Interior Department’s Minerals Management Service (MMS) has proposed a “complete rewrite” of its regulations on production rates, burning oil and venting and flaring natural gas on the federal Outer Continental Shelf (OCS).
The most significant change, in terms of costs, calls for offshore operators to install natural gas flare/vent meters on OCS facilities that process significant volumes of oil, the agency said in a Federal Register notice announcing the proposed changes earlier this month.
“The current MMS requirements rely heavily on the accuracy of operator calculations and record keeping. Recent incidents have shown that these methods are insufficient to accurately capture actual flaring and venting volumes,” the MMS said. It noted that its proposed rule would require the installation of meters on OCS facilities that process more than 2,000 barrels of oil daily.
The agency estimates that the cost of purchasing and installing the meters will be $77,000 per facility, which it says is a small expense relative to the cost of operating the facilities and the income generated. It calculates that 14 operators would have to install meters on 112 facilities Of those operators that would have to install meters, nine are considered small businesses.
The MMS proposed this change in response to a July 2004 Government Accountability Office (GAO) report, which said more accurate records on flaring and venting were needed to determine the amount of natural gas wasted and the volume of greenhouse gas emissions that these practices contribute to the atmosphere each year.
The proposed rule also would eliminate some requirements that are considered unnecessary in the current petroleum environment, the MMS said. For example, in 1974, the MMS required operators to establish maximum production rates (MPRs) for producing well completions, and maximum efficient rates (MERs) for production reservoirs on the OCS. This was during a period of oil shortages and energy crises, it noted.
Based on the past 25 years of experience, the MMS said it has concluded that maximum rate requirements and production balancing requirements can be largely eliminated without significant detriment to conservation and maximization of ultimate recovery. Under the proposed rule, however, the MMS would retain the authority to set MPRs and MERs when necessary.
The proposed rule also clarifies the requirements for documents that operators must submit to MMS, as well as the timing of those submissions, and provides guidance on notifying adjoining offshore operators regarding production with 500 feet of a common lease or unit line.
Comments on the proposed rule are due at the MMS by June 4.
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