The Environmental Protection Agency (EPA) recently released final regulations for oil and natural gas production methane emissions. These regulations address both New Source Performance Standards (NSPS) and existing source Emissions Guidelines (EG). While the NSPS requirements are specific regulations, the EG generates a state planning process over the next two years. Taken together, the regulations will impose significant new compliance burdens on oil and natural gas production from the largest new well sites to the smallest existing facility. The requirements are complicated and contradictory in some cases—requirements that could shut down many small facilities.
Key issues creating challenges. Let’s look at a couple of key issues that show the challenges that the producers will face over the next several years. A particularly challenging area is the impact on low-production wells that dominate existing sources. There are about 750,000 of these wells, producing up to 15 boed. Two of EPA’s major regulatory provisions that affect these operations are pneumatic controller limits and leak detection and repair (LDAR) requirements. The American Petroleum Institute released an Earth System Sciences study of the implications of EPA’s proposed regulations, concluding that about 300,000 of these wells would be uneconomic. This amount represents virtually all the 1.0-bopd (6 Mcfd) wells in the United States. The question then becomes, did EPA change its pneumatic controller and LDAR requirements from its proposal; the answer is—essentially no.
Why do the EPA regulations present such a challenge? For pneumatic controllers, EPA is prohibiting them for both new and existing sources. EPA’s basis for this conclusion is highly questionable, largely based on emissions estimates that overstate the benefits and understate replacement costs that do not reflect the differences between new sources that are large and these small existing sources.
For LDAR, the assessment is more complicated. There are many ways to address managing fugitive leaks at well sites. Moreover, a Department of Energy study of small well emissions identified where the largest ones come from and that they can be controlled through cost-effective techniques and good site maintenance. For example, the major leak sources are tanks where thief hatches have been left open, some pneumatic controllers where maintenance can limit emissions, and other miscellaneous sources like vents that need to be closed. All these can be straightforwardly addressed through what is called AVO (audio-visual-olfactory) LDAR and good maintenance. Industry has strongly supported the use of AVO as a cost-effective approach and recommended its use to EPA.
EPA’s more costly version. EPA, however, created a much more complicated and costly LDAR program. While it does use AVO for single-wellhead-only sites and small well sites, it uses a much more costly approach—Optical Gas Imaging (OGI)—for all other wells and for multi-wellhead only sites. The critical issue is what wells fall in each category. EPA’s LDAR program applies to all equipment at the site, but it does not include controllers, since they are considered a separate facility. Yet, when it defines the other well site category, one of its criteria is the presence of controllers. Consequently, if there is even one controller at a well site, it is excluded from the AVO-only program and shifted to an OGI program.
EPA asserts that this other well site category is defined, because these types of sites are known sources of super-emitter emissions events. Elsewhere, EPA defines a super-emitter, such that it would have an emissions rate of about 130 Mcfd. How can a well that produces 6 Mcfd emit 130 Mcfd?
This is an example of the challenge that oil and natural gas producers face in responding to EPA’s new regulations—instead of finding pragmatic approaches to managing methane emissions, EPA generated requirements that are unnecessary to meet its objectives.
States tasked with regulation creation. Next, for existing sources, the actual creation of regulations will fall on states. Regarding the LDAR controls, states will now be faced with developing regulations that can shut down all their smallest wells. No state uses an LDAR program like EPA’s Emissions Guidelines. Yet, if a state tries to vary from EPA’s approach, it will be castigated for failing to meet the national mandate.
Oil and natural gas producers are committed to effectively managing their methane and volatile organic compounds (VOC) emissions. At issue is developing appropriate techniques that reflect both the emissions profile and the economic challenges of each segment of the industry from large to small. It is too soon to know the full impact and associated issues in EPA’s latest regulations. More analysis is necessary, and some materials are not yet available. Perhaps, after the full scope of the issues is understood, EPA can be convinced to reconsider those aspects of these regulations and improve them. WO
LEE FULLER is Officer for Environment and General Strategy at the Independent Petroleum Association of America. He joined the IPAA staff in 1998 and is responsible for coordination of legislative and regulatory activities. Mr. Fuller has 45 years of experience in federal policy issues. He served as staff on the U.S. Senate Committee on Environment and Public Works from 1978 through 1986. In 1985 and 1986, he was the Minority Staff Director, serving under Senator Lloyd Bentsen (D-Texas). During this time, he was involved with all major legislation developed by the Committee. Subsequent to his service in Congress, Mr. Fuller has served as a Vice President of the Smith-Free Group (and its predecessor organizations, Walker Free Associates and Charls E. Walker Associates) and of Jellinek, Schwartz and Connolly, Inc., and as a senior legislative associate with Van Scoyoc Associates. At these firms, he concentrated on developing, implementing and advocating policy strategies for clients involved with environmental legislation, including proposals to restructure the regulation of oil and gas production wastes, the application of Superfund to oil and gas production facilities, and the air toxic provisions of the Clean Air Act as they apply to oil and gas production facilities. Before coming to Washington, Mr. Fuller worked for Exxon Company, USA, at its Baytown, Texas, refinery, providing technical support for process operations and managing environmental compliance issues. He graduated from Lehigh University as a chemical engineer.