HIGHLIGHTS:

  • The U.S. Department of the Interior (DOI) has proposed a rule developed by the Bureau of Land Management (BLM) to limit methane emissions from the flaring, leading and venting of natural gas on both public and tribal lands.
  • The new rule would restrict the development and production of oil and natural gas on tribal lands, as it would require operators to incur additional costs to conduct additional inspections, replace equipment, adopt technology to limit flaring and prepare reports.
  • Tribal governments and developers seeking to promote oil and gas development on tribal lands should consider submitting comments on the proposed rule by the April 8, 2016, deadline.

The U.S. Department of the Interior (DOI), on Jan. 22, 2016, proposed a rule developed by the Bureau of Land Management (BLM) that would limit the flaring, leaking and venting of natural gas on public and tribal lands. Flaring is a type of gas combustion used in industrial plants – such as petroleum refineries, chemical plants and natural gas-processing plants – that protects against the dangers of over-pressuring industrial plant equipment. It is also used at oil or gas production sites having oil wells, gas wells, offshore oil and gas rigs, and landfills.

The Proposed Rule

The proposed rule would require oil and gas producers to inspect their equipment for leaks, replace equipment that unnecessarily releases large quantities of gas into the air, and adopt processes and technology that limit the rate of flaring. Metering and reporting would also be required when flared volumes reach 50 million cubic feet (Mcf)/day. According to the BLM, if implemented, this rule would cost the oil and gas industry from $125 million to $161 million per year.

Impacts On Tribal Lands And Economic Development

The industry aims to save as much gas as possible to maximize the value of the oil or gas produced, so the rule provides no added protection or value. Flared gases are released as part of the oil and gas production processes, and are often unusable. Flaring also protects against the dangers of over-pressuring industrial plant equipment. Accordingly, gas and oil well operators have to flare unused gases, but they minimize the flaring as much as possible to maximize their production of the resource. Gas operators already have a business incentive to reduce flaring with oil wells and gas wells, because less flaring enables them to produce more oil or gas for sale. The rule does no more to reduce flaring than current industry practices.

Given the discoveries of Bakken and Marcellus shale gas resources on tribal lands, the rule would impose additional and unnecessary cost barriers to production, restricting oil and gas development on tribal lands. As some tribal governments and Native American-owned developers are new market entrants to this industry, the proposed rule may directly impact their ability to develop tribal natural resources.

The proposed rule states, "BLM requirements would not supersede equally effective or more stringent State and tribal requirements." However, BLM's proposed rule appears inconsistent with the federal government's support of economic independence for tribal governments in other respects (e.g., leasing regulations under the HEARTH Act). For tribes that are new market entrants in the oil and gas industry, it is crucial that federal policy refrain from imposing cost barriers to development that are more stringent than those that apply on private lands. Oil and gas production are capital-intensive at the outset, so every rule on equipment, processes and reporting impacts development.

As one aspect of its sovereignty, a tribal government should have the authority to regulate oil and gas development on its lands for the best interests of its community. If tribal governments were to choose to issue their own development rules, with DOI approval, this would provide their communities and the industry with regulatory certainty to promote energy development on tribal lands. The current proposed rule provides no such choice or economic independence for tribes who wish to promote development on their lands.

Comments are due by April 8, 2016. Public hearings concerning the proposed rule will also be held in February and early March.