EPA Makes the Best Case for State Regulation

With the EPA juggernaut chugging full speed ahead towards expansive new federal oil and gas regulation, its air rules are going to come first and may prove to be the most controversial. Flaws in the rule also demonstrate why the states are in the best position to oversee this industry—as they have for decades.

In August, EPA proposed new air standards (New Source Performance Standards and National Emission Standards for Hazardous Air Pollutants) for the oil and gas sector. Despite the complexity of the rules, EPA projects a final rule to be issued by April of 2012—a date most consider impossible to meet. The rules would significantly expand the universe of currently covered affected facilities and equipment and add requirements specific to hydraulic fracturing. Emissions reductions under the proposal would be achieved by controlling volatile organic compounds (VOC), sulfur dioxide, and other toxic pollutants, largely through green completions (new technologies and processes for enhanced gas recovery) and pit flaring (burning off unusable gas). The industry has generally raised concerns, not with the control of air emissions per se, but with the one-size-fits-all requirements, and the underlying assumptions.

One of those central assumptions is that methane emissions are significant, and can be controlled via surrogate VOC limits. EPA is proposing blanket standards based on assumptions about methane emissions that are at a minimum unsupported, and often simply incorrect.

For one, as noted in American Petroleum Institute comments, EPA has cast the net so widely that the rule would impose VOC control requirements on gas streams that could contain little or no VOC. In doing so, the rule imposes significant costs with dubious actual improvement in VOC reductions, leading API to conclude EPA is “essentially regulating GHG’s.”

And if the agency is going to regulate methane, the rules should be based on the best available science, accurate information about the methane emissions profile in the oil and gas sector, and be uniformly applicable. IHS CERA recently issued a report slamming the agency for mis-measuring methane in upstream natural gas operations—which undoubtedly influenced the agency in the NSPS/NESHAP rulemaking. The report notes several flaws, including estimations based on methane captured not emitted, the use of only a small number of statistically insignificant data points, and an assumption that methane produced during well completion is vented, rather than flared. The authors note that if venting were standard industry practice dangerous, toxic, and hazardous conditions would envelop a well site, and serious accidents would be frequent.

Flaws similar to EPA’s were recently pointed out by Dr. Lawrence Cathles and a group of researchers at Cornell University in a comment response to the controversial, and widely discredited, report released by Robert Howarth et al. last March. The Howarth study concluded—based on similar incorrect assumptions about methane emissions—that shale gas has a larger GHG footprint than coal. The Cathles report concludes that the mis-assumptions about industry operations are so severe, that if true “would indicate about a million dollars of methane is routinely vented into the atmosphere from each high volume well”—enough methane release in a 10-day pre-production period from one well “to fill a square mile with an explosive mixture of 5% methane to a height of 176 ft.” As the commentary appropriately notes, “not only is this an economic loss no business would contemplate, it represents a risk no company (or their insurer or regulator or rig workers) would accept.” Yet, federal rules are being forged based on these types of wildly incorrect assumptions.

The NSPS/NESHAP proposal highlights two of the fundamental problems facing EPA as it seeks (and is pressured) to regulate oil and gas "fracking" operations on a national scale: (1) there seems to be a lack of understanding or accurate and sufficient data about the true nature of oil and gas operations in unconventional plays—particularly with the increased use of fracking; and (2) one-size-fits-all standards are simply unworkable for an industry with operations that are so widely varied based on geology and geography. Ensuring safe and environmentally responsible drilling is critical to America’s energy future. However, this “uniformity” problem has reared its head in all of EPA’s fracking-related efforts thus far, and highlights why regulatory oversight is better left where it has been for decades—with the states.

—Eric Waeckerlin is an attorney with the Washington office of the law firm of Kelley Drye, where he specializes in environmental and natural resources law. This article originally appeared in the firm’s Fracking Insider blog and is reprinted with permission, with minor edits for style.