Natural Gas Midstream Operations

“Natural gas midstream operations” is industry shorthand for the processing, conditioning and treatment of that commodity once it comes out of the ground. Wellhead gas is moved by way of a pressure differential created by compressor stations, through pipelines to gas processing plants. Processing removes water, CO2, and other materials, so that the resulting finished gas meets applicable quality, safety, environmental and business standards. The subsequent salable gas product manufactured by a processing facility is then delivered to customers via transmissions pipelines.

Gas gathering and processing are often described as the “Midstream Segment” of the natural gas value chain.

midstream 2

These functions include multiple processes to separate natural gas, by extracting liquefied hydrocarbons into bulk natural gas liquids (NGLs). These resulting NGLs can be further processed by fractionating facilities into:

  • Ethane,
  • Propane,
  • Butanes, and
  • Pentanes plus (natural gasoline).

NGLs are used for production of plastics, the manufacture of gasoline and for consumers’ heating and cooking needs.

America’s private pipeline network spans 2.6 million miles, and transports 64 percent of the energy commodities consumed in the country.

The following table summarizes some of the key pending or proposed regulations that affect the Midstream natural gas segment:

Regulation Table (pdf)
Regulations Affecting Midstream Operations

Natural Gas Transmission and Gathering

  • On May 12, the US EPA issued three final rules requiring the oil and gas industry to further ratchet down on methane GHG emissions from new and modified production and related infrastructure. New and Modified Sources of Methane GHG Emissions — The final regulations will add an estimated $530 million in additional costs by 2025, according to the US EPA, and represents a 25 percent increase in estimated costs from that contained in the proposed rule last summer. US EPA estimates the combined benefits of the final rule to total $690 million by 2025. The new regulations on new and modified sources are effective immediately and also will now embrace low-producing wells as well as require more frequent site inspections (link to final rule).
  • Source Aggregation This final rule addresses when to combine, or “aggregate” air permits for oil and gas sector sources by narrowing the scope of the aggregation. The new rule sets for the first time delineates a threshold to assess when emissions from facilities are adjacent via a three-part test that theoretically make it easier for permitting agencies and applicants in making consistent source determinations under prevention of significant deterioration and new source review programs (link to proposed rule).
  • Tribal Lands — This final rule provides for issuance of a Federal Implementation Plan for new source review permitting for oil and gas production on tribal lands. US EPA claims the new rule will streamline the preconstruction permitting process though industry sources take issue with that (link to final rule).

US EPA also issued a request for information from the industry relative to existing sources of methane GHG emissions that are largely viewed as the precursor to their future regulation.

  • “Information Collection Request (ICR) — EPA issued an initial draft of an ICR that seeks a broad range of information from the oil and gas industry on how various pieces of equipment (e.g., compressor stations, processing facilities) are or can be configured to impact emissions controls, how installation of this equipment can be accomplished, and what the costs are to do so.  The ICR will be sent to a representative sample of the impacted industry and an additional round of requests could occur later this year.  The ICR is a prelude to eventual regulation, likely in 2017, of existing sources of methane GHG emissions.”

Separately, PHMSA announced on May 6th its intent to regulate underground natural gas storage.