```

[Senate Hearing 114-467]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 114-467

    THE BUREAU OF LAND MANAGEMENT'S PROPOSED RULE ENTITLED ``WASTE 
       PREVENTION, PRODUCTION SUBJECT TO ROYALTIES, AND RESOURCE 
                             CONSERVATION''

=======================================================================

                                HEARING

                               BEFORE THE

           SUBCOMMITTEE ON PUBLIC LANDS, FORESTS, AND MINING

                                 OF THE

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 14, 2016

                               __________

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                       Printed for the use of the
               Committee on Energy and Natural Resources

           Available via the World Wide Web: http://fdsys.gov
           
                                ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

21-975                         WASHINGTON : 2017 
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  For sale by the Superintendent of Documents, U.S. Government Publishing 
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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                    LISA MURKOWSKI, Alaska, Chairman
JOHN BARRASSO, Wyoming               MARIA CANTWELL, Washington
JAMES E. RISCH, Idaho                RON WYDEN, Oregon
MIKE LEE, Utah                       BERNARD SANDERS, Vermont
JEFF FLAKE, Arizona                  DEBBIE STABENOW, Michigan
STEVE DAINES, Montana                AL FRANKEN, Minnesota
BILL CASSIDY, Louisiana              JOE MANCHIN III, West Virginia
CORY GARDNER, Colorado               MARTIN HEINRICH, New Mexico
ROB PORTMAN, Ohio                    MAZIE K. HIRONO, Hawaii
JOHN HOEVEN, North Dakota            ANGUS S. KING, JR., Maine
LAMAR ALEXANDER, Tennessee           ELIZABETH WARREN, Massachusetts
SHELLEY MOORE CAPITO, West Virginia

           Subcommittee on Public Lands, Forests, and Mining

                        JOHN BARRASSO, Chairman 
SHELLEY MOORE CAPITO                 RON WYDEN
JAMES E. RISCH                       DEBBIE STABENOW
MIKE LEE                             AL FRANKEN
STEVE DAINES                         JOE MANCHIN III
BILL CASSIDY                         MARTIN HEINRICH
CORY GARDNER                         MAZIE K. HIRONO
JOHN HOEVEN                          ELIZABETH WARREN
JEFF FLAKE
LAMAR ALEXANDER
                      COLIN HAYES, Staff Director
                PATRICK J. McCORMICK III, Chief Counsel
            TRISTAN ABBEY, Senior Professional Staff Member
                 KIP KNUDSON, Professional Staff Member
           ANGELA BECKER-DIPPMANN, Democratic Staff Director
                SAM E. FOWLER, Democratic Chief Counsel
           SPENCER GRAY, Democratic Professional Staff Member
      STEPHANIE TEICH-McGOLDRICK, Democratic Congressional Fellow
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Barrasso, Hon. John, Subcommittee Chairman and a U.S. Senator 
  from Wyoming...................................................     1
Wyden, Hon. Ron, Subcommittee Ranking Member and a U.S. Senator 
  from Oregon....................................................     8
Garnder, Hon. Cory, a U.S. Senator from Colorado.................    10

                               WITNESSES

Leiter, Amanda, Deputy Assistant Secretary, Lands and Minerals 
  Management, U.S. Department of the Interior....................    10
Parfitt, Todd, Director, Wyoming Department of Environmental 
  Quality........................................................    18
Olguin, Hon. James ``Mike'', Councilman, Southern Ute Indian 
  Tribe..........................................................    24
Boccella, Mark, Americas Business Development Manager, Optical 
  Gas Imaging, FLIR Systems, Inc.................................    33
Sgamma, Kathleen, Vice President of Government & Public Affairs, 
  Western Energy Alliance........................................    37

          ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

Alert Plus:
    Letter for the Record........................................    87
Barrasso, Hon. John:
    Opening Statement............................................     1
    Article in the New York Times by Jack Healy dated April 12, 
      2016 entitled ``In Wyoming, Hard Times Return as Energy 
      Prices Slump''.............................................     3
Boccella, Mark:
    Opening Statement............................................    33
    Written Testimony............................................    35
    Responses to Questions for the Record........................    84
Gardner, Hon. Cory:
    Opening Statement............................................    10
Leiter, Amanda:
    Opening Statement............................................    10
    Written Testimony............................................    13
    Responses to Questions for the Record........................    73
Mandan, Hidatsa & Arikara Nation:
    Statement for the Record.....................................    92
Olguin, Hon. James ``Mike'':
    Opening Statement............................................    24
    Letter dated April 16, 2016 from the Southern Ute Indian 
      Tribe......................................................    26
Parfitt, Todd:
    Opening Statement............................................    18
    Written Testimony............................................    20
    Response to Question for the Record..........................    83
Sgamma, Kathleen:
    Opening Statement............................................    37
    Photo........................................................    38
    Written Testimony............................................    41
State of Utah, Department of Natural Resources:
    Letter for the Record........................................    50
Utah State Senate:
    Letter for the Record........................................    48
(The) Wilderness Society:
    Letter for the Record........................................    99
Ute Indian Tribe:
    Statement for the Record.....................................   101
Wyden, Hon. Ron:
    Opening Statement............................................     8

 
    THE BUREAU OF LAND MANAGEMENT'S PROPOSED RULE ENTITLED ``WASTE 
       PREVENTION, PRODUCTION SUBJECT TO ROYALTIES, AND RESOURCE 
                             CONSERVATION''

                              ----------                              

                        THURSDAY, APRIL 14, 2016

                                       U.S. Senate,
         Subcommittee on Public Lands, Forests, and Mining,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:36 p.m. in 
Room SD-366, Dirksen Senate Office Building, Hon. John 
Barrasso, Chairman of the Subcommittee, presiding.

  OPENING STATEMENT OF HON. JOHN BARRASSO, U.S. SENATOR FROM 
                            WYOMING

    Senator Barrasso. The committee will come to order.
    This afternoon the Public Lands Subcommittee will hold an 
oversight hearing on the Bureau of Land Management's (BLM) so-
called waste prevention rule. The stated purpose of the rule is 
to reduce venting and flaring of natural gas that is produced 
from oil wells on Federal land and Indian land.
    I think it is fair to say that we all want to reduce 
unnecessary venting and flaring of natural gas. Even the 
proposed rule recognizes that operators do not want to waste 
gas. That is written in the rule. Unnecessary venting and 
flaring reduces revenue to taxpayers, as well as States, 
tribes, and the Federal Government. Venting and flaring is also 
bad for the environment.
    So the question is not whether we should take steps to 
reduce unnecessary venting and flaring. The question is, what 
is the most cost-effective way of doing so, and who is best 
positioned to lead this effort, producers, states, tribes, or 
Washington?
    I question whether Washington should play any role in this 
arena, but even those who believe Washington has a role to 
play, they question whether the BLM has legal authority to 
regulate air quality. Air quality is the responsibility of the 
EPA, the states, and some tribes like the Southern Ute, not the 
BLM.
    I suspect that is why Secretary Jewell sent Ms. Leiter, an 
accomplished law professor on leave at the department, to 
testify here today. The Administration knows it will need to 
employ legal gymnastics to defend the rule.
    I also have practical questions related to the BLM's 
proposed rule. For example, if BLM truly wants to reduce 
flaring, then why isn't it taking steps to put its own house in 
order? In other words, why isn't BLM taking steps to account 
for and address delays in permitting of natural gas pipelines?
    As the proposed rule explains, the primary means to avoid 
flaring gas from oil wells is to capture, transport, and 
process that gas for sale, using the same technologies that are 
used for natural gas wells, specifically gas-gathering 
infrastructure. Now this consists of small pipelines that ship 
natural gas from oil wells to processing plants.
    According to the BLM, flaring takes place in areas ``with 
existing capture infrastructure, but where the rate of well 
construction is outpacing the infrastructure capacity.'' 
Flaring also occurs in areas ``where capture and processing 
infrastructure has not yet been built.''
    One reason for the lack of sufficient infrastructure is 
BLM's permitting process. For years, oil and gas producers have 
reported long delays in obtaining permits for gas-gathering 
lines on Federal land.
    To date, BLM is still unable to produce a complete list of 
the pending permits--just a list of the permits--for natural 
gas-gathering lines on Federal land.
    The data that is available is not promising. As of April 8, 
2016, over half of the 832 applications for rights-of-way for 
oil and gas pipelines have been pending with BLM for more than 
two years--more than two years. To me, this is inexcusable. It 
is why any final rule must include a means by which BLM can 
readily account for and promptly address delays in permitting 
gas-gathering lines on Federal land.
    Now I understand the Administration wants to finalize this 
rule in June, but now is not the time to set an artificial 
schedule.
    Over the last 18 months, the West has seen devastating job 
loss. Wyoming alone has lost over 4,800 oil and gas jobs. The 
New York Times highlighted this yesterday, Wednesday, April 13, 
2016, with the story, ``In Wyoming, Hard Times Return as Energy 
Prices Slump.''
    [The information referred to follows:]
    
    
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    A rule that is rushed out the door will only make this 
situation worse and more difficult for these folks to get back 
to work.
    Ms. Leiter, I think it is important that BLM understand 
that.
    I will now turn to Senator Wyden to offer his opening 
remarks.

     STATEMENT OF HON. RON WYDEN, U.S. SENATOR FROM OREGON

    Senator Wyden. Thank you very much, Mr. Chairman.
    Today we have an opportunity to look at the issues 
surrounding oil and gas production on public lands and how to 
bring our policies in this area into the 21st century.
    When I was Chair of this full committee, I held a series of 
roundtables on natural gas. One area that came through loud and 
clear is that America needs to find ways to reduce venting and 
flaring of natural gas. Not only is it wasteful, it is 
detrimental to the environment, and when it takes place on 
Federal land, it cheats taxpayers out of their fair return.
    The Mineral Leasing Act of 1920 requires that BLM ensure 
that lessees, and I quote here, ``use all reasonable 
precautions to prevent waste of oil or gas.'' Yet the Bureau of 
Land Management has not updated its rules to minimize waste in 
over 30 years. This is despite the fact that the oil and gas 
industry has changed dramatically and that massive strides have 
been made in the technologies and practices to reduce waste in 
cost-effective ways.
    So let's be clear, the rules are from yesteryear. They have 
not been updated in three decades, yet it is very clear that 
there has been enormous progress made with respect to more 
productive technologies and ways to reduce waste.
    In 2010, the General Accounting Office (GAO) came out with 
report that showed that millions of dollars were being wasted 
by the venting and flaring of natural gas from oil and gas 
production on Federal lands.
    In a letter to Interior Secretary Sally Jewell, I, along 
with a bicameral group of lawmakers, called on the Interior 
Department to act. The Department has taken a concrete step 
toward addressing this problem by establishing limits on 
venting and flaring, improving leak detection, clarifying and 
revising royalty rates, and by doing a better job of planning 
our oil and gas infrastructure so as to be able to minimize 
waste. According to the Inspector General and the GAO, these 
updates from the Administration are long overdue. So again, 
this is the reason we have independent auditors, colleagues. 
