EPA Will Regulate Methane from New Oil, Gas Wells as Part of White House Strategy

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By Andrew Childers

Jan. 14 — The Environmental Protection Agency will directly regulate methane emissions from oil and natural gas wells for the first time as part of an Obama administration strategy expected to curb methane emissions by as much as 45 percent by 2025.

While the broad-based strategy announced Jan. 14 includes measures from the EPA, Bureau of Land Management, Energy Department and Pipeline and Hazardous Materials Safety Administration, both industry representatives and environmental advocates said the administration will likely miss its emissions target if it does not address methane emissions from the existing oil and natural gas network, something not included in the strategy.

“We really see this as an important first step in the right direction, but the administration really should go further and regulate existing sources since those sources are responsible for a majority of the problem, Jayni Hein,, policy director at the Institute for Policy Integrity, told Bloomberg BNA Jan. 14.

Methane accounted for nearly 10 percent of U.S. greenhouse gas emissions in 2012, according to the administration. Methane is a short-lived greenhouse gas that is 25 times more potent than carbon dioxide over a 100 year period, according to the EPA.

Methane emissions from the oil and natural gas sector have dropped by 16 percent since 1990, but they're projected to grow by more than 25 percent by 2025 without new measures to control emissions, the administration said. The methane strategy could reduce methane emissions by between 40 percent and 45 percent by 2025, according to the administration.

The petroleum industry said new rules are unnecessary at a time when the EPA acknowledges emissions from the sector are already declining.

“And even with that knowledge, the White House has singled out oil and natural gas for regulation, where methane emissions represent only two percent of total greenhouse emissions,” Jack Gerrard, president and chief executive officer of the American Petroleum Institute, said in a Jan. 14 statement. “Emissions will continue to fall as operators innovate and find new ways to capture and deliver more methane to consumers, and existing EPA and state regulations are working. Another layer of burdensome requirements could actually slow down industry progress to reduce methane emissions.”

Methane Directly Regulated

As part of the strategy, the EPA will propose this summer a rule to set methane and volatile organic compound emissions standards for new and modified oil and natural gas wells. The final rule is expected in 2016. The EPA in 2012 issued new source performance standards for oil and natural gas wells, but that rule did not directly regulate methane emissions. Instead, the agency said the required controls for volatile organic compounds would also reduce methane emissions by the equivalent of 33 million tons of carbon pollution per year.

The EPA said its upcoming rule will not conflict with requirements in states that have already taken steps to regulate emissions from the oil and natural gas sector.

In February 2014, the Colorado Air Quality Control Commission adopted the nation’s first statewide rule requiring oil and natural gas operations to detect and reduce methane emissions.

“We fully expect the EPA rule will align nicely with what is already in the books in Colorado,” Will Allison, director of the Air Pollution Control Division in the Colorado Department of Public Health and Environment, told Bloomberg BNA Jan. 14.

Ozone Rule Targets Methane

The EPA also plans to issue Control Techniques Guidelines to states outlining cost-effective technologies for controlling volatile organic compound emissions from existing oil and natural gas systems as part of state plans to comply with new, more stringent air quality standards for ozone. As with its performance standards for oil and natural gas wells, the EPA said those controls are expected to reduce methane emissions as wells.

Observers questioned how effective those controls would be given that ozone is primarily an urban problem and most nonattainment areas do not include oil and natural gas production sites.

The EPA will also seek better data on methane emissions and consider new requirements for oil and natural gas system operators to monitor equipment for leaks. The agency in November 2014 proposed additional greenhouse gas emissions reporting requirements for oil and natural gas wells to improve the data it collects from the industry.

The strategy also calls for the EPA to expand voluntary programs such as its Natural Gas STAR Program where companies take voluntary measures to reduce methane emissions.

Existing Sources Not Addressed

Speaking with reporters Jan. 14, Dan Utech, special assistant to the president for energy and climate, and Janet McCabe, EPA acting assistant administrator for air and radiation, declined multiple times to comment on the fact that regulating new and modified sources under Section 111(b) of the Clean Air Act also would trigger requirements for existing sources under Section 111(d).

“We agree we need to get reductions from existing sources,” Utech said, adding the administration wanted to work with states and industry to do that. “What additional steps are appropriate beyond those steps we're outlining today will become more clear over time.”

The Clean Air Act requires the EPA to set emissions limits for existing sources of emissions under Section 111(d) when it sets performance standards pollutant under Section 111(b) that was not previously regulated. Methane has not previously been regulated for oil and natural gas wells under Section 111(b).

“I don’t think they can argue you have a 111(d) trigger for coal-fired power plants but not for the oil and gas sector,” Richard Alonso, a partner at Bracewell & Giuliani LLP, told Bloomberg BNA Jan. 14.

The EPA said it was compelled to propose carbon dioxide standards for existing power plants under Section 111(d) of the Clean Air Act after it proposed similar standards for existing power plants under Section 111(b).

