart:
    (a) Lost oil is ``unavoidably lost'' if the operator has not been 
negligent; the operator has taken prudent and reasonable steps to avoid 
waste; and the operator has complied fully with applicable laws, lease 
terms, regulations, provisions of a previously approved operating plan, 
and other written orders of the BLM.
    (b) Lost gas is ``unavoidably lost'' if the operator has not been 
negligent; the operator has taken prudent and reasonable steps to avoid 
waste; the operator has complied fully with applicable laws, lease 
terms, regulations, provisions of a previously approved operating plan, 
and other written orders of the BLM; and the gas is lost from the 
following operations or sources:
    (1) Well drilling;
    (2) Well completion and related operations, subject to the 
limitations in Sec.  3179.102;
    (3) Initial production tests, subject to the limitations in Sec.  
3179.103;
    (4) Subsequent well tests, subject to the limitations in Sec.  
3179.104;
    (5) Exploratory coalbed methane well dewatering;
    (6) Emergency situations, subject to the limitations in Sec.  
3179.105;
    (7) Normal operating losses from a natural-gas-activated pneumatic 
controller or pump;
    (8) Normal operating losses from a storage vessel or other low-
pressure production vessel that is in compliance with Sec.  3179.203 
and Sec.  3174.5(b);
    (9) Well venting in the course of downhole well maintenance and/or 
liquids unloading performed in compliance with Sec.  3179.204;
    (10) Leaks, when the operator has complied with the leak detection 
and repair requirements in Sec. Sec.  3179.301 and 302;
    (11) Facility and pipeline maintenance, such as when an operator 
must blow-down and depressurize equipment to perform maintenance or 
repairs;
    (12) Pipeline capacity constraints, midstream processing failures, 
or other

[[Page 73617]]

similar events that prevent oil-well gas from being transported through 
the connected pipeline, subject to the limitations in Sec.  3179.8;
    (13) Flaring of gas from which at least 50 percent of natural gas 
liquids have been removed and captured for market, if the operator has 
notified the BLM through a Sundry Notices and Report on Wells, Form 
3160-5 (Sundry Notice) that the operator is conducting such capture and 
the inlet of the equipment used to remove the natural gas liquids will 
be an FMP;
    (14) Flaring of gas from a well that is not connected to a gas 
pipeline, to the extent that such flaring was authorized by the BLM in 
the approval of the Application for Permit to Drill.
    (c) Lost oil or gas that is not ``unavoidably lost'' as defined in 
paragraphs (a) and (b) of this section is ``avoidably lost.''


Sec.  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.  3179.6  Safety.

    (a) The operator must flare, rather than vent, any gas that is not 
captured, except:
    (1) When flaring the gas is technically infeasible, such as when 
volumes are too small to flare;
    (2) Under emergency conditions, 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 the gas is vented from a storage vessel, provided that 
Sec.  3179.203 does not require the capture or flaring of the gas;
    (5) When the gas is vented during downhole well maintenance or 
liquids unloading activities performed in compliance with Sec.  
3179.204;
    (6) When the gas is vented through a leak;
    (7) When venting is necessary to allow non-routine facility and 
pipeline maintenance, such as when an operator must, upon occasion, 
blow-down and depressurize equipment to perform maintenance or repairs; 
or
    (8) When a release of gas is necessary and flaring is prohibited by 
Federal, State, local, or Tribal law or regulation, or enforceable 
permit term.
    (b) All flares or combustion devices must be equipped with an 
automatic ignition system. Upon discovery of a flare that is not lit, 
the BLM may subject the operator to an immediate assessment of $1,000 
per violation.
    (c) The flare must be placed a sufficient distance from the tank 
battery containment area and any other significant structures or 
objects so that the flare does not create a safety hazard. The 
prevailing wind direction must be taken into consideration when 
locating the flare.


Sec.  3179.7  Gas-well gas.

    Gas well gas may not be flared or vented, except where it is 
unavoidably lost pursuant to Sec.  3179.4(b).


Sec.  3179.8  Oil-well gas.

