The U.S. Environmental Protection Agency (EPA) on Wednesday announced it would delay requiring the use of green completion technology for hydraulic fractured natural gas wells until 2015.
"We are taking a deliberate step to allow the time needed for manufacturers to make and distribute the technology to allow all oil and gas companies to rise to the leadership standards," said EPA Assistant Administrator Gina McCarthy in a conference call with reporters on Wednesday.
During the transition period, producers will have the option until 2015 of either using green completion technology or flaring gas. Starting January 1, 2015, the energy industry will be required to use green completions, and not have the option to only flare gas.
"The rule was being implemented in a way that would recognize the companies that are already using green completion technology," McCarthy said, noting that green completions are already being utilized for approximately half of the natural gas wells in the U.S.
EPA estimates that 13,000 new and existing natural gas wells are fractured or re-fractured each year. The finalized rule targets the volatile organic compounds (VOCs), which contribute to smog formation, and air toxics, including benzene and hexane. The rule is intended to reduce organic compound emissions from natural gas wells that form smog and can cause a range of adverse health effects, including cancer.
McCarthy estimates that between 90,000 and 290,000 volatile organic compounds (VOCs) per year and 12,000 to 20,000 tons per year of benzene of emissions that come from gas storage tanks and other equipment would be eliminated. A significant environmental co-benefit of the rule is the reduction of methane.
Methane, the primary component of natural gas, is 20 times more potent than carbon dioxide when released directly into the atmosphere. Between 1 million and 1.7 million tons of methane would also be eliminated by the rule, McCarthy said.
The use of green completion technology will also enable companies to collect additional natural gas that can be sold, EPA said in a statement released Wednesday.
"Natural gas is a key component of the nation's clean energy future and the standards released today make sure that we can continue to expand production of this important domestic resource while reducing impacts to public health and most importantly build on steps already being taken by industry leaders."
The EPA opted not have allow exemptions for low VOC producers, McCarthy said.
"We didn't have the data to justify it and would have resulted in a case by case decision for small sources that number around 13,000. We couldn't implement something like that," McCarthy added.
The bulk of the data reviewed in the rulemaking showed that it was not feasible to do green completions on low pressure wells, but these types of wells tend to be found in areas with low VOCs in terms of geology.
The decision to delay implementation of the requirement for companies to use green completion technology was not politically motivated, said McCarthy.
"The idea of a phased in approach is not a new consideration, but one we wanted to make sure that the answer was the correct one," McCarthy added.
McCarthy addressed energy industry concerns that the data used by EPA to finalize the rule was incomplete or overstated emissions from gas operations.
"The amount of reductions achieved in the rule is actually less in terms of tonnage than we proposed not because the rule is less stringent, but because if industry comments indicating that there were fewer wells were being refracked than EPA anticipated," McCarthy said."It's still a very strong rule, but it has been adjusted in response to the data we've received."
The confusion over EPA's estimates of greenhouse gases was that the baseline in EPA's study didn't take into consideration companies who are already using green completion technology, McCarthy commented.
Energy industry groups such as the American Petroleum Institute had said that requiring companies to implement the technology this year would be difficult due to the lack of available equipment and time needed to manufacture enough equipment to meet the new standard.
"The president has been clear that he wants to expand production of important domestic resources like natural gas, and today's standard supports that goal while making sure these fuels are produced without threatening the health of the American people," said EPA Administration Lisa P. Jackson in a statement.
Dow Jones reported last week that the White House would form a working group to coordinate oversight of gas drilling and hydraulic fracturing.
The American Petroleum Institute (API) said Wednesday that the EPA made constructive changes to the hydraulic fracturing rules, said Howard Feldman, director of regulatory and scientific affairs for API.
"The industry has led efforts to reduce emissions by developing new technologies that were adopted in the rule," said Feldman in a statement. "EPA has made some improvements in the rules that allow our companies to continue reducing emissions while producing the oil and natural gas our country needs."
"This is a large and complicated rulemaking for an industry so critical to the economy, and we need to thoroughly review the final rule to fully understand its impacts," Feldman continued.
In a conference call with reporters in April, API officials laid out concerns that implementation of the EPA rule could actually cost the U.S. oil and gas industry $783 million over the four-year period following the rule's implementation.
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