January 15, 2015
The United States Environmental Protection Agency ("EPA") announced its highly anticipated proposal for targeting methane emissions from oil and gas production on January 14, 2015. The proposal–a combination of regulatory initiatives and voluntary programs–seeks to reduce methane emissions by 40 to 45 percent of 2012 levels by 2025. Formal regulatory proposals are expected this summer to meet the Administration’s self-described "ambitious" goal.
Performance Standards for New and Modified Sources
The cornerstone of the Administration’s proposal is New Source Performance Standards under Clean Air Act Section 111(b) for methane and volatile organic compounds (VOCs) from new and modified wells, processing, and transmission sources. In announcing the planned rulemaking, EPA indicated that the rule will target completion of hydraulic fracture oil wells, pneumatic pumps, and leaks from well sites and compressor stations.
Although details of how EPA will address emissions from new and modified sources will not be unveiled until this summer, EPA pointed to a series of technical white papers issued in 2014 as a guidepost for the upcoming regulations. Based on the approach outlined in the EPA methane white papers, the upcoming regulatory proposal likely will include the following elements:
Contrast with Utility Sector Approach
EPA’s announcement on its planned regulatory program was notable in what it did not include–performance standards under Section 111(d) for existing sources. In other recent rulemakings–specifically, the proposed performance standards addressing greenhouse gases from existing electric utilities–EPA argued that when the agency "establishes a [performance standard] for new sources in a particular source category, the EPA is also required under [Clean Air Act] Section 111(d)(1), to prescribe regulations . . . [for] existing sources in that source category that, in general, is not regulated under" other sections of the Clean Air Act. Given that background, EPA’s omission of any commitment or public strategy on existing sources in its plan for the oil and gas sector seems in tension with its highly controversial proposal for utilities.
Expansion of Existing VOC Standards and Voluntary Programs
In addition to the rule governing new and modified sources, EPA announced that it will expand existing New Source Performance Standards governing VOC emissions to capture additional segments of the supply chain. Many controls utilized for VOCs reduce methane as a co-benefit.
EPA plans to obtain further methane reductions through voluntary programs for the oil and gas sector such as expansion of the existing Natural Gas STAR Program.
Additional Action for Areas with Ozone Problems
EPA’s methane plan includes expansion of VOC requirements in areas of nonattainment for ozone and the Ozone Transport Region. For this aspect of the proposal, EPA will employ rarely invoked statutory provisions on Control Technical Guidelines under Section 182 of the Clean Air Act. States with ozone nonattainment areas will be required to revise state implementation plans to incorporate "reasonably available control technology" standards for sources emitting VOCs.
Action by Other Federal Agencies
The Obama Administration will couple EPA’s program with other actions by federal agencies. For instance, the Department of the Interior’s Bureau of Land Management will reduce methane flaring, venting, and leaking on public lands. The Department of Energy will receive additional funding to develop cost-effective technology to detect and reduce leaks during transmission and to improve quantification of emissions. DOE also will issue energy efficiency standards for natural gas and air compressors. The Department of Transportation’s Pipeline and Hazardous Materials Safety Administration will issue natural gas safety standards this year that also are expected to lower emissions.
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