METHANE

Interior finalizes rule, gets hit with industry lawsuit

This story was updated at 2 p.m. EST.

The Interior Department finalized a rule today designed to slash the volume of natural gas that's vented and flared each year into the atmosphere from roughly 100,000 wells on federal and tribal lands.

The Methane and Waste Prevention Rule's goal is twofold: Reduce releases of methane, a greenhouse gas that's more than 25 times more potent than carbon dioxide, and ensure that taxpayers get a fair return on the use of federal lands by capturing flared gas that is not subjected to royalty payments.

Interior says the new rule — which replaces 30-year-old regulations — is projected to cut methane emissions from the oil and gas sector by as much as 35 percent.

The rule is fiercely opposed by the oil and gas industry and congressional Republicans. Interior Secretary Sally Jewell's announcement of the final rule this morning was quickly followed by an industry lawsuit.

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The Western Energy Alliance and the Independent Petroleum Association of America filed the suit in U.S. District Court for the District of Wyoming, calling the regulation "a vast overreach" of Interior's regulatory authority.

Interior's Bureau of Land Management, which worked on the rule for five years, says reducing the flaring, venting and leaking of methane from federally managed oil and gas wells would save society up to $188 million annually by allowing more natural gas to be sold and preventing the escape of methane and other pollutants (Greenwire, Jan. 22).

"This rule to prevent waste of our nation's natural gas supplies is good government, plain and simple," Jewell said in a statement.

"We are proving that we can cut harmful methane emissions that contribute to climate change, while putting in place standards that make good economic sense for the nation," she added. "Not only will we save more natural gas to power our nation, but we will modernize decades-old standards to keep pace with industry and to ensure a fair return to the American taxpayers for use of a valuable resource that belongs to all of us."

But beyond the legal challenge, the rule's future is very much in doubt after President-elect Donald Trump's election last week. The Republican has made it clear that his administration will reduce regulation and expand oil and natural gas drilling on federal lands.

Trump will almost certainly attempt to roll back the rule. But outright overturning BLM's final methane regulation would require going through the entire rulemaking process again and is no simple task, said Fred Cheever, an environmental law professor at the University of Denver Sturm College of Law.

Under the Administrative Procedure Act, an incoming administration needs to provide reasons or evidence that circumstances have changed since the rule was created or show that the reasoning behind the rule was otherwise flawed.

"If I were tasked by a new Trump secretary of the Interior to come up with a justification for pulling back what is clearly a protective action, I would be hard-pressed," Cheever said.

Trump may also work with members of the Republican majorities in the House and Senate to strip funding for the rule, observers say.

And Trump might work to clear a backlog of right-of-way applications to build pipelines and other infrastructure that the industry says would allow drilling operations to capture excess gas and pipe it to market instead of venting it into the air.

This has been a major sticking point for Republican congressional leaders, who accuse the Obama administration of giving the industry little choice but to vent and flare gas into the atmosphere.

"This methane rule duplicates state regulations already in place, expands bureaucracy, drives up costs and kills jobs in the process," said Rep. Cynthia Lummis (R-Wyo.), who chairs the Congressional Western Caucus. "The BLM should be streamlining their permitting process for pipeline construction to improve the collection of this valuable resource and generate as many royalties for the taxpayer as possible rather than trying to stick a cork in production."

"Even though the administration may not be able to make the rule go away, the administration is definitely in a position to simply not enforce the rule," Cheever added.

Kathleen Sgamma, vice president of government and public affairs for the Denver-based Western Energy Alliance, vowed industry would "seek ways to overturn BLM's vast overreach of legal authority."

"BLM lacks statutory authority for the creation of an air quality regulatory program, which has resided with EPA and the states since the 1970s," she said after her group filed the lawsuit with IPAA.

"This is an 11th hour shot by an administration that doesn't fully understand how its rules impact our businesses," Dan Naatz, senior vice president of government relations and political affairs at IPAA, said in a statement. "The continued regulatory onslaught on American producers calls into question the president's commitment to the laws requiring mineral production on federal lands or whether the misguided crusade to 'Keep It in the Ground' has overtaken this administration."

Critical to Obama's climate plan

Finalizing the methane rule was a major priority of the Obama administration. Reducing venting, flaring and leaking of methane is a major component of President Obama's 2013 Climate Action Plan.

U.S. EPA earlier this year released revised estimates of methane emissions from the oil and gas sector, concluding that natural gas systems were the country's largest source of methane in 2014, accounting for a third of total emissions (E&ENews PM, April 15).

