Oil states brace for Biden methane rule


The Biden administration is set to launch a major crackdown on oil and gas methane emissions in the coming weeks, but concerns are emerging about how the rule could affect small operators and to what extent the country’s major oil and gas-producing states could fight the plan. .

Smaller oil and gas operators say the EPA’s upcoming methane rules could have a disproportionate impact on the low-production wells that are their lifeblood, and trade groups and companies have filed comments with the. agency requesting an exclusion to protect these sites.

They argue that the EPA lacks adequate emissions data for low-production wells, while environmental groups say so-called stripping wells are a serious emissions problem and need to be regulated.

The next rules are also expected to be received differently in states like Texas and North Dakota, where efforts to reduce methane have largely been voluntary. This contrasts with states like Colorado and New Mexico, where Gov. Michelle Lujan Grisham (D) tasked state agencies to design what would be the country’s toughest methane controls.

While lawsuits over regulations are almost inevitable, some industry officials also say the context for the debate has changed. They advocate specific protections that will give certain parts of the industry leeway, rather than denying that climate change is happening or that it needs to be addressed.

“I don’t hear anyone making those comments anymore,” Jason Modglin, president of the Texas Alliance of Energy Producers, said in an interview.

Methane, the main component of natural gas, has more than 80 times the warming power of carbon dioxide over a 20-year period, and the EPA’s highly anticipated plan will cover new and existing oil and gas infrastructure. The draft rules – which are under consideration in the White House – would strengthen federal methane regulations released in 2016 that apply only to wells, processing plants, and other facilities that were built or altered after 2015 (Climate wire, September 8). The one-of-a-kind proposition for older sources would apply to most U.S. oil and gas infrastructure (Green wire, September 20).

Current regulations for these older sites target the approximately 900,000 existing wells in the United States that have largely bypassed federal methane oversight. The biggest change for owners of these pre-2015 wells is that they would likely be required to perform periodic leak inspections and fix any issues.

Many of the larger producers support the idea. The Oil and Gas Climate Initiative, which represents several of the major producers, including Exxon Mobil Corp., Chevron Corp. and BP PLC, said its members were already reducing leaks from their own operations (Energy wire, 20 October 2020).

And earlier this month, OGCI members engaged achieve zero net emissions “from operations under their control”, or Scope 1 and Scope 2 emissions.

Still, the Environmental Defense Fund, which funded a series of analyzes of oil and gas wells in the Permian Basin, said the vast oil field continues to be a major source of methane despite the efforts of the industry to reduce emissions.

The group’s most recent aerial surveys in August detected 900 plumes from more than 500 sources. Of these, at least 50 were large leaks of more than a ton per hour.

And about 10 percent of global sources involved small, low-production wells, although emissions from these wells are often assumed to be too small to be detected from an aircraft.

EDF has previously stated that around 10% of the flares used to burn natural gas in the oil field are either extinguished or failing, letting raw gas escape into the atmosphere (Energy wire, May 1, 2020).

“We know that flaring and marginal wells are huge parts of the methane problem,” EDF senior scientist David Lyon said in a statement last week.

“The death knell” for small producers?

These marginal wells have been a thorny problem. Many of them are operated by small businesses, and they argued to state regulators that new regulations would make sinks unprofitable (Energy wire, March 2, 2020).

Nationally, there are 770,000 wells that produce less than 15 barrels per day – the definition of a stripping well – and they are distributed among approximately 15,000 companies.

Just complying with some of the planning and paperwork for EPA regulations could cost the industry up to $ 600 million, according to a study by the National Stripper Well Association.

That’s not a lot for big oil producers like Exxon or Chevron, who regularly spend hundreds of millions of dollars on capital projects. But small operators don’t have the staff or the economies of scale, said Charles Venditti, who works for Countrymark Energy Resources LLC, an independent producer in Evansville, Indiana.

“They’ve already made the investment – they’ve owned the cameras and the drones [for monitoring methane emissions] and they’ve already trained their staff, ”he said of the bigger competitors.

