One of the most head-scratching aspects of the Obama Administration’s recently finalized methane rule is the fact that after Environmental Protection Agency’s (EPA) draft regulations included an exemption for marginal wells – since small sources, obviously, are not releasing large amounts of methane – EPA’s final rules actually eliminate that exemption, and with no reasonable explanation.
EPA’s August 2015 draft regulations on methane included a set of control techniques guidelines (CTG) that explicitly acknowledged that marginal operations would be exempt in EPA’s methane rule – or its New Source Performance Standard (NSPS) – on the basis of economic hardship and because emissions at marginal sites are “inherently low.” As EPA put it,
“For purposes of this guideline, the emissions and programs to control emissions discussed herein would apply to the collection of fugitive emissions components at a well site with an average production of greater than 15 barrel equivalents per well per day (15 barrel equivalents), and the collection of fugitive emissions components at compressor stations in the production segment. It is our understanding that fugitive emissions at a well site with low production wells are inherently low and that many well sites are owned and operated by small businesses. We are concerned about the burden of the fugitive emissions recommendation on small businesses, in particular where there is little emission reduction to be achieved. For the purposes of this guideline, fugitive emissions recommendations would not apply to well sites that only contain wellheads.” (p. 9-1; emphasis added)
In December 2015, the Independent Petroleum Association of America (IPAA) and the American Exploration & Production Council (AXPC) cited that exact passage in its official comments to the EPA. “This recognition is entirely appropriate and accurate,” IPAA and AXPC wrote. The groups added that they “agree that a fugitive emissions program should not apply to facilities with only a single wellhead.”
So how did the Administration, less than a year later, come to exactly the opposite conclusion? Thus far, EPA has claimed that “several commenters” had recommended not including low producing wells and, as the agency puts it,
“Because we did not receive additional data on equipment or component counts for low production wells, we believe that a low production well model plant would have the same equipment and component counts as a non-low production well site.”
But as the CTG clearly shows, it was EPA – not commenters – who had initially suggested marginal wells should be treated differently, and potentially even exempted from the agency’s methane rule. The EPA claimed the industry didn’t adequately support its position, even though the industry was simply agreeing with what the EPA had already formulated!
“Unconventional” Data Underscores Decision
Meanwhile, a quick look at what some anti-fracking commenters had to say sheds a bit of light on what could be the motivation behind EPA’s strange and contradictory move. The Clean Air Task Force (CATF) for instance, quoted a study spearheaded by the Environmental Defense Fund (EDF), Zavala-Araiza et. al, which CATF says shows that “lower producing wells can have significant emissions.” CATF would have you believe, counterintuitively, that small sites can emit the same volume as larger sites.
But Zavala-Araiza et. al actually changes the definition of “super-emitter” in order to make this claim. The researchers of the study define “functional super-emitters” not as sites that emit a lot of methane but as sites where a certain percentage of that well’s methane may be leaking. From the report:
“We designed a conceptual framework that functionally defines superemitting sites as those with the highest proportional loss rates (methane emitted relative to methane produced).”
It goes on to say,
“[L]ower production sites (10−100 thousand standard cubic feet per day or Mcf/d) are almost twice as likely to be among the top 5% of emitters relative to sites with an order of magnitude higher rates of production (100−1000 Mcf/d) (Table 1). Not unexpectedly, however, the highest producing sites (>1000 Mcf/d) are 4−7 times more likely than other sites to be among the highest emitting 5% of sites. Consequently, the conventional definition of super-emitters would be biased toward the highest producing sites.”
In other words, even the researchers themselves admit that what they are doing is not exactly conventional.
Also, a closer look at the data used in the EDF study demonstrates that marginal wells clearly represent a low component of the methane emissions universe.
The above graphic shows that although a similar percentage of total production can emit from marginal wells when compared to high-producing wells, actual emissions from marginal wells are negligible.
Having said that, however, even the above data on marginal wells from the study are highly questionable considering they indicate high emitting marginal wells leak nearly half of their extracted gas. This is unrealistic as no producer would continue operating a well that is losing half of its value.
If the Obama Administration’s objective is come up with a justification for new federal regulations, presenting the data in this “unconventional” way would be one way to give it “cover.” But if the Administration insists on using this flawed EDF data as the reason for rejecting its own original proposal to exempt marginal wells, it should also bear the burden of explaining EDF’s unrealistic conclusions.
Small Producers Hit the Hardest
The EPA is correct that small businesses are the predominant operators of marginal wells, because larger companies often sell wells to small businesses when they no longer want to operate them. But, the Administration’s decision on this NSPS will certainly change that.
What’s more is the Administration’s decision doesn’t meet fundamental test of defining the Best System of Emissions Reductions that must be used in setting a NSPS. The fugitive emissions requirements in the regulation are based on operations when a well is new, when its production is at its highest rate – 1,000, 2,000, 5,000 mcfd. But, when a well becomes marginal and its average production drops to 22 mcfd, it cannot bear the cost of a fugitive emissions program designed and justified for production rates 50 to 100 times its production rate. By embedding the fugitive emissions program on these wells for the life of their existence, the Administration is guaranteeing that they will end that life well before it otherwise would end, hurting small producers the most.
This may be a great decision for the “keep it in the ground” activists but it’s a bad decision for American energy security and American energy consumers.
Data Integrity Concerns
The Administration’s decision on marginal wells adds to growing concerns about its methane rules.
A report last year by NERA Economic Consulting – which has performed analyses for the U.S. Department of Energy, among others – found that the methane rule was based on a single, flawed economic study of the “social cost of methane.” The study was also authored by individuals within the EPA.
Additionally, calculations by Energy In Depth showed that President Obama’s broader methane mitigation strategy – which includes the EPA’s methane rule – would yield only 0.0047 degrees Celsius of avoided warming the end of the century. The EPA also projected hundreds of millions of dollars in benefits based on the value of natural gas that would be captured and sold as a result of the rule, but the value was based on natural gas prices being $4 per thousand cubic feet (mcf). The current average natural gas price is nearly half that, or $2.16/mcf.
Just weeks before rolling out the final methane rule, the EPA significantly increased its estimates of methane emissions from petroleum and natural gas systems. The EPA did not identify additional emissions, but simply began assuming that marginal wells had emissions profiles similar to those of higher producing wells.
The EPA admitted that its emissions estimates “greatly increase” as a result of its new methodology, “due to the activity data revision alone.”
But as the EPA itself acknowledged last summer, marginal wells have “inherently low” emissions – even though the Administration now says otherwise.