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H.J. Res. 36, Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the final rule of the Bureau of Land Management relating to ‘‘Waste Prevention, Production Subject to Royalties, and Resource Conservation’’

Floor Situation

On­­­­ Friday, February 3, 2017, the House will consider H.J. Res. 36, under a closed rule. H.R. Res. 36, a bill Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the final rule of the Bureau of Land Management relating to ‘‘Waste Prevention, Production Subject to Royalties, and Resource Conservation’’ was introduced on January 30, 2017, by Rep. Rob Bishop (R-UT) and was referred to the Committee on Natural Resources. ​


Summary

H.J. Res. 36 nullifies a rule that was issued by the Bureau of Land Management (BLM) as it relates to “Waste Prevention, Production Subject to Royalties, and Resource Conservation.”  The rule requires operators to take various actions to reduce waste of gas lost during oil and gas production activities through venting or flaring of the gas, and through equipment leaks. This rule was proposed by the BLM on November 18, 2016, and became effective on January 17th, 2017.


Background

The Congressional Review Act, enacted in 1996, establishes special congressional procedures for disapproving a broad range of regulatory actions issued by federal agencies. If Congress passes a joint resolution disapproving the rule, and the resolution becomes law, the rule cannot take effect or continue in effect. The agency also may not reissue that rule or any substantially similar rule, except under authority of a subsequently enacted law.

The Bureau of Land Management’s (BLM’s), onshore oil and gas management program is a major contributor to our nation's oil and gas production. The BLM manages more than 245 million acres of land and 700 million acres of subsurface estate, making up nearly a third of the nation's mineral estate. Domestic production from 96,000 Federal onshore oil and gas wells accounts for 11 percent of the Nation's natural gas supply and 5 percent of its oil.[1] The Mineral Leasing Act of 1920 (MLA) requires the BLM to ensure that lessees “use all reasonable precautions to prevent waste of oil or gas developed in the land,”[2]

BLM’s new rule requires operators to take various actions to reduce waste of gas that is lost during oil and gas production activities through venting or flaring of the gas, and through equipment leaks. The rule establishes criteria for when flared gas will qualify as waste and therefore be subject to royalties, and clarifies which on-site uses of gas are exempt from royalties.

The rule prohibits venting of natural gas, except under certain specified conditions, such as in an emergency or when flaring is technically infeasible. The rule requires operators to reduce wasteful flaring of gas by capturing for sale or using on the lease a percentage of their gas production. The rule also requires operators to use an instrument-based approach to leak detection and must repair leaks within 30 days of discovery, absent good cause, and verify that the leak is fixed.[3]

BLM analyzed the costs and benefits of this final rule, as did several private firms. BLM estimates that this rule will pose costs ranging from $114-$279 million per year (using a 7 percent discount rate to annualize capital costs) or $110-$275 million per year (using a 3 percent discount rate to annualize capital costs) over the next 10 years.  BLM measures the benefits of the rule as the cost savings that the industry would receive from the recovery and sale of natural gas and the environmental benefits of reducing the amount of methane and other air pollutants released into the atmosphere. BLM estimates that this rule will result in monetized benefits of $209-$403 million per year (using model averages of the social cost of methane with a 3 percent discount rate). BLM further estimates that the final rule would reduce methane emissions by 175,000-180,000 tons per year, roughly a 35 percent reduction in methane emissions from the 2014 estimates.[4] 

BLM’s estimates appear to be based on flawed assumptions.  Private studies using up-to-date information contend that the regulations will only add about $4 million per year in royalties to the federal government, while the costs to industry and the economy could reach well over a $1 billion per year.[5]  Furthermore, methane emissions in the oil and gas sector have dropped dramatically over the last decade[6], even as oil and gas development has increased significantly.[7]  This suggests that current regulatory measures are more than sufficient to further policy goals.  In addition, the legal basis for this rule is also tenuous.  As a general matter, the EPA and states are authorized by the Clean Air Act to regulate emissions, whereas BLM is charged with federal land use management.  Therefore, it is unclear BLM has the expertise or personnel to efficiently administer this rule.


Cost

A Congressional Budget Office (CBO) cost estimate is currently not available.


Staff Contact

For questions or further information please contact John Huston with the House Republican Policy Committee by email or at 5-3021.

 

[1] 81 FR 83008 at Background.
[2] 30 U.S.C. 225
[3] See GAO Report, “Department of the Interior, Bureau of Land Management: Waste Prevention, Production Subject to Royalties, and Resource Conservation,” December 5, 2016.
[4] Id.
[5] The Bureau of Land Management’s Proposed Rule “Waste Prevention, Production Subject to Royalties, and Resources Conservation” before S. Comm. on Energy and Natural Resources, 114th Cong. (2016) (statement of Kathleen Sgamma, Vice President of Government & Public Affairs, Western Energy Alliance).
[6] U.S. Greenhouse Gas Inventory Report: 1990-2014, EPA, April 2016.
[7] U.S. Natural Gas Marketed Production, Energy Information Administration, December 2016.

 

115th Congress