Oil and Gas Site Security, Oil Measurement, and Gas Measurement Regulations

DEPARTMENT OF THE INTERIOR

Bureau of Land Management

43 CFR Part 3170

[19X.LLWO310000.L13100000.PP0000]

RIN 1004-AE59

Oil and Gas Site Security, Oil Measurement, and Gas Measurement Regulations

AGENCY:

Bureau of Land Management, Interior.

ACTION:

Proposed rule.

SUMMARY:

On November 17, 2016, the Bureau of Land Management (BLM) published in the

Federal Register

three final rules dealing with onshore oil and gas measurement and site security. In accordance with Executive Order 13783, Promoting Energy Independence and Economic Growth (March 28, 2017), and Secretary's Order No. 3349, American Energy Independence, (March 29, 2017), the BLM reviewed the affected regulations to determine if certain provisions may have added regulatory burdens that unnecessarily encumber energy production, constrain economic growth, and prevent job creation. As a result of this review, and in light of implementation issues that have arisen, the BLM is now proposing to modify certain provisions to reduce unnecessary and burdensome regulatory requirements.

DATES:

Send your comments on this proposed rule to the BLM on or before November 9, 2020.

Information Collection Requirements:

If you wish to comment on the information collection requirements in this proposed rule, please note that the Office of Management and Budget (OMB) is required to make a decision concerning the collection of information contained in this proposed rule between 30 and 60 days after publication of this proposed rule in the

Federal Register

. Therefore, comments should be submitted to OMB by October 13, 2020.

ADDRESSES:

Mail:

U.S. Department of the Interior, Director (630), Bureau of Land Management, Mail Stop 2134LM, 1849 C St. NW, Washington, DC 20240, Attention: 1004-AE59.

Personal or messenger delivery:

U.S. Department of the Interior, Bureau of Land Management, 20 M Street SE, Room 2134 LM, Washington, DC 20003, Attention: Regulatory Affairs.

Federal eRulemaking Portal: https://www.regulations.gov.

In the Searchbox, enter “RIN 1004-AE59 and click the “Search” button. Follow the instructions at this website.

For Comments on Information-Collection Activities

Written comments and suggestions on the information collection requirements should be submitted within 30 days of publication of this notice to

www.reginfo.gov/public/do/PRAMain.

Find this particular information collection by selecting “Currently under 30-day Review—Open for Public Comments” or by using the search function. Please provide a copy of your comments to Bureau of Land Management, Faith Bremner, 20 M Street SE, Room 2134 LM, Washington, DC 20003, Attention: Regulatory Affairs (1004-AE59); or by email to

fbremner@blm.gov.

Please reference OMB Control Numbers 1004-0207, 1004-0209, 1004-0210; 1004-0137 in the subject line of your comments.

Do not submit to OMB comments that do not pertain to the proposed rule's information-collection burdens. The BLM is not obligated to consider or include in the Administrative Record for the final rule any comments, which do not relate to the information collection burdens, that you improperly direct to OMB.

FOR FURTHER INFORMATION CONTACT:

Rebecca Good, Acting Division Chief, Fluid Minerals Division, 307-261-7633 or

rgood@blm.gov,

for information regarding the substance of this proposed rule or information about the BLM's Fluid Minerals program. For questions relating to regulatory process issues, contact Faith Bremner at 202-912-7441 or

fbremner@blm.gov.

Persons who use a telecommunications device for the deaf (TDD) may call the Federal Relay Service (FRS) at 1-800-877-8339, 24 hours a day, 7 days a week, to leave a message or question. You will receive a reply during normal business hours.

SUPPLEMENTARY INFORMATION:

I. List of Acronyms

II. Executive Summary

III. Public Comment Procedures

IV. Background

V. Incorporation by Reference of Industry Standards

VI. Discussion of the Proposed Rule

VII. Procedural Matters

I. List of Acronyms

AFMSS = Automated Fluid Minerals Support System

ATG = Automatic tank gauging

Bbl = Barrels

Bbl/d = Barrels per day

BLM = Bureau of Land Management

Btu = British thermal units

CA = Communitization agreement

CAA = Commingling and allocation agreement

CFR = Code of Federal Regulations

CMS = Coriolis measurement system

DOI = Department of the Interior

E.O. = Executive Order

EGM = Electronic gas metering

FMP = Facility Measurement Point

GAO = Government Accountability Office

GARVS = Gas Annual Reporting and Verification System

GC = Gas chromatograph

GS = General Schedule

GSA = Gas storage agreement

HV = High-volume

IMs = Instructional Memoranda

LACT = Lease Automatic Custody Transfer

LV = Low-volume

Mcf = Thousand cubic feet

Mcf/d = Thousand cubic feet per day

MDS = Measurement data system

NGL = Natural gas liquids

NGS = Natural gas storage facilities

OGOR = Oil and Gas Operations Report

ONRR = Office of Natural Resource Revenue

OPM = Office of Personnel Management

PMT = Production Measurement Team

PRA = Paperwork Reduction Act

QTR = Quantity transaction record

RIA = Regulatory Impact Analysis

SBA = Small Business Administration

Scf = Standard cubic foot

S.O. = Secretarial Order

SME = Subject matter expert

SWD = Salt water disposal

Tcf = Trillion cubic feet

Unit PA = Unit participation area.

VHV = Very-high-volume

VLV = Very-low-volume

WDP = Waste discharge permit

WDW = Water disposal well

WIW = Water injection well

II. Executive Summary

On November 17, 2016, the Bureau of Land Management (BLM) published in the

Federal Register

the three following final rules: (1) “Onshore Oil and Gas Operations; Federal and Indian Oil and Gas Leases; Site Security” (81 FR 81365), codified at 43 CFR subparts 3170 and 3173; (2) “Onshore Oil and Gas Operations; Federal and Indian Oil and Gas Leases; Measurement of Oil” (81 FR 81462), codified at 43 CFR subpart 3174; and (3) “Onshore Oil and Gas Operations; Federal and Indian Oil and Gas Leases; Measurement of Gas” (81 FR 81516), codified at 43 CFR subpart 3175. Collectively, we refer to these three rules as the “2016 Final Rules.”

The 2016 Final Rules were prompted by external and internal oversight reviews, which found that many of the BLM's production measurement and accountability policies were outdated and inconsistently applied. The rules addressed some of the Government Accountability Office (GAO) concerns for areas of high risk with regard to production accountability. The rules also provided a process for approving new measurement technologies that meet defined performance standards.

The rules became effective on January 17, 2017.

Since the issuance of the 2016 Final Rules, representatives of the oil and gas industry and other interested stakeholders have raised a number of issues and concerns related to the implementation of the new regulations. The BLM agrees that there have been challenges with implementing some of the provisions of the 2016 Final Rules and has attempted to address some of them through administrative policy directives.

1

However, the BLM can address other provisions only by revising the 2016 Final Rules through a rulemaking action.

1

These administrative policy directives were contained in three Instruction Memoranda (IMs): IM No. 2017-032 (Jan. 17, 2017), IM No. 2018-069 (June 29, 2018), and IM No. 2018-077 (June 29, 2018). All three of these IMs are available on the BLM's website at

https://www.blm.gov/policy/instruction-memorandum.

In addition, on March 28, 2017, President Trump issued Executive Order (E.O.) 13783, “Promoting Energy Independence and Economic Growth” (82 FR 16093). E.O. 13783 holds that “[i]t is in the national interest to promote clean and safe development of our Nation's vast energy resources, while at the same time avoiding regulatory burdens that unnecessarily encumber energy production, constrain economic growth, and prevent job creation.” E.O. 13783 directed Federal agencies, including the BLM, to “review all existing regulations, orders, guidance documents, policies, and any other similar agency actions . . . that potentially burden the development or use of domestically produced energy resources, with particular attention to oil, natural gas, coal, and nuclear energy resources.” E.O. 13783, Section 2(a). Notably, these Executive Orders did not prescribe specific outcomes, rather they directed review of the regulations, in accordance with all Federal laws.

On March 29, 2017, the Secretary of the Interior issued Secretary's Order (S.O.) No. 3349, “American Energy Independence.” It directed DOI bureaus to “identify all existing [DOI] actions . . . that potentially burden . . . the development or utilization of domestically produced energy resources, with particular attention to oil, natural gas, coal, and nuclear resources.” S.O. 3349, Section 5(c)(v).

The BLM reviewed the 2016 Final Rules for opportunities to address implementation challenges and to determine if certain provisions may impose regulatory burdens that unnecessarily encumber energy production, constrain economic growth, and prevent job creation. As a result of this review, the BLM is now proposing to modify certain provisions of 43 CFR subparts 3170, 3173, 3174, and 3175 to reduce unnecessary and burdensome regulatory requirements.

The proposed rule would remove or revise requirements that the BLM has found to be unnecessarily burdensome, unclear, inconsistent, or otherwise problematic. The proposed rule would also adopt updated industry standards, where appropriate, and provide for the use of emerging measurement technologies. The BLM has concluded that the proposed changes will not affect its ability to implement GAO and Office of Inspector General (OIG) recommendations regarding oil and gas production reporting and accountability. The BLM does not anticipate that this proposed rule would have a significant impact on royalty revenues. First, as explained in the preamble to the 2016 rules, the goal of the 2016 rules was to reduce uncertainty, remove bias, and increase verifiability in production measurement. While improvements in these areas help to ensure accurate royalty payments, it is difficult to determine their likely overall impact because such improvements do not necessarily increase royalty revenues. See 81 FR 81553. The one provision from the 2016 rules that was specifically assessed in the 2016 Regulatory Impact Analysis (RIA) and estimated to likely increase royalty revenues—the requirement that gas heating values be reported on a dry basis—is not being modified in this proposed rule.

Furthermore, the BLM notes that this proposed rule would continue to address the major issues identified by the GAO in 2010 and 2015. Specifically, the GAO had faulted the BLM's prior regulatory regime for inconsistently tracking how oil and gas were measured and failing to account for current measurement technologies and standards. See 81 FR 81463; 81 FR 81517. The 2016 rule addressed those issues, and this proposed rule would not backtrack on the BLM's progress in these areas. This proposed rule would maintain consistent, nation-wide measurement requirements and would allow for the use of current measurement technologies.

III. Public Comment Procedures

If you wish to comment on this proposed rule, you may submit your comments to the BLM by mail, personal or messenger delivery, or through

https://www.regulations.gov

(see the

ADDRESSES

section).

Please make your comments on the proposed rule as specific as possible, confine them to issues pertinent to the proposed rule, explain the reason for any changes you recommend, and include any supporting documentation. Where possible, your comments should reference the specific section or paragraph of the proposal that you are addressing. The BLM is not obligated to consider or include in the Administrative Record for the final rule comments that we receive after the close of the comment period (see

DATES

) or comments delivered to an address other than those listed previously (see

ADDRESSES

).

Comments, including names and street addresses of respondents, will be available for public review at the address listed under “

ADDRESSES:

Personal or messenger delivery

” during regular hours (7:45 a.m. to 4:15 p.m.), Monday through Friday, except holidays. Before including your address, telephone number, email address, or other personal identifying information in your comment, be advised that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold from public review your personal identifying information, we cannot guarantee that we will be able to do so.

As explained later, this proposed rule would include revisions to information collection requirements that must be approved by the Office of Management and Budget (OMB). If you wish to comment on the revised information collection requirements in this proposed rule, please note that such comments must be sent directly to the OMB in the manner described in the

ADDRESSES

section. The OMB is required to make a decision concerning the collection of information contained in this proposed rule between 30 and 60 days after publication of this document in the

Federal Register

. Therefore, a comment to the OMB on the proposed information collection revisions is best assured of being given full consideration if the OMB receives it by October 13, 2020.

IV. Background

Americans enjoy a quality of life today that depends largely upon a stable and abundant supply of affordable energy. The Federal energy portfolio managed by the BLM includes oil and gas, coal, oil shale and tar sands, and, increasingly, renewable sources of energy, such as wind, solar and geothermal.

Oil and gas from public and Indian lands are a significant part of this energy mix. For Fiscal Year (FY) 2018, sales of

oil, gas, and natural gas liquids produced on Federal and Indian lands accounted for approximately 6 percent of all oil, 10 percent of all natural gas, and 7 percent of all natural gas liquids produced in the United States.

The BLM manages the Federal Government's onshore subsurface mineral estate—about 700 million acres (30 percent of the U.S. landmass)—for the benefit of the American public. It also manages some aspects of oil and gas development for Indian tribes (not including the Osage Tribe).

Consistent with statutory requirements, Federal lease contracts with private parties specify that royalties are owed on all production removed or sold from Federal and Indian oil and gas leases. The basis for those royalty payments is the measured volume and quality of the production from those leases. In FY 2018, over $2.14 billion in Federal royalties, rental payments, bonus bids, and other revenues, were generated from Federal onshore oil and gas leases. These revenues were split between the U.S. Treasury and the States where the development occurred. Also in FY 2018, over $830 million in royalties, rental payments and other revenues were generated from tribal oil and gas leases. All of these revenues were distributed to the appropriate tribes and individual allotment owners.

Given the magnitude of this production and the BLM's statutory management obligations, it is critically important that the BLM ensure that operators accurately measure, report, and account for that production. To that end, the BLM has instituted regulations relating to site security, oil measurement, and gas measurement. The BLM maintains an inspection and enforcement program to ensure that operators comply with these regulations. Operators are required to report production volumes and submit royalty payments to the Office of Natural Resources Revenue (ONRR). The ONRR maintains an audit program to ensure that the government receives all royalties owed.

The basis for this proposed rule is the Secretary of the Interior's authority under various Federal and Indian mineral leasing laws to manage oil and gas operations. These mineral leasing laws are: The Mineral Leasing Act of 1920, 30 U.S.C. 181

et seq.;

the Mineral Leasing Act for Acquired Lands, 30 U.S.C. 351

et seq.;

the Federal Oil and Gas Royalty Management Act of 1982, 30 U.S.C. 1701

et seq.;

the Indian Mineral Leasing Act, 25 U.S.C. 396a

et seq.;

the Act of March 3, 1909, 25 U.S.C. 396; the Indian Mineral Development Act, 25 U.S.C. 2101

et seq.;

and the Federal Land Policy and Management Act, 43 U.S.C. 1701

et seq.

Each of these statutes gives the Secretary the authority to promulgate necessary and appropriate rules and regulations governing Federal and Indian (except Osage Tribe) oil and gas leases. See 30 U.S.C. 189; 30 U.S.C. 359; 25 U.S.C. 396d; 25 U.S.C. 396; 25 U.S.C. 2107; and 43 U.S.C. 1740.

In recognition of the fact that not all oil and gas wells are identical due to geology and other circumstances, the Mineral Leasing Act provides the Secretary with statutory authority to reduce royalty rates “for the purposes of encouraging the greatest ultimate recovery of [oil and gas] and in the interest of conservation of natural resources,” whenever it is necessary to do so in order to “promote development” or because the lease could not be “successfully operated” otherwise. 30 U.S.C. 209. This provision acknowledges the changing economics of Federal oil and gas wells and provides guidance that, in cases such as marginal wells, the Secretary has discretion to prioritize production over royalties to ensure the maximum recovery of the resources.

The primary statutory authority underpinning the BLM's site security and measurement regulations is in the Federal Oil and Gas Royalty Management Act of 1982 (FOGRMA) (30 U.S.C. 1701-1756). Congress enacted FOGRMA upon finding that “the system of accounting with respect to royalties and other payments due and owing on oil and gas produced from [Federal and Indian] lease sites is archaic and inadequate.” 30 U.S.C. 1701(a)(2). Among Congress' purposes in enacting FOGRMA was “to define the authorities and responsibilities of the Secretary of the Interior to implement and maintain a royalty management system” and “to require the development of enforcement practices that ensure the prompt and proper collection and disbursement of oil and gas revenues owed to the United States and Indian lessors.” 30 U.S.C. 1701(b)(2)-(3). FOGRMA states that the Secretary “shall establish a comprehensive inspection, collection and fiscal and production accounting and auditing system to provide the capability to accurately determine oil and gas royalties, interest, fines, penalties, fees, deposits, and other payments owed, and to collect and account for such amounts in a timely manner.” 30 U.S.C. 1711(a). FOGRMA authorizes enforcement of this system through inspections, audits, investigations, and civil penalties. 30 U.S.C. 1711, 1717-19. FOGRMA also states that an operator shall develop and comply with a site security plan that conforms “with such minimum standards as the Secretary may prescribe by rule, taking into account the variety of circumstances at lease sites.” 30 U.S.C. 1712(b). FOGRMA contains a “broad grant of rulemaking authority to achieve its objectives.”

