Wednesday, October 17, 2018

Shale Law in the Spotlight – Overview of Litigation Challenging the Delaware River Basin Commission’s Moratorium on Shale Gas Development


Written by Chloe Marie – Research Specialist

The Delaware River Basin Commission (Commission) is a federal interstate agency established in 1961 by the Delaware River Basin Compact and is comprised of the states of Delaware, New Jersey, New York, Pennsylvania and the U.S. Army Corps of Engineers working together on the management of water resources in the Basin. The Commission has been working for a long time on the consideration of regulations addressing the impacts of natural gas development on waters within the Basin. Eventually, on November 30, 2017, the Commission proposed to prohibit hydraulic fracturing within the Basin.

On May 17, 2016, Wayne Land and Mineral Group (WLMG), LLC, filed a lawsuit against the Delaware River Basin Commission challenging the Commission’s jurisdiction to review and approve natural gas projects located in the Delaware River Basin – and indirectly the proposed ban on hydraulic fracturing projects in the Basin. The WLMG is a group of landowners whose properties overlay shale gas resources in the Basin. The landowners allege that natural gas well pads and related facilities targeting shale formation in the Basin are not projects that are to be reviewed by the Commission under Section 3.8 of the Compact.

WLMG also complains that the Commission infringes upon their rights to develop shale gas resources on their properties after the agency announced in 2010 that it would not review applications for natural gas projects until it adopted specific natural gas development regulations.

On July 8, 2016, the Commission filed a motion to dismiss WLMG’s complaint for failure to state a claim. In its motion, the Commission asserted that, besides its regulatory authority, the Commission has planning and project review authority for any activity or facility undertaken for the purpose of managing, developing and using water resources of the Delaware River Basin, and that all projects in the Basin must be reviewed and approved by the Commission pursuant to Section 3.8 of the Compact. In this case, however, the Commission alleged that the records do not show that WLMG submitted any application to the agency for a project in the Basin, despite arguing that the Commission “has already decided that it has project review jurisdiction over WLMG’s activities” based on a discretionary basis. The Commission stated that WLMG made “conclusory allegations” regarding its actions, stating that “the Complaint offers no detail on when this decision was purportedly made or by whom.”

As to WLMG’s claim that the Commission used discretionary powers in declaring that all natural gas well pads and related facilities targeting shale formation in the Basin are projects to be reviewed under Section 3.8 of the Compact, the Commission alleged that those are mere declarations made in the Executive Director Determinations (EDD) – respectively dated May 2009, June 2010, and July 2010 – and are not binding regulations. The Commission stated that these declarations are interpretive of Section 3.8 of the Compact as well as “administratively appealable, non-final decisions that remain subject to challenge during an individual project review proceeding, and were not subject to notice and comment.”

The U.S. District Court for the Middle District of Pennsylvania granted the Commission’s motion to dismiss on March 23, 2017, and found that “on the face of Plaintiff’s Complaint … it is apparent that its proposed activities within the Delaware River Basin constitute a ‘project’ within the meaning of that term as defined in Sections 1.2(g) and 1.2(i) of the Compact.” WLMG appealed this decision to the United States Court of Appeals for the Third Circuit (docket no. 17-1800) on April 7, 2017.

On July 3, 2018, the U.S. Court of Appeals for the Third Circuit vacated the U.S. District Court’s decision and remanded the case for further proceedings. The U.S. Court of Appeals concluded that the meaning of the word “project” in the Compact is “ambiguous” and needs further interpretation.

On September 17, 2018, three Pennsylvania state senators – Joseph B. Scarnati, Lisa Baker, and Gene Yaw – filed a motion to intervene as Parties Plaintiffs in the court proceedings. The Senators declared that they have a “substantial protective interest” in the process of interpreting the Compact. The Senators argued in their motion that the Compact is a “quintessential creature of the legislature,” and that they “are in privity of contract under the Compact and, thus, must be permitted to participate in this action to the same extent as any contracting party is permitted in an ordinary contractual dispute.”

