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Revised Standards Ensure Accurate Measurement of Oil and Royalties

WASHINGTON – The Bureau of Land Management (BLM) announced a proposed rule today to update and replace its regulations governing the measurement of oil produced from onshore Federal and Indian leases. The requirements contained in the proposed rule reflect advances in measurement technology and critical updates in standards and practices. It also responds directly to concerns from the Government Accountability Office (GAO), the Department of the Interior’s Office of Inspector General, and Secretary’s Subcommittee on Royalty Management, that the BLM’s existing rules do not provide adequate assurance that oil production on public and Indian lands is being accounted for in a way that ensures that all royalties are accurately tracked and paid.  These concerns have contributed to the Department’s inclusion on the GAO’s High Risk List. 
 
Public comment on the rule is being sought for 60 days, through November 30, 2015.
 
“The proposed rule represents yet another important step in the BLM’s modernization of its oil and gas regulations,” said Assistant Secretary for Land and Minerals Management Janice M. Schneider. “These updates address longstanding concerns about the adequacy of existing regulations and will help ensure that the oil produced from Federal and Indian leases is properly measured and accounted for -- a critical component of ensuring that American taxpayers, Indian tribes and allottees, and States and local governments receive the full royalties they are due.”
 
The proposed rule would replace Onshore Oil and Gas Order Number 4 (Order 4), which sets minimum standards for the measurement of oil.  Order 4 has not been updated since 1989, and does not reflect modern industry practices or standards.  
“It's been almost 30 years since the standards in Onshore Order 4 have been revised,” said BLM Director Neil Kornze.  “The industry has taken major strides in recent decades and this update reflects those changes in addition to making our regulations more adaptable for the future.”
Specifically, the proposed rule would:

• Incorporate proven industry standards developed by oil measurement experts from industry and the BLM. 
• Formally authorize the use of Coriolis Measurement Systems (CMSs).  Even though CMSs have been proven reliable and accurate, Order 4 currently only expressly allows oil to be measured by manual tank gauging or with a positive displacement meter, which means operators wanting to use CMSs must seek a variance. The proposed rule would eliminate the need for industry to submit, and for the BLM to process, such variance requests. 
• Establish a process to recognize and approve the use of new measurement technology and methods, without the BLM having to amend its regulations.
• Increase the accountability of high-volume production wells by requiring operators to verify the accuracy of the meters on those wells more frequently.
• Make changes to improve the BLM’s ability to verify and audit production records in order to ensure that production is being properly tracked.

 
The proposed rule is the next step in a process that the BLM began in 2011 with tribal consultation meetings and continued in 2013 with public listening sessions.  The public listening sessions included representatives from Indian lands, the oil and gas industry, environmental groups, and Federal agencies.  Input from the listening sessions, stakeholder outreach, and tribal consultation meetings helped inform the development of the proposed rule.
 
The BLM's oil and gas management program is one of the most important mineral leasing programs in the Federal government.  The total value of annual production is over $33 billion, which generates more than $3 billion in royalty revenue each year from oil and gas leasing activities on federal lands (most of which is shared with state and local governments) and more than $1 billion in royalty revenue from activities on tribal lands (all of which goes to tribes or individuals with allotments).
 
The proposed rule may be viewed online at www.regulations.gov
 
The BLM encourages the public to participate in the rulemaking process by submitting comments on the proposed rule by November 30, 2015 through one of the following methods:
 

• Federal eRulemaking Portal:  http://www.regulations.gov.  Follow the instructions at this website.
• Mail: 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.
• Personal/messenger delivery: Bureau of Land Management, 20 M. Street SE, Room 2134 LM, Attention: Regulatory Affairs, Washington, DC 20003.

 
The BLM manages more than 245 million acres of public land, the most of any Federal agency. This land, known as the National System of Public Lands, is primarily located in 12 Western states, including Alaska. The BLM also administers 700 million acres of sub-surface mineral estate throughout the nation. The BLM's mission is to manage and conserve the public lands for the use and enjoyment of present and future generations under our mandate of multiple-use and sustained yield. In Fiscal Year 2014, the BLM generated $5.2 billion in receipts from public lands.