Week Ending September 14, 2018

Industry Pleased with EPA Move to Alter Methane Emission Monitoring, Reporting

This Article Appears as Published in Foster Report No 3215

In a step it says would save the oil and natural gas industry $484 million in regulatory costs over a six-year period, the Environmental Protection Agency on September 11 proposed a rule to reduce the frequency of methane emission monitoring and reporting, and alter steps to address methane emissions.

The proposed rule would affect producers and pipelines on how frequently they monitor, report on and address methane emissions from production equipment natural gas pipeline compressor stations and some processing facilities.

The proposal would replace a controversial rule imposed in 2016 under former President Barack Obama that was challenged in court and panned by the industry and many Republicans on Capitol Hill. Not surprisingly, the new Trump administration proposal was criticized by Democrats and environmental groups as another example of the administration rolling back environmental protections.

Both sides acknowledge the potency of methane emissions, which are 25 times more potent than carbon dioxide as a greenhouse gas. Critics point to the 2016 rule that fostered technology gains in monitoring equipment, such as the use of drones and aerial monitoring, while asserting that reduced frequency of monitoring will lead to reduced measures to address emissions.

Industry groups point to market enhancements, technology improvements and voluntary measures that have reduced emissions of methane and volatile organic compounds at production sites, natural gas pipeline compressor stations and processing plants. Methane emissions from the industry have declined 14% since 1990 while production has increased 50%, noted Howard Feldman, senior director of regulatory and scientific affairs at the American Petroleum Institute.

“Industry will continue to develop and employ the most efficient and effective technologies to help these trends continue, while working with academia and state and federal governments to achieve comprehensive, science-based best practices and regulations,” Feldman said in a statement.

API “supports cost-effective, achievable regulations targeting our mutual objective of reducing emissions of volatile organic compounds that, as a co-benefit, also reduce methane,” he said.

The Interstate Natural Gas Association of America (INGAA) in August noted that its members have made commitments to detect and reduce methane emissions with several steps. Those steps include use of air-driven, low-bleed, or intermittent pneumatic controllers when installing new pneumatic controllers, minimizing emissions during maintenance or replacement of pipeline facilities, among other measures.

Pneumatic controllers are mechanisms that open and close valves, and some types vent methane each time they cycle, while others have low-bleed or zero-bleed venting that trims emissions at different facilities.

EPA’s September 11 proposal involves “targeted improvements” to the 2016 New Source Performance Standards (NSPS) for the oil and gas industry, including addressing fugitive emissions, or leaks, to reduce the regulatory burden and compliance costs for the industry, the agency said. The proposed rule is designed to improve alignment with state environmental programs addressing methane and address technical issues in the rule brought by comments from the industry, according to an EPA fact sheet on the plan.

The agency also is proposing amendments to requirements that a professional engineer certify the design of closed vent systems; and requirements for requesting alternative means of emissions limitations.

The proposed changes address implementation issues that have been brought to EPA’s attention in the two years since the final standards were issued, including clarifying the acceptable location of separators used during well completions, clarifying the definition of well site to avoid unintended burdens on third parties, and correcting the definition of capital expenditure for onshore natural gas processing plant requirements.

EPA’s regulatory impact analysis estimates that the proposed amendments would save the oil and gas industry up to $75 million a year, or a total of $484 million for the 2019-2025 period.

Under the proposed rule, owners/operators would be allowed to apply to conduct emission monitoring surveys using emerging technologies, and the proposal clarifies requirements for doing so. The amendments would establish alternative fugitive emissions standards that are based on requirements established by certain states instead of the requirements in the NSPS. EPA is proposing to allow owners/operators to choose to base fugitive emissions monitoring and repair plans on requirements from California, Colorado, Ohio, or Pennsylvania for well sites and compressor stations, and Texas and Utah for well sites only.

The proposed monitoring frequency for well sites is based on production volumes, with every other year for low-production sites – those that average less than 15 barrels of oil equivalent/d over the first 30 days of production – and annually for sites above those volumes. The NSPS called for quarterly monitoring for many facilities.

For all well sites, EPA is proposing to allow monitoring to be stopped once all major production and processing equipment is removed so that the site contains only wellheads. However, separate tank batteries receiving oil or gas produced from wellhead-only sites are considered modified and would be subject to fugitive emissions monitoring requirements.

