New Wells Regulated, EPA Eyes Methane From Existing Sources

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By Andrew Childers and Anthony Adragna

May 12 — The Environmental Protection Agency will immediately begin collecting data on methane emissions from existing oil and gas wells after finalizing the first-ever emissions limits for new and modified wells.

“We’re going to move as quickly as we can to get the most comprehensive record we can for the next administration to rely on,” EPA Administrator Gina McCarthy told reporters May 12 as the agency unveiled its final new source performance standards.

The EPA issued a two-part proposed information collection request to gather data on methane emissions from oil and gas wells currently in operation as the agency moves to regulate those sources under Section 111(d) of the Clean Air Act. Those standards have long been sought by environmental advocates and come at the same time the EPA issued comparable new source peformance standards (RIN:2060-AS30) for methane emissions from new and modified wells under Section 111(b) of the act.

While the EPA likely won't be able to propose methane standards for existing wells in the time left in the Obama administration, the information collection request is the latest step toward curbing the short-lived greenhouse gas, which is 25 times more potent than carbon dioxide over a 100-year period, according to the EPA.

“In all likelihood, the next president—especially if it’s Secretary [Hillary] Clinton—will look to act on existing sources of methane as well as other climate opportunities, like emissions from refineries. This administration is acutely aware of the ticking clock,” Paul Bledsoe a former Clinton White House climate adviser and president of Bledsoe & Associates, an energy consultancy, told Bloomberg BNA.

EPA Seeks Better Data

The final rule and information collection request come after the EPA in February admitted that it had been significantly underestimating methane emissions from the oil and natural gas sector as part of its annual greenhouse gas emissions inventory (37 DEN A-1, 2/25/16).

“That information is going to come in quickly and we think is going to be the missing piece in making sure we can do this as quickly and effectively as we can,” McCarthy said.

Some of the information the agency is seeking includes what emissions controls are currently in use, how difficult it would be for operators to replace or upgrade pollution controls, how much retrofitting would cost and how often oil and gas production sites are staffed or visited.

“Currently there are hundreds of thousands of pieces of equipment across the country in all kinds of different situations and configurations,” the agency said. “To determine how to efficiently and effectively address emissions from this volume of sources in a timely, but administrable manner, we need more comprehensive information.”

The agency is proposing to take a two-part approach to soliciting information from the industry. Under the first step, all known onshore oil and gas facility operators would be asked to provide the EPA with certain non-confidential information, including the name and location of all facilities and the number of wells, tanks and compressors at each facility. The information collected under that industry-wide survey would aid the identification and categorization of all oil and gas production facilities that would potentially be covered by the methane standards, the agency said.

The second part of the proposed information-gathering process would use a statistical sampling method to collect data from a number of oil and gas facilities across different industry segments, including onshore production, processing and pipelines. Information collected from those facilities will be used to identify the types and prevalence of emissions reduction strategies in use by industry. It also may be used to fill data gaps and evaluate the potential costs of various regulatory options, according to the EPA.

If the information collection request is approved by the White House Office of Management and Budget, the EPA projects it will send out letters requesting data by Oct. 30, 2016. Operators would be required to complete the initial survey within 30 days of receipt, while facilities that receive the more detailed data request would have 120 days to provide the agency with the requested information.

Assuming the EPA does not send out the data requests until close to the projected date of Oct. 30, industry would not need to respond to the more detailed request until late February 2017, after the Obama administration is over.

Leak Detection Plans Required

The EPA's rule requires new wells to develop leak monitoring plans and mandates that well site operators conduct an initial leak survey within a year or within 60 days of startup and twice annually after that. The rule requires that operators scan for leaks using optical gas imaging equipment or comparable monitoring methods. Use of infrared cameras has already been growing in the oil and gas industry (62 DEN B-1, 3/31/16).

“Every leak that is fixed means more gas is available to be used or sold and less pollution,” McCarthy said.

As part of the final rule, the EPA chose not to exempt low production well sites—those that produce less than 15 barrels of oil equivalent per day—from the leak detection requirements.

The rule also sets methane emissions limits for pneumatic pumps, compressors and pneumatic controllers used at compressor stations and pieces of equipment covered by performance standards issued in 2012 that did not explicitly regulate methane.

The final rule amends 40 C.F.R. Part 60, Subpart OOOO and adds a new 40 C.F.R. Part 60, Subpart OOOOa. The agency estimates it will reduce 510,000 short tons of methane in 2025 while providing climate benefits of $690 million in 2025, outweighing the estimated costs of $530 million in 2025.

Industry Pans Rule

The oil and gas industry dismissed the EPA's rule as unnecessary, touting the voluntary steps companies have already taken to capture methane emissions.

“The industry is already leading the way on methane reduction because it’s good for the environment and good for business,” Kyle Isakower, vice president of regulatory and economic policy at the American Petroleum Institute, told reporters.

The petroleum industry estimates the new source performance standards will affect “tens of thousands” of new wells each year.

While the EPA estimates the rule's compliance costs at $530 million in 2025, the American Petroleum Institute argues the costs could be as high as $800 million as they perform the monitoring and collect the records necessary to demonstrate compliance.

The industry's more pressing concern is the EPA's upcoming standards for existing sources, which could set emissions limits for 900,000 active wells.

“This sets a precedent for impacting all wells in the country, which is a top level concern for us,” Howard Feldman, senior director of regulatory and scientific affairs at the American Petroleum Institute, told reporters.

Environmental advocates, however, said the EPA's rule merely builds on successful state efforts in places like Colorado, Wyoming and Ohio.

“Today’s rules are achievable as far as economically as well as environmentally,” Jeremy Symons, associate vice president for climate political affairs at the Environmental Defense Fund, told reporters.

EPA Issues Aggregation Rule

With the performance standards, the EPA also issued a final rule (RIN:2060-AS06) defining when oil and gas emissions sources should be aggregated together for the purposes of Clean Air Act permitting.

Smaller emissions sources that are under common control and are deemed “adjacent” can be aggregated together for the purposes of prevention of significant deterioration, new source review and Title V permitting. While smaller sources individually would be subject to minor source permitting requirements, aggregating them can force them to comply with the more stringent major source provisions.

The EPA's final rule defines “adjacent” as equipment and activities that are under common control and are on the same site or sites and within a quarter mile of each other.

With assistance from Patrick Ambrosio in Washington.

To contact the reporters on this story: Andrew Childers and Anthony Adragna in Washington at achilders@bna.com and aadragna@bna.com

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

For More Information

The EPA's final rule is available at https://www3.epa.gov/airquality/oilandgas/may2016/nsps-finalrule.pdf.

The EPA's information collection request is available at https://www3.epa.gov/airquality/oilandgas/methane.html.

The EPA's final source determination rule is available at https://www3.epa.gov/airquality/oilandgas/may2016/source-determination-finalrule.pdf.