New Mandatory GHG Reporting for the Oil and Gas Industry

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On January 14, 2015, the Obama Administration announced an update to its March 2014 “Strategy to Reduce Methane Emissions from the Oil and Gas Sector” (Strategy).  Within this announcement it was revealed that the Administration would be taking a host of future actions in order to achieve their methane reduction goals, including the following:

• Proposing and setting standards for methane and ozone-forming emissions from new and modified sources.
• Implementing new guidelines to reduce volatile organic compounds (VOC).
• Considering enhancement of leak detection and emissions reporting.
• Leading by example on public lands.
• Reducing methane emissions while improving pipeline safety.
• Driving technology to reduce natural gas losses and improving emissions quantification.
• Modernizing natural gas transmission and distribution infrastructure.
• Releasing a Quadrennial Energy Review (QER).

If you are a member of the oil and gas industry, you’ve probably been following updates concerning the Administration’s Strategy, as well as the related activity concerning U.S. Environmental Protection Agency’s (U.S. EPA’s) development of future amendments to the industry’s New Source Performance Standards (NSPS).  The NSPS amendments, which are anticipated to be proposed this summer, are expected to impose first-time direct limits on methane from certain oil and gas operations and add new equipment types (including hydraulically fractured oil wells, pneumatic pumps, and leaks from new and modified well sites and compressor stations) to those types of sources already covered by the standards.  But while amendments to the NSPS loom on the horizon, oil and gas operations are being immediately impacted from another direction – U.S. EPA’s Mandatory Greenhouse Gas (GHG) Reporting Rule promulgated at 40 CFR Part 98.

On October 30, 2009, U.S. EPA published the original version of 40 CFR Part 98 for the purpose of collecting GHG information from a broad range of industry sectors.  The 2009 rule, which finalized reporting requirements for 29 source categories, did not initially include the Petroleum and Natural Gas Systems source category.  A subsequent rule was published on November 30, 2010 which finalized requirements for the Petroleum and Natural Gas Systems source category at 40 CFR Part 98, Subpart W.  Since Subpart W’s promulgation roughly four (4) years ago, it has already been revised eight (8) times by U.S. EPA, most recently on November 25, 2014.  On December 9, 2014, additional amendments were also proposed which would add new industry segments and add reporting requirements to those already required under the rule.

With industry facing an upcoming annual March 31, 2015 deadline to submit 40 CFR Part 98 GHG reports, let’s dig into the recent November 25 and December 9, 2014 rulemakings and discuss who it will impact and when, what has changed, and what actions affected entities can take to both ensure compliance with the final November 25, 2014 rule and understand the potential impact of the December 9, 2014 proposed amendments.

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Determining If Your Facility Is Affected

To determine if  your oil and gas facility is required to report under 40 CFR Part 98, Subpart W you need to determine whether you meet the reporting thresholds of 40 CFR §98.231 and which of the following eight (8) Subpart W industry segments is appropriate for your facility to report pursuant to:

(1)  Offshore petroleum and natural gas production.

(2)  Onshore petroleum and natural gas production.

(3)  Onshore natural gas processing.

(4)  Onshore natural gas transmission compression.

(5)  Underground natural gas storage.

(6)  Liquefied natural gas (LNG) storage.

(7)  LNG import and export equipment.

(8)  Natural gas distribution.

Let’s discuss the implications to these industry segments in the context of each recent rulemaking action.

November 25, 2014 Final Amendments

The November 25, 2014 final amendments became effective January 1, 2015 and are widespread in scope – revising calculation methods, monitoring and data reporting requirements, terms and definitions, and technical and editorial errors.  The rulemaking impacts each of the eight (8) existing industry segments.

Pursuant to the preamble of the November 25, 2014 final rulemaking, the final amendments are not expected to impart significant additional burden to reporters and in the following circumstances are actually expected to reduce burden or have no impact:

