EPA’s proposal to rescind GHG and VOC standards 

Eversheds Sutherland (US) LLP

Eversheds Sutherland (US) LLP

On August 28, the US Environmental Protection Agency (EPA) released a proposed rulemaking that would remove certain natural gas and oil storage and transmission facilities from existing air emissions standards governing volatile organic compounds (VOC) and greenhouse gases (GHG). The proposed rule also proposes to rescind certain methane emission standard requirements applicable to production and processing of natural gas and oil. The EPA proposes to accomplish these goals by rolling back Obama Era rules that expanded the entities and industries subject to these emission standards to include oil and natural gas transmission and storage. The proposed rule finds that existing technology adequately limits emissions of methane and VOCs from natural gas and oil production and processing. Importantly, the proposed rule would remove VOC standards only for storage and transmission facilities—not for production and processing facilities.

Because the emission standards proposed to be removed limit the release of GHGs (including methane) and VOCs—which are inherently difficult to control in oil and gas transmission—implementation of the proposed rule could result in significant savings for the transmission industry by avoiding new facility emissions control and monitoring equipment investments. Specifically, the EPA estimates that these changes would result in approximately $17–$19 million per year in savings between 2019 and 2025. For shippers on such pipelines, some degree of savings could be passed through as part of federal and state rate proceedings. However, the impact on fugitive emissions, and therefore lost and unaccounted for natural gas, is unclear. The EPA notes that while it is reconsidering standards for fugitive emissions from pipeline compressor stations and other pipeline facilities in a separate rulemaking, it nonetheless proposes to rescind fugitive emission standards for compressor stations.

Note also that the proposed rule sets forth an alternative proposal under which EPA would remove the methane requirements for oil and natural gas without upending the definition of the entities covered by the regulation. This alternative proposal would not affect VOC requirements. With regard to this alternative, EPA seeks comment on its statutory authority to regulate pollutants. Specifically, EPA requests comment on: (1) whether the EPA is required to make a finding that GHGs from a particular source cause or significantly contribute to public health and welfare endangerment, and if not, (2) whether GHG emission from the oil and gas sector do cause such endangerment. Notably this request appears primed to challenge a 2016 EPA rule that determined that EPA was not required to make the endangerment finding and that GHGs do cause such endangerment.

Public comments on the proposed rule will be accepted for 60 days from the date of publication in the Federal Register, which will happen soon. EPA will also hold a public hearing on the proposed rule in Texas, with details to be announced shortly in the Federal Register. Reports suggest that the Trump administration will then aim to finalize and implement a final rule sometime in 2020. A final rule appears primed for a legal challenge in the courts given EPA’s statements that the Obama Era interpretation exceeded its statutory authority and the request for comments that challenge prior EPA legal findings. If a stay is issued in connection with any legal challenges, this could push implementation beyond 2020. If the rulemaking is delayed and a Democratic nominee is elected president, the rule would likely be withdrawn.

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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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