Wyoming

v.

DOI,

2017 WL 161428, *6 (D. Wyo. 2017). Specifically, FOGRMA states that “the Secretary shall prescribe such rules and regulations as he deems reasonably necessary to carry out this chapter.” 30 U.S.C. 1751(a).

The Secretary's authority to regulate onshore oil and gas operations under the mineral leasing laws has been delegated to the BLM. In implementing this authority, the BLM has issued regulations governing onshore Federal and Indian oil and gas production. This proposed rule would modify the BLM's regulations pertaining to site security and the measurement of oil and gas produced or sold from a lease.

The site security requirements in this proposed rule would ensure the proper and secure handling of production from Federal and Indian onshore oil and gas leases. The proper handling of this production is essential to accurate measurement, proper reporting, and overall production accountability. The oil and gas measurement requirements of this proposed rule would ensure accurate measurement and reporting of onshore oil and gas production. Taken together, the requirements of this proposed rule would ensure that the American public, Indian tribes, and allottees receive royalties owed to them on oil and gas production.

On November 17, 2016, the BLM published in the

Federal Register

the three final rules: (1) “Onshore Oil and Gas Operations; Federal and Indian Oil and Gas Leases; Site Security” (81 FR 81365), codified at 43 CFR subparts 3170 and 3173; (2) “Onshore Oil and Gas Operations; Federal and Indian Oil and Gas Leases; Measurement of Oil” (81 FR 81462), codified at 43 CFR subpart 3174; and (3) “Onshore Oil and Gas Operations; Federal and Indian Oil and Gas Leases; Measurement of Gas” (81 FR 81516), codified at 43 CFR subpart 3175.

The 2016 Final Rules were prompted by external and internal oversight reviews, which found that many of the BLM's production measurement and accountability policies were outdated and inconsistently applied. The rules addressed the concerns raised by the GAO that led the GAO to designate DOI's onshore production accountability as an area of high risk. GAO considers a program or operation

to be high risk when, after evaluation, the program or operation is determined to be vulnerable to fraud, waste, abuse, and mismanagement, or in need of transformation. (

https://www.gao.gov/highrisk/overview

) The 2016 Final Rules also provided a process for approving new measurement technologies that meet defined performance goals. The rules became effective on January 17, 2017.

On March 28, 2017, President Trump issued Executive Order (E.O.) 13783, “Promoting Energy Independence and Economic Growth” (82 FR 16093). E.O. 13783 directed Federal agencies, including the BLM, to “review all existing regulations, orders, guidance documents, policies, and any other similar agency actions. . . that potentially burden the development or use of domestically produced energy resources, with particular attention to oil, natural gas, coal, and nuclear energy resources.” E.O. 13783, Section 2(a). On March 29, 2017, then Secretary of the Interior Ryan Zinke issued S.O. 3349, entitled, “American Energy Independence,” to implement E.O. 13783. S.O. 3349 directed DOI bureaus to “identify all existing [DOI] actions . . . that potentially burden . . . the development or utilization of domestically produced energy resources, with particular attention to oil, natural gas, coal, and nuclear resources.” S.O. 3349, Section 5(c)(v).

Additionally, once the BLM began enforcing the 2016 Final Rules, the BLM became aware of practical implementation challenges associated with the rules. These challenges include differing interpretations of specific rule language among industry and BLM personnel, as well as the identification of less burdensome approaches that would achieve the same performance outcomes sought by the 2016 Final Rules. For example, Lease Automatic Custody Transfer (LACT) systems (composed of a meter, ability to prove the meter, devices for determining temperature, pressure, and liquid sampling, and a means for determining nonmerchantable oil, referenced under existing § 3174.8(b)) are required to follow the industry standard API chapter 6.1 (API 6.1). The use of this API standard created confusion both within industry and the BLM with respect to what equipment was required as opposed to optional. To eliminate this confusion, this proposed rule, in § 3174.100 through § 3174.108, would remove the reference to API 6.1 and would list the required equipment for Facility Measurement Point (FMP) LACT systems. Other examples of implementation challenges the BLM encountered include:

• The delay in the development of the AFMSS 2 system (the means by which operators would apply for FMP numbers) undermined the “phase-in” periods in subpart 3174, as those phase-in periods were based on the dates on which operators were required to apply for FMP numbers.

• There were questions about how the rules should be applied to situations not specifically addressed in the regulation text, including temporary measurement equipment and gas storage agreements.

• Some operators employed water-vapor-detection devices that were not designed for natural gas applications, creating the potential for misreporting of hydrocarbon liquids as water.

• The time period indicated by the word “monthly” was found in practice not to be clear.

• The meaning of “normal” operating conditions for meter proving under subpart 3174 proved not to be clear when implemented.

• The recordkeeping requirements for water-draining operations in subpart 3173 proved to be burdensome.

On June 22, 2017, the Department of the Interior (Interior) published a notice in the

Federal Register

requesting public input on how Interior could improve implementation of various regulatory reform initiatives—including those contained in E.O. 13783 and S.O. 3349—and identify regulations for repeal, replacement, or modification. 82 FR 28429 (June 22, 2017). Among the comments Interior received in response to this request were five comments that directly addressed the site security and measurement regulations. Among the commenters were an individual, an oil and gas exploration and production company, two industry trade associations, and an Alaska Native Regional Corporation. The comments asked the BLM to make certain changes to the regulations, including: Updating the list of incorporated industry standards; providing for automatic acceptance of measurement devices meeting certain standards; more evenly phasing-in the subparts 3173 and 3174 requirements; preserving existing variances, commingling agreements, and off-site measurement approvals; accommodating “economically marginal” properties; and, reducing the frequency of required meter provings and meter-tube inspections.

In light of the foregoing, the BLM reviewed the 2016 Final Rules for opportunities to address the implementation challenges and to determine if certain provisions may have added regulatory burdens that unnecessarily encumber energy production, constrain economic growth, and prevent job creation. As a result of this review, the BLM is now proposing to modify certain provisions of 43 CFR subparts 3170, 3173, 3174, and 3175 to remedy implementation issues and reduce unnecessary and burdensome regulatory requirements.

When the BLM issued the 2016 Final Rules, it determined that none of the rules were economically significant according the criteria in E.O. 12866, “Regulatory Planning and Review.” However, regardless of classification under E.O. 12866, the 2016 Final Rules posed considerable costs to industry and the BLM.

The BLM examined the burdens to industry and the BLM in its RIA for each of the 2016 Final Rules. Those estimated burdens are summarized as follows:

• For 43 CFR subpart 3173, $29.6 million in each of the first 3 years and $14.5 million per year thereafter (see 2016 RIA for subpart 3173, at p. 13);

• For 43 CFR subpart 3174, $6.1 million in each of the first 3 years and $4.9 million per year thereafter (see 2016 RIA for subpart 3174, at p. 11); and

• For 43 CFR subpart 3175, $20.3 million in each of the first 3 years and $12.4 million per year thereafter (see 2016 RIA for subpart 3175, at p. 11).

In developing this proposed rule, the BLM has sought to reduce the regulatory burdens associated with the 2016 Final Rules while maintaining appropriate safeguards to ensure production accountability. While the proposed revisions would streamline, reduce, or eliminate some of the burdens associated with the 2016 Final Rules, the BLM believes that the 2019 revisions would not compromise the government's ability to ensure accurate and reliable royalty collection. The BLM would maintain its capacity to ensure a fair return to the American public and the tribes from oil and gas operations on the Federal and Indian mineral estate. Doing so without unduly burdening development, to ensure the Nation's energy security and independence, balances its royalty mission with the goals stated in E.O. 13783 and S.O. 3349 in a fully complimentary and appropriate manner.

The BLM notes that, while the BLM was separately reviewing the 2016 Final Rules and considering appropriate revisions, the Department of the Interior's Royalty Policy Committee (RPC), Subcommittee on Planning, Analysis, and Competitiveness, recommended that the BLM revise the 2016 Final Rules. The BLM is aware that the U.S. District Court for the District of

Montana has enjoined “further use or reliance on” recommendations issued by the RPC.

Western Organization of Resource Councils

v.

David Bernhardt,

9:18-cv-00139-DWM (D. Mont. 8/13/2019). To ensure compliance with the District Court's injunction, the BLM reviewed the RPC's recommendations and has confirmed that this proposed rule does not use or rely on RPC recommendations. Rather, the BLM is relying on facts, analysis, and recommendations, as set forth in the Background section of this proposed rule, that are independent of any recommendations of the RPC, including its subcommittees. To be clear, the BLM is

not

relying on any RPC recommendation in this proposed rule and this proposed rule is not intended to implement any RPC recommendation. Furthermore, the BLM requests that commenters refrain from using or relying on RPC recommendations in their comments.

V. Incorporation by Reference of Industry Standards

This proposed rule would incorporate a number of industry standards and recommended practices, either in whole or in part, without republishing the standards in their entirety in the CFR, a practice known as incorporating by reference (IBR). These standards have been developed through a consensus process, facilitated by the API, with input from the oil and gas industry and Federal agencies with oil and gas operational oversight responsibilities. The BLM has reviewed these standards and determined that they would achieve the intent of 43 CFR 3174.31 through 3174.180 and 43 CFR 3175.31 through 3175.140 of this proposed rule. The legal effect of IBR is that the incorporated standards would become regulatory requirements. With the approval of the Director of the Federal Register, this proposed rule would incorporate the current versions of the standards listed.

Some of the standards referenced in this section would be incorporated in their entirety. For other standards, the BLM would incorporate only those sections that are relevant to the rule, meet the intent of §§ 3174.30 and 3175.30 of the proposed rule, and do not need further clarification.

The National Technology Transfer and Advancement Act (NTTAA), Public Law 104-113 (NTTAA), 15 U.S.C. 3701

et seq.

(Pub. L. 104-113), charges, with certain exceptions, that “all Federal agencies and departments shall use technical standards that are developed or adopted by voluntary consensus standards bodies, using such technical standards as a means to carry out policy objectives or activities determined by the agencies and departments.” The BLM may incorporate these standards into its regulations by reference without republishing the standards in their entirety in the regulations. The legal effect of incorporation by reference is that the incorporated standards become regulatory requirements. This incorporated material, like any other regulation, has the force and effect of law. Operators, lessees, and other regulated parties must comply with the documents incorporated by reference in the regulations.

The incorporation of industry standards follows the requirements found in 1 CFR part 51. The industry standards in this proposed rule are eligible for incorporation under 1 CFR 51.7 because, among other things, they would substantially reduce the volume of material published in the

Federal Register

; the standards are published, bound, numbered, and organized; and the standards incorporated are readily available to the general public through purchase from the standards organization or through inspection at any BLM office with oil and gas administrative responsibilities (1 CFR 51.7(a)(3) and (4)). The language of incorporation in §§ 3174.30 and 3175.30 meets the requirements of 1 CFR 51.9. Where appropriate, the BLM would incorporate by reference an industry standard governing a particular process and then impose requirements that add to or modify the requirements imposed by that standard (

e.g.,

the BLM sets a specific value for a variable where the industry standard proposed a range of values or options).

All material that is proposed to be incorporated by reference is available for inspection at the Bureau of Land Management, Division of Fluid Minerals, 20 M Street SE, Washington, DC 20003, 202-912-7162; and at all BLM offices with jurisdiction over oil and gas activities; and is available from the sources listed below. Before visiting a BLM office during the Covid-19 pandemic, please call ahead to confirm that the office is open to the public. If it is not open, you may make an appointment to visit the office.

All American Gas Association (AGA) documents are available for inspection and purchase from AGA, 400 North Capitol Street NW, Suite 450, Washington, DC 20001; telephone 202-824-7000. All of the API materials are available for inspection and purchase at the API, 1220 L Street NW, Washington, DC 20005; telephone 202-682-8000; API also offers free, read-only access to some of the material at

http://publications.api.org.

The standards that are proposed to be incorporated are summarized as part of the section-by-section analysis for §§ 3174.30 and 3175.30 in section V of this preamble.

VI. Discussion of the Proposed Rule

1. Summary

The following is a summary of the proposed modifications to subparts 3170, 3173, 3174, and 3175:

43 CFR subpart 3170—Onshore Oil and Gas Production: General

• Various changes are required to conform with the substantive changes to 43 CFR subparts 3173, 3174, and 3175.

43 CFR subparts 3173—Requirements for Site Security and Production Handling

• Reduce certain equipment seal requirements for equipment locations deemed to be of low risk to mishandling or theft;

• Reduce recordkeeping requirements associated with water draining operations;

• Reduce requirements for co-located facility on-site facility diagrams;

• Remove a requirement to submit a new site facility diagram when change of operator occurs;

• Increase volume thresholds for submitting FMP applications; and

• Remove immediate assessment for seals associated with LACT units.

43 CFR subpart 3174—Oil Measurement

• Update all incorporated API standards to the latest published edition;

• Create a third low-volume FMP category with no measurement uncertainty requirements;

• Add Production Measurement Team (PMT) review and BLM approval requirements for electronic thermometers, LACT sampling systems, temperature and pressure transducers, and temperature averaging devices;

• Delay the requirement for using BLM-approved equipment on existing high-volume FMPs and low-volume FMPs until such time as the equipment is replaced or the FMP elevates to a very-high-volume FMP; and

• Remove the immediate assessment for failure to notify the BLM of a LACT component failure.

43 CFR subpart 3175—Gas Measurement

• Update all incorporated API standards to the latest published edition;

• Add PMT review and BLM approval requirements for Gas

Chromatograph (GC) software and water vapor detection methods;

• Reduce basic meter-tube inspection frequency and remove detailed meter-tube inspection requirement for low-volume FMPs;

• Add initial meter-tube inspections for high- and very-high volume FMPs;

• Eliminate the requirement of installing composite samplers or on-line GCs for very-high volume FMPs; and

• Add language to make portions of the rule apply to gas meters associated with gas storage agreements.

The proposed modifications to subparts 3170, 3173, 3174, and 3175 are described in detail in the following section-by-section discussion.

B. Section-by-Section Discussion

The following discussion addresses the proposed changes from the existing regulation. If a provision is not specifically discussed in this section-by-section analysis, then the provision is essentially the same as the existing regulation.

1. Section-by-Section Discussion for Changes to Subpart 3170

The following table provides a cross-walk comparison of proposed subpart 3170 to the corresponding sections in existing subpart 3170:

Existing subpart 3170 sec.

Proposed subpart 3170 sec.

3170.1 Authority

3170.1 Authority.

3170.2 Scope

3170.2 Scope.

3170.3 Definitions and acronyms

3170.10 Definitions and acronyms.

3170.4 Prohibitions against by-pass and tampering

3170.20 Prohibitions against by-pass and tampering.

3170.5 [Reserved]

3170.30 Alternative measurement equipment and procedures.

3170.6 Variances

3170.40 Variances.

3170.7 Required recordkeeping, records retention, and records submission

3170.50 Required recordkeeping, records retention, and records submission.

3170.8 Appeal procedures

3170.60 Appeal procedures.

3170.9 Enforcement

3170.70 Enforcement.

The following discussion addresses section-by-section changes in the proposed subparts 3170 from the existing subparts 3170.

Section 3170.2 Scope

The BLM is proposing to add a new paragraph (f) to § 3170.2. Proposed § 3170.2(f) would expand the scope of the subpart 3170 regulations to include “measurement points on BLM-managed gas-storage agreements.” Proposed subpart 3175 would add requirements for gas-storage-agreement measurement points (discussed in detail later), thus necessitating this amendment to the Scope provision.