They are not Democrats. They are not Republicans. They are 
independent auditors, and they say the updates are long 
overdue.
    For example, the General Accounting Office found back in 
2010 that around 40 percent of natural gas estimated to be 
vented and flared on onshore Federal leases could be 
economically captured with currently available control 
technologies.
    The Bureau of Land Management's proposed methane rules 
would cut the waste of valuable natural gas from oil and gas 
production on public lands. This waste results in lost royalty 
revenues to the American people. The Federal Government has an 
obligation to ensure that American taxpayers get a fair return 
on resources mined from public lands. My view is this rule is a 
much-needed step in fulfilling this obligation.
    The Bureau of Land Management estimates that between 2009 
and 2014, oil and gas producers on public and tribal lands 
vented, flared, and leaked enough gas to supply roughly five 
million homes for a year. Using conservative assumptions, the 
Bureau of Land Management also estimated that the net benefits 
of the rule would range from $115 to nearly $200 million per 
year.
    While the Bureau of Land Management's charge is primarily 
to reduce the waste of publicly-owned resources, I think you 
cannot ignore the fact that there are significant environmental 
benefits of this rule. Methane is a potent greenhouse gas that 
America cannot afford economically or environmentally to just 
keep sending up into the atmosphere.
    In addition, discharges from oil and gas production, 
including a host of gases, are directly harmful to human 
health. This includes toxins like benzene and toluene, which 
cause cancer, neurological disorders, and birth defects. 
Volatile organic compounds are also commonly emitted, which 
leads to ozone and local air quality problems.
    When a new rule comes out, often the affected industry says 
it is unreasonable, it is unworkable, it is going to cause 
grievous harm. I would like to note, and this is particularly 
important, that a number of states have already implemented 
much of what the Bureau of Land Management is proposing, 
including my friend's home State of Wyoming, and we are going 
to hear from them today.
    While some states have their own rules, many do not. In my 
view, it is the responsibility now of the Federal Government, 
since these rules have not been updated in decades, to 
establish a foundation from which state agencies can build 
their own regulatory framework. The Bureau of Land Management's 
proposed rule will do that. It will create a level playing 
field, ensuring that public resources are not wasted in all 
states, while giving flexibility to states to implement their 
own rules that meet or exceed Bureau of Land Management 
standards.
    Finally, I want to thank our witnesses, particularly Mark 
Boccella from FLIR, a leading company in methane-leak 
detection, specifically optical gas imaging, which is 
headquartered in my home State of Oregon. It is my 
understanding FLIR is not here to take a public position. They 
are going to tell us what kind of technology is out there and 
what that technology can do.
    I very much appreciate the time and interest of all of you. 
There are not very many flights to Oregon left in the day, so I 
hope you will excuse my bad manners if, before long, I chase 
off. But it is my intention to work very closely with Chairman 
Barrasso on these issues. These are important issues. They were 
important a few years ago. They are even more important today, 
and I think we ought to work together.
    Thank you, Mr. Chairman.
    Senator Barrasso. If you do have additional questions, we 
will certainly be able to put them into the record and submit 
them in writing, so I would request that you respond quickly to 
Senator Wyden.
    Additionally, Senator Gardner, I know that you have some 
friends from home.

   STATEMENT OF HON. CORY GARDNER, U.S. SENATOR FROM COLORADO

    Senator Gardner. Thank you, Senator Barrasso.
    Welcome to the United States Senate, Councilmember Michael 
Olguin of the Southern Ute Tribe in Western Colorado. Thank you 
very much for your time and testimony today, and thank you for 
your leadership.
    I also want to thank you for the flag. I hope you had a 
chance to see it flying very proudly outside of our office 
today and always. So thank you very much, Councilmember Olguin, 
for your time.
    I see Tyson in the background as well, so he is here. I 
have a number of representatives. Thank you very much.
    And to Kathleen Sgamma with Western Energy Alliance, thank 
you very much, both of you proud Coloradans, for your 
representation today.
    This is an important issue in terms of our economy, in 
terms of our sovereignty, and in terms of the work that both of 
you are doing to grow economic opportunity for all who you 
represent. So thank you very much for being here today before 
the United States Senate.
    Thank you, Chairman Barrasso.
    Senator Barrasso. Thank you, Senator Gardner.
    At this point, I want to welcome the witnesses. Joining us 
this afternoon, Ms. Amanda Leiter, who is the Deputy Assistant 
Secretary for Land and Mineral Management at the Department of 
the Interior; Mr. Todd Parfitt, who is the Director of the 
Wyoming Department of Environmental Quality, thank you very 
much for returning today; the Honorable James Mike Olguin, who 
is a Councilman with the Southern Ute Indian Tribe; Mr. Mark 
Boccella, who is the American Business Development Manager of 
Optical Gas Imaging at FLIR Systems; and Ms. Kathleen Sgamma, 
Vice President of Government and Public Affairs at the Western 
Energy Alliance. Welcome to all of you. I look forward to your 
testimony.
    Ms. Leiter, please begin.

 STATEMENT OF AMANDA LEITER, DEPUTY ASSISTANT SECRETARY, LANDS 
    AND MINERALS MANAGEMENT, U.S. DEPARTMENT OF THE INTERIOR

    Ms. Leiter. Thank you very much. Mr. Chairman, Ranking 
Member, members of the Subcommittee, thank you for the 
opportunity to be here.
    The BLM manages roughly ten percent of the nation's surface 
and nearly a third of its minerals. We manage these lands on 
behalf of the American public under a framework of multiple use 
and sustained yield.
    The BLM works diligently to fulfill its role in America's 
energy future by supporting the responsible development of oil 
and gas resources on public and Indian lands. Domestic oil 
production is at its highest level in nearly 30 years, and the 
nation is now the largest natural gas producer in the world. In 
fact, during this Administration, oil production from public 
and Indian lands onshore has increased by 108 percent, 
exceeding the increase on state and private lands.
    This production contributes to the nation's energy supplies 
and provides important economic benefits. In Fiscal Year 2015, 
for example, onshore Federal oil and gas royalties exceeded $2 
billion, about half of which was paid to the states in which 
the development occurred.
    In supporting oil and gas development on public and Indian 
lands, the BLM's highest priorities are ensuring that 
operations are safe and environmentally responsible and provide 
a fair return on public resources.
    The common-sense measures in the proposed methane and waste 
reduction rule would advance those priorities by curbing waste 
of our nation's natural gas supply. Domestic natural gas 
provides an abundant source of clean-burning fuel to power and 
heat American homes and businesses. At the same time, however, 
venting, flaring, and leaks during oil and gas operations waste 
natural gas and generate harmful methane emissions.
    The primary component of natural gas is methane, a 
greenhouse gas far more potent than carbon dioxide. Methane 
accounts for about nine percent of U.S. greenhouse gas 
emissions, and almost a third of U.S. methane emissions are 
estimated to come from oil and gas operations.
    Currently, oil and gas operations on public and Indian 
lands lose vast amounts of natural gas. As you just heard, 
between 2009 and 2014, 375 billion cubic feet of natural gas 
was lost through venting and flaring, enough gas to supply more 
than five million households for a year.
    These resources belong to the American public. They should 
be used and not wasted. Venting, flaring, and leaks of natural 
gas not only waste public resources and cause environmental 
impacts, they also deprive states, tribes, and Federal 
taxpayers of up to $23 million annually in potential royalty 
revenue. And in the absence of sensible controls, natural gas 
losses from U.S. oil and gas operations are projected to 
increase.
    The BLM's proposed rule would advance the Administration's 
goals of reducing the waste of public resources and cutting 
methane emissions from the oil and gas sector. By requiring 
reasonable and cost-effective measures to reduce venting, 
flaring, and leaks, the BLM expects to reduce the waste of 
natural gas by at least 40 percent.
    The proposal establishes baseline standards and practices. 
In brief, the rule would limit flaring and would largely 
prohibit venting as a means of gas disposal. Operators would 
also be required to use currently available methods to conduct 
periodic inspections of their operations, and they would be 
required to promptly repair any leaks they find during those 
inspections. Further, operators would be required to replace 
certain devices that run on natural gas with newer devices that 
are readily available and that waste less gas.
    Taking into account the broader impacts of the wasted gas, 
we believe that the overall benefits of the proposal would 
substantially outweigh its costs.
    Several states and the U.S. Environmental Protection Agency 
have also taken steps to limit losses of natural gas from oil 
and gas operations. In developing the proposed rule, the BLM 
regularly consulted and continues to consult with EPA. And we 
conducted a series of meetings and public forums over the past 
two years to consult with tribal and state governments and 
solicit stakeholder views.
    The BLM has worked to ensure that its proposed regulations 
would not impose conflicting or redundant requirements on 
operators, and we remain committed to coordinating with our 
Federal, State, and tribal partners to align and target the 
final regulations.
    Once finalized, this rule will reduce waste; increase 
returns to Federal taxpayers, States, and tribes; and, help 
protect our environment, while also ensuring continued 
development of the public's oil and gas resources.
    Thank you for the opportunity to present this testimony, 
and I would be glad to answer any questions you may have.
    [The prepared statement of Ms. Leiter follows:]
   
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    Senator Barrasso. Thank you very much for your testimony.
    Mr. Todd Parfitt?

  STATEMENT OF TODD PARFITT, DIRECTOR, WYOMING DEPARTMENT OF 
                     ENVIRONMENTAL QUALITY

    Mr. Parfitt. Thank you, and good afternoon, Chairman 
Barrasso, Ranking Member Wyden, and honorable members of this 
subcommittee.
    My name is Todd Parfitt. I am the Director of the Wyoming 
Department of Environmental Quality. I thank the subcommittee 
for inviting the State of Wyoming to share its perspective on 
the Bureau of Land Management's proposed rule entitled ``Waste 
Prevention, Production Subject to Royalties, and Resource 
Conservation.'' My comments today will focus on environmental 
aspects of the BLM's proposal.
    Wyoming is blessed with amazing and abundant natural 
resources. Wyoming is also blessed with abundant mineral 
resources that have provided the nation, the state, and its 
citizens with revenue and jobs.
    In Wyoming, we manage our natural and mineral resources 
exceptionally well, providing for both environmental 
stewardship and energy production by fostering a regulatory 
framework that encourages responsible production of oil and gas 
resources.
    Throughout the past 20 years, Wyoming has been recognized 
as a national leader in regulating air emissions from oil and 
gas production. In 1997, absent an EPA permitting program, 
Wyoming DEQ's Air Quality Division established its oil and gas 
minor source permitting and guidance program. This air 
emissions program is consistent with Wyoming's legislative 
directive aimed at preventing, reducing, and eliminating 
pollution, and retaining primacy over Wyoming's air-quality 
resources.
