EPA Doubles Down with Expansive New Methane Regulation

On June 3, EPA published in the Federal Register a far-reaching, first-ever set of methane regulations capping methane and other emissions from new and modified direct and fugitive emissions sources in the oil and gas industry. EPA also began an information-gathering process to inform the anticipated development of regulations for existing methane sources. EPA has said methane has a global warming potential 25 times greater than carbon dioxide over 100 years¹ , while the Intergovernmental Panel on Climate Change (IPCC) has concluded that methane’s potency may be 86 times greater than carbon dioxide over 20 years and 34 times greater over 100 years.² EPA’s new and emerging methane rules for the oil and gas industry reflect a coordinated and comprehensive federal strategy to implement the President’s 2013 Climate Action Plan, which addresses the challenges of climate change across various sectors of the economy.

• The new source rule:
  • Requires “green completions” for hydraulically fractured oil and gas wells;
  • Sets express methane emissions standards;
  • Builds on EPA’s 2012 VOCs rule (that had the incidental effect of reducing methane emissions as well) by covering new oil wells and covering a broader range of equipment;
  • Sets a fixed schedule for monitoring leaks; and
  • Includes low-production wells.
• Rules for existing sources are not expected until 2017. Like the new source rule, they will probably be comprehensive, with few exemptions. Compliance is expected to be costly, and a significant number of older oil and gas wells could be forced to shut down.

The Heart of EPA’s Final Rule—Regulating Methane and VOC Emissions from New Oil and Gas Facilities: Full-Sector Application, Steep Emissions Reductions, Frequent Monitoring Regime, and Green Completion

On May 12, 2016, EPA released a final rule³ amending the New Source Performance Standards (NSPS) under the Clean Air Act to set methane emissions limits for new and modified emissions sources within the oil and gas sector. The new rule, published in the Federal Register on June 3, 2016, also expands on EPA’s 2012 rule regulating volatile organic compounds (VOCs) emissions at hydraulically fractured natural gas wells.⁴ While the 2012 VOC rules did not expressly target methane, EPA has acknowledged that it intended for them to incidentally reduce methane emissions from various sources at gas well sites, production gathering and boosting stations, natural gas processing plants, and storage tanks at gas compressor stations. In fact, EPA estimated the 2012 rule would reduce methane emissions by 1 to 1.7 million short tons annually once fully implemented.

In the new rule, EPA asserts the position that “in light of the current and projected future GHG emissions from the oil and natural gas industry, reducing GHG emissions from [methane] should not be treated simply as an incidental benefit to VOC reduction.” EPA has therefore focused on directly reducing methane emissions at gas and oil wells and fugitive emissions (equipment leaks) from well sites, gathering and boosting stations, gas compressor stations, and gas processing plants.

A key feature of the new rule is expanded requirements to use reduced emissions completions (RECs), also known as green completions, to ensure that methane is captured during the hydraulic fracturing of wells. These “green completions” utilize equipment at the wellhead which separates the initial flowback following the hydraulic fracturing of a well into gas, solids and liquids, thus allowing the gas to be captured and put to beneficial use rather than vented into the atmosphere. Natural gas producers are currently required to use “green completion” to capture VOCs at the well under the 2012 rule. The new rule requires both gas and oil wells to use green completions to capture methane, and not just VOCs.⁵ Operators must generally route flowback from hydraulic fracturing to a separator, unless it is shown to be technically infeasible. Once the separator begins to function, a green completion, including routing gas to a collection system, re-injecting the gas into a well, or using the gas onsite as a fuel or for another normal purpose must be used. Once production begins, or the well is disconnected, the use of a green completion is no longer required.

Download: EPA Doubles Down with Expansive New Methane Regulation

1. https://www3.epa.gov/climatechange/ghgemissions/gases/ch4.html
2. Intergovernmental Panel on Climate Change: Fifth Assessment Report
3. https://federalregister.gov/a/2016-11971 40 CFR part 60, subpart OOOOa.
4. https://www.gpo.gov/fdsys/pkg/FR-2012-08-16/pdf/2012-16806.pdf. 40 CFR Parts 60 and 63.
5. EPA’s final rule on existing sources of methane and other emissions from the oil and gas sector was issued the same day the Agency released its final rule on when it will aggregate multiple emission sources to determine if they should be treated as a single, major source of emissions. An overview of this rule and its likely impact is summarized in the Pillsbury client alert available at this link. Taken together, a new nonadjacent facility may now be considered a major source, and therefore subject to the methane and VOC emission requirements, if it is within a quarter mile from another facility and shares common tankage or facilities.