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Wyoming, Industry Push Back in Senate Hearing on BLM Flaring Rule

The U.S. Bureau of Land Management's (BLM) proposed rules for natural gas flaring and venting on public lands drew skepticism and concern from various state, tribal and industry representatives Thursday during testimony at a U.S. Senate Energy and Natural Resources subcommittee hearing in Washington, DC.

As articulated by Sen. John Barrasso (R-WY), chair of the public lands, forest and mining subcommittee, there is bipartisan support for reducing volumes of vented and flared gas, but there is skepticism over whether BLM should have any role in this effort. Barrasso made clear that he doesn't think the federal agency should be involved.

The Obama administration's Amanda Leiter, deputy assistant Interior Department secretary for lands and minerals management, offered committee members assurances that BLM was not overstepping its authority by trying to regulate air quality and that it was open to providing exemptions for states such as Wyoming, Colorado and Utah that have strong regulations in place to address the wellsite problem. But several others who testified expressed concerns.

Wyoming Director of the Department of Environmental Quality (DEQ) Todd Parfitt said the BLM proposed rules are "duplicative and unnecessary" given his state's longstanding rules governing venting and flaring of gas. Parfitt called the proposed rules applied to public lands a case of "federal government overreach."

Similarly, Kathleen Sgamma, vice president for government and public affairs at Denver-based Western Energy Alliance (WEA), argued that through the flaring/venting proposal BLM is attempting to regulate air quality, "something the agency simply does not have the authority to do." However, at one point in the hearing, Sen. Al Franken (D-MN) said BLM was not basing its rules on air quality but rather on its authority to eliminate the waste of natural resources on federal and tribal lands.

"In essence, BLM is asserting regulatory omnipotence on federal lands" in the case of the proposed flaring/venting rules, Sgamma said. "Even if it had the authority to regulate air quality, why is it doing this when EPA is already addressing the issue."

Earlier this year, BLM unveiled its long-awaited flaring/venting rules for associated natural gas on public and tribal lands (see Shale DailyJan. 22), requiring operators to deploy equipment and processes to limit the amount of flared gas at oil wells on public and tribals lands, and to periodically inspect wells for leaks. Operators would also be required to limit venting from storage tanks.

The rules also clarifies when operators owe the government royalties, and gives the BLM the option of setting certain royalty rates higher than 12.5%. A 60-day comment period for the proposal has been ongoing, and Leiter said some of the issues raised in Congressional testimony will be incorporated into the record.

In March, North Dakota producers told BLM the proposal could cut production in parts of the Bakken Shale by 20% and cause tens of millions of dollars in lost tax and royalty revenues if the rules are implemented as they now stand (see Shale DailyMarch 4). The North Dakota Petroleum Council (NDPC) estimated that in the Bakken this could affect more than 2,780 wells.

Based on the comments, BLM plans to "revise the draft accordingly" with the goal of finalizing rules by the end of the year, according to a spokesperson. NDPC, community leaders and regulators all have asked for extensions of the comment deadline.

Sgamma and Leiter debated the cost-benefits of the BLM proposal with committee members serving as referee, although they are skeptical of the federal agency's math, compared to that of the industry as represented by Sgamma's assertion that the full cost of the proposed rule would be $1.26 billion, compared to estimated benefits for $90 million in benefits. "The rule is extremely non-cost-effective," she told the committee.

Leiter acknowledged that the data on venting/flaring on public lands is incomplete, and one of the reasons for BLM's proposed rule is to address that shortcoming. She also argued that the rule addresses the need to have a uniform approach on venting/flaring across all states. But Sgamma countered that oil/gas geologic formations and operations vary from state to state, and therefore, the states themselves are in a better position to regulate the issue.

Franken said he would expect states’ with already strong venting/flaring rules to "have an interest in having the rules be uniform."

Others testifying were James Olguin, councilman of the Southern Ute Indian Tribe; and Mark Boccella, Americas business development manager for FLIR Systems Inc., a provider of leak detection equipment. Olguin opposed the BLM rules while Boccella had no opinion on the federal agency's proposal but outlined some technological advances that now make identifying and eliminating gas leaks easier and more cost-effective.

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