American Oil and Gas Reporter - June 2016 - 27

WASHINGTONWATCH
Methane Rule
Inappropriately Targets
Marginal Wells
While marginal wells are defined as those producing 15 barrels oil of day of oil or less, or 90 Mcf of gas a day or less, these
wells are far from marginal in their contribution to America's energy production. There are more than 1.1 million oil and natural gas wells in the United States; approximately 760,000 are marginal wells. These small wells account for about 20 percent of U.S.
oil production and 13 percent of its natural gas production.
Because of the declining nature of oil and natural gas wells,
"new" wells ultimately will become "marginal." Because marginal
wells will continue to be part of America's energy production, it
is crucial for regulators to grasp their operating characteristics.
While many state regulators have years of experience in regulating
marginal wells, actions by the U.S. Environmental Protection
Agency demonstrate a lack of understanding.
EPA issued a final rule on May 12 to amend its New Source
Performance Standards to reduce methane leaks from new and
modified oil and gas facilities (see story page 34). These rules,
which build on EPA's 2012 requirements to reduce volatile organic compounds, pull in some sources not previously covered:
marginal wells.
When EPA proposed these changes last September, it recommended low-producing wells be exempt. In comments submitted
in early December, the Independent Petroleum Association of America and the American Exploration & Production Council supported
that exemption, noting the minimal incremental emissions from
marginal wells, and arguing the cost of reducing those emissions
were likely to make many marginal wells uneconomic.
"The opportunity cost or value of that lost production is not
offset by the minimal emission reductions achieved by regulating existing sources," the associations contended.
But instead, EPA relied on comments indicating that "low production well sites have the potential to emit substantial amounts
of fugitive emissions," and that "a significant number of wells
would be excluded from fugitive emissions monitoring, based on
this exemption. We believe the emissions from low production
and non-low-production well sites are comparable."
Such a conclusion flies in the face of logic. Energy in Depth
explored this abrupt change in agency thinking and the counterintuitive "evidence." EPA relied on comments submitted by the
Clean Air Task Force (CATF), which was launched in 1996 with
a single goal: to enact federal policy to reduce the pollutants from
America's coal-fired power plants that caused respiratory death
and disease, smog, acid rain, and haze. According to its website,
"CATF has continued to apply its technical and policy know-how
to aspects of the climate challenge in cutting-edge ways."
One apparently novel way was to persuade EPA, through an
Environmental Defense Fund study, that the focus should be on
methane as a percent of production, not on sites emitting large
quantities of methane. Using that construct, the EDF study found
that "lower production sites . . . are almost twice as likely to be
among the top 5 percent of emitters, relative to sites with an order of magnitude higher rates of production."
Some examples in the study showed a well in which half of

"Actions by the U.S. Environmental
Protection Agency demonstrate a lack of

understanding.

its extraction was lost in emissions. The study concluded that "the
conventional definition of superemitters would be biased toward
the highest producing sites." What a shock!
This inaccurate portrayal of emissions from oil and gas sites
does not explain to how these enormous emissions were calculated. Was this a single-day occurrence, such as a liquid unloading
operation? Otherwise, it is difficult to explain how a producer
would allow so much of a valuable product to be wasted.
EPA's bias against marginal wells also is present in its 2016
Greenhouse Gas Inventory (GHGI), which abruptly reversed EPA's
estimate of declining methane emissions from the oil and natural gas industry. The 2015 inventory indicated methane emissions
from natural gas systems had dropped 11 percent since 2005. But
after revising the 2015 data, this year's GHGI found the reductions in methane emissions from natural gas to be less than 1 percent. Further, the 2016 data show a 29 percent increase in methane
emissions from petroleum systems since 2005.
Part of EPA's focus on marginal wells can be seen in the GHGI.
EPA acknowledges that 70 percent of smaller oil and natural gas
production facilities do not report, and therefore are not part of
the GHGI. EPA appears to assume that these smaller facilities are
releasing emissions comparable to those of larger producing facilities. And EPA intends to pursue this line of thinking by requiring
marginal wells to monitor leaks.
Marginal wells should not be marginalized in the implementation of environmental regulations. These wells, which are operated primarily by smaller producers, provide a significant portion of America's energy. New rules should not encourage producers to shut in those resources.
❒

SUSAN GINSBERG is vice
president of crude oil and natural gas regulatory affairs for
the Independent Petroleum
Association of America. She
covers legislation and regulation, focusing on the CFTC
and FERC. Her experience in
natural gas regulatory affairs
spans 25 years.
JUNE 2016 27

American Oil and Gas Reporter - June 2016

Table of Contents for the Digital Edition of American Oil and Gas Reporter - June 2016