Recent months brought a wave of changes to oil and gas related policy and legislation. From the Environmental Protection Agency (EPA) to the Department of the Interior (DOI) to the National Parks, the current administration is taking a good hard look at how to streamline processes to empower oil and gas companies to make a positive difference in the lives of millions of Americans.
It comes as no surprise that proposed changes to Obama-era regulations have brought criticism from mainstream media; the oil and gas industry has long been framed as a villain to the environment. This narrative has continued as the media has framed the new methane regulation changes announced by the Trump administration with headlines such as “Trump tells Oil and Gas not to Worry about Methane” and claiming that “Trump … puts Americans at Risk.’”
However, there are a few relevant facts that no one is talking about. These proposals are aimed to streamline processes by removing duplicated regulations, while at the same time using revenues produced in energy development to maintain National Parks and Public Lands.
Putting the States in the Lead on Methane Regulation
Many states throughout the country already have methane regulations, and they are proving successful. In Colorado, for example, energy companies have found and repaired about 73,000 methane leaks since 2015, in compliance with a state-required oilfield inspection program.
According to a state report, the number of leaks has fallen by 52 percent from 2015 to 2017. The purpose of the Trump administration proposals is not to ignore the dangers of methane, but to give the states the power and responsibility to create methane regulations that fit their unique needs and situations.
So what do the new regulations change? The first change came from the Environmental Protection Agency’s proposal to ease certain aspects of the 2016 Oil and Natural Gas Sector: Emission Standards for New, Reconstructed and Modified Sources Act. One of the most significant changes is in the monitoring frequencies of well sites. Originally, well sites had to be monitored every six months, and repairs had to be completed within 30 days of finding the leak.
The Obama-era EPA acknowledged the difficulties that extreme conditions often create, and included provisions which attempted to fit the different needs of states. While the EPA recognized that different areas of the country had different needs, they failed to see the burden that one size fits all regulation created on companies. When speaking about the federal regulations, Tracee Bentley, head of the Colorado Petroleum Council, said, “I think that the states know best, and honestly, every state is different.”
In response to industry feedback, EPA Acting Director Andrew R. Wheeler signed a notice Sept. 11, 2018, outlining proposals to revise the Obama-era methane rules. One of the proposed changes is to decrease monitoring frequencies. The changes would decrease monitoring frequency to (1) annual monitoring for non-low production well sites, (2) biennial (once every other year) monitoring for low production well sites, (3) semiannual and annual monitoring for compressor stations, and (4) yearly monitoring for compressor stations located on the Alaska North Slope. Additionally, the EPA proposed that monitoring would no longer be required when all major production and processing equipment is removed from a well site such that it becomes a wellhead only well site. Further, the EPA is proposing that companies must make the first attempt at repair within 30 days of identifying a component with fugitive emissions, with final repair completed within 60 days.
The EPA rule applies to new oil field facilities, while the DOI has rules that apply to new and existing facilities on federal and Native American lands. The U.S. Department of the Interior’s Bureau of Land Management (BLM) announced a final rule Sept. 18, 2018, revising the Obama-era 2016 Waste Prevention Rule (also known as the Venting and Flaring Rule). According to the DOI, the new rule will “reduce unnecessary burdens on the private sector and restore proven regulations at a time when investment in Federal onshore oil and gas is skyrocketing.”
The BLM reviewed the 2016 rule and found that it had considerable overlap in existing State, Tribal and Federal regulations. Kathleen Sgamma, President of Western Energy Alliance, said the old rule improperly put the Bureau of Land Management in the role of regulating air quality, which she said should instead be done by the EPA or state agencies. State agencies are much more aware of the challenges companies face locally and are more agile in creating rules that fit their needs.
Congress Advances Energy Legislation
While agencies have been hacking away at excessive regulations, Congress has also been busy creating legislation to put revenues received from energy development to good use. This September, the House Committee on Natural Resources’ markup produced one of the most significant bi-partisan conservation measures in recent memory.
Chairman Rob Bishop (R-UT) and ranking member Raúl Grijalva’s (D-AZ) “Restore Our Parks and Public Lands Act” which was introduced last July is designed to help fund the nearly $12 billion deferred maintenance backlog currently plaguing the National Parks. The bill would establish the National Park Service and Public Lands Legacy Restoration Fund, which will receive its funding from 50 percent of the unallocated revenue paid to the federal government from energy production on federal lands.
Revenue raised through both onshore and offshore development and alternative and renewable energy sources such as solar, wind, geothermal and hydropower will be included in the fund, up to $1.3 billion annually.
Lease payments, rental and other fees and royalty rates all remain unchanged. Instead, the legislation directs additional unobligated funds towards reducing the maintenance backlog on federal lands. The bill proposes to allocate 80 percent of the fund to the National Parks Service, with the remaining 20 percent divided between the Fish and Wildlife Service, Bureau of Land Management and Bureau of Indian Education.
Leveraging Energy Revenue to Conserve Public Lands
Leveraging revenue from federal energy leasing to support conservation of public land is a not a new concept. The Reclamation Fund, Land and Water Conservation Fund (LWCF), Historic Preservation Fund (HPF) and coastal restoration through the Gulf of Mexico Energy Security Act (GOMESA) funds are all supported through receipts derived from energy leasing. The new National Park Service and Public Lands Legacy Restoration Fund expands this funding mechanism to assist land management agencies and BIE schools but does not divert funding from the previously mentioned funds.
The committee also passed H.R. 502, which was introduced by Grijalva. The bill proposes to permanently authorize the Land and Water Conservation Fund (LWCF). Created in 1965, the LWCF was initially enacted to preserve, develop and ensure public access to outdoor recreation resources. The bill also requires that no less than 1.5 percent of the annual authorized funding amount, or $10 million, whichever is greater, be used for projects that secure recreational public access to existing federal public land for hunting, fishing and other recreational purposes.
More recently, on Oct. 2, similar bills to those passed in the House Committee were passed in the Senate Committee on Energy and Natural Resources. The “Restore Our Parks Act” would set aside unallocated federal money received from onshore and offshore drilling. Senator Rob Portman (R-Ohio), the bill’s main sponsor, said that the bill is “…about good stewardship.”
In another bipartisan win, the committee also passed a bill to permanently reauthorize the LWCF. Although differences between the house and senate versions will need to be worked out, the recent trend of bipartisan support of National Parks looks promising. These two conservation measures are expected to become the drivers of a much larger omnibus public lands and energy package later this fall to which dozens of smaller energy and natural resource bills that have piled up over the past two years will be added.
The U.S oil and gas industry makes all of this possible through federal royalties and fees paid from the production of the national assets. Unfortunately, this is often lost on many of those same groups which oppose the industry but very much benefit from the federal revenues produced through oil and gas development.
The Administration’s streamlined regulation efforts are not just providing much needed and expedited access to our abundant resources but is robustly funding our national parks, wildlife refuges, forest and public lands. Those are values we all share and is made possible by our nation’s oil and gas producers.
Alby Modiano is the President and CEO of the U.S. Oil & Gas Association. Halea Walker, Research Assistant at USOGA, contributed to this article.