House Republicans and state regulators sparred with Democrats and the Department of Interior’s (DOI) Bureau of Land Management (BLM) at a hearing Wednesday to discuss proposed rules governing flaring and venting of associated natural gas on public and tribal lands, with both sides in open disagreement over whether the BLM has the authority to enact such rules.
BLM unveiled the proposed rules in January (see Daily GPI, Jan. 22). As proposed, operators would be required to deploy equipment and processes to limit the amount of flared gas at oil wells on public and tribal lands, and to periodically inspect their wells for leaks. They would also be required to limit venting from storage tanks. The rules also clarify when operators owe the government royalties, and they give the BLM the option of setting certain royalty rates higher than 12.5%.
Those rules faced withering scrutiny by the GOP-led panel. Case in point, the hearing was officially titled “BLM’s Regulatory Overreach into Methane Emissions Regulation.”
DOI’s Amanda Leiter, deputy assistant secretary for land and minerals management, testified that the Mineral Leasing Act (MLA) of 1920 gives the BLM the authority "to develop regulations governing all aspects of oil and gas operations," while two additional federal laws -- the Indian Mineral Leasing Act and the Federal Land Policy and Management (FLPMA) Act of 1976 -- extend that authority even further.
"The FLPMA directs the BLM to manage the public lands using the principles of multiple use and sustained yield and to take appropriate actions to prevent unnecessary or undue degradation," Leiter said in her written testimony. "The MLA further requires the BLM to ensure that oil and gas operators 'use all reasonable precautions to prevent waste of oil or gas.'"
Leiter said the BLM's current rules covering venting, flaring and leaks were adopted more than 30 years ago and need to be updated to reflect current technology. BLM estimates the new rules benefits will outweigh the costs, with monetized net benefits ranging from $115-188 million per year. By comparison, the agency estimates the annual cost to industry to implement the rules would be $125-161 million.
"By requiring operators to take these simple, common-sense actions to reduce waste, the BLM expects to reduce wasteful venting, flaring and leaks by at least 40%" Leiter said. "This would avoid nearly 170,000 tons of methane emissions per year, roughly equivalent to eliminating the [greenhouse gas] emissions from 860,000 to 890,000 vehicles."
La Plata, CO, commissioner Gwen Lachelt testified there are more than 3,300 oil and gas wells in her county targeting the San Juan Basin, many of which are on public and tribal lands. She called it "unacceptable" that venting and flaring is allowed to go unchecked.
"Overall, the proposal put forward by the Bureau of Land Management is an effective one," Lachelt said. "I believe these guidelines are a significant step in the right direction. We need to ensure that as little natural gas as possible is wasted. Wasted gas is lost money for the American taxpayers and the taxpayers of my state, as well as a public health hazard for citizens nearby."
But others disagreed. Lynn Helms, who directs the North Dakota Department of Mineral Resources, told the House panel that his state could lose about $24 million annually in royalties and taxes if the BLM's rule is implemented. It would also upset the state's unique land ownership situation which dates back to the 1930s, where federal mineral ownership is interspersed with a checkerboard pattern of private and state mineral or surface ownership.
Helms added that North Dakota considers Section 3178.2 "the most egregious part" of the BLM's proposed rulemaking. Under that section, committed state or private tracts in a federally approved unit or communitized area (CA) would be subject to the rule.
"That means that gas lines and wells on private land or state land that happens to fall within a federally-approved CA are going to be subjected to this rule," Helms said. "There is no authority for the BLM to do that."
Shawn Bolton, chairman of Colorado’s Rio Blanco Board of County Commissioners, concurred.
"The BLM is consistently adding layers of bureaucracy to handicap oil and gas producers," Bolton said. "It appears that the BLM's focus is to drive more and more operators from federal lands. There is a direct correlation between the impact of the BLM's overreaching, needless regulations and energy production on federal lands, which already lags far behind production on privately held lands."
BLM is 'Inefficiency At Its Worst,’ Says Congressman
Rep. Matt Cartwright (D-PA) said the BLM's proposed rule "is well within the powers Congress granted the agency under the MLA, and it is an important step in addressing methane emissions."
According to Cartwright, "opponents of the BLM regulation claim that it will chase away natural gas producers and kill jobs," but naysayers made similar claims when Pennsylvania Gov. Tom Wolf unveiled a methane reduction program in January (see Shale Daily, Jan. 19).
"They predicted that producers would feel across the borders to Ohio or West Virginia, where there's less being done to combat methane. But that has not been the case -- Pennsylvania still has the most rigs of any of the three states, and production is increasing faster than in any other state."
Rep. Jared Polis (D-CO) added that the "BLM not only has the right to act to regulate the flaring, venting and leaks from oil and gas wells on public lands, but really it's a moral imperative. In fact, I would argue that while this rule is important, it doesn't go far enough."
However, Rep. Cresent Hardy (R-NV) called the BLM "inefficiency at its worst," and said that while the nation is "concerned about reducing methane emissions, I think there's far more efficient ways to do this than through the command-and-control mandates from agencies I believe have no business in regulating emissions in the first place."
Other Republicans also hammered on the message that the oil and gas industry could reduce methane emissions if only they received authorization by federal officials to build more pipelines.
"The problem is pipeline infrastructure is either delayed or canceled because companies are unable to get a right-of-way [ROW] or a permit through the federal government, including the BLM," Hardy said.
Helms agreed. "It is by far the largest problem that industry deals with, in terms of building out the infrastructure to market this gas," he said.
Leiter countered that the BLM estimates about 20% of lost gas occurs from leaks or other issues "that can be fixed entirely without a pipeline," but stressed that the agency was also taking the ROW processing issue seriously.
"We're doing various things on that, including increasing staffing," Leiter said. "We doubled training last year, and we have a strike team that is going to offices where there is a significant backlog to try to improve the processing time. We have also requested additional funding so that we can further staff up those offices to try to speed the processing time.
"The BLM recognized a problem, which is the waste of America's public resources. We also heard from communities around these wells that flares are unsightly, loud and disrupt community life. We are seeking a cost-effective solution. I want to emphasize we're at the proposed rule stage, and we will take back the concerns we heard today [and from] the public meetings we've held across the country. We will try to make this rule better and try to make sure that it is simple and cost effective."
Mark Watson, an oil and gas supervisor with the Wyoming Oil and Gas Conservation Commission, said the BLM resembles oil and gas commissions across the country in terms of staffing.
"They’re staffed with petroleum engineers, geologists and field inspectors, just like the commissions are," Watson said. "But they don't have air emissions experts. And I don't have air emissions experts, which is why our Department of Environmental Quality exerts their authority on air emissions. So I think that's a big problem that maybe the BLM hasn't recognized yet.
"There are already delays in permitting for drilling permits, etc. This just adds another layer of bureaucracy that could lead to delays."