Proposed BLM regulations draw industry criticism

James Fenton
The Daily Times

The proposed rule changes, announced Friday, will update the BLM's “Onshore Oil and Gas Order Number 3 (Order 3),” which was established in 1989 before many modern industry operations and technological advances, such as horizontal drilling, were in use.

The proposed changes to federal regulations are intended to ensure that oil and gas produced from leases overseen by the BLM are “properly and securely handled,” according to a BLM press release.

The new proposed rules will be available for public comment for a 60-day period ending Sept. 11.

Janice M. Schneider — a President Barack Obama nominee who became assistant secretary for land and minerals management at the Department of the Interior in 2013 — said the proposed regulations will ensure increased accuracy and reliability of royalty payments from oil and gas leases on public lands.

“The proposed rule represents an important step in the BLM's modernization of its oil and gas regulations,” Schneider said in a statement. “These updates will help ensure that oil and gas produced from leases overseen by the BLM is properly measured, that American taxpayers receive fair value for public resources, and that Indian tribes and allottees, states and local governments receive the full royalties they are due.”

The proposed rules seek to clarify oil and gas measurements, called “facility measurement points,” to increase the accuracy of royalty payments for new and existing leases.

The federal agency's oil and gas management program generates more than $3 billion in royalty revenue each year from leases on public lands and $1 billion each year in royalties from tribal lands, according to the BLM.

But Steve Henke, president of the New Mexico Oil and Gas Association, said the proposed changes are misguided. Henke said they spell greater risk and uncertainty and would have a detrimental effect on oil-field activity on federal land.

“If you increase those costs, the net effect will be a reduction in (royalty) revenue rather than an enhancement,” Henke said in a phone interview on Monday. “The market will determine whether this is a proper course by the federal government.”

Wally Drangmeister, NMOGA spokesman, said the oil and gas association is currently reviewing the proposed rule changes.

He said the proposed changes are another sign the federal government is overburdening an industry that is still reeling from a downturn in oil and gas prices. Increased regulations only further threaten the industry in New Mexico, he said, which is challenged in the courts by environmental and conservation groups and compounded by permitting gridlock.

In May, NMOGA launched a campaign to combat what the organization says is misinformation that is unfairly biasing people against oil and gas development.

NMOGA rolled out a 30-second commercial — part of its “Funding Education, Fueling Our Future” campaign — that will air on markets throughout the state until February 2016.

“The price of natural gas and oil is low and any additional regulations that costs the industry extra money is really something that's a great concern,” Drangmeister said. “There's about four drilling rigs operating right now in the San Juan Basin and efforts to try to use lawsuits to shut down ongoing development only add to the uncertainty and concerns.”

Drangmeister said the San Juan Basin's existing wells are at risk.

“There's some 25,000 existing wells and it is a low-pressure, long-life basin, but if you can't do it profitably because of growing regulations, it amounts to a threat to those operations,” he said.

The BLM said that the proposed changes are primarily to sharpen its ability to measure overall production and make companies accountable. The bureau will also look at separately proposing new regulations to update and replace “Onshore Oil and Gas Orders Nos. 4 (Order 4) and 5 (Order 5)” related to measurement of oil and gas beginning next year.

To comment on the proposed changes, go to or write to the U.S. Department of the Interior, Director (630), Bureau of Land Management, Mail Stop 2134 LM, 1849 C Street NW, Washington, DC 20240 Attention: Regulatory Affairs.

James Fenton is the business editor of The Daily Times. He can be reached at 505-564-4621 and Follow him @fentondt on Twitter.