New Methane Rule
The rule seeks to modernize BLM’s decades-old requirements around oil and gas venting, flaring and leaks. The guidelines additionally will increase royalty payments by nearly $39 million per year to support oil and gas waste management efforts and compensate federal and Indian mineral owners accordingly. Specifically, the proposed rule would:
- Compel federal and Indian operators to engage in preventative measures to minimize oil and gas waste on federal and tribal land. As such, BLM permit approval may hinge on established “reasonable measures” to prevent oil and gas waste. If an application is approved already, BLM may call on operators to implement such reasonable measures. These specifications may include technological advances and adjustments to industry practices.
- Require operators to incorporate a waste minimization plan in their permit applications to drill oil wells. These plans would empower BLM to anticipate gas production, an operator’s capacity to sell the gas produced and an operator’s commitment to reducing gas waste. Should BLM determine that operators are not reducing waste sufficiently, it may require the operator to address concerns before permit action.
- Obliges operators to avoid wasting oil and gas by prohibiting the use of certain controllers and pumps, mandating the use of certain oil storage tanks, and requiring operators to utilize a leak detection and repair (LDAR) program.
DOI acknowledges in the proposed rule that some oil and gas is inevitable waste. The proposal notes that such waste will not be subject to royalty payments. Moreover, BLM will detail the circumstances in which oil and gas waste is “unavoidably lost” and establish a volume limit on royalty-free flaring due to events that prevent produced gas from going to the market.
The proposed rule will publish in the Federal Register within the coming days—after which DOI will accept public comments for 60 days.
Background
In 2016, President Obama’s DOI issued its own methane rule. Similarly, the regulation sought to address flaring, venting and natural gas leaks from oil and gas production. However, the U.S. District Court for the District of Wyoming struck down the rule in 2020. The decision argued that BLM “exceeded its statutory authority and acted arbitrarily in promulgating the new regulations.” Specifically, Judge Scott Skavdhal explained that the rule sought to regulate air quality, ultimately falling outside of BLM’s jurisdiction. The Biden-Harris administration’s DOI addressed “certain elements” of the 2016 iteration to prevent additional court challenges.
The DOI’s methane rule is separate from the Environmental Protection Agency’s (EPA) methane guidelines recently announced during the 27th Conference of the Parties (COP 27). The EPA issued a supplemental notice of proposed rulemaking which would establish standards of performance for new, reconstructed and modified sources of methane emissions and other named pollutants, and establish guidelines for existing sources of emissions in the oil and gas sector. The guidance requires that all drilling sites be monitored for leaks until they are closed, compelling site operators to respond to credible third-party reports of high-volume methane leaks and strengthening restrictions on flaring, among many other requirements.
Conclusion
Akin Gump’s public law and policy and environmental and natural resources teams are continuously monitoring the DOI’s methane rule and remain ready to advise clients as they navigate new regulations.