Originally published by Barclay Nicholson (US) and Miriam Melancon.
The U.S. Secretary of the Interior, Sally Jewell, proposed a rule developed by the Bureau of Land Management (“BLM”) that would limit the flaring, leaking and venting of natural gas on public and tribal lands. The reported purpose of this proposed rule is to cut down on methane emissions and prevent waste of natural gas.
A significant portion of public and tribal lands overlay the Bakken formation. If enacted, this rule will impact the oil and gas industry in the region as operators plan for gas capture, detect leaks, and monitor and limit gas flaring.
The new measures would require oil and gas producers to inspect their equipment for leaks, replace equipment that releases large quantities of gas into the air, and adopt processes and technology that limit the rate of flaring. Metering and reporting would also be required when flared volumes reach 50 Mcf/day. According to the BLM, if implemented, this rule may cost the oil and gas industry up to $161 million per year.
The proposed rule plans to phase in a flaring limit over three years. This limit would apply only to flared gas from producing wells and excludes flaring from wildcat or exploration wells. The rule also provides an exemption if compliance would cause an operator to cease production and abandon significant recoverable oil reserves.
The proposal also modifies royalty rate provisions allowing the BLM to specify a royalty rate at or above 12.5 percent for new leases. Under existing rules, the BLM has no discretion to raise the rate above 12.5 percent.
The rule also includes clarification on when operators owe royalties on flared gas. The royalties would apply only to gas flared from wells already connected to gas capture infrastructure which would keep operators from having to submit applications for approval to flare royalty-free. Because this is listed as a clarification and not a new rule, this portion may be applicable to both new and existing leases.
Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.
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