    (a) Where oil-well gas must be flared due to pipeline capacity 
constraints, midstream processing failures, or other similar events 
that prevent produced gas from being transported through the connected 
pipeline, up to 1,050 Mcf per month, per lease, unit, or CA, of such 
flared gas will be considered ``unavoidably lost'' for the purposes of 
Sec. Sec.  3179.4(b)(12) and 3179.5.
    (b) Where substantial volumes of oil-well gas are flared, resulting 
in the unreasonable and undue waste of Federal or Indian gas, the BLM 
may order the operator to curtail or shut-in production as necessary to 
avoid the unreasonable and undue waste of Federal or Indian gas. The 
BLM will not issue a shut-in or curtailment order under this paragraph 
unless the operator has reported flaring in excess of 4,000 Mcf per 
month for 3 consecutive months and the BLM confirms that flaring is 
ongoing.
    (c) If a BLM order under paragraph (b) of this section would 
adversely affect production of oil or gas from non-Federal and non-
Indian mineral interests (e.g., production allocated to a mix of 
Federal, State, Indian, and private leases under a unit agreement), the 
BLM may issue such an order only to the extent that the BLM is 
authorized to regulate the rate of production under the governing unit 
or communitization agreement. In the absence of such authorization, the 
BLM will contact the State regulatory authority having jurisdiction 
over the oil and gas production from the non-Federal and non-Indian 
interests and request that that entity take appropriate action to limit 
the waste of gas.


Sec.  3179.9   Measuring and reporting volumes of gas vented and 
flared.

    (a) The operator must measure or estimate all volumes of gas vented 
or flared from wells, facilities, and equipment on a lease, unit PA, or 
communitized area and report those volumes under applicable Office of 
Natural Resources Revenue (ONRR) reporting requirements (see the ONRR 
Minerals Revenue Reporter Handbook for details on reporting vented and 
flared volumes).
    (b) The following requirements apply to all high-pressure flares 
flaring 1,050 Mcf per month or more:
    (1) Flaring from all high-pressured flares must be measured by 
orifice meters. Starting on [DATE 6 MONTHS AFTER THE EFFECTIVE DATE OF 
THE FINAL RULE], an appropriate meter must be installed at all high-
pressure flares.
    (2) The orifice plate for the meter must be pulled and inspected at 
least once a year.
    (3) The meter must be verified at least once a year.
    (4) The quality of the flared gas must be determined at least once 
a year.
    (A) A C6+ analysis must be performed for any gas samples 
used in determining the quality of the flared gas.
    (B) The gas sample must be taken from one of the following 
locations:
    (i) At the flare meter;
    (ii) At the gas FMP, if there is a gas FMP at the well site and the 
gas composition is the same as that of the flare-meter gas; or
    (iii) At another location approved by the BLM.
    (5) Measurement at the high-pressure flare must achieve an overall 
measurement uncertainty within 5 percent.
    (6) The operator must take radiant heat from the flare into 
consideration when determining the placement of the flare meter.
    (7) Except as otherwise specified in this paragraph, measurement 
from high-pressure flares must meet the measurement requirements for a 
low-volume FMP under subpart 3175 of this part.
    (c) For all other flares, the operator must:
    (1) Measure flared volumes in accordance with paragraph (b) of this 
section;
    (2) Estimate flared volumes utilizing sampling and compositional 
analysis conducted pursuant to, or consistent with, Sec.  3179.203(c); 
or
    (3) Estimate flared volumes using another method approved by the 
BLM.
    (d) If a flare is combusting gas that is combined across multiple 
leases, unit PAs, or communitized areas, the operator may measure or 
estimate the gas at a single point at the flare but must use an 
allocation method approved by the BLM to allocate the quantities of 
flared gas to each lease, unit PA, or communitized area.
    (e) Measurement points for flared volumes are not FMPs for the 
purposes of subpart 3175 of this part.

[[Page 73618]]

Sec.  3179.10  Determinations regarding royalty-free flaring.

    (a) Approvals to flare royalty free, which are in effect as of the 
effective date of this rule, will continue in effect until [DATE 6 
MONTHS AFTER THE EFFECTIVE DATE OF THE FINAL RULE]. From this date 
forward, the royalty-bearing status of all flaring will be determined 
according to the provisions of this subpart.
    (b) The provisions of this subpart do not affect any determination 
made by the BLM before or after [EFFECTIVE DATE OF THE FINAL RULE], 
with respect to the royalty-bearing status of flaring that occurred 
prior to [EFFECTIVE DATE OF THE FINAL RULE].


