U.S. mulls oil drilling fee to fund oil-well inspections
Federal bureau also mulls guidelines to discourage the practice of flaring natural gas in the pursuit of higher-priced oil
Risk & Compliance
Oil & Gas
WASHINGTON—The U.S. Bureau of Land Management lacks sufficient resources to inspect high-risk oil and gas wells on federal land as a drilling boom continues in Wyoming, Colorado and other states, Interior Secretary Sally Jewell said.
The Obama administration has proposed a fee on oil and gas drillers that would allow the land management agency to hire more than 60 inspectors, but the proposal has not gained traction in Congress.
The land bureau faces a “major backlog of inspections” as it tries to keep pace with a drilling boom that has sharply increased U.S. oil and gas production in recent years, Jewell said.
“We do not have the resources necessary to do the job,” Jewell said at a breakfast sponsored by the Christian Science Monitor.
The Associated Press reported last year that 40 per cent of new wells on federal and Indian land with a higher pollution risk were not inspected from 2009 to 2012.
Asked if the situation had improved since then, Jewell said no, adding: “We are under-resourced.”
While the proposed fee has stalled in Congress, Jewell said it remains the agency’s best option to whittle its inspections backlog.
“It makes no sense not to match supply and demand,” she said, adding that if the drilling boom slows or fizzles, the need to charge a fee would go away.
Jewell also lamented a practice in which energy companies “flare” or burn off vast supplies of natural gas as they drill for oil. A report by the Government Accountability Office said 40 per cent of the gas being burned or vented could be captured economically and sold.
The bureau has not completed new guidelines on flaring, but Jewell said a proposed rule could be released for public comment later this year. But even without new federal rules, Jewell urged energy companies to rethink their practice of flaring natural gas in the pursuit of higher-priced oil.
“It’s crazy to vent natural gas into the atmosphere when natural gas is a fuel that can produce electricity at a much lower carbon footprint than other (energy) sources like coal,” Jewell said.
On a related topic, Jewell said she is confident that new rules for oil and gas drilling on federal lands nationwide will be upheld, despite a court challenge by four states and two industry groups. The Bureau of Land Management has delayed implementing the rules until a federal judge in Wyoming rules on the case.
Jewell said the rules “are based on common sense and science,” although she acknowledged some changes may be required.
The rules, announced in March, would require oil and gas developers to report the chemicals they pump underground during hydraulic fracturing. The drilling procedure, also known as fracking, involves pumping huge volumes of water mixed with fine sand and chemicals underground to crack open deposits and boost flows of oil and gas.
The federal rules also would require pressure testing of newly installed wells.
The petroleum industry argues the rules would be costly to oil and gas developers. Officials in Wyoming, Colorado, Utah and North Dakota claim the rules would damage their economies by causing energy companies to move off federal lands to regions where oil and gas reserves can be exploited from private land, where the government has less oversight. Two industry groups, the Western Energy Alliance and Independent Petroleum Association of America, joined the lawsuit.
Six environmental groups have sided with the Obama administration, saying the government needs strong rules for oil and gas drilling to protect water, wildlife and other resources on federal land.