The Bureau of Land Management
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The Bureau of Land Management
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Last updated: 04/04/03
FACT SHEET
Proposed Rule, Onshore Oil and Gas
Date Published: December 3, 1998
How to Get a Copy of the Proposed Rule. Copies of the proposed
rule are available from the Federal Register, from any BLM State Office, or online.
Public Comment Procedures. Written comments on the proposed
rule should be specific, confined to issues pertinent to the proposed rule,
reference the specific section or paragraph of the proposal, and explain the
reason for change. BLM may not consider or include in the final rule comments
received after the close of the comment period or comments delivered to an address
other than those listed in the Federal Register. Comments must be made by April
2, 1999. BLM will consider comments received or postmarked on or before this
date in the preparation of the final rule. Comments may be hand- delivered to
BLM, Administrative Record, Room 401, 1620 L St., NW, Washington, D.C., or mailed
to BLM, Administrative Record, Room 401LS, 1849 C Street, N.W., Washington,
D.C. 20240. Comments may be transmitted electronically via the Internet to:
WoComment@wo.blm.gov. Comments will
be available for review at the L Street address during regular business hours
from 7:45 a.m. to 4:15 p.m., Monday through Friday, except holidays.
Summary. This proposed rule is part of the
Department of Interior's reinventing government initiative and
would revise the BLM's current Federal oil and gas leasing and
operations regulations. It is written in plain English, uses
performance standards in certain instances in lieu of the current
prescriptive requirements, incorporates BLM's onshore orders and
national notices to lessees, revises and replaces BLM's current
unitization regulations with a more flexible process, eliminates
redundancies, clarifies procedures and regulatory requirements
and streamlines processes.
Questions and Answers About the Proposed Rule
- Why does the rule need revising?
- In response to the Reinventing Government initiative and
Executive Order 12866, in 1995 the BLM undertook an agency-wide
review of its regulations to determine those in need of
streamlining and to identify those that would help meet the
agency's goal of reducing the volume of regulations. As a result
of that review, the BLM identified the oil and gas regulations as
a prime candidate for updating. The proposed rule is written in
plain English in accordance with the Reinventing Government
initiative. It also includes performance standards, which are
new to the regulation. The BLM added them in accordance with
Executive Order 12866. The proposed rule also includes a number
of substantive changes that would modify existing regulations.
For example, it increases bonding levels, which have not changed
since the 1960s.
- What does the rule do?
- This proposed rule puts the regulations in a more
logical sequence, streamlines some processes and reduces
duplication. It incorporates most of the existing oil and gas
regulations and all of the existing onshore orders and national
notices to lessees to make one coherent document. Some sections
of the proposed rule contain new language to correct problems,
improve procedures, or clarify existing requirements. These
regulations are written in plain English to more effectively
communicate BLM regulatory requirements. Plain English uses a
series of questions and answers in place of the traditional short
heading and regulatory requirements. The question and answer
together constitute the regulatory requirement. The proposed
regulation is also organizationally different from the current
regulation and presents sections in a more logical and easily
followed order that closely tracks leasing and operations
procedures as they might occur chronologically. Proposed changes
to the rule result in clear and understandable regulations. The
proposed rule uses performance standards in certain instances in
lieu of the current prescriptive requirements. These proposed
regulations also cite industry standards and incorporate them by
reference rather than repeat those standards in the rule itself.
Finally, this proposed rule would eliminate redundancies, clarify
procedures and regulatory requirements and streamline
processes.
- What doesn't the rule do?
- The proposed rule does not attempt to make wholesale
changes to the federal regulatory system for oil and gas leasing
and operations. In most instances this proposed rule does not
change the policy or procedure of a given section of the current
regulation and only translates current regulatory language into
plain English. Also, this proposal does not include sections in
the current regulations that deal with oil and gas drainage (see
proposed rule on drainage, published on January 13, 1998, at 63
FR 1936 and notice of limited reopening of the comment period
published on December 3, 1998), Combined Hydrocarbon Leasing
(3140), and the Oil and Gas Leasing: National Petroleum
Reserve - Alaska (3130).
- Why Use Performance Standards?
- Performance standards offer operators and BLM increased
flexibility to deal with unique geologic, ecological and
engineering circumstances, while at the same time protecting the
environment and other federal interests. Under the current
regulations and onshore orders, operators are required to meet
certain very specific and often rigid requirements set out in the
regulations and orders. This inflexible approach may not always
work in the most efficient or even most desirable manner. With
performance standards, the focus is on the outcome or goal stated
in the regulation and better protects the public interest since
operators will be held to a stated standard rather than just
having to comply with a checklist. BLM currently issues
variances to the current regulations to deal with unique
geologic, ecological and engineering situations that exist
throughout the country. This is an administrative burden for BLM
and is time consuming and expensive for operators as well. The
BLM anticipates that the use of performance standards will
significantly reduce the number of requests for
variances.
- Why Incorporate Industry Standards by
Reference?
