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New Obama Methane Goals Threaten Shale Oil/Gas, Industry Says

Stymied, for now, in attempts to further regulate greenhouse gas (GHG) emissions at the utility level, the Obama administration Thursday announced plans -- in collaboration with Canada -- to target methane emissions from existing oil and natural gas production/transmission facilities.

"The [Environmental Protection] Agency [EPA] will begin with a formal process to require companies operating existing oil and gas sources to provide information to assist in the development of comprehensive regulations to reduce methane emissions," the agency said.

The move follows the stalling of the administration's utility-focused Clean Power Plan, which has been blocked by the Supreme Court and faces an uncertain future (see Shale Daily, Feb. 10). The American Petroleum Institute's (API) Kyle Isakower, vice president of regulatory and economic policy, said API only heard about the administration's latest GHG intentions Wednesday night.

"Additional regulations on methane by the administration could discourage the shale energy revolution that has helped America lead the world in reducing emissions while significantly lowering the costs of energy to consumers," Isakower said. "The administration is catering to environmental extremists at the expense of American consumers."

The effort to reduce oil/gas industry methane emissions is part of a much broader U.S.-Canada agenda on climate change announced by President Obama and Canadian Prime Minister Justin Trudeau on Thursday at the White House.

"Building on a history of working together to reduce air emissions, Canada and the U.S. commit to take action to reduce methane emissions from the oil and gas sector, the world's largest industrial methane source, in support of achieving our respective international climate change commitments," the leaders said.

Obama and Trudeau committed to reducing methane emissions by 40-45% below 2012 levels by 2025 from the oil and gas sector, as well as explore opportunities for additional methane reductions. EPA had previously sought such a reduction through limiting emissions from new sources. Thursday’s action adds the potential to limit emissions of existing sources.

"An existing-source [methane] proposal may be months away,” analysts at ClearView Energy Partners LLC said in a note Thursday, “but we would be surprised if the scope of an eventual rule deviated significantly from either the EPA's Aug. 18, 2015 proposal to regulate methane from new and modified oil and gas wells [see Shale Daily, Aug. 18, 2015] or the Bureau of Land Management's (BLM) Jan. 22 proposal to regulate venting and flaring on federal and tribal lands [see Shale Daily, Jan. 22]. Both rules proposed to address: (1) compressors; (2) pneumatic devices; (3) leak detection and repair; and (4) well completion. In addition, the BLM proposed to address: (5) storage tanks; and (6) liquids unloading."                  

For its part, Environment and Climate Change Canada said it intends to publish an initial phase of proposed regulations for methane by early 2017.

Building on the U.S.-Canada Air Quality Agreement, both countries intend to pursue programs, policies and strategies, and share experiences on reducing oil and gas methane emissions as they implement their respective federal regulations, beginning this year, they said in an announcement.

"...Canada and the U.S. will work together to improve methane data collection and emissions quantification, and transparency of emissions reporting in North America, and share knowledge of cost-effective methane-reduction technologies and practices.”

The agreement “...addresses one of the most serious aspects of our climate crisis: methane emissions from the oil and gas industry,” said Environmental Defense Fund President Fred Krupp. “Methane is responsible for about a quarter of today's warming, and the U.S. and Canada are the second- and fourth-largest emitters of oil and gas methane, respectively."

The pro-energy industry Institute for Energy Research (IER) said the move by the Obama administration is "...designed to cut off access to America's abundant, affordable energy resources...

"The plan concocted by President Obama and PM Trudeau isn't about methane emissions," said IER President Thomas Pyle. "Even as energy production has increased, America's oil and gas producers are reducing methane emissions because they have an incentive to do so. This regulation is about increasing the cost of producing natural gas and oil. And for all the damage this regulation would cause, it would have no impact on the climate."

Pyle said an earlier statement by Obama that the country "can't just drill" its way to lower gas prices has proven to be wrong. "The rise in U.S. and Canadian energy production is the reason why natural gas, oil and gasoline prices are so low, he said. "Since 2008, 97% of the total increase in world oil production came from the U.S. and Canada alone."

