Osage Rulemaking Committee approves proposed drilling changes to federal regs: No timeline given

PAWHUSKA, Okla. – Setting aside formal and informal requests for extensions, the Osage Negotiated Rulemaking Committee approved proposed changes to federal drilling regulations April 2.

“We are at a critical time,” Osage Minerals Council member Myron Red Eagle said. “We have to make this work. I’ve said it before and I’ll say it again: this needs to be discussed more.

“I wish this would go on some more. It needs to be looked at more deeply.”

With the April 2nd  vote, the committee’s draft will be sent on to Mike Black, director of the Bureau of Indian Affairs, and the Secretary of the Interior for approval. It will then be open to another round of public input before implementation. No time line has been given for when the new regulations could take effect.

“What is coming out of this (process) is proposed regulations,” Black said. “Purely that.”

At its March meeting, the tribe’s Mineral Council requested an indefinite extension of the negotiated rulemaking process to amend the drilling policies used in Osage County. Generating about 13,000 barrels of oil per day, the $4 billion mineral estate is the largest single-owner mineral estate in the country and is among the top five oil producing counties in Oklahoma.           

Among the changes in the proposed regulations is the implementation of the Bureau of Land Management’s standards concerning hydrogen sulfide gas, which is a natural byproduct of flared excess natural gas. Also known as “swamp gas,” hydrogen sulfide can cause dizziness, nausea, headaches, eye irritation and breathing problems within a few breaths and can be lethal to humans as well as wildlife.

“We put them in because there weren’t any standards already in place and because many of our producers were already following the BLM’s standards,” Osage Minerals Council chairman Galen Crum said.

The proposed regulations also defer to pre-existing BLM standards for gas measurement. The implementation of any other BLM regulations by the Osage Agency superintendent would have to be done in consultation with the Osage Minerals Council.

If adopted, the new regulations will increase fines for producers. Once ranging from $50 to $500, daily fines would now be between $150 and $1,000, depending on the nature of the offense.

The proposal still includes plans to increase royalty rates to 20 percent on new leases and to tie all royalty rates to the monthly average NYMEX price in Cushing, despite protests from producers. The royalty rate, about 16 percent for most leases, is currently based off of the highest posted price within Osage County.

“My purchasers are concerned about going to NYMEX,” Avant-based oil and gas accountant and landowner Nona Roach said. “NYMEX is based off of increments of 10,000 perfect barrels, which most of ours aren’t. If you want to go off of NYMEX, just hire a broker.”