Obama Administration Makes Two Regulatory Moves On Oil, Gas Operations

The Obama administration took its first two regulatory steps — one final, one tentative — toward guarding against air and ground water pollution from fracking.

The final rule on air emissions from the Environmental Protection Agency (EPA) and proposed rule from the Department of Interior (DOI) covered different regulatory terrain. The EPA limits emissions of volatile organic chemicals, chiefly methane, from fracked oil and gas wells while the DOI wants gas companies and their well digging contractors to disclose more information about the fracking chemicals they use and about their well digging and construction practices.

Lost in the headlines over the controversial fracking implications was the EPA’s decision, in its final rule, to step back from what interstate pipelines worried would be onerous new, emission reduction requirements on transmission and storage operations. There, the EPA proposed rule issued previously would have expanded New Source Performance Standards (NSPS) for the oil and gas industry. Those standards regulate emissions of volatile organic chemicals, the chief one being, with regard to pipelines, methane. The EPA had proposed to broaden the reach of the NSPS to cover, for the first time, transmission and storage operations and fracking.

In the final rule published in April, the EPA stayed with the first-time fracking requirements, but softened them considerably. The transmission and storage enhancements were for the most part ditched. Compressor and pneumatic controller reductions were omitted — for the moment. The final rule exempted from regulation low-bleed controllers (with bleed rates below 6 standard cubic feet per hour) located between the well-head and the point where the gas enters the transmission line, to encourage a quicker transition from high-bleed controllers. The requirements for high-bleed controllers were also phased in over one year to give manufacturers of these devices the time needed to test and document the gas bleed rate.

With regard to fracked wells going forward, operators there will have to either flare their emissions or use emissions reduction technology called “green completions,” technologies that are already widely deployed at wells. In 2015, all new fractured wells will be required to use green completions. The final rule does not require new federal permits.

“We are very pleased that EPA was convinced by our arguments that there are very few VOC emissions from the transmission sector and thus they chose not to regulate that segment in this rule,” says Lisa S. Beal, vice president, environment and construction policy, Interstate Natural Gas Association of America (INGAA). “However, we are still perplexed by some of the language in the rule that suggests this might just be temporary. We do not believe that further analysis will result in a different conclusion. Simply put, EPA would be chasing something that just isn’t there.”

The EPA also softened proposed changes to the Maximum Achievable Control Technology (MACT) standards which apply to emissions of air toxics. Richard N. Wheatley, manager, media relations/emergency response communications, El Paso Corporation, says the NSPS and MACT changes in the final rule “are a significant improvement.”

The Department of Interior proposed rule on fracking was issued by the Bureau of Land Management (BLM) and will apply, once finalized, to state, federal and Indian lands. The rule would provide disclosure to the public of chemicals used in hydraulic fracturing on public land and Indian land, strengthen regulations related to well-bore integrity and address issues related to flowback water.

The proposed rule would require that disclosure of the chemicals used in the fracturing process be provided to the BLM after the fracturing operation is completed. This information is intended to be posted on a public web site, possibly FracFocus.org.

In a teleconference with reporters on May 9, Jack Gerard, President and CEO of the American Petroleum Institute, didn’t mince words in criticizing the BLM proposed rule. He said the states are fully able to handle regulation of hydraulic fracturing. “It is simply not necessary to add a new federal regulatory regime for fracking on top of an already highly competent state regime,” he explained.

Asked whether the API would ask the BLM to withdraw the proposed rule, Gerard did not answer directly. He said the API would continue to work with the White House and the BLM and look closely at the proposed rule. “But at the end of the exercise, we have to answer a fundamental question. That is: ‘what is the need for these regulations?'” He pointed out that EPA Administrator Lisa Jackson said the week before there was no evidence of groundwater contamination from fracking, and allegations of contamination in specific places have been found to be hollow. Rather than concerning itself with a new layer of federal fracking rules, Gerard emphasized that the federal government “ought to be spending its time modifying oil and gas permitting rules.'”

He noted that Secretary of the Interior Salazar had just approved a permit for Anadarko to drill over 3,600 natural gas wells in Utah’s Uinta Basin. It took DOI six years to approve that permit, Gerard stated. “North Dakota can issue a permit in 14 days,” he continued. “The federal government should be looking at those models.”

FERC Approves Facilities For LNG Export
Fracking also has reared its head as an issue in the debate over U.S. exports of LNG. That debate took the next step forward when the Sierra Club filed a protest with the Department of Energy on April 18, two days after the Federal Energy Regulatory Commission, acting in the DOE’s wake, approved the first construction permit at an existing LNG facility for modifications needed to export U.S. natural gas in the form of LNG. The FERC approved the first such application on April 16 approving a Sabine Pass Liquefaction LLC and Sabine Pass LNG L.P (Louisiana) application to build a liquefaction project in two stages, each consisting of two LNG process trains with a liquefaction capacity of an estimated 4.0 mtpa.

The DOE had separately approved exports from Sabine Pass in 2011. “The DOE has a responsibility to protect American families from the damaging side-effects of LNG exports,” said Michael Brune, executive director of the Sierra Club. “There is no doubt that LNG exports will mean more dangerous fracking.”

The Sierra Club is also opposing an application from Maryland’s Cove Point LNG terminal to build a liquefaction facility. Construction is expected to begin in 2014, with an in-service date in 2017, pending receipt of necessary approvals, negotiating binding terminal service agreements with the shippers and successful completion of engineering studies.

The DOE has already given Dominion approval to export LNG from Cove Point to countries with whom the U.S. has free trade agreements. Another Dominion application to export to non-free trade countries is pending. Dan Donovan, a spokesman for Dominion, says the company plans to file an application with FERC this summer asking for approval to build the export facilities at Cove Point.

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