CMM Regulatory Compliance & Environmental Issues 5 — Questions and Answers
Question 1: What is the 'no surface occupancy' (NSO) stipulation that may be attached to a federal oil and gas lease?
- A requirement to restore the surface to pre-disturbance conditions after operations
- A lease condition prohibiting any surface use or occupancy, requiring directional drilling from outside the stipulated area (Correct answer)
- A temporary seasonal restriction on drilling during wildlife migration periods
- A requirement for the operator to obtain surface owner consent before any operations
Correct answer: A lease condition prohibiting any surface use or occupancy, requiring directional drilling from outside the stipulated area
An NSO stipulation prohibits all surface disturbance within the designated area, typically requiring operators to access the subsurface via directional drilling from outside the boundary.
Question 2: Under the Clean Air Act, what is a 'Title V operating permit' and which oil and gas facilities typically require one?
- A construction permit for any new source emitting more than 100 tons/year of any criteria pollutant
- A comprehensive operating permit for major sources emitting 100+ tons/year of criteria pollutants or 10+ tons of a single HAP, covering all applicable air requirements (Correct answer)
- An emergency variance allowing temporary excess emissions during equipment failures
- A minor source permit required for all oil and gas compressor stations regardless of emissions
Correct answer: A comprehensive operating permit for major sources emitting 100+ tons/year of criteria pollutants or 10+ tons of a single HAP, covering all applicable air requirements
Title V permits are required for major sources and consolidate all applicable CAA requirements into one enforceable document, applying to large compressor stations and processing facilities that exceed major source thresholds.
Question 3: The 'Royalty Simplification and Fairness Act' (RSFA) of 1996 primarily changed oil and gas royalty compliance by:
- Eliminating all royalties on stripper well production on federal lands
- Establishing a 7-year statute of limitations for royalty underpayment claims and shifting burden of proof in some contexts (Correct answer)
- Transferring royalty collection authority from ONRR to BLM permanently
- Requiring all federal royalties to be paid in-kind rather than cash
Correct answer: Establishing a 7-year statute of limitations for royalty underpayment claims and shifting burden of proof in some contexts
RSFA established a 7-year limitation period for federal royalty claims and modified audit and appeal procedures to streamline royalty compliance for lessees.
Question 4: When an oil and gas operator discovers a historic artifact during ground-disturbing operations on federal land, what is the required immediate action under ARPA and BLM regulations?
- Document the find and continue operations if it appears to be of low cultural value
- Stop work immediately in the area of discovery and notify BLM and the appropriate SHPO or THPO (Correct answer)
- Remove and secure the artifact to prevent vandalism, then report within 30 days
- Continue operations and report the find in the next quarterly compliance report
Correct answer: Stop work immediately in the area of discovery and notify BLM and the appropriate SHPO or THPO
Under ARPA and BLM regulations, operators must immediately halt work near any discovered cultural resource and notify BLM so qualified personnel can assess and protect the site.
Question 5: Which provision of the Energy Policy Act of 2005 exempted hydraulic fracturing from regulation under the Safe Drinking Water Act's UIC program, commonly called the 'Halliburton Loophole'?
- Section 322 of the Energy Policy Act of 2005, amending SDWA Section 1421(d) (Correct answer)
- Section 526 of the Energy Policy Act of 2005, amending the Clean Air Act
- RCRA Section 3001(b)(2)(A) Bevill Amendment
- CERCLA Section 101(14) petroleum exclusion
Correct answer: Section 322 of the Energy Policy Act of 2005, amending SDWA Section 1421(d)
Section 322 of the Energy Policy Act of 2005 amended SDWA to exclude hydraulic fracturing (except diesel fuel-based fracking) from UIC Class II well regulation.
Question 6: Under BLM's 2016 Venting and Flaring Rule (later subject to regulatory changes), operators on federal and Indian lands were generally required to:
- Report all venting and flaring events but face no royalty obligation on vented or flared gas
- Capture gas and pay royalties on avoidably lost gas, with phased-in capture percentage requirements (Correct answer)
- Eliminate all flaring within 24 months of the rule's effective date regardless of capture infrastructure
- Obtain a separate BLM permit for each individual flaring event exceeding 1 MMcf
Correct answer: Capture gas and pay royalties on avoidably lost gas, with phased-in capture percentage requirements
BLM's 2016 rule required operators to meet phased capture targets, pay royalties on avoidably lost gas, and implement waste minimization plans to reduce venting and flaring on federal and Indian leases.
Question 7: A 'Memorandum of Agreement' (MOA) under NHPA Section 106 is executed when federal agencies and consulting parties agree that a project will have an adverse effect on historic properties. What does the MOA typically specify?
- The financial penalty the operator must pay to the SHPO for causing the adverse effect
- Measures to avoid, minimize, or mitigate the adverse effects on historic properties as a binding commitment (Correct answer)
- A waiver of all further Section 106 obligations once the MOA is signed
- Transfer of cultural resource compliance monitoring to the project operator without agency oversight
Correct answer: Measures to avoid, minimize, or mitigate the adverse effects on historic properties as a binding commitment
An MOA under Section 106 is a legally binding agreement that documents the measures the agency and operator will implement to mitigate adverse effects on identified historic properties.
CMM Regulatory Compliance & Environmental Issues 5
What is the 'no surface occupancy' (NSO) stipulation that may be attached to a federal oil and gas lease?