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Last updated: 04/04/03

BLM Seeks Comment on Proposed Oil and Gas Rule

The Department of Interior's Bureau of Land Management (BLM) is seeking comments on a proposed new oil and gas rule aimed at reducing overlap among current regulations, giving operators increased flexibility in meeting agency requirements, ensuring appropriate bond amounts to cover such costs as reclamation, and simplifying classification of regulatory violations.

"Our goal is to make all regulations relating to oil and gas leasing and operations easier to understand," Acting BLM Director Tom Fry said. "We also believe by using performance standards -- identifying for the operators what objectives need to be met instead of prescribing exactly how to do it -- oil and gas operators will have more flexibility. At the same time, we can ensure protection of the environment and federal royalty interests."

The proposal brings together in one place most of the existing oil and gas regulations, all of the existing onshore orders and national notices to lessees.

Details of major components of the proposed rule include: Performance Standards -- This proposed regulation provides operators with performance standards that, in some instances, replace prescriptive requirements. Under the current regulations and onshore orders, operators must meet very specific and often rigid requirements. Using performance standards will give operators and the BLM increased flexibility to deal with unique geologic, ecological and engineering circumstances, while still protecting environmental and other federal interests.

Bonding -- The proposed rule would increase some bond amounts and create a new bond requirement. Individual lease bond amounts would increase from $10,000 to $20,000, and statewide bonds would increase from $25,000 to $75,000. Nationwide bonds would remain at $150,000. These increases are proposed because current bond amounts, which have not changed since 1960, are not sufficient to ensure wells are properly plugged and reclaimed and required royalties are paid. The BLM is proposing to phase-in the new bond amounts over two years. The BLM would also require an increase in bond if the federal well were inactive for more than one year. The operator would be required to increase the bond by $2 per foot of depth per well, or pay a $100 annual fee into a BLM account to help offset the cost of plugging orphan wells. In addition, the BLM would cancel bonds after ensuring that all lease obligations are met, thus releasing the operator from liability. Currently, the agency does not cancel bonds unless liability is assumed by someone else.

Violations -- The proposed rule would eliminate the "major" and "minor" classification of regulatory violations. Instead, the BLM would require that severe violations be corrected more quickly than less critical violations. The proposal would also replace the $500-a-day assessment for major violations and the one-time $250 assessment for minor violations with an assessment of up to $250 a day for uncorrected violations.

Unit Regulations -- The proposed rule would replace current unitization regulations with a more flexible process that would allow BLM and operators to negotiate key development terms. The BLM would also be able to limit the number of unit terms, which would enable the agency to approve units more quickly.

Complete details of the rule are available by calling 202-452-5030. You may also retrieve a copy of the rule via the Internet from BLM's website (http://www.blm.gov/nhp/news/regul/3100p5.html). A fact sheet providing more information on the proposed rule is also available online (http://www.blm.gov/nhp/news/oilgasfacts.html).

In January, the BLM anticipates holding a satellite broadcast on this proposed rule, which would be available to all interested publics. Further details will be available on the BLM's Internet website (http://www.blm.gov).

The rule, which is published in the December 3 Federal Register, provides for a 120-day comment period, which will end April 2, 1999. The 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 the BLM, Administrative Record, Room 401, 1620 L St., N.W., Washington, D.C., or mailed to the Bureau of Land Management, Administrative Record, Room 401LS, 1849 C. Street, N.W., Washington, D.C. 20240. Comments may also be transmitted electronically via the Internet to: WoComment@wo.blm.gov and should include the regulation identifier number AC94, commenter name, and return address. 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.

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. The BLM administers 43,708 Federal and Indian leases, of which nearly 23,595 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.

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