Federal oil and gas rules harm taxpayers, environment, petition alleges

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Environmental and taxpayer advocacy groups have asked the Biden administration to tighten regulations designed to guarantee the cleanup of oil and gas wells.

The 10-page petition, submitted to the Department of the Interior and Bureau of Land Management (BLM) on Wednesday by Wyoming’s Powder River Basin Resource Council, on behalf of the Western Organization of Resource Councils, Taxpayers for Common Sense and the Natural Resources Defense Council, called existing reclamation bonding requirements “woefully inadequate” and urged prompt action from officials.

The Biden administration is ramping up efforts to reduce methane emissions, targeting the oil and gas industry for its role in global warming even as President Joe Biden has pressed energy producers for more oil drilling to lower prices at the gasoline pump.SEE MORE: Biden Accuses Big Oil Of War Profiteering, Weighs ConsequencesPresident Biden was set to announce on Friday a supplemental rule cracking down on emissions of methane a potent greenhouse gas that contributes significantly to global warming and packs a stronger short-term punch than even carbon dioxide as he attends a global climate conference in Egypt.The new rule by the Environmental Protection Agency follows up on a methane rule President Biden announced last year at a United Nations climate summit in Scotland. The 2021 rule targets emissions from existing oil and gas wells nationwide, rather than focusing only on new wells as previous EPA regulations have done.The new rule goes a step further and takes aim at all drilling sites, including smaller wells that emit less than 3 tons of methane per year. Small wells currently are subject to an initial inspection but are rarely checked again for leaks.The proposal also requires operators to respond to credible third-party reports of high-volume methane leaks.The Biden administration will embark on a relentless focus to root out emissions wherever we can find them, White House national climate adviser Ali Zaidi said Friday at climate negotiations in Egypt, hours before the president was set to speak at the international climate summit.SEE MORE: Blowout: Inside America’s Energy GambleOil and gas production is the nations largest industrial source of methane, the primary component of natural gas, and is a key target for the Biden administration as it seeks to combat climate change. The United States is among more than 100 countries that have pledged to cut methane emissions by 30% by 2030 from 2020 levels.We must lead by example when it comes to tackling methane pollution one of the biggest drivers of climate change,” said EPA Administrator Michael Regan, who also is in Egypt for the climate talks. The new, stronger standards will enable innovative new technology to flourish while protecting people and the planet, he said.Our regulatory approach is very aggressive from a timing standpoint and a stringency standpoint,” Regan said at a briefing in Egypt. The old and new rules should be able to prevent more than 80% of the energy waste, about 36 million tons of carbon emissions, he said.Leakage from wells and pipelines is why former Vice President Al Gore and others call natural gas a bridge to nowhere. In an interview with The Associated Press, Gore said: When you work the math, a leakage of 2 to 3% of the methane completely negates the climate advantage of methane gas. And, tragically, the wildcatters that do most of the hydrological fracturing do not pay attention to the methane leakage. You have leakage in the LNG (liquefied natural gas) process, you have leakage in pipelines, you have leakage in the use.The supplemental rule comes as President Biden has accused oil companies of war profiteering and raised the possibility of imposing a windfall tax on energy companies if they dont boost domestic production.President Biden has repeatedly criticized major oil companies for making record-setting profits in the wake of Russia’s war in Ukraine while refusing to help lower prices at the pump for the American people. The Democratic president suggested last week that he will look to Congress to impose tax penalties on oil companies if they dont invest some of their record-breaking profits to lower costs for American consumers.Besides the EPA rule, the new climate and health law approved by Congress in August includes a methane emissions reduction program that would impose a fee on energy producers that exceed a certain level of methane emissions. The fee, set to rise to $1,500 per metric ton of methane, marks the first time the federal government has directly imposed a fee, or tax, on greenhouse gas emissions.The law allows exemptions for companies that comply with the EPAs standards or fall below a certain emissions threshold. It also includes $1.5 billon in grants and other spending to help operators and local communities improve monitoring and data collection for methane emissions, with the goal of finding and repairing natural gas leaks.Multiple studies have found that smaller wells produce just 6% of the nations oil and gas but account for up to half the methane emissions from well sites.We cant leave half of the problem on the table and expect to get the reductions that we need to get and protect local communities from pollution, said Jon Goldstein, senior director of regulatory affairs for oil and gas at the Environmental Defense Fund.The oil industry has generally welcomed direct federal regulation of methane emissions, preferring

Reclamation bonds are intended to keep energy companies — not citizens — on the hook for eventual reclamation costs in cases where operators don’t plug the wells themselves.

