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RBC | The federal Bureau of Land Management (BLM) is responsible for the management of all mineral resources owned by U.S. Citizens—the taxpayers—and Indians on tribal lands. On Nov. 18, 2016, after deliberations with public and industry involvement that began in 2011, BLM promulgated its “Waste Prevention, Production Subject to Royalties, and Resource Conservation, Final Rule” under the authority of the Mineral Leasing Act (MLA) of 1920, as amended. In short, the regulation is known as the BLM Methane Rule.
Specifically, the BLM Rule requires operators of crude oil and natural gas facilities on federal and Indian lands to take various actions to reduce the waste of gas, establishes clear criteria for when flared gas will qualify as waste and therefore be subject to royalties and clarifies which on-site uses of gas are exempt from royalties. According to the Congressional Research Service (CRS), BLM estimates the rule will annually reduce methane emissions by 510,000 tons in 2025 and yield total benefits of $690 million in that year, outweighing the estimated costs of $530 million. Annual royalties to the federal government, tribal governments, states and private owners are estimated to increase by $3 million to $10 million per year.
In April last year, Shawn Bolton, chairman of the Rio Blanco County (RBC) Commissioners, testified to the U.S. House Subcommittee on Energy and Mineral Resources of the Committee on Natural Resources. His statement reads, in part, “The barrage of regulations coming out of Washington and our local (BLM) field office is negatively affecting Rio Blanco County’s economy and directly affects the governmental services we provide to our residents.”
Specifically, Bolton reported that the (then proposed) BLM Methane Rule was “an unnecessary, redundant policy which ignores current emission reduction actions already being taken by our energy partners.” He claimed that the rule would reduce revenue critical to the health and well-being of county residents.
Bolton further stated that during the preceding year, BLM had hit the county with “an onslaught of mandates, policies and directives.” These included, he reported, “Sage grouse protection, endangered and threatened species such as the bladderpod, twinpod and beardtongue penstemon, wild horse management, cultural resource protection and the 2.0 planning rule.”
As part of a larger program to control air pollution with new technology, Colorado was the first state to regulate methane emissions from the oil and gas industry. In 2014, the Colorado Oil and Gas Conservation Commission adopted rules which require the capture of natural gas previously vented or flared, as well as the detection and repair of leaks. Further, the Colorado rule requires that operators install devices that capture 95 percent of their emissions. Most states have not adopted such rules.
Consultations by BLM included reaching out through numerous forums and hearings across the country and receiving thousands of written public comments. The rule is effectively an update to the six-page “notice to leaseholders” issued in 1979, nearly 40 years ago.
Under the MLA, BLM is required to ensure that its lessees “use all reasonable precautions to prevent waste of oil or gas” and that leases include “a provision that such rules … for the prevention of undue waste as may be prescribed by (the) Secretary shall be observed.” Natural gas that has been vented, flared or leaked from crude oil and gas production, processing and transmission activities can be defined as both air pollution and undue waste.
In the meantime, Congress enabled itself, under the Congressional Review Act (CRA), to repeal any new federal regulations. Such action must occur within 60 legislative days of when the rule takes effect. For example, Congress used the CRA last month to reverse a December 2016 Environmental Protection Agency (EPA) rule restricting coal mines from dumping debris and waste, including toxic heavy metals, into nearby waterways.
Under the CRA, once a regulation is repealed, the agency cannot (ever) reissue a substantially similar rule unless Congress has acted to authorize it. The House passed its resolution repealing the BLM Methane Rule on Feb. 3. Colorado’s Western Slope congressman, Scott Tipton (R-Cortez), voted for the repeal. The repeal resolution passed the House on a 221-191 vote with three Democrats joining the Republicans in favor and 11 Republicans joining the Democrats in opposition.
The Senate now must consider this repeal. Due to the very few days Congress actually “legislates,” the 60 day CRA deadline is not expected to occur until sometime in May, or later. Washington insiders report that we are now only at day 43 since the Rule’s Nov. 18 inception.
The Daily Sentinel reported this week that while Colorado U.S. Senator Cory Gardner (R-Yuma) has not yet determined how he will vote on the repeal, U.S. Senator Michael Bennet (D-Denver) has joined a group of 24 Senate Democrats in signing a letter of opposition to the repeal.
Bolton is joined in opposition to the rule by the oil and gas industry generally. There are those, however, that call the rule “tough but reasonable, as (it) improves air quality and enables responsible, economic energy development.” This sector is composed, in part, of companies that provide gas capture technology and equipment.
According to Patrick von Bargen, executive director of the Center for Methane Emissions Solutions, there are nearly 80 companies in the U.S. poised to help the industry meet the challenge of containing and using previously wasted natural gas. Von Bargen also points out that last June, the U.S., Canada and Mexico signed an agreement to cut methane emissions by 40 percent before 2025.
The center commissioned a study based on in-depth interviews with 10 representatives of oil and gas companies, including large and small producers, and third-party service providers, regarding the impact of methane regulation. Highlights of the study completed in January include agreement that the Colorado rule significantly reduces methane emissions, that in the long run companies are not incurring significant implementation costs and that the benefits to finding and fixing gas leaks outweigh the costs.
A group of more than 60 elected officials from Colorado, New Mexico, Utah and Nevada, mostly county commissioners, co-signed a letter to Congress stating that the rule would save more than $330 million worth of gas annually, help clean up the air and assure a fairer return of royalty revenues to the U.S. Treasury. Plus, they wrote, it would put more entrepreneurs to work creating technologies to help producers comply.
In a March 2 letter, more than 60 western Colorado business owners and operators urged Gardner and Bennet to vote “no” on the methane rule repeal. They stated that the rule makes good business sense, preventing waste and protecting Colorado’s western slope from needless pollution, keeping it a great place to live and visit. The businesses, from Aspen, Carbondale, Grand Junction, and Delta to Durango, include restaurants, hoteliers, local food producers, healthcare and fitness centers and outdoor recreation concerns.
Rodger Steen of Steamboat Springs, chair of the Western Colorado Congress Oil and Gas Committee and a former air quality consultant to government and industry, told the Herald Times, “Everything is wrong about wasting natural gas when it can be efficiently captured and sold with royalty revenues returned to the citizens. Nothing is right about wasting the gas.”
President and CEO of the American Petroleum Institute in D.C., Jack Gerard, claims the rule’s “unnecessary requirements could result in the shut-in of a number of currently producing wells, reducing revenues to the federal treasury and the supply of affordable energy.”
Similarly, Kathleen Sgamma, president of the Western Energy Alliance in Denver, has publicly thanked Utah Congressman Rob Bishop (R-Brigham City), who introduced the House resolution, for his leadership in getting the repeal through the House. Bishop is chairman of the House Committee on Natural Resources.
Barry Russell, president and CEO of the Independent Petroleum Association of America, also in D.C., states that, “If not repealed, (the rule) will most certainly mean a decline in production on federal lands as marginal wells will be forced to shut-in which will also lead to a decline in revenue to the U.S. Treasury from royalty payments.”
In contrast, Jesse Prentice-Dunn, advocacy director at the Denver Center for Western Priorities, noted that the repeal action “checks the box on another major agenda item for big oil and gas companies at the expense of American taxpayers … and will simply let the gas go up in smoke.”
Wyoming U.S. Senator John Barrasso, M.D. (R-Casper), who was unanimously elected chairman of the Senate Committee on Environment and Public Works in January, has introduced the repeal’s Senate resolution.