American Oil and Gas Reporter - February 2016 - 93

Onshore Orders No. 3, 4, 5

Proposed BLM Changes Under Attack
WASHINGTON-The costs of changes
to Onshore Orders No. 3, 4 and 5 proposed
by the U.S. Bureau of Land Management
are unlikely to be matched by any benefits to the federal government or the public, contend state and national oil and gas
industry trade associations.
BLM says the onshore orders have not
been updated since they were issued in
1989. According to the agency, Order No.
3 establishes standards to minimize theft
or loss of oil and gas production, and regulates measuring and production accountability. Onshore Order No. 4 establishes
minimum standards for oil measurements,
while No. 5 covers natural gas measurements (see accompanying story).
In comments it filed in response to the
proposed changes, the Independent Petroleum Association of America says it
asked BLM to work with the oil and gas
industry as it drafted the revisions.
"As they stand, the federal government's proposed changes are counterproductive, and do not account for innovative new technologies," says Dan Naatz,
IPAA's senior vice president of government
relations and political affairs. "A collaborative approach will bring a greater return
on investment-and more quickly-than
new and burdensome regulations. Instead
of proposing overly prescriptive rule makings, which do not account for new technologies that could improve operations nor
have demonstrated a benefit to the public,
BLM should work with industry stakeholders in developing sensible, performancebased rules, and should not apply them
retroactively."
IPAA filed its comments on Onshore
Order No. 3 in conjunction with the
Western Energy Alliance, North Dakota
Petroleum Council, New Mexico Oil &
Gas Association, Oklahoma Independent
Petroleum Association, West Slope Colorado Oil & Gas Association, Montana Petroleum Association, and Utah Petroleum
Association.
Association Criticisms
Several state associations filed individual comments asserting BLM's proposed
revisions would lead to substantial changes
in how domestic onshore operations were
conducted that would result in unwarranted increases in costs and burdens to producers.
One complaint expressed by several associations targets BLM's decision to not
make the changes in a comprehensive

package. The agency says its proposal to
revise Onshore Order No. 3 will work in
conjunction with planned changes to the
other orders, but the groups point out no
changes to Orders No. 4 and 5 had been
published when Order No. 3 was released for public comment late last year.
The Petroleum Association of
Wyoming says BLM failed to properly account for the interrelatedness of the three
orders, and should conduct a single National Environmental Policy Act analysis before revising them, while the NDPC urges
the agency to "provide adequate notice
(and) sufficient comment period, and
conduct good-faith outreach to the regulated community and other stakeholders
in order to have adequate NEPA documentation prior to releasing draft rules to minimize unintended consequences."
The associations also object to the
agency's attempt to expand the regulations'
applicability to state and fee tracts that are
tied to federally approved units or communitized areas (CAs). Under the proposed
revisions, operators working on state and
fee parcels drilled in unit participating areas or CAs with federal or tribal minerals
would have to secure federal approval to
drill. The group asserts neither the Federal Land Policy and Management Act nor
the Mineral Leasing Act of 1920 includes
authority for federal jurisdiction over
state or fee minerals.
Increased Workloads
IPAA and the Western Alliance criticize
BLM's plans to apply the provisions of Order No. 3 retroactively. The groups say doing so would create substantial and unjustified workloads for both operators and
BLM personnel. In addition, they predict
retroactivity would invalidate many commingling approvals, create environmental
impacts that had not been analyzed fully,
and undermine federal units put together
to maximize production while minimizing
costs and environmental impacts.
For the commingling and allocation approvals that would be invalidated under the
proposed revisions, IPAA and the Alliance
warn, many operators would have to
completely revise their gathering and
metering procedures and facilities, leading to significant surface disturbances
and costs. Similarly, they say the agency's
plan to prohibit off-lease measurement and
requirements for single facility measurement points (FMPs)-the federally approved point to measure oil or gas produc-

tion on a federal or Indian lease-also
would impose additional costs and add to
environmental disturbances with no benefits.
"Many of these problems could be
avoided by changing the language of the
proposed rule so its provisions are applicable only to new facilities, and not
retroactive to existing facilities," the
groups offer.
Offering its state as an example of likely outcomes, NMOGA says a 2014 study
shows New Mexico's oil production from
federal lands has dropped 6 percent since
2009 while gas production is down 28 percent. In contrast, the association says oil
output on nonfederal acreage is up 61 percent, while gas has increased 31 percent.
"The primary reason for this shortfall
is not declining resources or industry desire to produce. The barrier is overburdening regulations, time constraints and costs,"
NMOGA asserts. "The proposed changes
to Onshore Order No. 3 are overly restrictive, and put BLM in the role of being involved in the day-to-day operations of producing oil and gas. It is unclear that such
regulation is warranted, since BLM has
provided no demonstrative evidence that
current measurement facilities are not accurately capturing production."
The Independent Petroleum Association of New Mexico notes in its comments
that assigning each of the state's oil and
gas facilities two unique FMPs, as is required under the revisions, would involve processing paperwork for 30,561 active wells. If each FMP takes two hours to
process, the state's BLM field offices
would be dedicating 244,488 hours in additional labor to the proposed rule change,
it calculates.
"If, as noted in BLM's comments, its
intent is to complete the assignment of
FMPs within one year of receipt, this task
alone would require 118 new employees
working 40 hours a week for 52 weeks
straight," IPANM declares.
Inadequate Reviews
Before it releases any future revisions,
PAW suggests BLM conduct public meetings in several Western states, unlike its
first outreach efforts, which consisted of
two meetings in Washington and a webcast that began at 8:30 a.m. Eastern Standard Time, well before the normal work
day for Rocky Mountain and West Coast
operators. In November, the agency announced another round of public meetings
FEBRUARY 2016 93

American Oil and Gas Reporter - February 2016

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