November 11, 2020

As methane rulemaking progresses, questions about exemptions linger

Kendra Chamberlain

A well site in the Greater Chaco region.

New Mexico Environment Department Secretary James Kenney said his department is working through hundreds of comments related to a proposed rule for regulating air pollution associated with oil and gas development. 

“We received over 400 comments on our rule,” Kenney told state legislators during a recent committee meeting. 

Last year, NMED and the state Energy, Minerals and Natural Resources Department (EMNRD) were tasked with developing new rules targeting methane emissions in the state resulting from oil and gas activity. While EMNRD’s rule addresses methane emissions directly, NMED’s draft rule instead targets volatile organic compounds (VOC) and nitrous oxide (NOx) emissions from oil and gas wells. 

Both NMED and EMNRD released draft proposals for their respective rules in July for public comment, after a year of work by the state’s Methane Advisory Panel, which was composed of oil and gas representatives, environmental groups and other stakeholders. EMNRD released a finalized version of its rule in mid-October. On Nov. 4, the Oil Conservation Commission agreed to set a hearing for the finalized rule in January. 

But NMED still has some work to do before it releases a finalized version of its rule, Kenney said. Much of that work is around two controversial exemptions baked into the draft rule. 

While clean energy advocates and environmental groups are largely supportive of the initiative to tackle the state’s methane emissions problem, several are concerned the exemptions could allow nearly all the oil and gas wells in the state to continue emitting pollution, rendering the new regulations effectively moot. 

“The job of the Environment Department first and foremost is to protect the health of New Mexicans from pollution. Right now, due in part to pollution from oil and gas, [air quality] is being negatively impacted in Eddy County and Lea County and San Juan County,” Jon Goldstein, director of regulatory and legislative affairs at EDF, said. “They need to make sure that they’re addressing that problem. The data shows these exemptions would leave far too many tons of pollution on the table. And they would not be effective.”

Marginal wells are big contributors to greenhouse gas emissions

The state doesn’t have the regulatory authority to target methane specifically in its regulations, because the state’s Air Quality Control Act ties NMED’s air quality regulations to the federal EPA standards, and doesn’t allow the Environment Department to set air quality standards that are more or less stringent than the EPA’s. But Kenney has claimed that by targeting VOCs and NNOx emissions, the state can get at methane emissions, too. 

“When we control VOCs, we control methane emissions, so we have a co-benefit,” Kenney said back in July, when the draft rule was announced. 

NMED’s draft rule would require oil and gas producers to better report their VOC and NOx emissions and incentivizing producers to upgrade their equipment. But under the draft rule, low-producing wells, also called marginal or stripper wells, and wells that have the potential to emit less than 15 tons a year of VOCs are exempt from those air quality control provisions. 

EDF estimates that, taken together, those exemptions would remove up to 95 percent of oil and gas wells in the state from the new regulations. That’s because New Mexico has a lot of marginal and lower producing wells across its two oil and natural gas regions. According to the U.S. Energy Information Administration (EIA), marginal oil wells producing less than 15 barrels of oil per day make up roughly 71 percent of oil wells in the state.

RELATED: Will loopholes gut New Mexico’s new rules on oil and gas well pollution?

Leaks in equipment are the largest source of methane emissions in the state, outpacing venting and faulty flaring. And there’s a growing body of research indicating that marginal wells can be disportionately large sources of methane emissions, despite the small amounts of oil they produce.

Research published earlier this year in the Journal of the Air and Waste Management Association found that marginal wells that produce less than 1 barrel of oil per day account for 11 percent of methane emissions tracked in the U.S. EPA’s greenhouse gas inventory, despite contributing less than 1 percent of the country’s oil and gas production per year. 

Amy Townsend-Small, co-author of the study and director of the Environmental Studies program at the University of Cincinnati, said the emissions data she helped collect indicated that methane emissions could be traced back to a few so-called “super emitter” wells, while most other marginal wells saw fewer emissions. She pointed to a lack of maintenance as one of the main sources of emissions on marginal wells. 

“There was a general relationship with maintenance, with sites with noted maintenance issues such as disconnected pipelines having a higher methane emission rate,” Townsend-Small told NM Political Report

Townsend-Small’s study aligns with recent research conducted by EDF and the University of Wyoming in the Permian Basin. The Permian Basin study, which was published in October in the American Chemical Society’s Environmental Science and Technology journal, found that, on average, marginal wells in the Permian were actually emitting more methane and VOCs than higher-producing wells.  

“What the science is showing is that smaller wells, wells that maybe have a lower potential to emit or smaller production, don’t necessarily have less emissions,” Goldstein said. “They can be big sources of emissions, too.”

“That’s one of the issues we have with these thresholds,” Goldstein said, referring to the marginal well exemptions. “It’s not really following the science as far as where the pollution can come from.”  

Exemptions miss the mark

EDF’s analyses indicate that NMED’s rule won’t be nearly as effective at reducing emissions and air pollution as it needs to be if the exemptions remain in place. 

NMED estimates the draft rule, as written, would result in a 77,000 ton reduction in VOC emissions and a 21,000 ton reduction of NOx. But Goldstein said that tonnage represents just a portion of air pollution coming from oil and gas wells across the state. 

“Even from a pollution perspective, the exemptions would leave 71 percent of the methane and 66 percent of VOC emissions unaddressed,” he said. “So even from a pollution perspective, it’s not going to get after the problem as well as it needs to.”

In the past, NMED officials have argued the exemptions were designed to protect smaller producers from being forced to make expensive upgrades to equipment associated with low-producing wells. But Goldstein told NM Political Report those exemptions miss the mark.

“When you look at the wells that would be exempted—it’s not the small producers. It’s the biggest oil and gas producers in the state. It’s Hilcorp, number one, and then other folks like Chevron and Devon,” Goldstein said. “So, just from a pure numbers perspective, these exemptions would benefit the largest oil and gas producers in the state.”

NM Political Report asked NMED if the department agrees with EDF’s calculations and conclusions that 95 percent of oil and gas wells in the state would qualify for the exemptions. An NMED spokesperson did not answer the question, but instead offered the following statement: 

“The EMNRD and NMED proposed rules work together to capture and reduce emissions of methane and volatile organic compounds (VOC), respectively. In effect, EMNRD’s proposed rules will apply broadly to reduce methane while NMED’s rules will apply to those sources which impact ozone. With this in mind, NMED is continuing to refine its rule per the requirements of the Air Quality Control Act to make improvements based on public comment received.”

Finalized rule expected in December

NMED is now sifting through the pages of public comment it received and, Kenney said, incorporating feedback into a new version of its rule. 

“We’ve received a number of comments related to exemptions that were in the proposed rule for a stripper and low emitting wells,” Kenney said. “And we continue to look through those comments both technically and economically to see what kind of improvements we can make from there.”

Kenney told legislators he expects NMED to release a finalized version of the rule sometime in December. Then, the Environmental Improvement Board (EIB), the body that will give final approval to any new rules proposed by NMED, will need to schedule a hearing for the rulemaking, which will likely occur in early 2021. 

Meanwhile, calls for NMED to strengthen its proposed rule are gaining volume. On Nov. 10, the New Mexico State Treasurer and a group of 40 investors, managing some $102 billion worth of assets in the state, sent a letter to Gov. Michelle Lujan Grisham, calling for the exemptions to be removed from the proposed regulations. 

“We appreciate Gov. Lujan Grisham’s leadership and her agencies’ hard work,” said State Treasurer Tim Eichenberg. “The finalization of regulations without loopholes will help New Mexico’s oil and gas sector maintain its viability while addressing the economy-wide risks of climate change.”