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BLM's NatGas Venting/Flaring Final Rule Faces Challenge From Western Energy Alliance, IPAA

The final rule to reduce natural gas venting and flaring from oil and gas operations on public and Indian lands, issued Tuesday by the Department of Interior, drew an immediate lawsuit by two industry groups, which claim the broad air quality regime goes beyond any authority granted by Congress.

The Methane and Waste Prevention Rule, which updates 30-year-old regulations governing venting, flaring and leaks of natural gas, is designed to "prevent waste of our nation's natural gas supplies [and] is good government, plain and simple," Interior Secretary Sally Jewell said. "We are proving that we can cut harmful methane emissions that contribute to climate change, while putting in place standards that make good economic sense for the nation.

"Not only will we save more natural gas to power our nation, but we will modernize decades-old standards to keep pace with industry and to ensure a fair return to the American taxpayers for use of a valuable resource that belongs to all of us."

Interior estimated that "enough natural gas was lost between 2009 and 2015 to serve more than six million households for a year. According to a 2010 Government Accountability Office (GAO) report, that amount of wasted gas means states, tribes and federal taxpayers lose millions of dollars annually in royalty revenue for the federal government and the states that share it."

The final rule, to be phased in over time by the Bureau of Land Management (BLM), requires oil and gas producers to use currently available technologies and processes to cut flaring in half at oil wells on public and tribal lands. Operators also are required to periodically inspect their facilities for leaks and replace outdated equipment that vents large quantities of gas into the air. Other parts of the rule require operators to limit venting from storage tanks and to use best practices to limit gas losses when removing liquids from wells.

To ensure a fair return to U.S. taxpayers, the rule also clarifies when operators owe royalties on flared gas and restores the government's congressionally authorized flexibility to set royalty rates at or above 12.5% of the value of production.

"The rule makes an important contribution to the Obama administration's goal to cut methane emissions from the oil and gas sector by 40-45% from 2012 levels by 2025," Interior noted. The rule projects cutting methane emissions by as much as 35%.

"This rule will benefit the American public and the environment," said Assistant Secretary for Land and Minerals Management Janice Schneider. "The rule responds to recommendations from several government studies, as well as stakeholder and tribal input. The result is an effective rule that not only gets more of our nation's natural gas into pipelines but also reduces pollution and cuts greenhouse gas emissions."

BLM developed the final rule after robust outreach efforts beginning in 2014 with public and tribal meetings. Publication of the draft rule was followed by a public comment period that generated thousands of comments, and during which the BLM held additional public meetings and tribal consultation. The BLM also coordinated with states and the U.S. Environmental Protection Agency to avoid inconsistency or redundancy in regulations.

The previous rules addressed venting and flaring, but they were adopted long before new technologies unlocked vast gas supplies in the United States. Recent technological advances allow operators to produce more oil and gas with less waste. About 40% of gas now vented or flared from onshore federal leases could be economically captured with currently available technologies, according to a 2010 GAO report.

"America's natural gas helps power our economy -- it's a resource, not a waste product, and it's time we start treating it that way," said BLM Director Neil Kornze. "With better planning and today's affordable technology, we can cut waste in half. This common-sense rule will save enough gas to supply every household in the cities of Dallas and Salt Lake City combined -- every year."

Only minutes after Interior published notice of the final rule, the Western Energy Alliance (WEA) and the Independent Petroleum Association of America (IPAA) filed a lawsuit in U.S. District Court in Wyoming, claiming the rule is beyond the scope of BLM's authority granted by Congress.

"When operating on public lands, businesses already comply with air quality regulations mandated by the EPA," the trade groups said. BLM's rule "creates duplicative regulation that conflicts with EPA requirements." EPA was given authority to regulate air quality under the Clean Air Act, but BLM "has tried to assume this role under the guise of reducing waste from oil and natural gas production."

WEA spokeswoman Kathleen Sgamma said BLM "lacks statutory authority for the creation of an air quality regulatory program, which has resided with EPA and the states since the 1970s. We support the goals of capturing greater quantities of associated gas and reducing waste gas, but overreaching regulation that fails to acknowledge industry success is not the most effective way to meet those goals.

"The natural gas industry has delivered a 21% reduction in methane emissions since 1990 at the same time as increasing production by 47% -- all without federal regulation. We don't need federal rules to tell us to reduce methane emissions, as it's the very product we're working so hard to capture and sell. The venting and flaring rule is just as egregious as BLM's hydraulic fracturing rule, and we're confident it will similarly be overturned by the courts.

Said IPAA spokesman Dan Naatz, "Make no mistake, reducing emissions is in the best interest of our industry. Producers have every incentive to capture and sell as much of their product as possible to consumers, rather than letting it escape in the atmosphere.

"However, currently, a lack of infrastructure and gathering lines to collect gas at the wellhead make it difficult for producers to safely transport our product to market. Independent producers have repeatedly shared our concerns with and provided industry data to the Obama administration. This is an 11th hour shot by an administration that doesn't fully understand how its rules impact our businesses. Furthermore, potentially raising royalties on an industry that has been financially hurting is counterintuitive to any business certainty.

"The continued regulatory onslaught on American producers calls into question the president's commitment to the laws requiring mineral production on federal lands or whether the misguided crusade to 'Keep It in the Ground' has overtaken this administration."

U.S. Sen. Jim Inhofe (R-OK), who chairs the Senate Environment and Public Works Committee, called the final rule a "purely political move by the Obama administration" and "a last ditch effort to save the president’s crumbling climate legacy." The rule "is unnecessary and duplicative. Congress has many tools with which to rescind this rule and I look forward to working with the incoming Trump administration to ensure economic expansion prevails over misguided bureaucratic interference."

Institute for Energy Research President Thomas Pyle said President Obama was "frantically trying to impose his climate agenda on the American people" before Trump's inauguration.

"With one foot out the door, bureaucrats and political operatives in the Obama administration are working to drive up the cost of producing energy on federal lands. The end of this administration's anti-energy agenda cannot come soon enough."

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