EPA Expands Its Oversight of Oil and Gas Operations

EPA directly regulates many aspects of oil and gas activity. Mainly, its regulatory authority relates to air emissions from a multitude of sources and equipment from drilling operations to refinery operations. In addition to the major new rules it has issued over the last several years, EPA is now pursuing two courses of action that create a level of complexity and uncertainty for oil and gas operators.

In 2012, EPA announced New Source Performance Standards for sources within the oil and gas sector. Primarily, the rule imposed VOC standards on hydraulically fractured gas well completions, requiring reduced emissions completion, or ‘green completions.’ In 2016, EPA issued additional regulations for these and additional sources. The rule imposed methane and VOC standards on previously unregulated sources, such as hydraulically fractured oil well completions, pneumatic pumps, and fugitive emissions at well sites and it added methane standards for previously regulated sources and equipment, such as gas well completions and leaks at gas processing plants.

Rather than leave well enough alone by relying on its own direct regulatory authority, EPA is pursuing additional review and oversight that will significantly impact oil and gas operators. First, it is reviewing the emission factors for oil and gas flares. Second, it now seeks to impose its will on other agencies who issue permits relating to oil and gas activities. It has used its review and comment authority to seek or force changes in, or at least slow down, the permit process of other agencies.

EPA recently entered into a ‘sue-and-settle’ resolution of claims brought by various environmental groups. The complaint and the proposed consent decree were filed the same day. The proposed consent decree imposes a requirement on EPA to review the AP-42 emission factors used to estimate emissions from flares used in natural gas drilling operations. By June 5, 2017, EPA must complete the review and either propose a change or issue a proposed determination that no change is necessary. By February 5, 2018, EPA must issue a final rule making the change or issue a final determination that no change is needed.

It should be noted that EPA entered into another sue-and-settle resolution of a similar claim regarding emission factors for industrial flares. EPA’s review of those emission factors led to a revision, in April, 2015, of the AP-42 emission factors for industrial flares. It is likely that the current review will lead to more stringent emission factors. In turn, this will lead to estimates of higher emissions, which could be very problematic in non-attainment areas and could turn a minor source into a major source.

EPA is also asserting its regulatory authority to review decisions by the Federal Energy Regulatory Commission (FERC) and the Corps of Engineers relating to oil and gas pipelines. Under the Clean Air Act and the National Environmental Policy Act statute and regulations, EPA has an opportunity to review and comment on draft environmental impact statements issued by FERC on pipelines.

Over the last year, EPA has negatively commented on draft EISs prepared by FERC on several pipelines. For example, for a major pipeline project in the northeast, EPA recently submitted comments, pointing out its concerns on such portions of the EIS as the alternatives analysis and the cumulative impact on the environment and public health. Now, the FERC process will grind to a halt while FERC deals with EPA’s comments.

Additionally, under CWA Section 404, EPA has a ‘veto’ power over permits issued by the Corps for impacts to wetlands. EPA has recently used that power to essentially revoke a permit issued by the Corps for a surface coal mining operation in West Virginia. Many pipeline projects impact wetlands and require a Corps permit. EPA, under its review and veto authority, may prove to be an obstacle in moving forward with the project, even though the Corps has issued the permit.

Oil and gas operators, from producers, pipeline owners, to refineries, face an ever increasing web of costly and burdensome regulations. EPA’s new efforts will add to this burden and require consideration of EPA’s potential comments when dealing with other agencies.

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