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White House looks to EPA to enforce new regulations and avoid Congress

The White House announced yesterday that it will be releasing new regulations to curb the amount of methane generated by drilling operations throughout the United States. How the regulations will affect the oil and gas industry and how greatly they will reduce greenhouse gasses will not be finalized until 2016. President Obama will be putting these new regulations into effect through the Environmental Protection Association’s (EPA) Clean Air Act, avoiding the need to put the legislation through Congress.

While the exact standards for the new methane regulations remains to be determined, the White House has said that it hopes to cut methane emissions by 40% to 45% by 2025, compared to 2012 levels. Officials have not said yet how far these new rules are expected to go in meeting Obama’s goal to cut overall greenhouse-gas (GHG) emissions by up to 28% by 2025. Once the regulations go into effect, the new rules will only be applied to new and modified facilities.

Even though methane only makes up 9% of U.S. GHG emissions, according to the White House fact sheet, it is far more potent than other gases at capturing and storing the heat from the sun. Compared to carbon dioxide, the main contributor to U.S. GHG emissions, methane captures 30 times more atmospheric heat, according to USA Today. Because of its disproportionate effect in the atmosphere, it has become a focus of the Obama administration in reducing overall GHG emissions.

Colorado leads the way

After the regulations were announced Wednesday, U.S. Sen. Michael Bennet (D-CO) urged the White House to follow Colorado’s model for curbing methane emissions, reports the Durango Herald. Colorado put its own regulations in place in 2014 to curb methane emissions associated with oil and gas operations.

Companies in Colorado are required to install technology that captures 95% of methane emissions and volatile organic compounds. “The Administration should follow Colorado’s lead by working with all parties to craft rules that significantly reduce fugitive methane emissions, while also providing the necessary flexibility and assurances for the regulated community,” Sen. Bennet said.

Colorado’s rules on curbing methane emissions were the result of months of negotiations between state regulators, Colorado’s largest oil and gas companies and the Environmental Defense Fund (EDF) and are expected to start phasing in later this month for the large oil and gas companies in Colorado, with the smaller facilities scheduled to come under the new regulations by January 1, 2016.

The regulations set by Colorado require that oil and gas operations are visited in person at least once a month for a “look, listen and smell” check, said Will Allison, the director of the Colorado Department of Public Health and Environment (CDPHE), reports the Denver Business Journal. The rules set also require that specialized infrared equipment be used to check for leaks at least once a year for most facilities, while bigger facilities are checked once a quarter or once a month, Allison said.

There has been pushback from the industry since the White House’s announcement Wednesday that they planned to introduce these new regulations. The industry has said that they are already trying to reduce leaks in order to optimize operations, and adding costly regulations and red tape will only hinder their efforts.

In a statement released by House Energy and Commerce Committee Chairman Fred Upton (R-MI) and Energy and Power Subcommittee Chairman Ed Whitfield (R-KY), they said, “Our goal should be to modernize our energy infrastructure and welcome successes in reducing emissions. These should be the priorities that we focus on, not creating new layers of bureaucracy that could smother such promising innovation.”

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.