Waste Prevention, Production Subject to Royalties, and Resource Conservation

Waste Prevention, Production Subject to Royalties, and Resource Conservation

SUPPLEMENTARY INFORMATION:

I. Background

This direct final rule corrects technical errors in 43 CFR subpart 3179 of the final rule that published in the Federal Register on April 10, 2024 (89 FR 25378), entitled, "Waste Prevention, Production Subject to Royalties, and Resource Conservation" (Waste Prevention rule). The Waste Prevention rule established various measures to reduce waste of natural gas from onshore Federal and Indian oil and gas leases, including measures that are intended to ensure that, when such gas is wasted, the public or Indian mineral owners are compensated for that gas through royalty payments. To assist in meeting these objectives, § 3179.71(b) requires operators to measure flared gas for high-pressure flares for volumes greater than 1,050 Mcf per month above the averaging period (as defined in 43 CFR 3170.3). The Waste Prevention rule also sets out, in § 3179.71(g) and (h), three equations intended to be used by operators when reporting or allocating flared gas. In addition, the Waste Prevention rule established a Leak Detection and Repair (LDAR) program for production facilities located on Federal or Indian surface estates.

API 22.3 is referenced in the amendatory text of this document and was previously approved for § 3179.71.

II. Direct Final Rulemaking

The BLM is publishing corrections to the Waste Prevention rule as a direct final rule. This rule merely corrects inadvertent errors that would otherwise cause unnecessary confusion for the operators attempting to comply with the reporting requirements of the Waste Prevention rule, but does not impose new requirements. None of the changes are inconsistent with the BLM's explanation of the Waste Prevention rule in its preamble. Therefore, the Department of the Interior has determined that it is appropriate for this rule to go into effect at the close of a 30-day comment period unless BLM receives a significant adverse comment.

A significant adverse comment is one that explains: (1) why the rule is inappropriate, including challenges to the rule's underlying premise or approach; or (2) why the direct final rule will be ineffective or unacceptable without additional changes. After the 30-day comment period closes, the BLM will assess whether any of the comments received qualify as a significant adverse comment. If the BLM finds that there is a significant adverse comment, then it will withdraw this direct final rule. If no such comment is received, this direct final rule will become effective on December 23, 2024, without further BLM action. The BLM will not consider a comment recommending an addition to the rule to be significant or adverse unless the comment explains how this direct final rule would be ineffective without additional change. Aside from the technical corrections described in this direct final rule, this rule does not affect the Waste Prevention rule.

III. Discussion

The BLM is making technical corrections to Equations 2 and 3 in § 3179.71, as further discussed below. In addition, the BLM is restyling Equation 1 by moving the value to be determined from the right side of the equal sign to the left, in keeping with mathematical convention. In addition, for clarity, the rule as now corrected separately lists the variable definitions for each equation (in the final rule, the variable definitions for Equations 1 and 2 were combined in a single list). This rule also adds clarifying language in § 3179.71(b) and (g) and removes unintended and unworkable references to low-pressure flare volumes, discussed below, and corrects typographical errors, such as in § 3179.2(a) (removing a second unintended instance of the word "provide") and in § 3179.71(b) (correcting the reference to paragraph (h) so that it refers instead to the intended paragraph (g)).

In response to public comment on the proposed rule and based on further consideration, the BLM included equations in § 3179.71(g) and (h) of the final Waste Prevention rule to guide operators in reporting estimated volumes of flared gas. The BLM included Equations 1 and 2 in paragraph (g) for operators to use in estimating the flared volumes for high-pressure flares measuring less than 1,050 Mcf per month. The BLM included Equation 3 in paragraph (h) to assist operators in allocating flared volumes when gas from multiple leases, unit participating areas (unit PAs), or communitization areas (CAs) is commingled and then measured at a single flare, as authorized in § 3179.71(a).

Following publication of the final rule, the BLM received questions from several industry groups. One group observed that Equation 2 does not account for the on-lease use of gas when accounting for the disposition of the total gas produced, contrary to the Waste Prevention rule preamble acknowledgment that "[t]he BLM authorizes royalty-free use of lease production for operations and production purposes, including placing oil or gas in marketable condition. " 89 FR 25420 (emphasis added). Equation 2 calculates total gas produced by multiplying total oil produced by the gas-to-oil ratio, which is derived from operator-submitted Oil and Gas Operations Reports (OGORs) over a 6-month period (Equation 1). The equation in the April 10 rule would calculate the total volume of gas produced and then subtract the volume of gas sold to arrive at the total flared volume. The BLM agrees that Equation 2 in the Waste Prevention rule inadvertently omitted a variable for straightforward recognition of deductions for gas used on-lease (V _LU ) that is necessary to put the product in marketable condition. This rule corrects that inadvertent omission.

