Upstream Operators May Get Some Regulatory Relief

EPA proposed revisions to the emission standards for the oil and natural gas sector, which has become known as the Methane Rule, on Sept. 11, 2018. The revisions, as proposed, do not substantially alter the fundamental requirements of the rule, but do relax several provisions for which the industry requested reconsideration. EPA also freely admits that the proposed revisions will increase emissions of methane and VOCs.

The Methane Rule was published in June 2016 and established new source performance standards for greenhouse gases (primarily methane) and VOCs. Since the Trump administration came into office in January 2017, the EPA has made efforts to stay, reconsider and/or review the rule. For example, a three-month stay was issued in June 2017, but was later vacated by the D.C. Circuit.

The proposed rule addresses several general areas, including fugitive emission requirements, pneumatic pump standards and professional engineer certifications. It also proposes some minor revisions and technical corrections.

EPA proposes to revise certain fugitive emission monitoring requirements for well sites and compressor stations. For non-low-production well sites, EPA proposes to require only annual monitoring as opposed to semiannual and annual monitoring, and for low-production well sites, EPA proposes to require only biannual (every other year) monitoring as opposed to annual monitoring. For compressor stations, EPA co-proposes semiannual and annual monitoring instead of initial and quarterly monitoring.

EPA also proposes to revise its definition of modification of fugitive emission components at a well site. EPA generally retained its current definition, but added two instances relating to separate tank batteries where there is no well at that battery. First, when production is routed to an existing separate tank battery, the separate tank battery has been modified for fugitive emission monitoring purposes. Second, when the major production and processing equipment is removed from a well site, leaving only the well head, and the production is sent to an existing separate tank battery, the separate tank battery has been modified.

EPA also proposes to expand the technical infeasibility provision to all well sites by eliminating the categorical distinction between greenfield sites and non-greenfield sites (and the categorical restriction of the technical infeasibility provision to existing sites) for the pneumatic pump requirements. In other words, EPA proposes to allow even new or greenfield sites to make a technical infeasibility showing for pneumatic pumps. EPA also proposes to amend the certification requirements for closed vent system (CVS) design and technical infeasibility for pneumatic pumps to allow certification by either a PE or an in-house engineer with expertise on the design and operation of the CVS or pneumatic pump.

The revisions come with costs savings but also an estimated increase in emissions. EPA estimates that industry would save about $65 million per year in compliance costs. EPA also estimates an increase in emissions of 380,000 short tons per year of methane, 100,000 tons per year of VOC emissions, and 3,800 tons per year of hazardous pollutants.

As the revisions are fairly modest in nature and the cost savings are relatively minor, it remains to be seen whether the trade-off of increased emissions will be acceptable to those who already believe that the Trump administration has little regard for environmental protection. Undoubtedly, those opposed to the relaxation of any standards will provide comments in opposition and then seek to attack any final rule.

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