BLM delays onshore oil and gas drainage rule

By Maureen Lorenzetti
OGJ Online

WASHINGTON, DC, Apr. 11 -- The US Bureau of Land Management this week further delayed by an additional 120 days a controversial final rule detailing when onshore lease holders pay the government for well drainage costs.

Issued Jan. 10, the final rule said lease assignees �have responsibilities for certain plugging and abandonment, reclamation, and environmental liabilities that arose prior to their assignment and which were evident to a purchaser exercising due diligence.�

BLM delayed the rule until Apr.10 in accordance with a White House regulatory directive, but has since extended the deadline again to Aug. 8. In the interim, BLM officials strongly suggested the Clinton administration-era plan may be gutted or rescinded pending the outcome of an interagency energy taskforce this summer (OGJ Online, Apr. 3, 2001).

Based on a survey of state offices last year, BLM officials in the Clinton administration estimated the federal government would receive an extra $9.2 million from the oil and gas drainage program. Those revenues include royalties from protective wells, compensatory royalty assessments, unitization and communitization agreements, or bonus bid payments on previously unleased lands.

Earlier industry comments to BLM suggested it was uneconomical for lessees who hold leases for speculative purposes, with no intent to drill, to monitor activity on adjacent leases for drainage. Some companies also suggested BLM, not industry, should monitor drainage issues. They also proposed that that if BLM directs the drilling of a protective well and the well does not return a reasonable profit to the lessee, BLM should pay the cost of drilling, completing, and equipping the well.

BLM did not incorporate these suggestions in its final rule. Clinton officials instead argued it was the responsibility of a leaseholder to protect public land from environmental risks associated with drilling.

However, in its latest notice BLM said it wants the opportunity for interested parties � to present more extensive legal arguments� on the rule.

In its notice, BLM asked for public comment on a number of questions.

Contact Maureen Lorenzetti at [email protected]