American Oil and Gas Reporter - November 2016 - 34

Public Lands

BLM Releases Onshore Order Updates
WASHINGTON-While the Bureau of
Land Management hails new regulations for
measuring crude oil and natural gas produced from federal onshore leases as "a
durable framework that will support responsible development and management of the
nation's oil and gas resources," the Independent Petroleum Association of America characterizes them as inflexible and
costly.
On Oct. 17, BLM announced final rules
to update and replace Onshore Oil and Gas
Orders 3, 4 and 5 with 43 CFR 3173, 3174
and 3175, respectively, establishing standards for site security at onshore federal
and Indian oil and gas leases, and standards
for measuring crude oil and natural gas.
BLM Director Neil Kornze says finalizing the rules concludes a seven-year effort to address concerns raised by the Government Accountability Office, the Department of Interior's Office of the Inspector
General, and the Secretary's Royalty Policy Committee.
BLM estimates the rule changes in aggregate will cost operators $12,856 a
year for the first three years, and $7,654
each year thereafter.
However, IPAA Senior Vice President
of Government Relations and Political Affairs Dan Naatz, who expresses the association's displeasure that BLM released all
three rules at once, counters, "We believe
the collective costs that these three regulations will impose on America's small
businesses and job creators have not been
accurately taken into consideration. Releasing these final regulations all at once
in the waning months of this administration is both disingenuous and careless policy making."
The three new regulations are available
on BLM's website at www.blm.gov.
43 CFR 3173
According to BLM, 43 CFR 3173 (replacing Onshore Order 3) addresses facility measurement points (FMPs), site facility diagrams, the use of seals, bypasses
around meters, documentation, record
keeping, commingling, off-lease measurement, and reporting of incidents of unauthorized removal or mishandling.
BLM says the final rule spreads the
compliance time frame for designating
FMPs over three years, and allows operators of existing measurement facilities to
continue to produce while their FMP applications are pending approval. Leases,
unit participating areas (PAs) and communization agreements (CAs) that have not
produced any oil or gas for 12 months will
not have to apply for FMPs until they re34 THE AMERICAN OIL & GAS REPORTER

sume operations.
BLM says the new rule grandfathers existing downhole commingling approvals
and existing surface commingling approvals where the average production
during the previous 12 months for each
covered lease, unit PA and CA is less than
1.0 million cubic feet of gas a month or
100 barrels of oil a month.
The new rule recognizes commingling
already authorized or approved by a tribe,
and exempts basins where BLM has determined commingling is necessary to
achieve maximum economic recovery
and/or resource conservation, the agency
adds.
43 CFR 3173 requires operators of new
and existing facilities to provide site facility diagrams, but BLM says operators of
existing facilities that have a diagram on
file that meets the requirements of Onshore
Order 3 will not have to provide a new diagram until the facility is modified or there
is a change in ownership.
43 CFR 3174
43 CFR 3174 (replacing Onshore Order 4) addresses oil meter technology, and
proper measurement documentation and
record keeping, and establishes performance standards for oil measurement systems. It includes a mechanism for BLM
to review and approve new oil measurement technology and systems, according
to the agency.
The rule gives operators between one
and four years to bring existing FMPs into
compliance, depending on production
volumes, and gives operators two years to
begin using approved equipment listed on
its website, BLM says.
In lieu of all the detailed procedures in
its proposed rule, BLM says the final rule
incorporates by reference many American
Petroleum Institute standards for FMPs
and alternative tank measuring methods.
The rule allows operators to use Coriolis measurement and automatic tank
gauging systems without having to obtain
variances from BLM by clarifying that
lease automatic custody transfer systems
may have either a Coriolis meter or a positive displacement meter.
BLM says FMPs measuring an average
monthly volume of at least 30,000 barrels
are subject to an uncertainty limit of
±0.50 percent, while FMPs smaller than
30,000 bbl/mo must meet an uncertainty
limit of ±1.50 percent.
43 CFR 3175
Like the crude oil measurement rule,
BLM says 43 CFR 3175 (replacing On-

shore Order 5) includes a mechanism for
the agency to review and approve new gas
measurement technology. In addition, it addresses gas meter technology, establishes
requirements for the hardware and software used on metering equipment, specifies the requirements for record keeping
and reporting, and establishes overall
measurement performance standards.
BLM says the rule provides operators
two years to begin using approved equipment listed on its website as well as to enter gas analyses into the federal Gas
Analysis Reporting and Verification System.
The new rule defines very-low-volume
(marginal-volume in the proposed rule)
wells as those producing 35 Mcf a day, and
low-volume wells as those producing
200 Mcf/d, according to a BLM fact
sheet.
BLM says the final rule allows operators to submit existing test data for all
makes, models and ranges of transducers,
as opposed to requiring all transducers be
tested under a prescribed protocol. It also
allows in-house testing of new transducers, as long as the testing facility meets the
requirements of a qualified testing facility.
Under the rule, BLM says, meter tubes
at low- and high-volume FMPs that were
in place prior to the effective date do not
have to comply with the latest API construction and length standards, nor does
software at low- and very-low-volume
FMPs in place prior to the effective date
have to meet the latest API calculation
methodologies.
The final rule requires meter tube inspections only if a basic inspection reveals
obstructions, pitting or buildup of foreign
substances, as opposed to a set schedule
for detailed inspections.
Other provisions of 43 CFR 3175, according to BLM:
* Require gauge lines have a nominal
diameter of 0.375 inches rather than an inside diameter of 0.375 inches;
* Establish requirements for verifying
gas chromatographs, cleaning and replacing chromatograph filters, and analyzing samples; and
* Fix gas sampling frequencies. ❒

Coming In December
Coverage of OIPA's fall conference, held Oct. 23-25 at the Big
Cedar Lodge outside Branson, Mo.
American Oil and Gas Reporter - November 2016

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