Implementation of 43 CFR subparts 3174 and 3175

UNITED STATES DEPARTMENT OF THE INTERIOR
BUREAU OF LAND MANAGEMENT
WASHINGTON, D.C. 20240
https://www.blm.gov

June 29, 2018

In Reply Refer To:

3170 (310) P  

EMS TRANSMISSION 07/11/2018

Instruction Memorandum No. 2018-069

Expires: 9/30/2020

To:                   All Field Office Officials

From:               Assistant Director, Energy, Minerals, and Realty Management

Subject:           Implementation of 43 CFR subparts 3174 and 3175                                                                

Program Area:  Oil and Gas Exploration and Operations.

Purpose:  This Instruction Memorandum (IM) outlines the Bureau of Land Management’s (BLM) guidance and recommendations to facilitate early adoption of certain standards in 43 CFR subparts 3174 and 3175 (referred to in this IM as “3174” and “3175”).  This IM also provides guidance for processing requests for variances from the sampling and analysis requirements for portable gas chromatographs in 3175.

Administrative or Mission Related:  This IM is Mission Related.  

Policy/Action:  

1. Approval of Automatic Tank Gauging (ATG) systems and Coriolis meters.  If your office receives a variance request for the use of ATG systems or Coriolis meters during the phase-in period for 3174,[1] consider the request using the attached Conditions of Approval (COA).  (See Attachment 1 for ATG systems and Attachment 2 for Coriolis meters.)
2. Early adoption of 3175.  For the reasons detailed in the Background section of this IM, and to discourage the waste of BLM enforcement resources on requirements that do not meaningfully enhance production accountability, the Washington Office (WO) directs that state and field offices allow for early adoption of the 3175 requirements listed in the table below during the phase-in periods for facility measurement points (FMP) that were in place prior to January 17, 2017.[2] If the state or field office does allow for such early adoption, the specified requirements in 3175 would apply rather than the corresponding requirements of Onshore Order 5 and the Statewide Notices to Lessees (NTL) [3] for electronic flow computers (Statewide NTL).  For all other items, the WO directs that the state or field offices continue to enforce the requirements in Onshore Order 5 and the Statewide NTL during the 3175 phase-in periods.

3. Processing requests for a variance from the sampling analysis requirements of 3175.113(d)(5)-(6).  If your office receives a request for a variance from the sampling and analysis requirements of 3175.113(d)(5)-(6), the variance request should typically be approved where the operator commits to following a standard operating procedure (SOP) for spot sampling using portable gas chromatographs that ensures quality control and satisfies the requirements of 3170.6(a)(4). If you approve the variance you should include the following Condition of Approval:

“Portable gas chromatographs used to sample and analyze gas at FMPs must be operated and maintained in accordance with the attached Standard Operating Procedure.”

The BLM has reviewed the attached SOP (Attachment 3) and believes that it ensures quality control and satisfies the requirements of 3170.6(a)(4).  If your office receives a variance request proposing a different SOP, please coordinate with the Production Measurement Team (PMT) as to whether it is sufficient to support a variance.

Timeframe:  This IM is effective upon issuance.

Budget Impact:  There may be some increased workload for processing variance requests.

Background:  On November 17, 2016, the BLM issued final rules for the measurement of oil and gas removed or sold from Federal and Indian leases (codified in 43 CFR Part 3170, subparts 3174 and 3175).  The regulated community has raised several concerns regarding implementation of certain provisions in those rules.  These concerns were expressed to the BLM in written comments from the American Petroleum Institute and the North Dakota Petroleum Council, as well as oral comments from operators during outreach sessions.  The BLM considered the concerns raised by the regulated community and determined that it would be appropriate to address some of those concerns through the guidance and recommendations contained in this IM.

1. Approval of Automatic Tank Gauging (ATG) and Coriolis Meters 

Under the new 3174 regulations, Onshore Order 4 continues to apply to measurement equipment and procedures in place on January 17, 2017, until the 3174 phase-in periods end.[4]  Due to delays in the deployment of the FMP application process, the 3174 phase-in periods will not end earlier than the summer of 2019 (high-tier leases), summer of 2020 (middle-tier leases), and the summer of 2021 (low-tier leases).

Although 3174 provides for the use of ATG systems and Coriolis meters, Onshore Order 4 does not.  During the phase-in periods, the BLM would have to approve ATG systems and Coriolis meters on a case-by-case basis through the Onshore Order 4 variance process.  In order to facilitate the early adoption of ATG systems and Coriolis meters through this variance process, the BLM has developed a set of conditions of approval (COA) reflecting the requirements of 3174.  See Attachment 1 for ATG systems and Attachment 2 for Coriolis meters.  State and field offices receiving variance requests for the use of ATG systems or Coriolis meters should consider these requests using these COAs.