Equation 3 allocates total flared volume from a commingled high-pressure flare to individual leases, unit PAs, or CAs that send gas to a common flare. The Waste Prevention rule provided in § 3179(h) that the allocation is to be "based on the oil production while flaring." Because of an error in Equation 3, however, that equation uses the volume of oil sold, commonly referred to as net standard volume (NSV). The BLM is correcting that typographical error in this final rule. As corrected, Equation 3 allocates the flared volume based on the total volume of oil produced (V _opi ), which is consistent with the text of paragraph (h).

In the Waste Prevention rule, § 3179.71(g) would apply when, "the flared volume for a high-pressure flare is less than or equal to 1,050 Mcf per month," instead of simply "less than," as the BLM intended and as reflected in Table 1 to § 3179.71(f). The BLM is correcting this typographical error by removing the reference to "or equal to" in § 3179.71(g).

In § 3179.71(g) of the Waste Prevention rule, the BLM required estimation of low-pressure flare volumes based on Equations 1 and 2. Industry representatives, however, correctly pointed out that Equations 1 and 2 do not work for low-pressure flare volumes. The inclusion of "and for low-pressure flares" in the first sentence of § 3179.71(g) was therefore a mistake and would require operators to use inappropriate formulas to estimate low-pressure flare volumes. The preamble to the Waste Prevention rule discussing § 3179.71 did not mention calculating low-pressure flare volumes, see 89 FR 25413 through 25415, and neither did the proposed rule. Generally, low-pressure flares combust tank vapors that lack sufficient pressure to enter the sales line, so, under § 3179.41(b)(7), normal operating losses from oil storage tanks are unavoidable losses and thus are not subject to royalty obligations. Because low-pressure flare volumes are also normally small in volume, and difficult to measure, there are several industry-accepted methods operators may use in estimating and reporting low-pressure flare volumes on the OGOR. For these reasons, this rule clarifies that the requirements in § 3179.71(g) apply to high-pressure flares, and the first sentence now states, "For high-pressure flares with volumes less than 1,050 Mcf per month, the flared volume may be estimated, or measured."

The BLM is also correcting a typographical error in § 3179.71(b). That section-which currently requires operators to "measure flared gas for high-pressure flares for volumes greater than 1,050 Mcf per month above the averaging period"-inadvertently omitted the words "or equal to" after "greater." The correct phrasing appears in Table 1 to § 3179.71(f) and is referenced twice in the final rule's preamble. See 89 FR 25413 ("requiring measurement on flared volumes less than 1,050 Mcf per month over the averaging period would encompass flaring operations that would meet the BLM's emergency criteria"); id. at 89 FR 25413 ("The study[ ] . . . supports the final rule requirement to measure high-pressure flares with volumes greater than or equal to 1,050 Mcf per month over the averaging period").

This direct final rule also corrects "above the averaging period" in § 3179.71(b) to read "over the averaging period," as BLM intended. There is no substantive difference, but "over" is a more standard expression (as in the above-quoted Waste Prevention rule preamble) and should prevent any confusion.

There are two other inadvertent errors in § 3179.71(b). The Waste Prevention rule provided that "operators may estimate the volume flared, as described in paragraph (h) of this section." Paragraph (h), however, applies to combusting gas that is combined across multiple units, unit PAs, or CAs. Paragraph (h) and its Equation 3 make no sense for operators who are not combining gas for flaring. The intended reference in paragraph (b) was to paragraph (g), and this direct final rule corrects that typographical error.

A second inadvertent error in § 3179.71(b) is that it encourages operators to estimate volumes of low-pressure flaring, as provided in paragraph (g). For the reasons discussed above, paragraph (g) and its Equations 1 and 2 are not appropriate or intended for use in estimating low-pressure flare volumes. Accordingly, the BLM is removing the inadvertent language. The corrected second sentence in § 3179(b) now states, "For high-pressure flares measuring less than 1,050 Mcf per month over the averaging period, operators may estimate the volume flared, as described in paragraph (g) of this section,"

In this direct final rule, the BLM also adds the full wording for the acronym AVO, which stands for Audio-Visual-Olfactory, in § 3179.100(b)(2)(i). The AVO acronym appears in the List of Acronyms (81 FR 25328) in the Waste Prevention rule preamble. However, the AVO acronym explanation does not appear within the regulatory text. For clarity, this final rule will add the AVO acronym explanation to § 3179.100(b)(2)(i) to read, "Well pads with only wellheads and no production equipment or storage must include quarterly Audio-Visual-Olfactory (AVO) inspections for leak detection." This change is not substantive and only provides further clarity for a reader who does not have access to the preamble with its List of Acronyms.

IV. Procedural Matters

A. Regulatory Planning and Review (Executive Order (E.O.) 12866, E.O. 13563)

E.O. 12866, as amended by E.O. 14094, provides that the Office of Information and Regulatory Affairs (OIRA) in the Office of Management and Budget (OMB) will review all significant rules. OIRA has determined that this rule is not significant.