- BLM does not need to repeat
minimum standards when BLM and industry standards are identical,
are published elsewhere and are easily accessed. In the process
of incorporating the orders and notices into this proposed rule,
the detailed minimum standards have been replaced with references
to the American Petroleum Institute (API) and American Gas
Association (AGA) standards and practices. API and AGA
publications cited in this proposed rule can be purchased
directly from API and AGA and will also be available for review
at BLM's field offices with oil and gas responsibilities. The
API and AGA standards are recognized by industry and have long
been cited by BLM as the minimum standards for Federal lands.
Specific dated editions of API and AGA standards are cited and
future amendments or updates will not be incorporated into BLM's
regulations until they are subjected to the rulemaking
process.
- How Important are Federal Lands to Oil and Gas
Development?
- Oil and gas produced from
lands managed by BLM accounted for about 5.6 percent of domestic
oil production and about 10.7 percent of domestic gas production
in 1997. BLM has jurisdiction and responsibility over virtually
all aspects of leasing, exploration, development, and production
of oil and gas from onshore Federal mineral estate and approves
and supervises most operations on Indian lands. BLM administers
43,708 Federal and Indian leases, of which approximately 23,500
are in a producing or producible status. As of December 31,
1997, there were 71,489 producing or producible wells under BLM's
jurisdiction, and 2,488 new wells were started during the year.
In 1997, more than $6.96 billion of oil and gas and associated
products was sold from Federal and Indian oil and gas leases,
which generated $762 million in royalties.
What Changes Are Proposed to the Leasing and
Geophysical Regulations?
- Eliminates formal lease nomination process.
- Eliminates presale lease offers.
- Requires that parcel integrity be maintained during the two-
year post sale window.
- Eliminates the requirement that an
offer be made for all available lands in a section and contiguous
lands to meet 640 acres minimum unless the lands are isolated.
- Reduces number of copies of an offer that must be filed from
three to two.
- Limits competitive and noncompetitive leases to
2,560 acres in the lower 48 States and 5,760 acres in Alaska.
- Considers balance due from bonus bids timely paid if payment
is postmarked on or before the due date.
- Eliminates unit
bonds.
- Adds requirement for new bond for wells inactive for more
than one year. Operator would be required to either increase the
bond in place by $2.00 per foot of depth per well, or pay a non-
refundable $100 yearly fee into a BLM managed account established
to abandon orphan wells.
- Increases dollar amount for some
bonds. Individual bonds from $10,000 to $20,000. Statewide
bonds from $25,000 to $75,000. Nationwide bonds remain $150,000.
- Changes current policy of terminating the period of liability
of bonds.
- Eliminates the need for holders of overriding
royalties, production payments or similar interests to file
notices with BLM.
- Eliminates requirement for option holders
to file a semiannual report of lease interest held under option
with BLM.
- Allows a Class I reinstatement when a nominal
deficiency is paid late.
- Provides for an increase in
percentage and dollar amount for nominal deficiencies on issued
leases.
- Adds a fair market value user fee for geophysical
exploration on BLM lands.
What Changes are Proposed to the Unitization Regulations?
- Increases the flexibility of the unitization process by allowing operators
and the BLM to negotiate exploration and development terms before entering
into a unit agreement.
- Allows operators to use any format, provided key terms are addressed.
Key terms are: (1) area; (2) development obligations; (3) well criteria;
and (4) the BLM's ability to protect Federal interests.
- Eliminates delays in BLM determination of participating areas.
What Changes Are Proposed to the Drilling, Production, and Enforcement
Regulations?
- References published industry standards instead of listing minimum standards.
- Simplifies procedure to calculate average daily oil production for leases
with sliding-scale and step-scale royalty rates.
- Eliminates provision to charge full value of gas vented or flared beginning
one year after BLM orders capture of gas.
- Exempts oil wells that produce less than 10 Mcf a day of gas from having
to obtain prior BLM approval to vent or flare.
- Allows bypasses to oil and gas meters if sealing requirements are followed.
- Eliminates requirement for site facility diagrams for single tank facilities
that service a single well.
- Provides exemptions for gas wells producing at a rate of 100 Mcf per
day or less from requirements for inspection frequency of the meter tube,
determination of flowing gas temperature, calibration frequency, and tracking
of static pens.
- Reduces proving requirement for positive displacement meters to semiannual
for systems measuring 10,000 barrels of oil per month or less.
- Eliminates classification of regulatory violations into major and minor
categories and corresponding assessment amounts.
- Changes system of immediate assessments for serious violations from
$500 per day per violation to a substantial one- time amount.
- Expands the list of serious violations subject to immediate assessments
to include surface disturbance and commingling of production without approval.
- Simplifies language in civil penalty regulations to more closely follow
provisions of the Federal Oil and Gas Royalty Management Act.
- How do these proposed regulations help meet the Executive Order
requiring that Federal Agencies reduce their regulations.
- The existing regulation includes a large number of onshore orders, which
were formerly dispersed through the Federal Register. Although not codified,
they had the force and effect of law. The proposed regulation has eliminated
these multiple onshore orders and replaces them with a single document to
which oil and gas operators may refer. Formerly, operators needed to refer
to several parts of the Federal Register for direction; now all requirements
will be codified in 43 CFR. So, although this proposed regulation expands
43 CFR, it helps meet the goal of the Executive Order.
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