American Oil and Gas Reporter - August 2016 - 16

IndustryDigest
Three Federal Agencies
Increase Civil Penalties
WASHINGTON-Three federal
agencies that oversee onshore and
offshore acreage have issued interim
rules to increase the level of civil
financial penalties, citing the Federal
Civil Penalties Inflation Adjustment
Improvements Act of 2015 as the
reason.
The purpose of the adjustments, as
stated in the legislation, is to maintain
the deterrent effect of civil penalties.
The act allows for an initial "catch-up"
adjustment that calculates the inflation
from the time the penalty was
established to the present, with annual
adjustments to follow.
The Administrative Procedures Act
requires agencies to publish interim
final rules by July 1 with an effective
date no later than Aug. 1. To comply,
the Bureau of Land Management says it
issued the adjusted penalties as an
interim final rule, and is requesting
comments post-promulgation.
According to BLM, the agency's
increases were to take effect Aug. 1.
Also issuing penalty increases are
the Bureau of Safety and Environmental
Enforcement and Bureau of Ocean
Energy Management.
BLM says under its regulations, only
the civil penalties for oil and gas are
subject to the act, and the calculated
adjustment is based on the percentage
change in the Consumer Price Index
from October 1987, the year its
penalties were set, to October 2015.
BLM's penalty adjustments include:
* Failure to comply: $1,031, up
from $500;
* Failure to permit inspection:
$20,628, up from $10,000; and
* False or inaccurate documents:
$51,570, up from $25,000.
Public comments on BLM's proposal
will be accepted through Aug. 29. The
Federal Register notice for the BLM
increase is available at
http://federalregister.gov/a/2016-15129.
BSEE says maximum civil penalty
rates for Outer Continental Shelf Lands
Act violations will increase from
$40,000 to $42,017 a day for each
violation. It adds its interim final rule
was to become effective July 28. BSEE
says its list of infractions and
corresponding fine amounts is available
at http://www.bsee.gov/Regulations16 THE AMERICAN OIL & GAS REPORTER

and-Guidance/Notices-to-Lessees-andOperators.
BOEM, which is seeking penalty
increases in line with BSEE's, is
accepting public comments through
Aug. 30. For instructions on submitting
comments, visit
http://boem.gov/note06302016.
"The civil monetary penalties now
align more closely with the actual costs
of drilling an oil and gas well," BLM
states. "However, this adjustment will
not pose a significant economic impact
because individuals and companies can
avoid these increased penalties by
complying with applicable oil and gas
regulations." ❒

'Zero Discharge' Rule
Exceeds Intended Scope,
According To PIOGA
WEXFORD, PA.-The regulatory net
for the U.S. Environmental Protection
Agency's final rule prohibiting the
discharge of onshore unconventional oil
and gas wastewaters to publicly owned
treatment works catches a significant
number of the Keystone State's
conventional formations as well, warns
the Pennsylvania Independent Oil &
Gas Association.
"The problem is that a number of
formations and wells our industry
considers conventional are considered
unconventional in this final rule, and
therefore erroneously subject to EPA's
new zero discharge rule," PIOGA warns
in a July 6 action alert.
The association notes that the rule is
scheduled to take effect Aug. 29.
According to PIOGA, the rule EPA
proposed in April 2015 repeatedly
stated an intention to apply only to
unconventional oil and gas, which it
defined as "crude oil and natural gas
produced by a well drilled into a low
porosity, low permeability formation
(including, but not limited to, shale gas,
shale oil, tight gas, and tight oil)." EPA
further stated, PIOGA goes on, "The
scope of this proposed rule making is
limited to pretreatment standards for
wastewater generated from
unconventional, rather than
conventional, oil and gas extraction
facilities."
EPA issued the final rule June 13 in
the form of a zero discharge
pretreatment standard for onshore

unconventional oil and gas extraction
facilities to publicly owned treatment
works (AOGR, July 2016, pg. 14).
However, PIOGA notes, the final
rule and its technical development
document (TDD) provide no further
clarification as to how EPA defines
'shale and/or tight formation,' other than
a preamble reference to the TDD for
additional information, which the
association notes deviates from the
proposed's rule definition by removing
"low porosity, low permeability"
formation.
The association goes on to explain
that the TDD cross-references a number
of definitions, some of which diverge
from longstanding Pennsylvania
terminology and list the Appalachian
Basin's Devonian, Clinton-Medina and
Tuscarora formations as
unconventional, despite decades of
historically verifiable conventional
activity.
PIOGA expresses its intention to
deal with the matter first by attempting
to persuade state and federal regulators
to address the definition, and urges its
members and allies to appeal to EPA
and other policymakers.
Failing that, the group also holds out
the possibility of litigation. "Under
section 509(b)(1) of the Clean Water
Act, judicial review of the final rule can
be had only by filing a petition for
review in the U.S. Court of Appeals
within 120 days after the regulation is
considered issued for purposes of
judicial review (July 12, 2016). Section
509(b)(2) of the CWA prohibits the
requirements of the final rule from
being challenged later in civil or
criminal proceedings brought by EPA to
enforce the requirements," PIOGA
points out. ❒

Associations Question
Financial Assurance
Notice To OCS Lessees
WASHINGTON-Industry
associations are expressing doubt about
a notice to lessees announced by the
Bureau of Ocean Energy Management
to update its financial assurance
requirements for companies operating
on the Outer Continental Shelf.
"BOEM's new financial
requirements will force each lease
owner to fully insure upfront all its
American Oil and Gas Reporter - August 2016

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