By Keith Reid
The EPA’s newly proposed regulation of methane at the wellhead is moving forward as part of the administration’s legacy goals with energy policy. There is technically still an opportunity to influence EPA before the rule is finalized. The goal is to reduce emissions some 40% to 45% compared to 2012 levels by 2025.
In general the regulation covers the wellhead and related production areas such as gas processing plants. Specifically, from the rule announcement: The proposed amendments include standards for methane and VOC for certain new, modified and reconstructed equipment, processes and activities across the oil and natural gas source category. These emission sources include those that are currently unregulated under the current NSPS (hydraulically fractured oil well completions, pneumatic pumps and fugitive emissions from well sites and compressor stations); those that are currently regulated for VOC but not for methane (hydraulically fractured gas well completions, equipment leaks at natural gas processing plants); and certain equipment that are used across the source category, but which the current NSPS regulates VOC emissions from only a subset of these equipment (pneumatic controllers, centrifugal compressors, reciprocating compressors), with the exception of compressors located at well sites.
Cost estimates from the proposed rule: The EPA estimates the total capital cost of the proposed NSPS will be $170 to $180 million in 2020 and $280 to $330 million in 2025. The estimate of total annualized engineering costs of the proposed NSPS is $180 to $200 million in 2020 and $370 to $500 million in 2025 when using a 7 percent discount rate. When estimated revenues from additional natural gas are included, the annualized engineering costs of the proposed NSPS are estimated to be $150 to $170 million in 2020 and $320 to $420 million in 2025, assuming a wellhead natural gas price of $4/thousand cubic feet (Mcf). These compliance cost estimates include revenues from recovered natural gas as the EPA estimates that about 8 billion cubic feet in 2020 and 16 to 19 billion cubic feet in 2025 of natural gas will be recovered by implementing the NSPS.
Of course, the rule will not actually “cost” anything and will, according to EPA, generate $35 to $42 million in 2020 for climate benefits with the quantified net benefits estimated to be $120 to $150 million in 2025.
What’s notable is that while the oil/gas industry and related affiliates have objected the tone is not nearly as severe as was seen with Obama/EPA’s actions on ozone regulations or electrical power generation. Nor have they provided the usual, aggressive counter point to EPA’s cost figures.
Perhaps explaining why, was Amy Harder’s coverage of the issue in the Wall Street Journal (updated August 17) that included the following statement: Many executives in the oil and gas industry say any regulation is unnecessary because they are reducing methane emissions already, though some company officials have said cutting such emissions could help them save money and wouldn’t impose a prohibitive cost.
The general theme from the oil and gas industry is that the industry has done a great job cutting emissions in an ongoing process so the regulations are unneeded and disruptive. Environmental groups see this as being short of perfect since it only covers new wells–for now. Harder did note that the groups opposed, such as API, have longer-term concerns that the current requirement that only applies to new wells might someday be expanded to all wells. She pointed out in the article that API feels the current application to new wells could easily become all wells in the future.
As we have previously covered even if climate change is occurring because of human carbon activity, with the science not nearly as settled as the proponents claim, additional carbon reduction in the Western world is virtually useless in attaining that environmental goals, as the major and ever-expanding carbon emitters are found in the developing world and with such strategic global competitors such as China.
Offered below is some of the formal response to the wellhead regulations.
American Petroleum Institute
EPA’s proposal for additional methane regulations on oil and gas wells and transmission are duplicative, costly, and undermine America’s competitiveness. The industry has already led the significant reduction in methane through innovation and existing regulations, according to API President and CEO Jack Gerard. “The oil and gas industry is leading the charge in reducing methane,” Gerard said. “The last thing we need is more duplicative and costly regulation that could increase the cost of energy for Americans. Even as oil and natural gas production has surged, methane emissions from hydraulically fractured natural gas wells have fallen nearly 79 percent since 2005, and CO2 emissions are down to 27-year lows. This is due to industry leadership and significant investments in new technologies.”
EPA’s own analysis shows that methane emissions from hydraulically fractured natural gas wells have fallen dramatically. Total methane emissions from natural gas systems are down 11 percent since 2005 – a direct result of industry innovation at the same time production has increased significantly, according to API.
“API supports a common sense regulatory approach that builds on cost-effective controls already required by EPA for new equipment,” Gerard said. “Combined with smart, voluntary efforts for existing sources, this approach will continue to lower methane emissions. To avoid undermining American competitiveness, we urge the EPA to coordinate its efforts and not add duplicative rules.”