The BLM is not proposing any other amendments to the Scope provision for subpart 3170. However, the BLM notes that industry representatives have recommended that the BLM set a Federal-interest threshold for application of its site-security, oil-measurement, and gas-measurement regulations to units and Communitization Agreements (CAs) (created for the cooperative development of multiple leases in a State regulatory agency's assigned drilling spacing (43 CFR 3217.11)) that produce a mix of Federal and non-Federal oil and gas. The rationale for this suggestion appears to be that the burdens associated with BLM regulation of site security and measurement at a unit or CA should be justified by a significant Federal interest in that unit or CA. The BLM has considered this suggestion, but has not put forth a proposed Federal-interest threshold due to the difficulty of identifying a threshold that would satisfy the BLM's obligations under FOGRMA and that would protect the Federal royalty interest in the variety of circumstances under which Federal oil and gas production occurs. The BLM is requesting comment on whether it should establish a Federal-interest threshold for applying its site-security and oil- and gas-measurement regulations to units and CAs. The BLM is particularly interested in comment on the following: The costs and benefits of setting a Federal-interest threshold; what an appropriate threshold would be; whether, and to what extent, such a threshold would jeopardize the Federal royalty interest or fail to satisfy the BLM's obligations under FOGRMA; and, whether a similar threshold could be adopted for applying the regulations to units and CAs producing Indian oil and gas. Finally, the BLM recognizes that the States in which Federal and Indian oil and gas production occurs have interests that may be impacted by BLM regulation of mixed-ownership units and CAs; the BLM therefore specifically requests comment from the governments of those States on this issue.

Section 3170.1 Definitions and Acronyms

This proposed section corresponds to existing § 3170.3 and would define the terms that are used in more than one part 3170 subpart. The proposed rule would renumber the section to § 3170.10 for consistency of numbering across the part 3170 subparts.

A new definition for “Alarm log” would be added in proposed § 3170.10. Since the term would be used in proposed subparts 3174 and 3175, its definition belongs in § 3170.10.

The proposed rule would delete the definition for “API (followed by a number).” This definition was originally needed to accommodate an existing requirement that operators identify certain wells by their API numbers. Proposed changes to subparts 3173, 3174, and 3175 would delete all references to API well numbers and require operators to identify wells by their US well numbers. API transferred the unique well identifier standard to the Professional Petroleum Data Management (PPDM) in 2010. At that time, PPDM created the US well number as the new industry standard for identifying oil and gas wells.

The proposed rule would modify the existing definition for “By-pass.” The revised definition would state that piping around a meter with a double block and bleed valve or a series of valves that ensures valve integrity that is effectively sealed as required under proposed § 3173.20 would not be considered a by-pass where approved by the BLM. The BLM believes the proposed change to the definition would allow for industry innovation in measurement while ensuring the FMP allows for oil or gas to flow with accountability.

The proposed rule would modify the definition of “Configuration log” and move it from existing § 3175.10 to proposed § 3170.10 because the term is

used in more than one part 3170 subpart. The proposed change to the definition would align it with the industry standard, API Chapter 21.1 Flow Measurement Using Electronic Metering Systems—electronic Gas Measurement—Second Edition, thereby preventing confusion among industry and the BLM as to the meaning of the term.

The BLM proposes to move the definition for “Event log” from existing subparts 3174 and 3175, where the term is used, to proposed § 3170.10. This proposed rule would also modify the existing definition of “event log” to align it with the current industry standard published in API Chapter 21.1 Flow Measurement Using Electronic Metering Systems—electronic Gas Measurement—Second Edition. The proposed modification to the definition would add clarity and eliminate confusion over the use of the term by industry and the BLM.

The BLM is proposing several changes to the definition of a “Facility measurement point (FMP).” First, the definition would be expanded to include not only measurement affecting the calculation of the volume and quality of production from a Federal or Indian lease, unit Participating Area (PA) (part of unit area which has proven to be productive of oil or gas in paying quantities or which is necessary for unit operations and to which production is allocated), or CA for which royalty is owed, but also measurement affecting the calculation of the volume and quality of the production on native gas or oil from gas storage agreements, which royalty is also owed.

Second, the proposed rule would remove from the FMP definition's second sentence the clause “but is not limited to, the approved point of royalty measurement and.” Upon review, the BLM does not foresee any circumstances under which an FMP is not relevant to the determination of the allocation of production to Federal or Indian leases, unit PAs, or CAs. Therefore, the clause was removed and the proposed definition reads, “An FMP includes all measurement points relevant to determining the allocation of production to Federal or Indian leases, unit PAs, or CAs.”

Third, the BLM is proposing to remove the fourth sentence from the existing definition, “An FMP also includes a meter or measurement facility used in the determination of the volume or quality of royalty-bearing oil or gas produced before BLM approval of an FMP under § 3173.12.” The proposed definition of FMP is not couched in terms of “BLM-approved” measurement points as the existing definition is written. Under the plain terms of the proposed definition, a measurement point affecting royalty or injection or withdrawal fees would be an FMP, even in the absence of BLM approval. The fourth sentence of the existing definition is therefore no longer necessary.

Fourth, the BLM is proposing to reword the last sentence in the existing definition for an FMP that now says the BLM will not approve a gas processing plant tailgate meter located off the lease, unit or CA, as an FMP. Instead, the proposed rule would change the last sentence to say that an FMP cannot be located at the tailgate of a gas-processing plant located off the lease, unit, or CA. This change would reflect proposed changes to the BLM's FMP number approval process. Existing § 3173.12(a) and (b) would be deleted. Existing § 3173.12(b) says the BLM will not approve as an FMP a gas processing plant tailgate meter located off the lease, unit, or communitized area. The proposed change to the definition would incorporate the intent of the existing § 3173.12(b) deleted paragraph.

The last proposed change to the existing FMP definition involves adding a sentence to the FMP definition that would resolve the confusion over measuring flared volumes that has arisen since the BLM published its waste prevention regulations (43 CFR subpart 3179). In the proposed FMP definition, measurement points for flared volumes are not FMPs, even though royalty may be due on the flared volumes. Measurement and reporting requirements for flared gas are contained in 43 CFR 3179.301.

In addition to the proposed changes to the FMP definition, the BLM is proposing to add a definition for “FMP number.” The FMP number would be the number that the BLM would assign to the FMP after reviewing the operator's FMP number application. This change would reflect proposed changes to the BLM's FMP-number approval process (see discussion of proposed § 3173.60 later in this preamble).

The proposed rule would relocate the definition for “Land description” from existing § 3173.1 to proposed § 3170.10, with a minor revision. The term “Land description” is used in subparts 3170 and 3173, so it belongs in § 3170.10. The revision would acknowledge that the U.S. Department of Interior's Manual of Surveying Instructions is periodically amended and that the most recent version would apply to specifications used in land descriptions.

The proposed rule would add a definition for “Measurement data system (MDS),” which does not appear in the existing rule. The definition is needed because proposed subparts 3174 and 3175 would use this new term. Since this definition is used in more than one subpart, it should be located in proposed § 3170.10.

Proposed § 3170.10 would add a new definition for “Notify.” Existing part 3170 does not have a definition for “Notify,” despite the fact the term is used throughout its subparts. In the existing regulation, responding to comments on § 3174.7(d) and (e), the BLM agreed with the commenters the term “Notify” was ambiguous and required a definition. Notify could mean a Sundry Notice, phone call, or many other forms of communication. The operators were concerned they would be notifying the BLM in a manner consistent with the regulation. In addition, there was a concern the BLM would interpret the term differently across field offices. In one field office the term “Notify” might mean Sundry Notice, while in another a phone call would suffice. Although the BLM defined “Notify” in the existing subpart 3174 preamble, the definition for “Notify” did not appear in the final regulation text in subpart 3170 or subpart 3174. Since the term “Notify” appears throughout the 3170 subpart, the BLM proposed to include the definition in subpart 3170. The BLM seeks to rectify this oversight by including the definition for “Notify” in proposed subpart 3170.

The proposed rule would relocate the definition of “Permanent measurement facility” from existing § 3173.1 to § 3170.10. The proposed rule would also change the length of time that equipment used to determine the quantity or quality of production or to store production could be used at an FMP before it would be considered a permanent measurement facility. The existing definition defines permanent as being 6 months or longer. The 6-month standard was based on the BLM's typical time frame for conducting an initial environmental inspection of production facilities after a well has been completed. The revised rule would set a 3-months standard that would more accurately reflect the concept of permanent facilities. The BLM believes 3 months is a sufficient amount of time for operators to construct facilities and begin use of an FMP number.

The proposed § 3170.10 definition for Production Measurement Team (PMT) would delete the last sentence which states the purpose of the PMT. The final sentence of the definition is redundant

and the BLM believes the intent of the purpose is already contained within the first sentence.

Proposed § 3170.10 would add a definition for “Temporary measurement facility.” The existing rule does not address temporary measurement, but proposed subparts 3174 and 3175 would. This definition would specify that any measurement equipment in place for less than 3 months would be considered temporary and would not need an FMP number even though the FMP is being used to measure production for the purposes of royalty collection.

Proposed § 3170.10 would add the new definition “US well number” to accommodate a proposed requirement that operators switch from using API well numbers to identify their wells to using US well numbers. Created by the PPDM Association in 2010, the US well number is the new industry standard for identifying oil and gas wells.

Section 3170.30 Alternative Measurement Equipment and Procedures

This proposed new section would clarify the process that operators or manufacturers must follow to get BLM approval for using alternative oil or gas measurement equipment or measurement methods. The proposed language is substantially similar to language in existing § 3174.4(d) and § 3174.13, with the biggest change being that it would apply to both oil and gas equipment and methods. In addition the proposed rule would require approval of alternative measurement equipment and procedures to meet or exceed the objectives in minimum standards in part 3170. Alternative measurement equipment and procedures would need to meet or exceed measurement performance requirements, audit trail and verification requirements, and site security requirements. This proposed new section would replace existing § 3174.4(d) and § 3174.13. Since these proposed requirements would apply to both oil and gas operations, they belong in proposed subpart 3170, which contains provisions that are common to multiple part 3170 subparts.

The purpose of proposed § 3170.30 is to allow the BLM to approve new measurement equipment and procedures not already approved for use in the regulations. The proposed section would require an operator or manufacturer requesting approval to submit appropriate data demonstrating that the proposed alternative equipment or measurement method/procedure meets or exceeds the performance standards, would not affect royalty income, production accountability, or site security. The BLM is proposing that the PMT would review operators' or manufacturers' requests for approval of alternative equipment or measurement methods/procedures to ensure that the alternative equipment or measurement methods/procedures would meet or exceed the objectives of the applicable minimum standards of part 3170 and would not affect royalty income, production accountability, or site security. After reviewing the requests, the PMT would make recommendations to BLM management, including any suggested conditions of approval. After BLM approval, the PMT would post the make, model, range or software version (as applicable), or method/procedure on the BLM's website, making it available for use at all FMPs.

Proposed § 3170.30(c) would clarify that the procedures for requesting and granting a variance under § 3170.40 of this subpart may not be used as an avenue for approving new measurement technology, methods, or equipment.

Section 3170.40 Variances

Under this proposed rule, existing § 3170.6 would be renumbered to § 3170.40. Both § 3170.6 and § 3170.40 provide instructions on how an operator could electronically submit a request for a variance or, if electronic filing is not possible or practical, submit the request to a BLM field office. Proposed § 3170.40 would revise the existing language to match language in proposed § 3173.43(b) (existing § 3173.10(b)), which instructs operators on how to submit Sundry Notices. This change would create a uniform process for submitting variance requests, FMP number requests, site facility diagrams, and other requests for approval.

The BLM requests comment on whether it should also include a State and tribal variance provision that would allow States and tribes to request that the BLM apply analogous State or tribal rules or regulations in place of the BLM's requirements. The BLM is interested in achieving administrative efficiencies where possible while also protecting the public and tribal interests in production accountability and royalty revenues. The BLM specifically requests comment on the following: The appropriate standard for granting a State or tribal variance; the scope of a State or tribal variance; the appropriate process for obtaining a State or tribal variance; and, the means by which the BLM could address changes to State or tribal rules or regulations on which a variance is based. The BLM notes that its regulations in 43 CFR subpart 3179 previously contained a State and tribal variance provision at § 3179.401 (see 81 FR 83008 (Nov. 18, 2016)). Although that provision has since been rescinded (see 83 FR 49184 (Sept. 28, 2018)), the BLM requests comment on the extent to which former § 3179.401 could serve as a model for a new State and tribal variance provision.

Section 3170.50 Required Recordkeeping, Records Retention, and Records Submission

Proposed § 3170.50(g) would require operators to include the “Land description” on all records used to determine the quality, quantity, disposition, and verification of production from Federal or Indian leases, unit PAs, or CAs. Land description includes the quarter-quarter section, section, township, range and principal meridian, or other authorized survey designation acceptable to the AO, such as metes-and-bounds, or latitude and longitude. A land description is needed in case there are errors in other areas of a record. For example, when an operator mistakenly enters the wrong Federal agreement number, the BLM uses other information in the record to determine which Federal agreement is the correct one. The land description can be an important source of information to confirm or refute the validity of a record when the record contains missing or erroneous information. Proposed § 3170.50(g)(4) would also add “Land description” to the record-information requirement for facilities existing prior to the assignment of an FMP number. The need for the land description on records for facilities without an FMP number is the same for facilities with assigned FMP numbers.

2. Section-by-Section Discussion for Changes to Subpart 3173

This proposed rule would renumber all of the sections and rename one section in the existing subpart 3173 in order to improve consistency among the various part 3170 regulations. The following table provides a cross-walk comparison of proposed subpart 3173 to existing subpart 3173:

Existing subpart 3173 sec.

Proposed subpart 3173 sec.

3173.1 Definitions and acronyms

3173.10 Definitions and acronyms.

3173.2 Storage and sales facilities—seals

3173.20 Storage and sales facilities—seals.

3173.3 Oil measurement system components—seals

3173.21 Oil measurement system components—seals.

3173.4 Federal seals

3173.22 Federal seals.

3173.5 Removing production from tanks for sale and transportation by truck

3173.30 Removing production from tanks for sale and transportation by truck.

3173.6 Water-draining operations

3173.31 Water-draining operations.

3173.7 Hot oiling, clean-up, and completion operations

3173.32 Hot oiling, clean-up, and completion operations.

3173.8 Report of theft or mishandling of production

3173.40 Report of theft or mishandling of production.

3173.9 Required recordkeeping for inventory and seal records

3173.41 Required recordkeeping for inventory and seal records.

3173.10 Form 3160-5, Sundry Notices and Reports on Wells

3173.43 Data submission and notification requirements.

3173.11 Site facility diagram

3173.50 Site facility diagram.

3173.12 Applying for a facility measurement point

3173.60 Applying for a facility measurement point number.

3173.13 Requirements for approved facility measurement points

3173.61 Requirements for approved facility measurement point numbers.

3173.14 Conditions for commingling and allocation approval (surface and downhole)

3173.70 Conditions for commingling and allocation approval (surface and downhole).

3173.15 Applying for a commingling and allocation approval

3173.71 Applying for a commingling and allocation approval.

3173.16 Existing commingling and allocation approvals

3173.72 Existing commingling and allocation approvals.

3173.17 Relationship of a commingling and allocation approval to royalty-free use of production

3173.73 Relationship of a commingling and allocation approval to royalty-free use of production.

3173.18 Modification of a commingling and allocation approval

3173.74 Modification of a commingling and allocation approval.

3173.19 Effective date of a commingling and allocation approval

3173.75 Effective date of a commingling and allocation approval.

3173.20 Terminating a commingling and allocation approval

3173.76 Terminating a commingling and allocation approval.

3173.21 Combining production downhole in certain circumstances

3173.80 Combining production downhole in certain circumstances.

3173.22 Requirements for off-lease measurement

3173.90 Requirements for off-lease measurement.

3173.23 Applying for off-lease measurement

3173.91 Applying for off-lease measurement.

3173.24 Effective date of an off-lease measurement approval

3173.92 Effective date of an off-lease measurement approval.

3173.25 Existing approved off-lease measurement

3173.93 Existing approved off-lease measurement.

3173.26 Relationship of off-lease measurement approval to royalty-free use of production

3173.94 Relationship of off-lease measurement approval to royalty-free use of production.

3173.27 Termination of off-lease measurement approval

3173.95 Termination of off-lease measurement approval.

3173.28 Instances not constituting off-lease measurement, for which no approval is required

3173.96 Instances not constituting off-lease measurement, for which no approval is required.

3173.29 Immediate assessments for certain violations

3173.190 Immediate assessments for certain violations.

If a provision is not specifically discussed in this section-by-section analysis, then the provision is essentially the same as the existing regulation.

