By Valerie Volcovici

WASHINGTON (Reuters) - The U.S. Interior Department finalized rules on Tuesday aimed at preventing methane leaks from oil and gas production on federal and tribal lands, one of the last major Obama administration rules aimed at fighting climate change.

Interior's Bureau of Land Management (BLM) said on Tuesday the rule, updating 30-year-old regulations that govern flaring, venting and natural gas leaks from oil and gas production, could avoid wasting up to 41 billion cubic feet (BCF) of natural gas per year.

“This rule to prevent waste of our nation’s natural gas supplies is good government, plain and simple,” said Interior Secretary Sally Jewell.

“We are proving that we can cut harmful methane emissions that contribute to climate change, while putting in place standards that make good economic sense for the nation."

Environmental groups praised the rule, but industry and some western states called it unnecessary. One industry group sued BLM. The incoming Trump administration has promised to cut what it calls superfluous restrictions on energy production.

An Interior Department fact sheet said that between 2009 and 2015, oil and gas producers vented, flared and leaked 462 BCF of natural gas on federal and Indian lands, wasting as much as $23 million annually in royalty revenue.

Venting and leaks during oil and gas operations cause major emissions of methane, a greenhouse gas at least 25 times more potent than carbon dioxide.

The rule would phase in a limit on flaring over several years affecting 16 percent of oil wells, which account for 87 percent of gas flared, the BLM said.

Oil and gas operators can comply by expanding gas-capture technology or connecting wells to existing infrastructure through gathering lines.

Operators would have to use technology such as infrared cameras to detect methane leaks, invisible to the naked eye. BLM could also set and adjust royalty rates for oil and gas drilled on federal land to at or above 12.5 percent. Currently BLM has no discretion to raise the rate.

“Today’s announcement is a win for Western taxpayers. For too long, big oil companies have wasted natural gas that belongs to all Americans with no accountability," said Chris Saeger, Director of NGO Western Values Project.

“BLM is right to address methane waste from existing oil and gas facilities; these actions build on important state and federal progress already underway," said Fred Krupp, president of the Environmental Defense Fund.

Moments after the rule's release, the Western Energy Alliance and Independent Petroleum Association of America filed a lawsuit against the BLM in a Wyoming court.

(Reporting By Valerie Volcovici; Editing by Chizu Nomiyama and David Gregorio)