Environmental groups said existing sources represent the best opportunity to achieve cost effective emissions reductions.

Nearly 90 percent of projected methane emissions from the oil and natural gas sector in 2018 will come from sources that were not covered by the performance standards the EPA issued in 2012, the Institute for Policy Integrity said in a December 2014 policy brief.

“It remains to be seen whether it is necessary to address methane emissions under section 111(d), but we think based on the target EPA has set, 40 to 45 percent, it’s highly likely EPA will have to go there at some point,” Mark Brownstein, associate vice president and chief counsel for the Environmental Defense Fund's Climate and Energy Program, told reporters Jan. 14. “We are of the opinion they should go there.”

Methane Rule Could Boost Power Plants

Requiring oil and natural gas systems to reduce leaks and capture more methane could prove to be a boon to the EPA's proposed carbon dioxide standards for power plants. Those rules rely heavily on shifting electricity generation from dirtier coal to natural gas. Reducing the lifecycle greenhouse gas emissions of natural gas by patching leaks would make natural gas an even more attractive option, observers said.

“By EPA taking this step now to regulate methane directly, it’s actually helping to make the Clean Power Plant more beneficial from a climate standpoint,” Hein said.

The Institute for Policy Integrity said in its policy brief that between 1 percent and 3 percent of all natural gas production is lost to leaks and venting.

Republicans Decry ‘Red Tape.'

Ranking House and Senate Republicans accused the administration of proposing an onerous new set of regulations on the oil and natural gas industry at time when its emissions are already falling.

“The Obama administration is unwilling to streamline existing regulatory hurdles on pipeline infrastructure as a means to reduce emissions, and instead is expanding its inefficient and complicated bureaucracy,” Sen. James Inhofe (R-Okla.), chairman of the Senate Environment and Public Works Committee, said in a Jan. 14 statement. “With my colleagues, I will work towards limiting the red tape on our energy infrastructure and work towards common-sense solutions that allow America to responsibly develop and consume our natural resources.”

The leadership of the House Energy and Commerce Committee also decried the strategy.

“Studies show that while our energy production has significantly increased, methane emissions have continued to decline. This is something that should be celebrated, not bound by new red tape,” Committee Chairman Fred Upton (R-Mich.) and Rep. Ed Whitfield (R-Ky.), chairman of the Energy and Power Subcommittee, said in a Jan. 14 statement. “Our success has been— and should continue to be—rooted in new efficiencies created through technology and innovation, a commitment to continued safety enhancements, and greater permitting certainty.”

Unlike the EPA's proposed power plant rules, which featured extensive public engagement prior to being proposed, Alonso said the EPA failed to meet with industry representatives before announcing its emissions reduction target.

“In the Clean Power Plant, on the 111(d) rule, that’s something EPA has touted how great its coordinated with public,” he said. “Here there’s absolutely zero outreach.”

Other Agencies Play Roles

The strategy also requires the Interior Department's Bureau of Land Management to propose this spring new standards to reduce venting, flaring and leaks of natural gas from new and existing oil and natural gas wells on public lands.

“Reducing methane emissions is an important part of the picture as we work collaboratively with federal, state, local and industry partners to harness America's domestic energy potential while also tackling climate change,” Interior Secretary Sally Jewell said in a Jan. 14 statement.

The Obama administration also plans to seek methane emission reductions from new natural gas pipeline safety regulations. Pipeline and Hazardous Materials Safety Administration officials have said that while their rulemakings haven't specifically targeted climate change, some rules will have the “ancillary benefit” of reducing methane emissions.

Three PHMSA natural gas rulemakings that are being released in 2015 are expected to have this added benefit, PHMSA told Bloomberg BNA. This includes the gas transmission proposed rule, which will govern integrity management principles for these pipes, and is expected to be sent to the White House's Office of Management and Budget for review in February, according to a January department report.

Two other rulemakings — “Enforcement of State Excavation Damage Laws” and “Excess Flow Valves In Applications Other Than Single-Family Residences in Gas Distribution Systems” — also are expected to reduce methane emissions, in addition to their safety benefits, PHMSA said. The final excavation rule is expected to be sent to OMB for review in February and the excess flow valves proposed rule is expected to leave OMB Jan. 30, the Transportation Department report said.

As part of the strategy, the administration is also seeking $15 million for the Energy Department to demonstrate cost effective technologies to detect and reduce leaks from transmissions systems in fiscal year 2016. The budget request would also seek $10 million to improve measurements of emissions from natural gas infrastructure to improve the EPA's Greenhouse Gas Inventory.

With assistance from Anthony Adragna and Rachel Leven in Washington and Tripp Baltz in Denver.

To contact the reporter on this story: Andrew Childers in Washington at achilders@bna.com

To contact the editor responsible for this story: Larry Pearl in Washington at lpearl@bna.com