On August 13, 2020 the U.S. Environmental Protection Agency (EPA) issued two final rules, completing the rollback of Obama-era methane emissions regulations in the New Source Performance Standards (NSPS) for the Oil and Gas Industry. Issued in response to the March 2017 Executive Order on Promoting Energy Independence and Economic Growth, the EPA’s new rules relax methane gas emissions requirements applicable to various segments of the oil and gas industry. Methane, the primary component of natural gas, is a greenhouse gas.

Key Changes

The two rules include policy and technical amendments to the NSPS for the Oil and Gas Industry:

The final policy amendments to the 2012 and 2016 NSPS:

  • Remove the NSPS requirements for the transmission and storage segment of the oil and gas industry altogether, including rescinding both volatile organic compounds (VOC) and methane emissions standards for transmission and storage sources. This final rule concludes that the oil and natural gas production source category only includes the production and processing segments of the industry. The policy amendments state that under section 111 of the Clean Air Act (CAA), the Obama-era EPA could have listed the transportation and storage segment for regulation only if it first found that emissions from the segment cause or significantly contribute to air pollution that may be reasonably anticipated to endanger public health or welfare. EPA never made such a cause-or-contribute-significantly and endangerment finding, and therefore regulation of the transmission and storage segment under the NSPS is improper.
  • Rescind the methane emission standards for the production and processing segment of the oil and gas industry. The production and processing segment will still be required to meet smog-forming VOC emissions limits, which EPA contends will also reduce methane emissions, making separate methane requirements unnecessary.
  • Finalize an interpretation of the CAA section 111 for newly regulating any air pollutant that EPA did not consider when listing or initially regulating a source category. The final rule states that in order to newly regulate such an air pollutant, in this case methane, EPA must make a finding that emissions of that air pollutant from the source category cause or contribute significantly to air pollution which may reasonably be anticipated to endanger public health or welfare.

The final technical amendments to the 2016 NSPS stem from EPA’s reconsideration of four main areas: (1) fugitive emissions (leaks) requirements, (2) well site pneumatic pump standards, (3) requirements for certification of closed vent systems by a certified engineer, and (4) the application process for the use of an alternative means of emissions limitation. In addition, the technical amendments also include other efforts to streamline implementation of the 2016 NSPS as it relates to well completion, onshore natural gas processing plants, storage vessels, and record-keeping and reporting requirements. Paired with the policy amendments, oil and gas companies are no longer required to monitor and repair methane leaks from production and processing operations. For more about the technical amendments, read the final rule here.

Potential Challenges

These final rules are sure to be challenged in court by environmental groups after they are published in the Federal Register. Indeed, the Environmental Defense Fund announced its intention to sue EPA over the new rules last week. It is also possible that these rules could be reversed under the Congressional Review Act (CRA), depending on the outcome of the November 2020 elections. The CRA allows Congress to overturn new federal regulations issued by agencies, if Congress can pass a resolution disapproving of the rule within 60 legislative calendar days.