BLM Finalizes Regulations to Reduce Flaring, Natural Gas Waste on Federal and Indian Leases
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BLM Finalizes Regulations to Reduce Flaring, Natural Gas Waste on Federal and Indian Leases

Brownstein Client Alert, April 15, 2024

On April 10, 2024, the Bureau of Land Management (BLM) issued a long-awaited final rule updating its venting and flaring requirements on federal and Indian leases, imposing new requirements to establish plans for gas takeaway prior to BLM approving new permits, and establishing leak detection and repair (LDAR) requirements. The final Waste Prevention, Production Subject to Royalties, and Resource Conservation rule (“Final Rule”) replaces BLM’s prior requirements in the 1979 Notice to Lessees and Operators of Onshore Federal and Indian Oil and Gas Leases: Royalty or Compensations for Oil and Gas Lost (“NTL-4A”). During the past decade, BLM twice attempted to revise the NTL-4A requirements but failed after protracted litigation. The Final Rule supersedes NTL-4A and will govern operations on federal and Indian lands, plus operations on communitized and unitized areas with some carveouts for state and private tracts within those areas. In this alert, we summarize the affected parties, key requirements and deadlines.

Affected Leases and Facilities

  • Onshore federal and Indian (other than The Osage Nation) oil and gas leases, units and communitized areas;
  • Indian Mineral Development Act Agreements, unless specifically excluded;
  • Leases and other business agreements and contracts for the development of tribal energy resources under a tribal energy resource agreement, unless specifically excluded; and
  • Wells, equipment and operations on state or private tracts within a participating area of a federally approved unit agreement or within a communitized area. Please note some of the requirements, such as the preference for flaring over venting and the LDAR program, do not apply to state or private tracts within unitized or communitized areas; requirements that do not apply to state or private tracts are designated with an asterisk below.

Key Requirements

  • Royalties Owed on More Vented or Flared Gas. Like NTL-4A, the Final Rule requires operators to pay royalties on “avoidably lost” gas. However, BLM updated the definitions of “avoidably lost” and “unavoidably lost” to reduce the circumstances considered unavoidable. The new flaring regime imposes volumetric limits that decrease over time to address pipeline constraints and require operators to install meters and comply with gas sampling. Vented or flared gas during an emergency may only occur for up to 48 hours without being considered avoidably lost. And importantly, operators no longer have the option to request royalty-free flaring based on individual economic circumstances.
  • Waste Minimization Plan or Self-Certification Statement to Capture Oil Well Gas. With each new application for permit to drill (APD), the Final Rule requires operators to submit either a waste minimization plan (WMP) or a self-certification statement stating the operator will capture 100% of oil-well gas produced. The WMP requires three-year production and decline projections, a certification the operator has executed a contract to sell 100% of the oil-well gas produced, and other information regarding the operator’s plans to avoid waste from other on-site sources such as pneumatic controllers and storage tanks. In lieu of the WMP, an operator may submit a self-certification statement attesting the operator can capture 100% of oil-well gas produced from the date of first production through plugging and abandonment; if this option is selected, any flared gas will be categorized as avoidably lost unless the flaring meets emergency requirements.
  • Venting Prohibited with Few Exceptions.* In general, operators must flare uncaptured oil-well gas instead of venting. Venting may be allowed in limited circumstances, including if flaring is technically infeasible (small volumes), under emergency conditions where venting is necessary for safety, or through normal operation of a gas-activated pneumatic controller. Note that while venting may be allowed by BLM rules, separate Environmental Protection Agency regulations may prohibit it.
  • Flare Measurement Requirements. Operators must measure gas from high-pressure flares if flared volumes exceed 1,050 Mcf/month using either orifice plates and orifice meter tubes, or ultrasonic meters that meet the Final Rule’s specifications. For high-pressure flares with volumes of less than 1,050 Mcf/month during the averaging period or low-pressure flares, operators may estimate flared volumes using a BLM-provided equation.
  • Storage Tank Operation and Design Requirements.* The Final Rule requires vapor-tight thief hatches, connections, and other access points, and requires operators to keep storage tank thief hatches closed except as necessary to conduct production and measurement operations.
  • LDAR Program.* The Final Rule requires operators to maintain a statewide LDAR program and submit that program, plus an annual update, to BLM for review. Inspection requirements vary based on the equipment at the site. Each LDAR program must require repair of discovered leaks within 30 days of discovery unless good cause makes repair infeasible in that time frame. Operators must verify the repair’s effectiveness within 30 days using a Method 21 soap-bubble test or an instrument (presumably an IR camera, but the Final Rule does not specify). Operators must keep records of leaks and repairs and make those records available to BLM upon request.
  • New Fines. The Final Rule grants BLM the authority to impose an immediate $1,000 fine if BLM discovers a flare that is not combusting gas or upon discovery of an open or unlatched and unattended storage tank on a federal or Indian surface tract.

Compliance Deadlines

The Final Rule takes effect on June 10, 2024. BLM extended the deadlines for certain provisions as follows:

  • September 8, 2024: Operators must have a recordkeeping system in place for avoidable and unavoidable (including emergencies) venting and flaring events.
  • November 1, 2024: End date for pre-Final Rule approvals to flare royalty free. After this date, BLM will apply the new standards in the Final Rule for royalty-free flaring requests.
  • December 10, 2024, June 10, 2025 and December 10, 2025: Operators must install required meters on high-pressure flares with volumes of more than 1,050 Mcf per month and comply with gas sampling requirements; the applicable deadline depends on flare volume.
  • December 10, 2025: Operators must submit initial LDAR programs to BLM.*

Comments on BLM’s Legal Justification

In the preamble to the Final Rule, BLM included a lengthy discussion of its legal authority. This discussion is directed largely at the criticism of the 2016 rule, which the District Court for the District of Wyoming struck down in Wyoming v. U.S. Dep’t of the Interior, 493 F. Supp 3d 1046 (D. Wyo. 2020). Most notably, BLM removed many of the provisions from the 2016 rule that would have reduced air pollution but not necessarily waste (i.e., removing storage tank venting standards), provided a lengthy and updated discussion of venting and flaring volumes, and expressly excluded the social cost of greenhouse gases in justifying the economics of the rule. The agency also attempted to remove what it considered to be excessive burdens on marginal wells, including allowing royalty-free vented gas during liquids unloading for 24 hours and removing requirements for pneumatic controllers and diaphragm pumps (although, we note that analogous requirements exist under EPA’s new NSPS rules). Whether BLM succeeded in grounding this rule squarely within its “waste” authority is unclear, but we note BLM estimates costs will exceed benefits, at least in terms of waste avoided—BLM estimates the rule will cost operators $19.3 million per year, while generating $1.8 million per year in additional captured gas and $51 million per year in additional royalties.

The lawyers on this alert have been involved in the lengthy litigation involving BLM’s various attempts at promulgating a waste prevention regime to supersede NTL-4A. We would be happy to answer any questions you may have about the impact of this rule, or help analyze how this rule interacts with the EPA’s most recent methane initiatives, including NSPS OOOOb and c and the proposed Waste Emissions Charge rule.

This document is intended to provide you with general information regarding the BLM's final Waste Prevention, Production Subject to Royalties, and Resource Conservation rule. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.

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