Debunking the Obama Administration’s Justification for Midnight Methane Rules on Fracking on Federal Lands
The Obama administration is making good on its promise to push through as many regulations as possible while there’s still time. Today the Bureau of Land Management (BLM) finalized its rules for methane emissions on federal lands. The agency also released a fact sheet to justify these rules, which is unfortunately not very factual. Let’s have a look at BLM’s claims followed by the facts.
Claim: “Large quantities of natural gas are wasted during oil and gas production.”
Fact: This claim is just not in line with the science. Producers have every incentive to capture and sell as much of their product as possible to consumers, rather than letting it escape in the atmosphere.
That’s why data from the U.S. Energy Information Administration (EIA) have shown a dramatic decrease in the use of flaring in North Dakota over the past two years at the same time natural gas production in the state has been skyrocketing. As EIA reports:
“The volume of North Dakota’s natural gas production that is flared has fallen sharply in both absolute and percentage terms since 2014. In March 2016, 10% of North Dakota’s total natural gas production was flared, less than one-third of the January 2014 flaring rate, which was at 36%. Flaring rates and volumes have significantly decreased as North Dakota’s total natural gas production has continued to grow, setting a monthly total natural gas production record of 1.71 billion cubic feet per day in March 2016.” (Emphasis added)
Producers have made great strides, but there is also a lack of infrastructure and gathering lines to collect gas at the wellhead and bring all of the product to market. This is largely due to the current backlog of right-of-way applications to build pipelines and other infrastructure that would allow drilling operations to greatly reducing flaring.
Even so, study after study, including dozens by the Environmental Defense Fund (EDF) have found very low emissions – well below the threshold (2.7 percent) which scientists say must be maintained for natural gas to have climate advantages. In fact, most of those studies found leakage rates ranging from 1.2 percent to 1.6 percent.
Researchers from the University of Colorado at Boulder and the National Oceanic and Atmospheric Administration (NOAA) recently released a report, which found that methane leakage rates from three of the top shale developing regions are at about 1.1 percent of production.
The Environmental Protection Agency’s (EPA) latest Greenhouse Gas Reporting Program shows methane emissions from reporting petroleum and natural gas systems decreased 16 percent from 2011 to 2014, doing so despite the fact that 67 more facilities reported to the GHGRP in 2014 than did in 2011. Methane emissions from hydraulic fracturing specifically also continue to decline rapidly, falling 89 percent since 2011 according to the GHGRP.
Even EPA’s 2016 GHG inventory, while it upwardly revised the volume of emissions, still finds an almost 15 percent decline from 1990 from natural gas systems. As the inventory states, “Those emissions [from natural gas systems] have decreased by 30.6 MMT CO2 Eq. (14.8 percent) since 1990.” (p. ES-13; emphasis added).
Of course, as we’ve noted before, EPA’s estimates are based on the faulty assumption that methane emissions from smaller sources are the same as from larger sources. But even if we assume EPA’s latest estimates are correct (they’re not), consider that producers achieved this drop while production has increased 70 percent since 1990.
Claim: “Taxpayers are losing out”
Fact: BLM claims taxpayers are losing royalty revenues due to methane not being captured. Aside from the fact that methane emissions are low and continuing to plummet, BLM does not consider the fact that its rules will actually have the effect of reducing production on federal lands even further.
It’s well known that production on federal lands has significantly declined in recent years, primarily due to the added regulations, and this rule would further drive down production, meaning the government will miss out on considerable royalty payments when operators have to reduce production in order to meet its flaring limits — or stop production all together. An editorial from the Farmington Daily-Times rightly explains the impact of these regulations on taxpayers this way:
“One effect of the proposed changes would be to ensure wells producing smaller amounts of natural gas are taken out of service. When operators don’t produce from their wells, they ultimately lose their leases. Then the wells are plugged and abandoned. Once a low producing well is abandoned, it is unlikely it will be restarted.”
“That means no royalties and no profits from wells producing on BLM land, which would mean no royalties for the government. These new rules could cost the government millions in lost royalties.” (emphasis added)
A new report from the U.S. Chamber of Commerce has explained the dire economic consequence of limiting or banning fracking on federal lands. It finds it would result in a loss of more than “$11.3 billion per year in annual royalties and rental fees for federal and state governments,” and a loss of “more than 100,000 direct jobs” and another “280,000 indirect and induced jobs.”
And the report shows how revenues from generated from energy development on federal lands are also bolstering federal budgets:
“The U.S. government collected $7.2 billion in royalties from fossil fuel production on federal lands in 2015 and a cumulative $46.5 billion from 2011 to 2015 – enough to fund the budgets of the EPA or the Army Corps of Engineers over that time.”
