On June 30, 2021, President Biden signed into law a joint resolution of Congress repealing a Trump administration rule that removed methane as a pollutant regulated under the Clean Air Act in the oil and gas industry. As we previously reported, the resolution, issued pursuant to the Congressional Review Act (“CRA”), represents a continuation of the regulatory ping pong that commenced during the Obama administration.
In 2016, the Obama administration promulgated a New Source Performance Standard (“NSPS”) rule for onshore oil and gas operations that regulated methane from that sector. In 2020, in its so-called “Policy Amendments” rule, the Trump administration repealed parts of Subpart OOOOa by removing methane as a regulated pollutant. The 2020 rule also removed the transmission and storage sectors from all aspects of the Obama rule.
Now, with passage of the CRA resolution, the original 2016 rule springs back into effect, without the changes contained in the Policy Amendments.
What requirements are back for new sources?
In 2020, the Environmental Protection Agency (“EPA”) under the Trump administration issued two separate final rules amending the NSPS:
- Policy Amendments, which (i) removed the transmission and storage sectors from the NSPS, (ii) rescinded volatile organic compound (“VOC”) and methane emission standards for those sectors, and (iii) rescinded methane emission standards for the production and processing sectors; and
- Technical Amendments, which made a number of changes to simplify compliance, including (i) changes to the leaks monitoring and repair schedules for gathering and boosting compressor stations and low-production wells, (ii) changes to recordkeeping and reporting requirements, and (iii) changes to incorporate several states’ requirements.
Importantly, the CRA resolution affects only the Policy Amendments. Therefore, with passage of the resolution, it is as though the Policy Amendments never took effect. Methane is once more subject to regulation under Subpart OOOOa. And the production, processing, transmission, and storage sectors are again subject to both VOC and methane emission standards. However, the 2020 Technical Amendments are unaffected by the resolution and remain in place.
Litigation over the 2012 and 2016 rules creating the Obama-era standards is currently held in abeyance, but litigation will likely resume. Challengers will surely harness the Trump EPA’s justifications for the Policy Amendments to argue that:
- The NSPS’s methane emission standards are invalid because Section 111 of the Clean Air Act requires EPA to make a “significant contribution finding” that a pollutant will endanger public health or welfare before setting standards for that pollutant; and
- The NSPS’s regulation of the transmission and storage sectors is invalid because the Clean Air Act also requires EPA to make a “significant contribution finding” for each sector prior to regulating it under Section 111.
What about existing sources?
The restoration of emission standards for methane from new and modified sources triggers EPA’s mandatory duty under the Clean Air Act to issue guidelines for states to regulate methane emissions from existing sources. As we have previously explained, regulation of existing sources in the oil and gas industry will affect a much larger pool of sources and potential emissions. With the NSPS’s methane limits back in effect for new sources, EPA will very likely issue an Information Collection Request to regulated entities as a first step toward a rule regulating methane from existing sources.
What should companies do?
We are already seeing stepped-up enforcement of VOC violations in the upstream and midstream sectors. Because VOC and methane are emitted together in this sector, we expect to see further enforcement as the EPA targets not only VOCs, but now also methane emissions. The EPA is becoming particularly aggressive at arguing that upstream operations are subject to Subpart OOOOa, even if the operations are nominally subject to state air permitting limits. Companies should now take special care that their upstream operations do not trigger Subpart OOOOa. Companies should also take steps now to develop and implement leak detection and repair (“LDAR”) programs to reduce natural gas leaks at their facilities, which will have the benefit of reducing both VOC and methane emissions.
Companies in the oil and gas industry should monitor EPA’s regulatory actions closely. President Biden issued a day-one executive order directing EPA to “propos[e] new regulations to establish comprehensive standards of performance and emission guidelines for methane and volatile organic compound emissions from existing operations in the oil and gas sector, including the exploration and production, transmission, processing, and storage segments, by September 2021.” Thus, companies should be prepared to comment on new proposed regulations.