Capturing methane and gov't overreach in focus

James Fenton
Kathleen Sgamma, vice president of government and public affairs for Western Energy Alliance, speaks during the Four Corners Oil and Gas Conference on Wednesday at McGee Park.

FARMINGTON — A pending update of 30-year-old federal rules used to regulate the oil and gas industry took center stage on the opening day of the Four Corners Oil and Gas Conference at McGee Park.

The industry-only conference was celebrating 95 years of oil and gas development in the San Juan Basin. However, the issue that got special attention during several presentations, break-out conversations in the convention hallways during breaks and over a barbecue lunch was the proposed environmental rules coming from numerous federal agencies.

A suite of onshore orders and a rule on venting and flaring proposed by the Bureau of Land Management, and rules on methane emissions proposed by the Environmental Protection Agency are among the multiple regulations that are expected to be finalized by the end of the year.

Kathleen Sgamma, vice president of government and public affairs for the Denver-based Western Energy Alliance, opened her remarks during an afternoon presentation by characterizing the new oil and gas rules as “federal overreach” and laying the blame squarely on the Obama administration.

Kathleen Sgamma, vice president of government and public affairs for Western Energy Alliance, speaks during the Four Corners Oil and Gas Conference on Wednesday at McGee Park.

"It is clear that this administration is trying to put this industry out of business," Sgamma said. "I think it's pretty clear they're out to get us,"

An oil and gas industry advocacy group, the alliance has engaged in 47 regulations proceedings over proposed rules by the EPA and the U.S. Department of the Interior since April of last year, she said.

Obama's goal to reduce emissions of methane by 25 percent by 2025 is unnecessary because the industry has already made strides in reducing methane emissions, she said.

"The natural gas sector has reduced emissions by 21 percent as production has climbed by 47 percent, down to 1990 levels," Sgamma said. "That's free-market, natural-gas driven."

Looking for relief from a post-Obama White House, Sgamma said the chance to have a more industry-friendly president in charge was "light at the end of the tunnel."

Asked if Republican presidential front runner Donald Trump showed any promise as a leader who would be sympathetic to issues facing the industry, Sgamma said it was too early to say but that he "doesn't understand public lands."

However, she said Trump "could be coach-able."

She was also asked if she or her group believed in climate change. Either way, she said, natural gas technologies will be needed to meet some of the proposed goals.

"The oil and gas industry, we do know for a fact that natural gas is the most reasonable, reliable, efficient way to meet those targets, to reduce greenhouse gas emissions," she said. "We are delivering more climate change benefits The big, bad ol' oil and gas industry is delivering more climate change benefits than any other industry ..."

In a morning session, Jeff Voorhis of HY-BON Engineering Company, Inc., made the pitch to a room of about 50 oil and gas representatives that capturing methane with his company's vapor recovery units, or VRUs, can bring producers' oil and gas wells into compliance with pending regulations. But he also said the units can increase company revenue by capturing gas for sale that otherwise be lost in the atmosphere.

Hy-Bon Engineering Company engineer Jeff Voorhis give a presentation on Wednesday at the Four Corners Oil and Gas Conference at McGee Park Convention Center in Farmington.

He said the worst offenders are oil storage tanks at oil and gas well sites that leak and vent methane, calling them "the elephant in the room."

"The issue is the tanks and the amount of gas coming off those tanks," Voorhis said. "What gets measured, gets controlled. And what gets controlled can make you money, revenue."

He illustrated his point by showing infrared video of an oil tank venting methane.

“It’s the smell of money – the smell of wasted money,” Voorhis said as he pointed to stark black-and-white imagery of methane gas rising in plumes from the top of oilfield tanks in the video. "That's normal operations, 1,500 tons (of methane) per year."

Capturing methane has been a solid business for the Midland, Tex.-based company since 1952, Voorhis said. He said that technology advances have also made their way into the engineering of VRUs — and the infrared cameras that environmental groups and federal inspectors use in the field to document what is otherwise odorless and invisible to the human eye.

To sweeten the deal, Voorhis said his company just launched a new business model — HY-BON will install VPUs at well sites for free and take 50 percent of the revenue the captured gas delivers until the equipment is paid off.

"It's better than free," he said. "No capital costs, free installation and equipment, 50 percent revenue sharing till it's paid off."

But despite what appears to be a sweet deal, making customers out of oil and gas companies is proving difficult, he said afterward. He said the twofold challenges of pending regulations and record-low natural-gas prices make companies leery, unwilling or unable to make the investment.

A universal tendency to resist change may be at play, too, he said.

"I tell companies to not look at this as a burden but as an opportunity," Voorhis said. "There's money to be made in this stuff. But the oil and gas industry's first instinct is to push back. They all think everything's okay. It's resistance to change. Let's be reactive instead of proactive. They need to see that (federal regulations are) coming and do something about it."

After Sgamma's talk, Dugan Production Corp. Vice President John Alexander said he agreed with Sgamma and believes the industry does a good job coming up with solutions on its own.

"When you have the BLM and the veracity of the number of regulations being piled onto us right now, it's hard," Alexander said. "As an independent operator in the San Juan Basin, what we want to do is just to legally, morally and ethically make money.That's the reason we're in business."

Alexander said the industry is the victim of its own success. But he conceded that environmental groups have been winning the public relations war for years.

"Shame on us for not doing a better job of educating (people about the oil and gas industry)," he said. "We need to do a better job."

State Rep.James Strickler, R-Farmington, who owns — and is sole employee of — JMJ Land and Minerals Co. in Farmington, said the industry's struggles are multiple.

"When you're friends are losing their jobs, it hurts. I've been laid off twice in my 30-year-career. Here we are, we're fighting our own government," Strickler said. "It's one thing fighting Saudi Arabia ... But that's the problem. We're just playing defense."

James Fenton is the business editor of The Daily Times. He can be reached at 505-564-4621.