The U.S. Department of the Interior’s Bureau of Land Management (BLM) has finalized a rule designed to curb methane pollution from oil and natural gas production on federal and Tribal lands, in part by collecting royalty payments on flared gas.
The Waste Prevention, Production Subject to Royalties, and Resource Conservation rule, which was proposed in late 2022 and finalized last week, “modernizes existing BLM regulations to require current technology and practices to better account for the waste of natural gas,” BLM said. “It requires operators of federal and Indian oil and gas leases to take reasonable steps to avoid natural gas waste from the very beginning of operations, carry out leak detection and repair across ongoing operations, and cut down on wasteful gas venting and flaring.
“Consistent with the Inflation Reduction Act, the rule also sets new limits on ‘royalty-free’ flaring, so that public and Tribal mineral owners are properly compensated through royalty payments for avoidable losses of natural gas.”
Federal lands and waters account for about 24% of U.S. oil production and 11% of natural gas output, according to the American Petroleum Institute. Total venting and flaring reported by federal and Indian onshore lessees averaged roughly 44.2 Bcf/year, BLM officials said.
The new rule is expected to generate more than $50 million in additional natural gas royalty payments each year to federal and Tribal mineral owners, “while conserving billions of cubic feet of gas that might otherwise have been vented, flared, or leaked from oil and gas operations,” according to BLM.
“This final rule, which updates 40-year-old regulations, furthers the Biden-Harris administration’s goals to prevent waste, protect our environment, and ensure a fair return to American taxpayers,” said Interior Secretary Deb Haaland. “By leveraging modern technology and best practices to reduce natural gas waste, we are taking long-overdue steps that will increase accountability for oil and gas operators and benefit energy communities now and for generations to come.”
BLM Director Tracy Stone-Manning added, “This rule represents a common sense, fair, and equitable solution to preventing waste that provides a level playing field for all of our energy-producing communities. “The BLM worked extensively with a wide range of stakeholders to modernize our decades-old regulations and help protect communities across the country.”
Western Energy Alliance President Kathleen Sgamma, a frequent critic of the Biden administration’s energy policies, expressed cautious optimism about the BLM rule.
“The oil and natural gas industry and the BLM share the goal of reducing waste of natural gas through venting, flaring, and leaks,” said Sgamma. “Western Energy Alliance appreciates that with the waste prevention rule, BLM is attempting to achieve clarity on how to classify waste gas as avoidably and unavoidably lost, and hence whether it bears royalties or not.”
She said the group, which represents exploration and production firms in the western United States, “is reviewing the final rule to ensure it has corrected the problems with the 2016 Obama Administration rule that was overturned” by the U.S. District Court for the District of Wyoming in 2020.
Sgamma added that, “The 2022 proposed rule was better than the 2016 rule that we successfully overturned in court, as the Wyoming District Court found that BLM had usurped the air quality authority of EPA and the states. Many but not all of those problems were fixed in the 2022 proposed rule.”
The BLM rule is separate from the Environmental Protection Agency’s proposed methane waste emissions charge, commonly referred to by the industry as a methane fee, which has generated more vehement opposition from the industry.