The leaders also said their countries would jointly endorse the World Bank's Zero Routine Flaring by 2030 Initiative, reflecting increasing concern about the impacts of oil and natural gas flaring, particularly in sensitive regions such as the Arctic.

EPA's information collection request (ICR) on oil/gas methane emissions will allow it to "gather important information on existing sources of methane emissions, technologies to reduce those emissions and the costs of those technologies in the production, gathering, processing, and transmission and storage segments of the oil and gas sector," the agency said.

"There are hundreds of thousands of existing oil and gas sources across the country; some emit small amounts of methane, but others emit very large quantities. Through the ICR, EPA will be seeking a broad range of information that will help us determine how to effectively reduce emissions, including information such as how equipment and emissions controls are, or can be, configured, and what installing those controls entails."

API is skeptical, to say the least, of anything that could add costs to the operations of oil and natural gas producers. Isakower told reporters Thursday during a briefing that the industry already is doing its part to bring down methane emissions from operations.

"America is already leading the world in reducing greenhouse gas emissions," Isakower said. "Even as oil and natural gas production has risen dramatically, methane emissions have fallen, thanks to industry leadership and investment in new technologies.

"Let's not forget that the safe and responsible development of energy from shale has helped the U.S. cut CO2 [carbon dioxide] emissions to near 20-year lows. The last thing we need is more duplicative and costly regulations that could increase the cost of energy for Americans and that could potentially drive up greenhouse gas emissions."

National Association of Manufacturers' Ross Eisenberg, vice president of energy and resources policy, also praised private-sector emissions-reduction efforts and the role of technology in the same.

"Manufacturers have reduced greenhouse gas emissions by 10% since 2005, while our value to the economy has increased by 19% over the same time period," Eisenberg said. "Our ability to produce more and grow the economy while lowering emissions is dependent on access to reliable and affordable energy. The shale revolution has served as a major bright spot for manufacturers and has been a key driver in new investments across the country that have added hundreds of thousands of manufacturing jobs."

EPA will also be seeking information that will help the agency identify sources with high emissions and the factors that contribute to those emissions. The ICR will likely apply to the same types of sources covered by the current and proposed New Source Performance Standards for the oil and gas sector, as well as additional sources.

"We'll be talking with industry, environmental groups, state, local and tribal air agencies, and communities to walk them through the process and to hear feedback and insights on our plans," EPA said.

The ICR process, which is governed by the Paperwork Reduction Act, provides the public opportunities to review drafts of the information collection request. EPA will begin the ICR process next month, signing a draft information collection request that will be made available for public comment. The agency will revise that draft as necessary based on comment and send it to the Office of Management and Budget for additional review and input.

Once the collection request is approved -- which can include surveys and required emissions monitoring -- it will go to industry, which is required to respond and attest that the information it provides is accurate. EPA's goal is to receive the first phase of information later this year.

It is not clear how far the the administration will get toward its goal before the clock runs out on the Obama presidency. A proposed rule could be issued by the end of the year, but a new Republican administration would, presumably, be less likely to pursue methane regulation.

"Natural gas producers are deeply committed to continuing the trend of cutting methane emissions that they have sustained for the last decade," Natural Gas Supply Association spokeswoman Daphne Magnuson said in an email. "Even as production increased to record levels, we watched as emissions from natural gas production decrease, due to voluntary activities on the part of the industry.  At the same time, increased use of natural gas contributed to a 20-year low for carbon dioxide emissions."

The move by Obama and Trudeau won praise from environmentalists.

"For the first time, the United States is taking concrete measures to rein in methane leaks from existing oil and gas infrastructure that will protect the atmosphere and people’s health," said Sam Adams, U.S. climate director for the World Resources Institute.

"The oil and gas industry wastes more than 9 million metric tons of methane pollution annually, which is enough to power over 6.5 million homes in one year. Measures to reduce methane leaks from natural gas systems pay for themselves in three years or less. One recent study estimates that vast majority of natural gas developments can eliminate leaks at an average cost of a penny per thousand cubic feet. The business case is obvious: avoiding leaks means that more product can be delivered to consumers.”

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