    In 2011, EPA looked to Wyoming and Colorado as it developed 
its oil and gas new source performance standards for production 
equipment. EPA's rule recognized that some state permitting 
programs already regulate those wells, and the rule took 
advantage of existing state compliance mechanisms.
    In 2015, under the President's climate change agenda, EPA 
proposed additional rulemaking to address methane and volatile 
organic compounds, extend coverage to additional downstream 
natural gas transmission equipment, and add leak detection 
requirements. Wyoming has provided comments on these proposed 
rules.
    In March of this year, EPA announced its initiative to 
regulate emissions from existing sources. EPA noted that this 
effort was broad and would start with an information collection 
request that would look at a large universe of representative 
sources and data.
    Shortly before EPA announced its existing source data 
collection effort, BLM came out with its proposed rule, which 
includes requirements for venting and flaring. Several parts of 
BLM's proposed rule are designed to regulate air pollution, 
which is a matter that Congress delegated to the states and 
EPA, not to the BLM.
    Wyoming and EPA already regulate what BLM is attempting to 
regulate. This is evident by the fact that much of BLM's 
proposal is based on Wyoming's air-quality environmental 
regulations. In fact, BLM references Wyoming's air-quality 
regulations over 40 times in the proposed rules.
    This duplication of environmental control measures raises 
many concerns. For example, the BLM's proposal usurps authority 
currently vested with the states. By attempting to exert 
control over state and private lands that are intermingled 
within Federal lease is an example of Federal Government 
overreach.
    It is also unnecessary. Wyoming's air-quality rules and Oil 
and Gas Conservation Commission regulations apply across the 
entire state, to private, State, and Federal mineral 
development.
    Some key definitions posed by BLM are inconsistent with 
EPA's definitions, further creating regulatory confusion.
    BLM's proposed variance process is not a legitimate 
variance process in the context of cooperative federalism. It 
is dissimilar to EPA's primacy recognition and is subject to 
BLM interpretation, which creates an inconsistency within and 
among states.
    It is worth repeating that BLM's proposal sites Wyoming's 
air-quality existing source regulations over 40 times. While 
Wyoming appreciates the recognition, BLM has misapplied 
Wyoming's environmental regulations, which are applicable to a 
specific ozone nonattainment area and did not consider how 
Wyoming addresses oil and gas development on a statewide basis. 
The unique nature of this nonattainment area is not applicable 
to other areas of the state. Air-quality agencies understand 
the impacts and interactions of multiple pollutants and that 
certain actions may actually worsen or create additional air 
pollution issues.
    In the NEPA process, the BLM has historically recognized 
the state's air-quality primacy and deferred to the state on 
air-quality issues. But BLM's proposed rule would be an 
unwarranted deviation from this practice. BLM's proposed rule 
will lead to inconsistency and uncertainty, resulting in 
administrative inefficiencies and delays.
    In closing, Wyoming respectfully requests that BLM continue 
to recognize the state's air-quality primacy and defer to the 
state on air-quality issues. Thank you.
    [The prepared statement of Mr. Parfitt follows:]
    
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    Senator Barrasso. Thank you very much, Mr. Parfitt.
    Now if I could please ask Councilman Olguin to testify? 
Thank you.

 STATEMENT OF HON. JAMES ``MIKE'' OLGUIN, COUNCILMAN, SOUTHERN 
                        UTE INDIAN TRIBE

    Mr. Olguin. Good afternoon, Chairman Barrasso and committee 
members. It is a pleasure to be here this afternoon.
    My name is Michael Olguin. I am an elected official for the 
Southern Ute Indian Tribe, and I want to thank you for this 
opportunity to provide a statement on the tribe's behalf on 
what is commonly known as the BLM's proposed venting and 
flaring rule and its potential impacts on the tribe and 
economic development on our reservation.
    On April 5, 2016, the tribe submitted formal comments to 
the BLM on a proposed venting and flaring rule, a copy of which 
we provided to this committee. At this time, I would like to 
highlight our main concerns about the proposed rule.
    First, we question BLM's authority to impose air pollution 
control aspects of the proposed rule. Under the guise of 
preventing waste and protecting trust assets, the BLM is, in 
fact, reaching beyond the authority given it by Congress and 
encroaching into the EPA's jurisdiction.
    Under the Clean Air Act, Congress established a regulatory 
structure based on the principle of cooperative federalism, 
under which air pollution is regulated by EPA and by states and 
tribes who are delegated primacy by EPA. From our perspective, 
the BLM's proposed rule appears to sidestep that settled 
structure.
    Second, BLM's proposed command and control approach is 
redundant with EPA regulations and fails to afford appropriate 
deference to EPA as well as to the tribe and State of Colorado 
Environmental Commission.
    In 2004, Congress enacted the Southern Ute and Colorado 
Intergovernmental Agreement Implementation Act. Under that Act, 
Congress endorsed and implemented a unique cooperative 
arrangement between the tribe and the State of Colorado for 
regulating air quality on the Southern Ute Indian Reservation.
    One of the key elements of that Act was to ensure there was 
one set of air-quality regulations applicable to all lands 
within our checkerboard reservation. In other words, we wanted 
and Congress wanted to avoid checkerboard regulations of air 
quality.
    The state and the tribe have appointed three persons to a 
Joint Environmental Commission. This commission has established 
rules for regulating air pollution on our reservation. BLM's 
proposed rule fails to acknowledge the commission's 
congressionally-sanctioned role on our reservation and would 
potentially create duplicative and conflicting regulations, 
causing reservation operators confusion.
    Third, BLM's proposed rule is out of step with recent more 
progressive and enlightened rulemaking by its sister agencies. 
Both the BIA and EPA have adopted rules that provide greater 
deference to tribes on decisions affecting tribal lands. Unlike 
the recent BIA and EPA rules, BLM's proposed rule reflects a 
``my way or the highway'' paternalism toward tribes.
    Under the BLM's proposed rule, tribes could obtain a 
variance to the rule's requirements, but only if the tribal 
rule meets or exceeds BLM's requirements. The approval of a 
variance is subject to the absolute discretion of the state BLM 
director, and that director's denial of a tribal variance 
request is not subject to administrative appeal. The BLM should 
follow its sister agency leads by giving due deference to 
tribal decision-making and thereby promoting tribal self-
determination and self-governance.
    Fourth, BLM's one-size-fits-all approach elevates national 
uniformity over reasonableness and fails to recognize that 
emissions associated with extraction activities can vary 
widely. For instance, a rule that may be appropriate for high-
pressure and volume wells that produce both oil and gas in the 
Bakken reservoir may not be appropriate for lower pressure, 
low-volume coalbed methane in the San Juan basin.
    Fifth, the tribe supports the goals of capturing greater 
quantities of gas and reducing waste, but the cost of 
compliance with BLM's proposed rule on the Southern Ute 
Reservation will outweigh the production value of some low-
producing wells, causing operators to plug those wells. This 
will cause a loss of royalties to the tribe, which is 
inconsistent with the BLM's stated intended purpose of the 
rule.
    We expect that the cost of compliance with BLM's proposed 
rule and the added regulations will drive away additional 
development on the reservation. It will make our reservation a 
much less business friendly place.
    Instead, like you, Chairman Barrasso, we believe one of the 
ways to obviate the need for the BLM rule is to expedite 
Federal permitting and construction of gas-gathering 
infrastructure, so the gas currently being vented and flared 
could be captured and made to serve the tribe and its members.
    To this end, as you know, the tribe is supportive of the 
Natural Gas Gathering Act as well as the Indian Tribal Energy 
Development and Self-Determination Act.
    In conclusion, creating and maintaining a favorable 
business environment on the reservation is important to the 
tribe; however, we also recognize the importance and value of 
maintaining and improving the reservation's air quality.
    BLM is overreaching, ignoring, and underestimating the cost 
and economic impacts of its proposed rule, and unless the 
agency itself steps back or Congress steps in, tribal economies 
will be crushed under the burden of every-expanding government 
regulations.
    Thank you for this opportunity.
    [The letter dated April 6, 2016 from the Southern Ute 
Indian Tribe follows:]

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    Senator Barrasso. Thank you so much for your testimony.
    Mr. Boccella.

   STATEMENT OF MARK BOCCELLA, AMERICAS BUSINESS DEVELOPMENT 
        MANAGER, OPTICAL GAS IMAGING, FLIR SYSTEMS, INC.

    Mr. Boccella. Good afternoon, Chairman Barrasso and members 
of the subcommittee.
    My name is Mark Boccella, and I am a Business Development 
Manager for FLIR Systems and am responsible for the optical gas 
imaging business in the Americas. I am delighted to be here by 
invitation of Senator Wyden, as FLIR is a constituent company 
within the great State of Oregon.
    We are not here in any type of advocacy role, but instead 
have been asked to talk specifically about FLIR gas detection 
technology. Therefore, I do not intend to offer comment 
pursuant to any current or proposed regulations.
    FLIR is a company that has a long history of partnering 
with industry and government on critical initiatives. FLIR 
develops both airborne and ground-based thermal sensing 
platforms that provide U.S. troops with the critical night 
vision and situational awareness. FLIR has been a market leader 
in this realm for over 50 years now.
    In this 50 years, we have witnessed thermal imaging, or 
infrared technology, begin to follow a similar development and 
cost trajectory as GPS technology. What was once a technology 
that was large in size, costing hundreds of thousands of 
dollars and only available to military personnel, GPS has 
become a commercial technology with low price points, making it 
available to everyone.
    Like GPS, low-cost IR, or infrared sensors, are being 
implemented today in smart phones and other types of handheld 
devices.
    In 2005, FLIR developed a new technology called optical gas 
imaging, or OGI. OGI allows for easy visualization of otherwise 
invisible gases, such as methane or natural gas, in general.
    FLIR manufactures a portable camera that oil and gas 
operators can use to ensure their equipment is not leaking 
valuable product into the air. With an OGI camera, the operator 
can simply stand in a central location at a natural gas well 
site or production facility and scan for what the industry 
calls super-emitters or fat tails. These are essentially large-
scale gas leaks.
    Optical gas imaging is a technology that companies 
currently use to ensure compliance in states that have rules 
for leak detection of hydrocarbons or methane emissions. But 
more importantly, this technology has been widely adopted by 
companies worldwide as a way for them to affordably meet 
sustainability objectives.
    Over the past decade, FLIR has performed considerable 
research, gathering information from customers and service 
providers regarding the effectiveness and affordability of 
implementing internal OGI programs.
    From the research, we received common feedback that the 
implementation of consistent leak detection and repair programs 
using OGI technology is a profitable endeavor to pursue, as it 
maximizes return on investment by keeping more product in the 
pipe. This concept has created a strong service provider 
network, which is part of a larger methane mitigation industry 
that is growing in the United States. Through this development, 
we have our own experience adding jobs to the sector.
