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In Venting/Flaring Case, API Blasts BLM for Expanding ‘Waste’ Definition

The American Petroleum Institute (API) told a federal court in Wyoming that a decision by the Interior Department's Bureau of Land Management (BLM) to expand the definition of "waste" is untenable as it pertains to venting and flaring associated natural gas on public and tribal lands.

In an amicus brief filed Thursday in U.S. District Court for the District of Wyoming, API said that since the enactment of the Mineral Leasing Act in 1920, BLM had historically allowed lessees to vent or flare gas that was uneconomic to capture and bring to market. The flared gas was not considered waste, and lessees were not required to pay royalties on it to the federal government.

API argues that under the Waste Prevention, Production Subject to Royalties, and Resource Conservation Rule, aka the venting and flaring rule promulgated last November, lessees would be required to capture and market gas previously considered waste, even if it is uneconomic to do so. They would also be required to pay royalties on such gas.

"BLM's regulatory overreach will have very real consequences for oil and gas operators across the nation," API said. "Requiring operators to capture and market unprofitable quantities of gas at a loss -- and also to pay royalties on that gas -- could render many operations that are currently profitable uneconomic, forcing operators to shut in or abandon currently productive wells and create true 'waste' by precluding recovery of those resources."

API also said the venting and flaring rule "fails to account for key differences among oil and gas leases depending on the productivity of the wells involved, the volume and quality of gas associated with that lease or well's production, the proximity of the lease or well to gas pipelines and transportation infrastructure, and numerous other factors related to lease or well operations and economics.

"The rule could have the biggest impact on marginally-producing wells, which undisputedly comprise the vast majority of wells currently operating on BLM-managed lands." As such, API argued, the BLM ran afoul of the Administrative Procedure Act (APA) because the bureau failed to consider those factors in assessing the economic impacts of the rule on operators.

Last June, U.S. District Court Judge Scott Skavdahl agreed to a request by the Trump administration to set an Oct. 2 deadline for opening briefs in the lead case over the venting and flaring rule, State of Wyoming et al v. United States Department of the Interior et al, No. 2:16-cv-00285-SWS. Skavdahl also set deadlines of Nov. 6 for response briefs and Nov. 22 for reply briefs.

The Independent Petroleum Association of America and the Western Energy Alliance filed a lawsuit against the rule last November. Montana and Wyoming filed a separate lawsuit three days later, and North Dakota and Texas subsequently joined as petitioners. The two lawsuits were combined at the end of November.

Earlier this month, a federal judge in San Francisco ruled that the Trump administration violated the APA when it tried to indefinitely postpone the venting and flaring rule until January 2019. With the ruling, operators currently face a Jan. 17 deadline to comply with several provisions of the rule that the BLM had hoped to delay or eventually rescind.

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