May 01, 2015

Emerging oil and gas greenhouse gas regulations

Leslie Cook Wong

White House plan

The emerging greenhouse gas (GHG) regulations for power plants are arguably the most discussed topic in U.S. air regulation. However, GHG regulations are also emerging for the upstream and midstream oil and gas industry (O&G). The White House released an outline of its “Methane Climate Action Plan—Strategy to Cut Methane Emissions” on January 14, 2015, the goal of which is to cut U.S. methane emissions 40 to 45 percent from 2012 levels by 2025. The bulk of the cuts will be focused on the O&G industry pursuant to new regulatory actions. They will primarily originate with the Environmental Protection Agency (EPA), but also from the Bureau of Land Management, Department of Energy, Bureau of Ocean Energy Management, and other federal agencies. While by weight O&G emissions of methane are dwarfed by power generation’s emissions of carbon dioxide, the fact that methane’s global warming potential (GWP) is 25 times that of carbon dioxide makes methane emissions nevertheless significant.


Current regulations

No current federal regulatory restrictions apply to methane emissions from O&G operations. O&G has significant data collection and disclosure obligations pursuant to the EPA GHG Reporting Program, however. Congress enacted that program under section 114 of the Clean Air Act (CAA), and it is therefore strictly limited to information disclosure. New and modified O&G sources also have significant emissions and operational control obligations pursuant to the O&G New Source Performance Standards, Subpart OOOO, enacted under CAA section 111(b) (known as “Subpart OOOO”). These obligations, however, attach only to the volatile organic compound (VOC) emissions from O&G operations that are typically co-emitted with methane at much lower concentrations, not directly to methane emissions themselves. This scenario is expected to end in the summer of 2015 when EPA proposes an expansion of Subpart OOOO. The expansion is expected not only to extend applicability to more midstream O&G operations, but also to extend the scope of regulated pollutants from VOC emissions to both VOC and methane emissions.

Potential expansion to include methane

The extension of applicability of Subpart OOOO to GHG emissions has the potential to do for O&G operations what it did for power plants: open the door to regulation of existing sources under CAA section 111(d) Emission Guidelines in the form of an Existing Source Performance Standard (ESPS). This ESPS would be implemented at the state level with the potential to reach many, many more facilities than a New Source Performance Standard, including older facilities not scheduled for additional investment. While EPA has stated in the media that it does not support and is not actively planning an ESPS for O&G, the fact remains that CAA section 111(d) would require such regulation at some point in time because methane emissions are not covered by a National Ambient Air Quality Standard, assuming this concept is not overturned by litigation. And, EPA has already included a limited existing source program, applicable to O&G operations in ozone nonattainment areas only, as part of the summer 2015 Subpart OOOO expansion. Under this program, EPA will issue “Control Techniques Guidelines” for use by states to develop O&G methane reduction regulations for use in ozone nonattainment areas. Of course, by the time EPA finalizes the Subpart OOOO rules, which EPA anticipates will occur by the end of 2016, ozone nonattainment areas will be poised to expand dramatically as the new, lower ozone National Ambient Air Quality Standard is implemented and a new administration is entering the White House.

Expanded reporting requirements

While expansion of Subpart OOOO is the lynchpin for increasing EPA jurisdiction over O&G operations, the march to broader O&G emissions regulation will not begin with the planned summer expansion of Subpart OOOO. It already began last fall with the expansion of EPA’s GHG Reporting Program jurisdiction, with relatively little industry engagement, to include O&G gathering and boosting stations, hydraulically fractured oil wells, and gas transmission pipeline blowdowns. Interestingly, these are the very sources slated for addition to Subpart OOOO applicability in the summer of 2015. In essence, EPA is developing a pattern of collecting data under its section 114-based GHG reporting program in preparation for implementation of GHG emissions restrictions the following year. These restrictions for new and modified sources are implemented under section 111(b), followed by expansion to existing sources under section 111(d).

Industry engagement

In light of these developments, the best defense for upstream and midstream O&G operations against what appears to be a multi-year program of rapidly expanding air emissions regulatory requirements is a good offense. In other words, it behooves the prudent O&G facility operator to develop and implement a robust compliance management system with plenty of room for expansion to cover new requirements.

Leslie Cook Wong

Leslie Cook Wong is a Texas State Bar-licensed attorney and a partner in the Air Quality and Climate Change division of Environmental Resources Management (ERM). She has over 20 years of experience solving complex air emissions management issues for a variety of industries.