New Rule Forces Feds to Allow Oil & Gas Commingling, Setting Strict 2% Measurement Accuracy Standard

This bill changes the rules for how oil and gas companies operate on federal land under the Mineral Leasing Act. Essentially, it requires the Secretary of the Interior to approve applications that let companies mix, or ‘commingle,’ the output from two or more wells before the government measures the production to calculate royalties. This is a big shift because it allows mixing even if the wells have different owners, different royalty rates, or different lease percentages.

The Trade-Off: Less Surface Disturbance for More Accounting Complexity

The stated goal here is efficiency and environmental protection. If companies can mix production from several wells at one central point, they don't have to build separate measurement stations and infrastructure for every single well. This means less surface disturbance on federal lands—a clear operational benefit. Think of it as consolidating five separate mailboxes into one central delivery point to reduce trips.

But here’s the catch: when you mix oil and gas from wells that owe the government different amounts (different royalty rates), the accounting gets complicated fast. The bill requires the company to either meter every single source separately or use a shared allocation method. Whichever they choose, the measurement system must be highly accurate, keeping the uncertainty level within plus or minus 2 percent of the actual monthly volume.

Who Benefits and Who’s Watching the Books?

For the oil and gas industry, this is a win. It streamlines operations, reduces their infrastructure footprint, and likely cuts costs, especially for fields with many small, scattered wells. It gives them more flexibility in how they manage their production flow.

However, for the federal government and, by extension, the taxpayer, this introduces a serious potential headache. Royalties are how the public gets paid for the resources extracted from public lands. If you’ve got two streams of oil—one where the company owes 12.5% royalty and another where it owes 18.75%—and you mix them before measuring, the ‘shared allocation method’ becomes crucial. If that method isn't perfectly transparent and standardized, it creates an opening for potential errors or manipulation that could lead to underpayment of royalties. The 2% accuracy requirement is strict, but ensuring that level of precision across diverse, complex allocation models is a major enforcement challenge for regulators.

In short, while we gain a reduction in physical disturbance on public lands, we trade it for a significant increase in accounting complexity. The effectiveness of this bill hinges entirely on whether the government can rigorously enforce that 2% accuracy standard across every commingling agreement to ensure taxpayers get every dollar they are owed.