American Oil and Gas Reporter - October 2015 - 46

climate bills to also surface.
Anthony Rendon, a Democrat from
Lakewood, Ca., was elected speaker for
2016 in late September. "The new speaker
is an extremely respected person and
very smart," Thomas praises. "I am not
sure if he is necessarily a fan of fossil
fuels. He is very much a fan of renewables.
Water will be a big issue in 2016. At
some point, hydraulic fracturing will
come up again, I am sure."
He says the 2016 agenda also likely
will include statutory proposals to implement AB 32, the Global Warming Solution
Act of 2006, which directs the state to
develop a program to reduce greenhouse

gas emissions. Legislators began that
process in the 2015 session with SB 32
(AOGR, March 2015, pg. 44).
According to a legislative analysis, SB
32 would have required CARB to approve
statewide GHG emissions limits equivalent
to 40 percent below 1990 levels by 2030
and 80 percent below 1990 levels by 2050.
It also would have prohibited CARB from
implementing any requirements until the
legislature had reviewed its plans.
SB 32 did not include the "marketbased compliance mechanism" of AB 32
that set up the cap-and-trade program
through 2020, the analysis points out.
Also unlike the 2006 bill, which required

CARB to approve the 2020 limit one
year after the bill was enacted, SB 32
provided no deadlines for approving 2030
and 2050 GHG limits.
"Governor Brown has been more than
fair with the oil and gas industry," Thomas
assesses. "He has been around for a while,
and he understands industry, economics
and commerce. CIPA will-respectfully of
course-agree to disagree with him on
certain positions, which is a normal occurrence in this business. As long as that is
the case, the oil and gas industry is OK. I
know he is likely to exercise a lot more
executive authority through CARB. We
will exercise our options accordingly." ❒

Methane Regulations

EPA Targeting Oil And Gas Emissions
By George O. Wilkinson Jr.
and Jordan A. Rodriguez

HOUSTON-The U.S. Environmental
Protection Agency's rules to further control methane and VOC emissions from
the oil and gas sector would place new
and expensive requirements on upstream
and midstream operations. The proposals
appeared in the Sept. 18 Federal Register,
and are open for public comments until
Nov. 17.
Reducing methane emissions from the
oil and gas sector is a strategic priority for
the Obama administration under its Climate
Action Plan. Methane is a potent greenhouse
gas, and EPA estimates oil production and
the production, transmission and distribution
of natural gas contribute nearly 30 percent
of U.S. methane emissions.
EPA divided the proposals into three
components: source aggregation, new
sources and existing sources. The Clean
Air Act has distinct statutory authority
for new and existing sources, while the
source aggregation proposal relates to
how emissions will be counted collectively
from dispersed oil and gas operations to
determine whether CAA permitting requirements apply.
Source Aggregation
Aggregation is a key issue in whether
an oil and gas project requires a CAA
permit, which is time-consuming and expensive to obtain. Under EPA's regulations,
all adjacent and co-owned emission points
must be aggregated as a single source.
Over time, EPA has expanded aggregation requirements through a series of
guidance documents and ad hoc interpretations. However, courts have invalidated many of those interpretations, so

46 THE AMERICAN OIL & GAS REPORTER

EPA proposed two options for an aggregation rule in conjunction with its methane
proposal.
The first approach-EPA's preferred
option-is based on the physical proximity
of emission points. Adjacent sources
would include all the emitting activities
located on a property, and those sources
that "are contiguous or are located within
a short distance of one another."
EPA proposes that properties within
one-quarter mile should be considered a
single source. However, it is seeking comments on whether to adopt another distance,
such as one-half mile. EPA also seeks
comments on whether to "daisy-chain"
sources in the aggregation analysis, which
could extend a source quite broadly.
Under EPA's second option, a single
source still would include all emitting
activities located on properties within
one-quarter mile, but sources beyond
one-quarter mile also could be grouped
based solely on their functional interrelatedness. EPA is proposing several factors
that could be used to support a finding
that emission points are "functionally interrelated," including a connection by
pipeline or the delivery of product from
one emission point to another.
EPA also is soliciting comments on
whether functional interrelatedness should
be limited to certain common configurations of equipment, such as a "hub and
spoke" production model.
Finally, EPA has requested input on
whether there was a distance beyond
which sources, even those meeting its
definition of functional interrelatedness,
should not be aggregated.
EPA's source-definition proposal would
place a heavy permitting burden on operators and regulating authorities. EPA es-

timates a major source permit typically
takes a year or more to process. EPA's
second option would be particularly time
consuming for permitting authorities because it would entail case-by-case determinations of the functional interrelatedness
of sources.

New Source Rules
The new source portion of EPA's proposal seeks to expand the agency's 2012
Subpart OOOO (Quad O) new source
performance standard to explicitly address
methane in addition to the volatile organic
compound controls required by the 2012
rule.
Adding methane to Quad O is duplicative because methane and VOC controls typically are the same for the sources
addressed by the rule. The VOC controls
installed by companies in response to
the 2012 Quad O regulations, along with
other industry innovations, already have
resulted in substantial reductions in
methane emissions.
EPA is proposing to amend Quad O
to add methane and VOC emission controls for hydraulically fractured oil well
completions. Oil wells with gas-to-oil
ratios of more than 300 cubic feet per
barrel would be subject to the well completion provisions. Hydraulically fractured
natural gas wells, which are regulated
under Quad O already, also would be
subject to the new methane standards.
Because EPA has determined the VOC
standards for gas wells reflect the best
system of reducing methane emissions,
natural gas sources already in compliance
with those standards likely will be able
to meet the methane standards without
further controls.
Consistent with Quad O, the proposed



American Oil and Gas Reporter - October 2015

Table of Contents for the Digital Edition of American Oil and Gas Reporter - October 2015

Contents
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