Section 3173.10 Definitions and Acronyms

This proposed section would clarify the definition of “Appropriate valves” by simplifying the language to say that such valves provide access to production (

i.e.,

access to add or remove liquids from a tank or piping system) before it is measured for sale. It would further clarify that such valves would be subject to the proposed rule's sealing requirements at proposed § 3170.20. This new definition would help BLM inspectors identify which valves are subject to the seal requirements and help operators comply with the regulation.

This proposed section would include a new definition for “Completed.” The term is used in proposed § 3173.80. The proposed changes in § 3173.80 are discussed later in this preamble.

The proposed rule would significantly change the definition for “Economically marginal property.” The existing regulation provides conditions under which a lease, unit PA, or CA may be defined as an economically marginal property. The existing regulation requires each lease, unit PA, or CA in a commingling application to meet one of the definitions of economically marginal property in order for the BLM to consider approving a request to commingle Federal or Indian production.

The existing regulation lists three economic conditions under which a property may be considered economically marginal. The first economic condition is when revenue from production is so low that a prudent operator would elect to plug a well or shut-in a lease rather than invest resources to achieve non-commingled production. The second economic condition is when the expected revenue, net any associated operating costs, generated from oil or gas production is insufficient to cover the nominal cost of the capital expenditure required to achieve measurement of non-commingled oil or gas production over a payout period of 18 months. The third economic condition occurs when the net present value, or the discounted value of the royalties collected from production for the Federal or Indian leases, unit PAs, or CAs over the expected life of the equipment required to achieve non-commingled production, is less than the capital expense of purchasing and installing this equipment.

This proposed rule would eliminate the first condition for an economically marginal property. Upon review, the BLM believes the first and third conditions in the existing rule are essentially the same. The BLM proposes to change the existing second and third economic conditions to state that the capital expense would be based on the least expensive, practicable, alternative equipment required to achieve non-commingled measurement of production. This change would clarify for industry and the BLM the equipment that would be included in an economic analysis for identifying an economically marginal property. The proposed rule would retain the last sentence of the existing definition with only minor administrative changes.

As discussed earlier in this preamble, the proposed rule would remove the definition of “Land description” from its current location in existing § 3173.1 and relocate it to proposed § 3170.10.

The proposed rule would move the revised definition for “Permanent

measurement facility” from § 3173.1 to § 3170.10. The revised definition for “Permanent measurement facility” is discussed previously.

The proposed rule would add a definition for the “Propagation of uncertainty” made necessary by the addition of a new condition for commingling in proposed § 3173.70(b)(5).

Section 3173.20 Storage and Sales Facilities—Seals

The proposed rule would clarify the requirement in § 3173.20(c)(2) that seals are not required on valves on water tanks, unless the valve could provide access to sales or storage tanks by water tank and oil tank by means of common piping. The BLM is proposing to add a diagram to Appendix A, subpart 3173, that would depict a common tank configuration and which valves in this configuration are appropriate valves, requiring seals, and which are not. The diagram is intended to address confusion over whether valves on water tanks that have the possibility of accessing oil are appropriate valves that must be sealed.

Section 3173.21 Oil Measurement System Components—Seals

This section addresses requirements for sealing components used in LACT meters and Coriolis measurement systems (CMS). This section identifies the components that must be effectively sealed, as defined in § 3173.10. The objective of this section is to eliminate the theft or mishandling that can occur when components that are used in determining the quantity or quality of oil are not properly sealed.

Upon reviewing existing § 3173.3, the BLM believes that some of the existing sealing requirements are excessive, while others are necessary, but are unclear and in need of revision. The proposed rule seeks to reduce the compliance burden on operators as well as the enforcement burden on the BLM. The BLM reviewed all oil measurement system components, eliminated seal requirements on those with minimal risk to site security, and revised the remaining requirements to provide clarity.

Proposed § 3173.21(a) would change the sealing requirements for the components on LACT meters and CMSs that are currently contained in existing § 3173.3(a)(1), (a)(4), (a)(5), (a)(6), (a)(7), (a)(8), (a)(9), (a)(10), (a)(12), and (a)(13).

Proposed § 3173.21would eliminate seal requirements for the following seals on LACT meters and CMSs:

§ 3173.3(a)(1) Sample probes;

§ 3173.3(a)(6) LACT meters or CMS;

§ 3173.3(a)(9) Manual-sampling valves (if so equipped)'

§ 3173.3(a)(10) Valves on diverter lines larger than 1 inch in nominal diameter;

§ 3173.3(a)(12) Totalizer; and

§ 3173.3(a)(13) Prover connections.

For each of these components, the BLM believes the burden of compliance outweighs the risk of the removal of unmeasured oil. The BLM requests comment on the assumptions made in the following proposals in this section.

Existing § 3173.3(a)(1), requiring a seal for sample probes on LACTs or CMSs, would be eliminated in proposed § 3173.21(a). Sample probe seal requirements would be removed because a sample probe is difficult to remove in normal operations. Since a sample probe is difficult to remove in normal operations, it poses a low risk to measurement if the current requirement for a seal is removed. If a sample probe were removed, its removal would cause a noticeable pressure drop. This pressure drop is likely to be noted on a flow computer, thereby alerting the operator or the BLM to a change in flow conditions in the measurement system.

Existing § 3173.3(a)(6), requiring a seal for LACT meters or CMS, would be eliminated in proposed § 3173.21(a). The existing regulation requires the sealing of LACT meters or CMS. Electronic meters cannot be opened and adjusted in the same way as a mechanical meter. New facilities with larger production volumes are generally using electronic meters for FMPs. Given the construction of electronic meters, it is impossible to seal components which affect the measurement of quality and quantity of oil because the components reside within the housing of the meter. Removal of the seal requirement for electronic meters on newer, higher-producing agreements poses low risk for improper measurement. Mechanical meters are more likely to be used on lower-production FMPs. The BLM believes the elimination of a seal requirement on these meters would not significantly affect production accountability, as higher-volume production facilities are safeguarded with the use of electronic meters.

Existing § 3173.3(a)(9), requiring a seal for manual sample valves, would be eliminated in proposed § 3173.21(a). The proposed rule would remove this requirement because most manual sample valves are less than 1-inch nominal size. Historically, the BLM has used the 1-inch nominal size to delineate the size beyond which the removal of product from a production facility without measurement becomes easier. For example, proposed § 3173.20(c)(4) designates a sample cock valve on piping or tanks of less than 1-inch nominal size as not an appropriate valve subject to sealing requirements. The proposed change provides consistency with the designation of what is not an appropriate valve in the proposed § 3173.20(c) and the proposed sealing requirements on oil measurement systems in proposed § 3173.21(a)(6). The BLM believes manual sample valves in a production facility are unlikely to provide easy access for the removal of oil that has not been measured for royalty purposes.

Existing § 3173.3(a)(10), requiring a seal for valves on divert lines larger than 1 inch in diameter, would be eliminated in proposed § 3173.21(a). Generally, production sent to a divert line does not meet sales quality specifications and would not be measured for production reporting for royalty purposes. Higher-volume facilities use electronic metering systems and operators may have the Programmable Logic Controller configured to show a load rejection in the event log. The event log record would allow BLM inspectors as well as operators, to account for diverted production and control loss risk on higher-volume properties. Removal of the requirement for a seal for valves on divert lines poses a low risk for theft and mishandling and continues to insure proper measurement of oil on which royalty is due.

Existing § 3173.3(a)(12), requiring a seal for the totalizer, would be eliminated in proposed § 3173.21(a). The BLM recognizes the sealing of an electronic meter totalizer is impractical. A seal on a mechanical meter counter head and mechanical meter head will be required in proposed § 3173.21(a)(3). The proposed rule eliminates the impractical requirement for electronic meters and includes the practical seal requirement on mechanical meters in proposed § 3173.21(a)(3). The removal of the requirement for a seal on a totalizer of an electronic meter has a low risk of theft or mishandling of production while still maintaining accurate measurement at the FMP.

Existing § 3173.3(a)(13), requiring a seal for proving connections, would be eliminated in proposed § 3173.3(a). The removal of the requirement to seal proving connections would restore the standard in Onshore Order No. 3, which had no seal requirement for proving connections. Mishandling or theft downstream of an FMP where these seals are located would not affect royalty revenues because royalties would be assessed on volumes measured at the FMP. After further consideration, the BLM has determined that the concern for sealing the proving

valves to prevent falsification of meter proving reports is unwarranted because a BLM inspector would easily detect a proving report that has only a changed date or looks exactly like previous proving reports. Therefore, the BLM would remove this requirement in the proposed rule.

Proposed § 3173.21(a)(3) would modify the meter-assembly sealing requirements now found in existing § 3173.3(a)(4). The existing regulation requires a meter assembly, including the counter head and meter head, to be sealed. The proposed new language would require operators to seal the mechanical counter head (totalizer) and meter head on a mechanical meter only. The existing regulation created confusion with respect to the sealing requirements on a non-mechanical or electronic meter. There is no practical way to seal these components on an electronic meter. This change would clarify that the sealing requirement applies to mechanical meters, and not to non-mechanical meters that are used for measurement.

Proposed § 3173.21(a)(4) would modify the seal requirement for a temperature averager, now found in existing § 3173.3(a)(5). The revised language would no longer refer to a seal requirement for a temperature averager, but instead to a seal requirement for a stand-alone temperature averager monitor. This proposed revision would eliminate any confusion over built-in temperature averagers, which are impossible to seal. The change in the proposed rule maintains the same level of risk for mismeasurement as the current rule and will continue to provide for accurate measurement.

Proposed § 3173.21(a)(5) would revise the sealing requirement for a back-pressure valve downstream of the meter, now found in existing § 3173.3(a)(7). The proposed new language would clarify that the seal requirement would apply only to fixed, non-automatic adjusting, back-pressure valves downstream of the meter. The result would be that operators could use automatic-adjusting back-pressure valves as intended, without having to modify the equipment in order to add seals to valves that adjust automatically based on operating conditions. A seal is used to maintain a fixed operating condition. Automatic-adjusting, back-pressure valves downstream of the meter vary with operating conditions. Sealing a piece of equipment designed to adjust to operating conditions does not make sense. This change is likely to improve measurement at locations with automatic-adjusting back-pressure valves downstream of the meter and maintain the same level of measurement accuracy at locations with fixed or non-automatic adjusting back-pressure valves downstream of the meter.

Proposed § 3173.21(a)(6) would clarify the sealing requirement for drain valves, now found in existing § 3173.3(a)(8). The new language would clarify that the requirement would apply to drain valves used on piping with a nominal pipe size of 1 inch or larger. The existing language applies to any drain valve in the system. This change would eliminate the need for operators to seal most drain valves on sample pots on LACT units. The BLM believes that the proposed requirement would adequately addresses security concerns regarding access to production without accountability and provide clarity for industry compliance and BLM inspection. The proposed change maintains a low risk for improper measurement, theft, or mishandling of production.

Section 3173.31 Water-Draining Operations

Existing § 3173.6 requires operators to document specific information when draining water from production storage tanks. The existing regulation requires the operator, purchaser, or transporter, as appropriate, to document information as specified in existing § 3173.6(a) through (h) when water is drained from a tank storing hydrocarbons.

This proposed rule would eliminate the specific requirements in § 3173.6(a) through (h) and instead defer to the seal-record requirements in proposed § 3173.41(b), which are currently in existing § 3173.9(b). In the current rule, the operator was not required to submit the required information to the BLM via Sundry Notice. Operators have only been required to maintain a record of the information. This proposed change in documentation during water-draining operations would not negate an operator's obligation to report produced water to ONRR on the Oil and Gas Operations Report (OGOR) Part A. The proposed change would, however, eliminate unnecessary burdens on operators by reducing the existing records requirements of Federal or Indian agreement number, land description of tank location, unique tank number and nominal capacity, date of the opening gauge, opening gauge, total observed volume and free water measurement, closing gauge and total observed volume to those maintained in a seal record. After review, the BLM believes the existing documentation requirements add minimal value to production accountability and is information available through internal records for water disposal. The proposed revision would require the operator, purchaser, or transporter, as appropriate, to maintain all seal records and make them available to the BLM upon request.

Section 3173.43 Data Submission and Notification Requirements

The proposed rule would make only minor changes to existing § 3173.10. In addition to renumbering the section, the proposed rule would change the section heading from “Form 3160-5 Sundry Notices” to “Data submission and notification requirements.” The proposed rule would also update regulatory cross references in paragraphs (a)(1) through (a)(7).

Section 3173.50 Site Facility Diagram

Proposed § 3173.50 would revise and renumber existing § 3173.11, which sets out the requirements for site facility diagrams.

Proposed § 3173.50(c)(3) would require operators to use the complete US well number on the site facility diagrams when identifying wells flowing into headers, instead of the API well number, as explained in the previous discussion on proposed § 3170.10. The complete US well number provides the most accurate unique well identification, including completion and sidetrack information. For BLM inspectors, the US well number provides a unique well identifier, critical for their production facility inspections when Federal or Indian wells are co-located with non-Federal or non-Indian wells. Created by the PPDM Association in 2010, the US well number is the new industry standard for identifying oil and gas wells.

Proposed § 3173.50(c)(4) would correct an editing error in existing § 3173.11(c)(4) regarding how an operator should depict a co-located facility on its site-facility diagram. The proposed change would require the operator of a co-located facility to identify the co-operator by name on the site facility diagram and identify with a box on the diagram the approximate location of the co-located facility. The BLM acknowledges that an operator of a Federal or Indian lease, unit PA, or CA is not responsible for another operator's co-located facility. However, a BLM inspector would need to understand the extent of the operator's responsibilities at a site with co-located facilities. The proposed change would reduce the burden on operators of Federal or trust minerals, acknowledge the limits of the operator's responsibility, and allow

BLM inspectors to conduct appropriate facility inspections.

Proposed § 3173.50(c)(6) would remove the requirement in existing § 3173.11(c)(6) for an operator of a co-located production facility to include on the site facility diagram a skeleton diagram of the other operator's co-located facility(ies). The proposed rule would maintain the existing requirement, in the second sentence of existing § 3173.11(c)(6), for one diagram in the case of storage facilities common to co-located facilities and operated by one operator. The proposed change would acknowledge the extent of an operator's responsibility on Federal or Indian leases, unit PAs, or CAs and reduce the burden and difficulty of creating diagrams for another operator's facilities. With the proposed change, BLM inspectors would continue to complete appropriate facility inspections effectively.

Proposed § 3173.50(c)(8) would give operators options, in addition to using the assigned FMP number, for identifying the measurement equipment used for royalty reporting on-site facility diagrams. The proposed change would also eliminate the requirement that operators wait to receive an FMP number before submitting amended or new diagrams. The proposed revision gives the operator greater flexibility when filling out the site facility diagram and allows for the timely submission of both new and amended diagrams where an FMP number has not yet been assigned. BLM inspectors would be able to conduct facility inspections whether the operator provides the BLM-assigned FMP number, the unique identifiers, or station identification (ID) numbers for the measurement equipment on its diagram.

