American Oil and Gas Reporter - February 2016 - 31

Federal Regulation

BLM Proposes Limits On Gas Flaring
WASHINGTON-The U.S. Bureau of
Land Management in January announced
new rules to limit natural gas leaks, venting and flaring on federal land that industry spokesmen contend are duplicative, unnecessary, and possibly illegal. As part of
the proposed rule making announced Jan.
22, BLM says it also plans to eliminate the
12.5 percent cap on royalty rates for new
competitive onshore oil and gas leases.
Interior Secretary Sally Jewell says the
proposed flaring rule is consistent with the
Obama administration's goal to cut
methane emissions from the oil and gas
sector by 40-45 percent from 2012 levels
by 2025. She adds that a 2010 Government
Accountability Office report estimates
that leaked, vented and flared gas costs federal and state governments $23 million a
year in lost royalties.
Noting that BLM's current rules on
venting and flaring are more than 30
years old, Jewell again cites the 2010 GAO
report, which figures 40 percent of vented and flared gas from onshore federal
leases could be captured economically
with currently available technologies. A
BLM fact sheet estimates the cost to industry of implementing the new requirements will be $125 million-$161 million
a year.
That fact sheet says that between 2009
and 2014, oil and gas producers on public and Indian lands vented, flared and
leaked 375 billion cubic feet of natural gas.
It says BLM's proposed rule can capture
41 Bcf-56 Bcf of gas a year, reducing flaring by 41-60 percent and venting by 4446 percent (compared with 2013 rates).
Proposed Regulations
BLM says it proposes to limit gas flaring at development oil wells (per lease) to:
* 72 million cubic feet a month during a well's first year of production;
* 36 MMcf a month during the second year; and
* 18 MMcf a month thereafter.
BLM says the flaring limits do not apply to exploration or wildcat wells or during emergencies, and that an exemption is
available if meeting the limit "would
cause an operator to abandon significant
recoverable oil reserves."
The agency says operators may comply with the flaring limits by expanding
gas-capture infrastructure such as installing compressors or constructing gathering lines, by adopting alternative on-site
capture technologies such as compressing
the gas or stripping out natural gas liquids,

or by temporarily slowing production.
BLM says the proposed rule requires
metering when flared volumes reach 50
Mcf a day.
In addition, BLM says, the proposed
rule would require operators to submit
waste minimization plans with their applications for permits to drill, as well as share
the plans with midstream companies "to
facilitate timely pipeline development."
To detect leaks, BLM says the proposed
rule mandates instrument-based leak detection programs utilizing infrared cameras "or other methods approved by
BLM." The agency adds that operators
with fewer than 500 wells "could alternatively use portable analyzers assisted by
audio, visual and olfactory inspection."
Initially, BLM says, operators must inspect their leases twice a year for leaks,
then depending on the results, could be required to inspect quarterly or be allowed
to go to annual inspections. BLM says this
portion of the rule is similar to EPA's
methane regulations announced in August,
which allow annual inspections if two consecutive surveys find leaks at less than 1
percent of covered components, but mandate quarterly inspections if two consecutive surveys find leaks at more than 3 percent of covered components (AOGR, September 2015, pg. 36).
The proposed rule prohibits venting
natural gas except for emergencies and
"from certain equipment subject to proposed limits," BLM continues. Under the
rule, BLM says, operators must replace all
high-bleed pneumatic controllers with
low-bleed controllers within one year. The
agency says the rule requires operators to
replace "certain pneumatic pumps" with
solar pumps or route the pumps to flares,
again similar to EPA's proposed methane
regulations, which stipulate controlling
volatile organic compounds and methane
emissions from pneumatic pumps by 95
percent.
BLM says wells drilled after the rule's
effective date "generally will not be allowed to purge into the atmosphere, and
operators unloading liquids from existing
wells will be required to use best management practices."
In addition, the agency says, "Operators will be required to capture, flare, use
or reinject gas released during well completions."
Regarding royalty rates, BLM contends
it has statutory authority under the Mineral Leasing Act to remove the 12.5 percent cap, although it says it "does not cur-

rently propose to raise royalty rates for new
competitive leases." The agency clarifies
that "royalties would apply only to gas
flared from wells already connected to gas
capture infrastructure."
Not Much Comfort
The Independent Petroleum Association of America takes little comfort from
BLM's stated intention not to raise royalty rates at present, according to Senior Vice
President of Government Relations and
Political Affairs Dan Naatz, who says,
"Lifting the ceiling simply leaves the
door open to increase rates on producers
down the road. This will change the predictability and certainty for operators on
federal lands.
"With effective state regulations already
in place, EPA's regulations on methane,
and voluntary initiatives by companies eager to capture and sell natural gas, (BLM's)
mandates are duplicative and unnecessarily costly," Naatz continues. "This is the
latest in the string of bad policies released
by this administration, showing a lack of
knowledge (about) how the oil and gas industry works."
Kathleen Sgamma, vice president of
government and public affairs at the
Western Energy Alliance, comments that
through technological innovation, oil and
gas producers already have reduced
methane emissions 21 percent since 1990
while increasing gas production by 47 percent.
"North Dakota companies have invested more than $11 billion to put in place
the pipelines, gas gathering lines and
other infrastructure necessary to capture
natural gas from oil wells, and have increased the gas capture rate from 64 percent in 2011 to 85 percent today," Sgamma points out. "In Wyoming, with its more
mature plays, the overall venting and
flaring rate is a mere 0.25 percent."
She says BLM's proposed rules are redundant with state efforts and lack justification, and contends that "by proposing
emission controls on existing wells, BLM
is attempting unlawful Clean Air Act
regulation that even EPA doesn't try to assert."
Arguing that delays in obtaining rights
of way for pipelines and gas gathering lines
are a major cause of high flaring rates,
Sgamma counters, "Rather than a long,
drawn-out rule making, BLM could reduce
SEE BLM PAGE 97
FEBRUARY 2016 31
American Oil and Gas Reporter - February 2016

Table of Contents for the Digital Edition of American Oil and Gas Reporter - February 2016
