U.S. President Barack Obama and Canadian Prime Minister Justin Trudeau recently committed to specific reduction targets under the Paris Climate Conference, a legally binding agreement among 195 countries. A significant aspect of their ambitious goal is to reduce methane emissions by 40-45 percent below 2012 levels by 2025 in oil and gas operations. This target was reaffirmed on June 30 when Mexico’s President Enrique Peña Nieto joined the commitment.
The U.S. has already begun acting on these commitments and this month the EPA issued a mandatory request for information that would help detect, measure, and mitigate emissions from the oil and gas industry. The environmental agency is also aggressively pursuing regulation of methane sources in the oil and gas sector. What does this mean for the industry, and how can companies engage effectively and prepare proactively?
To successfully address these mandates, oil and gas owners and operators must recognize that their organization needs to move beyond mere compliance with environmental regulations. For these companies to achieve lasting value for shareholders and society, they must be evolve their approach to focus on environmental performance and a transformation of their business operations. This is how oil and gas companies will develop a strategic advantage in the post-Paris regulatory environment.
EPA Issues Methane Regulations and Information Collection Request
The U.S. Environmental Protection Agency (EPA) has started a formal process that requires the participation of companies currently operating methane emissions sources. This process will allow the EPA to gain access to the information they need to develop comprehensive and realistic standards.
Under the proposed Information Collection Request (ICR), the EPA is seeking extensive, non-confidential information on the following:
- What emission controls are being used (and perhaps shared) in the field
- How these emission controls are configured
- What the difficulty of replacing or upgrading controls will be
- How much the time will be needed to retrofit and likely costs of retrofitting
- Whether electricity or generating capacity is available
- How often sites are staffed or visited
This ICR is the EPA’s first step towards regulating existing emission sources, issued alongside regulations to control methane emissions from new oil and gas sources on May 12, 2016. The ICR is comprised of two parts:
Part I: An “operator survey” designed to gather readily available information on the number and types of equipment at all onshore oil and gas production facilities in the U.S. Owners/operators will have 30 days from rule promulgation to respond.
Part II: A “facility survey,” to collect more detailed information on emissions sources and control devices or practices in use at facilities in the onshore production, gathering and boosting, processing, compression/transmission, pipeline, natural gas storage, and liquefied natural gas storage and import/expert facilities. Owners/operations will have 120 days from rule promulgation to respond.
The agency also made significant changes to the new source performance standards (NSPS) from the proposed rule, providing helpful leeway in some areas, such as allowing more time for companies to repair leaks, while increasing the burden of reporting in others. The final rule was published on June 3, 2016 and will be effective on August 2, 2016.
Increasing Burden of Data Collection in the Oil and Gas Industry
Some of the challenges that exist for the EPA as they try to determine the best way to tackle this issue are the same challenges that make it difficult for oil and gas companies to comply with the EPA’s request. With often widely dispersed workers and sites, the activities of every site are not always tracked in a central location. Although the EPA expects much of the information requested to be readily available from company records, owners and operators will still need to devote resources to collect some information, such as counts of pneumatic actuation devices and safety relief valves.
There is an increasing burden of reporting across the entire environmental management field, but there is particular pressure on the oil and gas industry at this time. Collectively, oil and gas facilities are the largest industrial emitters of methane in the United States and worldwide. Reducing these emissions is a key priority that has emerged out of the Paris Agreement for global action on climate change.
For this reason, much of the information the EPA is seeking is based on recent studies that have identified particular processes and activities as likely sources of large amounts of methane. These processes include natural gas venting that occurs as part of existing processes or maintenance activities, such as well and pipe blowdowns, equipment malfunctions, and flashing emissions from storage tanks. In addition, the EPA is seeking information on existing underground storage facilities, which the agency does not currently regulate.
Because the EPA’s ICR covers a large number of data elements, many companies are likely to find it time- and labor-intensive to address. This comes at a time when many oil and gas companies may struggle to absorb this additional expense. Any additional data collection requirements place an increased burden on companies and as a result, the value of this information must always be weighed against the cost of gathering it.
Next Steps for the U.S. Oil and Gas Industry
The first step for oil and gas companies is to respond to the EPA’s request for comments within the allotted period, which ends August 2, 2016. For more information on how to engage in this process, oil and gas companies can visit the EPA website here and read the fact sheet that lays out the next steps associated with this ICR in more detail. The second step is to respond to the upcoming ICRs. Draft copies of the ICR forms are available on the EPA website.
It’s unlikely that this will be the last of the information requests that oil and gas companies will see from government agencies. Forward-looking owners and operators should start thinking now about ways that they can centralize their processes and critical environmental information to make it easier to comply with future requests.