In addition, the Senators pointed out that they must be allowed to intervene in the proceedings because they have fiduciary duties as trustees of the natural resources of Pennsylvania. In their brief in support of the motion to intervene, the Senators explained that they have a “cognizable property interest” in the issue, before adding that “the Commission’s moratorium is not confined to private property, but also extends to Commonwealth-owned property that is part of the Trust, over which the Senators and other elected officials have trustee obligations.”

The U.S. District Court granted the Senators’ motion to intervene on the same day of its filing; however, the Court has yet to issue a written opinion supporting its order.

Interestingly, in October 2016, the three Senators filed a motion to intervene in this proceeding, but such motion was denied in January 2017. At that time, the court declared that “once legislation is enacted, legislators such as the three Senators seeking to intervene in this litigation, do not have a significantly protectable interest in its implementation to entitle them to intervene as of right.”

More information concerning the case Wayne Land and Mineral Group, LLC v. Delaware River Basin Commission is available at docket no. 3:16-cv-00897.

Stay tuned for further legal developments!



This material is based upon work supported by the National Agricultural Library, Agricultural Research Service, U.S. Department of Agriculture. 

Monday, October 15, 2018

Shale Law Weekly Review - October 15, 2018


Written by:
Brennan Weintraub - Research Assistant
Jackie Schweichler - Education Programs Coordinator

The following information is an update of recent local, state, national, and international legal developments relevant to shale gas.

Pipelines: FERC Approves Part of Mountaineer XPress Pipeline for Service
On October 5, 2018, the Federal Energy Regulatory Commission approved a request by from TransCanada to put its Elk River compression station into service. The compression station is part of the Mountaineer XPress natural gas pipeline which, when completed, will carry natural gas from northern to southern West Virginia. The project, which includes 170 new miles of pipeline, will transport over two billion cubic feet per day of natural gas across the state.

Pipelines: Army Corps of Engineers Suspends Mountain Valley Pipeline Permit
On October 5, 2018, the U.S. Army Corps of Engineers (Corps) sent a letter to Mountain Valley Pipeline, LLC informing it that the permits that the pipeline had been given to cross several water bodies in Virginia had been suspended. This follows a decision on October 2, 2018, by the U.S. Court of Appeals for the 4th Circuit, which suspended similar permits for the pipeline in West Virginia.  In its order, the Court of Appeals stated that the Corps improperly substituted the use of a “dry cut” method for four river crossings.  According to the court, stream crossings must be completed within 72 hours in the state of West Virginia.  In the recent letter, the Corps stated that it will “await clarity on this issue” before deciding whether to reissue the permit.

Wastewater Treatment/Disposal: EPA Holds Public Meeting on Oil and Gas Wastewater Study
On October 9, 2018, the Environmental Protection Agency held a public meeting to discuss a study that it is conducting on oil and gas wastewater to determine whether new regulations might be needed. EPA noted that new methods of wastewater management have developed over the last few years and that some states would like clear regulations on how this water may be reused. The agency has stated that it will solicit opinions from a variety of sources in potentially developing new regulations, including industry, Native American tribes, and NGOs.

Pipelines: Minnesota Court Dismisses Case Against Pipeline Protesters
On October 9, 2018, the Clearwater County District Court dismissed a case against climate change protesters who caused the shutdown of Enbridge Energy pipelines, according to The Guardian.  The article states that the judge dismissed the suit before the defendants could present their case because the prosecutors failed to prove that the protesters caused any damage.  Enbridge pursued the case after several protesters used bolt cutters to enter Enbridge pipeline valve enclosures in order to shut the pipelines down.  The protesters argued that their actions were necessary to prevent the growing threat of climate change.  Earlier, the Minnesota Court of Appeals had allowed the protesters to present the necessity defense and the Minnesota Supreme Court declined to review the case (State v. Klapstein, 2018 Minn. App. Unpub. Apr. 23, 2018).  Following the dismissal, several of the defendants expressed disappointment at being denied the opportunity to present the necessity defense in trial.

From the National Oil & Gas Law Experts:
Charles Sartain, Are Oilfield Contractors Liable for Road Damage?, Gray Reed (October 11, 2018)

John McFarland, Three Supreme Court Cases to Watch, Oil and Gas Lawyer Blog (October 15, 2018)

Pennsylvania Legislation
HB 2701: Referred to Environmental Resources and Energy (October 10, 2018) legislation would amend Oil and Gas Act to require well operators to provide additional reports on water and community impacts.