    It is important to note that optical gas imaging is 
continually evolving. Recently, fix-mounted OGI cameras have 
been developed, offering continuous emissions monitoring and 
automated leak detection in remote areas. Additionally, there 
is software technology available today that enhances optical 
gas imaging by offering real-time leak rate and volume 
quantification.
    In conclusion, FLIR's optical gas imaging technology 
provides a simple method for operators to quickly visualize gas 
leaks. By integrating this into LDAR programs, many companies 
are discovering a return on investment by recouping potential 
lost product from their operations.
    Moving forward, FLIR is continually investing to develop 
and produce new, innovative, and more cost-effective gas 
detection solutions so greater emission reductions can be 
realized at a lower cost for our customers.
    Thank you for the opportunity to speak today, and I am 
happy to address any questions regarding our technology.
    [The prepared statement of Mr. Boccella follows:]
    
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    Senator Barrasso. Thank you very much for the update.
    Ms. Sgamma.

 STATEMENT OF KATHLEEN SGAMMA, VICE PRESIDENT OF GOVERNMENT & 
            PUBLIC AFFAIRS, WESTERN ENERGY ALLIANCE

    Ms. Sgamma. Thank you, Mr. Chairman, members of the 
committee.
    Western Energy Alliance represents about 450 companies 
engaged in all aspects of environmentally responsible oil and 
natural gas in the West. Our members include environmental 
consultants and those who capture methane as well as the 
operators.
    The Administration has focused an overwhelming number of 
new regulations on the oil and natural gas industry that 
cumulatively extend far beyond reasonable regulatory oversight 
and into mechanisms for controlling and slowing production in 
America.
    Over the last year, Western Energy Alliance has responded 
to 48 regulatory processes involving 49,226 pages of regulatory 
documents. This is me standing by 49,226 pages.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] T1975.024
    
    I can assure you that it is hard to keep up with that 
regulatory stack and still continue to provide affordable 
energy for America.
    The good news is that industry is already reducing methane 
emissions. We have reduced methane emissions 21 percent since 
1990 even as we have increased natural gas production 47 
percent. Studies have found leakage rates around 0.42 percent.
    Other than coal, the Administration is not going after 
other industries with the same or greater environmental impact, 
but we are the only ones that capture natural gas and put it to 
beneficial use. When we increase natural gas production and 
then use it in electricity generation, we deliver 59 percent 
more climate change benefit than wind and solar combined since 
2006.
    Federal regulations, like this rule before us, invariably 
result in more redtape, more expense, less efficiency, and less 
natural gas than would be otherwise produced and less overall 
climate change impact. I am no philosopher, but that just does 
not make sense.
    Our biggest issue with the rule is that BLM simply doesn't 
have the authority to regulate air quality. BLM has limited 
authority under the Mineral Leasing Act, NTL-4A, to determine 
if gas lost is unavoidably or avoidably lost. That definition 
includes economic consideration, operational considerations, 
economic infrastructure considerations.
    The Clean Air Act is an extremely comprehensive law that 
gives EPA and states broad powers to regulate air emissions; 
however, there are very specific procedures that EPA must 
follow when it regulates air quality. BLM's assumption of 
expansive Clean Air Act authority conveniently comes without 
those Clean Air Act constraints.
    BLM's regulation, the Federal Land Policy and Management 
Act, FLPMA, gives BLM the ability to ensure compliance with 
environmental regulations for oil and gas operations but does 
not give them authority to create those regulations or those 
laws themselves.
    In essence, BLM is asserting regulatory omnipotence on 
Federal lands. And even if BLM had the authority to regulate 
air quality, why is it doing what EPA is already doing? I think 
when you look at what they are trying to do with existing 
sources, it is clearly an attempt to circumvent very specific 
Clean Air Act procedures and go after existing sources, 
something that even EPA does not dare to do.
    Another major problem with the rule is that it is one-size-
fits-all. The flaring standard was based on vertical wells in 
the 1980's. We are now developing horizontal wells that, in 
effect, equate to about ten vertical wells, and we are trying 
to apply the same flaring limit on those highly productive 
wells.
    This rule would cause production to be shut in. It would 
cause new wells to be scaled back so they would not be as 
highly productive, and simply seems antithetical, the waste of 
oil and natural gas you get, seems antithetical in a rule that 
is meant to control waste.
    Finally, when we are looking at the magnitude of this rule, 
we are looking at the industry on the well side, which is what 
I represent and what this rule is aimed at. It covers about 
1.07 percent of U.S. greenhouse gas emissions at a carbon 
dioxide equivalent, and this rule would return a scant 11 
million. It would affect 0.0092 percent of greenhouse gas 
emissions, so that is chasing a small return for a very large 
sum.
    BLM could simply approve rights-of-way in a timely manner 
that would enable us to go in and lay the pipelines and gas-
gathering infrastructure so we can stop flaring and collect 
more natural gas.
    Thank you very much.
    [The prepared statement of Ms. Sgamma follows:]
    
    
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    Senator Barrasso. Thank you very much for your testimony. 
We will start our rounds of questions with Senator Lee.
    Senator Lee. Thank you very much, Mr. Chairman. Thanks for 
your kindness and your willingness to accommodate my schedule, 
and thanks to all of you for being willing to come here today.
    Before I get started with my questions, Mr. Chairman, I 
would like to submit to the record a letter from the Utah 
Senate urging the Secretary of the Interior to withdraw the 
rule that is the subject here.
    Senator Barrasso. Without objection.
    [The information referred to follows:]
    
    
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    Senator Lee. I also would like to submit to the record a 
letter from the Utah Department of Natural Resources 
recommending that BLM reconsider moving forward with this 
regulation.
    Senator Barrasso. Without objection.
    [The information referred to follows:]
    
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    Senator Lee. Ms. Leiter, is the EPA currently in the 
process of promulgating a rule or promulgating a set of 
regulations to regulate methane emissions from new oil and 
natural gas sources?
    Ms. Leiter. That is my understanding. There is a proposed 
rule that they recently took comment on, and my understanding 
is that they are in the process of finalizing a rule that would 
cover methane emissions from new and modified oil and gas 
sources.
    Senator Lee. Okay. So they are in the process of drafting 
regulations that would deal with methane emissions from new 
sources, new wells.
    Is the EPA also then in the process of developing 
regulations that would deal with methane emissions from 
existing sources of oil and natural gas?
    Ms. Leiter. I believe, from some recent announcements, that 
they are beginning a data-gathering phase to ascertain the 
scope of the air problem from existing sources. That, from my 
understanding of past similar efforts, would be the beginning 
of a multiyear effort to address those pollutants.
    Senator Lee. The Administration has made the claim, a claim 
that I consider absurd, that its ability to implement policies 
to reduce waste somehow enables the BLM to regulate air 
emissions.
    Is the Department of the Interior aware of Utah's stringent 
regulations governing venting and flaring of waste?
    Ms. Leiter. Certainly, and, in fact, we have learned from 
the good examples of Utah, Colorado, and Wyoming in several 
aspects of the rule and other states. I don't want to leave 
anybody off the list, but, certainly, at least those three.
    Senator Lee. I think this is significant, the existing 
regulatory structure and those being developed by the EPA. In 
light of these state regulations, in particular, this rule 
appears to me to be utterly unnecessary. Not only is the BLM 
superseding Utah's venting and flaring regulations, but it is 
doing so by usurping, or maybe better said as encroaching upon, 
the regulatory powers reserved for the EPA.
    So separate and apart from this, you have the state 
overlap, and then separate and apart from the state overlap, 
you have overlap within the Federal Government between BLM and 
EPA.
    And it is not as though the state is doing a bad job of 
this, in my state. In 2015, Utah decreased the volumes of gas 
vented and flared from all wells, whether we are talking about 
new wells or existing wells, by 61 percent. I mean, this is 
pretty significant.
    Earlier today, I met with elected officials from Uintah 
County, Utah, where a whole lot of Utah's oil and natural gas 
production occurs. Utah's oil and natural gas industry today 
is, you might say, kind of on life support. As a result, 
unemployment in Uintah County has risen to nearly ten percent.
    With regulations like this one, regulations that I consider 
unnecessary and extraordinarily onerous, regulations like this 
one, I can only wonder whether the Administration wants to 
snuff it out completely.
    Is it the opinion that regulations in place in Utah, 
regulations imposed by the State of Utah, are insufficiently 
regulating methane venting and flaring within Utah?
    Ms. Leiter. So there are some very good examples from 
states, including Utah. We have tried to learn from those. But 
the landscape of state regulation is uneven, and the aim of the 
Administration, and really its obligation, is to reduce the 
waste of these resources from production on Federal lands and 
to do that in a consistent way across the country for all oil 
and gas production across Federal lands.
    Senator Lee. I guess I struggle a little bit with the fact 
that, to the extent that the regulation in Utah by the State of 
Utah is sufficient, I wonder why then you are willing to throw 
out the Utah regulations.
    Ms. Leiter. The aim is not to throw out Utah's or any 
state's regulations. There is a capacious variance provision in 
the act for any state that seeks to demonstrate that its 
regulations are comparable and doing what our regulations would 
do. Any state that establishes that, operators within the state 
would then be able to follow the state's regulations rather 
than these.
    Senator Lee. I would hope that you would simply exempt Utah 
from the rule in light of the fact that we have had great 
success with it.
    Thank you, Mr. Chairman. That is all my time allows for.
    Senator Barrasso. Thank you, Senator Lee.
    Senator Heinrich.
    Senator Heinrich. Thank you, Mr. Chair.
    As some of you know, last spring, NASA announced the 
discovery of a large methane hotspot over the four corners area 
in northwestern New Mexico. Since that time, I have heard from 
many of my constituents who are worried about what that hotspot 
means for our climate and for our public health in the area. I 
have also heard from a number of local elected officials who 
want to make sure that the State of New Mexico is getting the 
full benefit from the royalties it is entitled to and not 
losing out because of poorly maintained wells.
    I do not think any of us up here support waste. Natural gas 
is an important energy source and too valuable of a commodity 
not to take all practical steps to capture it and to put it to 
beneficial use.
    To be clear, I support Federal efforts to reduce waste, but 
I also believe there needs to be a balanced approach that 
encourages producers to reduce emissions without inadvertently 
causing producing wells to be capped. My focus is on making 
sure that efforts to reduce leaks from wells on Federal lands 
are done in a way that is technologically feasible and 
prioritizes the biggest sources first.
    Focusing enforcement on the biggest emitters and on the 
well components that are most likely to leak can reduce waste 
and pollution without imposing unnecessary costs on producers. 
I also think it is highly worthwhile to look at Colorado's 
example, and other state regulatory models, to see where there 
are areas that can be applied to production on Federal lands 
broadly.
    Ms. Leiter, I want to start with you and ask a question 
regarding the Colorado model. I believe that you are familiar 
with the consensus approach that was developed by Governor 
Hickenlooper in Colorado to reduce waste from venting and 
flaring.