And the Government Accountability Office last summer issued a report criticizing BLM for failing to have consistent policies in place to regulate the venting and flaring of natural gas at thousands of oil and natural gas wells, sometimes allowing industry to incorrectly burn off the gas without paying royalties (E&ENews PM, July 21).

"With better planning and today's affordable technology, we can cut waste in half," BLM Director Neil Kornze said in a statement. "This common-sense rule will save enough gas to supply every household in the cities of Dallas and Salt Lake City combined — every year."

The rule requires operators to use off-the-shelf technologies to reduce flaring, which happens when operators burn off excess gas.

According to BLM, flaring doubled from 2009 to 2013, driven in large part by oil wells in the Dakotas and New Mexico, where there are not yet adequate pipelines to capture associated gas.

It also sets gradually diminishing caps on the amount of gas that may be flared from wells, beginning with a limit of 5,400 mcf, or thousand cubic feet, per well per month for the first year. Allowable limits begin to decline gradually over a period of nine years.

Operators could comply by installing gas-capture infrastructure such as gathering lines, by compressing the gas or stripping out the natural gas liquids and trucking it off site, or by temporarily slowing production until capture infrastructure can be installed.

The rule also requires companies to prepare a "waste minimization plan" that evaluates opportunities for gas capture before being approved to drill a well. The plan would need to be shared with midstream gas capture companies to promote timely pipeline development, though the minimization plan would not be legally binding.

In addition, the rule requires companies to perform periodic inspections for methane leaks using infrared cameras or portable analyzers assisted by audio, visual and olfactory inspection.

Janice Schneider, Interior assistant secretary of land and minerals management, said the final rule is supported by government studies and was developed with numerous stakeholder input.

"The result is an effective rule that not only gets more of our nation's natural gas into pipelines but also reduces pollution and cuts greenhouse gas emissions," Schneider said in a statement.

Cheers and jeers

The finalization of the rule drew mixed reviews.

As expected, the oil and gas industry — which has argued that EPA, not BLM, should regulate emissions of methane — was particularly upset.

The contention that BLM is overstepping its authority forms the basis of the lawsuit filed by the Western Energy Alliance and IPAA.

"BLM is assuming Clean Air Act authority that only EPA and the states have, and as a consequence we are filing a lawsuit today," said Sgamma, whose Western Energy Alliance represents more than 450 independent oil and gas companies that produce a significant amount of the nation's onshore oil and gas.

Sgamma also took issue with statements in an Interior press release today that says the American public has not benefited from the full potential of natural gas development due to venting, flaring and leaks "of significant quantities of gas during the production process."

"I'm also disappointed to see Interior repeating falsehoods surrounding methane emissions from the oil and natural gas industry," she said. "Not only has our industry reduced emissions by 21 percent since 1990, but a recent [National Oceanic and Atmospheric Administration] study also documents how emissions are falling. That's all happening without these and other federal regulations."

In addition to industry, House Republicans, particularly, have been highly critical of the rule at public hearings on it in last spring.

House Natural Resources Chairman Rob Bishop of Utah and Majority Leader Kevin McCarthy of California joined 55 other Republicans in July accusing BLM of exceeding its legal authority with the rule and calling on Jewell to withdraw it (Greenwire, July 28).

But conservation groups praised the new rule.

"These guidelines will reduce the unnecessary and capricious waste of American energy," said Josh Mantell, the energy and climate campaign manager for the Wilderness Society. "Public resources must be used for the public good, and this rule will put in place standards to ensure taxpayers are seeing their fair share."

Fred Krupp, president of the Environmental Defense Fund, echoed Mantell.

"Natural gas is a valuable American resource, but when wasted into the air it causes dangerous pollution," Krupp said in a statement. "Reducing the amount of gas that oil and gas operators release will conserve an important domestic resource, improve air quality, lower asthma attacks, and slow climate change."

Mantell said the Wilderness Society and other conservation groups will be watching how the Trump administration handles implementation of the new rule.

"The Obama administration has been working diligently to ensure that when energy development does occur it is done safely, responsibly and in the right places — with consideration of the importance our public lands hold for the American people, as well as their impact on the climate. This rule is an important component of the administration's substantial legacy in modernizing development on federal lands," he said.

"We look forward to helping make sure the rule is fully implemented and enforced to have the maximum positive effects for our shared lands and resources."

Reporter Brittany Patterson contributed.

Email: sstreater@eenews.net

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