HB 107: Corrective Reprint, Printer’s No. 4133 (October 1, 2018) would authorize natural gas distribution companies to establish a distribution system extension charge to cover the cost of expanding to underserved areas.

Pennsylvania Notices
Upcoming Meetings: Environmental Resources and Energy (H) voting meeting on SB 138 (October 9, 2018)

Availability of Final Erosion and Sediment Control General Permit-3 for Earth Disturbance Associated with Oil and Gas Exploration, Production, Processing or Treatment Operations or Facilities (October 6, 2018)

Follow us on Twitter at PSU Ag & Shale Law (@AgShaleLaw) to receive ShaleLaw HotLinks:
“Petroleum index continues to climb” - Midland Reporter-Telegram

Connect with us on Facebook! Every week we will post the CASL Ledger which details all our publications and activities from the week.


Want to get updates, but prefer to listen? Check out the Shale Law Podcast! We can always be found on our Libsyn page, iTunes, Spotify, or Stitcher.

Check the September Agricultural Law Brief! Each month we compile the biggest legal developments in agriculture. If you’d like to receive this update via email, check out our website and subscribe!

Wednesday, October 10, 2018

Shale Law in the Spotlight – Impacts of Recent Steel and Aluminum Tariffs on the Oil and Gas Industry


Written by Chloe Marie – Research Specialist

Background

On February 16, 2018, U.S. Secretary of Commerce Wilbur Ross (Secretary) issued reports analyzing the effects of  aluminum and steel imports upon national security. The release of these reports followed an investigation that was initiated on April 19, 2017, by President Donald Trump under Section 232 of the amended Trade Expansion Act of 1962.

In the report relating to aluminum imports, the U.S. Department of Commerce (Department) observed an overdependence on foreign aluminum production which threatens the U.S. aluminum industry. For this reason, the Secretary recommended the imposition of a new tariff on aluminum products and the further tightening of industrial policies that benefit foreign aluminum imports. The report states that the tariff adjustment should be designed “to enable U.S. aluminum production to utilize an average of 80 percent of production capacity” even after exemptions are granted.

Regarding the effects of foreign steel imports, the Department found that, even though U.S. steel production has remained stable since 2001, it is now being threatened by an excess of global steel capacity that would put the country in a far less competitive position compared to other countries. The report also pointed out that domestic steel production is essential for security matters. As a result, the closure of U.S. steel mills due to excessive foreign imports could dramatically effect national security in time of emergency. The Secretary therefore suggested to “take immediate action by adjusting the level of these imports through quotas or tariffs … to enable U.S. steel producers to operate an 80 percent or better average capacity utilization rate based on available capacity in 2017.”

On March 8, 2018, President Donald Trump supported the findings of the Secretary that aluminum and steel goods are “being imported to the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States.” Consequently, President Trump issued two Presidential Proclamations resulting in adjusted import tariffs of 25% on steel articles and 10% on aluminum articles.  Both of these adjusted tariffs were imposed on imports from all countries.

Interestingly, on May 31, 2018, President Trump removed previous tariffs exemptions for Canada, Mexico and the European Union and implemented such tariffs stating that the Federal government was “unable to reach satisfactory arrangements” with these trading partners. The Trump administration, however, found common ground with Australia and Argentina on both steel and aluminum and also reached an agreement with South Korea and Brazil on steel.

Tariff Exclusions

On March 19, 2018, the Department published in the Federal Register a new interim final rule amending and supplementing the National Security Industrial Base Regulations (15 CFR Parts 700-705) with regard to the requirements and process for the submission of exclusion requests from steel and aluminum import tariffs that were implemented under the Presidential Proclamations.

The Presidential Proclamations authorize the Department to grant exclusions from the steel and aluminum tariffs, provided that “the steel or aluminum articles are determined not to be produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality or based upon specific national security considerations.” The new rule specifies that exclusion requests will be granted or denied “primarily” based on the availability of the product domestically. The Department, however, may review information regarding the state of the steel and aluminum supply market in other countries “to the extent relevant to determining whether specific national security considerations warrant an exclusion.”

