EPA Levies First GHG Rule on Gas Industry
Monday, August 8, 2016
Posted by: Floyd Gilzow
The Environmental Protection Agency’s first ever Air Rule on the oil and gas industry had a few unexpected surprises when it was finalized in May. The agency’s final rule came after considering over 900,000 comments filed on the draft rule.
First, the rule became at least a hundred million dollars more expensive for new, modified and reconstructed units. Second, EPA announced plans to begin the process to expand its Greenhouse Gas (GHG) reductions to existing facilities in the near future. The goal of the current rule is to slash GHG emissions by 40 to 45 percent, or 500,000 short tons a year, by 2025.
The agency is using the same sections of the Clean Air Act that was used to craft controls on electric generating units, to set up the two sets of rules for natural gas and oil.
The new rules will double the amount of monitoring required of pipeline companies for compressor stations, eliminating exemptions provided for low production wells and forcing the capture of methane at various points in the extraction, production and distribution system. While EPA predicts costs in the $530 million dollar range, industry sources claim actual costs will be more like $800 million. EPA projects national savings of $690 million, mostly from avoided damage caused by storms and other weather related events.
The industry is complaining that these new costs are coming at a time when margins are already cut to the bone and may require rate increases.
EPA’s draft Information Collection Request (ICR) is on a fast track through the administrative approval process in order to start collecting data later this summer on all facets of the existing natural gas system. The only relief at this point is that the agency specifically said they will not be asking for data on leakage from local gas distribution systems.
Methane is calculated to trap as much as 20 times the heat of an equal weight of carbon dioxide, making leak reduction a key component of administration plans to control climate change.