Policy and Targets
Background and the Role of Reductions in Meeting Environmental and Economic Objectives
The US flaring data and international agreements are described in the Federal Offshore case study, on the US federal offshore production. According to the Energy Information Administration, the states of Texas, North Dakota, and New Mexico account for 90 percent of total national flaring in 2018.
The share of onshore oil production on public lands has been increasing slowly for years. It picked up pace after 2015, thanks to increased drilling and development in tight oil plays, reaching 10 percent of total onshore oil production in 2020. The share of onshore gas production on public lands has been declining for years. It fell below 9 percent of total onshore gas production in 2020.
Flaring and venting from oil and gas operations on public lands has been regulated by the Department of the Interior’s Bureau of Land Management (BLM) since 1980. In a 2010 report, the GAO identified opportunities to reduce flared and vented gas in federal onshore and offshore fields to increase royalties and reduce GHG emissions. In a 2016 report, the GAO identified gaps in the regulation of flaring and venting in federal onshore fields by the BLM and the Department of Interior’s ONRR.
In 2014, the President’s Climate Action Plan set a goal of cutting methane emissions from oil and gas operations by 40–45 percent below the 2012 level by 2025. In response, the BLM issued the 2016 Waste Prevention Rule, which targeted the reduction of flaring and venting via a series of new measures, including some of the recommendations from the 2016 GAO report. The BLM’s 2016 Waste Prevention Rule has never been fully implemented, because of legal challenges from states and industry groups. By 2020, parts of it had been either rescinded by the BLM’s revisions or vacated by court rulings in response to legal challenges by several states and industry groups. Other states and environmental groups have been litigating to reinstate the 2016 Waste Prevention Rule. At the time of writing, the BLM regulation had mostly reverted to rules set in 1980.
In 2016, the EPA issued the NSPS, which include methane emissions from oil and gas operations. An Executive Order from President Trump rescinded the clauses related to methane emissions in 2020. An Executive Order from President Biden directed federal agencies to reinstate the regulations (see the Background and the Role of Reductions in Meeting Environmental and Economic Objectives section of the Federal Offshore case study).
Targets and Limits
The BLM’s 2016 Waste Prevention Rule introduced monthly limits per well, but court rulings partially vacated the rule (see the Economic Evaluation section of this case study).
Legal, Regulatory Framework, and Contractual rights
Primary and Secondary Legislation and Regulation
The BLM has the authority to manage and regulate public lands under the Federal Land Policy and Management Act, 1976. Title 30 US Code (Mineral Lands and Mining), as amended over the years, outlines various regulators’ roles in, and general principles for, oil and gas leasing.
BLM Notice to Lessees and Operators of Onshore Federal and Indian Oil and Gas Leases, Royalty or Compensation for Oil and Gas Lost, 1980 (NTL-4A) is the key document governing the regulation of flaring and venting on public lands. Title 43 CFR Subpart 3178 superseded sections in NTL-4A. The 2016 Waste Prevention Rule A court ruling vacated parts of the BLM’s 2016 Waste Prevention Rule. However, President Biden’s Executive Order may reinstate the rule. Various sections of this chapter discuss the relevant clauses.
The EPA issues and updates the NSPS under section 111 of the Clean Air Act, 1990. Title 40 CFR Subpart OOOO, issued in 2012, commonly known as Quad-O, focuses on the emissions of volatile organic compounds from onshore oil and gas facilities for which construction, modification, or reconstruction commenced after August 23, 2011, and on or before September 18, 2015. In 2016, Quad-O was amended with Subpart OOOOa for onshore facilities for which construction, modification, or reconstruction commenced after September 18, 2015. These amendments added GHGs, including methane leaks from hydraulically fractured oil well completions and most midstream sources. In 2020, the EPA rescinded most of the new restrictions following an Executive Order from President Trump in 2017. It is expected to annul 2020 changes and develop new methane regulations in response to an Executive Order from President Biden.
Federal laws and regulators govern flaring and venting on public lands. Regional BLM offices have the authority to interpret national BLM guidance if local conditions warrant it, sometimes in coordination with state energy, environmental regulators, or tribal authorities.