Sec.  3179.11   Incorporation by Reference (IBR).

    Certain material is incorporated by reference into this subpart 
with the approval of the Director of the Federal Register under 5 
U.S.C. 552(a) and 1 CFR part 51. To enforce any edition other than that 
specified in this section, the BLM must publish a rule in the Federal 
Register, and the material must be reasonably available to the public. 
All approved incorporation by reference (IBR) material is available for 
inspection at the Bureau of Land Management (BLM) and at the National 
Archives and Records Administration (NARA). Contact Amanda Eagle with 
the BLM at: Division of Fluid Minerals, 301 Dinosaur Trail, Santa Fe, 
NM 87505, telephone 505-954-2016; email [email protected]; https://www.blm.gov/programs/energy-and-minerals/oil-and-gas. The approved 
material is also available for inspection at all BLM offices with 
jurisdiction over oil and gas activities. For information on inspecting 
this material at NARA, visit www.archives.gov/federal-register/cfr/ibr-locations.html or email [email protected]. The material may be 
obtained from the following source:
    (a) GPA Midstream Association (GPA), 6060 American Plaza, Suite 
700, Tulsa, OK 74135; telephone 918-493-3872.
    (1) GPA Midstream Standard 2286-14, Method for the Extended 
Analysis for Natural Gas and Similar Gaseous Mixtures by Temperature 
Program Gas Chromatography, Revised 2014 (``GPA 2286''), IBR approved 
for Sec.  3179.203(c).
    (2) GPA Midstream Standard 2186-14, Method for the Extended 
Analysis of Hydrocarbon Liquid Mixtures Containing Nitrogen and Carbon 
Dioxide by Temperature Programmed Gas Chromatography, Revised 2014 
(``GPA 2186''), IBR approved for Sec.  3179.203(c).
    (b) [Reserved]


Sec.  3179.12  Reasonable precautions to prevent waste.

    (a) Operators must use all reasonable precautions to prevent the 
waste of oil or gas developed from the lease.
    (b) The Authorized Officer may specify reasonable measures to 
prevent waste as conditions of approval of an Application for Permit to 
Drill.
    (c) After an Application for Permit to Drill is approved, the 
Authorized Officer may order an operator to implement, within a 
reasonable time, additional reasonable measures to prevent waste at 
ongoing exploration and production operations.
    (d) Reasonable measures to prevent waste may reflect factors 
including but not limited to relevant advances in technology and 
changes in industry practice.

Flaring and Venting Gas During Drilling and Production Operations


Sec.  3179.101  Well drilling.

    If, during drilling, gas is lost as a result of loss of well 
control, the BLM will make a determination as to whether the loss of 
well control was due to operator negligence. Such gas is avoidably lost 
if the BLM determines that the loss of well control was due to operator 
negligence. The BLM will notify the operator in writing when it makes a 
determination that gas was lost due to operator negligence.


Sec.  3179.102  Well completion and related operations.

    (a) When a new completion is in the process of being hydraulically 
fractured, up to 10,000 Mcf of gas that reaches the surface during well 
completion, post-completion, and fluid recovery operations may be 
flared royalty-free.
    (b) When an existing completion is refractured and the well is 
connected to a gas pipeline, up to 5,000 Mcf of gas that reaches the 
surface during well completion, post-completion, and fluid recovery 
operations may be flared royalty-free.


Sec.  3179.103  Initial production testing.

    (a) Gas flared during a well's initial production test is royalty-
free under Sec. Sec.  3179.4(b)(3) and 3179.5(b) of this subpart until 
one of the following occurs:
    (1) The operator determines that it has obtained adequate reservoir 
information for the well;
    (2) 30 days have passed since the beginning of the production test, 
except as provided in paragraphs (b) and (d) of this section;
    (3) The operator has flared 20,000 Mcf of gas, including volumes 
flared under Sec.  3179.102(a), except as provided in paragraph (c) of 
this section; or
    (4) Oil production begins.
    (b) The BLM may extend the period specified in paragraph (a)(2) of 
this section, not to exceed an additional 60 days, based on testing 
delays caused by well or equipment problems or if there is a need for 
further testing to develop adequate reservoir information.
    (c) The BLM may increase the limit specified in paragraph (a)(3) of 
this section by up to an additional 30,000 Mcf of gas for exploratory 
oil wells in remote locations where additional testing is needed in 
advance of development of pipeline infrastructure.
    (d) During the dewatering and initial evaluation of an exploratory 
coalbed methane well, the 30-day period specified in paragraph (a)(2) 
of this section is extended to 90 days. The BLM may approve up to two 
extensions of this evaluation period, of up to 90 days each.
    (e) The operator must submit its request for a longer test period 
or increased limit under paragraphs (b), (c), or (d) of this section 
using a Sundry Notice.


