API: Regulatory onslaught may keep producers out of methane program

An eruption of proposed US Environmental Protection Agency regulations in the last year could create such substantial compliance costs for oil and gas producers that many would not be able to participate in EPA’s voluntary Methane Challenge Program, two American Petroleum Institute officials warned.

EPA launched the voluntary methane emissions reduction effort on Mar. 30 with 41 companies, largely gas utilities with some gathering, transmission, and storage firms (OGJ Online, Mar. 31, 2016).

Producers, gas processors, and pipeline operators may have to deal with four proposed methane regulations that EPA announced on Sept. 18, 2015, dealing with New Source Performance Standards, Control Technique Guidelines, Source Determination for Oil and Gas Sources, and Aggregation, and a Tribal Lands Minor New Source Review, the API officials told reporters during a Mar. 31 briefing at API headquarters.

“They’re facing this suite of four rules in addition to the US Bureau of Land Management’s proposed venting and flaring rule and EPA’s Information Collection Request,” API Senior Regulatory and Scientific Policy Director Howard J. Feldman said.

API Executive Vice-Pres. Lewis Finkel said, “When you have no idea of what a growing command-and-control regime will look like, it’s hard for a company to invest in a voluntary program even if it looks like a good idea.”

Feldman said API considers EPA’s information collection request proposal for emissions measurement approaches is “a correct next step before going forward with new regulations.” He said, “There’s a large number of differing and existing sources. That said, most production comes from new wells. EPA should look carefully at what the costs will do to existing production. It needs to understand where production is, where emissions are, and what would be cost-effective.”

‘Flurry of new rules’

Finkel said, “There are a flurry of new rules coming out of EPA and [the US Department of the Interior]. Both have finite staffs, yet they seem to be rushing to complete rules before the end of this administration. They also might want to brandish their environmental credentials once the political campaigns reach their final stages. We firmly believe that heading into fall away from the primaries and conventions, we’ll see a debate on whether to extend our energy success or stifle it.”

The US business community in general usually grows less certain in an election year because policies in a new administration and Congress potentially could drive costs higher or ensure a manageable marketplace, he said.

“For us, there are stark choices and 2 distinct routes,” Finkel said. “Once is to continue making our production grow and increase our energy security. Even with depressed production, we still have strong production from fewer wells at lower costs. The other is to increase regulations on the domestic oil and gas industry.”

Regulatory uncertain probably will make many producers think twice about committing to voluntary programs, Feldman said. “In light of the current climate where there are so many proposed rules, it’s unlikely they’ll want to spend more money there,” he said.

Contact Nick Snow at nicks@pennwell.com.

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