The costs associated with implementing three new final rules by the U.S. Environmental Protection Agency (EPA) governing methane emissions from oil and gas industry sources would outweigh any benefits, industry supporters told a House panel on Thursday.
But an environmental advocate countered that some regulation is necessary to avoid future disasters, such as the one that struck the Aliso Canyon underground gas storage facility earlier this year (see Daily GPI, Feb. 18).
Three of the four witnesses called to testify before the Subcommittee on Environment -- part of the House Committee on Science, Space and Technology Committee -- did so on behalf of the industry, which is challenging the need for additional regulation by EPA. Even the name of the hearing, "A Solution in Search of a Problem," strongly suggested that House Republicans are also skeptical of the agency's intentions.
A 'War on Natural Gas'
"I am concerned about the EPA's expansive interpretation of its regulatory scope and its continued use of questionable scientific basis for rulemaking. My concern extends to the EPA's methane rule," said subcommittee Chairman Rep. Jim Bridenstine (R-OK).
EPA unveiled the three rules last May (see Shale Daily, May 12). The rules, collectively updates to the New Source Performance Standards, are designed to reduce methane, volatile organic compounds (VOC) and toxic air pollutants. The agency said its actions would help the Obama administration meet its goal of slashing methane emissions from the oil and gas sector by 40-45% from 2012 levels by the year 2025.
Bridenstine slammed EPA Administrator Gina McCarthy for saying she would expedite issuing the regulations. He added that her decision seems especially egregious since a study by the National Oceanic and Atmospheric Administration found that wetland and agriculture, not oil and gas production, were the main contributors to methane emissions.
"Rather than expedite methane regulation, EPA should take a breath and realize that the best available science does not support new rulemaking. But once again, EPA is back at it with cherry-picking and fudging data to fit a politically-driven agenda aided by a cabal of establishment environmentalists," Bridenstine said.
"The shale revolution has changed the U.S. economy and has been responsible for creating good-paying jobs. Instead of focusing on environmental protection however, the EPA is now pursuing a war on natural gas."
But Rep. Suzanne Bonamici (D-OR), the subcommittee's ranking member, responded that regulation is necessary in order to avoid a repeat of incidents such as the four-month leak at Southern California Gas Co.'s Aliso Canyon underground natural gas storage field.
"Incidents like this highlight the importance of EPA's methane regulations, specifically the leak detection component," Bonamici said. "Although the new rule only addresses methane emissions at new, reconstructed and modified oil and gas sources, it represents an important first step -- a step that needs to be made so that the problems of today are not the problems of tomorrow."
EDF: Industry Playing 'Catch-Up' With Science
Elgie Holstein, senior director for strategic planning at the Environmental Defense Fund, called the Aliso Canyon incident "a terrible tragedy" but warned that there are currently about 400 similar facilities in the U.S.
"The single most important thing to address in the construction of a new storage facility would be well integrity...to make sure that you've got the well constructed correctly," Holstein said. "The second category of actions you want to take is to have leak detection and repair protocols, so that you see what's happening and get a handle on these problems before they become a three- or four-month disaster requiring thousands of people to be evacuated."
When asked by Bonamici if voluntary efforts by the oil and gas industry were enough to prevent future incidents, Holstein urged lawmakers to be cautious.
"If we look at the power of the methane molecule, it's an enormously powerful, nasty climate actor...84 times more powerful than a molecule of carbon dioxide," Holstein said. "What that really means is we can't afford to wait for the industry to play 'catch-up' with the science.
"Part of the problem that the industry has...is that these random events are significant. A lot of this is counterintuitive. You can't simply make an assumption that old facilities are going to leak more than new facilities, or the other way around. It's enormously random, and that's why we need comprehensive leak detection."
Costs 'Far Exceed Any Benefits'
Bernard Weinstein, professor and associate director of the Maguire Energy Institute, Cox School of Business at Southern Methodist University, said many of the costs associated with the regulations were unaccounted for by EPA's own cost-benefit analysis.
"Methane releases are a serious environmental issue," Weinstein said. "I just believe there are better ways to deal with these issues. [How does] a blanket regulation that would apply to all producers of natural gas, oil and transmission companies make any sense if there are targeted areas that can be addressed in terms of controlling emissions? There are a number of other specific areas that I think could be dealt with a lot more simply than passing a new slew of federal regulations."
As examples, Weinstein said state regulatory agencies have traditionally handled orphaned wells, a source of methane leaks. Cities in the northeast have also been handling old leaking lead pipes.
"On balance, I think what's being proposed, in terms of new regulations from EPA on methane emissions, the costs overall are going to far exceed any benefits," Weinstein said.
Erik Milito, director for upstream and industry operations at the American Petroleum Institute, said the industry has voluntarily been deploying new technologies to reduce methane emissions for years. Some examples include green completions, reducing the use of pneumatic valves and controllers, and eliminating emissions from storage tanks.
"We are an industry that has been very active in deploying these technologies well before the EPA put any regulations forward," Milito said. "I would say that the EPA regulations are in many respects a lagging indicator of the industry because they're based upon technologies the industry has proactively developed."
Anthony Ventello, executive director of Progress Authority, an economic development organization serving Pennsylvania's Bradford and Susquehanna counties, said the new regulations come at a bad time for the industry, particularly with commodity prices in a slump.
"The industry has been pretty much self-policing," Ventello said. "We see a lot of improvements in what they've done. And of course, the release of methane is a loss of dollars. So there is a lot of effort to try to make sure that they do things to current standards. But in essence, right now in a low-cost environment, it would have a substantial impact long-term just because of the additional costs in not only improving the wells but also completions and transmitting.
"The key really lies in moving the gas so that you can minimize the amount of methane that is emitted from an idle situation."
Weinstein agreed. "We tend to forget that we are the world's number one gas producing country, and that we're also getting into the business of exporting natural gas," he said. "That has tremendous economic benefits, in addition to the environmental benefits.
"I think we need to be very careful in assessing new policies to regulations that can make it more expensive for us to produce and sell natural gas, unless there's overwhelming evidence that the benefits of regulation can exceed the costs."