Draft New Source Performance Standards to Reduce Methane and VOC Emissions

The oil and gas sector is the Environmental Protection Agency's (EPA) latest target regarding the reduction of GHG emissions. The White House and U.S. Environmental Protection Agency proposed new regulations on Tuesday, August 18, that aim to reduce methane emissions from the oil and gas sector, including from hydraulic fracture wells. The proposal is a part of President Barack Obama's Climate Action Plan to cut methane emissions across the oil and gas sector by 40 to 45 percent from 2012 levels by 2025. Recently, the EPA and the Obama Administration issued groundbreaking regulations to cut GHG emissions in the form of CO2 from the electric generation industry group.

This new rule is proposed under the New Source Performance Standard (NSPS) program pursuant to Section 111(b) of the Clean Air Act. The rule targets new and modified sources and is intended to cut down on methane, a short-lived but potent greenhouse gas, which the EPA says has a comparative impact on climate change that is 25 times greater than carbon dioxide over a 100-year period.

Specifically, the EPA is proposing both methane and VOC (volatile organic compounds) standards for several emission sources not currently covered by a prior NSPS (i.e., hydraulically-fractured oil well completions, fugitive emissions from well sites and compressor stations, and pneumatic pumps). In addition, the EPA is proposing methane standards for certain emission sources that are currently regulated under the existing NSPS for emissions of VOCs such as hydraulically-fractured gas well completions and equipment leaks at natural gas processing plants.

With respect to certain equipment that is used across the source category, the current NSPS regulates only a subset of the equipment (pneumatic controllers, centrifugal compressors and reciprocating compressors). The proposed rule would establish methane standards for this equipment across the source category and extend the current VOC standards to the remaining unregulated equipment, as well as impose methane standards (with the exception of compressors at well sites.)

Under this proposal, oil and gas companies will have to find and repair leaks, capture gas from the completion of fracked wells, limit emissions from pneumatic pumps and limit emissions from several types of equipment used at gas transmission compressor stations, including compressors and pneumatic controllers. The proposal would also require reduction of methane and VOCs from hydraulically fracked and re-fracked wells.

Janet McCabe, the Assistant Administrator for the Office of Air Radiation, said the new source rules, combined with other standards, could account for a 20 to 30 percent reduction of methane from the oil and gas sector. Given the total goal of up to a 45 percent reduction, it is unclear at this time whether the EPA will turn to existing sources for the remainder. The EPA has authority under Section 111(d) – although seldom used – to regulate existing sources after it issues regulations for new sources under Section 111(b). The EPA exercised its authority under Section 111(d) when finalizing the GHG standards for existing EGUs (electric generating unit.)

The EPA believes that this proposal also complements its Natural Gas Methane Challenge Program, which was announced July 23, through which natural gas companies can make and track commitments to reduce methane emissions. (See Stinson Leonard Street's previous alert on this topic.)

The program invites companies throughout the natural gas chain and in onshore oil production to commit to action under the challenge. The EPA has proposed BMPs (best management practices) and is taking comment through September 1. The oil and gas industry is skeptically looking at the structure of the program as it believes that significant reductions were already made under the Gas STAR program. It is also concerned that, once issued, that the BMPs and other measures identified may become a platform for binding regulations.

Draft Control Techniques Guidelines for the Control of VOCs

The EPA has also issued draft Control Techniques Guidelines (CTGs) for the control of VOCs at existing oil and gas sources in certain ozone nonattainment areas and states in the Ozone Transport Region. These "guidelines" provide the controls and measures that the EPA has determined are reasonable, available and cost effective for states to require that oil and gas sources implement if they are in or are causing or contributing to a designated ozone non-attainment area. The agency has issued a summary of proposed control guidelines for:

• Processes and equipment at natural gas wells,
• Oil well sites and equipment used in oil production,
• Processes and equipment at natural gas production gathering and bosting stations,
• Processes and equipment at natural gas processing plants; and,
• Equipment at natural gas transmission compressor stations.

States use these CTGs to apply binding standards in ozone non-attainment areas and for other purposes, so it is important to provide input. In addition, even if your sources are not in or impacting an ozone non-attainment, the EPA plans to lower the existing ozone standard in October. The current standard is 75ppb and the EPA has proposed to lower the standard between 60-70ppb. At the lower ranges some state agencies have reported that every monitor will violate such a low standard, even in areas with no identifiable sources.

Title V Permitting Proposed Source Determination Rule

Finally, the EPA is proposing to clarify its Clean Air Act permitting requirements for the oil and gas sector as to the definition of "adjacent" sources of pollution. This is an issue that has sparked much controversy, because the term could be used to group pieces of oil and gas infrastructure to qualify them as a source subject to the EPA's Prevention of Significant Deterioration Program (PSD) and Title V Permitting program. If the EPA connects pieces of equipment that are a significant distance from each other and that have been traditionally permitted as minor sources and treats them as major, this will increase the regulatory burden. Of particular concern is if these units are grouped as a single source and there is a modification of existing or construction of new equipment, the PSD construction permitting program could apply and increase controls required of those pieces of equipment (even over and above the NSPS, if applicable).

It is important for the industry to carefully review and comment. The EPA is asking for input on the proposed methane challenge until September 1 and plans to issue that voluntary program at the end of 2015. The EPA will be taking comment on the Draft NSPS, Draft CTGs and the Proposed Source Determination Rule 60 days from publication.