Tim Charters, NSWA Vice President of Governmental & Regulatory Affairs

Part 1 of 2

he following article, “EPA proposes voluntary methane reduction program for gas industry,” focuses on the EPA’s current draft rulemaking for methane capture and control for new source production in the oil and gas sector. This rulemaking has significant concern for stripper oil and natural gas producers as the potential impacts on small production could be devastating through much higher costs for little actual return for the EPA in real methane reductions. While this “new source” rulemaking will be harmful, the next step after EPA completes this process would be to establish an “existing source” rulemaking that could fundamentally change the economics and fundamentals within the oil and gas industry as a whole. However, that is a topic for later discussion.

Today, we want to focus on the newest step by EPA to accompany the “new source” rulemaking. That is the establishment of a new “Natural Gas STAR Methane Challenge Program.” Late last month, EPA proposed creating a voluntary program to allow oil and gas companies to make and track what they call “ambitious commitments” to reducing methane emissions without mandated rules. EPA believes that there remains “significant opportunities remain to reduce methane emissions, improve air quality, and capture and monetize this valuable energy resource.”

However, while EPA believes there are significant opportunities, a December 2014 report by Energy in Depth based on EPA data found that industry has made, and continues to make, real quantifiable reductions in methane emissions without government intervention. Specifically, EID says: “Based on data from the EPA Greenhouse Gas Reporting Program, EID’s report shows that methane emissions from some of the most prolific shales in the United States have fallen considerably. For example, in the basins that include the Utica and Marcellus shales, methane emissions fell by 55 percent and 10 percent, respectively. The San Juan Basin – an area that anti-fracking activists have claimed has rising emissions – actually reduced methane emissions by six percent. In the Anadarko Basin – which includes portions of western Oklahoma, one of the top oil and gas producing states –methane emissions decreased by 34 percent. Substantial reductions have also been achieved in Texas, which is leading the United States in oil and gas production: In the Permian and Gulf Coast Basins, methane emissions decreased by 9 percent and 18 percent respectively.”

All these emissions reductions have taken place at the same time as U.S. production of natural gas has grown more than 40 percent since 2006. One would imagine that in a world where production is up and emissions were down that the administration would spend their time and energy focusing on other priorities. However that is not the case.

The President has already committed the United States to be “fossil fuel-free” by 2100 and the overwhelming goal is to drive our nation that direction. These weighty methane rules on the oil and gas sector are designed to provide the President support and backing for a significant U.S. commitment at the world climate change talks taking place in Paris in December of 2015. This plan started with the 2014 White House strategy on methane emissions, which started the EPA process, but was significantly exacerbated by the stated goal of cutting methane emissions by 40-45 percent from 2012 levels by 2025 regardless of the costs or economic impacts.

This brings us back to the current “voluntary program.” EPA is currently asking for stakeholder comment and seeking industry partners to participate in the program. While there is little either incentive or point for stripper well operators to participate in the EPA program there will be no shortage of industry participants working in conjunction with EPA. One of the most likely groups to join EPA are the members of the One Future Coalition. The partnership between One Future and EPA was formalized in the EPA announcement on the methane challenge rule. While there are likely to be plenty of participants, there is still the fundamental question as to how companies will benefit from being engaged with EPA or if that engagement will change the decisions EPA is making with its rulemaking proposals.

NSWA will continue monitoring EPA’s changing rulemakings and policies on the emissions front with a goal of ensuring that stripper and marginal well producers are protected from the impacts of rulemakings. The Association is prepared to submit comments on any rulemaking processes, and will return to Washington, DC, after the August recess with a renewed focus to strategically educate key Congressional members on how devastating changes to current venting and flaring guidelines could be for America’s smallest, most economically-vulnerable oil and natural gas producers.