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BLM Proposes Updates to Royalty, Accountability Rules For Output on Federal, Indian Leases

The Bureau of Land Management (BLM) on Friday issued proposed, updated regulations to ensure accurate measurement, accountability and royalty payments for oil and natural gas production from federal and Indian leases.

The proposed rule does not impose an unreasonable financial or regulatory burden on industry or the BLM, officials said.

“The proposed rule represents an important step in the BLM’s modernization of its oil and gas regulations," said Assistant Secretary for Land and Minerals Management Janice M. Schneider. "These updates will help ensure that oil and gas produced from leases overseen by the BLM is properly measured, that American taxpayers receive fair value for public resources, and that Indian tribes and allottees, states and local governments receive the full royalties they are due."

The proposal would replace Onshore Oil and Gas Order No. 3 (Order 3), which has not been updated since 1989. It sets minimum standards for ensuring that oil and gas produced from leases overseen by the BLM are properly and securely handled. The BLM determined that updates were necessary based on its experience with oil and gas measurement in the field, as well as the changes in technology and industry operations that have occurred since Order 3 was issued.

"The BLM's rules concerning oil and gas measurement are over 25 years old and are long overdue for an update," said BLM Director Neil Kornze. "The reasonable and commonsense updates we are proposing...represent an important step forward toward modernizing our program and will help us ensure that oil and gas sites are properly and responsibly managed."

The rule was proposed following tribal consultations and public listening sessions, and it responds to recommendations from the Government Accountability Office (GAO), Interior's Office of the Inspector General, and the Interior's Subcommittee on Royalty Management, "all of which expressed concerns about the adequacy of the BLM's existing requirements with respect to production accountability," BLM said. "In recent years these concerns have contributed to the Department’s inclusion on the GAO's High Risk List."

The rule would:

  • Establish uniform procedures for designating official points for oil/gas measurement for royalty accounting purposes, known as facility measurement points, that are applicable to new and existing leases;
  • Codify existing guidance related to approving commingling, i.e., combining production from multiple leases, unit participating areas, communitized areas or fee or state properties before the point of royalty measurement;
  • Establish conditions to approve off-lease oil and gas measurement;
  • Update requirements related to the use of valve and drain seals, prohibitions on the use of meter by-passes, and reporting requirements;
  • Require operators of new and existing facilities to provide new site facility diagrams designed to help BLM meet its oversight responsibilities; and
  • Require purchasers and transporters to comply with the same standards as operators with respect to records.

Public comment on the proposed rule is being taken through Sept. 11.

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