Regulator's New Focus on Emissions Rankles Offshore Energy

HOUSTON Mar 16, 2007 (Dow Jones Newswires)

The Minerals Management Service is exploring whether to increase the scope of its regulation of greenhouse gas emissions in the oil and gas industry, a move that has producers worried their actions could be linked to global warming.

A proposed rule would direct offshore producers to track the flaring and venting of natural gas, which is a byproduct of crude production, as opposed to the rough estimates required now. Flaring involves the burning of methane gas, which releases carbon dioxide into the atmosphere. With venting, methane is released directly.

MMS, an arm of the Interior Department that has oversight of hydrocarbon exploration and production in federal waters, has long limited both flaring and venting, though the focus has been on avoiding the waste of natural gas, given the growing gap between U.S. gas production and demand. But over the last two years, the agency has turned its focus to the environmental effects of the release of greenhouse gases, which scientists say cause global warming.

"It's a new approach for us," said Elmer Danenberger, chief of offshore regulatory programs for MMS.

MMS is also asking for industry feedback on proposed rules that could require producers to flare, rather than vent, gas. Limiting emissions in order to impede global warming doesn't fall under the agency's brief, and the MMS may not have the authority to restrict venting or flaring for those reasons, Danenberger said.

"In the legislation we work under, greenhouse emissions aren't a consideration," he said.

The new rule makes no mention of global warming and doesn't change the current limits on flaring and venting. But some in the industry see the linking of oil production to climate change, however indirectly, as a dangerous precedent for them.

"They're trying to label certain ... practices we do as being contributory to greenhouse gas effects," said Allen Verret, executive director of the Offshore Operators Committee, or OOC, a trade group representing producers in the Gulf of Mexico. "Every chance we get, we remind those agencies they don't have the science to say that."

Worldwide, flaring and venting contribute 4% of methane and 1% of carbon dioxide released, according to a 2004 report by the Government Accountability Office used in drafting the MMS rule. The U.S. oil and gas industry is responsible for 3% of the world total, or one-tenth of 1% of all methane emissions.

"It's an important rule," Danenberger said. "The main thrust is wanting to maintain world leadership in minimizing the venting and flaring of gas."

MMS is accepting comments on the rule through June 4 and hopes to implement the new regulation later this year, Danenberger said.

The OOC will meet in April to determine its response. Verret said he expects the group will challenge the 2004 GAO report's findings.

Verret said producers would also not look favorably at further limits on venting, which, he added, is sometimes necessary for safety reasons.

"A lot of cases require ... venting," he said.

Copyright (c) 2007 Dow Jones & Company, Inc.

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