On August 13, 2020, the U.S. Environmental Protection Agency (EPA) issued two rules (Policy Amendments and Technical Amendments) to roll back portions of its 2012 and 2016 New Source Performance Standards (NSPS) for the Oil and Natural Gas Industry, also referred to as the “Methane Rule,” which will simplify compliance and reduce the regulatory costs for the oil and gas industry. Issued in response to President Donald Trump’s Executive Order on Promoting Energy Independence and Economic Growth, the rules redefine the types of sources covered under the NSPS, rescind methane limits for the remaining sources, reduce monitoring requirements, allow operators to follow state-issued regulations in lieu of EPA requirements and alters the schedule for repairing leaks.
Redefining the Sources Covered
Three different segments of the oil and gas industry have previously been regulated under the NSPS:
- the production segment;
- the processing segment; and
- the transmission and storage segment.
The new rules will remove all sources in the transmission and storage segment of the oil and natural gas industry from regulation under the NSPS with regard to both for ozone-forming volatile organic compounds (VOCs) and greenhouse gases (GHGs).
This determination is based on the EPA’s review of the original source category listing in its 2012 rule and subsequent revision in 2016 to expand the scope of sources to include the transmission and storage segments. In this rule, EPA determined that the original source category did not cover the transmission and storage segment, which is a distinct source category from the production and processing segments. EPA has determined that it may list a source for regulation under CAA section 111(b) only by making a cause-or-contribute-significantly and endangerment finding as required by the statute, as it pertains to a specific source category. Because no such finding was ever made for the transmission and storage segments of the oil and gas industry, EPA is rescinding the standards applicable to the sources in these segments.
Significant Contribution Finding
Another related and legally significant issue addressed in these rules is the determination that Section 111(b)(1)(A) of the Clean Air Act actually requires the agency to make a pollutant-specific Significant Contribution Finding (SCF) before it can regulate a given pollutant for a given source category. In contrast to the long relied-upon endangerment finding made by EPA in 2009 under the “cause or contribute” standard under Section 202 of the Clean Air Act regarding tailpipe emissions, Section 111(b)(1)(A) sets out a more stringent standard requiring the contribution to be “significant.” EPA made clear in the final rule that it intends to develop a set of criteria for making the SCF if it moves forward with further regulation under Section 111 for a source category. Importantly, EPA observed that:
It should be noted that several commenters contend that oil and gas methane emissions are too small to be considered ‘significant.’ For example, some commenters cite as support that the contribution of oil and gas methane to total U.S. GHG emissions is only about 3 percent, that U.S. methane emissions are only about 7 percent of global methane emissions, and that U.S. methane emissions are only about 1 percent of global GHG emissions. The EPA appreciates the commenters’ views concerning the amounts and impacts of methane emissions from the transmission and storage segment, as well as the production and processing segments. The EPA acknowledges that depending on the criteria that it adopts to support a SCF in the future, such a relatively small contribution to the national and global pool of methane emissions may not be deemed significant.
Rescinding Methane Standards for Remaining Sources
Having eliminated the transmission and storage segment from coverage under the NSPS, the new rules also rescind the methane emission standards for the remaining segments in the oil and gas industry – production and processing. According to the EPA, because the controls for VOCs for the production and processing segments also reduce methane at the same time, there is no need for a separate methane standard for these segments. Under the new rules, the oil and gas industry must continue to comply with VOC emission standards for equipment and processes in the production and processing segments, including well completions, pneumatic pumps, pneumatic controllers, gathering and boosting compressors, natural gas processing plants and storage tanks.
In addition to redefining the sources covered and rescinding the methane standards for the remaining segments, the new rules also make several technical changes to the standard. For example, under the previous rules, fugitive leak monitoring at gathering and boosting compressor stations was required on a quarterly basis. Under the new rules, this has not been reduced to a semi-annual monitoring requirement.
In addition, EPA is allowing operators to comply with an alternative means of emission limitations (AMELs) – a different work practice to achieve emissions reductions that are equal to, or greater than, the work practice specified in the NSPS. As part of this AMEL, EPA has incorporated state fugitive emissions standards for well sites and compressor stations in California, Colorado, Ohio, Pennsylvania and Texas, and Utah. Operators in these states may choose to comply with these state standards for individual well sites or compressor stations that are subject to fugitive emissions monitoring and repair requirements in the NSPS, rather than having to comply with both a federal and state set of monitoring and repair requirements.
The rule also includes numerous technical changes affecting pneumatic pumps, close vent systems, storage tanks, natural gas processing plants, and well completions.
Benjamin R. Rhem advises clients in the power generation, oil and gas, and mining industries regarding compliance with federal and state environmental laws. He works regularly before the Texas Commission on Environmental Quality and the United States Environmental Protection Agency. Ben’s practice also extends beyond environmental law, as he assists clients dealing with regulatory issues before Federal Energy Regulatory Commission, Pipeline and Hazardous Materials Safety Administration, the Railroad Commission of Texas, and Mine Safety and Health Administration.
Austin partner Michael J. Nasi practices environmental and energy law. Mike’s compliance counseling, permitting, and enforcement defense work spans the following federal (and related state) programs: Clean Air Act, Clean Water Act, Solid Waste Disposal Act, Endangered Species Act, and National Environmental Policy Act. Mike is counsel for parties in ongoing EPA regulatory proceedings relating to carbon dioxide, interstate air quality, regional haze, and coal combustion residuals, including appeals pending before the United States Courts of Appeals for the Fifth, Eighth, Tenth, and D.C. Circuits, as well as the Supreme Court of the United States. Mike is a past Chairman of the State Bar of Texas Environmental and Natural Resources Law Section and serves on the faculty for Rice University’s “Leadership & Decision Making in the Energy Industry” course and as a guest lecturer in the “Energy Law & Policy” course at the University of Texas Law School.
The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice.