January 01, 2016

Methane in the midstream

Wayne J. D’Angelo

The U.S. Environmental Protection Agency’s (EPA) September 18, 2015, proposal to tighten New Source Performance Standards (NSPS) applicable the oil and gas industry is primarily recognized for its first-ever direct regulation of methane emissions and for its expansion of the existing NSPS (Subpart OOOO) from natural gas wells to both natural gas and oil wells. While the agency’s proposal is most closely associated with these “upstream” sources, it also represents, not only the first effort to regulate methane emissions from oil and gas transmission equipment, but the first regulation of air emissions from equipment and facilities in the midstream sector. “Midstream” operations link “upstream” to “downstream” refining and marketing. Midstream activities are focused on transportation (particularly pipeline transportation), but also encompass processing and storage facilities.

Background

The proposed rule builds on a regulatory paradigm developed in 2012 when EPA first exercised its authority under section 111(b) of the Clean Air Act (CAA) to establish NSPS to control emissions of volatile organic compounds (VOCs) from new and modified natural gas wells, gathering infrastructure, and processing plants. The 2012 NSPS imposed work practice and monitoring requirements to identify and control fugitive emissions from specific categories of equipment such as compressors and pneumatic controllers. While the category of pollutants targeted by the 2012 NSPS were VOCs, methane capture was identified as a “co-benefit” of the rule because the potential sources of, and controls for, VOC emissions are the same as those for methane emissions.

Proposed regulations

The midstream components of the proposed new NSPS (Subpart OOOOa) comprise existing control requirements for equipment subject to the 2012 NSPS that are also used in the midstream sector. Covered equipment includes compressors, pneumatic controllers, and pneumatic pumps. As with VOC emissions, EPA is proposing to control methane emissions from this equipment through work practices, routine maintenance requirements, and equipment substitution.

EPA is also proposing to adopt in the midstream sector (and for oil and gas wells and boosting and gathering infrastructure) a new leak mitigation requirement previously only mandated for use at natural gas processing facilities. Under proposed Subpart OOOOa, operators of new and modified compressor stations will be required to survey for methane leaks using optical gas imaging cameras, through which invisible methane and VOC emissions can be observed, or through EPA’s Method 21, which identifies methane leaks by placing a handheld probe around potential sources of fugitive emissions such as fittings and valves.

These surveys must be done within 30 days of a compressor station’s initial startup or within 30 days of a modification. A compressor station is “modified” when one or more compressors is added after the effective date of the final rule or when a physical change is made to an existing compressor that increases the capacity or compression capability of that unit. With limited exceptions, repairs of leaks discovered during surveys must be made within 15 days of detecting a leak and a confirmatory leak detection survey must follow within 15 days of the repair. Subsequent leak detection surveys would follow annually or semiannually depending on the percentage of components where leaks are detected.

Why methane?

Methane is the second-most prevalent greenhouse gas emitted in the United States, but according to EPA, methane has a global warming potential more than 25 times greater than that of carbon dioxide. Given methane’s prevalence and potency, its control is essential to President Obama’s well-publicized commitment to cut greenhouse gas emissions in the United States 26 to 28 percent below 2005 levels by 2025. According to the administration, meeting the overall greenhouse gas target requires the United States to reduce its methane emissions by 40–45 percent between now and 2025. And, because EPA views natural gas and petroleum systems as the industry sector with the highest potential to achieve methane emissions reductions, the oil and gas industry is the primary focus of the agency’s regulatory strategy for methane.

The oil and gas industry, however, views methane quite differently. Methane is the primary component of the natural gas that companies spend a great deal of money to develop, transport, and sell. According to industry stakeholders, methane reductions need not be accomplished through federal regulation—methane’s value as an energy source incentivizes its capture. In industry’s view, this imbedded incentive is reflected in the nearly 80 percent reduction in methane emissions from hydraulically fractured natural gas wells since 2005 and the 11 percent reduction in total emissions from natural gas systems over the same time period. This occurred during a time period when total U.S. gas production increased 44 percent. None of these declines were the result of the direct regulation of methane emissions. The majority of these declines, moreover, occurred before methane capture was regulated as a co-benefit of the 2012 Subpart OOOO VOC controls.

What next?

Given the role of methane reductions in the president’s ambitious commitment to reduce domestic greenhouse gas emissions, EPA likely views as one of its top priorities for 2016 the finalization of this rule in substantially the same form as it was proposed. The rule’s prospects following finalization are decidedly more difficult to predict. Both proponents and opponents of the proposal have been quick to identify a wide range of practical concerns and legal vulnerabilities. Whether these concerns and potential legal vulnerabilities find their way into a petition for review of the rule will depend on how the key stakeholders view the impacts or infirmities of this rule relative to a significant number of rules slated to be finalized in the final year of this administration. It will also depend on stakeholders’ views of the 2016 presidential election and the prospect of having the next administration decide how much methane regulation is enough.

Wayne J. D’Angelo

Wayne D’Angelo is a partner in the Washington, D.C. office of Kelley Drye & Warren, LLP. His practice is focused on environmental, health, and safety issues in the energy industry and other heavily regulated industries.