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EPA issues emissions reporting rules for oil and gas industry

U.S. EPA announced the release today of final rules that will require oil and gas facilities and certain electronics manufacturing plants to begin keeping tabs on their greenhouse gas emissions next year.

The new regulations will add those industries to EPA's Greenhouse Gas Reporting Program, which kicked off at the beginning of this year. Companies are not required to achieve any emissions reductions through the program, but they must produce annual emissions reports that are intended to inform the public and guide policymakers in the quest to address global warming.

The addition of the oil and gas industry is notable because it was the last high-profile sector that was not addressed when EPA issued a set of reporting requirements last year. Sources responsible for about 85 percent of the nation's industrial greenhouse gas inventory were required to begin maintaining emissions data this past January, and on Jan. 1, 2011, that figure will nudge up a little higher.

Petroleum facilities such as oil and gas wells, compressor stations and storage tanks produce an estimated 2 to 3 percent of the nation's industrial greenhouse gases. Under the new regulations, the operators of those sources will need to track those emissions and submit their first annual emissions reports in March 2012.

"For far too long the public has been kept in the dark about the large volumes of pollution released from facilities in the oil and gas sector," said Emma Cheuse, an attorney at Earthjustice, in a statement. "EPA's action will strengthen public accountability for this major source of global warming pollution."

In addition to carbon dioxide, the oil and gas facilities produce large amounts of methane -- a natural gas component that is about 21 times more effective than CO2 at warming the atmosphere. Emissions from the oil and gas sector have the same effect as 40 million cars, according to EPA estimates.

Also today, the agency finalized reporting rules for sources of fluorinated greenhouse gases, which can be thousands of times more powerful than either CO2 or methane. Those sources, which include factories that build semiconductors, solar cells and electric transmission equipment, produce about 2 percent of the nation's greenhouse gases, and those emissions are still increasing, EPA says.

At what cost?

Industry groups such as the American Petroleum Institute have criticized the new rules, saying EPA has underestimated the cost of compliance. Because many oil and gas producers rely on smaller facilities in remote areas, the industry will have a harder time complying than other sectors, some of the nation's largest energy companies argued during meetings with White House economists this fall.

The groups had challenged EPA's decision to extend reporting requirements to all of a company's emissions sources within a single geographical basin, rather than using the ordinary definition of a facility. The agency argued this change was necessary to cover the majority of emissions sources, but it will "impose unreasonable reporting obligations on tens of thousands of oil and gas operations," said Howard Feldman, API's director of regulatory and scientific affairs, in a statement today.

EPA estimates that the rules for the oil and gas industry will cost $62 million for the first year and $19 million in following years. That translates to about $22,000 per facility next year.

But according to oil and gas companies, the true cost will be much higher. Some commenters said the average company would need to spend between $100,000 and $850,000 on data management software, adding up to between $123 million and $1 billion in costs for the industry.

In its final rule, EPA disagrees with that claim, saying the regulations do not require any costly technology. Ordinary spreadsheet software is "capable of managing far more data than will be necessary" for even the largest facilities, the agency wrote.

With today's final rules, just a few significant types of emissions sources remain unaddressed. The White House Office of Management and Budget is currently reviewing a rule that would establish reporting requirements for carbon dioxide injection and sequestration.

Underground sequestration is seen as the hope for continued petroleum use in a carbon-constrained world, but if companies want to prevent the carbon dioxide from contributing to global warming, it will have to stay put.

The same is true for carbon dioxide injection, a practice that is used to enhance recovery of oil from underground wells. While suppliers of the carbon dioxide gas argue that their emissions are negative because the product remains trapped underground, that claim is based upon the assumption that the emissions do not escape.

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