Sec.  3179.104  Subsequent well tests.

    During well tests subsequent to the initial production test, the 
operator may flare gas royalty free under Sec.  3179.4(b)(4) for no 
more than 24 hours, unless the BLM approves or requires a longer 
period. The operator must submit any request for a longer period under 
this section using a Sundry Notice.


Sec.  3179.105  Emergencies.

    (a) An operator may flare or, if flaring is not feasible due to the 
emergency situation, vent gas royalty-free under Sec.  3179.4(b)(6) of 
this subpart for no longer than 48 hours during an emergency situation. 
For purposes of this subpart, an ``emergency situation'' is a 
temporary, infrequent, and unavoidable situation in which the loss of 
gas is necessary to avoid a danger to human health, safety, or the 
environment.
    (b) The following examples do not constitute emergency situations 
for the purposes of royalty assessment:
    (1) Recurring failures within a single piece of equipment;
    (2) The operator's failure to install appropriate equipment of a 
sufficient capacity to accommodate the production conditions;
    (3) Failure to limit production when the production rate exceeds 
the capacity of the related equipment, pipeline, or

[[Page 73619]]

gas plant, or exceeds sales contract volumes of oil or gas;
    (4) Scheduled maintenance; or
    (5) A situation caused by operator negligence.
    (c) 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.

Gas Flared or Vented From Equipment and During Well Maintenance 
Operations


Sec.  3179.201  Pneumatic controllers and pneumatic diaphragm pumps.

    (a) Where a lease, unit PA, or CA is producing at least 120 Mcf of 
gas or 20 barrels of oil per month, the operator may not use a natural-
gas-activated pneumatic controller or pneumatic diaphragm pump with a 
bleed rate that exceeds 6 scf per hour.
    (b) Operators must comply with paragraph (a) of this section 
beginning on [DATE 1 YEAR AFTER THE EFFECTIVE DATE OF THE FINAL RULE].


Sec.  3179.203  Oil storage vessels.

    (a) The thief hatch on a storage vessel may be open only to the 
extent necessary to conduct production and measurement operations. Upon 
discovery of a thief hatch that has been left open and unattended, the 
BLM will impose an immediate assessment of $1,000 on the operator.
    (b) Beginning on [DATE 1 YEAR AFTER THE EFFECTIVE DATE OF THE FINAL 
RULE], all oil storage vessels must be equipped with a vapor-recovery 
system or other mechanism that avoids the intentional loss of natural 
gas from the vessel, unless the operator determines that equipping the 
storage vessel with a vapor-recovery system or other appropriate 
mechanism is technically or economically infeasible.
    (c) Where an operator has not equipped a storage vessel with a 
vapor recovery system or other appropriate mechanism under paragraph 
(b) of this section, the operator, using a Sundry Notice, must submit 
an annual compositional analysis of production flowing to the storage 
vessel.
    (1) The compositional analysis must be based on pressurized samples 
taken downstream of the last pressurized vessel and upstream of the 
last pressure reduction (e.g., a valve) prior to the oil flowing into 
the storage vessel.
    (2) The compositional analysis must show the expected emissions 
from the storage vessel at 60 degrees Fahrenheit and 14.73 psia.
    (3) The following sampling requirements apply:
    (i) Samples must be collected from a sample probe located 
downstream of the last pressurized vessel at least 2 feet below the 
gas-liquid interface of the vessel on the oil discharge, and upstream 
of the last pressure reduction prior to oil flowing into the storage 
vessel.
    (ii) Samples must be collected in constant pressure (CP) cylinders.
    (iii) Samples must be collected at a rate between 100 ml/minute and 
60 ml/minute.
    (iv) Samples must be collected within 30 minutes of the well cycle 
completion for intermittent flow.
    (v) Samples must indicate the pressure and temperature at the 
sample probe at the time of sampling. The equipment used to measure 
pressure and temperature must be certified to NIST within 0.5 psi and 1 degree Fahrenheit.
    (4) The following analysis requirements apply:
    (i) Flash-gas compositional analysis must be consistent with GPA 
2286 (incorporated by reference, see Sec.  3179.11).
    (ii) Dead oil composition analysis must be consistent with GPA 2186 
(incorporated by reference, see Sec.  3179.11).
    (d) Where practical and safe, gas released from an oil storage 
vessel must be flared rather than vented. An operator may commingle 
vapors from multiple storage vessels to a single flare without prior 
approval from the BLM.


