US House considers moving federal onshore oil, gas oversight to states

Nov. 27, 2017
A US House Natural Resources subcommittee discussed a proposal that would allow the US Interior secretary to delegate authority to regulate onshore oil and gas activity on federally managed lands to states with established, effective programs.

A US House Natural Resources subcommittee discussed a proposal that would allow the US Interior secretary to delegate authority to regulate onshore oil and gas activity on federally managed lands to states with established, effective programs.

"For too long, inefficient federal bureaucracies have imposed requirements and redundancies that have discourage oil and gas production on federal land," Energy and Mineral Resources Subcommittee Chairman Paul A. Gosar (R-Ariz.) said at an Oct. 13 hearing on the legislation's discussion draft, dubbed the Opportunities for the Nation and States to Harness Onshore Resources (Onshore) Act.

"Meanwhile, many states have developed extensive regulatory frameworks for permitting oil and gas development on lands they manage. Not only do they already perform many of the regulatory functions performed by the US Bureau of Land Management, but they do so more effectively, efficiently, and with less cost," Gosar said.

Ranking Minority Member Alan Lowenthal (D-Calif.) conceded that some states' oil and gas permit application reviews don't take as long as BLM's. But he added that state land agencies normally have narrower responsibilities than their federal counterpart.

The subcommittee discussed the legislative proposal 2 days after it considered one that allow the Interior secretary to schedule a federal offshore oil and gas lease sale in an area where none was scheduled under an existing US Outer Continental Shelf 5-year management program, along with other policy reforms.

Onshore proposal's provisions

Under the Onshore Act proposal, the US Interior secretary could delegate a state exclusive authority to issue and enforce drilling permits and plans on federal land within the state. A state seeking this responsibility would have to demonstrate that it has adequate funding and personnel, has solicited and obtained public comments and held a hearing, and has determined that approval of the application would not reduce leasing and royalty payments to the federal government.

States also would receive their shares of federal onshore lease payments and royalties directly instead of having to wait for a distribution from the federal treasury, where they now are deposited. A 2% payment processing fee that BLM imposed a few years ago would be waived, except in states without approved programs.

Certain areas could be designated as preferred after BLM determined they were open for leasing without a major constraint. Land use plans would then be updated and areas with the greatest oil and gas potential would have priority. Holding a lease sale or issuing a processing permit in such areas would not be considered a major federal action under the National Environmental Policy Act.

The secretary also would delegate regulation of hydraulic fracturing to states and Indian tribes after each submitted its requirements to BLM for consideration. The proposal also would require a secretarial review of the 2012 National Petroleum Reserve-Alaska integrated activity plan to determine which lands within the reserve should be made available for leasing.

Two regulators from producing states expressed confidence to the subcommittee that their offices could assume the additional responsibility. Wyoming Oil & Gas Supervisor Mark Watson said the state has used a commonsense approach to implement new rules to address flaring, bonding, baseline water quality, and setback distances to houses.

"The permitting of horizontal and directional wells creates a unique set of challenges because of the presence of mixed minerals, which is common in Wyoming. Horizontal wells, with lateral distances up to 10,000 ft, commonly access a combination of federal, state and private minerals in the same wellbore," Watson said.

A case of federal overreach

This also can create a jurisdictional challenge when the well pad is on private land, but the horizontal lateral reaches federal minerals that in some cases are 1½ miles or more from the wellbore's vertical portion, Watson said. BLM considers this a matter requiring a federal permit that can trigger further federal actions such as an environmental impact statement or a NEPA review. "Wyoming considers this implementation of federal regulations on private surface ownership a classic case of federal overreach."

Cathy Foerster, engineering commissioner for the Alaska Oil & Gas Conservation Commission (AOGCC), said, "My agency has been disappointed again and again by failures of federal governmental agencies operating in Alaska to abide by their own statutes and regulations, much less those of our state."

She said, "In one instance, BLM performed well work in Alaska without a permit from the state and, in a public hearing, admitted to us that it knew it needed a permit but thought it would be easier to ask for forgiveness than permission. Subsequently, it has had a mixed compliance record as it relates to getting permits for well work in Alaska. Most recently, BLM asserted it did not need our permission to operate on federal lands in our state."

Foerster said AOGCC's experience with its federal agency counterparts is that they have inadequate staffs and tend to use a one-size-fits-all approach that fails to consider unique local conditions such as, in Alaska's case, the presence of permafrost. "Another problem with this redundancy is that, where the state and federal regulations are different, operators are required to meet both sets of regulations, resulting in added costs, delays, and confusion," she said.

Both officials said the US Environmental Protection Agency has delegated regulatory authority successfully to their states.

A third witness, Daniel T. Naatz, senior vice-president for government relations and public affairs at the Independent Petroleum Association of America, said IPAA strongly supports delegating federal oil and gas regulatory authority to qualified states. "Recently, the Interstate Oil & Gas Compact Commission issued a resolution urging Congress to establish a process for delegating primacy to the states for the regulation of oil and gas operations," he said. "We support the IOGCC resolution and believe the mechanism outlined in the Onshore Act provides a workable process to achieve that objective."