ALERT: Greenhouse Gas Emissions Reporting Requirements For The Oil & Gas Industry

    25 March 2009

    On March 10, 2009, the Environmental Protection Agency (EPA) released proposed regulations that would require approximately 13,000 facilities nationwide to monitor and report their carbon dioxide and other greenhouse gas (GHG) emissions. This 1,410 page proposal estimates that 30,000 facilities will be required initially to assess whether they are required to report. The “facilities” cover everything from Adipic Acid Production to Manure Management. These are “proposed” regulations. Because of their detail and complexity, there will be areas where the EPA misapprehends the functioning of the industry. It is essential that you review the proposals and see how they will impact you. Another reason to pay attention is that these regulations will likely form the basis for any carbon caps or trading mechanism that emerges from the current debates in Congress and will also likely be the basis upon which the EPA decision, announced March 23, to treat GHG as “pollutants” under the Clean Air Act, will be enforced.

    Facilities emitting more than 25,000 metric tons of carbon dioxide or carbon dioxide equivalents would be required to begin collecting emissions data on January 1, 2010 and submit annual reports starting in 2011. Some facilities, simply because of the nature of their operations, must report.

    The gases covered by the proposed rule are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC), perfluorocarbons (PFC), sulfur hexafluoride (SF6), and other fluorinated gases, including nitrogen trifluoride (NF3) and hydrofluorinated ethers (HFE).

    Oil and gas activities are grouped into four areas: exploration and production, pipelines (including compression), gas processing plants, and refineries.

    1. Exploration and Production. Onshore wellheads are excluded from the definition of a facility and do not report. Producers are not required to aggregate all of their wellheads and treatment facilities prior to compression to determine if there is a “facility.” Fugitive emissions from natural gas pipeline segments between compressor stations and crude oil pipelines are excluded. While that is good news, EPA is seeking comments on how to define a "facility" and whether emissions should be reported from all onshore petroleum and natural gas production assets at the basin level. Wells that produce CO2 are not treated as E&P activities. Natural gas storage facilities are required to report. Offshore E&P entities are required to report on a facility (platform) basis.

    2. Pipelines. Natural gas pipeline segments (whether intrastate or interstate) between compressor stations and crude oil pipelines are excluded from reporting primarily because EPA thinks that “fugitive emissions” are not that great and are repaired quickly, and because the responsibility for reporting will be placed on the gas processing plants and refineries. Compressor facilities, including gathering/booting stations, are subject to reporting based on the test of whether more than 25,000 metric tons of carbon dioxide or carbon dioxide equivalents are emitted. Compressor facilities do not report on the carbon dioxide content of their throughput.

    3. Gas Processing. There are two requirements in reporting by natural gas processing plants.

    • If the facility produces more than 25,000 metric tons of carbon dioxide or equivalents in “fugitive emissions” – what escapes from the plant – reporting is required.

    • Reporting is also required with respect to the NGLs actually produced by the plant. Instead of looking to producers to report natural gas production, EPA decided to require reports from Local Distribution Companies (LDC) for dry gas and natural gas processing facilities for NGLs. Hence the proposals do not require gas processing plants to report the dry gas delivered to pipelines after processing, but only the NGLs produced, and the reports on NGLs will be based on the entire carbon content of the NGL stream. Likewise, all natural gas processing plants must report even if the NGL production would amount to less than 25,000 metric tons of carbon dioxide. Reports must include only the carbon dioxide component and must be broken down by actual NGLs extracted and separated. The method to be used by gas processing plants to determine carbon dioxide content is the “mass-balance” method. The “mass-balance” method takes into account the volume of liquids exiting the facility and uses “look-up” tables to determine the carbon content of the produced NGLs. EPA expressly decided not to require more expensive sampling of the specific NGL stream. EPA also believes that significant additional data gathering will not be required because processing plants already report on EIA Forms 816 and 64A and the new reporting information can be derived from those reports.

    4. Refineries. All refineries must report in two categories: Petroleum Refineries and Suppliers of Petroleum Products.

    • A refinery must report based on its actual emissions from the refinery. Separate regulations tell you what to report and how, according to this table:

     

    Emission Source

    GHGs to report

    Subpart of proposed 40 CFR part 98 where emissions reporting methodologies addressed

    Stationary combustion

    sources

    CO2, CH4, and N20

    Subpart C

    Coke burn-off emissions from catalytic cracking units, fluid coking units, catalytic reforming units, and coke calcining units.

    CO2, CH4, and N20

    Subpart Y

    Flares

    CO2, CH4, and N20

    Subpart Y

    Hydrogen plant vent

    CO2 and CH4

    Subpart P

    Petrochemical processes

    CO2 and CH4

    Subpart X

    Sulfur recovery plant, on-site and off-site

    CO2

    Subpart Y

    On-site wastewater treatment system

    CO2 and CH4

    Subpart II

    On-site land disposal unit

    CH4

    Subpart HH

    Fugitive Emissions

    CO2, CH4 and N20

    Subpart Y

    Delayed coking units

    CH4

    Subpart Y

    • A refinery must report based on the carbon content of the production from the refinery and on imports and exports of such products. Refinery production reporting is on a refinery-by-refinery basis, whereas imports and exports are reported on a corporate basis. Retail gasoline stations and oxygenate blenders are not included. There is no exception for small refineries. If biomass is used in the generation of fuel to be sold, then the estimated CO2 emissions from the biomass are subtracted in reporting. As proposed, the CO2 remaining if the fuel were completely consumed must be reported. EPA proposes that the reporting facility use either the default CO2 emission factors set out in the proposed regs or develop their own factors using monthly sampling using various ASTM guidelines. A failure to report correctly under the proposed rules is a violation of the Clean Air Act.

    EPA is developing this rule under the authority of the Clean Air Act. The proposed rule will be open for public comment for 60 days after publication in the Federal Register. Two public hearings will be held during the comment period. If you have any comments or want additional information about how this proposal may affect your business, please give us a call.