• The ability to now use either site-specific composition data or a default gas composition for natural gas transmission compression, underground natural gas storage, LNG storage, LNG import and export, and natural gas distribution facilities.
• For well venting from liquids unloading, the ability for the measurement period to now differ slightly from the standard calendar year combined with annualizing the resulting venting data for facilities that calculate emissions using a recording flow meter.
• The option to now use a site-specific compressibility factor for calculating emissions from blowdown vents and for conversion of volumetric emissions at actual conditions to standard conditions.
• The revised calculation methods for onshore production storage tanks that now require quantification of emissions from well pad gas-liquid separator liquid dump valves only if the dump valve is determined to not be closing properly.
• The inclusion of a term to account for situations where part of the associated gas from a well goes to a sales line while another part of the gas is flared or vented.
• The removal of the requirement to consider vented compressor emissions routed to a flare in the compressor emissions total and retention of the requirement to report uncontrolled vented emissions from compressors.
• The reduction of the number of measurements required to quantify centrifugal and reciprocating compressor emissions routed to a common vent manifold or flare header.  Only a single annual emissions measurement at the common vent for groups of manifolded compressors is now required as opposed to emissions measurements for each individual compressor routed to the common vent.
• The revised requirements for conducting measurements in the “not-operating-depressurized mode” once every three (3) years or at the next scheduled depressurized shutdown (for centrifugal compressors) or at the next scheduled shutdown when the compressor rod packing is replaced (for reciprocating compressors).
• The revised calculation methods for the natural gas distribution segment to clarify the calculation methodologies and reporting requirements for above grade metering-regulating stations.
• The removal of the existing Best Available Monitoring Method (BAMM) provisions in 40 CFR §98.234(f) and the transitional BAMM provisions that apply for (portions of) the 2015 calendar year.
• The ability to now use optical gas imaging as a screening tool to detect emissions from reciprocating and centrifugal compressors.
• The providing of new missing data procedures as guidance for reporters when a measurement is inadvertently missed.

However, U.S. EPA also asserts within the November 25, 2014 preamble that in the following cases the final amendments may increase a reporter’s burden:

• Revision of the calculation and reporting requirements for completions and workovers which now differentiate between completions and workovers with different well type combinations in each sub-basin category.
• Revision of the calculation and reporting requirements for onshore natural gas transmission compression, underground natural gas storage, LNG storage, and LNG import and export to include emissions from flare stacks.
• The addition of 247 new data elements (many of which are typically already collected by reporters, related to data that are already being reported, or are readily available to reporters), the substantial revision of 13 data elements, and the deletion of 34 data elements that were historically required to be reported.

With an effective date of January 1, 2015, those reporting currently under Subpart W should immediately ensure that they are fluent in what has specifically changed because all data collected for the current calendar year must be monitored, recorded, and calculated in accordance with the November 25, 2014 provisions beginning January 1, 2015.  The first report to be submitted in accordance with the November 25, 2014 provisions will be due on March 31, 2016.

Calculation Methods and Impact

The table, Summary of Subpart W Calculation Method Revisions provides a concise summary of the calculation methods (per industry segment) that experienced revision on November 25, 2014 and illustrates their vast impact – each calculation method applicable to each respective industry segment has been revised.

U.S. EPA asserted within the November 25, 2014 preamble that removing the existing provisions would not add burden to existing Subpart W reporters because all reporters had been complying with the historic monitoring methods of 40 CFR §98.234 without utilizing the historic BAMM provisions.  However, each reporter should evaluate this on a case-by-case basis and determine if any action needs to be taken as an effect.  If a request for a transitional BAMM extension was not filed by January 30, 2015, the option for a reporter to utilize the new transitional BAMM provisions expires on March 30, 2015 and that reporter must obtain the necessary equipment to conduct measurements as required under the revised rule by April 1, 2015.  Regarding Subpart W monitoring requirements, the revisions do not impact the monitoring provisions specified at 40 CFR §98.234 concerning how to conduct leak detections; operate and calibrate flow meters, composition analyzers, or pressure gauges; use calibrated bags (i.e., vent bags); high volume samplers; or the Peng Robinson Equation of State.  However, reporters will recall that revised monitoring requirements are also incorporated throughout the 40 CFR §98.233 calculation methods and for that reason it is critical for a reporter to review what monitoring requirements have specifically changed from both a 40 CFR §98.233 and §98.234 standpoint.  Further, the November 25, 2014 revisions are extremely impactful in that they remove the historic provisions of Subpart W related to BAMM and replace them with special transitional BAMM provisions that only apply during the period January 1 through March 30, 2015.  This transitional BAMM applies for certain parameters that cannot reasonably be measured according to the rule’s updated monitoring and quality assurance/quality control (QA/QC) requirements.

To aid in this review, it will be helpful for each reporter to note that the transitional 2015 BAMM provisions included within the November 25, 2014 rulemaking are only intended for the following types of data:

• Well-related measurement data that cannot reasonably be measured for well venting for liquids unloading and gas well venting during well completions and workovers with hydraulic fracturing, from wells not previously measured.
• Reciprocating compressor blowdown valve, isolation valve, and rod packing venting from manifolded vents, when conducting “as found” measurements according to revised 40 CFR §98.233(p)(4) or (p)(5).
• Centrifugal compressor blowdown valve, isolation valve, and wet seal oil degassing venting from manifolded vents, when conducting “as found” measurements according to revised 40 CFR §98.233(o)(4) or (o)(5).

Lastly, in addition to the revisions noted above, U.S. EPA also finalized confidentiality determinations for certain new and substantially revised Subpart W data elements as part of the November 25, 2014 rulemaking action.

