It is no secret that EPA and many environmental groups are worried about the level of emissions of greenhouse gases (GHG) and the cumulative effects of rising amounts of GHG on our environment. Many recent regulations have been issued by EPA and lawsuits filed by environmental groups to try and reduce those emissions from various industry categories. Oil and gas exploration and production activities have been specifically targeted for special scrutiny because that industry has been deemed to be a significant source of such emissions.
Methane is a potent GHG. In fact, EPA currently rates methane as having twenty-five times the global warming potential of carbon dioxide. Since natural gas is primarily methane, EPA has focused some of its recent efforts in rule-making to curtailing the release of natural gas/methane from natural gas well completion activities associated with hydraulically fracturing, or fracking. However, while additional regulation is usually burdensome to the point where the costs outweigh potential benefits, these regulations may actually create discernible savings and profits for industry.
In April, 2012, EPA published final rules (found at 40 CFR Subpart OOOO) requiring that, no later than January 1, 2015, most natural gas wells undergoing fracking perform a reduced emissions completion (REC) during the flowback period. Fracking requires high volumes of liquids in order to fracture the underground formation, which then ‘flows back’ to the surface and which is usually accompanied by recoverable amounts of natural gas/methane. During the flowback period (which according to the regulations begins when the fracking liquids return to the surface and ends when the well is shut-in or is producing continuously to the flow line or storage vessel, whichever occurs first), the operator is required to recover as much of the gas as possible and route as much of the saleable gas to the flow line as soon as practicable. Special equipment (usually a portable device that may be moved from well to well) is used to separate the gas from the liquid.
Understandably, these RECs are also known as ‘green completion’ because the gas is not vented to the environment or wasted through flaring. EPA claims that, by 2015, there will be a reduction of nearly 1 to 1.7 million tons of methane, 12,000 to 20,000 tons of air toxics, and 190,000 to 290,000 tons per year of volatile organic compounds (VOC). The methane reductions will assist in addressing global warming or climate change and the reductions in air toxics and VOCs will assist with reduced health risks and potential ozone formation.
However, green completions also assist industry. Currently, excess or unwanted gas is vented or flared. The costs of renting or purchasing the equipment to separate the gas from the flowback liquids can be recouped. EPA estimates that revenues from selling the gas that currently goes to waste are expected to offset the costs of compliance, resulting in a cost savings of $11 to $19 million when the rules are fully implemented in 2015. Many oil and gas producers were engaged in green completions before the rule was even proposed, which shows that the practice is feasible and cost-effective.
It is not often that an EPA regulation serves the dual purpose of assisting the environment and industry at the same time. All too often, the costs seem to outweigh the benefits. Here, capturing the saleable gas creates the proverbial ‘win-win’ – it makes fracking a bit more profitable while protecting the environment.