    Is BLM open to considering modifications in the final rule 
along the lines agreed to in Colorado, and do you look to 
Colorado's approach as a model for this rule?
    Ms. Leiter. We certainly look to Colorado's approach, and 
we are open to considering any approaches that we see out 
there, or that are submitted to us in public comment.
    If you are referring specifically to focusing the leak 
detection, that specific aspect of it, we are looking hard at 
the data that are submitted to us in terms of whether there is 
a way to focus leak detection on those sources that are leaking 
at the highest rate or the largest volume. A lot of the data 
that have been submitted suggests that there may not be a way 
to focus, but we are looking to see whether there is a way to 
find those sources.
    Senator Heinrich. Mr. Boccella, would you agree with that 
position, and can you talk a little bit about whether or not 
your OGI technology that you talked about in your testimony has 
been used widely in the natural gas basins in Wyoming and 
Colorado that are under current existing waste prevention 
rules?
    Mr. Boccella. Yes. This technology has been around for over 
a decade now, so really, as a technology company, we have to be 
able to provide some kind of technology that traditionally can 
provide a return on investment for it to be adopted.
    So well before any regulatory entity really, I think, even 
knew what this technology was or started to evaluate this 
technology, we have seen considerable growth out of states like 
Wyoming, Colorado, Utah, and New Mexico, just based on 
production, again because the goal is to keep as much product 
in the pipe.
    So with that said, we have seen any company that employs 
more consistently detection and repair programs using our 
technology, that it has moved them in a direction toward being 
more profitable, for sure. I would have to assume that also 
reduces waste.
    Senator Heinrich. Because your technology is both visual 
and sort of intuitively volumetric, you are able to utilize it 
to focus on the biggest issues first and then move on to 
smaller issues over time?
    Mr. Boccella. That's correct, yes. We do considerable tests 
to ensure that we can see the small leaks as well, but 
obviously anybody who is trying to do this in an efficient 
manner is probably going to start with the biggest first.
    So we feel that the core benefit of our technology is the 
ability to very, very quickly, immediately assess the 
situation, so that you can understand where the big stuff is 
coming from, and you can try to reduce that.
    Senator Heinrich. Great. Thank you all.
    Thank you, Mr. Chairman.
    Senator Barrasso. Thank you.
    Senator Daines.
    Senator Daines. Thank you, Mr. Chairman.
    In Montana, oil and gas activity is at its lowest level in 
decades. It is clear our Federal Government needs to be better 
at incentivizing production, recognizing we are facing some 
real headwinds now in pricing. I have heard from concerned 
Montanans this proposed rule does exactly the opposite.
    Montana has immense oil and natural gas potential. In fact, 
in coal potential, we have more recoverable coal than any state 
in the union, yet we are ranked 19th in total oil and gas 
production.
    What is even more disheartening is our applications for 
permits to drill in Montana have dropped 80 percent from 2008, 
and that is significantly more than the overall national drop 
of 47 percent. America has great opportunity to responsibly 
grow our production and meet domestic and global demand. This 
not only benefits us, it benefits our allies overseas, as well 
as ultimately securing our own energy future.
    I am also very proud of the fact, as Americans, we can now 
claim we are the world's leading producer of oil and liquids, 
surpassing both Saudi Arabia and Russia, and that puts us in a 
much more secure place economically and from a national 
security viewpoint.
    Unfortunately, rules like this one coming out of the 
Administration, like the ones we are discussing today, seem to 
have the unintended consequences of stifling innovation that 
states and the private sector, I believe, are capable of 
accomplishing.
    By the way, I think our record levels of oil and oil 
liquids production in the world, now that we are number one, is 
not because of the Administration, but in spite of it, we got 
there. Thanks to American innovation, we are now the world's 
leader.
    For Ms. Sgamma, a question. The BLM contends the rule would 
result in a net benefit of up to $188 million to the public. Do 
you think the taxpayer would ultimately lose out on royalty 
revenue under the proposed rule?
    Ms. Sgamma. BLM's numbers are that the rule would cost $161 
million annually, and it would return $11 million in royalties. 
So only by the government accounting would that be considered 
cost-effective.
    Now we did a full assessment of the rule. If you look at 
the full cost of the rule, plus a realistic natural gas price--
which BLM used $4. We haven't seen $4 for NCF for quite some 
time. If you do that, you find that the rule is actually 
delivering $90 million in benefit, but delivering $1.26 billion 
in cost.
    So it is extremely not cost-effective, and that $11 million 
in royalties that BLM is claiming will be captured by this rule 
is actually $3 million at today's natural gas price, a drop in 
the bucket compared to the $2.1 billion in royalties----
    Senator Daines. So net-net, in terms of we sit up here on 
this dais as U.S. Senators, ensuring we are responsible 
stewards of the American tax dollars, you are saying that we 
will lose money because of this, not make money.
    Ms. Sgamma. Yes. In fact, getting $3 million in royalties 
will actually lose $65 million in Federal corporate income 
taxes. So that is not a cost-effective rule.
    Senator Daines. It sounds like D.C. math to me.
    Ms. Sgamma. Government accounting, yes.
    Senator Daines. Ms. Leiter, included in this venting and 
flaring rule is a proposal to amend BLM regs to remove the 
fixed 12.5 percent royalty rate and instead establish what the 
BLM terms a base rate of not less than 12.5 percent.
    What does BLM mean by the term ``base rate'' and what are 
the criteria and process set forth in the proposed rule to 
determine what the rate would be for different wells?
    Ms. Leiter. So all of the proposed rule aims to do right 
now is to ensure that our regulatory authority has a similar 
scope to our statutory authority. The statute under which we 
are operating sets the royalty rate at not less than 12.5 
percent. The BLM had a regulation in place that set the rate at 
12.5 percent.
    All we seek to deal to do, with the recommendation of the 
GAO, is ensure that we have the same regulatory authority as 
the statutory authority we have always had.
    Senator Daines. But what that does is it creates a lot of 
uncertainty in understanding and trying to put a pro forma 
together of understanding what used to be a fixed rate is now 
something that becomes variable and it can go up.
    Ms. Leiter. There is no intention now to raise the rate.
    Senator Daines. If there's no intention, why not keep it 
fixed?
    Ms. Leiter. Because the BLM needs, and the GAO strongly 
recommended that the BLM have, the authority to respond in a 
more nimble way as market conditions change.
    Senator Daines. Ms. Sgamma says the taxpayer loses out on 
this. What does your math say?
    Ms. Leiter. On this rule?
    Senator Daines. Correct.
    Ms. Leiter. Our math suggests, and I stand by our math, I 
do not think it is government math, our rule rests on an 
assessment of the costs of the rule to companies as well as the 
benefits of the rule in terms of benefits to companies of gas 
that is captured and can be sold; benefits to the American 
public in terms of gas that is captured instead of vented or 
flared and can be sold, and royalties can be realized; and 
then, finally, significant benefits to the American public by 
avoided methane emissions.
    Senator Daines. If I am sitting here thinking about 
investment, what is the net benefit in dollars to the American 
taxpayer based on your math?
    Ms. Leiter. Our estimate is a range of $115 million to $188 
million per year. That is with certain assumptions.
    Senator Daines. Okay, so both of you cannot be right. There 
is a huge disparity here.
    Ms. Sgamma, your number was with a ``B.'' I would be 
curious, I would like to have this reconciled in terms of 
looking at the assumptions here, because obviously there is a 
different set of assumptions and a different kind of math here 
with a very, very different outcome here in terms of the 
mathematics.
    Ms. Leiter. Well, I would just say we have a multi-hundred-
page regulatory impact analysis that is out for public comment 
right now, and we would welcome Ms. Sgamma and her organization 
to submit their numbers, and we will take a look.
    Ms. Sgamma. We will be commenting, but most of that is 
based on very tenuous, very fuzzy math, and the social cost of 
methane. We will go into detail on why that math is very 
faulty.
    Senator Daines. It sounds like there might be sensitivity 
in terms of pricing as well. You had questioned the $4 number 
as well. There are some pretty important assumptions here that 
might lead to very disparate outcomes here in terms of the 
mathematics.
    Mr. Chairman, I see that I am out of time here, but I will 
take a second round.
    Senator Barrasso. Thank you.
    Senator Franken.
    Senator Franken. Okay, I am trying to come to grips with 
some of the arguments here.
    Ms. Sgamma seems to say that BLM is doing this under the 
Clean Air Act. That is not my understanding. My understanding 
is that you are doing it under wise public use. Is that right, 
Ms. Leiter?
    Ms. Leiter. Well, specifically, under the Mineral Leasing 
Act, which requires that we use ``all reasonable precautions to 
prevent waste of oil or gas developed on the public lands.''
    Senator Franken. Right, that is your authority here.
    Ms. Leiter. Yes.
    Senator Franken. So I do not think there's any question. I 
think there are benefits to our air. I think there are benefits 
in terms of the amount of carbon and in terms of greenhouse 
gases, but my understanding was that you have the authority to 
do this. This is on Federal lands.
    A couple other things that confused me. The reason that 
there is less drilling now, or oil and gas coming out of 
Montana I think is because of the price. The price is low 
because production is so high, and that is because fracking and 
horizontal drilling and all that came out of work that the 
Federal Government did with industry.
    You said no, Ms. Sgamma, but you are wrong, when I started 
saying----
    Ms. Sgamma. I would take more credit from industry than the 
Federal Government on that one.
    Senator Franken. No, but I was about to say--you cannot 
deny that the Federal Government had a role in this, can you?
    Ms. Sgamma. I'm not denying that.
    Senator Franken. Okay, then why shake your head? In other 
words, I am feeling a little bit of a heavy bias coming from 
you. The BLM has the authority to do this.
    I would also think that states that are doing this well, 
like Utah, Colorado, and Wyoming, would actually have an 
interest in having this be a uniform rule, because I know that 
when Minnesota companies are doing things by more stringent 
standards than other states, if the other states are 
capturing--in this case it would be about capturing methane, 
which, when it is vented, is, in the long term, about 30-some 
times worse as a greenhouse gas. Those Minnesota companies 
would be happy that the Federal Government was putting out a 
uniform regulation. It would make me more competitive.
    So I do not understand. I guess we are going to do a second 
round.
    We saw in Paris almost 200 nations come together. Part of 
this revolved around transparency and the proper measure of 
emissions. If we demand that other countries properly measure 
emissions, I think we have to do that ourselves.
    I am concerned about undetected methane leaks. We cannot 
reduce our greenhouse gas emissions if we do not even know they 
are happening in the first place.
    Ms. Leiter, in your experience, how common is it for oil 
and gas operators to have significant methane leaks and how 
long does it typically take for them to be detected?
    Ms. Leiter. Well, to be honest, under the notice to lessees 
4A, that this replaces, we did not have great recordkeeping 
requirements in place. One aim of this rule is to improve the 
information that we have about how much venting and flaring is 
going on and also the extent of the leak problem.