2. Early adoption of 3175

During the 3175 phase-in periods for gas FMPs that were in place prior to January 17, 2017, [5] Onshore Order 5 and the Statewide NTLs for electronic flow computers (Statewide NTLs) remain in effect for those FMPs.  Numerous operators have expressed an interest in implementing certain 3175 requirements immediately, rather than waiting for the phase-in periods to end.  In particular, operators are interested in adopting those provisions that are less stringent (though not less effective) than those in Onshore Order 5 and the Statewide NTLs.  For example, Onshore Order 5 and the Statewide NTLs require quarterly calibrations.  Under 3175, operators are only required to calibrate low-volume FMPs semi-annually and very-low-volume FMPs annually.  The BLM developed a list of all 3175 standards that are less stringent than Onshore Order 5 or the Statewide NTLs, which is shown in the Policy/Action section above (see item 2).  The BLM finds that early adoption of these 3175 requirements would be in the public interest and recommends that state and field offices allow operators to comply with these less stringent 3175 standards during the phase-in periods. 

The BLM does not believe that early adoption of these 3175 standards will have a negative impact on royalty or production accountability.  The BLM deliberately wrote the standards of 3175 to ensure that operators will meet the performance of goals of 3175.31.  The performance goals in 3175.31 are as strict or more strict than the implied performance goals of Onshore Order 5 and the Statewide NTLs; therefore, the BLM believes that compliance with the 3175 standards, even if they are less demanding than some of the specific requirements in Onshore Order 5 and the Statewide NTLs, will ensure that measurement meets the purpose of the BLM’s measurement regulations (including Onshore Order 5 and the Statewide NTLs).

3. Processing Requests for a Variance from the Requirements of 3175.113(d)(5)-(6)

Subparagraphs 3175.113(d)(5) and (d)(6) require the operator to take and analyze at least three samples when using a portable gas chromatograph (GC), and then use those three analyses to determine an average heating value for Oil and Gas Operations Report B reporting.  For high- and very-high-volume FMPs, 3175.113(d)(6) requires the operator to continue taking samples until the heating value difference is within an established tolerance.  These specific requirements were not contained in the proposed rule that was published for public comment.  The BLM added these requirements to the final gas measurement rule to help address quality control issues when operators use portable GCs.  Operators have expressed concern with these requirements because the tolerances can be difficult to meet when analyzing a live gas stream.  Operators also expressed concern about the burdens associated with retaining data from the additional analyses.  Many operators believe that these additional requirements on portable GCs are onerous enough that they will go back to using cylinders.

Operators may request a variance from the requirements of 3175.113(d)(5)-(6) under 3170.6 by proposing an alternative means of compliance.  Pursuant to 3170.6(a)(4), the BLM may approve such a request for a variance when: (1) the proposed alternative means of compliance meet or exceed the objectives of 3175.113(d)(5)-(6); (2) approving the variance will not adversely affect royalty income and production accountability; and, (3) issuing the variance is consistent with maximum ultimate recovery.

Where an operator’s proposed alternative means of compliance include an SOP that ensures quality control and satisfies the requirements of 3170.6(a)(4), the operator’s request for a variance from the requirements of 3175.113(d)(5)-(6) should typically be approved.  A consortium of oil and gas operators and midstream companies developed the attached SOP (Attachment 3) and submitted it to the BLM.  The BLM has reviewed this SOP and believes that it adequately addresses the quality control issues for which 3175.113(d)(5) and (6) were intended.  Therefore, the BLM believes adoption of this SOP meets the requirements of 3170.6(a)(4).

Manual/ Handbook Sections Affected:  The Appendices to the Inspection and Enforcement Handbook dealing with 3174 and 3175.

Coordination:  This IM was coordinated with the Department of the Interior; the Office of the Solicitor; and the BLM Washington Office Division of Fluid Minerals.

Contact:  State Directors may direct any questions or concerns to me at 202-208-4201.  Staff may contact Steve Wells, Chief, Division of Fluid Minerals (WO-310), at 202-912-7123 and s1wells@blm.gov, or Rich Estabrook, Petroleum Engineer (WO-310), at 707-468-4052 and restabro@blm.gov.

Signed by:                                                       Authenticated by:

Michael D. Nedd                                            Robert M. Williams

Assistant Director                                           Division of IT Policy and Planning,WO-870

Energy, Minerals, and Realty Management

3 Attachments

1 – Conditions of Approval for Automatic Tank Gauging systems (1 p)

     2 – Conditions of Approval for Coriolis meters (3 pp)

     3 – Standard Operating Procedures for Portable Gas Chromatographs (19 pp)