EPA’s Efforts To Combat Climate Change Moving To The Oil And Gas Industry

on May 19, 2016 at 10:00 AM

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The U.S. Environmental Protection Agency’s (EPA) Clean Power Plan, which seeks to curb carbon dioxide (CO2 ) emissions from power plants, has gotten considerable news coverage recently. Another recent EPA initiative to combat climate change is not nearly as well known, despite the fact that it could also have significant implications for the overall U.S. energy industry. Recently, the EPA has undertaken a concerted effort to reduce methane emissions from the oil and gas Industry.

Methane is a potent greenhouse gas that is estimated to be nearly 25 times more effective at causing global warming than CO2, although it is emitted in far smaller quantities. According to recent EPA estimates, the oil and gas industry is the source of nearly 30 percent of the total methane emissions produced by U.S. industry. As such, President Obama’s June 2013 Climate Action Plan called for the EPA and five other federal agencies to develop a strategy to reduce methane emissions.

Following a series of EPA white papers identifying sources and quantities of industrial methane emissions, the president announced a new methane reduction goal in January 2015. This new goal seeks a 40-45 percent decrease in oil and gas sector methane emissions relative to 2012 levels by 2025.

Rules Proposed for New and Modified Sources

The EPA’s effort to reduce methane emissions from new and modified oil and gas facilities is not made up of a singular rule, but rather a “suite” of proposed rules. According to the EPA, the rules will not only have the effect of reducing methane emissions, but also emissions of  volatile organic compounds (VOCs), which can lead to ground-level ozone formation, or “smog,” and other harmful air toxics known as hazardous air pollutants. The suite of proposed rules consists of:

  • An update to an existing New Source Performance Standard (NSPS) to include emissions standards for hydraulic fracturing (or “fracking”) and various types of equipment used in natural gas pipelines. 
  • A requirement for owners/operators of natural gas facilities to find and repair methane leaks.
  • A proposed set of control techniques aimed at assisting states in devising methods to reduce VOC emissions in areas with smog pollution problems.
  • A proposed rule that seeks to clarify EPA’s air construction and operating permitting rules as they apply to oil and gas pipeline facilities. 
  • A federal implementation plan for permitting oil and gas facilities on tribal lands. 

EPA estimates that these rules will yield reductions of 340,000-400,000 tons of methane by 2025, which equates to approximately 9-10 million tons of CO2. Such a reduction would represent more than half  of the president’s intended goal.

As is the case with all EPA rule-makings, a public comment period is required before a rule can become finalized. This comment period allows environmental groups, affected industries and the general public to offer any objections or suggestions for changes to the proposed rules. The official comment period for the proposed methane regulations closed on December 4, 2015. Currently, EPA is expected to finalize the regulations by summer or fall of 2016.

Regulatory Focus Turning to Existing Infrastructure

In March 2016, President Obama and Canadian Prime Minister Justin Trudeau announced a collaborative effort to achieve methane emissions reductions from each country’s oil and gas industry.  In response to this initiative, EPA announced its intentions to develop regulations for existing oil and gas facilities. This approach of first regulating new sources, followed by the regulation of existing sources, follows the template that EPA established in regulating power plant CO2.

This intended rule-making is in its infancy as EPA has just completed the first step, which consists of issuing a formal data request in order to gather emissions information from existing oil and gas facilities throughout the U.S. While drafting a proposed rule can sometimes take several months to over a year, EPA could be motivated to expedite this rule-making an effort to propose the rule before President Obama leaves office in January 2017. However, this timeline may be difficult to achieve.

Where We Go From Here

EPA estimates that the proposed rules regulating new and modified sources will save $120-150 million in costs associated with climate change by 2025. Additionally, an Environmental Defense Fund (EDF) analysis estimate that natural gas leaks cost companies $360 million in 2013 alone. However, the oil and gas industry estimates that industry and consumer costs associated with complying with the rule will far surpass any benefits. The American Petroleum Institute, for instance, has estimated that the new regulations could cost as much as $1 billion by 2025.

Regardless of whose numbers are correct, as with any EPA rule-making, there will certainly  be legal challenges  by industry and other stake holders to the  final rules. Such litigation could ultimately delay, change, or derail altogether any oil and gas methane emissions standards. Meanwhile, the industry will be tracking the rule developments closely.

Published originally on Black & Veatch Solutions.