EPA said it will take comment on the proposed rule for 60 days after the proposal is published in the Federal Register and will hold a public hearing in Denver, with details to be announced later.

The agency said it continues to consider broad policy issues related to the 2016 NSPS, including the regulation of greenhouse gases in the oil and natural gas sector, and that those issues will be addressed in a separate proposal at a later date.

“These commonsense reforms will alleviate unnecessary and duplicative red tape and give the energy sector the regulatory certainty it needs to continue providing affordable and reliable energy to the American people,” EPA Acting Administrator Andrew Wheeler said in a statement.

EPA had previously announced it was considering making changes to the NSPS requirements after it received comments that the timing mandated in the 2016 rule could lead to gas supply disruptions, safety concerns and increased emissions associated with flaring or venting at production facilities and blowdowns at compressor stations on pipelines, according to the agency. Under the 2016 rule, equipment owners were required to repair leaking components found during monitoring surveys within 30 days, unless doing so was technically infeasible, such as requiring a well or compressor station shutdown. In those cases, owners are required to fix leaks at the next unplanned or emergency shutdown, or within two years, whichever is earlier.

Since issuing the rule, EPA said it heard from commenters that due to the unpredictability of unplanned or emergency events, natural gas may need to be vented or flared while compressor stations or production facilities are repaired, which could lead to production being shut in or increasing emissions beyond what would have occurred if the repair was delayed until a scheduled event.

“INGAA appreciates that EPA continues to consider improvements to the new source methane rule,” said Cathy Landry, spokeswoman for the pipeline group. EPA currently requires quarterly fugitive emissions monitoring at compressor stations and is taking comment on changing the frequency to either semi-annual or annual monitoring.

“INGAA is concerned that EPA may have based its 2016 decision to require quarterly monitoring at compressor stations on flawed assumptions. Although INGAA is still reviewing the proposed rule, we welcome the opportunity to comment on the frequency of conducting fugitive emissions monitoring,” Landry said.

“INGAA also shares EPA’s concern that once a leak is detected, companies may require additional time beyond 30 days to successfully stop a leak. In certain situations, it may take multiple attempts to repair a leaking component. INGAA will carefully assess the proposed amendments to ensure that EPA has provided companies with adequate time to safely and effectively make repairs,” she said.

The EPA amendments recognize that infrastructure already in place in states like Ohio protect public health and the environment, said Craig Butler, director of the Ohio Environmental Protection Agency. “The proposed rule supports state leadership through cooperative federalism and removes unnecessary red tape and burdensome duplication that only serve as roadblocks to responsible energy development in Ohio,” Butler said in a statement.

The Independent Petroleum Association of America (IPAA) welcomed the move as a reasonable step to align state and federal efforts on methane emissions. “This proposal not only reassures America’s continued path toward global energy leadership, but also continues to protect the environment and communities where energy production is located. It is important for the states to play an important role in decisions that affect their citizens, industries and natural resources,” said Barry Russell, president and CEO of IPAA.

The Western Energy Alliance “is pleased that EPA is fixing a rule that was purposefully designed by the Obama administration to tie up the American oil and natural gas industry in red tape,” said Kathleen Sgamma, president of the group.

Countering those views was Sen. Tom Carper (D-Del.), ranking member on the Senate Environment and Public Works Committee, who said rolling back environmental protections and providing benefits to polluters “is the norm in the Trump administration.” Reversing course after meaningful steps have been made to reduce methane emissions “is dangerous and ignorant. We can’t afford reckless policies like this that prop up the oil and gas industry at the expense of our children’s health,” Carper said.

Rep. Frank Pallone, (D-N.J.), ranking member on the House Energy and Commerce Committee, also said the proposal “is unconscionable, but unfortunately not surprising given the Trump administration’s pattern of catering to the wishes of corporate polluters.”

The Natural Resources Defense Council, Sierra Club and other groups had similar reactions, stating that the Obama administration rule was adopted with broad public support.

“A fundamental tenet of business is that what is not monitored is not measured; and what is not measured is not addressed. Going back to the dark ages on methane monitoring serves nobody’s interests. This is a failed policy that will harm the climate, our citizens, and the very companies it purports to benefit,” said Danielle Fugere, president of As You Sow, a group that promotes corporate responsibility through shareholder advocacy on environmental issues.

By Tom Tiernan TTiernan@fosterreport.com

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