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Interior Secretary Says Rules Near on BOPs, Drilling Emissions, Royalties

The Department of Interior (DOI) is weeks away from proposing tougher rules on blowout preventers (BOP), and will take public comments on a proposal by its Bureau of Land Management (BLM) to be able to adjust royalty rates for oil and gas leases on public lands, according to Secretary Sally Jewell.

Jewell said DOI will also release a final rule governing hydraulic fracturing (fracking) on public lands within days, and it is months away from unveiling standards designed to cut methane emissions from drilling on public lands as well.

"Our task by the end of this administration is to put in place common sense reforms that promote good government and help define the rules of the road for America's energy future on our public lands," Jewell said Tuesday at the Center for Strategic and International Studies. "Our reform agenda over the next two years has three goals: safe and responsible energy development, good government and encouraging innovation."

In response to the BP plc Macondo well blowout and oil spill, DOI's Bureau of Safety and Environmental Enforcement (BSEE) had planned to issue a proposed rule to upgrade regulations for designing, manufacturing and repairing BOPs in March 2014, but the rule has been delayed (see Daily GPINov. 26, 2014). Jewell said that delay was soon coming to an end.

"We will propose a rule in the coming weeks that raises the bar on blowout preventers and well control measures based on technological progress advanced by industry," Jewell said. "Operators will be required to use best practices to protect against and effectively respond to any loss of well control.

"When it comes to these reforms, I recognize that there will be pushback from various corners. I also appreciate the importance of the oil and gas sector, and I'm committed to its ongoing success. I strongly believe that these reforms are not only achievable with modern technology and science, but absolutely critical to upholding public trust, enabling industry to responsibly develop our natural resources."

Jewell said within the coming weeks, DOI plans to take public comments on a proposal to give the BLM the power to adjust royalty rates for drilling on public lands.

"This is important, especially given the dramatic growth of oil production on public and tribal lands," she said. "Production has increased in each of the past six years, and overall, combined production was up 81% in 2014 versus 2008.

"It's not just about royalty rates. We need smarter management, too. In 2015, incredibly, we're still processing a majority of oil and gas permits by paper. And we've got about 150 inspectors in the BLM who are responsible for inspecting over 100,000 oil and gas wells spread over millions of acres of public and tribal lands."

Jewell encouraged Congress to pass an onshore inspection program that was partially funded through fees. "The proposal takes a page from offshore energy, where industry pays fees for permits and inspections, which means we can keep pace with the workload and don't have to divert funds from other programs to support permitting, leasing or inspection activities.”

Last month, BSEE and sister agency, the Bureau of Ocean Energy Management, proposed revising guidelines for Arctic Outer Continental Shelf (OCS) oil and natural gas drilling activities (see Daily GPIFeb. 20). The proposed rule focuses solely on the OCS within the Beaufort Sea and Chukchi Planning Areas.

DOI officials have mulled establishing a final rule on fracking on public lands for years (see Daily GPIDec. 1, 2010). Jewell said a decision was near, and "will include measures to protect our nation's groundwater -- requiring operators to construct sound wells, to disclose the chemicals they use, and to safely recover and handle fluids used in the process.

"Some have already labeled these baseline, proven standards as overly burdensome to industry. I think most Americans would call them common sense."

Last January, President Obama issued a plan for the oil and gas industry to cut methane emissions below 2012 levels from new and modified sources by 40-45% by 2025 (see Daily GPI,Jan. 14). He also directed the BLM to propose standards for both new and existing oil and gas wells drilled on public lands by spring.

"In the coming months, we will also propose standards to cut methane emissions and wasted gas that result from venting and flaring during oil and gas operations," Jewell said. "We will be updating our decades-old standards to encourage the kind of infrastructure and technology that companies I've met with in the Bakken [Shale] and Permian [Basin] have demonstrated can reduce harmful emissions and capture the natural gas as a source of energy and revenue for the American people."

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