The recent announcement on May 12th of a “final rule” from the Environmental Protection Agency (EPA) on curbing methane emissions should come as no shock to those in the oil and gas industry. Under the Climate Action Plan and the Clean Air Act, the agency is looking to cut methane emissions by 40 to 45 percent in the next 10 years. While many in the industry likely will expect court challenges to these rules, preparedness should be a watchword for companies with drilling, production, and transport operations in the US.
While earlier rules covering volatile organic compounds (VOCs) required many to start extensive inspection campaigns for these greenhouse gases and maintenance work to remove identified leaks, the new methane rules expand the scope of these inspection and maintenance efforts significantly. Specifically, the following areas will come under the performance standards of the EPA with this new set of rules:
In addition to applying methane requirements across much of the equipment covered under the 2012 VOC rules, these new rules also cover a wider array of processes and equipment in these rules. At its most impactful, the concept of “equipment leaks”, which are widely known in the industry as “fugitive emissions”, are also under the standards of the rule.
At a high-level, operators will be required to do the following:
- Capture methane and VOCs that are emitted during hydraulic fracturing
- Modify existing production processes for the equipment types above to ensure methane and VOCs are routed to emission control devices
- Implement a leak inspection and monitoring plan, requiring that any detected leaks be repaired within 30 days of discovery
These changes pose a significant challenge to the industry and, especially, for operators in states that have not previously implemented rules along these lines. However, those operators that take a measured and proactive approach to implementation of programs necessary for compliance with these rules can not only ensure compliance but also reduce the risks of significant disruption to their business.
Despite these rules, maintaining containment and ensuring that methane flows downstream are just good business practice. So, what should companies be doing now to get ahead of the regulations and apply best practices?
First, operators should look at this from a holistic perspective across drilling, production, and transport functions to ensure coverage. A clear current state assessment of any existing greenhouse gas programs should be done to understand whether these can be extended and expanded to deal with the increased scope of the EPA rules. This assessment should look at the organization from the following perspectives:
- Process: Do we have processes in place in both our inspection routines and in our engineering departments to account for the rules as they exist in their newest form?
- People: Do we have the right skills in our field force to perform the inspection and remediation activities that may be required?
- Data: Do we know where the equipment and processes that fall under the rule set are and what risk we have from each? Are we able to report easily on existing greenhouse gas efforts?
- Technology: Do we employ technology currently that can be scaled to meet the requirements of the new rule?
- Program: Do we have a centralized effort guiding the implementation of a greenhouse gas monitoring and intervention processes that can ensure consistency and risk reduction?
Once you have a clear view of where you are at now, it’s time to start planning. Efforts should initially focus on developing the processes and technology required to comply with the rule, but should be married early on with work to train personnel in the field to respond to the requirements set out. Any planning effort should be done centrally, with heavy involvement from the field force to ensure that implementation schedules and activities are realistic and achievable.
Finally, you need to get started. The rule states that operators need to start initial surveys of leaks and implementation of processes to contain methane within 1 year of the publish date. This will require significant coordination of the roll-out of company policies, standards, technology, tools, and new processes within a short amount of time.
These rules can definitely be seen as some of the most sweeping regulatory reform for US operators since the Macondo incident, and will have wide reaching impact. Those companies that take a deliberate approach to meeting the requirements will find that not only are they able to comply with standards but also have reduced overall risk for their organization.