Proposed § 3173.50(d)(1) would revise the timeframe in existing § 3173.11(d)(1) for when an operator would have to submit a new, permanent site-facility diagram. The time frame would be changed from 30 days after the BLM assigns an FMP to 60 days after the facility becomes operational. In addition, proposed § 3173.50(d)(2) would change the timeframe in existing § 3173.11(d)(2) for when an operator would have to submit an amended site facility diagram for a modified, existing facility. That time frame would be changed from 30 days to 60 days after the facility is modified. The proposed 60-day timeframe would also apply when a non-Federal facility located on a Federal lease or a federally approved unit or communitized area is constructed or modified. The BLM is proposing this change because many site-facility diagrams are not prepared “in-house” and the 30-day deadline is difficult for operators to meet. This proposed change would retain the new operator's responsibility to submit amended site facility diagrams when the facility is modified in any way. The BLM believes extending the timeframe for submission of site facility diagrams on new, permanent facilities and modified, existing facilities from 30 days to 60 days would not interfere with the BLM's responsibility for facility inspections.

Proposed § 3173.50 eliminates the requirement (in existing 3173.11(e)) to submit a site facility diagram for a location for which an FMP is not required. The BLM believes the existing requirement is covered by the requirement in proposed § 3173.50(a) and so the deletion of existing 3173.11(e)(1) and (e)(2) removes a regulatory redundancy. Under § 3173.50(a), operators would still be required to submit a site facility diagram for a location not requiring an FMP number.

Proposed § 3173.50(e) is a new section that would change the timeframe in existing § 3173.11(f) for when an operator must update and amend a diagram. The proposed rule would give operators 60 days, instead of the current 30 days, to update and amend a diagram after a facility is modified or a non-Federal facility located on a Federal lease or federally approved unit or communitized area is constructed or modified. The BLM supports this change because many site-facility diagrams are not prepared “in-house” and the 30-day deadline is difficult for operators to meet. The proposed change would also delete the requirement to submit a modified site-facility diagram when there is a change of operator and the only change to the diagram would be the new operator's name. The BLM estimates the operator burden to prepare a new site facility diagram to be 4 hours of operator staff time at $65.40 per hour for a total of $262.40 to prepare a new site facility diagram. The BLM believes the proposed changes will lessen the burden and cost on operators to comply with the regulations, while continuing to allow the BLM to ensure production accountability.

Section 3173.60 Applying for a Facility Measurement Point Number

Proposed § 3173.60 would revise the existing requirements for the FMP-number application process that are now located in existing § 3173.12.

The proposed rule would change the section title slightly from “Applying for a facility measurement point” to “Applying for a facility measurement point number.” This change would more accurately reflect the process of applying for and receiving an FMP number as opposed to applying for an FMP, which already exists as the point of royalty measurement even before the BLM issues an FMP number for it. The BLM proposes to delete existing §§ 3173.12(a)(1), (a)(2), and (b) because these sections essentially define FMP, off-lease measurement, and commingling. Proposed § 3170.10 already defines these terms. The proposed regulation would seek to make the distinction between an FMP—the point where oil or gas produced from a Federal or Indian lease, unit PA, or CA is measured, and where the measurement affects the calculation of the volume or quality of production on which royalty or injection and withdrawal fees are owed—and the FMP number. An FMP exists whether or not the BLM has assigned an FMP number. The proposed change would keep the definition of an FMP separate from the application for an FMP number and prevent confusion. In order to accommodate this change, the word “number” would be inserted after the word “FMP” throughout the revised section. Proposed § 3173.60(a) would add reference to gas storage agreement involving native gas or oil to the requirement of applying for an FMP number. This change would be necessary to address the changes proposed to the FMP definition.

Proposed §§ 3173.60(c)(1), (c)(2), and (c)(3) would change the tiers in existing § 3173.12(e) that dictate the timeframes under which operators of permanent existing facilities would be required to apply for FMP numbers. Each tier is grouped by monthly production amounts with assigned compliance dates that would fall either 1, 2, or 3 years after the effective date of the final rule. The tiers in existing §§ 3173.12(c)(1), (c)(2), and (c)(3) were derived from 2010 production data that was available when the existing regulations were written. The proposed rule seeks to replace the existing tiers with tiers derived from 2017 production data. The revised tiers better reflect the current operating environment by dividing the 2017 production data into equal thirds creating the new tiers. The proposed tier change would keep the application submissions by year split into thirds, reducing the burden on the BLM to process the influx of applications for existing locations when this section of the regulation goes into effect.

Proposed § 3173.60(c) would also delete the enforcement language in existing § 3173.12(e)(7). Subpart 3163

provides standalone authority for an Incident of Noncompliance (INC) and civil penalties for noncompliance with this part. In addition, proposed § 3170.70 provides further assurance the subpart 3163 enforcement mechanisms can be used to enforce the part 3170 requirements. Given the enforcement authority in other parts of the BLM's regulations, the BLM is proposing to delete this language without affecting the BLM's enforcement capacity.

Proposed § 3173.60(d) would list the information that the operator must include in its Sundry Notice requesting approval of an FMP number. These requirements are now found in existing § 3173.12(f). Existing § 3173.12(f)(2) requires the applicant to provide the applicable Measurement Type Code. The proposed rule would remove this requirement, since the Measurement Type Code will be generated automatically by the Automated Fluid Minerals Support System (AFMSS) 2 currently in development. In AFMSS 2, the FMP-number applicant will answer a series of questions on the FMP Sundry Notice. Based on the information submitted, AFMSS 2 will generate the FMP number. The first two digits of the FMP number will be the Measurement Type Code identifier. The BLM believes the AFMSS 2 application process negates the need for operators to provide the Measurement Type Code as required in existing § 3173.12(f)(2).

Proposed § 3173.60(d)(2)(i) through (iii) would revise the information that operators are now required to provide in their FMP applications about the equipment used for oil and gas measurement under existing § 3173.12(f)(3)(i) through (iii).

The BLM believes the proposed changes in § 3173.60(d)(2)(i), (ii), and (iii) would provide for consistent FMP-number-application-information requirements for gas measurement, oil measurement by tank gauge, and oil measurement by LACT or CMS. The proposed changes would also prevent operators from having to submit unnecessary information during the FMP number application process or information they are already required to provide elsewhere in the regulation.

Proposed § 3173.60(d)(2)(i) would change the information required under existing § 3173.12(f)(3)(i) on FMP number applications for gas measurement. The BLM is proposing to remove the requirement that operators list the “station number, primary element (meter tube) size or serial number, and type of secondary device (mechanical or electronic)” and replace it with a requirement that operators provide “the unique meter ID, and elevation.” The revised paragraph would still require gas-measurement FMP applicants to list the operator, purchaser, or transporter's name, as appropriate. This change would eliminate confusion as to what is required to identify the primary element, remove non-relevant information such as the type of secondary device, and include the elevation. The BLM believes the revised requirement would provide the information the BLM needs for production accountability and verification.

Under proposed § 3173.60(d)(2)(ii), the equipment information required under existing § 3173.12(f)(3)(ii) would remain the same for those applying for FMP numbers to measure oil by tank gauge. The only change would be that applicants would be required to specify the name of the operator, purchaser, or transporter, as appropriate. The additional information would make the new paragraph consistent with the information required for gas measurement and oil measurement by LACT or CMS in proposed § 3173.60(d)(2)(i) and (iii).

Proposed § 3173.60(d)(2)(iii) would change the information requirements under existing § 3173.12(f)(3)(iii) on FMP number applications for measuring oil by LACT or CMS. Purchasers, transporters, or parties other than the operator frequently operate the LACTs and CMS systems. The proposed change would require the operator to identify the purchaser or transporter, as appropriate, and the unique meter ID. The proposed change would also delete the requirement to identify whether the equipment is LACT or CMS, the associated oil tank number or serial number, and tank size. Much of the information required in existing § 3173.12(f)(3)(iii) is currently required on a site facility diagram. The proposed change would better serve the BLM with information connected to the associated record keeping requirements of the FMP, while reducing the burden on the operator.

Proposed § 3173.60(d)(3) would replace the reference to API number in existing § 3173.12(f)(4) with US well number. The proposed change would make the regulation consistent with the current industry standard for a unique well identifier.

Section 3173.61 Requirements for Approved Facility Measurement Points

Proposed § 3173.61 would revise the requirements in existing § 3173.13 that specify when operators must start using their FMP numbers on production reporting to ONRR and when they must notify the BLM of any permanent changes made to an FMP.

Proposed § 3173.61(a) would require all existing and new facilities to start using their FMP numbers when reporting production to ONRR starting with the third production month after the BLM assigns the FMP number(s). This would be a change from existing § 3173.13(a), which makes a distinction between existing facilities that are in operation 60 days on or before January 17, 2017, and new facilities that are in service 60 days after January 17, 2017. The existing rule requires existing facilities to begin using the FMP number for reporting production to ONRR on the OGOR starting with the fourth production month after the BLM assigns the number and new facilities to begin using the number starting with the first production month after the BLM assigns the number.

The proposed change would eliminate the burden on operators and the BLM to identify whether a facility is an existing or new facility based on the existing rule's publication date. The requirement for using an FMP number when reporting production to ONRR on OGORs would be tied only to the BLM's assignment of the FMP number. The BLM believes this change would eliminate confusion that has developed under the existing regulations due to delays with the development of AFMSS 2—the system that will be used to assign FMP numbers.

Proposed § 3173.61(b)(1) would not change from existing § 3173.13(b)(1). This paragraph would require operators to file a Sundry Notice within 30 days describing any permanent changes or modifications made to an FMP, including any changes to the information on an application submitted under proposed § 3173.60.

Proposed § 3173.61 would delete existing § 3173.13(b)(2) requiring the operator to include details, such as the primary element, secondary element, LACT/CMS meter, tank number(s), and wells or facilities when describing any changes or modifications made to an FMP under existing § 3173.13(b)(1). The BLM believes the existing requirement is redundant and adequately covered under proposed § 3173.61(b)(1), which states in part, “These include any changes and modifications to the information listed on an application submitted under § 3173.60.” The information required for applying for an FMP number would be sufficient to inform the BLM of an FMP modification. The existing regulation requires information in excess of that required on an initial FMP number application. The BLM believes the

deletion improves understanding of requirements and eliminates a redundancy.

Section 3173.70 Conditions for Commingling and Allocation Approval (Surface and Downhole)

Proposed § 3173.70 would revise the existing requirements for commingling and allocation approval that are now located in existing § 3173.14.

The BLM believes that commingling of production reduces the environmental footprint of oil and gas facilities and operators' capital expenditures. However, when considering an application for commingling of production, the BLM has an obligation to ensure the accuracy of measurement, the ability to verify reported production volumes, and the ability to audit reported production volumes going back 7 years on Federal minerals and 6 years on Indian trust minerals, as required by law. Based on in-house modeling using Monte Carlo simulation of produced volumes from multiple Federal interest percentages—as well as referencing a paper presented by Phillip Stockton, “Cost Benefit Analyses in the Design of Allocation Systems,” at the 27th International North Sea Flow Measurement Workshop in 2009

2

—the BLM is concerned about uncertainty of measurement in commonly used test allocation methods. Many commingling applications the BLM receives present an allocation scheme based on well tests or a single Federal or Indian agreement test containing multiple wells. In a test allocation method, production from a well or agreement is directed to a test separator and tank for a test period varying from hours to days. Production measured during this test period is used to calculate the proportionate production attributable to the well or agreement from the total commingled production for a reporting month. Typical test allocation methods have a higher overall uncertainty of measurement than measurement performance goals for FMPs in proposed § 3174.31 and § 3175.31. From modeling, the BLM believes the uncertainty of measurement in allocation methods is more of a concern when the Federal or Indian mineral interests in the agreements proposed for commingling are dissimilar. As the disparity in Federal or Indian mineral interest in the agreements proposed for commingling increases, the overall uncertainty of measurement increases. The BLM would like to ensure there is no greater uncertainty in measurement in commingling and allocation methods than in non-commingled production. With the changes proposed in this section, the BLM would expand its ability to approve commingling of production while preserving measurement performance.

2

Phillip Stockton, “Cost Benefit Analyses in the Design of Allocation Systems,” in

27th International North Sea Flow Measurement Workshop 2009: Tonsberg, Norway, 20-23 October 2009

(Red Hook, NY: Curran, 2010).

Proposed § 3173.70(a)(1)(i) and (a)(1)(iii) would rescind the requirement for the same revenue and royalty distribution that was initially required in IM 2013-152, Attachment 2-1 Royalty Distribution, and subsequently included in existing § 3173.14(a)(1)(i) and (a)(1)(iii). In practice, the BLM has discovered that it is difficult for BLM engineers to determine the revenue and royalty distribution based on the Federal lease type while reviewing applications for commingling. The BLM would be willing to forego this requirement given the difficulty in implementing it and the low risk that the BLM would approve commingling of Federal leases that have significantly diverse revenue and royalty distribution.

Proposed § 3173.70(a)(2) would remove the parenthetical requirement that an operator include an allocation method for produced water in its commingling application. The BLM's focus is on produced oil and gas on which there is a royalty obligation. If an approved commingling operation experiences an upset that results in significant oil in its water tanks, the operator would be required to account for the oil in the water tank based on the approved allocation method of oil production. The BLM believes the proposed change would eliminate an unnecessary requirement for commingling allocation approval and reduce the regulatory burden on operators and the BLM.

Proposed § 3173.70(a)(3) would change existing § 3173.14(a)(3) to allow a lease, unit PA, or CA to be included in a proposed Commingling and Allocation Approval (CAA) if it has an approved Application for Permit to Drill (APD), but no production at the time of the application. Under existing § 3173.14(a)(3), only leases, unit PAs, or CAs producing in paying quantities or, in the case of Federal leases, capable of producing in paying quantities, may be included in a proposed CAA. The proposed change would allow operators to apply for commingling approval before drilling wells, based on production volume projections, supported by offset-well decline curve data, presented in the commingling application in proposed § 3173.71(j). The BLM recognizes that operators base their drilling and production-facility economics on projected production volumes and regularly design new-well facilities based on offset-well information. The BLM believes the proposed change in requirements for commingling and allocation approval would allow operators to plan more efficiently while limiting the BLM's measurement accountability risk. In addition, proposed § 3173.76—which is discussed later in this preamble—includes new provisions for terminating CAAs based on projected oil or gas volumes or oil or gas quality if the actual production exceeds projections (

i.e.,

volumes are higher than projected).

Proposed § 3173.70(b)(2) would increase the existing average monthly production over the preceding 12 months for each Federal or Indian lease, unit PA, or CA proposed for the CAA from less than 1,000 Mcf of gas per month or 100 barrels (bbl) of oil per month to less than 6,000 Mcf of gas per month or 1,000 bbl of oil per month. The existing production volume thresholds were chosen because properties producing below these thresholds would almost always qualify as economically marginal properties as defined in § 3173.10 under the proposed rule and in conditions under which commingling may be approved in proposed § 3173.70(b).

The BLM calculated the existing 100 bbl per month oil threshold based on a cost to achieve non-commingled measurement of production of $50,000 for oil, estimating the cost of setting a single small tank. The production rate required to achieve an 18-month payout of this investment assuming a $60 per bbl oil price, including taxes, royalty payments, and fixed and variable operating costs would be approximately 100 bbl per month. Based on industry input and recent applications received for commingling approval, the BLM believes that the assumed capital expense estimate does not reflect current capital expenditures or construction costs to segregate production. With the advent of horizontal drilling and higher well production, industry claims the total construction cost to build a new facility is between $450,000 and $650,000 per well. The increase in the commingling oil threshold is based on a new estimate of $500,000 to achieve non-commingled measurement of oil production. The production rate required to achieve an 18-month payout of this capital investment, assuming $50 per bbl oil price including taxes, royalty payments, and fixed and variable operating costs

would be approximately 1,000 bbl per month of oil.

The BLM used a similar approach for determining the gas threshold of 1,000 Mcf per month in the existing rule. The production rate required to achieve an 18-month payout of this investment assuming a cost to achieve non-commingled gas production of $20,000, a $3 per MMBtu gas price, and including taxes, royalty payments, and operating expenses was approximately 1,000 Mcf per month. Assuming a capital expense of $200,000, the same relative increase as oil, to achieve non-commingled production, a gas price of $3 per MMBtu, and including taxes, royalty payments, and operating expenses, the proposed gas threshold would increase to 6,000 Mcf per month.

