After Coal, Is EPA Pivoting to Oil?

After tightening the noose and choking the coal industry through such stringent regulatory efforts as the Coal Combustion Residuals (CCR) Rule and the Clean Power Plan, EPA now seems to be focusing its efforts on the petroleum industry. At least two recent rulemakings, one final and one proposed, impact the upstream, transmission and downstream sectors of the oil and gas industry and serve to highlight EPA’s efforts to go beyond its regulation of coal to address oil.
EPA recently finalized a rule to further control emissions of hazardous air pollutants (HAPs) and volatile organic compounds (VOCs) from petroleum refineries. The rule imposed new requirements on storage vessels, delayed coker units and flares. Notably, it requires fenceline monitoring, the first ever in a national regulation. The recordkeeping and reporting requirements will provide emission data to the public, which will be used by environmental groups in citizen suits and by plaintiff lawyers in damage claims.

An extended comment period recently closed on a rule first proposed in August that is designed to build on the 2012 regulation of the oil and gas production sector. In the 2012 rule, EPA imposed the first federal standards for hydraulically fractured natural gas wells, requiring “green completions” during the flowback period. The rule proposed in August will require methane and VOC reductions from hydraulically fractured oil wells in order to, as EPA phrased it, “complement” the 2012 standards. In addition to regulating emissions from hydraulically fractured oil wells, the proposed rule will extend emission reduction requirements further downstream to cover equipment in the natural gas transmission segment of the industry that was not regulated in the 2012 rule, such as compressors, controllers and pumps at oil well sites, boosting stations, processing plants and compressor stations. EPA also proposed owners and operators find and repair leaks at all of these types of facilities. Finally, EPA proposed a third-party verification requirement and, like the CCR Rule, electronic reporting, public access to information and even data postings on a company-maintained website.

EPA stated the reductions in methane will “help combat climate change” by reducing up to 400,000 tons of methane by the year 2025. Using its social cost of carbon methodology, EPA estimated this level of reduction will yield up to $550 million in monetized climate benefits. VOC reductions were expected to be up to 180,000 tons and HAP reductions up to 2,500 tons by the year 2025. The costs of the rule are somewhat high though, with up to $330 million in total capital costs and up to $500 million in total annualized engineering costs in 2025. To temper these costs and realize a net benefit, EPA estimated 19 million cubic feet of natural gas would be recovered due to the rule, which would lower the net cost to about $420 million. Of course, without the monetized climate benefits, the costs would overwhelmingly exceed benefits of the rule. Indeed, one could ask whether there were any benefits from the rule.

Environmental groups have long sought to move “beyond coal.” Of all the fossil fuels, it seemed an easy first target because of the type and quantity of emissions associated with it. In reaction to, or perhaps even in concert with the efforts by these groups, EPA has imposed very strict regulations on the coal industry, mainly dealing with carbon emissions to combat climate change, which make it almost impossible to construct a new coal-fired power plant. These same environmental groups make it no secret they now want to move “beyond oil.” The final and proposed regulations affecting the oil and gas industry seem to signal EPA is seeking to follow its efforts against the coal industry with a similar effort against the oil industry.

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