Independent Natural Gas Producers Challenge EPA Air Rules

by Spilman Thomas & Battle, PLLC
Contact

[author: James D. Elliott]

On October 15, 2012, Spilman Thomas & Battle, PLLC filed suit in the D.C. Circuit Court of Appeals on behalf of the Independent Petroleum Association of America (“IPAA”) and six other state-level oil and gas associations (PA, WV, OH, KY, IL, IN), (referred to herein as “the Associations”) challenging the U. S. Environmental Protection Agency’s (“EPA”) New Source Performance Standards (“NSPS”) promulgated for the oil and natural gas industry on August 16, 2012. On the same day, this group of associations also petitioned EPA Administrator Lisa Jackson to reconsider certain aspects of the regulations that disproportionately impact the smaller, independent natural gas producers. Issues of particular concern to the associations are the misguided and inappropriate definition of a “low-pressure gas well” and EPA’s inappropriate use of industry-wide averages to calculate the cost-effectiveness of various requirements on well completions and storage tanks.

In addition to the Associations, eight other groups or entities challenged EPA’s air regulations: five groups representing industry, four environmental organizations and one state. The other petitions were filed by (1) the American Petroleum Institute; (2) the Gas Processors Association; (3) the Natural Resources Defense Council, Environmental Defense Fund, Sierra Club, Group Against Smog and Pollution, and Clean Air Council; (4) the Domestic Energy Producers Alliance; (5) the California Communities Against Toxics, Clean Air Council, Coalition for a Safe Environment, Desert Citizens Against Pollution, Natural Resources Defense Council and Sierra Club; (6) the Texas Oil and Gas Association; (7) the Western Energy Alliance; and (8) the State of Texas. The petitions for review have been consolidated into a single case and the parties were originally directed to inform the court of the issues they wish to raise on appeal by November 16, 2012, but that date has been delayed until December 21, 2012 to facilitate negotiations with EPA.

Although the petitions for review filed with the D.C. Circuit do not elaborate on the concerns of the parties, the Associations’ petition for reconsideration focused on a few key issues likely to be raised on appeal. A principal concern is that EPA’s exclusion of “low-pressure wells” from certain provisions of the regulations is inadequate and was illegally promulgated.  During the notice and comment period on the proposed rule, several commenters highlighted technical issues that prevent the implementation of reduced emission completions on low pressure gas wells due to the lack of the necessary reservoir pressure to flow at rates appropriate for the transportation of solids and liquids from a hydraulically fractured gas well completion into an imposed back-pressure. EPA acknowledged this issue and agreed that a “low pressure” threshold was appropriate to account for these technical limitations, and in the final rule defined a “low-pressure gas well” as “a well with reservoir pressure and vertical well depth such that 0.445 times the reservoir pressure (in psia) minus 0.038 times the vertical well depth (in feet) minus 67.578 psia is less than the flow-line pressure at the sales meter.” 40 C.F.R. § 60.5430. EPA’s discussion of how the agency arrived at this formula spans over 20 pages in the Supplemental Technical Support Document for the final regulation. The formula reflects well over a dozen assumptions made by EPA in its development of the formula, none of which were subject to public review and comment prior to the issuance of the final regulations.

In addition to EPA’s failure to meet the required notice and comment obligations of the Administrative Procedure Act, EPA’s concept of a low-pressure well based on the pressure of the sales line misconstrues the traditional notion and understanding of what constitutes a “low-pressure well.” Traditionally, low-pressure wells include vertically fracked wells, low-volume production wells or marginal wells. Low-pressure wells often require energized fracks using inert gases because the reservoir pressure is insufficient to overcome the pressure created by a column of water. While somewhat acknowledging differences with marginal wells, energized fracks and vertically fracked wells, EPA’s definition of a “low-pressure well” does little to nothing in terms of providing relief to what industry has generally considered a low-pressure well. EPA’s failure to differentiate low-pressure/low-production wells that utilize hydraulic fracturing techniques from the large Marcellus Shale horizontal wells that are dramatically different in scale is arbitrary and capricious. EPA’s failure to recognize the differences between different types of hydraulically fractured wells renders the economic justification for well completion requirements on low-pressure wells insufficient. EPA should have provided an exemption for these types of well based on the traditional notion of a low-pressure well, not based on the pressure in the sales pipeline.

Another key issue raised in the Associations’ petition for reconsideration, and an issue likely to be raised on appeal, is EPA’s use of industry-wide averages based on inadequate data to justify various controls on well completions and storage tanks as being cost-effective. EPA acknowledges in the rulemaking that the characteristics of emissions from production operations, specifically VOC content, vary considerably within an individual basin, let alone among different basins across the country. EPA’s own data demonstrates that the VOC percentage in natural gas in the US ranges from 0.0% by weight to 52.22%. Yet, to justify various controls EPA uses an industry-wide average of 18.28% by weight to calculate cost-effectiveness. This means that for wells with low VOC content, EPA’s selected control options are not cost-effective. Although EPA picked an average VOC content to calculate cost-effectiveness, it rejected a VOC threshold to exempt low-VOC-emitting wells because the agency indicated it could not know with certainty or in advance the VOC content of any given well. In addition to relying on a single VOC percentage to assess cost-effectiveness, EPA relied on as little as four data points to characterize the emission profile of certain activities for the entire industry.

The Associations are in the process of evaluating specific issues to raise on appeal. For example, EPA’s assumptions and subsequent controls on storage tanks are suspect. In the proposed rule, EPA suggested that emission controls on storage tanks emitting more than 10 tons per year (“TPY”) of VOCs would be cost-effective. Almost unanimously industry argued that the threshold should be 12 TPY. In the final rule, EPA lowered the threshold to 6 TPY. Industry also took exception to EPA’s estimate of the number of storage tanks affected by the proposed regulations. EPA estimated that only 304 tanks would be affected nationwide. Commenters estimated the number would exceed 10,000 in Texas alone. The issues associated with storage tank controls are also covered by the petition for reconsideration.
 

For more information, please contact:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Spilman Thomas & Battle, PLLC | Attorney Advertising

Written by:

Spilman Thomas & Battle, PLLC
Contact
more
less

Spilman Thomas & Battle, PLLC on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.