Federal Oil and Gas Leases:

Opportunities Exist to Capture Vented and Flared Natural Gas, Which Would Increase Royalty Payments and Reduce Greenhouse Gases

GAO-11-34: Published: Oct 29, 2010. Publicly Released: Nov 29, 2010.

Multimedia:

  • GAO: Vented Gas Visible Through Infrared CameraVIDEO: Vented Gas Visible Through Infrared Camera
    The video shows vented gas as seen through an infrared camera, which appears to be smoke, billowing from the top of cylindrical metal oil storage tanks and from a pneumatic valve. The video also shows the tanks as seen through the naked eye where the gas is invisible. Video clips were courtesy of EPA and a private emission detection firm.

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The Department of the Interior (Interior) leases public lands for oil and natural gas development, which generated about $9 billion in royalties in 2009. Some gas produced on these leases cannot be easily captured and is released (vented) directly to the atmosphere or is burned (flared). This vented and flared gas represents potential lost royalties for Interior and contributes to greenhouse gas emissions. GAO was asked to (1) examine available estimates of the vented and flared natural gas on federal leases, (2) estimate the potential to capture additional gas with available technologies and associated potential increases in royalty payments and decreases in greenhouse gas emissions, and (3) assess the federal role in reducing venting and flaring. In addressing these objectives, GAO analyzed data from Interior, the Environmental Protection Agency (EPA), and others and interviewed agency and industry officials.

Estimates of vented and flared natural gas for federal leases vary considerably, and GAO found that data collected by Interior to track venting and flaring on federal leases likely underestimate venting and flaring because they do not account for all sources of lost gas. For onshore federal leases, operators reported to Interior that about 0.13 percent of produced gas was vented or flared. Estimates from EPA and the Western Regional Air Partnership (WRAP) showed volumes as high as 30 times higher. Similarly, for offshore federal leases, operators reported that 0.5 percent of the natural gas produced was vented and flared, while data from an Interior offshore air quality study showed that volume to be about 1.4 percent, and estimates from EPA showed it to be about 2.3 percent. GAO found that the volumes operators reported to Interior do not fully account for some ongoing losses such as the emissions from gas dehydration equipment or from thousands of valves--key sources in the EPA, WRAP, and Interior offshore air quality studies. Data from EPA, supported by information obtained from technology vendors and GAO analysis, suggest that around 40 percent of natural gas estimated to be vented and flared on onshore federal leases could be economically captured with currently available control technologies. According to GAO analysis, such reductions could increase federal royalty payments by about $23 million annually and reduce greenhouse gas emissions by an amount equivalent to about 16.5 million metric tons of CO2--the annual emissions equivalent of 3.1 million cars. Venting and flaring reductions are also possible offshore, but data were not available for GAO to develop a complete estimate. As part of its oversight responsibilities, Interior is charged with minimizing vented and flared gas on federal leases. To minimize lost gas, Interior has issued regulations and guidance that limit venting and flaring during routine procedures. However, Interior's oversight efforts to minimize these losses have several limitations, including that its regulations and guidance do not address some significant sources of lost gas, despite available control technologies to potentially reduce them. Although EPA does not have a role in managing federal leases, it has voluntarily collaborated with the oil and gas industry through its Natural Gas STAR program, which encourages oil and gas producers to use gas saving technology, and through which operators reported venting reductions totaling about 0.4 percent of natural gas production in 2008. To reduce lost gas, increase royalties, and reduce greenhouse gas emissions, GAO recommends that Interior improve its venting and flaring data and address limitations in its regulations and guidance. Interior generally concurred with these recommendations.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: According to Interior officials, the Bureau of Land Management (BLM) has drafted a proposed rule to reduce wasteful flaring, venting, and leaking of natural gas from oil and gas production on public lands. BLM submitted the draft proposed rule to the White House Office of Information and Regulatory Affairs (OIRA) for review on September 18, 2015. This rule, according to Interior officials, would update the BLM's 30-year-old venting and flaring rules to require common sense and cost effective measures to reduce the waste of gas, recognizing recent technological advances in oil and gas production. According to Interior officials, the rule aims to increase our nation's natural gas supplies, reduce environmental damage from venting and flaring, and ensure a fair return for federal taxpayers, Tribes, and States. In addition, BOEM officials told us that they had completed a reconciliation of Gulfwide Offshore Activities Data System (GOADS) and Oil and Gas Operations Report (OGOR) data in July 2013 by following up with all 86 companies operating platforms in the Gulf of Mexico and inquiring about the differences between GOADS and OGOR data on venting and flaring.

