Whether the U.S. Environmental Protection Agency (EPA) ultimately stacks more layers of regulations on the midstream sector remains foggy but one thing is clear: The energy industry’s voluntary efforts to reduce methane emissions are working.

Methane (CH4) is the primary component of natural gas, and gas and petroleum systems are the most significant source of methane emissions from any industry in the U.S., according to the EPA. Some is released into the atmosphere during production, processing, storage, transmission and the distribution of natural gas.

Between 1990 and 2012, methane emissions increased in the U.S. by 11%. But that marked a tipping point, and according to research from EnergyInDepth.org, 2013 showed that operators in all major U.S. oil and gas basins began to show reductions in the greenhouse gases (GHG) released into the atmosphere.

All of which could benefit the midstream side of the industry if the EPA decides to press harder on the sector, industry insiders say.

“The environmental groups are putting tremendous pressure on EPA to insist on further controls related to methane,” Jim Smith, a partner in the environmental practice of Porter Hedges LLP in Houston, told Midstream Business. “[They] have acknowledged that burning methane is a substantially better way to produce electricity than burning coal. They also acknowledge that their favored ‘renewable’ sources cannot compete with natural gas at the current pricing structure.”

As Smith explained, the federal environmental agency is under significant pressure to further minimize GHG emissions and will be making announcements that it’s going to look a lot harder at trying to minimize methane emissions at the drill site. More importantly, he said, downstream of the drill site—but before hydrocarbons get to the refineries, which are already under strict regulations—there is room for additional reductions of emissions.

“There is this notion, but the science isn’t all that clear, that EPA can significantly reduce net GHGs if they would significantly lower methane emissions by new controls on the intermediate—the midstream—area,” Smith said. “Exactly what’s going to come out of that, we don’t know.”

The EPA has suggested that midstream facilities—pipelines, gathering and processing, storage and transmission facilities—may be much more important and much more damaging in the area of GHGs than originally thought, Smith said.

On one side of the debate are natural gas advocates who point to the GHG declines through moving toward more use of gas instead of coal. However, methane emissions, which may have up to 20 times the heat-retaining impact of CO2, remain a concern. And second only to CO2, methane is the most prolific GHG emitted from human activity, according to the EPA.

“Some enviros have really latched on to this methane problem and said we’re really not helping our greenhouse gas situation with all this natural gas because the methane is escaping at much greater quantities than the industry is telling us,” Smith said. The EPA’s science isn’t clear, but Smith said the current regulations on the midstream aren’t too onerous.

“But there are people within EPA, as a result of the environmentalist community, who have really got their eyes on midstream and saying, ‘Ah—that’s the problem!’ and there are some folks in the environmentalist community who will do anything and say anything to increase the cost of fossil fuels so that their favored alternatives, the ‘renewables,’ won’t be quite so economically bad in comparison.”

Celina Romero, an Austin, Texas, lawyer who represents several pipeline companies on environmental issues, said most companies are hopeful the EPA will continue to allow voluntary efforts currently used to augment the EPA’s 2012 New Source Performance Standards to remain in place, allowing voluntary efforts to be utilized to control methane emissions from the midstream industry.

“We already have seen significant emission reductions through voluntary measures, driven by economic incentives, that were taken even before the new [standards] were put in place,” Romero said.

As part of the Natural Gas STAR Program, part of the EPA’s Global Methane Initiative, companies representing more than 50% of the U.S. natural gas industry have voluntarily found ways to reduce their emissions. Since its inception in the 1990s, those partners with the EPA have cut almost 471 billion cubic feet of methane emissions using dozens of cost-effective technologies.

Given the success of the voluntary efforts, the industry is hoping the EPA will permit the system to remain in place.

“We have heard there may be a mandatory program put in place, which would be expensive and unnecessary because of the results that we’re already seeing through the voluntary measures,” Romero said.

Much of that cost would include personnel costs and equipment downtime.

“Under a mandatory leak detection program, you may have to repair a leak within a fixed period of time after discovery. In some instances, repairing a leak can result in more emissions than the leak itself. For example, in order to perform maintenance on an engine you have to blow down the engine, which in some instances, will cause emissions that will far exceed the leak rate of a flange or a valve.”

In fact, one Texas Commission on Environmental Quality provision provides that when a repair of a leak would generate more emissions than the leak at issue, the repair may be delayed until the next scheduled shutdown.

“That would make a lot more sense than being required by a federal rule to have to perform unscheduled maintenance activities that could double or triple the emissions than if industry were able to hold tag the leaks and repair them all at one time,” she said.

Flaring up

When it’s burned or flared, methane breaks down in such a way that it’s a plus for lowering GHG, Smith said. Whenever people drill for hydrocarbons, there’s always a good chance that natural gas will be all, most or part of the product.

“We, of course, have a lot of natural gas because of the ability to fracture these shale formations and because we have a lot more gas coming into the system, we have many opportunities for methane to escape. The industry doesn’t want the methane to escape because they are in the business of selling the stuff,” Smith said.

“Flaring is a way to stop methane from leaving as methane and instead leaving as carbon dioxide and water by burning the stuff. But flaring has its own problems, including it’s never 100% effective and there are other things that come out in flaring. And finally, separate from a direct environmental issue, flaring just strikes most people as something wrong because that gas should be valuable.”

In fact, a new industry group has organized to address shale-related gas flaring, stranded gas and emissions reduction with the goal of monetizing gas at the wellhead.

The group—Flaring Issues, Solutions and Technologies (FIST)—was officially launched at the recent Unconventional Resources Technology Conference in Denver.

“A major goal of FIST will be to use novel technology to monetize gas at the wellhead,” said Richard Haut, program manager for Environmentally Friendly-Drilling Systems Program, a research arm of the Houston Advanced Research Center and one of the members of FIST. Other FIST members are the Petroleum Technology Transfer Council and Environmentally Friendly Drilling.

Politics at play

Whether the EPA decides to lean on the midstream to appease Democrats and their environmentalist allies remains uncertain. Smith noted Congress could file legislation or cut the EPA’s budget to discourage or retaliate against such action.

“I think, given the realities, if I were advising midstream folks, I would say, ‘Yes, you have to pay attention to the political side.’ But it’s so broken, it’s not going anywhere, and I’m not even sure the Republicans’ threat to significantly cut EPA’s budget is going to get much political traction.

“If you’re going to do the best you can for your industry, I think it’s to concentrate on the science,” he added. “Get really good, effective scientific evidence to support the controls that are appropriate, reasonable and cost-effective and get that evidence into the [legislative] rule-making record.”

Deon Daugherty can be reached at ddaugherty@hartenergy.com or 713-260-1065.

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