New methane rule
Background


On 28 November 2022, the Department of the Interior's (DOI's) Bureau of Land Management (BLM) released its proposed methane rule. This action furthers the Biden-Harris administration's whole-of-government response to climate change. With the newly divided government, this regulation exemplifies President Biden's approach to meeting climate and sustainability goals – including the overarching target of conserving at least 30% of US lands and waters by 2030 – through executive action.

New methane rule

The rule seeks to modernise the BLM's decades-old requirements around oil and gas venting, flaring and leaks. The guidelines will additionally increase royalty payments by nearly $39 million per year to support oil and gas waste management efforts and compensate federal and Indian mineral owners accordingly. Specifically, the proposed rule would:

  • compel federal and Indian operators to engage in preventative measures to minimise oil and gas waste on federal and tribal land. As such, BLM permit approval may hinge on established "reasonable measures" to prevent oil and gas waste. If an application is approved already, BLM may call on operators to implement such reasonable measures. These specifications may include technological advances and adjustments to industry practices;
  • require operators to incorporate a waste minimisation plan in their permit applications to drill oil wells. These plans would empower BLM to anticipate gas production, an operator's capacity to sell the gas produced and an operator's commitment to reducing gas waste. Should BLM determine that operators are not reducing waste sufficiently, it may require the operator to address concerns before permit action; and
  • oblige operators to avoid wasting oil and gas by prohibiting the use of certain controllers and pumps, mandating the use of certain oil storage tanks, and requiring operators to utilise a leak detection and repair programme.

The DOI acknowledges in the proposed rule that some oil and gas is inevitable waste. The proposal notes that such waste will not be subject to royalty payments. Moreover, the BLM will detail the circumstances in which oil and gas waste is "unavoidably lost" and establish a volume limit on royalty-free flaring due to events that prevent produced gas from going to the market.

The proposed rule will shortly publish in the Federal Register, after which the DOI will accept public comments for 60 days.

Background

In 2016, President Obama's DOI issued its own methane rule. The regulation similarly sought to address flaring, venting and natural gas leaks from oil and gas production. However, the US District Court for the District of Wyoming struck down the rule in 2020. The decision argued that BLM had "exceeded its statutory authority and acted arbitrarily in promulgating the new regulations". Specifically, Judge Scott Skavdhal explained that the rule sought to regulate air quality, ultimately falling outside of BLM's jurisdiction. The Biden-Harris administration's DOI addressed "certain elements" of the 2016 iteration to prevent additional court challenges.

The DOI's methane rule is separate from the Environmental Protection Agency's (EPA's) methane guidelines recently announced during the 27th Conference of the Parties. The EPA issued a supplemental notice of proposed rulemaking that would establish standards of performance for new, reconstructed and modified sources of methane emissions and other named pollutants, and establish guidelines for existing sources of emissions in the oil and gas sector. The guidance requires that all drilling sites be monitored for leaks until they are closed, compelling site operators to respond to credible third-party reports of high-volume methane leaks and strengthening restrictions on flaring, among many other requirements.

For further information on this topic please contact Kenneth J Markowitz or Christopher A Treanor at Akin Gump Strauss Hauer & Feld LLP by telephone (+1 202 887 4000) or email ([email protected] or [email protected]). The Akin Gump Strauss Hauer & Feld LLP website can be accessed at www.akingump.com.

Leila Fleming, public policy specialist, assisted with the preparation of this article.