Pub.1 2019-2020 Issue 2

W hile our downstream colleagues are starting out the new year with two freshly implemented federal regulations, our upstream segment is bracing for a number of likely, but uncertain, state and federal regulatory changes. In November 2019, a legislative Performance Audit of Utah’s Oil and Gas Program was released. While UPA acknowledges that a number of the audit findings are indeed troubling, digging deeper into the audit there are also some key findings that deserve a broader perspective. One of the more prominent audit headlines was a stat of 105 unresolved noncompliant issues (note that there wasn’t a discussion as to what percent of these posed a likely environmental or safety risk versus how many were for minor infractions). Considering that the Oil and Gas Program oversees 16,141 active wells and 28 waste disposal facilities, only 0.65% of the facilities DOGM (Division of Oil Gas and Mining) oversees had unresolved noncompliant issues, most of which were subsequently resolved in a matter of weeks. Headlines also noted that six problem operators are expected to cost taxpayers nearly $1 million in reme- diation, plugging, and reclamation costs. However, the report later goes on to note that after potential bond forfeitures, the remaining liability transferred to the state is estimated to be $450 thousand. While UPA shares concerns about any unfunded liabilities to the state, particularly if these are not related to historical sites that didn’t previously require bonding, the $450 thousand would be funded from the Conservation Fund collected by the Division directly from operators, not from taxpayers. In 2018 alone, operators paid nearly $3.5 million into the Conservation Fund, in addition to the nearly $30 million paid in severance tax to the general fund. Regardless, we support the Division and anticipate working cooperatively to provide robust solutions to the problems identified. We look forward to the Division providing more details on the changes ahead, but in addition to staff changes, DOGM has also noted that there will be changes to inspections and training for staff and operators, changes to bonding regulations, and likely legislation in 2020, to give the Division the authority to levy fines. While it is premature for UPA to take a position on these changes as details have not yet been provided, we do support DOGM having adequate regulatory "teeth." A regulator that has the resources and enforcement tools necessary to carry out its mission is in our long-term best interest. Separate from the audit and any resulting changes, after several years of working together with the Division and Board of Oil, Gas and Mining, we antic- ipate completion of a forced polling rule in 2020. We are also actively working with the Division on horizontal drilling rules as well as operatorship rules. The Upstream Updates 2020 year is sure to be another busy regulatory year with the Division and Board of Oil, Gas and Mining! The end of 2019 also saw a flourish of activity with EPA that will likely result in multiple upstream rulemakings in 2020. On December 19, EPA announced temporarily expanding its voluntary self-audit and disclosure program for upstream oil and natural gas facilities by giving existing owners the opportunity to find, correct, and self-disclose Clean Air Act violations. EPA is making this self-audit program available to existing owners of oil and natural gas exploration and production facilities for a limited period of 12 months to accelerate compliance. Incentive programs like this one provide reduced penalties for a limited time. On December 16th, EPA also announced that the Region 8 Administrator signed the proposed rule entitled "Federal Implementation Plan for Managing Emissions from Oil and Natural Gas Sources on Indian Country Lands Within the Uintah and Ouray Indian Reservation in Utah.” This proposed rule would control emissions from new, modified, and existing oil and natural gas facilities on the Uintah & Ouray (U&O) Indian Reservation to address air quality in the Uinta Basin Ozone Nonattainment Area in northeast Utah. The proposed “U&O FIP” would also continue the streamlined approach to authorize new and modified minor oil and natural gas production sources on the Reservation. As of the date of this publication the rule has not yet been posted in the Federal Register, but EPA is planning on a 60 day comment period and UPA will col- laborate with Western Energy Alliance to provide substantive comments. We also anticipate that EPA may take action in 2020 on establishing a voluntary emission reduction credit (ERC) bank for ozone precursors. The rule would apply to stationary sources on Indian country lands within the Uintah and Ouray Indian Reservation following the feedback received from their May 2019 Advanced Notice of Proposed Rulemaking (ANPR). UPA is in discussions with EPA Region 8 to schedule a Q1 2020 meeting with Administrator Sopkin — members should look for details to come soon! A regulator that has the resources and enforcement tools necessary to carry out its mission is in our long-term best interest. 9 UP DATE