The Independent Petroleum Association of America (IPAA) noted in comments to the EPA that the agency overestimates emissions from low-production wells, noting that “regulations designed for large, high-production wells do not work appropriately for low-production wells.”

The IPAA, which represents independent producers of oil and natural gas, said the EPA’s information on low-production wells is “insufficient to develop regulations.” The group said the agency should wait for the completion of an energy ministry project this measures methane emissions at low production well sites in several basins.

At the same time, some producers argue that the industry should be more proactive when it comes to its emissions. Jonah Energy LLC, a gas producer in Wyoming, has agreed to monitor the methane released from its operations and work towards reducing it, as part of the United Nations Methane Partnership for Oil and Gas.

The move secures the company’s “social license” to operate and ensures Jonah can sell to customers looking for low-impact natural gas, said Paul Ulrich, vice president of government relations at the company. ‘business. Last year, a French utility company turned down a shipment of natural gas over concerns about emissions associated with fuel production (Energy wire, November 4, 2020).

“Staying ahead of fluctuations in policy and regulations puts us in a position where we don’t have to respond with a significant amount of unexpected capital to meet new regulations,” Ulrich said.

Yet the debate over small producers continues at the state level.

Oklahoma gets about 9.5% of its oil and 12% of its gas from marginal wells. Texas gets about 20% of its production from marginal wells, and state regulators stressed in a letter to the EPA that “all new wells will eventually become marginal.”

“It doesn’t stop there, because marginal wells provide a significant national economic contribution nationwide,” Oklahoma Petroleum Alliance spokesperson Cody Bannister said in an email.

“A single rule that applies to all types of sinks is not appropriate or reasonable, is an inefficient use of labor and funds, and it distracts attention from high-emitting sources where highest environmental benefits could be obtained. “

Ed Longanecker, president of the Texas Independent Producers & Royalty Owners Association, also sounded the alarm.

“For those in the DC Beltway, the regulation of low-production wells may not be of great concern,” Longanecker said in a statement to E&E News. “For moms and pop / small businesses across the country, over-regulation of low-production wells could unnecessarily spell the end of many businesses that power the country’s economy. The EPA should wait for data from the DOE.

Congress pressure

There are large differences between states in their approach to methane monitoring.

In 2014, Colorado became the first state to regulate methane, issuing rules that require operators to test wellheads and storage tanks for leaks and resolve any issues within set timeframes (Energy wire, February 24, 2014).

In 2020, Colorado regulators passed a rule banning most flaring and gas venting and put in place strict “pull-out” requirements for drilling near homes and schools (Energy wire, November 24, 2020).

In a letter Last week, EPA Administrator Michael Regan, Colorado Democrats called on the agency to “quickly adopt protective standards” for methane for the industry.

“Solutions to stop methane leaks during oil and gas production are cost effective and can be deployed immediately, often with financial gain for the operator who can market the captured gas,” read the letter, signed by the senses. . Michael Bennet and John Hickenlooper, as well as Representatives Diana DeGette, Jason Crow, Joe Neguse and Ed Perlmutter, all Democrats.

Lawmakers said several provisions should be incorporated into the new EPA rules, including an end to routine flaring and actions to stop “badly abandoned or orphaned wells and establish shutdown standards.”

In New Mexico, the state’s Petroleum Conservation Division has already promulgated rules that limit routine gas flaring and require companies to capture 98 percent of the methane they produce.

The state’s environment department has proposed a complementary set of rules that would require companies to perform periodic leak inspections. A hearing on these rules began last week.

According to Jon Goldstein, senior director of regulatory and legislative affairs at the Environmental Defense Fund, there will be a “first-mover advantage” for states with strict methane regulations, as well as for producers operating there.

“I think there will be a steeper slope for people on the Texan side of the Permian, for example, than there will be for producers in New Mexico when it comes to following federal rules ahead. “said Goldstein.

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