    So sources that are venting or flaring above a certain 
threshold amount would have to be reporting that venting and 
flaring, and all sources would have to be keeping clear records 
of their leak detection programs and the results of those 
programs and would have to make those leak detection reports 
available to the BLM upon request.
    Senator Franken. Okay, well, I am going to be running out 
of time now, and I want to respect other Senators' time. I hope 
I can stick around for a second round, but if not, thank you 
all for your testimony.
    Senator Barrasso. Thank you, Senator Franken.
    Before turning to Senator Hoeven, Ms. Sgamma--I will take 
this against my time--is there anything else you would like to 
add about the issue of government versus private activity 
related to the significant increase in oil and gas production?
    Ms. Sgamma. Well, industry is the one who has made billions 
of dollars in investment. There was some initial technology 
developed with DOE in the 1990's, but industry has taken it far 
beyond that.
    I would really like to address the reason that we regulate 
at the state level. It is because, as you know, the resources 
in Wyoming are quite different than the field in the Bakken or 
the Permian in New Mexico, different fields, different 
topography, different geology, different gas composition. You 
have associated gas at high volumes in the Bakken, not so much 
in your Wyoming fields. So the reason we regulate at the state 
level is for those differences.
    Senator Barrasso. Thank you.
    Senator Hoeven.
    Senator Hoeven. My initial questions are for Deputy 
Assistant Secretary Leiter.
    Welcome to all the witnesses. Thank you for being here.
    In September 2015, the EPA proposed methane emission 
standards for new production sources. That was September 2015. 
In February 2016, the BLM proposed its own methane regulations, 
resulting from production on Federal lands. So that is February 
2016. Then in March 2016, the EPA announced the agency will be 
proposing methane emission regulations on existing sources. 
These are all on top of state-led efforts to decrease fugitive 
emissions, and I believe that states should have primacy to 
regulate oil and gas operations.
    So my first question is, is it redundant to have BLM-
proposed rules in states that already have been addressing 
prevention of gas waste, so where states are already acting?
    Second, is there is a scenario where projects will need to 
comply with the state methane program, a different BLM methane 
program, and a different EPA methane program? And is that 
necessary and reasonable?
    Ms. Leiter. Thank you for your question, Senator.
    So we are well-aware of the very proactive efforts that 
North Dakota is making to control this problem in North Dakota. 
And the aim of the rule is to first learn from what states are 
doing well and to try to align requirements with state 
requirements where possible. But states are regulating 
different aspects of the problem and not always regulating 
consistently. So the other aim of the BLM rule is to ensure 
that consistent and sensible rules apply uniformly across 
Federal lands.
    With respect to EPA's rules, we are working closely with 
EPA on the things that we both regulate to try to ensure that 
our regulations are consistent with theirs or, where they 
differ, to ensure that compliance with EPA's regulations would 
be deemed compliance with ours as well.
    But we have a different aim. Our aim, as I have said, is 
waste reduction. It is not just our aim but our obligation 
under our statutory authority. So our rules would extend to 
certain aspects of the problem that EPA's rules don't cover, 
such as flaring.
    Senator Hoeven. So you have the state regulating methane 
emissions, you have BLM doing it and you have EPA doing it. You 
can see how our producers are in a difficult situation trying 
to comply with all three, and there may be differing 
requirements.
    Is there some way you can bring this together and make it 
simpler? That is the whole idea with state primacy, that if the 
state is taking the necessary steps and they are giving 
primacy, as we do in many regulatory programs with the state 
implementation plan for energy regulation and good 
environmental stewardship, why not do that here? And does BLM 
have a process to allow that, so if the state is stepping up 
and doing the job that you can then grant the state primacy or 
give them an exemption? If so, how do we accomplish that? How 
do you do that?
    Ms. Leiter. So that cooperative federalism regime certainly 
applies under the Clean Air Act. It isn't as relevant to the 
BLM's obligation under the Mineral Leasing Act to control waste 
of the public's oil and gas resources from Federal lands where 
the BLM has jurisdiction.
    But that said, we are working hard to make sure that the 
rules are as consistent as possible. We are talking to the EPA 
on a regular basis, we have consulted with North Dakota and 
other states, and we have included a variance provision such 
that any state that can establish that its regulations are as 
effective as ours in controlling this problem could establish 
essentially primacy, that it would be the state rules that 
would apply in those cases rather than the BLM rule.
    Senator Hoeven. Is there a process where we can work with 
the BLM to get an exemption, so the state, if they are 
undertaking the action, which, as you acknowledged, we are 
working very aggressively to do in North Dakota, as one 
example, where we can get an exemption to go ahead and do it 
and know that we are meeting the standard so they do not have 
to also go through the same regulatory approval for both BLM 
and EPA as well?
    Ms. Leiter. That is the intent of our variance provisions.
    Senator Hoeven. Are those in place?
    Ms. Leiter. The rule at the moment is out for public 
comment, so we are going to have to look at the comment that we 
get on the variance provisions and make sure that we hone them 
for the final rule. But we would be interested in, certainly, 
your state's and other states' comments on whether those are 
adequate and would be effective.
    Senator Hoeven. I have some follow-up, so I can wait for 
another round.
    Senator Barrasso. There will be a second round. I will 
finish my first-round questions.
    Mr. Parfitt, in your testimony, you state Wyoming and EPA 
already regulate what the BLM is attempting to regulate under 
the guise of waste prevention and royalty accountability. You 
explain that portions of the BLM's proposed rule are designed 
to regulate air pollution, which is a matter that Congress 
delegated to the states and the EPA, not to the BLM. You go on 
in your written testimony to say the BLM has historically 
recognized the state's air quality primacy and deferred to the 
state on air quality issues. So finally, you conclude the BLM's 
newfound interpretation of authority to regulate air quality 
above and beyond state and EPA requirements is, at best, I 
think you said arbitrary and unreasonable.
    Ms. Leiter, my question for you is, what has changed? Why 
is the BLM now in the business of regulating air quality?
    Ms. Leiter. Well, I do not think I can say it as well as 
Senator Franken did. I will try.
    Senator Barrasso. Nobody can. It is okay.
    Ms. Leiter. I will try.
    Our obligation under the Mineral Leasing Act is to regulate 
the waste of natural resources. It happens that in this case, 
in wasting natural gas, it goes up into the air. So by 
regulating that waste, we will have incidental very positive 
effects on air quality. But it is not our aim to regulate air 
quality. It is our aim to reduce waste.
    Senator Barrasso. Mr. Parfitt, would you like to respond?
    Mr. Parfitt. Thank you, Senator.
    Our position is that this is regulation of air quality. It 
is a matter that has been delegated to the states, and it will 
refer back to the December 2005 letter from the BLM where they 
state and acknowledge the authority for air quality is with the 
state.
    If I could just read this, this is a quote from the letter 
we received in 2005, ``It has been administratively determined 
that BLM does not have the authority to regulate air quality. 
That authority rests with the Wyoming Department of 
Environmental Quality.''
    You have a situation where EPA has recently come out with 
their rules for new and modified sources. That is still under 
final review by EPA. They are proposing to look at existing 
sources for methane through an information collection request 
process.
    So what you end up with is a duplication of rules from the 
BLM, from the EPA, and the state, which causes confusion and 
inefficiencies, in our view.
    Senator Barrasso. Mr. Olguin, would you like to add 
anything on that?
    Mr. Olguin. Yes, thank you.
    From our perspective, of course, being a checkerboard 
reservation, having this level of overregulating components 
here is going to create that problem of who regulates who. I 
think even as simple as, from my perspective, if BLM is 
regulating the air quality, who is regulating the minerals 
aspect, which is BLM's component?
    I think from our stance here, we have enough regulations 
governing Indian country as it is, and more regulations just 
create problems for Indian tribes and their economies. And we 
struggle very hard to maintain income for our people, our 
lands, and this is across Indian country. I think it is just 
another step to provide that paternalism from the Federal 
Government.
    Senator Barrasso. Ms. Leiter, where do you believe BLM's 
jurisdiction ends and the EPA's jurisdiction begins, with 
respect to methane emissions?
    Ms. Leiter. Well, I can certainly tell you that our 
jurisdiction ends where the resources, the land where the 
resources are non-federal.
    With respect to the lands and the minerals that we do 
regulate, I believe we have not just the authority but the 
obligation under the governing statute to try to reduce waste 
of the resources and to do that in as reasonable a way as 
possible.
    We do recognize the jurisdictional complications, certainly 
in the checkerboard areas, and our practice in the past has 
been to work with states or with the tribes where those issues 
arise.
    Senator Barrasso. Isn't BLM just trying to regulate 
existing sources of methane in a way that even the EPA is not 
allowed to under the Clean Air Act?
    Ms. Leiter. Well, EPA is not doing so under the provision 
that it is currently acting under, but EPA under the Clean Air 
Act is beginning to investigate the possibility of regulating 
existing sources. And it is our aim to set up our regulations 
such that compliance with EPA's regulations, where applicable, 
would be deemed to be compliance with ours as well.
    Senator Barrasso. Mr. Parfitt, I see a smile. Do you have 
anything you would like to add on to this? Then, Ms. Sgamma, I 
am going to ask you the same question.
    Mr. Parfitt. Thank you, Senator.
    Under the Clean Air Act, EPA would have to go through what 
is called the 111(b) process to regulate new and modified 
sources before it can establish regulation under 111(b) for 
existing sources.
    Senator Barrasso. Ms. Sgamma, anything additional?
    Ms. Sgamma. When we got this venting and flaring rule, we 
noticed it looked a lot like EPA's new source performance 
standards. In fact, there were some cut-and-paste that was a 
little bit interesting, if not funny at times, because it just 
did not apply well.
    So we will be cutting and pasting our comments from EPA's 
Quad-O regulation and putting that in our BLM regulation as 
well. It is talking about tons per year. It is talking about 
controlling emissions. That is clearly within the realm of EPA, 
not within the realm of BLM.
    Senator Barrasso. Thank you.
    We will now start a second round of questioning.
    Senator Daines, we will start with you.
    Senator Daines. Thank you, Mr. Chairman.
    Ms. Sgamma, I want to follow up. We got in the discussion a 
little bit about the impact on climate change, and I assume 
that BLM's proposed rules intend to regulate the capture of 
methane, which is a pollutant in the atmosphere, in an attempt 
to address climate change.
    How effective is the proposed rule in impacting global 
emissions in a meaningful way?
    Ms. Sgamma. By BLM's number, it would reduce emissions by 
0.0092 percent. So that is a very de minimis amount for a large 
cost.
    And it is putting at risk the much larger benefit we 
provide on the electricity generation end. Electricity 
generates ten times the emissions that producing sector does, 
the oil and natural gas producing sector. And we deliver those 
benefits by providing those climate benefits in a sector that 
has ten times the emissions.