Proposed § 3173.70(b)(5) would add a new paragraph with a new condition for commingling and allocation approvals and renumber existing § 3713.14(b)(5) to § 3173.70(b)(6). Proposed § 3713.70(b)(5) would provide operators an opportunity to demonstrate to the BLM an allocation uncertainty based on a propagation of uncertainty method similar to that published in the Guide to the Expression of Uncertainty in Measurement, International Organisation for Standardisation, ISO/IEC Guide 98:1995. The overall allocation uncertainty analysis must: Meet the performance goals in proposed § 3174.31 and proposed § 3175.31; show no allocation bias as a result of commingling allocation; state what the assumed underlying distribution is of the volumes generated in the analysis and support the use of the stated underlying distribution assumption; and be limited to four leases, unit PAs, or CAs proposed for commingling. The BLM proposes to limit the number of leases, unit PAs, or CAs to four based on assumed limitations of spreadsheets typically used in most offices. The BLM is concerned with the inherent risk to the uncertainty of allocation measurement for Federal or Indian trust mineral percentages in a commingling and allocation approval. If the applicant is able to demonstrate no risk to Federal or Indian trust mineral measurement, then the BLM could agree to a commingling and allocation approval. The BLM seeks comments on this proposed new condition for commingling and allocation approval. Specifically, the BLM would request comment from the public on the following:

1. Would the applicant be able to perform the required analysis?

2. Would an applicant use this condition to apply for commingling and allocation approval?

3. Is there a better condition/method for ensuring no risk to measurement of Federal or Indian trust mineral interest and approving commingling and allocation?

Section 3173.71 Applying for a Commingling and Allocation Approval

Proposed § 3173.71 would revise existing requirements for commingling and allocation approval applications that are now located in existing § 3173.15.

Proposed § 3173.71(a) would remove from existing § 3173.15(a) the provision stating that, if the commingling and allocation proposal includes off-lease measurement, a separate Sundry Notice required under existing § 3173.23 is unnecessary as long as the information required under existing § 3173.23(b) through (e) and, where applicable, existing § 3173.23(f) through (i), is included in the request for approval for commingling and allocation. The proposed rule would require a separate Sundry Notice for off-lease measurement approval. The BLM would regard the commingling and allocation approval as a separate decision from the off-lease measurement approval. The BLM believes this would provide clarity for operators and the BLM on processing a commingling and allocation application. The BLM can foresee cases where a commingling and allocation application would be approved, but the off-lease measurement would be denied. The proposed new language would separate a decision on a CAA application from a decision on off-lease measurement. In addition, proposed § 3173.71(a) would require separate Sundry Notices for approval of commingling and allocation of oil or gas. The BLM would like to separate oil CAA applications from gas CAA applications since the economics for each are calculated differently based on the proposed definition of economically marginal property in § 3173.10.

Proposed § 3173.71(b) would change existing § 3173.15(b) to require an operator to submit an off-lease measurement Sundry Notice request under proposed § 3173.91 separately from and simultaneously with the Sundry Notice requesting commingling and allocation approval. The proposed rule would eliminate the ability to apply for off-lease measurement and commingling on the same Sundry Notice. The BLM believes this change would allow for a single decision on a single Sundry Notice. Since the requests for off-lease measurement and commingling and allocation approvals are related, but separate decisions, the operator would submit the Sundry Notices simultaneously.

Proposed § 3173.71(c) would delete the requirement in existing § 3173.15(c) to include the allocation of produced water in a commingling and allocation application. The BLM would eliminate this requirement for the same reasons stated in the earlier discussion of proposed § 3173.70(a)(2).

Proposed § 3173.71(f) would amend the requirement in existing § 3173.15(f) for a surface-use plan of operations if new surface disturbance is proposed for the FMP or associated facilities on BLM-managed land within the boundaries of the leases, units, and communitized areas from which production would be commingled. The proposed rule would require an applicant-certified statement of a surface-use plan of operations if new surface disturbance is proposed in a commingling application on BLM-managed land. By submitting a certified statement, the applicant is presenting a sworn statement that a surface-use plan of operations for the CAA has been prepared pursuant to regulation. If the BLM were to request the surface-use plan of operations, the applicant should be prepared to provide the plan. The proposed change would reduce the application submission and application review burdens while ensuring a surface-use plan of operation has been prepared.

Proposed § 3173.71(g) and § 3173.71(i) would remove the requirement that an operator submit a right-of-way grant with its application for commingling and allocation approval if any of its facilities would be located on Federal or Indian land. Proposed § 3173.15(g) would instead require an operator to provide an applicant-certified statement that it already has a right-of-way grant, approved under 43 CFR part 2880 or approved under 43 CFR part 2800, as applicable, for Federal rights-of-way. Existing § 3173.15(g) and § 3173.15(i) require an operator to submit the grant application as part of its CAA application. Proposed § 3173.71(i) would reduce the requirement to the operator providing an applicant-certified statement that it already has a right-of-way grant, approved under 25 CFR part 169 for rights-of-way over Indian lands. With the submission of a certified statement, the applicant is presenting a sworn statement that a right-of-way grant has been obtained pursuant to the appropriate regulation. Like the proposed change in § 3172.71(f), the change in part (g) would also reduce application submission and review burdens on both industry and the BLM.

Proposed § 3173.71(j) would change the documentation requirements under existing § 3173.15(j) to allow leases that

are not yet producing to be included in an application for a CAA. An operator would have to document that each lease, unit PA, or CA proposed for commingling has an approved APD and has offset-well decline curve data and offset well oil gravity and/or gas Btu content to support the projected production estimates contained in the CAA application. Under existing § 3173.15(j), only leases, unit PAs, or CAs producing in paying quantities or, in the case of Federal leases, capable of producing in paying quantities, may be included in a proposed CAA application. This proposed change under § 3173.71(j) would make it consistent with proposed changes in § 3173.70(a)(3), which would allow commingling and allocation agreements to include properties that are not yet producing. The BLM believes this change would make it easier for operators to apply for and receive commingling approvals.

Proposed § 3173.71(a) would change existing § 3173.15(a) to require that gas CAA applications must be submitted separately from oil CAA applications. Existing § 3173.15(k) requires operators to submit gas analyses, if the CAA request includes gas, and oil gravities, if the CAA request includes oil. The BLM would like to separate gas CAA applications from oil CAA applications, since the economics for each are calculated differently. The BLM's decision to approve a gas CAA is separate from its decision to approve an oil CAA. The proposed language would say that all gas analyses, including Btu content or oil gravities, as applicable, for previous periods of production from the leases, units, unit PAs, or communitized areas proposed for includes in the CAA, for up to 6 years before the date of the application for approval of the CAA. The proposed inclusion of “as applicable” is for consistency with the requirement in proposed § 3173.71(a) for separate CAA applications for oil and gas.

Section 3173.72 Existing Commingling and Allocation Approvals

Proposed § 3173.72 would make small changes to the BLM's process, now described in existing § 3173.16, for reviewing existing commingling and allocation approvals.

Proposed § 3173.72(a)(2)(i) would increase the threshold for grandfathered surface commingling from less than 1,000 Mcf of gas per month in existing § 3173.16(a)(2)(i) to less than 6,000 Mcf of gas per month, and from less than 100 bbl of oil per month in existing § 3173.16(a)(2)(ii) to less than 1,000 bbl of oil per month. In the existing rule, the thresholds in § 3173.14(b)(2) and § 3173.16(a)(2) are identical. The proposed regulation maintains identical thresholds for these sections. The increased production thresholds are discussed earlier.

Proposed § 3173.72(d) would add a new provision that would further clarify the grandfathering of existing downhole commingling. During the implementation of the existing regulation, confusion arose as to whether the grandfathering of an existing downhole commingling approval simultaneously granted new surface commingling approval or the grandfathering of an associated surface commingling approval. This new paragraph would further clarify what constitutes a grandfathered downhole commingling approval. The BLM believes the proposed change would clarify the extent of the grandfathering of downhole commingling approvals.

Section 3173.74 Modification of a Commingling and Allocation Approval

Proposed § 3173.74(b) would add another condition to existing § 3173.18 that would require an operator to have the CAA reevaluated by the BLM when actual production exceeds the projected production in the commingling application. The proposed rule would allow the BLM to rescind or revise the approval, or modify its conditions of approval, if the CAA's actual production volumes and quality from any of the leases, unit PAs, or CAs exceed the production projections provided in the CAA application. The inclusion of this provision to reevaluate a CAA based on projected production would provide the BLM with recourse if the operator fails to provide accurate projections in the application for commingling and allocation approval.

Section 3173.76 Terminating a Commingling and Allocation Approval

Proposed § 3173.76(a)(4) would add another reason for the BLM to terminate a commingling and allocation approval. If the CAA's production quantity and quality exceeds the operator's projections in the CAA application, the BLM would retain the authority to terminate the approval. The proposed change provides the BLM with recourse when an operator's actual production no longer supports the commingling approval previously granted.

Section 3173.80 Combining Production Downhole in Certain Circumstances

Proposed § 3173.80 would make a small change to the BLM's requirements for combining production downhole that are now located in existing § 3173.21.

Proposed § 3173.80(a)(1) would change the words in existing § 3173.21(a)(1) from “drilled into” to “completed in.” The BLM does not believe this change would be substantive and the change in terms would more accurately describe the downhole situation.

Section 3173.91 Applying for Off-Lease Measurement

Proposed § 3173.91 would clarify and simplify the requirements for an off-lease measurement application in existing § 3173.23.

Proposed § 3173.91(a) would add new language that would clarify that operators would be required to submit separate Sundry Notices for applications for off-lease measurement for each oil and gas FMP. Existing § 3173.23(a) requires operators to submit only one Sundry Notice for an off-lease measurement application. The BLM believes a decision for an off-lease measurement approval for a gas FMP is a separate decision from an off-lease measurement approval for an oil FMP. As such, these applications should be submitted on separate Sundry Notices.

Proposed § 3173.91(f) and (g) would require an operator applying for off-lease measurement to submit an applicant-certified statement that it already has a right-of-way grant for a Federal right-of-way under 43 CFR part 2880 or 43 CFR part 2800, as applicable, or a right-of-way grant over Indian land under 25 CFR part 169. Existing § 3173.23(f) and (g) require an operator to submit the grant application as part of its off-lease measurement application. The proposed change would make this section consistent with changes in proposed § 3173.71(g) and (i), which are the proposed application requirements for commingling and allocation approval. The BLM believes this change would reduce regulatory burdens on both applicants and the BLM. The BLM would retain the ability to request the operator provide supporting documentation of the right-of-way grant when needed.

Proposed § 3173.91 would delete existing § 3173.23(j), which requires an operator to submit a statement with its off-lease measurement application that indicates whether the proposal includes all, or only a portion of, the production from the lease, unit, or CA. The BLM believes existing § 3173.23(j) requirement is unnecessary when applications for off-lease measurement are submitted on an FMP basis. Production from all FMPs from any lease, unit PA, or CA are fully

accounted for on the OGORs. The removal of this requirement would reduce operator regulatory burden.

Section 3173.190 Immediate Assessments for Certain Violations

Table 1 to Proposed § 3173.29—Violations Subject to an Immediate Assessment

The proposed rule would change the wording in existing Immediate Assessment 1, which calls for a $1,000 assessment when “an appropriate valve on an oil storage tank was not sealed, as required by § 3173.2.” Proposed Immediate Assessment 1 in § 3173.190 would be changed to match the definition in proposed § 3173.10, which would require valves to be “effectively” sealed. This change would clarify that the immediate assessment would apply to valves that have a seal but the seal is not effective.

The proposed rule would remove the existing Immediate Assessment 2, which calls for a $1,000 assessment when “an appropriate valve or component on an oil metering system was not sealed, as required by § 3173.3.” This proposal is in response to the sheer numbers of seals that are regularly required for the effective sealing of some components of an oil metering system (LACT or CMS), where each missing or ineffective seal is a separate violation and immediate assessment. This would not affect the requirement to effectively seal an appropriate valve or component covered in proposed § 3173.10. Where an operator has systemic and re-occurring violations, the BLM may always take appropriate enforcement action.

3. Section-By-Section Discussion for Changes to Subpart 3174

The proposed rule would renumber all of the sections in existing subpart 3174. The goal of this renumbering is to achieve formatting consistency among the various part 3170 regulations. Each category (

e.g.,

tank storage and tank gauging measurement, LACT measurement, Electronic Liquids Measurement (ELM), CMS, and Proving) has been re-numbered to a series in blocks of 10. The following table provides a cross-walk comparison of proposed subpart 3174 section numbers and their headings with the current subpart 3174 section numbers and headings. New proposed sections are identified by the word “New” in the existing subpart 3174 column.

Sec. existing subpart 3174

Sec. proposed subpart 3174

3174.1 Definitions and acronyms

3174.10 Definitions and acronyms.

3174.2 General requirements

3174.20 General requirements.

3174.3 Incorporation by reference (IBR)

3174.30 Incorporation by reference (IBR).

3174.4 Specific performance requirements

3174.31 Specific measurement performance requirements.

New

3174.40 Approved measurement equipment and data requirements.

New

3174.41 Measurement equipment requiring BLM approval.

New

3174.42 Measurement equipment approved by regulation.

New

3174.43 Data submission and notification requirements.

New

3174.50 Grandfathering.

3174.2 General requirements

3174.60 Timeframes for compliance.

3174.2 General requirements

3174.70 Measurement location.

3174.5 Oil measurement by tank gauging—general requirements

3174.80 Oil storage tank equipment.

3174.5 Oil measurement by tank gauging—general requirements

3174.81 Oil measurement by tank gauging.

3174.5 Oil measurement by tank gauging—general requirements

3174.82 Oil tank calibration.

3174.6 Oil measurement by tank gauging—procedures

3174.83 Tank gauging procedures.

3174.6 Oil measurement by tank gauging—procedures

3174.84 Tank oil sampling.

3174.6 Oil measurement by tank gauging—procedures

3174.85 Determining S&W content.

3174.6 Oil measurement by tank gauging—procedures

3174.86 Tank oil temperature determination.

3174.6 Oil measurement by tank gauging—procedures

3174.87 Observed oil gravity determination.

3174.6 Oil measurement by tank gauging—procedures

3174.88 Measuring tank fluid level

3174.7 LACT systems—general requirements

3174.90 LACT systems—general requirements.

3174.8 LACT systems—components and operating requirements

3174.100 LACT systems—components and operating requirements.

New

3174.101 Charging pump and motor.

3174.8 LACT systems—components and operating requirements

3174.102 Sampling and mixing system.

New

3174.103 Air Eliminator.

3174.8 LACT systems—components and operating requirements

3174.104 LACT meter.

3174.8 LACT systems—components and operating requirements

3174.105 Electronic temperature averaging device.

3174.8 LACT systems—components and operating requirements

3174.106 Pressure-indicating device.

New

3174.107 Meter Proving Connections.

3174.8 LACT systems—components and operating requirements

3174.108 Back Pressure and Check Valves.

3174.10 Coriolis meter for LACT and CMS measurement applications—operating requirements

3174.110 Coriolis meter operating requirements.

3174.10 Coriolis meter for LACT and CMS measurement applications—operating requirements

3174.120 Electronic liquids measurement, ELM (secondary and tertiary device).

New

3174.121 Measurement data system, MDS.

3174.9 Coriolis measurement systems (CMS)—general requirements and components

3174.130 Coriolis measurement systems (CMS) — general requirements and components.

New

3174.140 Temporary measurement.

3174.11 Meter-proving requirements

3174.150 Meter-proving requirements.

3174.11 Meter-proving requirements

3174.151 Meter prover.

3174.11 Meter-proving requirements

3174.152 Meter proving runs.

3174.11 Meter-proving requirements

3174.153 Minimum proving frequency.

3174.11 Meter-proving requirements

3174.154 Excessive meter factor deviation.

3174.11 Meter-proving requirements

3174.155 Verification of the temperature transducer.

3174.11 Meter-proving requirements

3174.156 Verification of the pressure transducer (if applicable).

3174.11 Meter-proving requirements

3174.157 Density verification (if applicable).

3174.11 Meter-proving requirements

3174.158 Meter proving reporting requirements.

3174.12 Measurement tickets

3174.160 Measurement tickets.

3174.12 Measurement tickets

3174.161 Tank gauging measurement ticket.

3174.12 Measurement tickets

3174.162 LACT system and CMS measurement ticket or volume statement.

3174.13 Oil measurement by other methods

3174.170 Oil measurement by other methods.

3174.14 Determination of oil volumes by methods other than measurement

3174.180 Determination of oil volumes by methods other than measurement.

3174.15 Immediate assessments

3174.190 Immediate assessments.

Another goal of this proposed numbering is to reduce the levels of section paragraphs and make it easier to locate and cite to specific requirements. For example, the existing subpart 3174 section that covers tank gauging is § 3174.6. Within this section, under paragraph (b), there are four levels of subparagraphs, which makes discerning the individual requirements of that section unnecessarily complex. The specific provisions that cover the procedure for determining the opening-tank fluid level are currently found at § 3174.6(b)(5)(i)(A) through (E). Under the proposed rule, the regulatory citation for determining the tank fluid level would be § 3174.88(a)(1) through (3). The BLM believes this change would benefit both industry and the BLM by making regulatory requirements more clear.

