Obama Drilling Expansion In Alaska Falls Short For Some

October 2012, Vol. 239 No. 10

ConocoPhillips Alaska, among the most active companies exploring for oil and gas in northern Alaska, found a lot not to like in the Obama administration decision in mid-August with regard to development of the 22.8 million-acre National Petroleum Reserve-Alaska.

“ConocoPhillips is disappointed that the Department of the Interior chose a version of Alternative B, which was our least desirable option of the four presented by the Bureau of Land Management for management of NPR-A,” said Natalie M. Lowman, director of communications, ConocoPhillips Alaska. “The proposed version of Alternative B chosen by the DOI also takes a significant amount of acreage off the market for future leasing. This not only decreases access to prospective areas, but also closes off lands with known oil discoveries.”

When the Interior Department announced its “preferred” option on Aug. 13 – -a final decision will be made in November – -it blessed a midpoint option of opening 11.8 million acres. That decision included a green light for a pipeline to be built through the NPR-A to carry oil and gas from the Beaufort and Chukchi Seas. ConocoPhillips and Shell plan to drill exploratory wells in the Chukchi Sea over the next few years. Kelly Op de Weegh, a spokeswoman for Shell, says her company is in the early phases of exploring a pipeline route from Chukchi to the TransAlaska pipeline. A route through the NPR-A is a possibility. “At this point we are doing scientific studies in an effort to understand the permafrost, the wildlife and topography,” she explained.

“Any company that is planning to drill exploratory wells in the Chukchi (and portions of the Beaufort) is likely to be discussing how to get any possible future discoveries of oil and gas through NPR-A,” added Lowman.

ConocoPhillips, BP, Anadarko, Total E&P and Fex L.P. have all been granted leases in parts of the 1.5 million acres of the NPR-A which have been open since 1999. No wells have been drilled as companies have gone through a long permit application process, and environmental reviews. ConocoPhillips said its first well will be the first to be drilled, but not until 2015.

The Bureau of Land Management opened 3 million additional acres in the NPR-A to leasing in December 2011. Seventeen bids covering 140,000 acres were accepted. In March the Interior Department proposed to open additional tracts, offering four alternatives, from opening the entire 23 million acres to development to keeping development to the currently opened acreage. In the end, the administration chose a modification of Alternative B, which opens a total of 11.8 million acres with substantial increases in areas designated as Special Areas, designation of extensive areas that would be unavailable for leasing around Teshekpuk Lake, in coastal bays and lagoons, and in the southwestern part of the Reserve with important caribou habitat and primitive recreation values, and recommendation for designation of 12 Wild and Scenic Rivers.

The 11.8 million acres makes the vast majority of projected oil resources in the NPR-A available for leasing, according to the Interior Department. That acreage is thought to hold 549 MMbbls of discovered and undiscovered economically recoverable oil and approximately 8.7 Tcf of discovered and undiscovered economically recoverable natural gas.

But the American Petroleum Institute, like ConocoPhillips and other energy industry players, would have liked to have seen many more acres opened. “This decision leaves domestic energy resources, jobs and government revenue off the table,” said Bill Bush, a spokesman for the API. “The public and the oil and natural gas industry continue to support U.S. energy development. The administration continues to prevent, delay and obstruct development of important resources, and puts off jobs for another day.”

Environmental groups backed the DOI decision. “We support the administration’s approach to conserving important ecological and subsistence areas from oil and gas development both on and off shore,” said Eleanor Huffines, manager of the Pew Charitable Trust’s U.S. Arctic Program. “Protecting Teshekpuk Lake, which is one of the most important goose-molting habitats in the circumpolar Arctic, as well as Kasegaluk Lagoon and other critical wildlife areas moves us toward a sustainable model for managing our natural resources in the Arctic environment.”

New Transmission Pipeline Emission Regs
The transmission pipeline industry will have three years to reduce emissions from equipment leaks and small glycol hydrators in order to comply with new EPA Clean Air Act rules. Those rules were announced in August and stem from two different programs. One program regulates emissions of volatile organic chemicals (VOCs) such as nitrogen oxide and the other hazardous air pollutants (HAPs), in this case benzene, ethylbenzene, toluene and xylene (BTEX).

Those looking for a silver lining may want to dwell on the fact that the EPA decided not regulate methane emissions in the VOC rule, nor emissions from pneumatic controllers. VOC emissions are covered by what are called subpart OOOO regulations. The EPA acknowledged that regulating pneumatic controllers in the pipeline industry would only cover 67 “sources” whose emissions of VOCs are 0.1 tons per year (tpy) per facility or about 6 tpy nationwide for new sources, which is well below the level emitted by other affected facilities in this sector.

“We have concluded that additional evaluation of these compliance and burden issues is appropriate prior to taking final action on pneumatic controllers in the transmission and storage segment,” the agency said.

However, the new subpart OOOO standards do cover centrifugal compressors with wet seals which will have to reduce VOC emissions by 95%. That will have to be done within three years as will new requirements for reciprocating compressors which will have to change rod packing after 26,000 hours or 36 months. El Paso, for example, had argued that wet seals should not be considered an affected facility, given the fact that dry seals have been used almost exclusively recently and replacing existing wet seals would cost nearly $200,000 per seal, according to Trinh Tran, supervisor, Air and Carbon Management, El Paso.

The HAP control program – this is called subpart HHH – sets maximum technology control standards (MACT) for certain equipment in order to reduce HAP emissions. The final rule establishes MACT standards for small glycol dehydration units in the natural gas transmission and storage source category. This subcategory consists of glycol dehydrators with an actual annual average natural gas flow rate of less than 283,000 standard cubic meters per day
(scmd) or actual average benzene emissions less than 0.9 Mg/yr.

The final MACT standard for this subcategory of small dehydrators requires existing affected sources to meet a unit-specific BTEX emission limit of 3.01 x 10-4 grams BTEX/scm-ppmv (parts per million by volume) and new affected sources are required to meet a limit of 5.44 x 10-5 grams BTEX/scm-ppmv.

There are also some new administrative requirements for pipelines in subpart HHH regarding malfunctions, start ups and shut downs of equipment. Specifically, facilities using carbon absorbers as a control device are required to keep records of their carbon replacement schedule and records for each carbon replacement. In addition, owners and operators are required to keep records of the occurrence and duration of each malfunction of operation (i.e., process equipment) or the air pollution control equipment and monitoring equipment.

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