The U.S. Environmental Protection Agency (EPA) has announced that it will delay the requirement for capturing emissions from natural gas hydraulic fracturing processes until 2015.
Development of shale gas plays through hydraulic fracturing, also called fracking, has been one of the main factors contributing to the dip in natural gas prices, which reached $1.91 on April 11. Low natural gas prices have influenced many electric utilities, which are in the midst of the largest retirement phase in the U.S. power industry’s history, to switch their plants to natural gas or combined-cycle natural gas. The U.S. Energy Information Administration (EIA) expects the natural gas portion of electric generation to increase from 24 percent in 2010 to 27 percent in 2035.
The final rule, mandated under the Clean Air Act, establishes a phase-in period to allow producers to install the appropriate technologies. During the first phase, until January 2015, owners and operators must either flare their emissions or use emissions reduction technology called “green completions,” technologies that are already widely deployed at wells. In 2015, the EPA will require all new fractured wells to use green completions.
“About 50 percent of the wells currently being fracked are already using green completion,” said Gina McCarthy, Assistant Administrator for the Office of Air and Radiation, on an April 18 call with reporters.
McCarthy said the final standards reduce implementation costs in comparison to the proposed standard. The technologies mandated through the standard will reduce 95 percent of emissions from the production sites, including volatile organic compounds (VOCs), which contribute to smog formation, and air toxics, including benzene and hexane.
The EPA also expects the rules to result in a cost savings for the oil and gas industry, since green completion technologies will be able to capture natural gas that might otherwise escape the well, which can subsequently be sold. “These rules will result in $11 to $19 million in savings for industry each year,” McCarthy said.
Bill Wince, vice president of business development for Chesapeake Energy Marketing, during a March phone interview with Power Engineering said that hydraulic fracturing is an essential component to America’s energy industry. “Virtually every well that’s drilled today, with a very few exceptions, is fracked.”
Chesapeake, the second-largest natural gas producer in the U.S., has already been preparing for the standards by developing an “all–green fracking component” that would have limit the emissions of any harm-causing chemicals, Wince said.
Kevin Geraghty, vice president of power generation at NV Energy (NYSE: NVE), said that from an electric utility perspective, fracking is not a current concern. “As people get more comfortable with the processes for getting to this gas, it should work its way out in the future.”
Brian Gutknecht, marketing general manager, thermal products for GE Power & Water, said the power industry should be confident that the oil and gas industry will address fracturing concerns in an “environmentally friendly fashion.” GE (NYSE: GE) and Exxon Mobil recently announced recently a $2 million total contribution toward research efforts for developing a technology to be used the shale gas development sector, Gutknecht said.
EPA Administrator Lisa P. Jackson said the air standard for oil and gas wells will allow for the continuation of natural gas production. “The president has been clear that he wants to continue to expand production of important domestic resources like natural gas, and today’s standard supports that goal while making sure these fuels are produced without threatening the health of the American people.”
For more information on the finalized standard, go to http://www.epa.gov/airquality/oilandgas.
To read more reaction on natural gas from power industry executives, check out the preview of our Gas Executive Roundtable, which will be featured in our May issue.