The following discussion provides a section-by-section explanation of the proposed changes to subpart 3174. If a provision is not specifically discussed in this section-by-section analysis, then the provision is essentially the same as the existing regulation

Section 3174.10 Definitions and Acronyms

This section lists definitions and acronyms that are used in this subpart.

This proposed rule would relocate the definitions for “Configuration log” and “Event log” in current § 3174.1 to the definitions section for subpart 3170 (§ 3170.10), which defines terms that are used in more than one of the part 3170 subparts.

The definition for “Base pressure” in current § 3174.1 would be modified to include the value of gauge pressure at base conditions. This change comes from requests by operators to include gauge pressure in the definition because they utilize gauge pressure units in their data systems, rather than absolute pressure units. By including the addition of the value of gauge pressure at base condition any confusion of whether use of gauge pressure units is acceptable would be removed.

A definition for “Electronic liquid measurement” would be added to support a new section that would address emerging hardware and software technologies that are associated with liquids measurement.

Definitions for three new proposed oil FMP categories would be added: “Very-high-volume FMP,” “High-volume FMP,” and “Low-volume FMP.” These definitions are needed to accommodate a new phase-in schedule for the subpart 3174 requirements, a third uncertainty level category for oil measurement, new grandfathering provisions, and specific exemptions from certain requirements. The proposed FMP category volume thresholds are tied primarily to the risk to royalty, based on uncertainty levels and anticipated costs to retrofit the FMPs to achieve these minimum uncertainty levels. The BLM requests comment on the proposed oil FMP categories and their associated measurement performance standards and requirement for BLM-approved equipment.

The proposed rule defines “Low-volume FMP” as any FMP that measures 50 bbl. oil/day or less over the averaging period. Low-volume FMPs would have to meet minimum requirement to ensure that measurements are verifiable under proposed § 3174.31(c), but would be exempt from the minimum uncertainty requirements found in proposed § 3174.31(a) and the requirement to achieve measurement without statistically significant bias in proposed § 3174.31(b). Under § 3174.50, low-volume FMPs in service before the effective date of the final rule would be exempt from the BLM-approved equipment requirements of proposed § 3174.41(a) through (i) until the listed equipment is replaced, or production levels at the FMP elevate it to the very-high-volume category. It is anticipated that low-volume FMPs would primarily consist of operations that employ manual tank-gauge measurement and would encompass an estimated 81 percent of the total FMPs, representing about 7 percent of reported production in calendar year 2017. For this category, all equipment and measuring procedures used to measure the volume and quality of oil for royalty purposes would have to comply with the requirements of subpart 3174 within 2 years of the effective date of the final rule.

The proposed rule defines “High-volume FMP” as any FMP that measures more than 50 bbl/oil per day, but less than 500 bbl oil/day over the averaging period. Proposed requirements for high-volume FMPs would ensure that measurements have no statistically significant bias, would be verifiable under proposed § 3174.31(b) and (c), and would achieve an overall measurement uncertainty of ±1.50 percent under proposed § 3174.31(a). The BLM believes the production volume threshold would make it economically feasible for operators to retrofit their FMPs to meet the overall uncertainty requirements. It is anticipated that this category would primarily consist of operations that employ manual tank-gauge measurement, automatic tank gauge (ATG), and LACT measurement, and would encompass an estimated 15 percent of the total FMPs, representing approximately 28 percent of reported production in calendar year 2017. Under § 3174.50, high-volume FMPs in service before the effective date of the final rule would be exempt from the BLM-approved equipment requirements of proposed § 3174.41(a) through (i) until the equipment listed in § 3174.41(a) through (i) is replaced, or the production levels at the FMP elevate it to the very-high-volume category. The new equipment would then be required to be BLM-approved equipment. For high-volume FMPs, all equipment and measuring procedures used to measure the volume and quality of oil for royalty purposes would have to comply with the requirements of subpart 3174 within 2 years of the effective date of the final rule.

The proposed rule defines “Very-high-volume FMP” as any FMP that measures 500 bbl oil or more over the averaging period. Proposed requirements for high-volume FMPs would ensure that measurements have no statistically significant bias, are verifiable under proposed § 3174.31(b) and (c), and would achieve an overall measurement uncertainty of ±0.50 percent under proposed § 3174.31(a). The BLM believes the production volume threshold would make it economically feasible for operators to retrofit FMPs to meet the overall

uncertainty requirements. It is anticipated this category would primarily consist of operations that employ LACT and CMS measurement and would encompass an estimated 3.8 percent of the total FMPs. This category would have the strictest measurement requirements of the three proposed FMP categories. For this category, all equipment and measuring procedures used to measure the volume and quality of oil for royalty purposes would have to comply with the requirements of subpart 3174 within 1 year of the effective date of the final rule.

A definition for “Measurement period” would be added to provide clear guidance when filling out measurement tickets, volume statements, and quantity transaction records.

The proposed rule would remove the definition for “Outage gauging” as the proposed rule would not contain a reference to “outage gauging.” The reason for removing the outage gauging option is discussed in the tank-gauge section later in this preamble.

The existing definition for “Quantity transaction record (QTR)” would be modified to include flow computers on LACTs, as well as on CMS, and would include any other systems approved by the BLM. The existing rule only addresses a QTR generated by a CMS, which has resulted in some confusion among operators, not knowing if this definition covered reports generated by LACTs and other BLM-approved equipment as well. This proposed change is intended to remove any confusion over QTR requirements.

The existing § 3174.1 definition for “Tertiary device” would be removed as it would be covered by the new definition of “Electronic liquids measurement.”

The existing “Vapor tight” definition stated that vapor tight meant capable of holding pressure differential only slightly higher than that of installed pressure-relieving and vapor recovery devices. There has been confusion within industry that the definition meant if a pressure relieving device relieved pressure at its pre-set pressure on the tank then the vapor tight condition had been compromised. The existing definition for “vapor tight” would be modified to clarify the intent to retain the vapor tight condition to the settings of installed pressure-relieving or vapor-recovery devices. This proposed change is intended to remove any confusion over the meaning of vapor tight.

Section 3174.20 General Requirements

Currently located in existing § 3174.2, this section would list the general requirements that do not fit in any of the other more specific sections of the proposed rule. The proposed changes for this section are primarily administrative, such as updating cross references to reflect the new numbering of this proposed rule and removing the phase-in and commingling language, which would be revised and moved to a new § 3174.60, and a new § 3174.70.

Section 3174.30 Incorporation by Reference (IBR)

Building on existing § 3174.3, this proposed section lists 34 industry standards and recommendations that are proposed for incorporation by reference, either in whole or in part.

• API Manual of Petroleum Measurement Standards (MPMS) Chapter 2—Tank Calibration, Section 2A, Measurement and Calibration of Upright Cylindrical Tanks by the Manual Tank Strapping Method; First Edition, February 1995; Reaffirmed February 2012; Reaffirmed August 2017 (“API 2.2A”). This standard describes the procedures for calibrating upright cylindrical tanks used for storing oil. There are no substantive changes to this standard; we are proposing to add approval for the new reaffirmation date of this standard.

• API MPMS Chapter 2—Tank Calibration, Section 2B, Calibration of Upright Cylindrical Tanks Using the Optical Reference Line Method; First Edition, March 1989; Reaffirmed January 2013 (“API 2.2B”). This standard describes measurement and calibration procedures for determining the diameters of upright welded cylindrical tanks, or vertical cylindrical tanks with a smooth surface and either floating or fixed roofs. This standard was previously approved for IBR and is unchanged.

• API MPMS Chapter 2—Tank Calibration, Section 2C, Calibration of Upright Cylindrical Tanks Using the Optical-triangulation Method; First Edition, January 2002; Reaffirmed April 2013 (“API 2.2C”). This standard describes a calibration procedure for applications to tanks above 26 feet in diameter with cylindrical courses that are substantially vertical. There are no substantive changes to this standard; we are proposing to add approval for the new reaffirmation date of this standard.

• API MPMS Chapter 3.1A, Standard Practice for the Manual Gauging of Petroleum and Petroleum Products; Third Edition, August 2013; Reaffirmed December 2018 (“API 3.1A”). This standard describes the following: (a) The procedures for manually gauging the liquid level of petroleum and petroleum products in non-pressure fixed roof tanks; (b) Procedures for manually gauging the level of free water that may be found with the petroleum or petroleum products; (c) Methods used to verify the length of gauge tapes under field conditions and the influence of bob weights and temperature on the gauge tape length; and (d) Influences that may affect the position of gauging reference point (either the datum plate or the reference gauge point). There are no substantive changes to this standard; we are proposing to add approval for the new reaffirmation date of this standard.

• API MPMS Chapter 3—Tank Gauging, Section 1B—Standard Practice for Level Measurement of Liquid Hydrocarbons in Stationary Tanks by Automatic Tank Gauging; Third Edition, April 2018 (“API 3.1B”). This standard describes the level measurement of liquid hydrocarbons in stationary, above ground, atmospheric storage tanks using ATGs. This standard discusses automatic tank gauging in general, accuracy, installation, commissioning, calibration, and verification of ATG that measure either innage or ullage. There are no substantive changes to this standard; we are proposing to add approval for the new edition number of this standard.

• API MPMS Chapter 3—Tank Gauging, Section 6, Measurement of Liquid Hydrocarbons by Hybrid Tank Measurement Systems; First Edition, February 2001; Errata September 2005; Reaffirmed January 2017 (“API 3.6”). This standard describes the selection, installation, commissioning, calibration, and verification of Hybrid Tank Measurement Systems. This standard also provides a method of uncertainty analysis to enable users to select the correct components and configurations to address for the intended application. There are no substantive changes to this standard; we are proposing to add approval for the new reaffirmation date of this standard.

• API MPMS Chapter 4—Proving Systems, Section 1, Introduction; Third Edition, February 2005; Reaffirmed June 2014 (“API 4.1”). Section 1 is a general introduction to the subject of proving meters. This standard was previously approved for IBR and is unchanged.

• API MPMS Chapter 4—Proving Systems, Section 2—Displacement Provers; Third Edition, September 2003; Reaffirmed March 2011; Addendum February 2015 (“API 4.2”). This standard outlines the essential elements of meter provers that do, and also do not, accumulate a minimum of 10,000

whole meter pulses between detector switches, and provides design and installation details for the types of displacement provers that are currently in use. The provers discussed in this chapter are designed for proving measurement devices under dynamic operating conditions with single-phase liquid hydrocarbons. This standard was previously approved for IBR and is unchanged.

• API MPMS Chapter 4.5, Master-Meter Provers; Fourth Edition, June 2016 (“API 4.5”). This standard covers the use of displacement and Coriolis meters as master meters. The requirements in this standard are for single-phase liquid hydrocarbons. This standard was previously approved for IBR and is unchanged.

• API MPMS Chapter 4—Proving Systems, Section 6, Pulse Interpolation; Second Edition, May 1999; Errata April 2007; Reaffirmed October 2013 (“API 4.6”). This standard describes how the double-chronometry method of pulse interpolation, including system operating requirements and equipment testing, is applied to meter proving. This standard was previously approved for IBR and is unchanged.

• API MPMS Chapter 4.8, Operation of Proving Systems; Second Edition September 2013 (“API 4.8”). This standard provides information for operating meter provers on single-phase liquid hydrocarbons. This standard was previously approved for IBR and is unchanged.

• API MPMS Chapter 4—Proving Systems, Section 9—Methods of Calibration for Displacement and Volumetric Tank Provers, Part 2—Determination of the Volume of Displacement and Tank Provers by the Waterdraw Method of Calibration; First Edition, December, 2005; Reaffirmed July 2015 (“API 4.9.2”). This standard covers all of the procedures required to determine the field data necessary to calculate a Base Prover Volume of Displacement Provers by the Waterdraw Method of Calibration. This standard was previously approved for IBR and is unchanged.

• API MPMS Chapter 5—Metering, Section 6—Measurement of Liquid Hydrocarbons by Coriolis Meters; First Edition, October 2002; Reaffirmed November 2013 (“API 5.6”). This standard is applicable to custody-transfer applications for liquid hydrocarbons. Topics covered are API standards used in the operation of Coriolis meters, proving and verification using volume-based methods, installation, operation, and maintenance. This standard was previously approved for IBR and is unchanged.

• API MPMS Chapter 7.1, Temperature Determination—Liquid-in-Glass Thermometers; Second Edition, August 2017 (“API 7.1”). This standard describes how to correctly use various types of liquid-in-glass thermometers to accurately determine the temperatures of hydrocarbon liquids. This standard is proposed for incorporation for its standards covering the use of liquid-in-glass thermometers for temperature determination in tank-gauging operations.

• API MPMS Chapter 7—Temperature Determination, Section 2—Portable Electronic Thermometers; Third Edition, May 2018 (“API 7.2”). This standard describes the methods, equipment, and procedures for manually determining the temperature of liquid petroleum and petroleum products by use of a portable electronic thermometer. This standard is proposed for incorporation for its standards covering the use of portable electronic thermometers for temperature determination in tank gauging operations.

• API MPMS Chapter 7—Temperature Determination, Section 4—Dynamic Temperature Measurement; Second Edition, January 2018 (“API 7.4”). This standard describes methods, equipment, installation, and operating procedures for the proper determination of the temperature of hydrocarbon liquids under dynamic conditions in custody transfer applications. This standard is proposed for incorporation for its standards covering the use of dynamic temperature determination in LACT and CMS operations.

• API MPMS Chapter 8.1, Standard Practice for Manual Sampling of Petroleum and Petroleum Products; Fourth Edition, October 2013, (“API 8.1”). This standard covers procedures and equipment for manually obtaining samples of liquid petroleum and petroleum products from the sample point into the primary containers. This standard was previously approved for IBR and is unchanged.

• API MPMS Chapter 8.2, Standard Practice for Automatic Sampling of Petroleum and Petroleum Products; Fourth Edition, November 2016 (“API 8.2”). This standard describes general procedures and equipment for automatically obtaining samples of liquid petroleum, petroleum products, and crude oils from a sample point into a primary container. There are no substantive changes to this standard; we are proposing to add approval for the new edition number of this standard.

• API MPMS Chapter 8—Sampling, Section 3—Standard Practice for Mixing and Handling of Liquid Samples of Petroleum and Petroleum Products; First Edition, October 1995; Errata March 1996; Reaffirmed, March 2010 (“API 8.3”). This standard covers the handling, mixing, and conditioning procedures required to ensure that a particular representative sample of the liquid petroleum or petroleum product is delivered from the primary sample container/receiver into the analytical test apparatus or into intermediate containers. This standard was previously approved for IBR and is unchanged.

