On May 12, EPA issued regulations to control methane emissions from new oil and gas sources, along with a proposed information collection request seeking information regarding methane emissions from existing oil and gas sources to support future existing source regulations. EPA also provided clarity regarding how and whether emissions from the oil and gas sector should be aggregated – a welcome relief after more than 30 years of inconsistent and confusing application of a subjective test.

These actions are part of the Obama Administration’s Climate Action Plan to address climate change and fulfill the commitments the Administration made to the international community last year in Paris.

New Source Regulations

A key element of the May 12 announcement is the new source performance standards (NSPS) for new oil and gas sources. EPA made a few significant changes to the NSPS from the proposed rule. Some of these changes benefit industry, while others will likely be viewed negatively.

On the one hand, it is encouraging that EPA will allow the use of the Method 21 sniffer test in lieu of mandating the use of expensive optical gas imaging equipment when conducting leak surveys. Through this rule, EPA has also provided a pathway to request approval to utilize new technologies to monitor leaks. These changes benefit industry. Another improvement in the rule is that EPA has provided more time for companies to repair leaks detected during surveys. EPA originally proposed that leaks must be repaired within 15 days of the survey, but the final rule requires that repairs must be made within 30 days unless the repair will require shutting down production which would increase emissions.

On the other hand, the final rule increased the burden of several requirements. For example, EPA did not finalize the proposed exemption for low production wells, which means leaks from new wells with low production rates must be monitored. EPA also increased the number of times that leaks from compressor stations must be monitored – from twice per year in the proposed rule to four times per year in the final rule. In addition, EPA removed the proposed performance-based schedule for monitoring leaks and instead set a schedule that applies to all well sites (twice per year) and compressor stations (four times per year). This change is disappointing for industry because the performance-based schedule would have rewarded companies with low methane leak rates by reducing their reporting burdens.

Information Collection at Existing Oil and Gas Facilities

At the same time, EPA issued a proposed Information Collection Request (ICR) that would require oil and gas companies to submit to EPA detailed information regarding existing sources. Gathering this data is the first step in EPA’s plan to regulate emissions from existing oil and gas sources. The ICR, which still must be approved by the White House’s Office of Management and Budget (OMB), will help EPA understand how the oil and gas sector operates, the types and numbers of emission sources, and technologies being used to control emissions. EPA will then use that information to inform the development of proposed regulations to reduce methane emissions from existing oil and gas sources.

Because there are hundreds of thousands of existing oil and gas sources and EPA plans to request information regarding a large number of data elements, it will likely be expensive, time consuming, and will require a lot of resources for companies to comply with the ICR. With low oil and gas prices and reduced workforces, companies may find the ICR to be very burdensome.

Once published in the Federal Register, the public will have 60 days to comment on the burden and feasibility of complying with the proposed ICR. OMB will be the final decision maker as to whether the burden imposed on the industry is appropriate given EPA’s data needs.

One particularly noteworthy aspect of the ICR is that EPA does not believe that the information it seeks is confidential business information. Because EPA will make the information collected publicly accessible, companies will want to closely examine the proposed ICR to verify the accuracy of EPA’s conclusion that such public disclosures will not have an adverse impact on competition or business operations.

Source Determination Rule

Finally, EPA issued a clarification regarding the definition of a source for new source review permitting. This decision is likely favorable to industry because it provides needed certainty regarding when emissions from oil and gas sources must be aggregated for new source review (NSR) permitting purposes. However, there may be circumstances where this new definition may continue to result in unnecessary NSR permitting.

In the past, EPA’s aggregation test created a lot of confusion about whether emissions from interconnected oil and gas sources are considered adjacent and should be aggregated together under one permit. The final rule sets a more clear-cut standard by clarifying that sources are only adjacent if they are located on the same site or sites that share equipment and are located within ¼ mile of each other. This clarification will help eliminate situations where emissions from sources that are located 10 or 20 miles apart were aggregated together during the permitting process.