The Other Shoe Just Dropped on Methane Emissions from the Oil and Gas Industry
By Mike Mills, Tom Henry and Shannon Morrissey on June 8, 2016
Not to be outdone by its federal counter-parts, the California Air Resources Board (“ARB”) released Greenhouse Gas Emission Standards for Crude Oil and Natural Gas Facilities (“proposed rule”) for methane emissions on Tuesday, May 31, following a slew of recent federal regulations targeting reduction of methane emissions. Cal. Code Regs. tit. 14, §§ 95665-95676 (proposed). The federal Bureau of Land Management released proposed regulations for reducing waste and methane emissions in oil and gas operations in January 2016. Then, in May 2016, the U.S. Environmental Protection Agency also began regulating methane when it released final regulations to curb emissions of methane and volatile organic compounds from additional new, modified, and reconstructed sources in the oil and gas industry.
While methane is the current emissions target for regulators’ greenhouse gas reduction efforts, the oil and gas sector is the industry target. The proposed rule is part of California’s plan to reduce emissions from short-lived climate pollutants, including methane emissions, by 40-45% by 2025. This follows the Obama Administration’s similar methane emissions reduction goal.
Broad-reaching, the proposed rule would apply to upstream oil and gas facilities, including onshore and offshore crude oil and natural gas production facilities, natural gas underground storage facilities, and natural gas transmission compressor stations. Cal. Code Regs. tit. 14, § 95666 (proposed). ARB plans to address methane emissions from pipelines and other midstream oil and gas infrastructure in a separate regulatory proceeding, following consultation with the California Public Utilities Commission.
The proposed rule would require oil and gas companies to increase efforts to capture methane emissions from oil and gas infrastructure, establish quarterly leak detection and repair requirements, submit a monitoring plan to ARB, and enhance leak monitoring and alarm systems for underground natural gas storage facilities. Operators subject to the proposed rule would be required to register with ARB and report specified information about the facility no later than January 1, 2018. ARB predicts that the proposed rule would reduce greenhouse gas emissions by about 1.5 million metric tons of carbon dioxide equivalent per year.
However, this greenhouse gas emissions reduction comes with a very hefty price tag. ARB estimates that compliance with the rule would cost operators about $23 million per year, which strikes these authors as being on the low end of the cost estimate range, when everything is said and done. The oil and gas industry has voiced concerns that the cost of compliance with the regulations could outweigh any potential benefits, especially in the current depressed-price oil market. Further, the proposed regulations single out the oil and gas industry explicitly, instead of focusing on potential fugitive emissions sources from other industries.
The deadline to submit public comments on the proposed rule is July 18, 2016, at 5:00 p.m.