EPA Plans Summer Release of Methane-Reduction Rule for Oil & Gas Industry

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The U.S. Environmental Protection Agency (EPA) (Washington, D.C.) announced January 14 it would release a draft rule this summer aimed at significantly cutting emissions of methane and volatile organic compounds (VOCs) from new and modified Oil & Gas production sources and from natural gas processing and transmission sources. The draft rule will seek to reduce emissions from the Oil & Gas Industry by 40% to 45% from 2012 levels by 2025. It is part of a multi-agency Obama administration effort to trim emissions of methane and other gases widely believed to cause climate change.

The Oil & Gas Industry criticized the agency's decision, while environmental organizations welcomed it. Emissions of methane (CH4) are a small part of the overall U.S. greenhouse gas footprint, but methane has 25 times the heat-trapping properties of CO2 over a 100-year period, the EPA said.

Click on the image at right to see the major sources of U.S. greenhouse gas emissions and the sources of methane emissions.

In a statement, Lee Fuller, executive vice president of the Independent Petroleum Association of America (IPAA) (Washington, D.C.), said: "The Obama administration needs to recognize that broad new regulatory actions are unnecessary. America's energy producers have demonstrated a commitment to reducing methane emissions and are already incentivized by further capturing emissions with the help of new and innovative technologies. The fact that there is no price tag associated with the administration's proposal is cause for serious concerns, at a time where America's oil and natural gas production industry is experiencing significant uncertainty."

Sierra Club Executive Director Michael Brune saw things a bit differently. In a statement issued as part of the group's "Beyond Gas" campaign, he said: "Reducing methane in the atmosphere is necessary to address the unchecked climate pollution caused by the dramatic growth of oil and gas production in the United States. This expansion is driven by dangerous techniques, including fracking [hydraulic fracturing], which the Sierra Club opposes because they pollute our air and water and hold us back from clean energy prosperity.

"Controlling methane, however, is not an end in itself and it will not make fracked oil and gas climate-friendly. Numerous scientific articles now point to the need to keep more than two-thirds of our fossil fuels in the ground in order to avoid climate chaos. We must move swiftly to truly clean energy like wind, solar and energy efficiency, while establishing policies that keep fossil fuels in the ground."

U.S. natural gas production has surged in recent years, as hydraulic fracturing and horizontal drilling have combined to make production economic from large shale formations, such as the Marcellus Shale and the Barnett Shale. This year, gas production from the Marcellus Shale, which mainly lies underneath West Virginia and Pennsylvania, will reach about 16 billion cubic feet per day (Bcf/d), more than 20% of overall U.S. gas production. By contrast, in 2007, that formation produced about 1 Bcf/d, according to the U.S. Energy Information Administration (EIA) , the statistical and analytic branch of the U.S. Energy Department of Energy (DoE).

Click on the image at right to see how gas production from the Marcellus Shale has surged since 2007.

Today, U.S. oil production is at its highest level in nearly three decades, the EPA said in a January 14 statement announcing the planned rules. The agency also noted the U.S. is now the world's largest gas-producing nation. Surging oil and gas production is "providing important energy security and economic benefits" to the U.S., the agency noted. "Continuing to rely on these domestic energy resources is a critical element of the President's energy strategy."

The EPA's statement noted emissions from the oil and gas sector are down 16% since 1990. Significant emissions reductions have been achieved in some segments of the industry, notably well completions, it added. "Nevertheless," the agency said, "emissions from the oil and gas sector are projected to rise more than 25% by 2025 without additional steps to lower them. For these reasons, a strategy for cutting methane emissions from the oil and gas sector is an important component of efforts to address climate change."

The planned rules follow the agency's release of five white papers last summer on methane emissions in the Oil & Gas Industry. For more on the background to this forthcoming rule, see December 22, 2014, article - EPA Delays Decision on Methane Reduction Among Oil & Gas Companies, and July 30, 2014, article - EPA Considering Steps to Cut Methane Emissions from Oil & Gas Facilities.

In developing this new rule, EPA said it will work with industry, states, tribes and other stakeholders "to consider a range of common-sense approaches that can reduce emissions from the sources discussed in the agency's Oil and Gas White Papers, including oil well completions, pneumatic pumps, and leaks from well sites, gathering and boosting stations and compressor stations."

The EPA said it was proposing this new rule as part of a broad and coordinated effort by the Obama administration to reduce methane emissions across the economy. Other agencies involved in this effort include the DoE, the Department of Interior (DOI), the Department of Transportation (DOT), the Department of Agriculture (DOA) and the Federal Energy Regulatory Commission (FERC). The effort stems from the administration's release of its "Strategy to Reduce Methane Emissions" last March.

Later this year, EPA said the DOI's Bureau of Land Management (BLM) will "update decades-old standards to reduce wasteful venting, flaring and leaks of natural gas, which is primarily methane, from oil and gas wells. These standards, to be proposed this spring, will address both new and existing oil and gas wells on public lands."

And the EPA doesn't plan to stop with new regulation of new and modified oil and gas facilities. Instead, it said, "fully attaining the administration's goal will require additional action, particularly with respect to existing sources of methane emissions. Several voluntary industry efforts to address these sources are under way, including EPA's plans to expand on the successful Natural Gas STAR Program by launching a new partnership in collaboration with key stakeholders later in 2015.

"The EPA will work with DOE, DOT and leading companies, individually and through broader initiatives such as the One Future Initiative and the Downstream Initiative, to develop and verify robust commitments to reduce methane emissions (from existing sources). This new effort will encourage innovation, provide accountability and transparency, and track progress toward specific methane emission reduction activities and goals to reduce methane leakage across the natural gas value chain."

"I expect this draft rule will draw a lot of public comments, and they will split along fairly predictable lines: environmental groups and Democrats will support it, and industry groups and Republicans will oppose it," said Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Production, Pipelines and Terminals. "And I expect there will be fireworks over this rule on Capitol Hill, where Republicans are the majority in both the House of Representatives and the Senate."

"The industry has done a good job reducing methane emissions in recent years," Davis continued. "It has shown--as it did in Colorado--that it can collaborate with government and environmental groups to enact common-sense, cost-effective new rules to lower methane emissions and improve air quality. As it rafts this new rule, I hope the EPA will consider how Colorado went about enacting its methane-reduction rules."

For more on what Colorado did, see December 5, 2013, article - Oil & Gas Companies Collaborate with Environmental Group to Draft Tough New Air Quality Regulations in Colorado.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.