The Bureau of Land Management (BLM) has finalized three rules designed to ensure the accurate measurement, proper reporting and accurate recordkeeping of natural gas and oil produced from federal and Indian leases in order to ensure that royalties are correctly paid.
Onshore Oil and Gas Orders 3 (43 CFR 3173 - site security), 4 (43 CFR 3174 - oil measurement) and 5 (43 CFR 3175 - gas measurement) were comprehensively updated for the first time since they were issued more than 25 years ago, BLM said.
The rule to replace Order 3 governs oil and gas handling and is designed to ensure that production is properly accounted for in order to prevent theft and loss and enable that production to be verified, BLM said. Orders 4 and 5 establish minimum standards for the accurate measurement of all oil and gas, respectively.
The new rules incorporate the latest industry standards, measurement technology, and practices, according to BLM, and establish a one-stop, national process for the review and approval of new measurement technologies and practices to allow them to be deployed quickly across BLM-managed leases.
"These new rules provide a strong foundation for our oil and gas program that will ensure we are meeting our obligation to the American people and to the tribes we work with," said BLM Director Neil Kornze. "These new rules also give the BLM the tools to be responsive to new technology -- this change is particularly important because changing technology often provides opportunities to make oilfield operations safer and more efficient."
Finalization of the rules concludes a seven-year effort to address concerns raised by the Government Accountability Office, the Department of the Interior's Office of the Inspector General and Interior's Royalty Policy Committee, all of which had expressed concern about the adequacy of the BLM's prior measurement rules.
Royalties from federal leases are split between the U.S. Treasury and the state where production occurs, BLM said. Indian tribes and individual Indian allotment owners keep 100% of royalties collected from leases on their lands. The total value of production last year was nearly $20 billion, which generated more than $2 billion in royalty revenue annually from federal leases and nearly $600 million in royalty revenue from tribal and allotted leases.
The final rules will also contribute to oil field safety, by expressly recognizing automatic tank gauging as a permissible means to measure oil and prepare end-of-month inventories, BLM said.
The regulations will become effective 60 days after they are published in the Federal Register.