American Oil and Gas Reporter - November 2020 - 33

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if we want a bright future. "
According to OCD, the proposed
rules include two periods: Phase one
initiates data collection and reporting
requirements to establish gas loss benchmarks for the starting stages of the oil
and gas value chain, including upstream
and gathering operations. The information
will drive the second phase, which requires upstream and midstream operators
to attain the 98% gas capture standard
by the end of 2026.
The phased approach is a fair way to
tackle the problem, Smitherman suggests.
" First, establish your company's capture
percentage, " he summarizes. " Once you
have that baseline, you have to improve
by a fixed percentage each year to get to
98% by the end of December 2026.
" The industry is up to the challenge,
though some companies may find it easier
than others, " Smitherman assesses. " It
will be a lot of work for a lot of companies, but it seems to be a responsible
capture level. I am not an expert on
every state's rules, but 98% may be an
unprecedented standard. If it is not at
the top, it certainly is close. It speaks
well of the agencies, but it also speaks
well of our companies that they have not
pushed back against that. "
Improvements, Sticking Points
Other ways in which OCD's second
draft has improved deal with jurisdictional
challenges on the midstream section,
Smitherman says. " The first round contained quite a bit of overlap between
what OCD wanted and other jurisdictions'
responsibilities, " he relates. " We noted
the potential conflict and OCD-probably
with input from those other agencies-attained some comfort others were overseeing certain technical aspects of gas
pipeline construction. "
However, Smitherman acknowledges,
a few sticking points remain, including
some pertaining to the rule's data gathering
phase. During four-plus decades in the
industry, Smitherman says, he has encountered numerous production accounting
systems that manage the processes for
sending data from the field to companies'
information systems, and ultimately, to
regulatory agencies. That experience
prompts him to question the propriety of
certain proposed reporting requirements,
he indicates.
" The granularity the department seeks
exceeds the current capabilities of most
companies' production accounting systems. Adjusting to these new requirements
may impose additional layers of complexity at great cost and yield little or no
benefit, " he cautions. " I have been involved in software development and in-

tegrating third-party software into companies' existing information systems, so
I have a feel for the challenges involved.
Beyond a certain level of detail, reporting
becomes impractical. "
Smitherman expresses doubt that the
extra detail will help identify and address
emissions. " We suggest allowing the industry to report many of the requested
emissions categories in a more summarized
way, with larger buckets that lump related
categories together, " he says.
The broader rulemaking process, and
especially the precise timeline on which
each agency is acting, remain unclear,
Smitherman mentions. NMED and OCD
revealed their initial draft rules at the
same time, he recounts, but such synchronicity in the next round would have
overwhelmed industry representatives'
ability to engage in the comment generation and, most importantly, in simultaneous hearings on important proposed
rules.
" We have not seen NMED's second
set of rules yet, " Smitherman notes.
" Both agencies started at the same stage,
published their informal proposed rules
on the same day last summer and coordinated their due dates for comments in
September. We saw a few conflicts, but
the two agencies tried to put together
something cohesive. "
According to Smitherman, OCD has
asked for a hearing on Jan. 5, 2021.
NMED has not pinpointed a particular
date, but has indicated its hearing likely
will be in the second quarter of 2021.
" Comments to the OCD are due on the
same day the hearing starts, " he observes.
" We have quite a bit of time to put comments together, but with the hearing on
the same day, it is unclear how well those
comments will be digested. "
NMOGA's technical team tackling the
methane regulations includes participants
from 21 companies, Smitherman reports.
" The experts these industry players have
brought to the table are impressive, " he
commends. " They are knowledgeable and
passionate about doing the right thing,
both environmentally, and in protecting
their companies' viability. "
Ultimately, Smitherman emphasizes,
NMOGA hopes the constructive exchange
will continue. " There are a few places
where we think the rules may be more
onerous than is practical, but there also
is a lot of common ground, and at the
end of the day, we want to be a good
partner, " he emphasizes. " We want to
use science, technology and facts to
create a set of rules that are practical
and effective in reducing emissions and
also protect this most important industry
to New Mexico. "
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American Oil and Gas Reporter - November 2020

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