New (And Improved?) BLM Onshore Orders Nos. 3, 4 and 5
The Bureau of Land Management (BLM) recently announced the update of Onshore Oil and Gas Orders 3 (new part 3173), 4 (new part 3174), and 5 (new part 3175), after a seven-year effort to address concerns raised by the Government Accountability Office (GAO), the Department of the Interior’s Office of the Inspector General (OIG), and the Secretary’s Royalty Policy Committee. All three agencies had raised questions about the adequacy of BLM’s previous measurement rules.
Accurate measurement and production accountability are critically important to BLM’s oil and gas mineral leasing program, with nearly $2 billion in royalty revenue annually from Federal leases and nearly $600 million in royalty revenue from tribal and allocated leases. Royalties from Federal leases are split between the U.S. Treasury and the State where production occurs; Indian tribes and individual Indian allotment owners keep 100 percent of the royalties collected from leases on their lands. The BLM maintains that the new rules are designed to ensure that the oil and gas produced from Federal and Indian leases are accurately measured and accounted for, so that the proper royalties due can be paid.
The rule to replace Order 3 governs oil and gas handling, and is designed to ensure that production is properly accounted for in order to prevent theft and loss; Orders 4 and 5 are designed to establish minimum standards for the accurate measurement of all oil and gas, respectively.
While all three of these rules address changing technologies and industry practices and address oilfield safety, energy industry groups have met the final rules with criticism. The Independent Petroleum Association of America (IPAA) and the American Petroleum Institute (API) have both expressed concerns that the updated rules could cause a decline in U.S. oil and gas production due to slow permitting and excess government red tape. Congressman Steve Pearce (R-NM 2) weighed in on BLM’s rulemaking efforts stating, “These new regulations are another attack on New Mexico jobs by this administration. These new rules will especially affect small businesses in New Mexico who may not be able to afford these new requirements and will be forced to shut their wells in.”
Copies of the signed rules submitted to the Federal Registrar, including fact sheets explaining the key changes between the proposed and final rules, are available on BLM’s website – 3173, 3174 and 3175.