Sec.  3179.204  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 per event, 
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.


Sec.  3179.205  Size of production equipment.

    Production and processing equipment must be of sufficient size to 
accommodate the volumes of production expected to occur at the lease 
site.

Leak Detection and Repair (LDAR)


Sec.  3179.301  Leak detection and repair program.

    (a) Pursuant to paragraph (b) of this section, the operator must 
maintain a leak detection and repair (LDAR) program designed to prevent 
the unreasonable and undue waste of Federal or Indian gas. The LDAR 
program must provide for regular inspections of all oil and gas 
production, processing, treatment, storage, and measurement equipment 
on the lease site.
    (b) The operator of a Federal or Indian lease must submit a Sundry 
Notice to the BLM describing the operator's LDAR program for the lease 
site, including the frequency of inspections and any instruments to be 
used for leak detection. The BLM will review the operator's LDAR 
program and notify the operator if the BLM deems the program to be 
inadequate. The notification will explain the basis for the BLM's 
determination, identify the plan's inadequacies, describe any 
additional measures that could address the inadequacies, and provide a 
reasonable time frame in which the operator must submit a revised LDAR 
program to the BLM for review. For leases in effect on [EFFECTIVE DATE 
OF THE FINAL RULE], the operator must submit the Sundry Notice 
describing the operator's LDAR program no later than [6 MONTHS AFTER 
THE EFFECTIVE DATE OF THE FINAL RULE]. For leases issued after 
[EFFECTIVE DATE OF THE FINAL RULE], the operator must submit the Sundry 
Notice describing the operator's LDAR program within six months of the 
lease's issuance.

[[Page 73620]]

    (c) LDAR inspections must occur on an annual basis, if not more 
frequently. For leases in effect on [EFFECTIVE DATE OF THE FINAL RULE] 
and on which operations have commenced, the operator must conduct an 
initial inspection within 1 year of [EFFECTIVE DATE OF THE FINAL RULE]. 
For other leases, the operator must conduct an initial inspection 
within one year of the commencement of operations.


Sec.  3179.302  Repairing leaks.

    (a) The operator must repair any leak as soon as practicable, and 
in no event later than 30 calendar days after discovery, unless good 
cause exists to delay the repair for a longer period. Good cause for 
delay of repair exists if the repair (including replacement) is 
technically infeasible (including unavailability of parts that have 
been ordered), would require a pipeline blowdown, a compressor station 
shutdown, or a well shut-in, or would be unsafe to conduct during 
operation of the unit.
    (b) If there is good cause for delaying the repair beyond 30 
calendar days, the operator must notify the BLM of the cause by Sundry 
Notice and must complete the repair at the earliest opportunity, such 
as during the next compressor station shutdown, well shut-in, or 
pipeline blowdown. In no case will the BLM approve a delay of more than 
2 years.
    (c) Not later than 30 calendar days after completion of a repair, 
the operator must verify the effectiveness of the repair by conducting 
a follow-up inspection using an appropriate instrument or a soap bubble 
test under Section 8.3.3 of EPA Method 21--Determination of Volatile 
Organic Compound Leaks (40 CFR Appendix A-7 to part 60).
    (d) If the repair is not effective, the operator must complete 
additional repairs within 15 calendar days and conduct follow-up 
inspections and repairs until the leak is repaired.


Sec.  3179.303  Leak detection inspection recordkeeping and reporting.

