How the gas industry reads the consent decree tea leaves to get ahead of regulatory shifts | Business

BUTLER, Pa. (TNS) — In the fall of 2018, PennEnergy Resources, a Cranberry-based oil and gas driller, bought a group of shale gas wells from a bankrupt competitor, widening its reach in Butler County.

Two weeks later, inspectors from the U.S. Environmental Protection Agency visited those wells and found more gas coming out of the storage tanks than permitted.

That violated the Clean Air Act, the inspectors noted.

The official notice of those violations arrived three years later, in 2021, said Domenic Tedesco, PennEnergy’s director of air quality and sustainability.

And it would be another three years before PennEnergy, the EPA and the Pennsylvania Department of Environmental Protection signed a consent decree — a settlement with a $2 million penalty and a 15-page list of remedial actions that PennEnergy agreed to undertake.

Two similar settlements with Pennsylvania Marcellus Shale operators ExxonMobil and Hilcorp — also separated from the original violations by half a dozen years — were announced earlier this month.

“Six years doesn’t sound quick, but compared to litigation it can be,” Mr. Tedesco said recently.

A consent decree, which often requires a company to commit to actions that go beyond the scope of current regulations, can also be an express lane to shifting industry practices before laws catch up. Changes start even before an agreement is signed, Mr. Tedesco said.

Such settlements only legally bind the company that signs them, but they can be a clear signal of where regulators are headed.

“The broad implementation of the same practices through a collection of consent decrees inevitably will shift the legal expectations and duty of care for remaining operators and facilities in the same sector,” wrote Tracy Hester, an environmental attorney, in a 2020 Missouri Law Review article.

Such settlements have served as “a test bed” for both new technologies and emerging regulations, he wrote.

Methane and the EPA’s priorities

It was nearly a decade ago that the EPA said it would target large storage tanks at oil and gas facilities for air pollution violations.

Every three years, the agency compiles a list of priorities for enforcement as a way to focus its own resources and signal intent to state environmental partners and the industries it regulates. In 2015, it crafted priorities for fiscal years 2017 through 2019 that included using optical gas imaging cameras and other methods to detect volatile organic compounds and hazardous air pollutions coming off storage tanks.

In the shale fields, such tanks typically sit on well pads and compressor stations. They hold the condensate and natural gas liquids that are in the gas being pulled out of the ground while the methane, the main component of natural gas, is piped away to be sold.

Methane wasn’t part of EPA’s enforcement agenda back then.

Back when the EPA inspected the Pennsylvania wells in 2018 and 2019, producers were not yet required to limit methane emissions.

By the time these settlements were signed this month, methane — a potent greenhouse gas that the EPA considers to be 25 times as powerful as carbon dioxide over the short term — was a central concern.

Announcing the settlements, the EPA highlighted that they “will result in significant reductions of greenhouse gas emissions. Greenhouse gases from human activities are a primary cause of climate change and global warming.”

The industry has also shifted its focus on methane.

“I think that the understanding of the industry related to emissions has increased in orders of magnitude over the past 10 years,” Mr. Tedesco said.

He said he began studying other companies’ consent decrees years before PennEnergy signed its own, as a way to see where the agency was headed. That gave the company a few years to set up its operations to comply with the stricter requirements that might be part of a settlement, Mr. Tedesco said.

This included swapping out all of PennEnergy’s natural gas-powered pneumatic controllers to ones powered by compressed air. Pneumatic controllers are used to control liquid levels and pressure in vessels and have been known for years to be among the top methane-emitting pieces of equipment in oil and gas production.

In 2021, EQT Corp. vowed to replace 8,000 gas-powered pneumatic controllers at a cost of $20 million in order to decrease methane emissions. By the time it was done, in January 2023, the company said it spent $28 million and replaced or retrofitted 9,000 devices.

That didn’t happen on a lark. The writing was on the wall for the industry.

Laying the groundwork for regulations

The EPA eventually, as in earlier this year, enacted regulations that would require non-emitting pneumatic controllers for new oil and gas facilities. In 2029, the same will apply to all existing equipment.

But companies that have done this voluntarily to claim a market advantage or through a consent decree are a proving ground that such technologies are available and that they work.

The meticulous documentation and frequent reporting required as part of a consent decree can be the data backbone of making or defending new regulatory standards.

Tom Decker, a spokesman for the Pennsylvania DEP, said, “The issues at the wells and central processing facilities that led to the consent decrees were quickly addressed and resolved.”

It was the forward-looking aspects of the settlement that took time.

“Several highly technical documents needed to be developed to support mitigation measures that were not otherwise required, including the replacement of hundreds of pneumatic controllers with non-emitting versions at well sites and processing facilities.”

Next up: plugging old wells?

ExxonMobil’s consent decree also involved a novel arrangement that will have the company plugging abandoned wells in order to offset its own excess emissions. This helps the DEP with another problem that has come into sharp relief over the past few years — leaking old wells with no one on the hook for taking care of them.

According to the EPA, during the 2024 fiscal year the agency conducted 353 oil and gas inspections across the U.S., with southwestern Pennsylvania, eastern Ohio and northern West Virginia an area of focus.

It may be years before the public learns what came of those inspections. But things in the field may start to change much sooner than that.