EPA Oil and Gas GHG and Source Aggregation Rules Coming Soon

Stinson LLP

Soon the Environmental Protection Agency will propose greenhouse gas (GHG) regulations for the oil and gas industry sector. The White House Office of Management & Budget (OMB) has begun formal review of an EPA proposal to cut emissions from the oil and gas sector that would impose first-time methane limits on new and modified sources. The EPA is taking this step as a part of the agency's commitment earlier this year under President Obama's Climate Action Plan to address methane and other smog-forming emissions from the oil and gas industry. The agency sent both proposed rules to the OMB at the end of June, according to the agency's website, and anticipates releasing the proposals in August of this year for public comment. The EPA expects to publish and finalize a methane rule in 2016, and certainly before the administration leaves office.

In accordance with the strategy, the rule will amend the agency's 2012 new source performance standards (NSPS) for the oil and gas sector, which included first time hydraulic fracturing controls for cutting emissions of volatile organic compounds (VOC). The 2012 rule has had a co-benefit of also reducing emissions of methane. Environmentalists have long sought direct methane regulations for the sector, arguing that a VOC-only rule captures only upstream sources. Conversely, the oil and gas industry has opposed direct methane controls and has urged the agency instead to expand the number of sources covered by VOC standards as opposed to imposing further methane controls on sources subject to the current VOC NSPS.

This rule is being proposed under Section 111(b) of the Clean Air Act (CAA) for new and modified sources in the oil and gas sector including (1) completions of hydraulically fractured wells, (2) leaks, (3) pneumatic devices, (4) compressors and (5) liquids unloading operations. Some industry representatives have argued that the EPA must first craft a finding showing that methane endangers public health and welfare before issuing its first-time CAA rules regulating the potent GHG pollutant from the oil and gas sector, previewing a possible legal challenge. Under the CAA, an affirmative endangerment finding is considered a prerequisite before the agency can regulate source emissions. In this regard, the industry points to voluntary reductions that have resulted in significant methane reductions and argue that an endangerment finding cannot be supported. However, the EPA will point to prior endangerment findings that included methane and will argue that another endangerment finding for this specific amendment to the current NSPS is not required under the CAA.

A second EPA-proposed measure that could impact the oil and gas sector is also before the OMB for review. The "Source Determination for Certain Emissions Units in the Oil and Natural Gas Sector," proposal will define source terms as they apply to the oil and gas sector. This proposal is important because the EPA will define how it can aggregate sources and thereby subject those sources to be more stringent permitting and possibly expand those sources subject to the new methane NSPS rule.


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.

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