§ 3179.201 - Oil-well gas.

§ 3179.201 Oil-well gas.

(a) 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.