July 2016, Vol. 243, No. 7

Government

INGAA Says Aspects of Methane Emission Limits Troublesome

The Environmental Protection Agency’s new rule requiring transmission pipelines to plug methane leaks at compressor stations includes some softening of earlier-proposed requirements, but will still impose substantial costs as companies move to repair leaks at new or modified compressors and controllers.

The rule was issued under the Clean Air Act and represents the Obama administration’s next step in limiting greenhouse gas emissions, of which methane is the most environmentally hazardous. Natural gas pipeline companies will have to both reduce methane emissions and plug equipment leaks when they become apparent.

In terms of concessions the EPA made, it decided to not finalize requirements for pneumatic pumps used at compressor stations. After considering information in the record and comments on the proposed rule, the agency decided information about the prevalence of pneumatic pump use at compressor stations is not reliable.

In a statement, Don Santa, president and CEO of the Interstate Natural Gas Association of America, said while he is disappointed the EPA proceeded with the rule, he was pleased “that EPA listened to our concerns about the timeframe for repairs at compressor stations.”

Kyle Isakower, vice president of Regulatory and Economic Policy, American Petroleum Institute, said, “It doesn’t make sense that the administration would add unreasonable and overly burdensome regulations when the industry is already leading the way in reducing emissions. Imposing a one-size-fits-all scheme on the industry could actually stifle innovation and discourage investments in new technologies that could serve to further reduce emissions.”

Compressors with wet seals will have to achieve a 95% reduction of methane and volatile organic chemical (VOC) emissions through flaring, or by routing captured gas back to a process. Dry seals are not covered by the final rule. Rod-packing systems in reciprocating compressors will have to be replaced at or before every 26,000 hours of operation or every 36 months. As an alternative to changing rod packing, operators may opt to route emissions from the rod packing via a closed vent system under negative pressure to be reused or recycled by a process or piece of equipment.

For continuous bleed, gas-driven pneumatic controllers, the final rule sets a gas bleed limit of 6 standard cubic feet of gas per hour at an individual controller. Low-bleed controllers used at compressor stations (with a gas bleed rate of 6 standard cubic feet per hour or less) are not subject to this rule. The rule includes exceptions for applications requiring high-bleed controllers for certain purposes, including operational requirements and safety. There are recordkeeping and reporting requirements for each of the equipment categories.

Pipelines must use a technology known as optical gas imaging to conduct a leak survey. Optical gas-imaging equipment uses a special camera to “see” emissions of methane and VOCs. Owners/operators may use “Method 21” as an alternative to optical gas imaging. For new and modified compressor stations, operators must conduct the initial survey within one year after the final rule is published in the Federal Register or within 60 days of the startup of a new or modified compressor station, whichever is later.

Monitoring must be repeated quarterly after the first survey. The survey covers several components including valves, connectors, pressure-relief devices, open-ended lines, flanges, compressors and thief hatches on controlled storage tanks, among others. Any leaks found by the surveys must be repaired within 30 days unless the repair would require shutting down. In that case, gas transmission companies are required to fix the leak at the next scheduled shutdown, or within two years.

Santa said INGAA remains concerned over EPA insistence on quarterly monitoring at compressor stations. He is also disappointed that the value of EPA’s decision to allow a more economic leak-detection method – Method 21 – was undermined by the extremely low leak threshold of 500 ppm.

“The rule does nothing to integrate new scientific data on methane emissions from this sector, which clearly shows that a very few large leaks account for the vast majority of emissions,” added Santa. “Rather, EPA accepted a leak detection and repair approach, which is much more costly and less effective than the directed inspection and maintenance (DI&M) approach proposed by INGAA.”

The EPA does not break out what it expect will be the cost of compliance to the transmission industry. Its estimate includes several sectors within the oil and gas industry, such as hydraulically fractured gas well completions and equipment leaks at natural gas processing plants. Those sources have emission limits for volatile organic chemicals, but not GHGs.

That said, the total capital cost, not reduced to account for methane capture, would be $250 million in 2020 and $360 million in 2025. Based on a natural gas price of $4 per thousand cubic feet for the recovered gas at the wellhead, the estimate of total annualized engineering costs of the final rule is estimated to be $320 million in 2020 and $530 million in 2025.

Faster Approval of LNG Exports Close to Passage

The House passed a bill (H.R. 4909) that would require the Department of Energy decide on an application to export LNG within 30 days after either of two federal agencies complete an environmental review of the project. The agencies are the Federal Energy Regulatory Commission and the Maritime Administration.

The provision was dropped into a much larger, must-pass bill, the Fiscal 2017 National Defense Authorization Act (NDAA). It passed the House 277-147 so it had bipartisan support, which bodes well for its prospects in the Senate.

The Senate will almost certainly pass a fiscal 2017 defense authorization bill. It is unclear whether the LNG provision will be included in that bill. If not, it will be an issue for the House-Senate conference committee. The Senate has already passed an energy bill (S. 2012) that includes an amendment that would force the DOE’s hands after 45 days.

The LNG applications at issue are those for export to nations with which the U.S. has no free trade agreement. Where agreements do exist, the DOE essentially approves the export application automatically though applications to non-FTA countries have at times been held up for years.

“U.S. LNG exports will create American jobs, significantly strengthen the global energy marketplace and bolster our strategic alliances,” said API Executive Vice President Louis Finkel. “Action by the House of Representatives to approve LNG exports provisions as part of the defense authorization bill further cements the critical role U.S. energy plays at home and abroad.”

Domestic manufacturers have opposed the speeding up of LNG export approvals to non-FTA countries for fear that some of the cheap gas they are enjoying will be diverted abroad where it attracts higher prices.