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Interior Moves to Rescind Most of Venting/Flaring Rule; Two States Sue

The Department of Interior (DOI) moved Tuesday to rescind most of an Obama-era rule governing associated natural gas flaring and venting on public and tribal lands while revising the remaining provisions, calling the parts of the rule marked for rescission "unnecessarily burdensome" for the oil and gas industry.

By day's end, attorneys general (AG) for California and New Mexico asked a federal district court in San Francisco to block DOI from rescinding and revising its Waste Prevention, Production Subject to Royalties, and Resource Conservation Rule, aka the venting and flaring rule.

Under the final rule, DOI's Bureau of Land Management (BLM) plans to rescind provisions of the Obama-era rule pertaining to waste minimization plans, gas-capture percentages, well drilling, well completion and related operations, pneumatic controllers, pneumatic diaphragm pumps, storage vessels, and leak detection and repair. For the remaining provisions, BLM said it plans to return to the regulatory environment that preceded the Obama-era rule when it came out in 2016.

"With respect to the flaring of associated gas from oil wells, the BLM will defer to appropriate state or tribal regulations in determining when such flaring will be royalty-free," DOI said in the final rule. The department will accept public comments on the rule for 60 days, following its publication in the Federal Register.

"Sadly, the flawed 2016 rule was a radical assertion of legal authority that stood in stark contrast to the longstanding understanding of Interior's own lawyers," said DOI Deputy Secretary David Bernhardt.

During a press call Tuesday, DOI Deputy Chief of Staff Kate MacGregor said the waste minimization plan "in some cases would have required operators to report information from other midstream companies that they are not privy to because it is proprietary."

MacGregor added that the final rule announced Tuesday "understands and recognizes marginal well production in this country," which BLM has generally defined as wells that produce 10 b/d or less of oil or 60 Mcf/d or less of natural gas. She said BLM estimates that about 73% of wells on leases it administers, about 69,000 wells in total, are considered marginal.

"When you look at one of those wells individually it might not seem like a lot of production, but when you look at them together -- that's a significant amount of energy," MacGregor said. "BLM estimates that those marginal wells in 2015 contributed $2.9 billion in economic activity.

"The retroactive nature of the 2016 rule really impacted the economic vitality and viability of these marginal wells to continue producing, and we wanted to ensure that these reserves are not being abandoned in the ground due to high compliance costs."

The oil and gas industry also applauded the move.

"We are relieved that BLM's final rule has been released and that it actually addresses waste prevention," said Western Energy Alliance (WEA) President Kathleen Sgamma. "The late 2016 Obama administration rule was all about regulating air quality, which is the job of the Environmental Protection Agency and the states under the Clean Air Act, not BLM, which has no air quality expertise or authority.

"The new regulation restores the rule of law while reducing waste of natural gas, which was supposed to be the intent of the original rule in the first place.”

Independent Petroleum Association of America (IPAA) CEO Barry Russell concurred. "The Obama-era rule was crafted with an unrealistic understanding of the real impact to our member companies.

"As environmental stewards and businessmen and women who live in the communities where they work, IPAA member companies strive to explore for and produce as much American oil and natural gas as possible, while always being mindful of the need to protect public lands and the environment. The Trump administration's rule recognizes this fact and acknowledges the cost burden placed on companies that work and explore on federal lands."

Conversely, environmental groups took DOI to task for the changes.

"Repealing a common-sense rule that saves taxpayers money and protects our health from pollution is irrational," said Earthjustice Staff Attorney Robin Cooley. "The Trump administration is once again taking its marching orders from the oil and gas industry while ignoring taxpayers and people who are living every day with the devastating impacts of drilling in their backyards."

Center for Western Priorities spokesman Jesse Prentice-Dunn added that the final rule means "oil and gas drillers can continue releasing methane into the air without accountability at the expense of taxpayers and clean air."

A legal challenge to the final rule was filed almost immediately. California AG Xavier Becerra and New Mexico AG Hector Balderas filed a complaint for declaratory and injunctive relief in the U.S. District Court for the Northern District of California on Tuesday. They allege BLM violated the Administrative Procedure Act, the Mineral Leasing Act and the National Environmental Policy Act in promulgating the final rule.

"BLM failed to offer a reasoned explanation for repealing requirements that, just two years ago, the agency determined were necessary to fulfill its statutory mandates," the AGs said in the complaint. "The rationale that BLM does provide -- that the Waste Prevention Rule would 'unnecessarily encumber energy production, constrain economic growth and prevent job creation' -- lacks merit and is directly contradicted by the record."

Last June, a three-judge panel of the Tenth Circuit Court of Appeals in Denver denied motions by California, New Mexico and a coalition of 16 environmental groups for a stay of the venting and flaring rule. The motions were filed in April following a ruling by Wyoming District Court Judge Scott Skavdahl. Skavdahl ruled that the phase-in provisions of the rule should be placed on hold to give BLM more time to ultimately revise or rescind the rule.

Environmental groups prevailed in the Northern District court last February, when Judge William Orrick rejected a proposed rule by the BLM to delay enforcement of parts of the venting and flaring rule until next January. The AGs for California and New Mexico were also parties to that lawsuit.

IPAA and WEA filed a lawsuit against the rule in Wyoming district court in November 2016. Montana and Wyoming filed a separate lawsuit, and North Dakota and Texas subsequently joined as petitioners. The two lawsuits were combined at the end of November.

Don Schreiber, owner of the Devil's Spring Ranch in New Mexico’s San Juan Basin, called the final rule a "backroom deal" concocted by Interior Secretary Ryan Zinke.

"For natural gas to have any sort of future in the San Juan Basin, companies need to work with landowners and support common sense protections like the BLM methane rule," Schreiber said. "Some companies do the right thing, others don't. All oil and gas companies need to be held to high standards."

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