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BLM repealed many requirements that were contained in the 2016 Methane Waste Prevention Rule, including among others: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