Industry asks for more time to comply with drilling pollution mandates

Two of the oil industry’s leading trade groups today implored federal regulators for more time to comply with a looming rule for cutting air pollution from hydraulic fracturing and natural gas wells.

There isn’t enough emission-cutting equipment to go around and satisfy the mandates slated to be imposed next week, said American Petroleum Institute president Jack Gerard in a letter to Environmental Protection Agency Administrator Lisa Jackson.

About 25,000 new wells are completed each year, but just 300 sets of emissions-reducing equipment are available for “green completion” that cuts pollution from natural gas drilling in accordance with the proposed rule, Gerard said.

“The equipment required to reduce these emissions is not produced on an assembly line where someone can instantly ramp up production. It must be carefully built one-by-one in machine shops, and this takes time,” said Howard Feldman, API’s director of regulatory and scientific affairs, in a conference call with reporters. “EPA needs to adjust the time frame for implementation because enough equipment will simply not be available in time to comply with the proposed rule schedule.”

Separately, Independent Petroleum Association of America Vice President Lee Fuller sent a letter to House senior adviser Valerie Jarrett asking the administration to delay the rulemaking until better data is collected about the amount of gas that can be recovered from green completions. Fuller said the EPA’s initial estimates were based on “flawed data” that “has led to grossly overestimated emissions and has ultimately resulted in a distortion of the agency’s required cost-benefit analysis.:

At issue is the Environmental Protection Agency’s proposed rule for reining in smog-forming emissions from a range of natural gas operations — including the initial drilling of wells, production at the sites and the eventual transportation of the fossil fuel. The mandates would be the first federal air standards for wells that are stimulated through hydraulic fracturing, a technique that involves blasting mixtures of water, sand and chemicals deep underground.

The rule would require the use of green completion equipment at new and updated gas wells that are hydraulically fractured. That equipment is designed to trap and separate natural gas from other fluids and solids that flow back from a well after it is fractured.

While the measure focuses on cutting emissions of ozone-forming volatile organic compounds, complying with the mandates also is projected to pare methane emissions by about 26 percent and toxic air emissions by 30 percent, according to the EPA.

The EPA is facing a court-ordered April 17 deadline to formalize the rule. The underlying emissions rules for gas drilling operations were last modified in 1985.

Environmental groups say the measure is necessary to protect the public from high ozone levels amid a surge in hydraulic fracturing that is being blamed for causing so much smog in some parts of the West that it rivals Los Angeles and Houston.

But industry officials insist that the rule could discourage natural gas production throughout the U.S., by raising costs and making some operations off limits until enough emission-cutting equipment can be produced and installed.

Environmental advocates who support the rule say the industry’s argument doesn’t wash.

“This isn’t super complicated equipment,” said Meleah Geertsma, with the Natural Resources Defense Council. “This is an industry that has shown over the past 10 years it is very good” at getting infrastructure out to wells.

In addition to requiring emission-cutting equipment at the wellhead, the proposed rule would require changes throughout the natural gas production process.

“The fact is, every step in the gas production process, there’s air pollution associated with that,” said Joe Osborne, with the Pennsylvania-based Group Against Smog and Pollution. If wells and compressor stations are considered in isolation, the pollution from them can seem insignificant, Osborne said, but with all of the drilling and activity surrounding the natural gas boom, it adds up fast.

Although ozone levels have been going down nationwide, shale development “has the potential to halt that progress or even reverse it,” Osborne added.

Most of the covered emissions come from completions of hydraulically fractured wells. But the rule also would require changes to pneumatic devices throughout the system. When that equipment is added or updated, companies would be required to use low- and no-bleed options. To curb the leakage of VOCs, companies also would be required to use a different sealing mechanism in centrifugal compressors and periodically replace packing material surrounding the moving parts in reciprocating compressors.

The API and other industry trade groups have been asking regulators to exempt facilities in which 10 percent or less of their total emissions are from VOCs. It isn’t cost effective to require emission-cutting technology when there are few of these compounds to control, Feldman said.

But rule supporters say that 10 percent threshold is too high. The pollution from most wells falls below that level, environmentalists argue, but in large operations, even 10 percent can mean tremendous escaping emissions.

The carve-out “would exempt a huge portion of the sources we’re talking about today,” Geertsma said. Thousands of wells producing even 5 percent VOCs would create significant pollution, she said.

Industry leaders have previously signaled they could challenge the rule in court and have refused to say litigation is off the table. They could challenge the rule as unworkable, based on the apparent lack of green completion equipment that would be required to comply with the mandate. Gerard hinted at this possible strategy in his letter to Jackson:

“If EPA requires immediate compliance with the REC requirement, the rule will cause substantial delays in most oil and gas development projects. Not only is this bad energy and economic policy, such an outcome is not supported by the law (e.g., a standard that cannot be met by most affected sources plainly cannot be shown to be achievable).”

Another avenue for a challenge is based in the data EPA used to analyze its propose rule. Fuller said the EPA used limited emission estimates provided by some producers working “a very limited number of wells.” That may have thrown off the agency’s required cost-benefit analysis. Fuller adds:

“Reports have shown that, in some cases, the EPA overstated emissions estimates by over 1,400 percent. When these numbers are corrected, EPA’s proposed requirements grossly fail its own cost-effectiveness standards.”