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Administration Makes Two Regulatory Moves On Oil And Gas Operations

Pipeline & Gas Journal...May 2012

     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. A different metric was also identified to simplify the determination of which storage tanks are covered by the standards. Instead of the proposed throughput measurement, the final rule identified a regulatory cutoff of 6 tons of VOC emissions.

        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 & 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.  So, in short, yes, the final rule addressed our concerns but until EPA makes a definitive determination that VOC controls on the transmission sector are unnecessary, we will remain vigilant."

      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 (1) provide disclosure to the public of chemicals used in hydraulic fracturing on public land and Indian land, (2) strengthen regulations related to well-bore integrity, and (3) 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, and the BLM is working with the Ground Water Protection Council to determine whether the disclosure can be integrated into the existing website known as FracFocus.org.

     Prior approval would be required for well stimulation activities, generally in connection with the prior approval process that already is in place for general well drilling activities through the Application for Permit to Drill (APD) process. Operators also will be required to submit cement bond logs before fracturing operations begin. The running of cement bond logs on surface casing, which is currently an optional practice, would now be required for new wells. Existing wells would require mechanical integrity testing prior to hydraulic fracturing.
     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 regulation.'" He pointed out that EPA Administration 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 stated.

      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."