    If we constrain natural gas production, we put that much 
greater climate change benefit at risk.
    Senator Daines. We saw a similar kind of analysis when we 
looked at the impact of the EPA Power Plan. They ran it through 
the EPA's own algorithm, Magic, it's called. The impact on 
global temperature between now and 2100 was 0.02 degrees 
centigrade, back to using the term de minimis.
    Ms. Leiter, are these numbers coming out of BLM in terms of 
this 0.0092 percent reduction in emissions?
    Ms. Leiter. So I am not sure exactly what number Ms. Sgamma 
is pointing at, but the Supreme Court has been very clear that 
agencies have the regulatory authority to take the steps that 
are needed toward what is a more comprehensive solution. The 
BLM is not under any illusion that it is solving climate change 
with this rule, but it is taking a step----
    Senator Daines. I understand, but we have to weigh 
tradeoffs in terms of a cost-benefit analysis, and there is 
some disagreement in terms of what the cost will be here.
    Ms. Leiter. Certainly.
    Senator Daines. The benefit, arguably, is perhaps de 
minimis. We have seen this with the EPA Power Plan, literally 
0.02 degree impact centigrade on climate temperature between 
now and 2100 for what will be a devastating effect on our 
economy in Montana.
    This is just looking at these tradeoffs, which, as always, 
what we have to do here is balancing pros and cons.
    Let me go back to Ms. Sgamma for a moment. You mentioned in 
your written testimony that the industry has an interest in 
capturing methane waste. I am wondering what the industry is 
doing to improve efficiencies, then, to manage methane waste, 
and what are some of the challenges to bringing that product to 
market?
    Ms. Sgamma. Well, it's not always in the control of the 
operator to capture that methane, because in the case of BLM, 
we have a backlog of rights-of-way, so we have wells where we 
cannot get the approval to put in the gas-gathering lines and 
the pipeline to collect that natural gas, so we have no choice 
but to flare it.
    Even when lines are put in place, there are maintenance 
issues, there are downtimes on the pipe, or there could be 
situations where new wells come online, and then the pipeline 
reaches maximum. So there are times that there will be 
downtimes, even if you are connected to that pipeline.
    The way BLM has interpreted this in the past is, if it is 
reasonable--they are determining what is avoidable and what is 
unavoidable. Certainly, maintenance issues, operational issues, 
pipeline capacity issues, gas plant capacity issues, where 
there is nowhere to put your natural gas, that is, certainly, a 
situation which should be considered unavoidably lost.
    Senator Daines. My understanding is when excess methane, in 
terms of you require some permitting for gathering lines as 
well. I mean, that is part of the solution here, and is it also 
a barrier as well?
    Ms. Sgamma. Well, BLM could virtually overnight decrease 
flaring rates by simply approving the rights-of-way 
applications before it now for gas-gathering lines and 
pipelines so that we could connect to that pipeline, get that 
gas to market.
    Senator Daines. How significant would that be in terms of 
reducing the amount of flaring?
    Ms. Sgamma. I don't have a number to quantify that, but I 
think Senator Barrasso had a number close to 900 rights-of-way 
that are awaiting approval and some of those are for over two 
years. So in the meantime, that operator has had to flare for 
two years.
    Senator Daines. If that is a possible barrier here to 
trying to do the right thing to reduce the methane emissions, I 
mean, turning back to Ms. Leiter, does the BLM have a policy 
for prioritizing permitting of gathering-line systems to 
capture gas which would otherwise be vented or flared, and then 
we could have it transported to consumers?
    Ms. Leiter. So I have a couple pieces of the answer to that 
question.
    The first is, no, we don't prioritize rights-of-way based 
on some estimate of the flaring that would otherwise occur, but 
we are working hard to reduce backlogs.
    My understanding is that in some states where there are 
significant numbers of rights-of-way pending, that can be due 
to market conditions. For example, in Farmington, New Mexico, 
something like 60 of the pending applications are actually 
awaiting additional information from the applicant, and the 
applicants have actually asked us to hold the applications 
until market conditions improve.
    But the other point to make is that at least 20 percent of 
this problem is due to leaks and things like that that can be 
repaired, where the presence or absence of a pipeline is 
unrelated.
    Another piece of the problem is that there needs to be more 
proactive planning by operators as they drill, more 
communication with midstream companies, et cetera. One purpose 
of this rule is to request, require, that operators submit a 
capture plan at the time of drilling, so that we can ensure 
that they have thought ahead about how to make sure that the 
capture infrastructure is in place in a timely way.
    Senator Daines. Thank you. I am out of time. Thank you for 
your comments.
    Senator Barrasso. Senator Franken.
    Senator Franken. Okay, again, I am just kind of listening 
to testimony and have questions.
    I hate to dwell on this, Ms. Sgamma, but you're shaking 
your head on the Federal Government's role in fracking and in 
getting natural gas and oil out of shale, which we have seen do 
tremendous things. In fact, when he was Governor, Governor 
Hoeven discovered all that. He personally did that. I wish he 
would do it in Minnesota.
    Senator Hoeven. Thank you. I'd like to thank my colleague 
from the great state of Minnesota for that.
    Senator Franken. Yes.
    Ms. Sgamma, you did this thing where it is like, well, yes, 
but the industry has put billions of dollars into it. Where did 
we get microseismic imaging that makes this possible? How much 
natural gas did we get out of shale in the 1990's?
    Ms. Sgamma. Not much.
    Senator Franken. Why?
    Ms. Sgamma. Because we hadn't applied the technology and 
developed it to such an extent that we could go after these 
shale deposits.
    Senator Franken. And who did that?
    Ms. Sgamma. Primarily the industry. I know you want to 
emphasize the role of----
    Senator Franken. Who did microseismic imaging? Who did 
that? Could you answer my question?
    Ms. Sgamma. Some of the original basic research was, 
indeed, done by DOE.
    Senator Franken. Yes, that is my point.
    The point is, I have had this answer before, too, when I 
had a witness in the HELP Committee say the Federal Government 
does not create jobs. I said, well, we are on C-SPAN. C-SPAN is 
the Cable Satellite Public Affairs Network. Who put up the 
first satellites? You can stream us on the Internet. Who 
developed the Internet? He said, well, yes, the Federal 
Government developed the Internet, but private industry has put 
billions and billions and billions of dollars into it. That is 
the whole point, that research by the Federal Government has 
helped to create this industry. That is the point. My 
colleagues seem to forget the role of the Federal Government in 
research and development of these technologies.
    Now let's go to this 0.0092 percent of emissions. Of what 
emissions?
    Ms. Sgamma. Global greenhouse gas emissions.
    Senator Franken. Global. Okay, global.
    We are trying to get the rest of the world to go along with 
us. My colleagues do not seem to recognize the seriousness of 
climate change, and that this is a global problem.
    So we are talking about this one rule doing 0.0092 of 
global emissions. If we are trying to get the rest of the world 
to go along with this, we have to demonstrate some leadership, 
too, and this is significant.
    If you just take that, your estimate from your written 
testimony, and a modest estimate of the social costs of carbon, 
a calculation of the cost of climate change to society, 
emission reductions from this rule alone would prevent more 
than $170 million in economic, public health, and environmental 
damages per year.
    You know, I remember, we have had hearings here in this 
committee where Republicans would not show up, because they 
knew the hearing was about climate change.
    When you were the ranking member, you would show up, but 
that would be it. So if we were to have a hearing on the rising 
sea level, you would be the only Republican here.
    I remember we had one on wildfires, and because we had Jon 
Kyl talk about the terrible wildfires in Arizona that year, 
Republicans showed up to hear his testimony.
    Well, right after him was the director of the Forest 
Service. I said to him, do your scientists tell you that these 
more intense fires, the longer season of the fires, the size of 
these fires, is exacerbated by climate change? And he said, 
``yes.''
    This is serious. I am a grandfather. We are leaving this 
planet to our children, our grandchildren, and our posterity. 
This is serious. And I do not like it when I see this 
existential problem that we are facing so diminished by 
witnesses and, frankly, by my colleagues. This is a crisis that 
we are facing.
    Thank you.
    Senator Barrasso. Senator Hoeven.
    Senator Hoeven. So I want to turn to Ms. Leiter again.
    Last month the North Dakota Pipeline Authority reported 
that 87 percent of the gas produced in North Dakota was 
captured and sold, so 13 percent was flared. As they say, in 
North Dakota, we have an aggressive program to capture this 
methane, not only from a standpoint of doing the best we can 
for good environmental stewardship but also so that we don't 
waste the resource.
    But of the 13 percent that was flared, the agency 
estimates, and this is our Pipeline Authority, that ten percent 
of that flared gas was due to challenges or constraints on 
existing gathering systems.
    One of the challenges here is to get more infrastructure 
out there, and to get more infrastructure out there, we need 
more gas-gathering systems.
    So how do we expedite that permitting process on Federal 
lands? Senator Barrasso and I have a bill to try to expedite 
that, but we have to be able to build the infrastructure in 
order to capture that gas.
    Ms. Leiter. So the BLM is doing a lot to speed the approval 
of rights-of-way. We had a strike team that was deployed over 
the last couple years that would go out to individual field 
offices to help speed the approval of pipeline rights-of-way. 
We have increased training.
    We have sought and received from the Office of Personnel 
Management authority to give a higher pay grade to 
professionals in certain areas, and we have a couple of key 
offices that are fully staffed with respect to pipeline 
approval for the first time in years.
    We did have trouble with staffing during the boom years, 
but we have worked to make ourselves more competitive and to 
increase staffing in those key offices.
    Senator Hoeven. But can you see how these things have to 
fit together? In other words, if you are going to come out with 
regulations on methane emissions and, at the same time, you 
have to approve the infrastructure that our producers and 
operators are trying to build in order to capture, the two have 
to work together.
    So you have to make sure that, as you develop your rule--
the two things I am trying to bring together here is you have 
BLM, EPA, and the states, and our producers are trying to meet 
the regulations of three different entities. At the same time, 
they have to get approvals from you to build the infrastructure 
needed to capture that gas.
    Again, we all want a clean environment. We want to make 
sure we are capturing that gas from an environmental 
standpoint. But those producers want to capture that gas so 
they can sell it and get revenue as well, so there is a 
financial aspect.
    But they cannot do it if, on the one hand, they cannot get 
approval for the gas-gathering systems, and on the other side 
they have to meet a regulation they cannot meet without you 
giving them a permit on the other side. So you have to do two 
things. You have to help them through the permitting process, 
and then you are going to have to come up with a way whereby, 
if the state is doing this, that the Federal agencies work with 
the state so the operators know that they are meeting the 
necessary requirement. You have to bring those two things 
together to make this work.
    Ms. Leiter. So I think that we are trying to do all of 
those things. We are trying to expedite right-of-way approvals. 
We are trying to work with the states to try to make sure that 
we are incorporating the best of the state rules, and that 
states could seek a variance for comparable state rules.
