Western Energy Alliance and IPAA Joint Comments to the Bureau Of

April 23, 2018 U.S. Department of the Interior Bureau of Land Management Mail Stop 2134 LM 1849 C St., NW Washington, D.C. 20240 Attn: 1004–AE53 Re: Waste Prevention, Production Subject to Royalties, and Resource Conservation: Rescission or Revision of Certain Requirements, Docket ID No. BLM-2018-0001-0001, RIN 1004-AE53 To Whom it May Concern: Western Energy Alliance (the Alliance) and the Independent Petroleum Association of America (IPAA) appreciate the opportunity to provide comments on the Bureau of Land Management’s (BLM) proposed revisions of certain provisions of the Methane and Waste Prevention rule, or 2016 rule. The 2016 rule as promulgated exceeded BLM’s authority under the Mineral Leasing Act (MLA), and that the decision to re-evaluate the rule is required. The proposed revision rule more accurately captures the scope of BLM’s waste minimization authority, and will better ensure federal mineral interests are adequately protected without excessively burdening federal lands development with overreaching regulations. IPAA represents thousands of independent oil and natural gas exploration and production companies, as well as the service and supply industries that support their efforts. Independent producers drill about 95% of American oil and natural gas wells, and produce about 54% of American oil and more than 85% of American natural gas. The Alliance represents over 300 companies engaged in all aspects of environmentally responsible exploration and production of oil and natural gas in the West. Alliance members are independents, the majority of which are small businesses with an average of 15 employees. The 2016 Waste Prevention Rule Exceeds BLM’s Statutory Authority The 2016 rule exceeds BLM’s statutory authority under the MLA and must be revised. The United States District Court for the District of Wyoming expressed significant concern with the rule. The court described BLM as having “hijacked the EPA’s authority under the guise of waste management” and stated that “the BLM cannot use overlap to justify overreach.”1 Given such a strong warning of the legal 1 Order on Mots. for Prelim. Inj., State of Wyoming v. U.S. Dep’t of the Interior, No. 2:16-CV-0285-SWS (Jan. 16, 2017), attached as Appendix A. 1 vulnerability of the rule, it is logical and necessary that BLM move to substantively revise it to more accurately reflect the agency’s statutory authority. Our comments on the 2016 rule, which are attached hereto as Appendix B and reincorporated in full by reference herein, provide an overview of our concerns with the technical and legal vulnerabilities of the 2016 rule.2 Many of those concerns went unaddressed and are subject to the ongoing litigation referenced above. This letter raises further concerns with the 2016 rule. The stated primary goal of the 2016 rule was to reduce methane emissions from oil and gas operations. During that rulemaking process, BLM repeatedly emphasized that the methane reductions achieved by the Proposed Rule justified its provisions. As the Wyoming court noted, however, BLM only has “authority to regulate the development of federal and Indian oil and gas resources for the prevention of waste.” Id. at 15 (emphasis in original). Therefore, some emissions reductions may occur as a result of an otherwise lawful measure to prevent the “waste” of gas pursuant to BLM’s authority under the MLA. But BLM’s obligation to promulgate reasonable waste prevention measures does not confer any authority to regulate air quality. The Wyoming court also made clear that the “protection of air quality . is expressly within the ‘substantive field’ of EPA and states pursuant to the Clean Air Act.” Id. (emphasis in original). Thus, in the context of the 2016 rule, BLM lacks authority to require the oil and gas industry to reduce methane (or other air) emissions. Under the MLA, produced gas is “wasted” only if it could have been economically captured and marketed or put to beneficial use on the lease. Thus, to establish that a proposed waste prevention measure is a “reasonable precaution” against “waste” and authorized under the MLA, BLM must demonstrate that the gas can be economically captured by the operator or beneficially used on the lease. If a waste prevention measure renders gas capture or use uneconomic, then BLM has no authority to impose it. Even BLM’s original cost-benefit analysis reflects that the 2016 rule did not meet the standards required of BLM when adopting waste prevention measures.3 For example, BLM estimated that its requirement to replace certain pneumatic pumps with zero-emission pumps would impose costs of $2.7 million per year, but would result in only $2.2 million in savings.4 By its own estimate, BLM failed to demonstrate that the gas currently vented from the pumps subject to the 2016 rule can