Oil and Natural Gas Sector: New Source Performance Standards and National Emission Standards for Hazardous Air Pollutants Reviews

Score: 31 / 60
52%
F

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What this Rule is Proposing

In this regulation the Environmental Protection Agency (EPA) proposes the adoption of the New Source Performance Standards (NSPS) for volatile organic compounds (VOC) and sulfur dioxide emissions from Natural Gas Processing Plants, adding any oil and gas operation not currently covered under the listing. The rule requires specific changes in the technology used so that fewer pollutants are emitted or a greater fraction of emitted pollutants are captured. The regulation also proposes new standards for the National Emission Standards for Hazardous Air Pollutants (NESHAP), addressing provisions related to periods of startup, shutdown, and malfunction.

Commentary

Based on the EPA's analysis, one can assume that the regulation is a win-win. That is, society can benefit from lower air emissions and Natural Gas Processing Plants (NGPP) can benefit from increased output through the recovery of otherwise emitted gas. Some costs seem to have been ignored, specifically labor costs and regulatory oversight costs. The cost-effectiveness estimates might still be negative with these costs included, but it would be beneficial to see by how much the gap closes. Given that the processes proposed in the regulation are reportedly cost-effective for the processing plants, it would be interesting to explore another solution to the problem without regulation. Given that the agency suggests that firms are not undertake the to-be-required capital investment due to imperfect information problems, might an educational campaign be more cost effective at solving the emissions problem at wells? Might this study eliminate the imperfect information? This option was not considered by the agency. Furthermore, natural gas price has been below $4.00 since August 2011. Currently it is around $2.75. At that low a price, costs of implementation would then be between 150 and 200 million dollars, not -74 million dollars. Though the RIA states, "As indicated by this difference, EPA has chosen a relatively conservative assumption (leading to an estimate of few savings and higher net costs) for the engineering costs analysis. The natural gas price at which the proposed NSPS breaks-even is around $3.77/Mcf." It appears to be not conservative enough. This suggests that maybe the industry has a better idea of expected costs than the agency.