California Gas Leak Boosts Obama Move to Curb Methane Emissions

  • Interior proposal will aim at existing wells on federal land
  • EPA has so far concentrated on new oil wells nationwide

A massive natural gas leak in southern California that has forced thousands of residents from their homes is giving momentum to the Obama administration’s plan to clamp down on methane emissions from oil and natural gas wells. 

The proposal, set to be unveiled by the Interior Department within days, takes aim at wells on federal and tribal lands, with the goal of plugging unintentional methane leaks at the sites and stopping energy companies from intentionally flaring or venting the gas. 

The Interior initiative will be the first federal regulation of methane emissions from existing wells. Industry executives say it’s an unnecessary burden at a time of plummeting crude prices that are forcing oil companies to pare workers and go into bankruptcy.

Although it wouldn’t directly affect the spill at the Aliso Canyon storage field that has spewed gas into the atmosphere since October, some lawmakers and conservationists say the leak near Porter Ranch in southern California underscores the urgency for rules.

"In the wake of this, it is so clear that more needs to be done -- not as a deterrent, not to punish the industry -- but simply to ensure going forward we have adequate safeguards over this massive unseen infrastructure," Tyson Slocum, director of Public Citizen’s energy program, said in a phone interview. "We need to start with some sort of movement on existing infrastructure."

Potent Gas

If it’s plugged by late March, the Aliso Canyon spill may have sent methane equivalent to about 4 million metric tons of carbon dioxide into the atmosphere from an underground gas storage site, according to data from the state’s Air Resources Board. By contrast, the equivalent of about 182.6 million metric tons of carbon dioxide is estimated to escape as methane from the nation’s oil and gas sector each year according to the Environmental Protection Agency’s latest estimates.

The primary component of natural gas, methane is a short-lived but potent greenhouse gas that is 84 times more powerful than carbon dioxide at warming the atmosphere over 20 years. The Obama administration has pledged to pare the oil and gas sector’s methane emissions by 40 to 45 percent from 2012 levels by 2025.

Reaching that goal means going beyond new wells and infrastructure targeted by a 2015 EPA proposal that would force energy companies to detect and repair leaks nationwide.

Environmentalists have pushed the Obama administration to tackle the methane leaking from existing energy infrastructure and sometimes intentionally burned or flared at oil wells as a byproduct of crude.

Sierra Club

Methane leaks are “one of the largest unregulated sources of greenhouse gas pollution," Sierra Club Executive Director Michael Brune said in an interview. "We have a big opportunity to protect public health and make more progress on climate change.”

The new Interior Department proposal should provide a model for the EPA to move on to existing wells and infrastructure on private land, said Dan Grossman, national director of state oil and gas programs for the Environmental Defense Fund based in Boulder, Colorado.

"Existing sources are the vast majority of the sources we’re going to be seeing over the foreseeable future," Grossman said in a telephone interview.

An estimated 65 billion cubic feet of natural gas leaked from oil and gas operations on federal and tribal lands in 2013, according to a report last year from ICF International Inc., a consulting firm based in Fairfax, Virginia.

How Long?

The proposal from the Interior Department’s Bureau of Land Management is expected to specify when energy companies can use natural gas captured from wells on public land to power equipment at the site. The agency also may dictate when -- and how much -- energy companies should pay in royalties for natural gas that’s vented or flared.

A major question is low long energy companies would have to start capturing gas -- including by sending it into pipelines -- before they are hit with penalties or royalties. Some venting and flaring is necessary at the beginning of a well’s life, particularly if pipelines aren’t available to take the fossil fuel.

"We’ll be primarily looking at the flexibility given for operational realities and the definition of avoidably lost gas," said Kathleen Sgamma, vice president of government affairs for the Western Energy Alliance, a trade association representing more than 450 companies engaged in exploration and production of oil and natural gas in the West.

Industry representatives say a lack of pipelines is the real problem. That forces energy companies to flare the natural gas flowing from their oil wells, said Dan Naatz, senior vice president of government relations for the Independent Petroleum Association of America, which represents non-integrated oil and gas production companies.

"The ultimate solution is infrastructure," Naatz said by phone. "Nobody wants to vent and flare if they can move it out and pay the royalties and move it on to market."

Interior’s proposed rule may mimic the methane leak detection and repair requirements the EPA proposed for new oil wells nationwide. Under the EPA proposal, companies would have to inspect sites every six months. Conservationists such as the Environmental Defense Fund want the agency to establish a more frequent quarterly timetable.

Anadarko, Encana

The proposal could touch tens of thousands of producing oil and gas wells on public lands nationwide, but its effects will be felt unevenly and mostly by producers active in the West. Energy companies with substantial federal leases, including Anadarko Petroleum Corp., Encana Corp., WPX Energy Inc. and Newfield Exploration Co., are more exposed to the rules than counterparts such as Pioneer Natural Resources Co. and Whiting Petroleum Corp., which are plumbing mostly private land.

Oil and gas companies say the mandates are unnecessary, coming on top of existing state regulations, the EPA proposal and voluntary moves by companies already eager to capture and sell natural gas. The Obama administration risks choking off a source of economic growth by imposing "costly regulations" on a small -- and declining -- source of emissions, Sgamma said.

"When you combine that with low commodity prices, things start to seem punitive, rather than truly based on regulatory need,” Sgamma said by phone.

Requirements for more frequent monitoring of methane emissions at oil and gas sites could bolster an emerging methane mitigation industry, benefiting such companies as Oregon-based FLIR Systems Inc., which makes infrared detectors, and Apogee Scientific Inc., which makes handheld leak-detection systems.

Before it's here, it's on the Bloomberg Terminal.