Drillers Say Obama Plan to Plug Methane Leaks Imperils Boom

(Bloomberg) — The Obama administration said it will issue

rules to cut leaks of climate-warming methane, a step the oil

and gas industry warned could choke the U.S. energy renaissance

fueled by hydraulic fracturing.

The Environmental Protection Agency said Wednesday it will

propose rules this year targeting new oil-and-gas equipment, the

centerpiece of an initiative to reduce methane emissions as much

as 45 percent by 2025. The EPA also plans to expand voluntary

programs with states and industry on equipment already in use, a

move that falls short of the new mandates environmentalists

sought.

“We are outlining a comprehensive set of steps that will

have a positive effect on the climate, on the economy and on

public health,” Dan Utech, a White House adviser on climate and

energy, said on a conference call with reporters. By 2025, the

efforts will reduce gas leaks enough to heat 2 million homes a

year, he said.

The announcement may be President Barack Obama’s last major

new climate initiative, following moves to curb carbon pollution

from cars and power plants. It represents a challenge to

Republicans who won majorities in Congress with promises to rein

in federal regulations.

Higher Costs

“This EPA mandate from the Obama administration will not

only increase the cost to do business in America, but it will

ultimately limit our nation’s ability to become fully energy

independent,” Senator James Inhofe, an Oklahoma Republican and

chairman of the environment committee, said in a statement.

Climate activists pushed Obama to target methane seeping

from wells, compressors, pumps, pipes and storage tanks in the

oil and gas network, arguing it represents the largest source of

greenhouse gases so far unaddressed.

Obama, who pledged to cut U.S. greenhouse gases 28 percent

by 2025, has embraced a boom in domestic oil and gas production

made possible by fracking and horizontal drilling in shale rock.

And the EPA has been relying on increased use of natural gas —

a cleaner alternative to coal — to reach the carbon reduction

goal from power plants.

Methane — the primary component of natural gas — is 25

times more potent than carbon at trapping heat, adding to global

warming. While companies have a vested interest in keeping

methane bottled up en route to customers, some leaks.

Industry Lobbying

The oil and gas industry had been lobbying to head off any

tougher restrictions on methane emissions, arguing that

voluntary measures are sufficient and new rules threaten to

undermine the drilling revival that’s a rare bright spot in the

U.S. economy.

“As oil and natural gas production has risen dramatically,

methane emissions have fallen thanks to industry leadership and

investment in new technologies,” Jack Gerard, president of the

American Petroleum Institute, said in a statement. “Onerous new

regulations could threaten the shale energy revolution.”

The EPA estimates about 30 million metric tons of methane

was emitted in 2012, about 10 percent of the total U.S.

greenhouse-gas emissions. The oil and gas industry accounts for

almost one-third of the methane emissions.

In its statement, the Obama administration announced steps

to address the leaks from the moment the well is drilled,

through the processing, compression and storage stages, to

delivery of the oil or gas to power plants and residential

distribution networks.

‘Landmark Moment’

“This is a landmark moment: direct federal regulation of

methane is essential, and the administration has set the right

goal and launched solid steps to get started,” Fred Krupp,

president of the Environmental Defense Fund, said in a

statement.

The EPA said rules that force gas drillers to capture the

methane released right after a well is fracked will be expanded

to cover oil wells, too. Separately, the EPA will issue rules

aimed at methane leaks from new or modified production and

transportation equipment, including compressors and pneumatic

devices. The EPA didn’t detail what the rules would include, or

how much it would cost companies to comply.

Ozone, Smog

Also, the EPA will set standards for the release of ozone-forming chemicals in regions with frequent smog. Addressing

those compounds forces producers to cut methane leaks, as well.

What the mandates won’t touch — at least initially — are the

valves, pneumatic devices and compressors that are already in

use. It’s a gap in Obama’s plan that worried environmental

groups.

“They just can’t meet their goal without addressing the

existing sources,” David Doniger, climate director for the

Natural Resources Defense Council, said in an interview. “The

lifetime of this equipment is basically indefinite.”

By law the EPA must issue standards for existing facilities

after it does so for new sources, and so — eventually — some

type of standard is likely.

And the EPA rules aren’t the only part of the White House

effort.

The Interior Department would issue standards to mandate

cuts in venting, flaring and leaks in oil and gas wells on

public lands, and the Department of Energy will invest $15

million in leak detection equipment.

The administration also praised a voluntary effort by

companies such as Southwestern Energy Co., Kinder Morgan Inc.,

Apache Corp. and four other companies to band together and

pledge their own cuts in leaks. Their group, named ONE Future,

will coordinate with the EPA on how to measure emissions and

reduction, according to a White House fact sheet.

“What the Obama administration has done here is make an

explicit choice: refrain from regulating methane from existing

sources in order to give the voluntary measures a chance to

work,” said Tom Michels, a Washington-based representative for

the group.

To contact the reporter on this story:

Mark Drajem in Washington at

mdrajem@bloomberg.net

To contact the editors responsible for this story:

Jon Morgan at

jmorgan97@bloomberg.net

Romaine Bostick, Steve Geimann

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