The Environmental Protection Agency has released the pre-publication versions of four significant Clean Air Act regulatory actions specifically targeting the oil and natural gas industry:
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Performance standards to limit methane emissions and volatile organic compound emissions from new, modified and reconstructed emission sources in the oil and natural gas field;
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A proposed information collection request demanding that oil and natural gas companies provide extensive information so that EPA can develop regulations to reduce methane emissions from existing oil and natural gas emission sources;
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A change to EPA’s air-permitting regulations that clarifies how EPA will determine what a “source” is for permitting purposes; and
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A plan for permitting “minor” emissions sources in Indian country.
All four actions will have substantial impacts on the oil and natural gas industry. The source-determination issue in particular implicates fundamental questions regarding EPA’s authority to regulate industry and, depending on how any legal challenges are resolved, could result in an expansion in the number of facilities subject to permitting and regulation. While the source-determination and Tribal permitting issues are important, this alert will address the first two issues, which – by EPA’s admission – will affect every operator in the U.S. Accordingly, this alert will lay out highlights from the performance standards and information collection request.
New Source Performance Standards
The new performance standards contain requirements for new, modified and reconstructed emission sources in the oil and natural gas field, and the requirements will generally become effective 60 days after EPA publishes them in the Federal Register. EPA will codify the following notable points at 40 C.F.R. Part 60, Subpart OOOOa:
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At 40 C.F.R. §§ 60.5430a and 60.5375a(a), EPA will extend “green completion” requirements to oil wells. Previously, EPA only required owners/operators to use green completions for natural gas wells. To achieve the completions, EPA generally will require owners/operators to use separators at most sites during flowback “unless it is technically infeasible for a separator to function.” The separator requirement will not apply to wildcat and delineation wells.
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At 40 C.F.R. § 60.5397a(g), EPA will require owners/operators to conduct semiannual monitoring for fugitive emissions from leaks at well sites and quarterly monitoring for fugitive emissions from leaks at compressor stations.
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EPA rejected industry comments that sought to codify performance-based reductions in the required leak-detection monitoring frequency. If EPA had adopted performance-based monitoring, then owners/operators could have qualified for reduced monitoring burdens by demonstrating that their components were not leaking. Instead, EPA codified fixed semiannual and quarterly monitoring.
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While EPA initially proposed to require owners/operators to use optical gas imaging – basically, FLIR cameras – for leak detection, EPA responded to industry comment by allowing owners/operators use Method 21 to detect leaks. In allowing this alternative, EPA will set the repair threshold in 40 C.F.R. § 60.5397a(a) at 500 ppm.
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Conversely, while EPA initially proposed to exempt low-production wells from the leak detection requirements, EPA has removed the exemption from the leak-detection requirements for low-production wells. The “low-production wells” are wells that produce less than 15 barrels of oil equivalent per day. It seems likely that EPA’s decision will severely affect small oil and natural gas businesses.
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40 C.F.R. § 60.5397a(i) will require owners/operators to repair leaks within 30 calendar days of detection. EPA initially proposed a 15-day repair window, but lengthened the repair window due to the remote nature of well sites.
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The rule also established standards for compressors, pneumatics and storage tanks. 40 C.F.R. §§ 60.5380a, 60.5385a, 60.5390a, 60.5393a and 60.5395a.
Given the substantial burdens created by the rule, industry groups will be evaluating an appeal. The deadline to seek judicial review at the D.C. Circuit Court of Appeals pursuant to Clean Air Act § 307 will be 60 days after publication of NSPS OOOOa in the Federal Register.
Information Collection Request
The new standards in NSPS OOOOa are only part of the battle, as the new standards will only apply to “new, modified and reconstructed sources” in the oil and natural gas industry. EPA also intends to regulate existing oil and natural gas sources. However, before it can do that, EPA requires “more comprehensive information” regarding “what emission controls are being used in the field,” “the likely costs of retrofitting” and “how often sites are staffed or visited.”
Accordingly, EPA wants to send operators a two-part survey, and EPA will require operators to respond pursuant to its authority under Clean Air Act § 114. EPA will send Part 1 “to all known operators of oil and gas production wells.” EPA estimates that there are 22,500 total operators. EPA will send Part 2 to a sample of operators – 3385 total operators – representing different operating conditions.
The two-part survey seeks to collect information cataloguing the number and types of equipment at production facilities (Part 1), and detailed, unit-specific facility surveys regarding emission-control devices and practices (Part 2). EPA has published the draft Part 1 and Part 2 requests.
If the White House’s Office of Management and Budget approves the information collection request, then EPA hopes to issue Part 1 by October 30, 2016. Operators would have to complete Part 1 within 30 days of receipt. The sample of operators receiving Part 2 would have to respond to that more-detailed survey within 120 days of receipt.
EPA claims that the surveys will cost an average of roughly $700/5 hours per operator for Part 1, and $7000/33 hours per operator for Part 2. In addition to EPA’s contended burden, issues are sure to arise regarding thoroughly cataloguing the equipment, describing the processes and maintaining the confidentiality of sensitive information.
EPA specifically states that it does not expect to treat any information submitted pursuant to Part 1 as Confidential Business Information. In other words, if someone – for example a competitor or an environmental non-governmental organization – submitted a FOIA request for the information, then the operator that provided the information could have a difficult time preventing EPA from releasing it. As for Part 2, EPA expects operators to seek confidentiality protection for their responses. If the information collection request makes it through OMB review, then operators should consider their submissions closely, and be mindful that EPA uniquely provides in its regulations that EPA does not have to wait for a FOIA submission from the public to challenge an operator’s assertion that information is a trade secret or otherwise confidential.
EPA’s publication of the information collection request is notable also because EPA is taking comment on it before actually publishing it. Specifically, EPA will publish the proposed information collection request in the Federal Register and take public comments on the request for 60 days after publication. Industry groups should consider whether they can reduce their ultimate burdens in responding to the request and address confidentiality issues by submitting comments.
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