Associated Gas Ownership
Natural resource ownership is tied to land ownership. The federal government owns oil, gas, and other minerals found below the surface of public lands except for certain tribal lands. Firms access oil and gas in federal lands through a concession (lease) from the BLM state offices. The concession grants the right to explore for and, if a commercial discovery is made, own, develop, and produce oil and gas. Royalties are not paid on unavoidably lost gas, which includes flared and vented volumes under certain conditions (see the Fiscal and Emission Reduction Incentives section of this case study).
Regulatory Governance and Organization
The Department of Interior’s BLM regulates flaring and venting from oil and gas leases on onshore federal and Indian lands. State regulators or tribal authorities may have rules, regulations, or orders governing flaring or venting of oil-well gas or emissions from flaring and venting. The BLM’s regional supervisors ratify such rules and any flare or vent authorizations issued by appropriate state regulators. The EPA has regulatory jurisdiction over air emissions from flaring and venting.
Regulatory Mandates and Responsibilities
The BLM has independent statutory responsibilities to prevent the waste of mineral resources, including oil and gas, in the course of their extraction from public lands. The BLM and state authorities may disagree, as demonstrated by the 2016 Waste Prevention Rule and the legal challenges that followed its issuance (see the Background and the Role of Reductions in Meeting Environmental and Economic Objectives section of this case study).
The BLM and the EPA have no overlapping or conflicting mandates. However, it is possible that the new methane regulations the EPA proposed in November 2021 will prove, upon analysis, to be more stringent than the BLM’s present rules—obliging the BLM to develop waste prevention rules consistent with the ultimate EPA regulations. Energy and environment regulators in states have historically adapted national regulations such as the EPA NSPS to their own conditions. These regulations often overlap and can create uncertainty.
Monitoring and Enforcement
The BLM Oil and Gas Program conducts inspections—averaging 30,000 annually since 2010—to ensure compliance with federal and Indian laws, regulations, policies, and permit conditions of approval. Title 43 CFR Subpart 3163 defines enforcement actions in case of noncompliance. The BLM has the authority to impose financial and nonfinancial penalties.
Flaring or Venting without Prior Approval
According to NTL-4A, flaring or venting is allowed without royalty obligation or prior authorization from the BLM if volumes are considered “unavoidably lost,” defined as follows:
- Volumes are lost during temporary emergencies, such as the failure of a compressor or other piece of equipment, relief of abnormal system pressures, or other conditions that result in flaring or venting of gas. Such venting or flaring cannot exceed 24 hours per incident or a cumulative total of 144 hours for the lease during any calendar month.
- Volumes are lost during the unloading or cleaning up of a well during routine evaluation tests. Such flaring or venting cannot exceed 24 hours.
- Volumes are lost during initial production tests, not exceeding 30 days or 50 mmcf of gas, whichever occurs first.
- Gas vapors are released from storage tanks or other low-pressure production vessels. A BLM regional supervisor may determine that operators must recover such vapors.
- Oil and gas are lost as a result of line failures, equipment malfunctions, blowouts, fires, or similar events. If a BLM regional supervisor determines that the loss resulted from the negligence or failure of the operator to take all reasonable measures to prevent the loss, losses cannot be classified as “unavoidably lost.”
Authorized Flaring or Venting
According to NTL-4A, prior authorization from a BLM regional supervisor is required if emergency flaring is expected to last longer than 24 hours. If a longer period of production testing is necessary, state regulators, if applicable, must authorize it, and the BLM regional supervisor must ratify this authorization.
Gas from a gas well cannot be flared or vented. Except when it falls under the “unavoidably lost” category (see the previous section), associated gas from oil wells cannot be flared or vented without written approval from a BLM regional supervisor.
The BLM’s 2016 Waste Prevention Rule required that a waste-minimization plan be submitted along with the application for an oil well drilling permit. The BLM rescinded this requirement in 2018. According to the BLM’s justification, at least some states have comparable gas capture requirements.