• API MPMS Chapter 9.1, Standard Test Method for Density, Relative Density, or API Gravity of Crude Petroleum and Liquid Petroleum Products by Hydrometer Method; Third Edition, December 2012; Reaffirmed, May 2017 (“API 9.1”). This standard covers the determination, using a glass hydrometer in conjunction with a series of calculations, of the density, relative density, or API gravity of crude petroleum, petroleum products, or mixtures of petroleum and nonpetroleum products normally handled as liquids and having a Reid vapor pressure of 101.325 Kilopascal (kPa) (14.696 psi) or less. There are no substantive changes to this standard; we are proposing to add approval for the new reaffirmation date of this standard.

• API MPMS Chapter 9.2, Standard Test Method for Density or Relative Density of Light Hydrocarbons by Pressure Hydrometer; Third Edition, December 2012; Reaffirmed, May 2017 (“API 9.2”). This standard covers the determination of the density or relative density of light hydrocarbons including liquefied petroleum gases having a Reid vapor pressure exceeding 101.325 kPa (14.696 psi). There are no substantive changes to this standard; we are proposing to add approval for the new reaffirmation date of this standard.

• API MPMS Chapter 9.3, Standard Test Method for Density, Relative Density, and API Gravity of Crude Petroleum and Liquid Petroleum Products by Thermohydrometer Method; Third Edition, December 2012; Reaffirmed, May 2017 (“API 9.3”). This standard covers the determination, using a glass thermohydrometer in conjunction with a series of calculations, of the density, relative density, or API gravity of crude petroleum, petroleum products, or mixtures of petroleum and nonpetroleum products normally handled as liquids and having a Reid vapor pressure of 101.325 kPa (14.696 psi) or less. There are no substantive

changes to this standard; we are proposing to add approval for the new reaffirmation date of this standard.

• API MPMS Chapter 10.4, Determination of Water and/or Sediment in Crude Oil by the Centrifuge Method (Field Procedure); Fourth Edition, October 2013; Errata, March 2015 (“API 10.4”). This standard describes the field centrifuge method for determining both water and sediment, or sediment only, in crude oil. This standard was previously approved for IBR and is unchanged.

• API MPMS Chapter 11—Physical Properties Data, Section 1—Temperature and Pressure Volume Correction Factors for Generalized Crude Oils, Refined Products and Lubricating Oils; May 2004; Addendum 1, September 2007; Reaffirmed, August 2012 (“API 11.1”). This standard provides the algorithm and implementation procedure for the correction of temperature and pressure effects on density and volume of liquid hydrocarbons that fall within the categories of crude oil. This standard was previously approved for IBR and is unchanged.

• API MPMS Chapter 12.1.1—Calculation of Static Petroleum Quantities—Upright Cylindrical Tanks and Marine Vessels; Fourth Edition, February 2019 (API 12.1.1). This standard guides users through the necessary steps to calculate static liquid quantities at atmospheric conditions in upright, cylindrical tanks, and marine tank vessels. This standard is proposed for incorporation for its standards covering the calculation of net standard volume for tank gauging operations.

• API MPMS Chapter 12—Calculation of Petroleum Quantities, Section 2—Calculation of Petroleum Quantities Using Dynamic Measurement Methods and Volumetric Correction Factors, Part 2—Measurement Tickets; Third Edition, June 2003; Reaffirmed February 2016 (“API 12.2.2”). This standard provides standardized calculation methods for the quantification of liquids and specifies the equations for computing correction factors, rules for rounding, calculation sequences, and discrimination levels to be employed in the calculations. There are no substantive changes to this standard; we are proposing to add approval for the new reaffirmation date of this standard.

• API MPMS Chapter 12—Calculation of Petroleum Quantities, Section 2— Calculation of Petroleum Quantities Using Dynamic Measurement Methods and Volumetric Correction Factors, Part 3—Proving Report; First Edition, October 1998; Reaffirmed May 2014 (“API 12.2.3”). This standard provides standardized calculation methods for the determination of meter factors under defined conditions. The criteria contained here will allow different entities using various computer languages on different computer hardware (or by manual calculations) to arrive at identical results using the same standardized input data. This document also specifies the equations for computing correction factors, including the calculation sequence, discrimination levels, and rules for rounding to be employed in the calculations. There are no substantive changes to this standard; we are proposing to add approval for the new reaffirmation date of this standard.

• API MPMS Chapter 12—Calculation of Petroleum Quantities, Section 2— Calculation of Petroleum Quantities Using Dynamic Measurement Methods and Volumetric Correction Factors, Part 4—Calculation of Base Prover Volumes by the Waterdraw Method; First Edition, December, 1997; Errata July 2009; Reaffirmed September 2014 (“API 12.2.4”). This standard provides standardized calculation methods for the quantification of liquids and the determination of base prover volumes under defined conditions. The criteria contained in this document allow different individuals, using various computer languages on different computer hardware (or manual calculations), to arrive at identical results using the same standardized input data. This standard specifies the equations for computing correction factors, rules for rounding, the sequence of the calculations, and the discrimination levels of all numbers to be used in these calculations. There are no substantive changes to this standard; we are proposing to add approval for the new reaffirmation date of this standard.

• API MPMS Chapter 13.3, Measurement Uncertainty; Second Edition, December 2017 (“API 13.3”). This standard establishes a methodology for developing an uncertainty analysis. There are no substantive changes to this standard; we are proposing to add approval for the new edition number of this standard.

• API MPMS Chapter 14, Section 3, Orifice Metering of Natural Gas and Other Related Hydrocarbon Fluids—Concentric, Square-edged Orifice Meters, Part 1, General Equations and Uncertainty Guidelines; Fourth Edition, September 2012; Errata July 2013; Reaffirmed, September 2017 (“API 14.3.1”). This standard provides reference for engineering equations and uncertainty estimations. There are no substantive changes to this standard; we are proposing to add approval for the new reaffirmation date of this standard.

• API MPMS Chapter 18—Custody Transfer, Section 1—Measurement Procedures for Crude Oil Gathered From Lease Tanks by Truck; Third Edition, May 2018 (“API 18.1”). This standard describes the procedures, organized into a recommended sequence of steps, for manually determining the quantity and quality of crude oil being transferred under field conditions. There are no substantive changes to this standard; we are proposing to add approval for the new edition number of this standard.

• API MPMS Chapter 21—Flow Measurement Using Electronic Metering Systems, Section 2—Electronic Liquid Volume Measurement Using Positive Displacement and Turbine Meters; First Edition, June 1998; Reaffirmed October 2016 (“API 21.2”). This standard provides for the effective utilization of electronic liquid measurement systems for custody-transfer measurement of liquid hydrocarbons. There are no substantive changes to this standard; we are proposing to add approval for the new reaffirmation date of this standard.

• API Recommended Practice (RP) 12R1, Setting, Maintenance, Inspection, Operation and Repair of Tanks in Production Service; Fifth Edition, August 1997; Reaffirmed April 2008; Addendum 1, December 2017 (“API RP 12R1”). This recommended practice is a guide on new tank installations and maintenance of existing tanks. Specific provisions of this recommended practice are identified as requirements in this final rule. There are no substantive changes to this standard; we are proposing to add approval for the new Addendum 1 to this standard.

• API RP 2556, Correction Gauge Tables for Incrustation; Second Edition, August 1993; Reaffirmed November 2013 (“API RP 2556”). This recommended practice provides for correcting gauge tables for incrustation applied to tank capacity tables. The tables given in this recommended practice show the percent of error of measurement caused by varying thicknesses of uniform incrustation in tanks of various sizes. This standard was previously approved for IBR and is unchanged.

The BLM is proposing to remove six industry standards that are currently incorporated by reference in existing § 3174.3.

• API MPMS Chapter 6—Metering Assemblies, Section 1, Lease Automatic Custody Transfer (LACT) Systems; Second Edition, May 1991; Reaffirmed May 2012 (“API 6.1”). This standard describes the design, installation, calibration, and operation of a LACT system. API 6.1 is proposed for removal due to the vagueness of its content. It is

not clear to the BLM what constitutes the enforceable content within the standard. To ensure consistent understanding and enforcement of the requirements, this rule would remove this standard and include new sections in the proposed rule (§§ 3174.101, 3174.103 and 3174.107) to capture the requirements that were intended to be addressed by API 6.1.

• API MPMS Chapter 7, Temperature Determination; First Edition, June 2001, Reaffirmed February 2012 (“API 7”). This standard describes the methods, equipment, and procedures for determining the temperature of petroleum and petroleum products under both static and dynamic conditions. API Chapter 7 is currently under revision by API. Many of the requirements in this chapter that were incorporated into the existing subpart 3174 have been included in the published editions of other API Chapter 7 sections. The BLM is therefore proposing to remove the general reference to Chapter 7 and include specific API Chapter 7 sections.

• API MPMS Chapter 7.3, Temperature Determination—Fixed Automatic Tank Temperature Systems; Second Edition, October 2011 (“API 7.3”). This standard describes the methods, equipment, and procedures for determining the temperature of petroleum and petroleum products under static conditions using automatic methods. API 7.3 is currently under revision by API. This proposed rule does not specifically address fixed tank temperature determination methods and dynamic temperature determination is covered under API 7.4. The BLM is therefore proposing to remove this standard.

• API MPMS Chapter 12—Calculation of Petroleum Quantities, Section 2, Calculation of Petroleum Quantities Using Dynamic Measurement Methods and Volumetric Correction Factors, Part 1, Introduction; Second Edition, May 1995; Errata July 2009; Reaffirmed March 2014 (“API 12.2.1”). This standard provides standardized calculation methods for the quantification of liquids and the determination of base prover volumes under defined conditions. The standard specifies the equations for computing correction factors, rules for rounding, calculational sequences, and discrimination levels to be employed in the calculations. API 12.2.1 is proposed for removal because the BLM believes the content within this standard is sufficiently covered in incorporated standards API 12.2.2, API 12.2.3 and API 12.2.4.

• API MPMS Chapter 13—Statistical Aspects of Measuring and Sampling, Section 1, Statistical Concepts and Procedures in Measurements; First Edition, June, 1985 Reaffirmed February 2011; Errata July 2013 (“API 13.1”). This standard covers the basic concepts involved in estimating errors by statistical techniques and ensuring that results are quoted in the most meaningful way. This standard also discusses the statistical procedures that should be followed in estimating a true quantity from one or more measurements and in deriving the range of uncertainty of the results. API 13.1 is proposed for removal because it has been superseded with no replacement available. The BLM believes the statistical concepts provided by this standard are sufficiently covered in incorporated API 13.3.

• API MPMS Chapter 18, Section 2, Custody Transfer of Crude Oil from Lease tanks Using Alternative Measurement Methods, First Edition, July 2016 (“API 18.2”). This standard defines the minimum equipment and methods used to determine the quantity and quality of oil being loaded from a lease tank to a truck trailer without requiring direct access to a lease tank gauge hatch. API 18.2 is proposed for removal due to the confusion surrounding the standard's content and how the standard fits into the BLM's PMT review and the BLM's approval process. The BLM has found that there is significant confusion as to what methods and processes outlined in API 18.2 are automatically approved and supersede the requirement that operators follow the PMT review and BLM approval process for a method or process not specifically outlined in the regulations. The BLM did not intend for API 18.2 to override the PMT review and BLM approval process. Rather, this API standard was meant to assist industry in considering alternative methods for the BLM to review for approval. The BLM still recommends that industry use API 18.2 as guidance when considering alternative methods for the BLM to review for approval.

Section 3174.31 Specific Measurement Performance Requirements

Currently located in existing § 3174.4, this proposed section specifies the measurement-performance requirement for each FMP. The uncertainty volume levels proposed in § 3174.31(a) align with the new FMP categories as previously discussed. The overall uncertainty tolerances have been reviewed, taking into consideration current equipment capabilities and industry standard practices and procedures. The BLM believes the current overall uncertainty tolerances of ±0.50 percent and ±1.50 percent are reasonable for very-high-volume (>15,000 Bbl per month) and high-volume (>1,500 Bbl per month and <15,000 Bbl/month) FMPs, respectively, and therefore the BLM would retain these uncertainty tolerances in the proposed rule. As in the current rule, the BLM believes the proposed rule's measurement uncertainties are reasonable, based on available equipment capabilities, industry standard practices and procedures, and BLM field experience. The BLM specifically requests comment on whether the proposed uncertainty requirements and production thresholds combinations are appropriate, or if different combinations should be considered. The BLM is particularly interested in the views of States and other non-Federal leaseholders with significant oil and gas production and who may have experience in implementing different thresholds based on their own assessments of risk tolerance and compliance costs. Specifically,

(1) Are the proposed uncertainty levels and FMP category combinations reasonable or unreasonable and why?

(2) What would be a better uncertainty level and FMP category recommendation to minimize risk of mismeasurement and compliance costs and why?

Notably, the new low-volume FMP category would be exempt from overall uncertainty requirements. This exemption is intended to cover the wells that are such low producers that they could be rendered uneconomical by the measurement performance thresholds, thereby avoiding premature shut-in or plugging of these wells. The assumption is that measurement within this category will comply with the requirements for manual tank gauge operations, which tend to be the least expensive measurement process.

The existing paragraph § 3174.4(b) would be renumbered to § 3174.31(b) with no change to the language concerning bias.

The existing paragraph § 3174.4(c) would be renumbered to § 3174.31(c) with no change to the language concerning verifiability.

The existing paragraph § 3174.4(d), requiring alternative equipment to meet or exceed the performance requirements of this section, would be moved to § 3170.3 because this requirement applies to both subparts 3174 and 3175.

Section 3174.40 Approved Measurement Equipment and Data Requirements

The BLM is proposing to add new §§ 3174.40 through 3174.43, which would consolidate approved measurement equipment and data requirements in one place, rather than having them scattered throughout the regulation, as they are in existing subpart 3174. This would make it easier for operators and BLM employees to find this information.

Section 3174.41 Measurement Equipment Requiring BLM Approval

Under the proposed rule, the equipment requiring BLM approval prior to use would be listed in § 3174.41. The introductory paragraph to § 3174.41 would direct operators to the BLM's website to locate the list of PMT-reviewed and BLM-approved equipment and corresponding requirements. This section also would inform operators that the BLM website provides instructions on how to apply for BLM approval for a piece of equipment through the PMT, and would list the BLM's recommended equipment testing procedures. These testing procedures would be recommended, rather than required, and would not be adopted through the notice-and-comment rule-making process. The BLM is proposing to recommend testing procedures rather than adopt a set of required testing procedures through notice-and-comment rule-making to allow the BLM flexibility in modifying its recommended procedures as technology develops, based on experience and input from operators and manufacturers, without undergoing the time-consuming rule-making process. The BLM is concerned that codifying approved testing procedures by regulation would encumber the BLM and operators with outdated testing procedures that conflict with testing procedures developed by industry associations or are not workable for unanticipated technologies or methods. In addition, by recommending testing procedures as opposed to requiring operators to use specific approved procedures, the BLM would give operators additional flexibility in choosing which procedures to employ, so long as they can demonstrate that the testing procedure results in reliable data. As explained in the discussion of proposed § 3170.30 earlier, the purpose of the PMT review process, and any associated testing procedures, would be to assess whether the proposed alternative equipment meets the minimum performance standards of subpart 3174. The BLM would tailor any recommended testing procedure to the narrow purpose of the PMT review process, which is verifying that the equipment meets the minimum performance standards codified in the regulation. The recommended testing procedures would be informed by the PMT's measurement expertise and, in general, would involve a baseline accuracy test and inform the PMT regarding a range of relevant operating conditions (

e.g.,

pressure) in which the equipment meets the minimum performances standards. Where possible, the BLM's recommended testing procedures will reflect widely accepted testing procedures, such as those developed by other regulatory agencies, equipment testing authorities, and industry associations (

e.g.,

the International Organization of Legal Metrology, the Measuring Instruments Directive, Measurement Canada, NIST, and API). The BLM recognizes that there is a tradeoff between this flexibility and allowing for public comment on testing procedures, through a rulemaking process. The BLM requests comment on this tradeoff. Finally, the BLM notes that the information provided on its website with respect to the PMT review process and its recommended testing procedures may be considered “guidance documents” subject to the requirements of Executive Order 13891, “Promoting the Rule of Law Through Improved Agency Guidance D

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