EPA Proposes Methane Limits for New Oil, Gas Wells

By Andrew Childers and Patrick Ambrosio

Aug. 18 — The Environmental Protection Agency proposed the first-ever methane emissions standards for new oil and natural gas wells, but environmental groups said rules are needed for existing facilities as well if the Obama administration plans to meet it goal to curb emissions of the pollutant.

The proposal (RIN 2060-AS30), released Aug. 18, would update the new source performance standards for the industry to require new and modified oil wells to capture methane and volatile organic compounds using reduced emissions completion techniques, known as green completions. In addition, the rule would set methane and volatile organic compound emissions limits for pneumatic pumps and for fugitive emissions from wells sites and compressor stations, which had not been covered when the performance standards were last amended in 2012.

The rule also would add methane standards for hydraulically fractured gas wells and equipment leaks at natural gas processing plants, which were already subject to volatile organic compounds emissions limits as part of the EPA's 2012 performance standards. However, those sources will not be required to install any additional pollution controls, the agency said.

Janet McCabe, the EPA's acting assistant administrator for air and radiation, told reporters Aug. 18 that the latest proposal builds on the prior 2012 rule.

“We’re not starting from scratch with these rules. We’re building on a strong foundation,” she said.

McCabe said the prior standards, which did not directly regulate methane, already have produced significant emissions reductions through other required controls. Methane emissions from the oil and natural gas sector declined by 12 percent between 2011 and 2013 as those prior standards took effect. The largest reductions came from hydraulically fractured oil wells, which saw their emissions decrease by 73 percent during that period.

Industry Calls Requirements ‘Redundant.'

The petroleum industry argued that emissions decline shows the EPA's proposed performance standards are unnecessary.

“We need good public policies that don’t involve redundant regulations,” Howard Feldman, director of scientific and regulatory policy at the American Petroleum Institute, told reporters Aug. 18.

Though well operators already use many of the emissions controls being proposed by the EPA, the performance standards would impose additional compliance requirements, Kathleen Sgamma, vice president of government and public relations at the Western Energy Alliance, said.

“Now we have to do it in a certain way, and we have to do a lot of paperwork to show we’re doing it,” she told Bloomberg BNA.

Harry Weiss, a partner at Ballard Spahr LLP who advises oil and gas companies, said the proposed performance standards would most significantly impact transmission companies.

“The principal impact would be on the mid-stream companies that operate transmission lines because they have a requirement to fix and repair leaks,” he told Bloomberg BNA Aug. 18.

Standards Part of Package of Rules 

The proposed performance standards were part of a package of rules and guidance the EPA announced Aug. 18. The EPA also issued draft control techniques guidelines to help states reduce emissions as well as a proposal (RIN 2060-AS06) to clarify permitting requirements for oil and natural gas wells and a federal implementation plan for minor source oil and gas wells on Indian lands.

The EPA estimates its proposal will reduce emissions of methane—a potent but short-lived greenhouse gas—by between 340,000 short tons and 400,000 short tons by 2025. The standards are projected to cost the industry between $320 million and $420 million, McCabe said.

The proposal is part of the Obama administration's methane strategy to curb emissions of the pollutant by as much as 45 percent by 2025. 

McCabe said the agency's 2012 standards combined with the latest proposal will reduce emissions by between 20 percent and 30 percent.

Standards Sought for Existing Sources 

Environmental groups said regulating methane emissions from the existing facilities will be critical for meeting that target. However, the agency has given no indication when it might issue those rules.

Kate DeAngelis, climate and energy campaigner at Friends of the Earth, called that “a major gap within this rule.”

As part of the administration's methane strategy, the Interior Department's Bureau of Land Management is to propose new standards to reduce venting, flaring and leaks of natural gas from new and existing oil and natural gas wells on public lands. The EPA could package its proposed standards for existing oil and gas wells with that rule, DeAngelis, told Bloomberg BNA Aug. 18.

If the EPA fails to act on existing sources once it completes its proposed new source performance standards, environmental groups could pursue lawsuits to force the agency to issue the standards.

“I definitely think that’s something we’d consider in the long term,” DeAngelis said.

McCabe repeatedly declined to say when the EPA might regulate methane emissions from existing oil and gas wells. Instead, McCabe highlighted the agency's recent “methane challenge” that would encourage oil and gas companies to commit to voluntary methane reduction targets that would be reported to the EPA through the annual greenhouse gas reporting requirements.

The oil and gas industry said it favors voluntary measures to control methane emissions, because producers already have incentives to capture as much of the product as possible.

“We don’t feel like we need EPA to come in and tell industry how to capture methane,” Feldman said.

EPA Seeks to Define Sources 

With the proposed performance standards, the EPA is also proposing to clarify permitting requirements for the oil and natural gas industry. The proposal seeks to determine whether the various components of an oil and gas production facility, which can be spread over significant distances, should constitute a single emissions source or several smaller sources.

The EPA is seeking comment on two different definitions of “adjacent” in the context of oil and natural gas permitting. The first would definite adjacent in terms of proximity between components while the second definition would consider whether those facilities and activities are linked.