According to NTL-4A, BLM regional supervisors consider the economics of a field-wide plan for oil and gas production for the leasehold. The BLM may approve an application for flaring or venting associated gas from oil wells if either of the documents below could justify the proposed action:
1. A technical and economic report by the operator demonstrating that
- the expenditures necessary to market or beneficially use gas are not economically justified and
- conservation of the gas, if required, would lead to the premature abandonment of recoverable oil reserves and ultimately to a greater loss of equivalent energy than would be recovered with flaring or venting of the gas.
2. An action plan from the operator that will eliminate flaring or venting within a year from the date of application.
However, a 2016 GAO report found that the BLM’s field offices approved a large percentage of flaring and venting requests without the documentation required in the BLM’s guidance. About half of the approved operations were allowed to flare royalty-free. The GAO also observed that the BLM’s field offices had applied BLM guidance inconsistently and sometimes with significant differences. The rapid increase in drilling activity in tight oil and other unconventional plays since the early 2010s led to a significant increase in the number of applications for various permits to the BLM’s regional offices, overwhelming staff.
Measurement and Reporting
Measurement and Reporting Requirements
According to NTL-4A, “the volume of oil or gas produced, whether sold, avoidably or unavoidably lost, vented or flared, or used for beneficial purposes must be reported.” The definition of beneficial purposes in NTL-4A is superseded by Title 43 Subpart 3178, which primarily defines conditions for qualification as lease-use gas. Operators must also report to the regional supervisor “the volume and value of all oil and gas which is sold, vented or flared without the authorization” [of the supervisor], or those volumes deemed by the supervisor to be avoidably lost.
All hydrocarbons produced from a well completion, including all gas flared, vented, and liquid hydrocarbons burned, must be reported on Form ONRR-4054, per Title 30 CFR § 1210.102. As with federal offshore, since September 15, 2010, leaseholders must specify flaring and venting volumes separately in OGOR Part B. They must use different disposition codes for flared oil-well gas, flared gas-well gas, vented oil-well gas, and vented gas-well gas.
According to NTL-4A, if the amounts of oil or gas involved have been measured, the measured volumes must be reported. Estimation criteria are provided. Metering is not required, but the BLM’s regional supervisors may require the installation of additional measuring equipment if the goals of NTL-4A are not met with existing equipment or estimation methods. Separately, operators must follow the guidance of Title 43 Subpart 3175 on gas measurement. This subpart has clauses on gas metering technology, hardware, and software requirements for metering, performance standards, and record-keeping requirements to ensure accurate royalty calculations.
Measurement Frequency and Methods
For reporting required by NTL-4A two forms must be filed: Form 9-329, the Monthly Report of Operation, and Form 9-361, the Monthly Report of Sales and Royalties. According to Title 30 CFR § 1210.102, all operators must file Form ONRR-4054 for each well for each calendar month, beginning the month in which drilling is completed unless it is only test production or ONRR grants an exemption in writing.
According to NTL-4A, when there is no measurement, the volume of oil or gas must be determined utilizing the following criteria, as applicable:
- last measured throughput of the production facility
- duration of the period in which no measurement was made
- daily lease production rates
- historic production data
- well production rates and gas-to-oil ratio tests
- productive capability of other wells in the area completed in the same formation
- subsequent measurement or testing, as required by the supervisor
- other methods approved by the supervisor.
The 2016 GAO report considers these methods insufficiently specific, leading to varied methodologies across regions subject to the approval of the BLM regional supervisor. According to the report, some operators adopted estimation techniques used in the EPA’s GHG reporting. The 2016 Waste Prevention Rule had more prescriptive requirements on measurement and estimation of flare and vent volumes (Title 43 § 3179.301), but the courts vacated Subpart 3179 in 2020. President Biden’s Executive Order in early 2021 may lead the BLM to reinstate the 2016 Waste Prevention Rule with some modifications to avoid legal challenges.
No requirements for how long records must be kept could be identified. However, the BLM reviews operational records every one to four years, depending on the lease conditions and performance.
Data Compilation and Publishing
The ONRR is responsible for compiling the OGOR databases, which include flare and vent volumes as well as emissions. Given the concerns expressed in the 2016 GAO report regarding the lack of specificity of the guidance for the OGOR reporting process, these data may not be consistent or complete.