Final Thoughts On Rulemaking

December 9, 2014 Proposed Amendments

If finalized as proposed, the December 9, 2014 proposed amendments would affect reporters belonging to the existing “Onshore Petroleum and Natural Gas Production” industry segment, and would also add two (2) new Subpart W industry segments: an “Onshore Petroleum and Natural Gas Gathering and Boosting” segment and an “Onshore Natural Gas Transmission Pipeline” segment.  U.S. EPA intends to finalize the December 9, 2014 proposed amendments by the end of 2015, with an effective date of January 1, 2016.  If finalized according to this schedule, all data collected for the 2016 calendar year would need to be monitored, recorded, and calculated in accordance with the future rulemaking beginning January 1, 2016.  The first report to be submitted in accordance with the future rulemaking would be due on March 31, 2017.

Under the proposed rulemaking, “Onshore Petroleum and Natural Gas Production” segment reporters would be required to monitor and report emissions and data elements associated with oil well (not just gas well) completions and workovers with hydraulic fracturing, and would also have to report Well Identification Numbers associated with individual oil and gas wells, and for certain pieces of equipment that are associated with individual oil and gas wells (e.g., acid gas removal units, dehydrators, tanks, and flares).  Members of the oil and gas industry that perform oil well completions and workovers with hydraulic fracturing are advised to keep in mind that U.S. EPA’s incorporation of a requirement to report emissions from these activities has the potential to increase the amount of emissions that would count towards determining applicability to Subpart W.  In fact, U.S. EPA expects 50 new reporters to exceed the reporting threshold for Subpart W based upon this future requirement, in addition to the estimated 246 existing reporters that would also be affected.  On the other hand, the proposed reporting of Well Identification Numbers is not expected to have significant impact because reporters should already be tracking and maintaining Well Identification Numbers associated with measurements used for other existing Subpart W input data.

Under the proposed December 9, 2014 rulemaking, U.S. EPA would add a new “Onshore Petroleum and Natural Gas Gathering and Boosting” segment that would require the reporting of emissions data and related data elements for equipment used by gathering pipeline systems that move petroleum and natural gas from the well to either larger gathering pipeline systems, natural gas processing plants, natural gas transmission pipelines, or natural gas distribution pipelines.  U.S. EPA expects approximately 200 new reporters to become subject to Subpart W if the “Onshore Petroleum and Natural Gas Gathering and Boosting” segment requirements are finalized as proposed.  If you fall into this camp, it’s hopefully not completely surprising news, given that reporting from gathering and boosting stations was actually proposed in the original version of Subpart W, but delayed given U.S. EPA’s need to address extensive commenting around the implications of ownership and boundaries.

Under the proposed rulemaking, U.S. EPA would add a new “Onshore Natural Gas Transmission Pipeline” segment that would require the reporting of emissions data and related data elements associated with transmission pipeline blowdown activities.  In the case of the new “Onshore Natural Gas Transmission Pipeline” segment, U.S. EPA expects approximately 150 new reporters to become subject to Subpart W if requirements for this new segment are finalized as proposed.

U.S. EPA has also proposed confidentiality determinations for new data reporting elements within the December 9, 2015 action, specifically proposing to determine that none of the new data reporting elements are entitled to confidential protection.

As stated already, U.S. EPA intends to finalize the December 9, 2014 proposed amendments by the end of 2015, with an effective date of January 1, 2016.  Given this intended schedule, it’s prudent for existing “Onshore Petroleum and Natural Gas Production” segment reporters to familiarize themselves with what has been proposed to change for that segment and also important for facilities with either gathering pipeline systems or transmission pipeline blowdown activities to evaluate what may be required in the future if new industry segments are added as proposed. U.S. EPA accepted comments on the December 9, 2014 amendments through February 24, 2015.

While U.S. EPA is not proposing to incorporate new provisions involving advanced innovative monitoring methods through this proposed rulemaking, they are in the process of assessing potential opportunities for incorporating remote sensing technologies and other innovational technologies into subsequent versions of the rule and are using the current commenting period as an opportunity to solicit data concerning the benefits, costs, and potential problem areas, as well as their “Discussion Paper on Potential Implementation of Alternative Monitoring under the GHGRP” in Docket ID No. EPA-HQ-OAR-2014-0831.

As you’ll see, whether you are a current reporter under Subpart W or one of the several hundred facilities expected to trigger reporting once the December 9, 2014 proposed amendments are finalized, there are a number of actions that are likely warranted in the short-term.  For more information on the impact of the recent Subpart W amendments on your particular facility, or the regulation and reporting of GHG within the oil and gas industry in general, please contact ALL4.