Expect More Regulation of Methane & GHGs

During his recent visit to China, President Obama reached a “historic” agreement with China regarding each country’s efforts to reduce greenhouse gases (GHGs) to combat climate change. President Obama announced the United States would strive for a more aggressive goal of reducing GHGs by 26-28% by 2025, surpassing the previous goal of cutting GHGs by 17%. However, with both houses of Congress coming under Republican control in 2015, the prospects of federal legislation addressing climate change are remote. Therefore, the President must rely upon the Environmental Protection Agency (EPA) to continue to lead federal efforts to address climate change through rulemaking. EPA recently issued two rulemaking actions targeting the oil and gas industry.

On November 13, 2014, EPA Administrator Gina McCarthy signed a prepublication version of proposed regulations that would require oil and gas operators to collect and report additional GHG emission data. EPA-HQ-OAR-2014-0831; FRL—9918-48-OAR; RIN 2060-AS37. EPA is proposing to add calculation methods and reporting requirements for greenhouse gas emissions from gathering and boosting facilities, completions and workovers of oil wells with hydraulic fracturing, and blowdowns of natural gas transmission pipelines between compressor stations. EPA is also proposing well identification reporting requirements to improve EPA’s ability to verify reported data and enhance transparency.

EPA explained the reasons for the proposed rule in the background and preamble:

First, we have been working to enhance the quality of data from petroleum and natural gas systems gathered through Part 98, because it has been an important tool for the EPA and the public to analyze emissions, identify opportunities for improving the data, and understand emissions trends. One of the strengths of the GHG Reporting Program’s petroleum and natural gas systems data is that it provides a better understanding of sources in the petroleum and natural gas industry for which the public previously had little information. … These proposed revisions reflect the fact that this sector has been growing and changing rapidly since the GHG Reporting Program’s petroleum and natural gas systems requirements were originally promulgated in 2010. Greenhouse gas reporting from gathering and boosting systems was proposed in 2010 but was not finalized due to the need to conduct additional analysis.

Page 9 of prepublication rulemaking, RIN 2060-AS37.

These proposed rules, which are expected to be published in the Federal Register later this fall, respond to President Obama’s directive to EPA and other federal agencies to consider regulations and voluntary programs to reduce methane emissions as part of his methane reduction strategy. Addressing reporters at a forum sponsored by America’s Natural Gas Alliance on November 17, 2014, Administrator McCarthy explained: “It’s not just about what EPA can do, but where do we see emissions of methane that are readily reduced and can be done cost effectively and with certainty. So we are looking really at both regulation and voluntary actions and commitments for the business community as opportunities for reductions.”

On November 25, 2014, EPA published final regulations (79 FR 70352, effective on January 1, 2015) revising the mandatory GHG reporting and recordkeeping requirements applicable to the oil and gas industry as a result of 2010 rulemaking which created 40 CFR Part 98 Subpart W (Petroleum and Natural Gas Systems). These revisions include changes to certain calculation methods (allowing transitional Best Available Monitoring Methods or “BAMM” for the 2015 calendar year but not thereafter), amendments to certain monitoring and data reporting requirements, clarification of certain terms and definitions, and corrections to certain technical and editorial errors that have been identified during the course of implementation. This action also finalizes confidentiality determinations for new or substantially revised data elements contained in the amendments and revises the confidentiality determination for one existing data element.

As EPA continues to require the oil and gas industry to report on methane and other GHG emissions, expect additional regulations directed at reducing emissions as part of EPA’s overall methane reduction strategy.   Indeed, in a news release issued by the Environmental Defense Fund (EDF) on November 14, 2014, EDF senior attorney Peter Zalzal applauded EPA for revising the reporting requirements but criticized EPA for not requiring industry to implement more aggressive measures to reduce methane: “These new EPA reporting requirements enhance the transparency and rigor of publicly available methane emissions data. But these important reporting requirements are not a substitute for action to reduce emissions. It is critical that EPA move ahead with commonsense clean air measures to reduce methane emissions from the nation’s largest industrial source and to protect the health of our communities.”

Industry should continue to closely monitor EPA’s rulemaking efforts and comment on draft rules as appropriate. It will be important to assure that the administrative burdens of complying with the rules do not outweigh the benefits of reduced methane emissions.

Stephen Smith focuses his practice on environmental and energy-related matters including regulatory counseling and litigation, administrative law, governmental affairs and lobbying. He represents clients before federal and state courts and administrative agencies. He provides client counseling and advice on compliance, permitting and agency communications as well as business transactions.
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