    But we do see in certain offices, including around 
Dickinson, for example, there is a significant amount of 
flaring that goes on and essentially no right-of-way 
applications pending. I think there are four pending in the 
Dickinson office at the moment.
    Senator Hoeven. Four pending?
    Ms. Leiter. Right-of-way applications.
    Senator Hoeven. Right-of-way requests?
    Ms. Leiter. Yes.
    Senator Hoeven. Okay. But you are telling me there is going 
to be some way that you are going to bring this process 
together so that one oil and gas project does not have to get 
approval from the state methane program, from the BLM rule, and 
the EPA rule, all of which could be different? Somehow you are 
going to work with our industry and industries across the 
country, states across the country, to bring these together?
    I mean, again, they can only do this if you help them with 
a rational regulatory regime that also matches the approval 
process. In other words, you have to help them do it.
    Ms. Leiter. Our aim is certainly not to create duplicative 
regulation. The rules are out, as I said, for public comment. 
So in places where North Dakota sees inconsistency with North 
Dakota's rules, we would love to hear about it in the comment 
process.
    Senator Hoeven. What I am saying is, as you work on that 
rule, you have to provide an exemption process where somebody, 
and I believe it should be the state, can be the primary 
regulator, and as long as they are meeting or exceeding your 
requirements, that you let them take the lead and you then 
expedite the permitting process, if you want to accomplish 
this.
    Ms. Leiter. Thank you.
    Senator Hoeven. I am asking you if you agree with that or 
not, and if you are willing to try to accomplish that.
    Ms. Leiter. I certainly agree that there are many pieces to 
this puzzle, and that we are working hard to try to make sure 
that our rules mesh well with the EPA's rules and with the 
states rules, and also working hard to try to expedite right-
of-way permitting.
    Senator Hoeven. Are you willing to try to get to that one 
point of contact for the producers, so that if the state is 
meeting or exceeding your requirements, then they can be the 
primary regulator, that exemption process?
    Ms. Leiter. I am certainly willing to take that back to the 
department and consider it. Thank you.
    Senator Hoeven. Okay. Thank you.
    Senator Barrasso. Senator Hoeven, thank you.
    Senator Hoeven. Thank you, Mr. Chairman.
    Senator Barrasso. Ms. Sgamma, in your testimony, you say it 
is such a costly rule, many existing wells will be shut in and 
new wells not developed, denying the Federal Treasury much 
larger royalties than the rule would return. You explain that 
wells abandoned prematurely represent a huge waste of oil and 
natural gas resources. Yet BLM has not adequately quantified 
such waste in this so-called waste prevention rule.
    Mr. Olguin, you testified that the cost to comply will 
likely outweigh the production benefits, the production value 
of some of the low-producing wells, thereby causing operators 
to plug those wells. You also explain this will ultimately 
result in a net loss of royalty payments to the public and to 
the tribes.
    So I would also note that Governor Martinez of New Mexico 
has written to the BLM stating that preliminary estimates 
indicate that compliance with this rule will render as much as 
ten percent of New Mexico's production uneconomic, along the 
lines of your testimony.
    So, Ms. Sgamma, would you please explain how BLM should 
quantify the amount of gas and oil that will be shut in and 
left undeveloped as a result of this rule?
    Ms. Sgamma. This rule will, in effect, force operators to 
do things that don't economically make sense. When that 
happens, the result will mostly be to shut in wells. So BLM 
should adequately look at those low-producing marginal wells 
and what kind of cost structure would cause them to go into 
being shut in.
    The New Mexico Oil and Gas Association suggests that a 
large percentage of their marginal wells would be shut in with 
just $5,000 of additional cost a day. These are very low-
producing wells, so that would be one consideration.
    I think they should just look at and even consider what 
their rules will do for future production. They are not really 
looking at the full economic--all the costs that the rule will 
impose.
    Senator Barrasso. Ms. Leiter, would BLM consider taking 
steps recommended like this, prior to issuing a final rule?
    Ms. Leiter. So the proposed rule incorporates exemptions in 
a bunch of different areas where an operator could demonstrate 
that compliance with a particular requirement would cause them 
to shut in and abandon significant resources on a lease. They 
would then be exempt from that requirement. That is aimed 
specifically at the problem Ms. Sgamma identifies.
    Senator Barrasso. It seems if BLM does not take steps, it 
is truly opening itself up to the charge that this rule is not 
a waste prevention rule, but a waste promotion rule. That is 
what it sounds like the impacts are going to be locally on the 
tribes and in the states.
    Mr. Olguin, in your written testimony, you tell us that the 
proposed rule further incentivizes mineral development on non-
Indian lands within the exterior boundaries of the Southern Ute 
Indian Reservation. You explained that the BLM rule will apply 
to lands under BLM's jurisdiction only, namely trust and 
allotted Indian lands.
    Non-Indian lands within the reservation will not be subject 
to the BLM's proposed rule. You go on to talk about how the 
rule creates a regulatory-free zone within the reservation that 
will likely divert additional development and the resultant 
royalties away from Indian lands.
    So could you please discuss the importance of oil and gas 
revenues to the Southern Ute Indian Tribe and what lost revenue 
would mean to your community?
    Mr. Olguin. Yes, Mr. Chairman.
    As I stated numerous times, we are a checkerboard 
reservation. The Southern Ute Tribe being placed where it is in 
southern Colorado, that was not by choice. That was by design 
of the Federal Government.
    And I must say, listening to Mr. Franken, it kind of 
offended me in regards to the Federal Government, and I have to 
say this for the record. Hearing the great things the Federal 
Government has done, well, as far as Indian country, the 
Federal Government has not done a great job in the caretaking 
and trust responsibilities for Indian tribes.
    So when we look at every dollar, every penny, that tribes 
generate from their lands, we take that very seriously. As 
Southern Ute, we take that very seriously, when we can only 
control what we can control, which is our lands.
    With a checkerboard reservation, fee lands, lands that are 
not under our jurisdiction other than air quality, due to the 
environment commission, they can either drill a well, produce a 
well, generate revenue without any Federal oversight other than 
following the state's rules and regs. So it becomes one of 
those issues that it is easier to drill across the fence line, 
produce across the fence line, versus follow all these 
regulations from the Federal Government standpoint, which 
hinders our ability to generate revenue.
    And we are not unique to this. Indian country is the one 
that suffers from this. Again, it goes back to that situation 
of the paternalism of the Federal Government knows best for 
Indian country.
    In our case, we will review, we will dispute, we will 
debate, we will file suits. I mean, we will actually argue the 
point to say we know what we are doing. We can do it better 
than the Federal Government. We can achieve a better result, 
and we hire the right people and provide that resource to the 
tribal membership, so that we can sustain our way of life.
    Senator Barrasso. Ms. Leiter, could you explain why the BLM 
did not analyze how its rule would divert economic investment 
away from the Indian lands like we hear about with the Southern 
Utes?
    Ms. Leiter. I cannot explain it, but certainly, if those 
comments are submitted, and I believe they are included in the 
letter that I had the opportunity to read this morning, it's 
something that we can take a look at in the final rule.
    Senator Barrasso. Thank you.
    Mr. Parfitt, I want to return to the BLM's so-called 
variance process. As you state, the BLM's proposed variance 
process is not a legitimate variance process in the context of, 
as you say, cooperative federalism.
    You explain it is dissimilar to the EPA's primacy 
recognition and is subject to BLM interpretation, which creates 
this inconsistency among states and creates competitive 
advantages and competitive disadvantages.
    So would you expand upon your comments a little bit in 
terms of explaining this to the committee and for the record?
    Mr. Parfitt. Sure. When we work with our other Federal 
partners, like the Environmental Protection Agency, we obtain 
primacy. So we make a demonstration that we can implement a 
program, and then we take the lead.
    This situation is different in that it is subject to the 
BLM State Director, so there's some subjectivity. There is a 
concern that you would have inconsistency across the states 
and, quite frankly, with the BLM whether or not they would 
delegate that authority to their regional offices, which would 
create further inconsistencies within the state. And it isn't 
appealable, which is also problematic.
    Senator Barrasso. Ms. Leiter, is there anything you can do, 
from BLM's standpoint, to improve the variance process?
    Ms. Leiter. We would certainly be open to taking a look at 
suggestions that the states submit. We do not have the same 
statutory authority under the MLA that EPA has, and the same 
statutory regime that the EPA has under the Clean Air Act, 
which sort of expressly envisions this cooperative federalism 
regime. That is not true under the Mineral Leasing Act. We have 
statutory obligation to manage the lands that we administer.
    Senator Barrasso. Mr. Parfitt, is there anything that you 
would like to add on that or respond?
    Mr. Parfitt. Yes, thank you.
    Again, our concern is with consistency. And we feel, 
without that consistency, it will have administrative impacts 
on our agency from an implementation standpoint. We do believe 
that that does fall within the cooperative federalism realm.
    Senator Barrasso. Mr. Boccella, I know you are not here to 
talk about the policy standpoint, so I am not going to ask you 
questions regarding that component of this. But I understand 
that FLIR has a large share of the market for infrared cameras, 
which are used to detect methane leaks. I also understand that 
FLIR, through an organization called the Center for Methane 
Emissions Solutions, is lobbying states to adopt methane leak 
regulations. So my first question is, can you tell us the size 
of FLIR's share of the U.S. market for the infrared cameras, 
which are used to detect methane leaks?
    Mr. Boccella. So first, I think I would like to say that 
FLIR's involvement in the Center for Methane Emissions 
Solutions is not necessarily lobbying for any type of 
regulation. Our goal and CMES's goal in that entity is to 
broaden awareness of methane mitigation technologies in 
general. If a regulation chooses specific methane mitigations 
and incorporates that, that may be due to the broadening of 
awareness in general. But I don't think that it would be 
considered lobbying for a specific regulation.
    It is hard to say what the specific market share that FLIR 
has of infrared camera technology for methane mitigation would 
be in the United States. We were the inventor of this 
technology, so competition has come into play, I would say 
probably in the last five years for us. But I think it is safe 
to say upwards of maybe 70 percent to 80 percent.
    Senator Barrasso. Is it fair to assume that BLM's rule 
would be good for FLIR's business?
    Mr. Boccella. I cannot say that I am intimately familiar 
with all the details associated with BLM's rule, but if there 
are requirements for things like optical gas imaging, there is 
no doubt that that could potentially require more use of our 
technology.
    Senator Barrasso. I appreciate all of you being here today 
to answer these questions. Some of the other members of the 
committee may submit written questions to you. We ask that you 
respond. The hearing will remain open for two weeks for the 
record. Your full testimony will be made part of the record.
    Senator Barrasso. I thank you all for being here.
    This committee meeting is adjourned.
    [Whereupon, at 4:17 p.m., the hearing was adjourned.]

                      APPENDIX MATERIAL SUBMITTED

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