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Vol. 21, No. 5 Week of January 31, 2016
Providing coverage of Alaska and northern Canada's oil and gas industry

DOI proposes new rule

Agency would limit gas flared from federal land, restrict venting, require testing


Petroleum News

On Jan. 22 the U.S. Department of the Interior released a proposed rule aimed at reducing the wastage of methane from oil and gas operations on federal land. The rule, developed by the Bureau of Land Management, comes as part of a series of proposals announced by the Obama administration in January 2015, with the objective of cutting methane emissions from the oil and gas sector by 40 to 45 percent of 2012 levels by 2025.

As part of the administration’s program, in the summer of 2015 the Environmental Protection Agency proposed a new rule limiting the emission of methane from new and modified oil and gas facilities in the United States. The agency is also in the process of implementing a voluntary program for reducing methane emissions from the oil industry. The new proposed rule particularly addresses gas flaring and venting.

Potent greenhouse gas

Methane is a potent greenhouse gas with 25 times the heat-trapping potential of carbon dioxide over a 100-year period should it be released into the atmosphere. Moreover, gas lost through flaring, venting or leaks represents a wastage of a resource that could otherwise be used as fuel.

“I think most people would agree that we should be using our nation’s natural gas to power our economy - not wasting it by venting and flaring it into the atmosphere,” said Interior Secretary Sally Jewell, when announcing Interior’s proposed rule. “We need to modernize decades-old standards to reflect existing technologies so that we can cut down on harmful methane emissions and use this captured gas to generate power and provide a return to taxpayers, tribes and states for this public resource. We look forward to hearing from the public on this proposal.”

Limit to flaring

Currently, BLM has no upper limit on the volume of gas that can be flared in conjunction with oil and gas operations on federal land. The new rule would limit flaring per development well, initially to 7.2 million cubic feet per month, with that limit dropping to 1.8 million cubic feet three years after the rule goes into effect. The rule would apply to production wells and not to exploration wells.

The rule would require operators to evaluate opportunities for methane capture and to prepare a methane waste management plan prior to drilling a development well. Operators would be required to instigate an instrument-based leak detection program to find and repair leaks - biennial inspections would be required, but with the inspection frequency becoming annual if few leaks are found, while becoming quarterly if more leaks are detected.

Venting prohibited

Under the rule, there would be a complete prohibition on the venting of methane, except under some narrowly specified circumstances such as emergency situations or to meet equipment limitations. Within six months of the rule going into effect, operators of storage tanks that vent more than six tons of volatile organic compounds per year would need to implement a means of capturing or flaring gas emitted from the tanks. Well operators would need to capture, flare, use or re-inject gas released during well completions. However, assuming that the Environmental Protection Agency finalizes a similar rule for hydraulically fractured well completions, BLM’s rule for well completion would only apply to conventional completions.

BLM’s proposed rule also includes a provision allowing a royalty rate above the currently fixed rate of 12.5 percent for federal oil and gas leases.

Regulation in Alaska

The new rule would apply to oil and gas operations on federal land in Alaska, in particular in the National Petroleum Reserve-Alaska, where ConocoPhillips is pursuing a program of oil development. However, oil and gas wells in Alaska, including those on federal lands, are already subject to strict rules enforced by the Alaska Oil and Gas Conservation Commission and the Alaska Department of Environmental Conservation, to prevent the wastage of hydrocarbon resources and avoid air pollution. Those rules include a prohibition of methane flaring or venting, other than in small volumes for specific allowed purposes.

AOGCC Chair Cathy Foerster has told Petroleum News that the commission regulates oil and gas wells in Alaska, while ADEC has jurisdiction over air emissions from surface facilities and pipelines. But the commission requires, with few exceptions, all produced gas to be either delivered to market or re-injected into field reservoirs, regardless of whether production comes from federal or state land. Gas can only be flared or vented for safety reasons or for some hydrocarbon conservation purpose, Foerster said. However, the large oil fields have small pilot gas flares running continuously to enable gas to be diverted to a flare stack should some emergency arise.

The commission monitors gas volumes passing through sales meters relative to volumes metered from production wells and will fine a company if gas is wasted, Foerster said.

“Every single month every operator has to give us a report of every puff of gas they produced and what they did with it, and it has to meet our standards,” she said.

AOGCC also requires wells to pass stringent integrity tests, to ensure that fluids do not leak.

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