By Bret Wells, George Butler Research Professor of Law and Tracy Hester, Lecturer at the University of Houston Law Center
One of us pointed out in a prior blog post that the oil and gas industry downturn represented the perfect time for the Texas Railroad Commission to change its regulations on flaring associated gas. The current rules – known as Rule 32 – allow drillers to burn off natural gas produced along with more profitable crude oil if there isn’t an immediately available pipeline or other marketing facility to take it. That’s been sweepingly interpreted to allow the burning of gas that could have been captured and sold.
In a subsequent post, the same co-author argued that the flaring of potentially profitable and economically valuable natural gas may give rise to common law claims for royalty owners. Under Texas law, the operator is held to an implied covenant to act as a reasonably prudent operator. As part of this implied duty, an operator must reasonably and prudently administer the leasehold estate in a nonwasteful manner. So that previous post argued that flaring commercially profitable natural gas may violate this implied covenant standard and thus subject the operator to damage claims by impacted landowners.
But recent events have made flaring a political issue. The Bureau of Land Management, which oversees the development of federally owned lands, proposed regulations last February to curtail methane emissions from public lands. As the Bureau of Land Management noted in its regulations, methane is the primary component of natural gas, and the venting or flaring of natural gas causes methane to be released into the atmosphere. Moreover, the Bureau of Land Management estimated that methane has a climate change impact 25 times greater than that of CO2.
Whether or not one accepts the climate change concerns raised by these methane emissions, the fact remains that the Bureau of Land Management has a vital interest in ensuring that natural gas obtained from federally owned lands is put to a productive use. Thus, the Bureau of Land Management issued regulations that sought to curtail the amount of flaring that could occur on federally owned lands, and one of the rationales was to prevent the needless waste of an economically valuable and scarce natural resource.
Last week, it was reported that Congress and the President would seek to overturn needless regulations that inhibit business activity, and news reports identified the Bureau of Land Management’s recent regulations as targets for elimination.
Flaring degrades the nation’s air quality, adds to global climate change impacts and also wastes a valuable natural resource that could have had a productive use. The public should expect the Bureau of Land Management would ensure that federally owned lands would be developed in a way that minimizes the waste of natural gas. To that end, it is appropriate for the Bureau of Land Management to require businesses to use best practices in its oil and gas development activities conducted on federal lands.
Thus, we hope that the current administration and Congress will defend these regulations as a reasonable effort to minimize the waste of our finite natural resources.