    Recommendation: To ensure that Interior has a complete picture of venting and flaring on federal leases and takes steps to reduce this lost gas where economic to do so, and to ensure that Interior's data are complete and accurate, the Secretary of the Interior should direct BLM and BOEMRE to take additional steps to ensure that each agency has a complete and accurate picture of vented and flared gas, for both onshore and offshore leases, by (1) BLM developing more complete data on lost gas by taking into consideration additional large onshore sources and ways to estimate them not currently addressed in regulations--sources that EPA's newly proposed greenhouse gas reporting rule addresses--and (2) BOEMRE reconciling differences in reported offshore venting and flaring volumes in Oil and Gas Operations Report (OGOR) and Gulfwide Offshore Activities Data System (GOADS) data systems and making adjustments to ensure the accuracy of these systems. Page

    Agency Affected: Department of the Interior

  2. Status: Closed - Implemented

    Comments: According to Interior officials, the Bureau of Land Management (BLM) has drafted a proposed rule to reduce wasteful flaring, venting, and leaking of natural gas from oil and gas production on public lands. BLM submitted the draft proposed rule to the White House Office of Information and Regulatory Affairs (OIRA) for review on September 18, 2015. This rule, according to Interior officials, would update the BLM's 30-year-old venting and flaring rules to require common sense and cost effective measures to reduce the waste of gas, recognizing recent technological advances in oil and gas production. According to Interior officials, the rule aims to increase our nation's natural gas supplies, reduce environmental damage from venting and flaring, and ensure a fair return for federal taxpayers, Tribes, and States. In addition, officials told us that Bureau of Safety and Environmental Enforcement's (BSEE) Notice to Lessees (NTL) 2012-NO4, which provides updated guidance for requesting approval to flare or vent natural gas and clarification of the discretionary authority of BSEE for approving such requests, has led to a significant reduction in approvals for venting and flaring. Finally, according to officials, this issue was further examined in a September 2015 joint study conducted by BOEM and BSEE that examined the costs and benefits of efforts to further reduce venting and flaring. The study concluded that the data available are insufficient to support definitive conclusions in this area. Although BSEE's infrared camera pilot study focused on detecting fugitive emissions (i.e., leaks) using infrared camera technology, BSEE would have also detected lease use gas emissions if such emissions had been extensive, which they were not. Given the findings and limitations of the available data described in the report and the results of the BSEE infrared camera pilot study, BSEE and BOEM will not extend gas capture requirements to "lease-use" sources of gas at this time. Both bureaus, however, will remain open to further studies in this area as priorities allow.

    Recommendation: To ensure that Interior has a complete picture of venting and flaring on federal leases and takes steps to reduce this lost gas where economic to do so, and to help reduce venting and flaring of gas by addressing limitations in their regulations, the Secretary of the Interior should direct BLM and BOEMRE to revise its guidance to operators to make it clear that technologies should be used where they can economically capture sources of vented and flared gas, including gas from liquid unloading, well completions, pneumatic valves, and glycol dehydrators. BOEMRE should consider extending its requirement that gas be captured where economical to "lease-use" sources of gas.

    Agency Affected: Department of the Interior

  3. Status: Closed - Implemented

    Comments: According to Interior officials, the Bureau of Land Management (BLM) has drafted a proposed rule to reduce wasteful flaring, venting, and leaking of natural gas from oil and gas production on public lands. BLM submitted the draft proposed rule to the White House Office of Information and Regulatory Affairs (OIRA) for review on September 18, 2015. This rule, according to Interior officials, would update the BLM's 30-year-old venting and flaring rules to require common sense and cost effective measures to reduce the waste of gas, recognizing recent technological advances in oil and gas production. According to Interior officials, the rule aims to increase our nation's natural gas supplies, reduce environmental damage from venting and flaring, and ensure a fair return for federal taxpayers, Tribes, and States. Additionally, BSEE and BOEM officials told us they analyzed production facility methane emissions from venting and flaring and the opportunity to reduce greenhouse gas emissions if vented natural gas is flared. BSEE officials explained that the analysis took this focus after recognizing that there are no longer likely to be significant opportunities to eliminate venting or flaring for economic reasons after restrictions on such circumstances were imposed by BSEE's July 2012 Notice to Lessees (NTL 2012-N04). Instead, according to BSEE officials, the primary type of benefit from regulatory requirements reducing offshore methane emissions would be the social benefit of reduced greenhouse gas emissions. Officials stated that a particularly beneficial step could be flaring gas that is currently vented because the products of flaring (C02) have approximately one-twenty-fifth of the greenhouse warming potential. Moreover, according to officials, a secondary benefit would be the Federal royalty and private revenues resulting from selling captured gas instead of emitting it (due to equipment upgrades or other steps to reduce emission losses). However, agency officials concluded that increased revenues are anticipated to be relatively small due to the moderate incremental sales volumes expected with any equipment upgrades and the low wellhead price of natural gas.