They exist “to protect taxpayers from liabilities associated with the cleanup of abandoned wells, and this is not happening,” said Autumn Hanna, vice president of Taxpayers for Common Sense, a budget advocacy group based in Washington, during a virtual presentation Wednesday on the petition.

Federal minimum bond amounts were set in the 1950s and ‘60s. Those decades-old values are “insufficient to ensure plugging and reclamation of federal wells,” according to the petition, because they “have not been updated since to address the impacts of inflation and the increasing depth and complexity of modern wells and infrastructure.”

Hanna said the artificially low costs borne by the oil and gas industry have forced Congress to intervene, shifting the burden to taxpayers.

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“Without action, the problem will only continue to grow,” she said.

The U.S. Government Accountability Office has warned of the cost disparity in multiple reports over the last several years. And the BLM determined in an internal review of the federal oil and gas leasing program, released last November, that it “should increase minimum bond amounts and set the appropriate levels taking into consideration changes in technology, the complexity and depth of modern wells, inflation, and the risk of abandonment.”

While Congressional Democrats succeeded in raising payments, including minimum royalty rates and per-acre bids, on new federal oil and gas leases, a provision that would’ve raised minimum bonds was struck from the bill ahead of its passage.

Shannon Anderson, staff attorney for the Powder River Basin Resource Council and the author of the petition, suspects that modernizing oil and gas bonding has languished near — but not near enough — the top of the BLM’s priority list.

“The Department of the Interior moves incredibly slow with policy, particularly rulemaking,” Anderson said. “Rulemaking just takes years. It takes a long commitment.”

But idle wells leak methane, a pollutant with many times more warming power than carbon dioxide, into the atmosphere, and cost many tens of thousands of dollars apiece to reclaim.

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Anderson hopes the petition will show the growing desire for bonding reform at the grassroots level and give the agency the nudge it needs to start a rulemaking process.

The groups want the BLM to replace blanket bonding, which covers multiple wellsites, with individual bonds that “reflect estimated plugging and reclamation costs” and are required as part of the approval process for drilling permits. They want those bonding amounts to be calculated per foot and include the cost of surface reclamation, be adopted for both federal and tribal minerals and be applied retroactively to existing wells “as soon as possible.” And they want the BLM to reassess its bond amounts at least every five years.

They also want the BLM to strengthen its enforcement of existing policies to the greatest degree possible until the rule-making process is complete.

Wyoming’s oil and gas industry disagrees.

“The whole point of bonding is to encourage development while still adding some protections,” said Ryan McConnaughey, vice president of the Petroleum Association of Wyoming.

Requiring the entire cost of reclamation during the permitting process would “be really problematic for our smaller operators,” he said, because “they have to pay that entirely up front without making any sale of product from that well.”

It would be especially challenging, he noted, if the bond amount was unreasonably high — as he believes the $15-per-foot minimum recommended in the petition is. Raising costs too sharply “will mean that operators will look for opportunities to drill in places where federal lands aren’t involved,” he said.

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The petition cited a 2009 report that found that reclamation costs, adjusted for inflation, average upwards of $13 per foot.

McConnaughey declined to suggest a preferable number. But he pointed to Wyoming’s bonding standards for wells accessing state and private minerals as an example of a program that exceeds federal regulations and still works for the industry.

The Wyoming Oil and Gas Conservation Commission has funded the closure of abandoned wells for decades using a combination of bonds posted by oil and gas companies and a conservation tax levied on producers. It has successfully plugged most of the abandoned wells under its purview.

Wyoming’s reclamation program is almost entirely separate from the BLM’s. And the discrepancy has created a very different scenario on federal land — including private land that houses federally managed minerals — compared with what’s happening under state oversight.

“I don’t think anybody’s arguing that there isn’t room for discussion,” McConnaughey said. “But I will say that this petition is overly burdensome on its pricing structure. … And so I think these are discussions that need to be had, and we could go from there.”

The groups behind the petition, meanwhile, believe it’s time for those ongoing discussions to generate significant policy change.