    (a) The operator must maintain the following records for the period 
required under Sec.  3162.4-1(d) of this title and make them available 
to the BLM upon request:
    (1) For each inspection required under Sec.  3179.301 of this 
subpart, documentation of:
    (i) The date of the inspection; and
    (ii) The site where the inspection was conducted;
    (2) The monitoring method(s) used to determine the presence of 
leaks;
    (3) A list of leak components on which leaks were found;
    (4) The date each leak was repaired; and
    (5) The date and result of the follow-up inspection(s) required 
under Sec.  3179.302(c) of this subpart.
    (b) By March 31 of each calendar year, the operator must provide to 
the BLM an annual summary report on the previous year's inspection 
activities that includes:
    (1) The number of sites inspected;
    (2) The total number of leaks identified, categorized by the type 
of component;
    (3) The total number of leaks repaired;
    (4) The total number of leaks that were not repaired as of December 
31 of the previous calendar year due to good cause and an estimated 
date of repair for each leak.
    (c) Audio/visual/olfactory (AVO) checks are not required to be 
documented unless they find a leak requiring repair.

State or Tribal Variances


Sec.  3179.401   State or Tribal requests for variances from the 
requirements of this subpart.

    (a)(1) At the request of a State (for Federal land) or a Tribe (for 
Indian lands), the BLM State Director may grant a variance, from any 
provision(s) of this subpart, that would apply to all Federal leases, 
units, or communitized areas within a State or to all Tribal leases, 
IMDAs, units, or communitized areas within the Tribe's lands, or to 
specific fields or basins within the State or Tribe's lands, if the BLM 
finds that the variance would meet the criteria in paragraph (b) of 
this section.
    (2) A State or Tribal variance request must:
    (i) Identify the provision(s) of this subpart from which the State 
or Tribe is requesting the variance;
    (ii) Identify the State, local, or Tribal regulation(s) or rule(s) 
that would be applied in place of the provision(s) of this subpart;
    (iii) Explain why the variance is needed; and
    (iv) Demonstrate how the State, local, or Tribal regulation(s) or 
rule(s) would perform at least equally well to reduce waste of oil and 
gas, reduce environmental impacts from venting and/or flaring of gas, 
assure appropriate royalty payments to the United States or to the 
beneficial Indian owners, and ensure the safe and responsible 
production of oil and gas, compared to the particular regulatory 
provision(s) from which the State or Tribe is requesting the variance.
    (b) The BLM State Director, after considering all relevant factors, 
may approve the request for a variance, or approve it with one or more 
conditions, only if the BLM determines that the State, local or Tribal 
regulation(s) or rule(s) would perform at least equally well in terms 
of reducing waste of oil and gas, reducing environmental impacts from 
venting and/or flaring of gas, assuring appropriate royalty payments to 
the United States or to the beneficial Indian owners, and ensuring the 
safe and responsible production of oil and gas, compared to the 
particular regulatory provision(s) from which the State or Tribe is 
requesting the variance, and would be consistent with the terms of the 
affected Federal or Indian leases and applicable statutes. The BLM's 
decision to grant or deny the variance will be in writing and is 
discretionary. The decision on a variance request is not subject to 
administrative appeals under 43 CFR part 4.
    (c) A variance from any particular regulatory requirement of this 
subpart does not constitute a variance from provisions of any other 
regulations, laws, or orders.
    (d) The BLM reserves the right to rescind a variance or modify any 
condition of approval, in which case the BLM will provide notice to the 
affected State or Tribe.
    (e) If the BLM approves a variance under this section, the State or 
Tribe that requested the variance must notify the BLM in writing and in 
a timely manner of any substantive amendments, revisions, or other 
changes to the State, local or Tribal regulation(s) or rule(s) to be 
applied under the variance.
    (f) If the BLM approves a variance under this section, the State, 
local or Tribal regulation(s) or rule(s) to be applied under the 
variance, including any changes to the regulation(s) or rule(s) 
described in paragraph (e) of this section, may be enforced by the BLM 
as if the regulation(s) or rule(s) were provided for in this subpart. 
The State, locality, or Tribes' own authority to enforce its 
regulation(s) or rule(s) to be applied under the variance is not to be 
affected by the BLM's approval of a variance.

Laura Daniel-Davis,
Principal Deputy Assistant Secretary, Land and Minerals Management.
[FR Doc. 2022-25345 Filed 11-29-22; 8:45 am]
BILLING CODE 4310-84-P

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