Understanding BLM’s Waste Prevention, Production Subject to Royalties, and Resource Conservation Rule

Last month, the United States Bureau of Land Management (BLM) published the final version of its Waste Prevention, Production Subject to Royalties, and Resource Conservation Rule. The Final Rule will require owners and operators of both new and existing federal oil and gas leases to implement comprehensive methane leak detection and repair (LDAR) programs throughout their extraction, storage and transmission infrastructures, and will also place substantial new restrictions on the venting and flaring of methane during drilling and storage operations on those leases by establishing stringent new methane emissions reduction and capture targets. BLM’s Final Rule is set to go into effect next month on January 17, 2017.

On November 28, 2016 the Western Energy Alliance, Independent Petroleum Association of America, and the States of Wyoming, Montana and North Dakota filed with the U.S. District Court in the District of Wyoming for preliminary injunction to block the rule. The Petitioners claim that the BLM rule exceeds the Bureau’s statutory authority by attempting to regulate atmospheric emissions of methane — an authority the Petitioners argue that Congress explicitly delegated to the states and the EPA. They contend that if the rule goes into effect next month, it will cause irreparable harm by undermining the states’ air quality control programs and the states’ ability to regulate the production of state minerals.

Since the initial petition was filed, fifteen separate environmental advocacy groups and NGOs, in addition to the States of California and New Mexico have intervened on behalf of BLM in support of the new rule. Supporters and BLM argue that it is, indeed, the authority of the Bureau, as granted by Congress under multiple environmental statutes, to consider environmental impacts in the promulgation of rules and regulations regarding the use of federal lands.

One of the BLM’s guiding statutes, the Federal Land Policy and Management Act (FLPMA), specifically states, “In managing the public lands […] shall, by regulation or otherwise, take any action necessary to prevent unnecessary or undue degradation of the lands,” and that 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.” The supporters point to the U.S. Supreme Court’s decision in Massachusetts v. Environmental Protection Agency, 549 U.S. 497 (2007), a landmark case in which the Court formally recognized the status of methane and other GHGs as pollutants under the Clean Air Act, thereby legally acknowledging their role in degrading air quality and the environment.

Prevention of Waste & Production Subject to Royalties

While BLM’s mandate for multiple use and sustained yield of public resources is well established under FLPMA, it is by no means the only compelling or legitimate basis for the Final Rule. In the Final Rule, BLM points repeatedly to 30 U.S.C § 225 of the Mineral Leasing Act (MLA) which states, “All leases of lands containing oil or gas, made or issued under the provisions of this chapter, shall be subject to the condition that the lessee will, in conducting his explorations and mining operations, use all reasonable precautions to prevent waste of oil or gas developed in the land,” and that “[v]iolations of the provisions of this section shall constitute grounds for the forfeiture of the lease.”

Since 2006, the United States has nearly doubled its domestic oil and natural gas production due to the discovery of numerous large shale plays including the Marcellus, Haynesville, Barnett, Eagle Ford and Bakken formations, as well as the development of new drilling technologies such as hydraulic fracturing and directional drilling. With the recent discovery of an estimated 20 BBL at the Wolfcamp Shale in Western Texas and the incoming administration’s pledge to expand federal oil and gas leases, this production growth shows no signs of slowing.

However, the BLM and other proponents of the Final Rule contend that the American public has not received the full benefit of this increased production due to the venting, flaring, and leakage of significant quantities of methane during the production process. Federal and Indian onshore lease holders, who account for around 11 percent of U.S. domestic natural gas production, reported to the Office of Natural Resources Revenue (ONRR) that they vented or flared 462 billion cubic feet (Bcf) of natural gas between 2009 and 2015. This is enough natural gas to meet the energy needs of approximately 6.2 million American households for an entire year. A 2010 Government Accountability Office (GAO) report showed that venting and flaring of natural gas from federal leases costs American taxpayers as much as $23 million annually in lost royalty revenues. BLM estimates that the proposed rule could save and put to productive use somewhere between 41 and 56 Bcf of gas per year.

Resource Conservation

BLM’s Final Rule seeks to enforce capture targets on all federal oil and gas lessees in an effort to eliminate outright venting and waste of methane gas. By January 17, 2018, lessees will be required to recover or flare 85 percent of all methane produced on federal oil and gas leases. That number increases to 95 percent in 2020, and to 98 percent beginning in 2026. Accompanying these capture targets, the Final Rule also establishes a phased reduction in allowable flaring of methane produced from wells on federal lands. Beginning immediately on January 17, 2017, BLM will enforce a monthly allowable flaring limit of 5,400 million cubic feet (Mcf) per well. That number will fall to 3,600 Mcf by 2019, and continue to fall annually to 750 Mcf by 2025. Federal oil and gas lessees will be required to document releases of methane emissions, along with volumes of methane routed to flare or combustor systems.

Leaks resulted in an additional four billion cubic feet of methane emissions during 2014 alone. To reduce methane waste from leaks in drilling, storage, transmission and other types of equipment, BLM is enforcing an LDAR requirement that is designed to be concurrent with LDAR programs required by EPA under 40 CFR part 60 subpart 0000(a), more commonly known as Quad-0. The LDAR provisions will require both new and existing oil and gas operators to conduct semi-annual inspections at well sites and quarterly inspections at compressor stations. Operators must repair leaks within 30 days of discovery, and verify that leaks have been repaired through subsequent follow-up inspections. Operators must keep records documenting the dates and results of leak inspections, repairs, and follow-up inspections, and submit annual reports of the previous year’s inspection activities.

Let VelocityEHS Help

VelocityEHS offers a comprehensive suite of cloud environment, health, safety and sustainability management software solutions to help you comply with the requirements of BLM’s Final Rule, and reach your EHS goals faster. Our Air Emissions software simplifies the monitoring, calculation and reporting of emissions from virtually any type of fuel or emissions source under a wide range of environmental and operational parameters. You’ll have the ability to easily track methane and other emissions at each of your wells and facilities, and quickly report that data to BLM, EPA and other regulatory agencies to demonstrate compliance with the new emissions requirements. In addition, our Audit & Inspection software gives you an all-in-one solution to schedule, perform, document and manage your LDAR program to help streamline compliance with leak detection and repair requirements and enhance the safety of both your crews and the communities you serve. Visit our website at www.ehs.com for additional resources, and to learn how VelocityEHS can help you.