Regulations Affecting NGL Production and Transportation

Regulations Affecting NGL Production and Transportation

Jun 14, 2015 | NGL Recovery & Fractionation, Regulations

Several types of regulations affect the production and distribution of natural gas liquids (NGLs). The Natural Gas Act of 1938, for example, affects how natural gas and gas liquids may be imported and exported. The U.S. Department of Energy authorizes both short- and long-term import and export deals through the act, though monthly reports must be filed to the department to maintain those permissions.

However, NGLs — along with condensates — are not quite gas and not quite crude according to the U.S. Energy Information Administration (EIA), and classifying NGLs for regulatory and export purposes has been a muddled process at best. Reuters reporter John Kemp pointed out this problem in October 2014, arguing that “the inconsistent and confusing definition of natural gas liquids reduces transparency and makes sensible policymaking impossible.” Once the EIA agrees on more consistent definitions, data systems and any applicable sections in the U.S. Code of Federal Regulations will have to be updated.

The U.S. Environmental Protection Agency will also be implementing new requirements in the summer of 2015 to reduce volatile organic compound (VOC) and methane emissions from oil and gas production. NGL recovery from completions is one of the proposed methods of controlling VOCs, indirectly affecting the NGL market. These new VOC regulations along with gas flaring rules imposed in North Dakota are pressuring many Bakken producers, for example, to consider adding NGL processing to their facilities. They originally hadn’t been handling natural gas and NGLs due to the significant lack of midstream infrastructure, but regulations may force processors’ hands.

One method of adding infrastructure has been to convert old gas pipelines to carry NGLs. However, even then pipeline regulations control how NGLs can be transported, though some argue the regulations are too lax. The Pipeline and Hazardous Materials Safety Administration does already recommend against converting some types of natural gas pipelines into NGL pipelines, but as NPR News Station WFPL pointed out in January 2015 “the agency has only 12 engineers responsible for inspecting pipelines and investigating accidents in the Southeast.” Regardless, vigorous testing is still required to ensure such brownfield modifications are safe to human health and environment. Similar testing and planning must also go into rail transport of NGLs, regulated by the U.S. Department of Transportation.