On June 20, 2018, the Secretary announced that the Department had granted a total of 42 exclusion requests for steel articles; however, it also had denied 56 requests from 11 separate companies. The Secretary declared that “this first set of exclusions confirm what we have said from the beginning – that we are taking a balanced approach that accounts for the needs of downstream industries while also recognizing the threatened impairment of our national security caused by imports.”

Reactions from the Oil and Gas Industry

The implementation of the Presidential Proclamations has generated a response from energy companies that directly use steel and aluminum articles during their business operations. Following the denial of exclusion requests from two Texas based-pipeline companies – Plains All American and Borusan Mannesmann Pipe US – the American Petroleum Institute (API) issued a strongly-worded reaction. In a Press Release dated July 17, 2018, API stated that “the administration’s decision-making is not serving the interests of energy consumers and American businesses, as these tariffs are expected to increase the cost of sourcing steel for the oil and natural gas companies which in turn could increase the cost of energy to consumers. This is not the way to achieve the administration’s commendable goal of U.S. energy dominance.”

Similarly, in a letter to the Secretary dated May 18, 2018, the Center for Liquefied Natural Gas (CLNG) expressed concerns about losing the possibility to import foreign steels. The Center’s Executive Director Charlie Riedl wrote that “much of the steel used in the construction of LNG terminals is specialty steel that must withstand extreme conditions” before pointing out that “in some instances, there are no U.S. manufacturers certified – or with sufficient capacity – to supply the necessary specialty steel.” Thus, he urged the Department to grant the LNG sector an industry-wide exclusion to the steel tariffs.

On September 11, 2018, the Department published a revised interim final rule following receipt of public comments. The Department answered many of the concerns regarding the transparency and efficiency of the product exclusion process and stated that “the Department understands the importance of having a transparent, fair and efficient exclusion and objection process” and that this revised rule provides “significant improvements in all three respects.”

Impacts on the Oil and Gas Industry

Though President Trump’s stated intention of imposing U.S. tariffs on steel and aluminum imports from foreign countries is to stimulate growth in the metal market, and therefore stimulate the national economy, questions have been raised whether tariffs will be entirely beneficial to the country, and more especially to the oil and gas sector.

As indicated in the prior section, many U.S. pipeline companies have long used specialty steel and aluminum in the conduct of their projects. These specialty materials may not be available domestically or may be in limited supply. As mentioned by the outgoing API President Jack Gerard during the annual state of Colorado energy luncheon, held in July 2018, the imposition of tariffs may “send a chilling effect throughout the industry – particularly for the big players that use a lot of steel for a lot of infrastructure.”

Some even worry that U.S. tariffs on steel and aluminum imports could interfere with national security by creating a resource constraint for pipelines that may jeopardize the quality or completion of pipeline projects. In this regard, the President of the Interstate Natural Gas Association of America (INGAA), Don Santa, noted that “imports of both pipeline-quality steel and pipe products are necessary for timely construction of the new pipeline infrastructure needed to link natural gas producers with industrial, power generation and residential consumers, and ensure our national security.”

Furthermore, various stakeholders from across the oil and gas industry have raised concerns about an increase in the prices for steel and aluminum, which will correlate directly to increases in domestic production costs for manufacturers. These increased production costs could result in higher energy prices for customers.

Questions also have risen among the industry stakeholders about impacts on the overall supply chain when President Trump, in May 2018, removed U.S. tariff exemptions on steel and aluminum articles from its traditional trade allies – Canada, Mexico, and the European Union. API’s outgoing President Jack Gerard declared being “deeply discouraged” by such action and warned the Trump administration that “the implementation of new tariffs will disrupt the U.S. oil and natural gas industry’s complex supply chain, compromising ongoing and future U.S. energy projects …” INGAA President Don Santa also expressed his dissatisfaction, stating that “the administration’s decision to immediately impose a 25 percent tariff on steel imported from our long-standing allies of Canada, Mexico and the European Union is very troubling to the US pipeline industry and inconsistent with the administration’s long-standing goal to capitalize on our nation’s energy abundance to help bring low-cost energy to American consumers.”

