Energy

Bureau of Land Management’s Methane Rule Sunk by House Vote

Last Friday, the House voted 221 to 191 to nullify the Bureau of Land Management’s (BLM) final rule (November 18, 2016, FR) to limit venting, flaring, and leaking from oil and gas (O&G) operations on public land. The House exercised its authority under the Congressional Review Act (CRA) to kill this major Obama-administration environmental regulation just as it had 2 days earlier with the Stream Protection Rule (SPR) issued by the Office of Surface Mining Reclamation and Enforcement. The Senate also voted to withdraw the SPR, and that withdrawal can now be made final with President Trump’s expected signature. As of this writing, the Senate has yet to vote on BLM’s rule, commonly called the methane venting and flaring rule.

Prevent Waste, Increase Royalties

According to the BLM, the rule is needed to prevent waste of natural resources extracted on public land. Gas that is lost during affected resource extraction on public lands reduces the royalty revenues to U.S. taxpayers and the states by millions of dollars annually, the BLM says.

The cobenefit of the rule is a reduction in methane emissions. Methane is the main component of natural gas and a major source of energy. Methane is also a powerful greenhouse gas (GHG), and one legal argument against the rule is that the BLM actually issued an air pollution regulation, an action that is reserved to the EPA under the Clean Air Act.

The rule requires that, over time, O&G producers use currently available technologies and processes to cut flaring in half at oil wells on public and tribal lands. Operators must also periodically inspect their operations for leaks and replace outdated equipment that vents large quantities of gas into the atmosphere. Other parts of the rule require operators to limit venting from storage tanks and use best practices to limit gas losses when removing liquids from wells. The rule also clarifies when operators owe royalties on flared gas.

Outdated Gas Value

In a letter to House Speaker Paul Ryan several days before the CRA vote, the Independent Petroleum Association of America (IPAA) said BLM’s economic justification for the rule is flawed because it is based on a 2014 study that placed the trading value of natural gas at $4 per million cubic feet (mcf), which is “highly inflated for today’s market.” The rule will therefore defeat BLM’s objective of increasing royalties, says the IPAA.

“The fugitive emissions program outlined in the rule will result in many marginal wells that produce less than 15 barrels of oil per day or 90 mcf of gas per day to be shut down as the cost of installing and maintaining mandatory measuring equipment is not viable at a low rate of production,” the IPAA states. “This means the federal government will forgo substantial royalty payments to the general treasury.”

Colorado Rule Cited

Also, in a letter to Congress before the House vote, many environmental and public health organizations said that the rule filled a critical public health need because leaked natural gas contains volatile organic compounds, an asthma irritant; benzene; and other hazardous air pollutants that are known carcinogens. The groups also noted that after Colorado implemented a similar rule, natural gas production increased, and “the standard has been popular.”

The groups also called the CRA a “blunt instrument that seeks to undermine the federal rulemaking process.”

“By essentially voiding the rulemaking process and mandating that substantially similar rules not be pursued in the future, the CRA on the BLM’s Methane Rule wastes taxpayer money and defies the public interest,” the groups added.