E.O. 13563 reaffirms the principles of E.O. 12866, as amended by E.O. 14094, while calling for improvements in the Nation's regulatory system to promote predictability, reduce uncertainty, and use the best, most innovative, and least burdensome tools for achieving regulatory ends. E.O. 13563 directs agencies to consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public where these approaches are relevant, feasible, and consistent with regulatory objectives. E.O.13563 emphasizes further that agencies must base regulations on the best available science and that the rulemaking process must allow for public participation and an open exchange of ideas. The BLM developed this rule in a manner consistent with those requirements.

B. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA, 5 U.S.C. 601-612) requires an agency to prepare a regulatory flexibility analysis for all rules unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. The RFA applies only to rules for which an agency is required to first publish a proposed rule. See 5 U.S.C. 603(a) and 604(a). As the BLM is not required to publish a notice of proposed rulemaking for this direct final rule, the RFA does not apply.

C. Congressional Review Act

This rule is not a major rule under the Congressional Review Act, 5 U.S.C. 804(2). Specifically, the direct final rule: (a) will not have an annual effect on the economy of $100 million or more; (b) will not cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; and (c) will not have significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets.

Regulatory or Economic Impacts

This direct final rule only corrects errors and provides consistency and clarity to the April 10 rule. The changes neither create new requirements nor eliminate substantive requirements from the Waste Prevention rule. Therefore, the regulatory impacts are unchanged from those analyzed for the Waste Prevention rule, and there is no need for a separate regulatory impact analysis for this rule.

D. Unfunded Mandates Reform Act

This rule does not impose an unfunded mandate on State, local, or Tribal governments, or the private sector, of more than $100 million per year. The rule does not have a significant or unique effect on State, local, or Tribal governments, or the private sector. The rule merely corrects inadvertent errors in the Waste Prevention rule and other potential sources of confusion. Therefore, a statement containing the information required by the Unfunded Mandates Reform Act (2 U.S.C. 1531 et seq. ) is not required.

E. Takings (E.O. 12630)

This rule does not result in a taking of private property or otherwise have regulatory takings implications under E.O. 12630. The rule primarily corrects inadvertent errors and sources of confusion in the Waste Prevention rule without substantive change; therefore, the rule will not result in private property being taken for public use without just compensation. A takings implication assessment is not required.

F. Federalism (E.O. 13132)

Under the criteria of section 1 of E.O. 13132, this rule does not have sufficient federalism implications to warrant the preparation of a federalism summary impact statement. This rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. A federalism summary impact statement is not required.

G. Civil Justice Reform (E.O. 12988)

This direct final rule complies with the requirements of E.O. 12988. Among other things, this rule:

(a) Meets the criteria of section 3(a) requiring that all regulations be reviewed to eliminate errors and ambiguity and be written to minimize litigation;

(b) Meets the criteria of section 3(b)(2) requiring that all regulations be written in clear language and contain clear legal standards.

H. Consultation With Indian Tribes (E.O. 13175 and Departmental Policy)

The Department of the Interior strives to strengthen its government-to-government relationship with Indian Tribes through a commitment to consultation with Tribes and recognition of their right to self-governance and Tribal sovereignty. The BLM evaluated this direct final rule under E.O. 13175 and the Department's and the BLM's consultation policies and determined that it has no substantial direct effects on federally recognized Indian Tribes and that consultation under the Tribal consultation policies is not required. The rule merely revises the BLM's regulation to correct inadvertent errors and other potential sources of confusion.

I. Paperwork Reduction Act (44 U.S.C. 3501 et seq.)

This rule does not impose any new information collection burden under the Paperwork Reduction Act. OMB previously approved the information collection activities contained in the April 10 rule and assigned OMB control number 1004-0211. This rule does not impose an information collection burden because the BLM is only clarifying, not increasing, the information collection requirements.

J. National Environmental Policy Act

This direct final rule does not constitute a major Federal action significantly affecting the quality of the human environment. A detailed statement under the National Environmental Policy Act (NEPA, 42 U.S.C. 4321 et seq. ) is not required because this rule is covered by a categorical exclusion applicable to regulatory functions "that are of an administrative, financial, legal, technical, or procedural nature." 43 CFR 46.210(i). In addition, the BLM has determined that this rule does not involve any of the extraordinary circumstances listed in 43 CFR 46.215 that would require further analysis under NEPA.

K. Effects on the Energy Supply (E.O. 13211)

This direct final rule is not a significant energy action as defined in E.O. 13211. Therefore, a Statement of Energy Effects is not required.

For the reasons set out in the preamble, the Bureau of Land Management amends 43 CFR part 3170 as follows:

PART 3170-ONSHORE OIL AND GAS PRODUCTION

Delegation of Signing Authority

The action taken herein is pursuant to an existing delegation of authority.