Change in EPA policy could broaden reach over wells

WASHINGTON - Oil and gas wells across Texas and the country could soon be subject to stricter emissions regulation and government inspections under a policy change under review at the U.S. Environmental Protection Agency.

The proposal, released quietly last summer at the same time the administration unveiled a plan to combat climate change by cutting methane emissions from oil and gas wells, would amend the rules on whether a group of wells are classified as a single source of pollution or multiple sources of pollution.

What might sound like arcane legalese could mean that wells that had been allowed to operate relatively free of federal oversight would be considered what the EPA calls a "major source" of pollution. That would force companies to, among other things, begin publicly reporting toxic air pollution, buy higher-quality emission control equipment and work to reduce ozone pollution around cities.

Lawyers representing oil and gas companies are still trying to figure out the full scale of the regulatory impact. But some are concerned the new determination might also extend standards on greenhouse gas emissions for new oil and gas wells, like the methane rule, to existing wells.

An EPA spokesman last week said while the proposed change could mean some new regulations for existing oil and gas wells, it would not mean those wells have to meet the methane rule and other standards set for new wells.

There are more than 1 million active oil and gas wells across the United States. How many would be affected remains unclear, attorneys say.

But for an industry struggling under a historic drop in crude and natural gas prices, the prospect of more government regulation has set off a flurry of opposition from companies, trade groups and state regulatory agencies, including the Texas Railroad Commission.

Already, companies are gearing up for a legal fight on an issue that has been a source of contention between the industry and government going back decades, said Lee Fuller, executive vice president of the Independent Petroleum Association of America.

"Over the years, the EPA has tried to find ways to aggregate existing sources to try and bring them under their authority," he said. "But the purpose of the (Clean Air Act) isn't to throw a broad blanket over an area and call it one source just for the purpose of trying to get more regulation."

The final rule is not set to be released until this spring, the EPA said. According to agency documents, officials are considering two possible interpretations of whether a well is a "major source," one that would group together any wells within a quarter mile of each other. The other would include those wells and any deemed to be "related by function," which could theoretically pull in wells on a common pipeline or that feed the same processing facility.

The industry has largely acquiesced to the first option. But under the latter, oil and gas operations across the Eagle Ford and Permian Basins could find themselves answering to federal regulators, under a similar level of oversight that EPA now applies to oil refineries and coal-fired power plants.

"The regulatory burden on state and federal regulators of exposing thousands of existing sources to new regulation would be immense. The manpower from both industry and regulators and the associated economic burden will far outweigh any perceived environmental benefit," Ed Longanecker, president of the Texas Independent Producers and Royalty Owners Association, wrote in a comment on the EPA proposal in December.

The expansion of EPA authority would help cement the environmental legacy of a president who has made cutting greenhouse gas emissions one of his signature issues.

Attention has only increased since December, when President Barack Obama pledged along with other world leaders to reduce carbon emissions to try to prevent a more than 2-degree Celsius increase in world temperatures.

"They went after cars first. That's about one-third of greenhouse gas emissions, then power plants, which is about another third. Now they're going after oil and gas," said Robert Meyers, a Washington energy attorney and former EPA official.

Even if existing wells aren't forced to comply with the methane rule, the hope is if the EPA does begin grouping wells together, the companies that operate them will go ahead and voluntarily upgrade their equipment to stay below pollution thresholds, said Michael Freeman, an attorney with the activist group Earthjustice.

"Simply for administrative ease it creates a major incentive for companies to reduce emissions," he said.

The move to increase federal authority over the energy sector puts the White House squarely at odds with state oil and gas regulators around the country.

In Texas, where energy represents close to 20 percent of the economy, officials at the Railroad Commission and Commission on Environmental Quality carry enormous power in monitoring how oil and gas is drilled and produced.

But the railroad commission is also charged with preserving the economic health of Texas oil and gas reserves, "for the benefit of Texans."

In a letter to the EPA in December, Lindil Fowler, former acting executive director of the railroad commission, said the well aggregation rule would harm the industry with a negligible benefit for the environment.

"It is this commission's hope that EPA will retain the regulatory flexibility of the states under the current rules and abandon the proposed arbitrary, capricious, overly burdensome and unnecessary one-size-fits-all approach," he wrote.