Claim: “The rule will reduce emissions that worsen climate change.”
Fact: Study after study has shown that the global rise in methane emissions is not due to oil and gas development.
A new National Oceanic and Atmospheric Administration (NOAA) study found that microbial sources such as rice paddies and wetlands are the cause of the global increase in methane emissions. Lead author Stefan Schwietzke of NOAA at the University of Colorado Boulder also emphasized that fossil fuel development is “not responsible for the increase in total methane emissions observed since 2007.”
Similarly, a study by researchers at Royal Holloway, University of London found the spike in global methane emissions since 2007 has been “largely driven” by tropical wetlands and agriculture, as lead author Euan Nisbet explained,
“Our results go against conventional thinking that the recent increase in atmospheric methane must be caused by increased emissions from natural gas, oil, and coal production. Our analysis of methane’s isotopic composition clearly points to increased emissions from microbial sources, such as wetlands or agriculture.”
Another study by NOAA researchers in conjunction with National Institute of Water and Atmospheric Research in New Zealand (NIWAR) also found increased global methane emissions are coming from wetlands and agriculture. As Climatewire further reported,
“Greenhouse gas inventories from U.S. EPA show that emissions from fossil fuel extraction have increased in recent years. But this has apparently not registered on the global scale. This is possibly because the U.S. energy industry contributes little to the overall burden of global fossil fuel emissions, Schaefer said.” (emphasis added)
Finally a study by researchers at Washington State University-Vancouver found that man-made reservoirs used primarily for hydroelectric power emit as much methane as world’s rice paddies, which have been estimated to be more than 700 million metric tons, or 10-12 percent of the world’s total anthropogenic emissions! As study co-authors John Harrison and Bridget Deemer told Climate Central in an email:
“To put these reservoir methane emissions in context, they are similar in size to other major human sources such as biomass burning and rice paddies, hence reservoirs are not necessarily the ‘clean’ energy source they are often thought to be.”
Even the Intergovernmental Panel on Climate Change (IPCC), has said that the “rapid deployment of hydraulic-fracturing and horizontal-drilling technologies, which has increased and diversified the gas supply and allowed for a more extensive switching of power and heat production from coal to gas …is an important reason for a reduction of GHG emissions in the United States.”
If anything, BLM’s rules will make it that much harder to produce the one fuel that is providing the United States with significant climate benefits.
Claim: “The rule’s benefits are projected to outweigh its costs” and “Impacts to operators are expected to be minimal”
Fact: The BLM says reducing the flaring, venting and leaking of methane from federally managed oil and gas wells would save society up to $188 million annually by allowing more natural gas to be sold and preventing the escape of methane and other pollutants.
But similar to the ICF International report used to justify methane regulations on new and modified infrastructure nationwide, the report used to arrive at these figures assumes $4/Mcf natural gas prices.
Natural gas prices haven’t reached the $4 Mcf level since November 2014 and have remained well below $3/Mcf over the past 19 months. Furthermore, the Energy Information Administration’s (EIA) analysis of EPA’s Clean Power Plan, released in 2015, projects natural gas prices may not reach $4/Mcf until after 2030, based upon a high oil and natural gas resource base assumption.
The $4/Mcf assumption used by BLM incorrectly overvalues the projected 41 Bcf of annual mitigated methane emissions at $164 million, which is drastically overblown. Using a more reasonable price assumption of $2.25/Mcf, which was used in a recent ICF report commissioned by the Our Nation’s Energy Future (ONE Future) coalition, values those potential mitigated emissions much more reasonably at $92 million.
Even by BLM’s most ambitious estimates, the rule would reduce approximately 0.0092 percent of global GHG emissions, a miniscule amount. There’s no doubt, however, that it will impose onerous and duplicative costs on producers at a time when producers are hurting from the current price environment.
The “facts” put forth yesterday by the Obama administration to justify its methane rules on federal lands are actually anything but, serving only to further to highlight the actual fact that the rules are burdensome and unnecessary.
Fortunately, it appears the BLM faces an uphill climb going forward. The Western Energy Alliance and the Independent Petroleum Association of America (IPAA) have already filed a lawsuit, and according to E&E News, President-elect Donald Trump could try to block the rule or work with Congress to stop funding the rule.
And in what could have been a more pragmatic approach all along, the Trump administration could also start clearing a backlog of right-of-way applications to build pipelines and other infrastructure that the industry has contended all along would allow drilling operations to capture excess gas and pipe it to market instead of venting it into the air.
So it appears that by waiting until the last minute to finalize its methane rules on federal lands, the clock may have run out on the Obama administration in its attempt to push its latest unnecessary regulations on the oil and gas industry past the goal line.