    Recommendation: To ensure that Interior has a complete picture of venting and flaring on federal leases and takes steps to reduce this lost gas where economic to do so, and to help reduce venting and flaring of gas by addressing limitations in their regulations, the Secretary of the Interior should direct BLM and BOEMRE to assess the potential use of venting and flaring reduction technologies to minimize the waste of natural gas in advance of production where applicable, and not solely for purposes of air quality.

    Agency Affected: Department of the Interior

  4. Status: Closed - Implemented

    Comments: Onshore, BLM conducted a study in May 2013 of infrared camera use at two pilot locations, which found limitations in the usefulness of these cameras. Although the study recommended against full implementation of cameras across BLM at that time, BLM officials told us that Onshore Order Number 9 is expected to further address the use of infrared cameras, and BLM is considering a performance-based approach to inspecting leaks. BLM officials set a time frame of fiscal year 2016 to complete this order. Offshore, although there are no formal policies at BSEE on future infrared camera use, BSEE has acquired two additional cameras and is hoping to hire additional staff to expand offshore camera use. A report on the use of infrared cameras offshore is nearing completion. When completed, BSEE officials stated that it will allow them to decide the need and economic justification, if any, for expanding use of the camera program and/or if formal policies should be developed for implementation by BSEE or for industry compliance under future regulatory oversight.

    Recommendation: To ensure that Interior has a complete picture of venting and flaring on federal leases and takes steps to reduce this lost gas where economic to do so, and to help reduce venting and flaring of gas by addressing limitations in their regulations, the Secretary of the Interior should direct BLM and BOEMRE to consider the expanded use of infrared cameras, where economical, to improve reporting of emission sources and to identify opportunities to minimize lost gas.

    Agency Affected: Department of the Interior

  5. Status: Closed - Implemented

    Comments: According to Interior officials, the Bureau of Land Management (BLM) has drafted a proposed rule to reduce wasteful flaring, venting, and leaking of natural gas from oil and gas production on public lands. BLM submitted the draft proposed rule to the White House Office of Information and Regulatory Affairs (OIRA) for review on September 18, 2015. This rule, according to Interior officials, would update the BLM's 30-year-old venting and flaring rules to require common sense and cost effective measures to reduce the waste of gas, recognizing recent technological advances in oil and gas production. According to Interior officials, the rule aims to increase our nation's natural gas supplies, reduce environmental damage from venting and flaring, and ensure a fair return for federal taxpayers, Tribes, and States. Additionally, according agency officials, BSEE and BOEM analyzed the available GOADS data to identify opportunities to reduce methane emissions. The available data, according to officials, suggest flaring currently vented methane and replacing high-bleed pneumatic controllers with zero- or low-bleed pneumatic controllers would likely provide the greatest opportunities for meaningful and cost effective emission reductions. While there may be opportunities for additional methane emission reductions, agency officials stated that the estimated volumes are too small and the data insufficient to provide strong evidence of cost beneficial opportunities in any other equipment categories. Agency officials also pointed out that onshore and offshore venting and flaring practices are quite different. Offshore operators in the Gulf of Mexico are required to install natural gas pipelines so there is an outlet for produced associated gas. Due to this Federal offshore requirement, venting and flaring volumes are generally small, except when necessary for equipment repairs or safety reasons.

    Recommendation: To ensure that Interior has a complete picture of venting and flaring on federal leases and takes steps to reduce this lost gas where economic to do so, and and to help reduce venting and flaring of gas by addressing limitations in their regulations, the Secretary of the Interior should direct BLM and BOEMRE to collect information on the extent that larger operators use venting and flaring reduction technology and periodically review this information to identify potential opportunities for oil and gas operators to reduce their emissions, and BOEMRE should use existing information in its GOADS data system for this same purpose, to the extent possible.

    Agency Affected: Department of the Interior

 

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