Natural gas is frequently a by-product of oil production, and if there are no gas pipelines in an oil field, operators will burn that gas off. It usually comes out in a rush at the beginning of production and rapidly tapers off. And it’s a practice that has been a sticking point for environmentalists, and the subject of multiple regulations from Wyoming and the feds.
One of those rules has been causing confusion since the start of the year: The Bureau of Land Management’s methane waste reduction rule. Congress attempted, and failed, to ax the regulation. Industry and the Department of the Interior attempted to delay the rule, and environmental groups fought delay in the courts.
Two decisions that impact the future of the controversial rule came within hours of each other on Thursday. The Interior announced its intention to try to delay the rule again, this time according to the federal process. Hours later, a federal court in California sided with environmental advocates that the Interior had unlawfully delayed the rule the first go round, and decided that the rule would be in effect immediately.
The back and forth has created some uncertainty in Wyoming. Most operators say they took the safe route earlier in the year and prepared for compliance despite the stay. But they are expecting that the Interior will successfully stay the rule on its second try, putting off compliance, or perhaps unraveling the rule altogether.
“From what I understand talking to various operators, when stays like this happen, they don’t want to get into this situation where there is lag time, when you aren’t really sure what’s happening, so you just comply,” said John Robitaille, vice president of the Petroleum Association of Wyoming.
Taking advantage of the stay could put producers in a bind, because they would be on the hook for non-compliance, he said.
“We had to err on the side of caution,” said Steve Degenfelder of Kirkwood Oil and Gas, an independent based in Casper. “We weren’t really given the idea that we would be given a grace period.”
Although Kirkwood spends about a third of its budget on regulation compliance staff, small independents in Wyoming are not always best placed to advocate for industry when it comes to big federal changes. They rely on industry groups like the Western Energy Alliance and the Independent Petroleum Association of America to wade into the battle.
As this rule, or a stay of the rule, limps forward, operators are in a wait and see pattern, said Kevin Meenan, general counsel for Wold Oil, another Casper independent.
In the meantime, the controversy over the BLM rules continues in court and in the Interior Department.
“Industry obviously will comply with whatever requirements that have to,” Meenan said. “But they feel that the new rules were particularly onerous ... Some of the changes really were unnecessarily burdensome.”
The BLM rule restricted the waste of natural gas whether from leaks along pipeline infrastructure or flaring from a well. It instituted a number of protections towards this end, including on the ground checks for leaks and deploying infrared technology to catch fugitive emissions.
Environmental groups, and the federal department, said wasted gas added up to hundreds of millions in lost revenue and posed a threat to the environment. Methane is a potent gas that scientists say is contributing to rapid climate change.
The oil and gas industry maintains that the Bureau of Land Management has no right to regulate air quality.
“The Clean Air Act gives that authority to the [Environmental Protection Agency], who then delegated that authority to the state,” said Robitaille of the Petroleum Association.
No operator is wantonly wasting a valuable resource anyway, he said.
The rule is problematic for industry, because it took what are essentially Wyoming’s state rules for new sources of emissions and applied them to all existing sources, which is a financial and regulatory web industry shouldn’t have to navigate, he said.
Environmental advocates are not swayed by industry’s stance, and took the court decision Wednesday as a win in their favor. Many pledged to continue to fight for the rule as the Interior attempts to undo it.
The EPA, meanwhile, has stopped its development of a new source rule, one that would address what the BLM tried to regulate in its venting and flaring rule. Administrator Scott Pruitt halted that rule’s promulgation earlier this year at the request of industry.
Operators in Wyoming are pleased to see the Interior’s walk back regardless of the interim of uncertainty. They don’t want that rule in place, in any form, from the BLM.
“I still think that the premise is flawed,” said Degenfelder. “It assumes that we are wasting natural gas. We want to sell every molecule that we produce. That’s money in our pocket. To make a rule that assumes that operators are wasting natural gas is, I think, everybody has a lot more important things to do with their time.”