The six weeks since mid-June have brought some unexpected clarity to EPA’s goal of saving the world, aka “addressing climate change.” The agency announced on June 18 its proposal to reduce GHG emissions from existing coal-fired power plants, and five days later the Supreme Court imposed some significant restrictions on how it could achieve that objective (UARG v. EPA). A report from four authors at the National Renewable Energy Laboratory indicated that life cycle GHG emissions (actually methane) from shale are probably no worse than emissions from conventional natural gas formations, notwithstanding some hysterical predictions made in 2011 by some professors from Cornell and since trumpeted by the environmental community. The good news from the report is tarnished a bit, however, by a July 25 report of EPA’s Inspector General who has concluded that while methane leaks do exist across the vast infrastructure of the natural gas pipeline system, it is not the production system that is the problem. Rather, it is the local distribution companies, the gas utilities, which purchase gas from the transmission system and send it to residential and commercial customers.
Where does this leave EPA? Bluntly, in a mess. Set aside for a moment whether GHG emissions represent the problem that EPA has propagandized for the last five years. Methane is the second largest source of GHG after carbon dioxide (not carbon notwithstanding the EPA propagandists who purposefully confuse the two). By consensus, it is 21 to 25 times more reactive in the atmosphere than CO2 and much longer lived. Most important, methane is energy, and is useful. It is essentially the natural gas that we use to heat water and furnaces, or utilize as the essential ingredient in petrochemical production. Because it is something that producers want to get paid for, and consumers must pay for, it has value which should not be wasted.
Much to EPA’s regret, it will have few options available to reduce these emissions. It cannot require an air quality permit for natural gas production, transmission or distribution as none of these activities routinely emit any of the criteria pollutants for which such permits are needed. Even if those pollutants were present, no single activity in natural gas production emits a pollutant in the threshold quantity that requires a permit, and EPA’s fairly transparent attempt to aggregate activities for the purpose of requiring a permit was not treated favorably by the first appellate court to review the attempt in the case of Summit Petroleum v. EPA .
To add to the regulatory hurdles, the primary source of leakage that EPA’s Inspector General found is with local gas distribution companies. As explained in the report, local gas utilities have little or no economic incentive to repair or replace leaking gas lines, many of which are made of decades old cast or wrought iron, or unprotected steel. Compare this to the exploration and production companies, or those in the transmission business, who economic benefits are enhanced by minimizing leakage from pipelines. Not surprisingly, under the voluntary program that EPA commenced in 2012, over 98 percent of the methane leakage reductions have come from those two sectors.
Although EPA displays a near addiction to control by regulation, it could profit from the approach taken by Department of Energy (DOE) on the issue of methane leakage. On July 29, DOE hosted a roundtable of various natural gas interests – trade unions, transmission companies, local distribution companies (LDC’s), gas producers, utility regulators, academics, environmentalists – to discuss the means and value in reducing leakage. While the summary of the event is self-congratulatory, buried in the verbiage is the hard truth that while everyone agrees that reducing methane emissions is admirable, there is little in the way of ideas for how to pay for the infrastructure improvements necessary to achieve this goal. Particularly for the regulated portion of the gas industry (the LDC’s), which is the source of a disproportionate percentage of leaks and which cannot automatically recover those costs, this is the critical issue. This issue is further complicated by the fact that those companies are regulated by state utility commissions and not by any federal authority. Nevertheless, DOE is more likely to promote reductions in methane emissions by the best practices and voluntary initiatives found in its summary than EPA will.
One final aspect of the Inspector General’s report is noteworthy. On page two it states, “By the time natural gas reaches the distribution sector, almost all pollutants and impurities have been removed. At this point, it is almost 100 percent pure methane.” Memo to Inspector General: under your agency’s ideology of pollution, the methane is the pollutant because it is a GHG and the agency has so declared it.
I am betting that we will see a different nomenclature the next time this is discussed within EPA.
This article was authored by Blair M. Gardner, Jackson Kelly PLLC. For more information on the author, see here.