EPA Announces Major Changes In Oil and Gas Regulations

With the election looming, EPA has finalized a three-year effort to revise, amend, or repeal the 2012 and 2016 new source performance standards regulating volatile organic compound and methane emissions from the oil and gas production, processing, and transmission and storage segments. EPA has issued two rules that make sweeping changes to these Obama-era regulations.
The 2012 rule established NSPS for VOC emissions from these three segments of the oil and natural gas industry. The 2016 rule established NSPS for the three segments for greenhouse gases in the form of limitations on methane. In the 2012 and 2016 rules, EPA interpreted the source category to also include the natural gas transmission and storage segment. Prior to that, it only had included the production and processing segments.
In the current rules, EPA takes aim at the expansion of regulation to the natural gas transmission and storage segment, the regulation of methane from all three segments, and numerous VOC requirements in the oil and gas production and processing segments. To accomplish this, EPA issued two rules. The Policy Rule addresses the regulation of the natural gas transmission and storage segment and the regulation of methane from all three segments. The Technical Rule addresses VOC requirements in the oil and gas production and processing segments.
The Policy Rule contains three main parts. First, it finalizes a proposed rule that the source category includes only the production and processing segments of the industry. EPA reviewed the original scope of the source category published in 1979 and found that it did not include this segment. Instead, the natural gas transmission and storage segment is its own source category. EPA explained that, under CAA Section 111, it can only list a source category for regulation by making a cause-or-contribute-significantly and endangerment finding, which EPA has never done. As a result, EPA rescinded the standards (VOC and methane) applicable to the transmission and storage segment of the industry.
Second, EPA rescinded the methane requirements of the NSPS applicable to sources in the production and processing segments. EPA concluded that the methane requirements are redundant with the existing NSPS for VOC and, thus, establish no additional health protections. EPA stated that rescinding the methane requirements while leaving the VOC emission requirements in place will not affect the amount of methane emission reductions.
Third, EPA included an interpretation of CAA Section 111 which requires thatEPA must make a finding that emissions of an air pollutant from the source category cause or contribute significantly to air pollution which may endanger public health or welfare prior to newly regulating any air pollutant that the EPA did not consider when initially regulating the source category. While seemingly innocuous, this interpretation would seemingly require a finding that methane would ‘cause or contribute’ prior to re-regulating methane from the transmission and storage segment, an unlikely finding under the current administration.
The Technical Rule is somewhat more straightforward and applies to existing requirements applicable in the oil and gas production and processing segments. In general, they address a range of technical and implementation issues in response to administrative petitions for reconsideration and other issues brought to EPA’s attention, including fugitive emissions requirements, provisions to apply for the use of an alternative means of emission limitation, pneumatic pump standards, storage vessel standard applicability determinations, and engineer certifications.
The Policy Rule is effective when published in the Federal Register and the Technical Rule is effective sixty days after publication. With the election pending, the provisions of the Congressional Review Act may play a role in the survival of the two rules. In general terms, the Act allows Congress to vote to disapprove of the regulation (thus preventing it from going into effect) within 60 days after Congress receives the rule.
Taken together, the two rules free the transmission and storage segment from NSPS regulation, establish a framework for regulating new source categories, and substantially revise existing regulations in the production and processing segments. However, it remains to be seen whether these rules will survive a change in administration.