New Climate Rules Will Impact Oil and Gas Industry

EPA continues to focus on the oil and gas sector in its relentless quest for reduction of methane and volatile organic compound (VOC) emissions. It now seeks to expand on the standards announced in 2012 for hydraulically fractured natural gas wells by having additional standards on a variety of sources in place by 2016.

Methane accounts for about 9 percent of domestic greenhouse gas emissions. Although methane emissions have decreased since 1990, EPA predicts they will increase through 2030 if action is not taken. As a result, EPA believes new reductions are necessary in order to meet the administration’s goal of reducing greenhouse gas emissions by 17-percent below 2005 levels by 2030. As the oil and gas sector accounts for roughly 28 percent (in 2012) of greenhouse gas emissions, EPA sees it as a fertile ground for action.

EPA has already established standards for methane/VOC emissions from hydraulically fractured natural gas wells. One key feature was the requirement during the well flowback period for reduced environmental completions or green completions. When fully implemented this year, EPA estimates the regulation will decrease methane emissions equivalent to 33 million tons of carbon pollution.

The current efforts stem from the president’s Climate Action Plan, released in 2013, and the Strategy to Reduce Methane Emissions, released in 2014. In 2014, EPA assessed several potentially significant sources of methane/VOCs from the oil and gas sector. It solicited five white papers relating to compressors, completions at hydraulically fractured oil wells, leaks, liquids unloading and pneumatic devices. Each paper presents data and potential mitigation techniques relating to the source at issue.

Unsurprisingly, EPA has decided to move forward with proposed rulemaking to reduce methane/VOC emissions from the oil and gas sector. The rule will likely impact oil and gas production sources, and natural gas processing and transmission sources. Details are lacking at this time but will become clearer as EPA moves through the rulemaking process, according to the agency. However, EPA did state it plans to focus on in-use technologies, current industry practices, emerging innovative techniques and flexible regulatory approaches in the rulemaking.

EPA also indicated it will develop new guidelines to reduce ozone-forming pollutants from existing oil and gas systems in nonattainment areas (that is, areas that do not meet current ozone standards). EPA will issue Control Techniques Guidelines that provide an analysis of available, cost-effective technologies for controlling VOC emissions. Each state would include these types of controls in their state plans to reduce ozone formation.

In a related move, the U.S. Department of the Interior’s Bureau of Land Management (BLM) will update its standards to reduce flaring and venting on public lands at new and existing oil and gas wells. BLM has couched the flaring and venting as a waste of federal gas revenues and the upcoming rule as one designed to reduce the loss of natural gas and associated revenues.

Much of the oil and gas industry is wary of new requirements, noting even as natural gas production increased, methane emissions fell. Industry will continue investments in new technologies. Many believe adding a new layer of rules and requirements will slow down industry progress in reducing methane emissions on their own.

Although EPA is organizing a Small Business Advocacy Review Panel to provide advice and recommendations about the impacts of the proposed rule on small business, the oil and gas industry should seek every opportunity and avenue to ensure it has input into the proposed rule. Otherwise, the rule may include burdensome and unnecessary requirements and practices that only serve to hinder oil and gas production.

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