National Resources Defense Council
In another key step to combat dangerous climate change, the Environmental Protection Agency today released proposed Clean Air Act standards for reducing methane pollution from new oil and gas production, processing and transmission equipment nationwide. A statement follows from Meleah Geertsma, senior attorney at the Natural Resources Defense Council:
“Curbing the oil and gas industry’s rampant methane pollution problem is the next biggest thing the White House can do to fight climate change after addressing carbon pollution from power plants.
“Reducing emissions from new oil and gas operations is an important first step. The largest source of this pollution, however, is the oil and gas infrastructure that already exists across the country. That must be addressed next.
“Meaningful progress in combating this potent climate pollutant will require an industrywide cleanup—from infrastructure new and old, nationwide. We are hopeful today’s announcement is just the beginning.”
Partnership for A Better Energy Future
Since 2005, domestic oil production has nearly doubled and natural-gas production has risen by about 50%, according to the U.S. Energy Information Administration yet methane emissions from the sector have dropped roughly 15%, according to EPA data. Methane emissions from hydraulically-fractured natural gas wells are down 79% since 2005. All of the reductions are a direct result of industry innovation.
“Another day, and another job-killing rule rolls off of EPA’s regulatory assembly line. The oil and natural gas revolution has driven unprecedented job growth, providing Americans with affordable energy, and significantly reducing emissions,” said Christopher Guith, senior vice president for policy at the U.S. Chamber’s Institute for 21st Century Energy. “Oil and gas innovations, along with the industry’s broad focus on safe and responsible development has helped the U.S. cut CO2 emissions and still meet consumers’ needs every day. Additional regulations on methane by EPA and other agencies are a solution in search of a problem, and only add to the difficult market conditions that are already hampering the sector.”
The rule will also dramatically impact manufacturers who have expanded dramatically recently in the U.S. because of access to low cost energy and natural gas. Since March 2010, manufacturers have added almost 900,000 jobs.
“This proposed rule adds to a growing suite of regulations that threaten manufacturers’ energy advantage by increasing costs and making it more difficult to access the resources needed to fuel our facilities,” said National Association of Manufacturers Director of Energy and Resources Policy Greg Bertelsen. “Manufacturers need increased access to reliable and affordable energy to foster innovation, encourage new investments and remain competitive in today’s global economy. This proposed regulation, coupled with the Administration’s planned ozone rule and Clean Power Plan, will have the opposite effect. If manufacturers are going to continue leading the way in creating products and solutions to lower emissions and ensure a more sustainable future, we need a more balanced approach to regulations.”
The Partnership for a Better Energy Future (PBEF), a coalition of more than 170 organizations and trade associations, will continue to explore every possible remedy to make sure greenhouse gas (GHG) regulatory actions do not cost American jobs and hurt the U.S. economy.
Environmental Defense Fund
“This is critical step toward protecting our climate and public health. EPA is taking on a pollutant responsible for 25 percent of the warming we are experiencing today,” said EDF President Fred Krupp.
“The nation’s oil and gas companies emit over seven million tons of methane pollution every year, equal to the greenhouse gas pollution of about 160 coal fired power plants over the next twenty years. This proposal begins the important work of ensuring that the oil and gas industry reduces this pollution.
“There is ample evidence that technologies and practices exist to significantly cut methane pollution from the oil and gas industry. Some leading companies have adopted these practices, but too few have, which is why emissions remain unacceptably high. That’s why we need sensible standards to set a level playing field for everyone.
“Setting the first national standards for methane emissions from the oil and gas industry is an important move, but it can’t be the last. This proposal addresses methane emissions from newly built and modified oil and gas operations, but not from the existing facilities that account for all of today’s emissions and will still account for 90 percent of the problem by 2018.
“In January, the President set a goal of reducing methane pollution 40-45% by 2025. Additional actions by government are needed to achieve this goal. The question to ask of any proposal is how far does it take us toward achieving a 45% reduction, and how quickly does it get us there?
– Fred Krupp, president of Environmental Defense Fund
America’s Natural Gas Alliance
Background: Following is a statement by Marty Durbin, president and chief executive officer for America’s Natural Gas Alliance, on proposals by the Environmental Protection Agency of new methane regulations.
“Since 2005, natural gas producers have cut methane emissions 38 percent, while increasing production 35 percent. This impressive record has been accomplished through existing regulations and industry innovation. With further improvements certain to continue, we believe new and additional regulations are both unnecessary and counterproductive. This rule is simply not the best way to achieve our shared goal of methane emissions reductions.
“Natural gas producers will continue reducing methane emissions regardless of this proposal. Not only do we have an incentive to capture methane – it is the product we sell – but our track record of efficiency improvement and innovation are what drives the environmental, economic and energy security benefits of natural gas. A collaborative approach will bring greater reductions more quickly than new and unnecessary regulation.”