A broader reading of adjacent that aggregates together the various components of production network would mean more oil and gas facilities would be deemed major sources of emissions and subject to more stringent new source review, prevention of significant deterioration and Title V permitting requirements, Sgamma said.

“Everybody in their right mind knows what adjacent is. It’s not 20 miles away,” she said.

Draft Control Guidelines Released 

The EPA Aug. 18 also issued a set of draft guidelines for the control of emissions of volatile organic compounds, an ozone precursor, from existing oil and gas facilities.

The guidelines, which the EPA said do not impose any legal requirements on sources, are intended to be used to meet ozone precursor control requirements in certain nonattainment areas.

States can consider the guidelines in determining what constitutes reasonably available control technology (RACT) for controlling volatile organic emissions from covered processes and equipment, though states have the flexibility to use different emissions control approaches. RACT requirements apply in moderate and severe ozone nonattainment areas and throughout the Ozone Transport Region, which encompasses 11 states and the Washington, D.C., metropolitan area.

The draft guidelines include information on the costs of available technology that could be used to control storage vessels, compressors, pneumatic pumps and other sources of volatile organic compound emissions. The EPA included model rule language in the draft guidelines that states could directly adopt if they wish to address their volatile organic compound control requirements using the EPA's recommendations.

The EPA projected that the draft guidelines would cut volatile organic compound emissions by about 82,000 tons per year at an annual cost of $76 million if affected states chose to fully implement the recommendations.

Feldman of the API said the reach of the draft guidelines will depend on where the EPA sets the national ambient air quality standards. The agency is under an Oct. 1 deadline to decide whether to revise or retain the current 75 parts per billion standards. If the agency tightens those standards, the draft guidelines would be “more extensively applied” than projected because there would be more nonattainment areas, Feldman said.

Methane Database Now Available 

The Environmental Council of the States launched a database of best practices, regulations, protocols and voluntary programs that are used to reduce emissions from the natural gas sector.

The database, known as the ECOS Methane and Air Toxics Reduction Information Exchange, is intended to promote interstate and interagency coordination on the issue of methane and VOC reduction, the organizations said in an Aug. 18 news release. The EPA, Department of Energy, American Gas Association and Environmental Defense Fund are among the organizations that partnered with ECOS to launch the database.

Republicans Pan Rule 

Congressional Republicans predictably panned the proposal as impeding development of domestic energy sources. They said the requirements are unnecessary at a time when methane emissions from the oil and natural gas sector are already declining.

“Instead of conspiring with extreme environmental interests, EPA should stop punishing cooperative industry stakeholders and start partnering with them in their current efforts to capture methane in a responsible manner,” Rep. Lamar Smith (R-Texas), chairman of the House Science, Space, and Technology Committee, said in an Aug. 18 statement.

Sen. James Inhofe (R-Okla.), chairman of the Senate Environment and Public Works Committee, said the EPA's proposal imposes new costs on the oil and gas industry without providing significant climate change benefits.

“The minuscule fraction of greenhouse gas emissions made up by methane emissions from oil and gas production makes this yet another regulation from the Obama administration that will have no tangible impact on reducing greenhouse gas emissions,” he said in a statement.

Inhofe pledged “rigorous oversight” of the rule.

Rep. Rob Bishop (R-Utah), chairman of the House Natural Resources Committee, said the EPA's proposal “flies in the face of technological reality.” He accused the EPA of using the rule to inhibit new fossil fuel production.

“The truth is that while the oil and natural gas industry has greatly increased production on state and private lands, methane emissions have actually fallen,” he said in a statement. “This proposal is another unprecedented attack aimed at federal control of our nation’s energy production, with the goal of stopping new production.”

Sen. Sheldon Whitehouse (D-R.I.) defended the proposal as a “sensible, cost-effective step.”

“As we replace coal with natural gas, it's important to reduce methane leakage,” he said in a statement. “Industry has been dragging its feet in implementing solutions, so EPA is stepping in with sensible requirements.”

Methane Emissions Underestimated 

The EPA may be underestimating the scale of methane emissions from the oil and gas sector, according to research funded by the Environmental Defense Fund. The group has put out a series of studies looking at how much and from where methane is escaping across the oil and gas supply chain, including facilities that gather natural gas from well sites across the U.S.

Though these facilities have been largely uncounted in federal data, they may actually be the biggest source of methane in the natural gas supply chain, the EDF’s latest research suggests.

The research, published Aug. 18, showed gathering facilities emit about 100 billion cubic feet of natural gas each year—roughly eight times previous estimates from the EPA. Meanwhile, emissions at natural gas processing facilities are lower than the EPA’s inventory, it said.

Environmental groups have used that research to call on the EPA to set stringent methane limits for the sector, particularly for existing facilities.

—With assistance from Andrea Vittorio in Washington

To contact the reporters on this story: Andrew Childers in Washington at achilders@bna.com and Patrick Ambrosio in Washington at pambrosio@bna.com

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