WASHINGTON, May 5, 2016 - Several witnesses from states that depend on oil and gas production for jobs and royalties told a House subcommittee on energy last week that a rule proposed by the Obama administration to cut down on methane emissions would actually cut down on energy production.
The proposed rule from the Bureau of Land Management would reduce the waste of methane (the primary component of natural gas) from flaring, venting and leaks during oil and gas production on public lands “by at least 40 percent,” Amanda Leiter, the Interior Department’s deputy assistant secretary of Land and Mineral Management, testified.
That’s “nearly 170,000 tons of methane (a greenhouse gas 25 times more potent than carbon dioxide) emissions per year, roughly equivalent to eliminating the greenhouse emissions from 860,000 to 890,000 vehicles,” she said.
The rule would phase in per well, per month, average limits on the amount of gas allowed to be flared. It would also prohibit venting as a method of disposing of gas in most cases.
Oil and gas operators would be required to develop a waste minimization plan before they drill, replace outdated equipment (like high bleed pneumatic devices that vent large quantities of gas), limit venting from storage tanks and inspect their operations periodically for leaks and fix the ones they find.
Leiter said BLM determined the rule would create $115 million to $188 million per year in net benefits, based on revenues from the sale of recovered natural gas and the environmental benefits of reducing methane emissions. Not including those gas sales, the agency estimates that the annual cost to industry would be between $121 million to $161 million.
But according to some of the hearing witnesses, the costs of the rule would be far greater.
Lynn Helms, director of the North Dakota Industrial Commission, said implementing the proposed rule would cost his state an estimated $24 million a year in lost royalties and taxes “throughout the entire 30-year development life of the Bakken” shale formation. North Dakota, with recent annual output topping 450 billion cubic feet of natural gas, ranks second among the states in oil and gas production, Helms noted.
Helms argued companies might comply with the new rule, only to have their one-year drilling permits expire before the BLM can reissue them – which means less natural gas can be extracted and sold. He also said that restricting flaring on federal wells would cut into production rates and “force” operators to boost output on state and private lands to make up for those production losses, thus increasing flaring.
Shawn Bolton, the chairman of the board of commissioners in Rio Blanco County in Colorado, testified that his county – with about 6,000 residents – depends on the oil and gas royalties generated through extraction on federal lands to maintain municipal roads, bridges and the sheriff’s department.
“The BLM is consistently adding layers of bureaucracy to handicap oil and gas producers,” he said. “It appears that the BLM’s focus is to drive more and more operators from federal lands,” ultimately affecting the county’s solvency.
Gwen Lachelt, a county commissioner in La Plata County, Colorado – which is also dependent on oil and gas – had a wholly different take.
“It is unacceptable that we currently allow the unfettered venting and flaring of natural gas,” she said. “These practices result in the loss of millions of dollars in state and federal revenue.”
Indeed, a 2010 Government Accountability Office report found that natural gas lost through venting, flaring and leaks could have generated as much as $23 million annually in royalty revenue for states, tribes and federal tax payers.
Another report by the Interior Department found that 375 billion cubic feet of natural gas – enough to supply more than 5 million households for a year – was lost through venting and flaring between 2009 and 2014. BLM says it has an obligation under federal law to prevent those losses.
Another witness, Mark Watson, the oil and gas supervisor for the Wyoming Oil and Gas Conservation Commission, called for more local control. “It is the states who are best positioned to regulate air emission from oil and gas development,” he testified.
Watson said the proposed rule would be duplicative of existing state laws (a statement Leiter disputed), and that rules pertaining to greenhouse gas emissions should be handled by EPA, not BLM. He also suggested that the rule’s process for granting states a variance was “not fair to the industry” because it would require states to implement venting and flaring rules that are more strict than those proposed by the BLM.
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