American Oil and Gas Reporter - May 2016 - 99

IPAA, AXPC Rip Methane Regulations
WASHINGTON-Additional controls
on methane emissions from oil and natural
gas equipment, processes and activities
proposed by the U.S. Environmental Protection Agency are "unnecessary, unjustified, poorly developed and counterproductive," industry groups protest.
In comments filed on behalf of themselves and more than 50 state oil and gas
associations and industry trade groups,
the Independent Petroleum Association
of America and the American Exploration
& Production Council predict the rules
proposed by EPA in September will increase energy costs for American families.
EPA says the proposal amends the
Clean Air Act's New Source Performance
Standard for the oil and gas source category by setting standards for methane
and volatile organic compounds to supplement existing sulfur dioxide standards.
The agency says it is proposing both
methane and VOC standards for several
emission sources in the production, processing, transmission and storage sectors
not covered by the NSPS, and is proposing
methane standards for certain emission
sources now regulated for VOCs only.
The proposed regulations were published
in the Sept. 18 Federal Register.
The targeted emission sources include
those EPA says are unregulated under
the existing NSPS-including hydraulically
fractured oil well completions, pneumatic
pumps and fugitive emissions from well
sites and compressor stations. The regulations seek to cut methane emissions by
40-45 percent by 2025. The proposed
regulation includes requirements for reducing methane because EPA classifies
the gas as a greenhouse gas, and it says
the oil and gas category is one of the nation's largest methane emitters (AOGR,
October 2015, pg. 46).
Reductions
The industry coalition says the EPA
proposal fails to recognize that most of
the methane emission reductions it seeks
already have occurred because of voluntary
industry actions. The oil and natural gas
production sector is 1.07 percent of the
national greenhouse gas inventory, and
its methane emissions will continue to
drop because of industry emissions management, the groups say, arguing that
any justification for additional regulations
must be weighed thoroughly on cost effectiveness and economic consequences.
According to IPAA and AXPC, EPA's
latest proposal fails that test.

The fugitive emissions regulation is
the most egregious element within the
agency's NSPS proposal, the groups
assert. It is based on purely speculative
emission reductions, but as designed,
they say, it is excessively and unnecessarily
burdensome.
"Oil and natural gas production fugitive
emissions management is an emerging
arena. Companies and state regulatory
programs still are learning how best to
efficiently and effectively control them,"
AXPC and IPAA say. "Several states are
implementing programs, none of which
parallel EPA's proposals. Experience with
those state efforts demonstrates that emission patterns result from a few high emissions sources that can be managed quickly
with sustained reductions."
Stating that EPA's proposal to lock in
what they term "an unworkable program"
for at least five years is arbitrary and inappropriate, IPAA and AXPC urge the
agency to wait for an analysis of state
programs to determine whether a revised
NSPS is logical or necessary.
AXPC and IPAA also say the NSPS
proposal is flawed and unnecessary because:
* EPA's proposal to designate control
technique guidelines (CTG) for volatile
organic compounds in ozone nonattainment areas fails to comply with the
agency's fundamental responsibility for
developing reasonably available control
technology. In the proposal, EPA largely
transposes the same requirements in the
2012 NSPS and those included in this
proposal for new sources to existing
sources. EPA thus fails to determine
whether those new facility requirements
are appropriate economically.
* By linking the CTG to the administration's Climate Action Plan, EPA fails
to address the need for the CTG with regard to ozone nonattainment. According
to an agency analysis, EPA has demonstrated that the CTG are wholly unnecessary to attain the ozone National Ambient
Air Quality Standard. The EPA already
had concluded that all but a few areas of
the United States would meet the new
ozone requirements by 2025 using federal
regulations.
* Because the CTG are unnecessary,
their likely impacts will be to inappropriately restrict economic growth in ozone
nonattainment areas.
As it addresses source determination
for oil and gas production facilities, the
industry coalition suggests EPA adopt a
narrow definition similar to the approach
it uses under the National Emissions

Standards for Hazardous Air Pollutants
program. The agency should base its decision on factors such as sites that are
contiguous, share the same Standard Industrial Classification code, and are under
common control.
No New Regulations
Because of the industry's unique production operations when compared with
other types of manufacturing-with well
production declining after a period of
flush production-AXPC and IPAA say
controls on new sources alone will achieve
EPA's objectives without the need for
new regulations.
There are 760,000 marginal wells in
the United States that produce 15 barrels
of oil or 90 Mcf a day of natural gas or
less, out of a total well population of
more than 1.1 million. Those marginal
wells account for 20 percent of U.S. oil
production and 13 percent of domestic
gas output, the groups note.
As production declines, the amount
of VOCs and methane emitted also decline.
AXPC and IPAA question the cost effectiveness of expanding emission regulations
over thousands of stripper wells.
"Unlike manufacturing, where new
facilities do not replace existing ones, in
the oil and natural gas production industry,
implementing technology on new wells
rapidly results in its application across
the breadth of the industry, as new wells
become the predominant source of emissions," the associations write.
IPAA and AXPC predict that within
12 years, wells subject to the new source
regulatory requirements will dominate
domestic gas production, and the remaining wells will be marginal producers with
minimal incremental emissions beyond
emissions from wells already subject to
regulations. The costs associated with reducing emissions will exceed the costs
of implementing controls on new or modified sources, and are likely to make
many marginal wells uneconomic, forcing
them to be shut in or abandoned, they
warn.
"IPAA and AXPC have told EPA repeatedly that additional regulation is not
needed," the groups point out. "Market
forces drive the industry to minimize
emissions. Unlike certain 'products' in
other industries with 'emissions' that are
a byproduct or negative externality associated with production, the 'emission' of
concern to EPA is the very product this
industry brings to market."
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MAY 2016 99

American Oil and Gas Reporter - May 2016

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