EPA targets oil and gas methane emissions

On August 18, 2015, the U.S. Environmental Protection Agency ("EPA") fired another salvo in the agency's efforts to combat climate change, proposing new methane and volatile organic compound ("VOC") regulations under the Clean Air Act ("CAA") for the oil and natural gas sector.1

Specifically, the EPA is proposing expansive amendments to Subpart OOOO, the New Source Performance Standards ("NSPS") for the Oil and Natural Gas Sector.  The proposal addresses new, modified, and reconstructed emissions sources across the entire sector, as follows:

• Covers additional sources:  The proposal adds requirements for hydraulically fractured oil well completions, fugitive emissions from well sites and compressor stations, and pneumatic pumps. 
• Adds methane standards:  The proposal adds methane standards to the existing VOC standards for hydraulically fractured gas well completions and equipment leaks at natural gas processing plants.
• Sector-wide expansion:  The proposal expands standards for pneumatic controllers and centrifugal and reciprocating compressors (with the exception of well-head compressors) to the entire oil and gas sector.

In general, the standards for new or expanded sources will be the same or similar to those under the current version of Subpart OOOO.  However, the proposed fugitive emissions standards for well sites and compressor stations would be based on the use of an optical gas imaging device (e.g., infrared camera).  This requirement and reduced emission completion ("REC") requirements for oil wells appear to be the most significant of the new and expanded control provisions.   

Potentially more significant than the proposed methane control requirements, the EPA is requesting comments on "next generation compliance" options.  This request may be laying the foundation for eventual requirements, such as use of third-party auditors to certify compliance, submission of third-party reports directly to the EPA, and professional engineer certification that vent systems will meet a "no venting" standard. 

Like all of EPA's climate change regulations, the proposal will receive much scrutiny.  Further details regarding the proposal are discussed below.

Background

As expected, the new proposal arrives in the form of amendments to NSPS Subpart OOOO.  When Subpart OOOO was finalized in 2012, the EPA declined to impose explicit requirements for methane reductions.  The agency subsequently received petitions for reconsideration in which environmental advocacy groups urged the Administrator to adopt standards for the "methane pollution" released by the oil and gas sector. 

The EPA states in the preamble to the proposed rule that the new regulations are the agency's response to these petitions for reconsideration.  The preamble also notes that the EPA has, over the last several years, collected significant data on oil and gas sector methane emissions through the Mandatory Greenhouse Gas Reporting Rule and, in 2014, issued several white papers summarizing sector emissions and potential mitigation technologies. 

Lastly, the preamble notes that proposed regulations follow through on President Obama's 2013 Climate Action Plan and Methane Strategy and the EPA's own goal of cutting oil and gas sector methane emissions by 40 to 45% from 2012 levels by 2025.

New and Expanded Requirements

In the preamble, the EPA states that the Best System of Emissions Reduction ("BSER")—the control standard for new, modified, and reconstructed NSPS sources—is generally the same for methane as it is for VOCs.  Accordingly, the proposal generally expands the application of the types of existing VOC controls contained in the current version of Subpart OOOO.  The new and expanded requirements would apply to those constructed, modified, or reconstructed after the publication date of the proposal.

• Centrifugal compressors:  Expands the requirements for wet-seal centrifugal compressors in the production segment to the entire oil and gas sector, except well-head compressors are exempt.  The requirement would be to capture and reduce emissions by 95%.
• Reciprocating compressors:  Expands the requirements for reciprocating compressors in the production segment to the entire oil and gas sector, except well-head compressors.  The requirement would be to change the rod packing every 26,000 hours or 36 months.
• Pneumatic controllers:  Expands the general requirement to use low-bleed controllers (not to exceed 6 scfh) to the entire oil and gas sector, except that no-bleed controllers would still be the general requirement for natural gas processing plants.
• Pneumatic pumps:  Adds natural gas-driven chemical/methanol pumps and diaphragm pumps to Subpart OOOO.  The general requirement would be to capture and reduce emissions by 95% if a control device is available at the site.
• Well completions:  Expands the REC and combustion control requirements for hydraulically fractured natural gas wells to hydraulically fractured oil wells.  The same partial exemptions that currently apply to natural gas wells (e.g., for wildcat, delineation, and low-pressure wells) would apply to oil wells.
• Fugitive emissions:  Adds fugitive emission requirements to production well sites and compressor stations.  Inspections would be required on a quarterly to annual basis, depending on  the results of the last two semi-annual monitoring events.
• Leaks would be visually confirmed with an optical gas imaging device.  The EPA is soliciting comments on whether to allow Method 21 as an alternative. 
• Well sites with only a wellhead and no ancillary equipment and low-production sites (less than 15 bopd) would be excluded. 
• Well sites would be "modified" only if a new well is added or a well is fractured or refractured.
• Compressor sites would be "modified" only if a new compressor is added or if a physical change is made that increases the compression capacity of the facility.
• For natural gas processing plants, methane would be added to VOCs as a controlled pollutant, but requirements would not change.
• Liquids unloading:  Based on a lack of sufficient information, the EPA is not proposing standards for liquids unloading.  However, the EPA is soliciting comment on this issue.
• "Next Generation Compliance":  The EPA is taking comment on "next generation compliance" options, such as independent third-party compliance verifications, professional engineer certifications for vent systems, and third-party submission of compliance information.

Other Amendments

The EPA is also proposing modifications to the current requirements in Subpart OOOO.  These changes would apply to affected facilities that are already subject to Subpart OOOO.  The most significant of these amendments are:

• Control device monitoring and testing:  Unless a manufacturer's performance test was conducted, the operator must conduct an initial test and follow-up tests every 60 months.  The performance criterion would be raised from 20 ppmv to 600 ppmv.  Monthly monitoring of visual emissions would be required (15 minutes using Method 22).
• Flare design:  The EPA proposes to clarify that flares must meet the requirements in 40 CFR 60.18.  The agency is requesting comment on the use of pressure-assisted flares that exceed the maximum exit velocity of 400 ft/sec.
• Large water recycling tanks:  The EPA is considering changes to remove applicability for large water recycling tanks that, despite very low VOC concentrations, can exceed 6 tpy of VOCs due to millions of gallons of annual throughput.

Conclusion

With the possible exception of the Mandatory GHG Reporting Rule, which was specifically mandated by Congress, every EPA rule concerning GHGs has faced extensive litigation.  This rule will be no different.

However, the most significant issue in the proposal may not be the proposed methane limits, but the EPA's request for comments regarding "next generation compliance" options.  These could presage requirements to employ third-party auditors to inspect and certify compliance and even  provisions mandating that auditors submit compliance reports directly to the EPA. 

A possible professional engineer certification for vent systems and control devices could be another issue.  The EPA seems to be aiming towards a "no venting" standard similar to that currently imposed in Colorado.  The professional engineer would have to verify and certify that the closed vent system is designed to handle all reasonably expected emissions scenarios, including flash emissions, such that thief hatches and other devices would not relieve during normal operations.  If such a requirement were adopted, it would have a very significant effect on many facilities, particularly minor sources that are currently authorized by permits that allow emissions from such devices as long as annual emissions are below specified levels. 

If next generation compliance options were to be finalized, it is almost certain that they will begin appearing in future rules as well, especially if the EPA's budgets keep getting cut and enforcement resources continue to dwindle.  The overall impact of these types of requirements on CAA enforcement could be similar to Title V.