American Oil and Gas Reporter - November 2015 - 25

WASHINGTONWATCH
Laudable Goals
Obscured By Process
Of Updating Rules
The Department of Interior's Bureau of Land Management runs
one of the most important mineral leasing programs in the federal government, overseeing annual production valued at more
than $33 billion. That production generates more than $3 billion
in annual royalty revenue from oil and gas activities on federal
lands, which is shared with state and local governments. In excess of $1 billion in royalty revenue from activities on tribal lands
goes to tribes or individual allottees as well.
Given the significance of these dollar amounts and BLM's role
in collecting revenues on behalf of others, the agency has a responsibility to ensure that its rules reflect modern industry practices and standards, and strike an equitable balance between the
taxpayer and lessee alike.
BLM has put forth several proposed rules to reform and replace
existing Onshore Order No. 3, Site Security; Onshore Order No.
4, Measurement of Oil; and Onshore Order No. 5, Measurement
of Gas. One can't argue that updates are not appropriate, as BLM's
rules are more than 25 years old. However, the Independent Petroleum Association of America is arguing that the proposed rules
fail to meet BLM's objectives and go well beyond an update.
Administratively, the three onshore orders have been proposed
in a sequential fashion that does not allow for coordinated stakeholder input on the proposed changes in each of these interrelated
rules. For example, the comment period for Onshore Order No.
3 closed before Onshore Order No. 5 was even released.
A group of producer associations, including IPAA and the
Western Energy Alliance, filed comments for Order No. 3 on Oct.
9. The associations recognize "the need to keep regulations current with modern technology and industry standards," but express
concern that "the proposed rule change would result in substantial changes to the way domestic onshore oil and gas operations
are conducted, leading to an unwarranted increase in costs and
burdens to domestic oil and natural gas producers. These costs
would be incurred largely without a concomitant benefit to the
federal government or the public at large, and create further disincentives for oil and natural gas producers to invest in development on federal public and tribal lands."
The associations further point out, "Some of these revisions
would require physical changes (that have) impacts to the environment, and (have) socio-economic impacts that have not
been analyzed adequately in the environmental assessment for the
proposed rule."
Among the producer groups' objections is that BLM's proposal
to prohibit off-lease measurement and require single-facility measurement points for both new and existing leases would result in
significant costs for operators and require new environmental disturbance, "all without a demonstrable benefit to the public."
Producers are not taking a "just say no" approach. The associations suggest that "many of these problems could be avoided
by changing the language of the proposed rule so that its provisions are applicable only to new facilities, and (are) not retroactive to existing facilities."
The associations also urge BLM to address whether it possesses

"BLM has put forth several proposed rules
to reform and replace existing Onshore
Order Nos. 3, 4 and 5.

the staff and other resources necessary to administer the proposed
requirements. This concern is not paternalistic, but is based on
producers' experience that understaffed field offices result in backlogs for leasing and permitting.
The comment deadlines for Orders Nos. 4 and 5 are on the horizon, and extension requests are pending. The highly technical nature of the proposals necessitates a well-researched and coordinated response from the oil and natural gas industry. "The timing for this regulatory onslaught is concerning," says Mallori Miller,
manager of government relations for IPAA. "As an industry, we
have a desire and a duty to modernize industry best practices. However, the extremely short window given by the BLM to digest each
regulation, understand how it will impact our companies, and comment appropriately is insufficient. These are highly technical rules
that deserve a methodical and detailed response that should not
be slapped together by an artificial 60-day deadline."
The rule-making process should be sufficiently flexible to allow for BLM and the affected parties to work together on crafting an updated yet workable plan.
The goals of up-to-date regulations that ensure proper measurement, improved accountability, and increased accuracy are laudable. However, BLM's proposed rules may go so far as to discourage production of oil and gas on federal lands by unnecessarily increasing costs to producers or further burdening BLM staff,
which would inhibit leasing. As the Congressional Research Service notes, "Overall, annual U.S. natural gas production rose (21
percent) since fiscal 2010, while production on federal lands fell
by about 31 percent over the same period."
Revenues collected by BLM on behalf of states, local governments and Indian tribes should not be diminished because of
federal overreach and excessively burdensome regulations
cloaked as updates and improvements.
❒

SUSAN GINSBERG is vice
president of crude oil and natural gas regulatory affairs for
the Independent Petroleum
Association of America. She
covers legislation and regulation, focusing on the CFTC
and FERC. Her experience in
natural gas regulatory affairs
spans 25 years.

NOVEMBER 2015 25

American Oil and Gas Reporter - November 2015

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