Data on flared and vented volumes, aggregated by region, are available online from the Energy Information Administration. They are based on voluntary summary reports from states, which, in turn, depend on self-reporting by producers. Not all states collect or report flaring and venting data to the Energy Information Administration. Those that do report do not necessarily follow the same reporting standards. Hence this data set is incomplete, and there are inconsistencies between state data and data published online by the Energy Information Administration. The Data Compilation and Publishing section of the Federal Offshore case study cites other national data sources.
Fines, Penalties, and Sanctions
According to Title 43 CFR § 3163.1, in the event of failure or refusal to comply with BLM regulations, the terms of any lease or permit, any notice, or order requirements, the regulator notifies the party concerned in writing of the violation. A fine of US$1,000 per violation a day for major violations and a fine of US$250 per violation a day for minor violations may be imposed. According to Title 43 CFR § 3163.2, for failure or refusal to comply within 20 days (or another time period set by an authorized officer of the BLM) of the violation notice, the operator is liable for a civil penalty, which can be as high as US$5,000 per violation a day for up to 60 days.
According to Title 43 CFR § 3163.1, “when necessary for compliance, or where operations have been commenced without approval, or where continued operations could result in immediate, substantial, and adverse impacts on public health and safety, the environment, production accountability, or royalty income,” the regulator may shut down operations after due written notice. Immediate shut in is possible if a BLM regional supervisor deems the offense severe enough. Continued noncompliance may lead to lease cancellation. According to Title 43 CFR § 3163.2, in addition to civil penalties, there can be criminal penalties of up to two years of imprisonment.
The Performance Requirements Section of the Federal Offshore case study covers national environmental regulations with performance requirements applicable to flares. For onshore operations, Title 43 CFR § 3179.305 requires operators to find and repair leaks at least twice a year. The BLM is responsible for ensuring compliance with this regulation. However, a court vacated Subpart 3179 in 2020. One of the litigants’ concerns was that the cost of adding equipment for leak detection would be too high for many small operators. President Biden’s Executive Order in early 2021 may lead the BLM to reinstate the 2016 Waste Prevention Rule, with some modifications.
Fiscal and Emission Reduction Incentives
According to NTL-4A, unavoidably lost production (see the Flaring or Venting without Prior Approval section of this case study) is exempt from royalty calculations. BLM officers may determine that lost production was caused by failure to comply fully with the applicable lease terms and regulations, or appropriate provisions of the approved operating plan. Avoidable losses are subject to royalty. Set by law in 1920, the minimum royalty rate on federal onshore is 12.5 percent.
The BLM’s 2016 Waste Prevention Rule introduced several conditions that create additional incentives. For example, it detailed the economic justification necessary for operators to demonstrate that capture is uneconomic and introduced a limit of 10 mmcf per well a month. Above this limit, the BLM may determine that gas is avoidably lost and hence subject to royalty. The 2016 rule also required that an action plan show how the operator will minimize the flaring or venting of the oil-well gas within one year. An operator may apply for approval of an extension of the one-year limit. If the operator fails to implement the action plan, the entire volume of gas vented or flared during the time covered by the action plan is subject to royalty. The BLM rescinded these requirements in 2018. President Biden’s Executive Order in early 2021 may lead the BLM to reinstate some of these requirements, but modifications may be necessary to avoid legal challenges.
Use of Market-Based Principles
No evidence regarding the use of market-based principles to reduce flaring, venting, or associated emissions could be found in the sources consulted. See the Use of Market-Based Principles section of the United States: Federal Offshore case study.
Negotiated Agreements between the Public and the Private Sector
No evidence regarding negotiated agreements between the public and the private sector could be found in the sources consulted.
Interplay with Midstream and Downstream Regulatory Framework
For a description of the US natural gas market and infrastructure development, see the Interplay with Midstream and Downstream Regulatory Framework section of the United States: Federal Offshore case study. For onshore operations, the BLM’s proposed waste minimization plan (see the Development Plans section of this case study) was intended to guide operators to work with midstream companies to identify sufficient pipeline and processing capacity near the planned drilling site so that associated gas can be captured from the first day of production. The previous US administration rescinded this requirement. The current one may reintroduce it or something similar.