§ 3179.201 - Oil-well gas.

§ 3179.201 Equipment requirements for pneumatic controllersOil-well gas.

(a) A pneumatic controller that uses natural gas produced from a Federal or Indian lease, or from a unit or communitized area that includes a Federal or Indian lease, is subject to this section if the pneumatic controller:

(1) Has a continuous bleed rate greater than 6 standard cubic feet (scf) per hour; and

(2) Is not subject to any of the requirements of 40 CFR part 60, subpart OOOO or subpart OOOOa, but would be subject to one of those subparts if it were a new, modified, or reconstructed source.

(b) The operator must replace a pneumatic controller subject to this section with a controller (including but not limited to a continuous or intermittent pneumatic controller) having a bleed rate of 6 scf per hour or less within the timeframes set forth in paragraph (d) of this section, unless:

(1) Use of a pneumatic controller with a bleed rate greater than 6 scf per hour is required based on functional needs that may include, but are not limited to, response time, safety, and positive actuation, provided that the operator notifies the BLM through a Sundry Notice that describes the functional needs necessitating the use of a pneumatic controller with a bleed rate greater than 6 scf per hour;

(2) The pneumatic controller exhaust was, as of January 17, 2017 and continues to be, routed to a flare device or low-pressure combustor;

(3) The pneumatic controller exhaust is routed to processing equipment; or

(4) The operator notifies the BLM through a Sundry Notice and demonstrates, and the BLM agrees, based on the information identified in paragraph (c) of this section, that replacement of a pneumatic controller subject to paragraph (a)(1)(i) of this section would impose such costs as to cause the operator to cease production and abandon significant recoverable oil reserves under the lease.

(c) To support a demonstration under paragraph (b)(4) of this section, the operator must submit a Sundry Notice that includes the following information:

(1) The name, number, and location of each of the operator's wells, and the number of the lease, unit, or communitized area with which it is associated;

(2) The oil and gas production levels of each of the operator's wells on the lease, unit or communitized area for the most recent production month for which information is available;

(3) Data that show the costs of compliance with paragraph (b) of this section on the lease;

(4) Projected costs of and the combined stream of revenues from both gas and oil production, including:

(i) The operator's projections of gas prices, gas production volumes, gas quality (i.e., heating value and H₂S content), revenues derived from gas production, and royalty payments on gas production over the next 15 years or the life of the operator's lease, unit, or communitized area, whichever is less; and

(ii) The operator's projections of oil prices, oil production volumes, costs, revenues, and royalty payments from the operator's oil and gas operations within the lease over the next 15 years or the life of the operator's lease, unit, or communitized area, whichever is less.

(d) The operator must replace the pneumatic controller(s) by January 17, 2019, as required under paragraph (b) of this section. If, however, the well or facility that the pneumatic controller serves has an estimated remaining productive life of 3 years or less from January 17, 2017, then the operator may notify the BLM through a Sundry Notice and replace the pneumatic controller no later than 3 years from January 17, 2017.

(e) The operator must ensure pneumatic controllers are functioning within manufacturers' specifications.

[81 FR 83078, Nov. 18, 2016, as amended at 82 FR 58072, Dec. 8, 2017]

Except as provided in §§ 3179.101, 3179.102, 3179.103, and 3179.104, vented or flared oil-well gas is royalty free if it is vented or flared pursuant to applicable rules, regulations, or orders of the appropriate State regulatory agency or tribe. Applicable State or tribal rules, regulations, or orders are appropriate if they place limitations on the venting and flaring of oil-well gas, including through general or qualified prohibitions, volume or time limitations, capture percentage requirements, or trading mechanisms.

(b) With respect to production from Indian leases, vented or flared oil-well gas will be treated as royalty free pursuant to paragraph (a) of this section only to the extent it is consistent with the BLM's trust responsibility.

(c) Except as otherwise provided in this subpart, oil-well gas may not be vented or flared royalty free unless the BLM approves it in writing. The BLM may approve an application for royalty-free venting or flaring of oil-well gas if it determines that it is justified by the operator's submission of either:

(1) An evaluation report supported by engineering, geologic, and economic data that demonstrates to the BLM's satisfaction that the expenditures necessary to market or beneficially use such gas are not economically justified. If flaring exceeds 10 MMcf per well during any month, the BLM may determine that the gas is avoidably lost and therefore subject to royalty; or

(2) An action plan showing how the operator will minimize the venting or flaring of the oil-well gas within 1 year. An operator may apply for approval of an extension of the 1-year time limit, if justified. If the operator fails to implement the action plan, the gas vented or flared during the time covered by the action plan will be subject to royalty. If flaring exceeds 10 MMcf per well during any month, the BLM may determine that the gas is avoidably lost and therefore subject to royalty.

(d) The evaluation report in paragraph (c)(1) of this section:

(1) Must include all appropriate engineering, geologic, and economic data to support the applicant's determination that marketing or using the gas is not economically viable. The information provided must include the applicant's estimates of the volumes of oil and gas that would be produced to the economic limit if the application to vent or flare were approved and the volumes of the oil and gas that would be produced if the applicant was required to market or use the gas. When evaluating the feasibility of marketing or using of the gas, the BLM will determine whether the operator can economically operate the lease if it is required to market or use the gas, considering the total leasehold production, including both oil and gas, as well as the economics of a field-wide plan; and

(2) The BLM may require the operator to provide an updated evaluation report as additional development occurs or economic conditions improve, but no more than once a year.

(e) An approval to flare royalty free, which is in effect as of November 27, 2018, will continue in effect unless:

(1) The approval is no longer necessary because the venting or flaring is authorized by the applicable rules, regulations, or orders of an appropriate State regulatory agency or tribe, as provided in paragraph (a) of this section; or

(2) The BLM requires an updated evaluation report under paragraph (d)(2) of this section and determines to amend or revoke its approval.