The industry also is concerned about the impacts of retaliatory actions from these countries as well as those from China. Indeed, China is one of the world’s largest importer of natural gas, a significant portion of which comes from the United States. Some commentators have pointed out that retaliatory actions on U.S. liquefied natural gas from China could cause a significant shift in the energy market. These concerns are beginning to manifest as China announced in August 2018 it would impose retaliatory tariffs on $60 million worth of U.S. goods, including liquefied natural gas.

Conclusion

The recent administrative actions relating to international trade have raised concerns among many different economic sectors in the United States. The imposition of tariffs on steel and aluminum imports, in particular, has caused many industry participants and observers to question the economic spinoffs of these tariffs upon the oil and gas industry. There is concern that these tariffs will redefine the contours of international trade relationships between the U.S. and its allies, and thus could significantly impact several industries with the oil and gas, and pipeline industries being on the forefront. The economic consequences of these adjusted import tariffs have not yet been fully assessed, but many oil and gas stakeholders expect adverse outcomes to occur.



This material is based upon work supported by the National Agricultural Library, Agricultural Research Service, U.S. Department of Agriculture.

Monday, October 8, 2018

Shale Law Weekly Review - October 8, 2018

Written by:
Brennan Weintraub - Research Assistant
Jackie Schweichler - Education Programs Coordinator

The following information is an update of recent local, state, national, and international legal developments relevant to shale gas.

Methane Emissions: Environmental Groups Sue to Reinstate Waste Prevention Rule
On September 28, 2018, a coalition of environmental advocacy groups sued the U.S. Department of the Interior in the U.S. District Court for the Northern District of California to prevent the rollback of the Waste Prevention Rule (Sierra Club v. Zinke, Case No. 3:18-cv-5984).  The Waste Prevention Rule, or Waste Prevention, Production Subject to Royalties, and Resource Conservation rule, was created to reduce natural gas waste from venting, flaring, and leaks during oil and gas production.  On September 18, 2018, the Bureau of Land Management (BLM) issued a new rule (the Rescission rule) revising the Waste Prevention Rule.  In their complaint, the environmental groups allege that BLM failed to consider environmental impacts when it withdrew many of the regulations within the Waste Prevention Rule. The plaintiffs allege that these changes constitute a violation of the Department’s obligation to protect the public interest and the environment.  This is the second lawsuit filed in response to BLM’s Rescission Rule. On September 18, 2018, California and New Mexico also filed a complaint alleging BLM violated the Administrative Procedure Act, the Mineral Leasing Act, and the National Environmental Policy Act.

Pipelines: Federal Judge Dismisses Eminent Domain Suit Against FERC
On September 28, 2018, the U.S. District Court for the District of Columbia dismissed a lawsuit brought against the Federal Energy Regulatory Commission (FERC) for granting limited eminent domain rights to the Atlantic Coast Pipeline and the Mountain Valley Pipeline (Bold Alliance v. Federal Energy Regulatory Commission, Case No. 17-cv-01822). The suit was brought by a group of landowners who hold property along the proposed path of the pipelines. The court found that it lacked subject-matter jurisdiction to hear the case.  The court explained in the opinion that Congress has vested sole jurisdiction to adjudicate challenges related to natural gas pipeline construction in FERC. Accordingly, the court found that the appropriate forum for an appeal of FERC decisions would be a U.S. appellate court.

Pipelines: Court of Appeals Vacates Mountain Valley Pipeline Stream-Crossing Approval
On October 2, 2018, the U.S. Court of Appeals for the Fourth Circuit issued an order vacating stream-crossing approval in southern West Virginia for the Mountain Valley Pipeline (Sierra Club v. United States Army Corps of Engineers, Case No. 18-1173 (L)). The court found that the Army Corps of Engineers, which approved the project, lacked the authority to approve an alternative river crossing method.  According to the court, the Army Corps improperly permitted the use of a “dry cut” method for four river crossings, a method that may require 4-6 weeks to complete. West Virginia law requires all stream crossing projects to be completed within a 72 hour period to avoid potential environmental harm.