be economically captured by replacing the pumps with zero-emission pumps. Accordingly, the only way BLM could justify this particular measure on a cost-benefit basis was by adding in the $18 million in “monetized benefits” that it believed can be achieved in terms of climate change through the reduction in methane emissions that would occur if zero-emission pumps were used. This is just one example from the 2016 rule, but more broadly, the rule suffers from the same fundamental flaw—the only way BLM could justify the rule was to incorporate global climate change benefits. As the Wyoming court put it, “the Rule only results in a ‘net benefit’ if the ‘social cost of methane’ is allowed to be factored into the analysis . [and] [t]he Court questions whether the ‘social cost of methane’ is an appropriate factor for BLM to consider in 2 Comments on Waste Prevention Rule. Western Energy Alliance, IPAA, American Exploration & Production Council, and U.S. Oil & Gas Association. April 22, 2016. 3 As detailed in the Alliance and IPAA’s April 22, 2016 comments, the Alliance and IPAA disagree with BLM’s original cost-benefit analysis. 4 BLM, Regulatory Impact Analysis for: Revisions to 43 CFR 3100 (Onshore Oil and Gas Leasing) and 43 CFR 3600 (Onshore Oil and Gas Operations) Additions of 43 CFR 3178 (Royalty-Free Use of Lease Production) and 43 CFR 3179 (Waste Prevention and Resource Conservation) 62 (2016) (“2016 RIA”). 2 promulgating a resource conservation rule pursuant to its MLA authority.”5 Id. at 21 (citing the RIA at 5- 6). BLM lacks authority under the MLA, or any of the other statutes that BLM cites in the 2016 rule’s preamble, to regulate the air quality at oil and natural operations on federal and Indian leases for the purpose of controlling climate change. That authority, to the extent it exists, has been given by Congress exclusively to EPA and the states under the Clean Air Act. By relying on the benefits of methane reductions to justify its waste prevention measures, BLM relied on factors which Congress did not intend it to consider when developing “waste prevention” measures under the MLA (or any of its other authorizing statutes). As noted above, to demonstrate that a particular measure is a reasonable precaution against waste, BLM must demonstrate that the gas subject to the measure can be economically captured by the operator. Potential global societal benefits resulting from methane reductions have no place in BLM’s determination of what may be a reasonable waste precaution. Because those benefits do not flow to the operator in any discernable fashion, they are not revenue that can be spent to make capture of the gas economical. Similarly, such benefits do not flow to the American public in the form of increased royalties; and it is royalty benefits, not global climate change benefits, that BLM is statutorily authorized to ensure. See the Federal Oil and Gas Royalty Management Act, 30 U.S.C. §§ 1701-1758. Thus, while an otherwise “reasonable” measure to prevent the “waste” of gas may have the incidental effect of reducing the amount of methane that is emitted from oil and gas operations, such a measure may not be made “reasonable” solely by virtue of that incidental effect. Yet, that is precisely how the 2016 rule was structured and why it was unlawful. Federal oil and gas lessees have a right to develop the oil and natural gas resources on their leases, subject to the requirement that they take “reasonable precautions” to prevent the “waste” of those resources, and that they comply with other applicable federal laws and regulations, like the ones adopted by EPA to regulate air emissions. If they are not “wasting” those resources—i.e., if those resources cannot be economically captured—BLM may not impose so-called waste prevention measures under its MLA authority. The issuance of an executive branch edict (i.e., the Obama Climate Action Plan and Methane Strategy) to selectively impose emission controls on certain industry sectors does not somehow transform BLM’s MLA authority over waste to authorize air quality regulation. Only Congress can delegate such authority and it has not done so. Thus, the 2016 rule exceeded BLM’s Congressional delegation of its waste authority. Moreover, the oil and natural gas industry has and will continue to work voluntarily to economically reduce methane emissions, but federal oil and gas lessees may not be made to bear the costs of reducing those emissions under the guise of BLM‘s authority to impose “reasonable precautions” to prevent the “waste” of gas. The Revised Rule Aligns With the Agency’s Statutory Authority Given the clear overreach by BLM in the 2016 rule, we support the changes being proposed by BLM to bring the Waste Prevention rule back in alignment with Congressional intent and statutory authority.

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