Interior Department Announces Final Rule to Reduce Methane Emissions & Wasted Gas on Public, Tribal Lands.
December 12, 2016

HY-BON/EDI CAN HELP.

FINAL RULE OVERVIEW

Final Rule Limits Venting, Flaring and Leaking from Oil & Gas Operations to Reduce Waste and Harmful Emissions, Provide Fair Return to Taxpayers. The Mineral Leasing Act requires the BLM to ensure that operators “use all reasonable precautions to prevent waste of oil or gas.”  Important elements of the final rule include:

LIMITING ROUTINE GAS FLARING

Until now, there has been no upper limit on how much an operator can flare.  The rule requires operators to capture most of their gas after accounting for specified volumes of allowed flaring.

  • Capture targets phase in from 2018-2026 from 85% to 98% of associated gas produced from development oil wells (i.e., targets don’t apply to exploratory wells, well testing).
  • Capture targets do not apply to “flaring allowable” volumes, which phase down from 2018-2025 from 5,400 Mcf/per well to 750 Mcf/per well, on average across operations in a state
  • Capture targets can be met lease-by-lease or through averaging state-wide across all an operators’ operations on federal and Indian leases.
  • Excess flaring beyond the capture targets pays royalty and is subject to enforcement.
  • Provides for alternative requirement if meeting capture target would cause an operator to cease production and abandon significant recoverable reserves under a lease.
  • Operators could comply with the proposed flaring limits by: expanding gas-capture infrastructure (e.g. installing compressors to increase pipeline capacity, or connecting wells to existing infrastructure through gathering lines); adopting alternative on-site capture technologies (e.g. compressing the natural gas or stripping out natural gas liquids and trucking the product to a gas processing plant); or temporarily slowing production at a well to minimize losses until capture infrastructure is installed.
  • Also improves disclosure of flared volumes by requiring measurement (through meters or calculation based on gas-to-oil ratio) when flared volumes reach 50 Mcf/day.

PRE-DRILLING PLANNING FOR GAS CAPTURE

Until now, we had no mechanism to better align timing of well development and pipeline installation.

  • Before drilling a development oil well, operators would need to evaluate opportunities for gas capture and prepare a waste minimization plan, which must be submitted with an Application for Permit to Drill.
  • The plan must meet various requirements, and must be shared with midstream gas capture companies to facilitate timely pipeline development, but plan details would not be enforceable elements of the permit to drill.

DETECTING LEAKS

  • The rule requires operators to use an instrument-based leak detection program to find and repair leaks.  Operators may use infrared cameras, portable analyzers assisted by audio, visual and olfactory inspection, or other methods approved by the BLM.
  • Operators must conduct inspections semi-annually for all sites except compressor stations, and quarterly for compressor stations.
  • This tracks EPA’s fugitive emissions requirements for new wells and facilities, and is similar to leak detection and repair requirements in Colorado and Wyoming.
  • Operators in compliance with EPA fugitive emissions requirements for new wells would be deemed in compliance with the BLM requirements.
  • Provides for alternative requirement if meeting the limit would cause an operator to cease production and abandon significant recoverable reserves under a lease.

REDUCING VENTING

  • Except in narrowly specified circumstances, operators may not vent natural gas.  Exceptions include emergencies and venting from certain equipment subject to limits.
  • Operators must replace “high bleed” continuous pneumatic controllers with low/zero bleed controllers within one year, tracking requirements in Colorado and Wyoming.
  • Operators must replace pneumatic diaphragm pumps with solar pumps, if adequate for the function, or route the pumps to a flare (if one is available on-site) within one year. This is similar to Wyoming requirements and EPA requirements on new pumps.
  • Within one year, operators must capture or flare gas from storage tanks that vent more than six tons of volatile organic compounds (Volatile Organic Compounds)/year.  This affects only the highest venting tanks and is similar to EPA requirements for new tanks and Colorado and Wyoming requirements for new and existing tanks.
  • Operators unloading liquids from wells would be required to use best management practices– e.g., optimize automated plunger lift systems to reduce venting; stay on site during manual purging.
  • Operators must capture, flare, use, or re-inject gas released during well completions, but operators in compliance with EPA’s similar requirements would be deemed in compliance with the BLM requirements.
  • An operator may be exempted by demonstrating that compliance with the requirement would impose such costs as to cause the operator to cease production and abandon significant quantities of recoverable reserves under the lease.

 CLARIFYING AND REVISING ROYALTY RATES

  • The rule revises existing royalty provisions for onshore oil and gas leases to specify a royalty rate at or above 12.5 percent for new competitive leases, consistent with the statutory authority in the Mineral Leasing Act.  The prior regulation specified a rate of 12.5 percent and left the BLM no discretion to raise the rate as conditions change.
  • This responds to findings and recommendations in audits from the Government Accountability Office and Department of Interior Office of Inspector General.
  • The BLM is not currently raising royalty rates for new competitive leases.
  • The rule also clarifies that royalties apply only to gas flared from wells already connected to gas capture infrastructure. This removes the burden on operators to submit applications for approval to flare royalty-free.

INTERACTION WITH STATE AND TRIBAL RULES

  • States/tribes may be granted a variance, which applies state/tribal regulations in lieu of provisions of BLM regulations.
  • The BLM may grant a variance if the State/tribe shows that the State/tribal rule will perform at least as well as the provisions of the BLM’s rule in reducing waste, reducing environmental impacts, and ensuring safe production.

HY-BON/EDI’s TOTAL SOLUTION APPROACH

HY-BON/EDI’s engineered vapor recovery units (VRU), vapor recovery towers (VRT) and enclosed vapor combustion units (VCU) along with our IQR and Leak Detection and Repair (LDAR) services offer a complete package for operators to reduce their greenhouse gas emissions. Our testing and monitoring systems can set your baseline GHG emissions and track the reductions with real-time data.

If you have any questions on information presented above, please contact Jeff Voorhis at KFt|m/xc&q]X]#[[R%*~G-k@$mh