Pipelines: Federal Government Announces Cybersecurity Initiative
On October 2, 2018, the U.S. Department of Homeland Security (DHS) announced the launch of the Pipeline Cybersecurity Initiative.  The initiative was announced at a meeting between DHS and the Oil and Natural Gas Sector Coordinating Council, the Transportation Security Administration Administrator, and the National Protection and Programs Directorate Under Secretary.  The initiative will focus on taking a strategic approach to avoid threats and create a secure pipeline system.  The new initiative was facilitated by the National Risk Management Center, which aims to identify critical infrastructure where cyber incidents could have destructive consequences.

Pipelines: FERC Approves Service for Atlantic Sunrise Project
On October 4, 2018, the Federal Energy Regulatory Commission (FERC) granted Transcontinental Gas Pipe Line Company’s (Transco) request to begin service on the Atlantic Sunrise Project (CP15-138-000 and CP17-212-000).  The Atlantic Sunrise Project consists of 183 miles of new pipeline, 12 miles of loops, 2.5 miles of pipeline replacement, two compressor stations, and other facilities.  The project will increase the capacity of the Transcontinental Pipeline by 1.7 Bcf/day to 15.8 Bcf/day.  In the recent order, FERC determined that Transco “has adequately stabilized the areas disturbed by construction.”  FERC’s approval is conditioned upon terms within the 2017 Order Issuing Certificate.

Pennsylvania Legislation
HB 107: Corrective Reprint, Printer’s No. 4133 (October 1, 2018) would authorize natural gas distribution companies to establish a distribution system extension charge to cover the cost of expanding to underserved areas.

Pennsylvania Notices
Upcoming Meetings: Environmental Resources and Energy (H) voting meeting on SB 138 (October 9, 2018)

Availability of Final Erosion and Sediment Control General Permit-3 for Earth Disturbance Associated with Oil and Gas Exploration, Production, Processing or Treatment Operations or Facilities (October 6, 2018)

Follow us on Twitter at PSU Ag & Shale Law (@AgShaleLaw) to receive ShaleLaw HotLinks:

Connect with us on Facebook! Every week we will post the CASL Ledger which details all our publications and activities from the week.

This week we published one new Shale Law in the Spotlight article: Overview of Recent Amendments to the BLM Methane Waste Prevention Rule

Want to get updates, but prefer to listen? Check out the Shale Law Podcast! We can always be found on our Libsyn page, iTunes, Spotify, or Stitcher.

Check the September Agricultural Law Brief! Each month we compile the biggest legal developments in agriculture. If you’d like to receive this update via email, check out our website and subscribe!

Wednesday, October 3, 2018

Shale Law in the Spotlight – Overview of Recent Amendments to the BLM Methane Waste Prevention Rule


Written by Chloe Marie – Research Specialist

This article provides a detailed discussion of the recent regulatory activity related to the BLM Methane Waste Prevention rule initiated by the Trump administration.

Background

The “Waste Prevention, Production Subject to Royalties, and Resource Conservation” rule – also known as the Methane Waste Prevention rule – was published on November 18, 2016, as part of President Obama’s Climate Action Plan to reduce U.S. methane emissions.

In a Presidential Executive Order No. 13783 dated March 2017, the White House directed Interior Secretary Ryan Zinke to review the 2016 Methane Waste Prevention rule as part of President Trump’s plan to reduce regulation that would limit energy development and production. Initially, the Bureau of Land Management (BLM) issued a final rule on December 8, 2017, “temporarily suspending or delaying certain requirements” provided for in the 2016 rule.

On March 22, 2018, BLM published a draft rule in the Federal Register that proposed to revise the 2016 rule in order to reduce unnecessary compliance burdens associated with the 2016 rule’s provisions and requirements. Approximately six months following the publication of this draft rule, BLM issued a final rule on September 18, 2018. BLM declared that “the new rule … will reduce unnecessary burdens on the private sector and restore proven regulations at a time when investment in Federal onshore oil and gas is skyrocketing.”

The 2018 Final Rule

In the final rule, BLM explained that it decided to implement requirements similar to the ones prevailing and contained in NTL-4A prior to the promulgation of the 2016 Methane Waste Prevention Rule. It also pointed out that a return to the NTL-4A regulatory framework will minimize gas waste while also allowing compliance cost savings, unlike the Methane Waste Prevention Rule, which imposed costs “well in excess of the value of the resource to be conserved.”

BLM repealed many requirements that were contained in the 2016 Methane Waste Prevention Rule, including among others:

- The waste minimization plan requirement (43 CFR 3162.1(j)) – The 2016 rule required submission of such plan as part of an Application for Permit to Drill (APD); however, the BLM alleged that it represented an “unnecessary administrative burden” on both the industry and the agency. BLM calculated that rescission of the waste minimization plan requirement will save the agency $800,000 per year.

- The capture percentage requirement (43 CFR 3179.7) – The 2016 rule mandated that operators capture a certain percentage of gas produced after flaring a certain volume per well. BLM determined that this requirement “would have imposed costs that exceeded the value of the gas that they were expected to conserve.” Thus, BLM rescinded and replaced such requirement with a different approach to regulating gas flaring.

The alternative capture requirement (43 CFR 3179.8) – Also called the lower capture percentage, BLM rescinded this requirement based on the fact that it is inherent to the capture percentage requirement.

Well drilling requirement (43 CFR 3179.101) – This provision prohibited gas venting during drilling operations as a way to dispose of it and also classified gas lost due to a loss of well control as avoidably lost. BLM repealed it because these same requirements are now respectively contained in final § 3179.6(b) and § 3179.4(b);

Well completion and related operations requirements (43 CFR 3179.102) – The 2016 rule prescribed that gas coming to the surface following hydraulic fracturing operations must be disposed only in certain ways stated in this provision, but it could not be vented unless technically infeasible. BLM, however, rescinded the provision due to its “duplicative and unnecessary” nature. The agency explained that, though it was considered by the previous administration as a “backstop” in case the EPA would repeal its similar regulations, BLM “no longer believes that it is appropriate to insert duplicative regulations into the Code of Federal Regulations as insurance against unlikely events.”

Equipment requirements for pneumatic controllers (43 CFR 3179.201) – The 2016 rule required operators to replace pneumatic controllers with low-bleed continuous pneumatic controllers no later than January 17, 2019, or within 3 years from the effective date of the rule in cases where the well or production facility has a remaining lifespan of 3 years or less. BLM rescinded this provision based on the fact that “low-bleed continuous pneumatic controllers are expected to generate revenue for operators when employed at sites from which gas is captured and sold and when the sale price of gas is generally higher than it is now. Thus, BLM expects many operators to adopt low-bleed pneumatic controllers “even in the absence of [such] requirements.

Requirements for pneumatic diaphragm pumps (43 CFR 3179.202) – Under this provision, operators had to switch from covered pneumatic diaphragm pumps to a zero-emissions pumps, or route the exhaust gas to capture or flare no later than January 17, 2018. The final rule determined that this provision is not efficient enough in terms of waste prevention; thus, it repealed it in its entirety pointing out that the “industry is [already] making ongoing efforts to retire old leak-prone equipment, including pneumatic pumps, on a voluntary basis.”

Storage vessels (43 CFR 3179.203) – Prior to publication of the final rule, all gas vapor from storage vessels with potential VOC emissions equal to or greater than 6 tons per year had to be routed to a sales line, or alternatively to a combustion device if routing gas vapor to a sales line was technically infeasible or too expensive. BLM entirely rescinded this provision because “the costs of compliance with previous § 3179.203 would have outweighed the value of its conservation effects;”

Leak detection and repair (43 CFR 3179.301 through 3179.305) – These prior provisions imposed specific requirements relating to the instruments and methods used for leak detection, inspection frequency, and time frames for repairing leaks. The final rule repealed the entire content of these provisions stating that “these requirements, over 10 years from 2019-2028, would have imposed costs of about $550 million to $688 million while only generating cost savings from product recovery of about $101 million to $128 million.”

Interestingly, BLM did not alter the royalty provisions codified under 43 CFR 3103.3-1 and the royalty free-use provisions codified under 43 CFR subpart 3178 of the 2016 rule. This Final Rule was published in the Federal Register on September 28, 2018, and will be effective on November 27, 2018.



This project is funded by the National Agricultural Library, Agricultural Research Service, U.S. Department of Agriculture.