May 15, 2017 Practice Points

Controversy and Challenges with EPA’s New Source Performance Standards for Oil and Gas

Key highlights from the February 22, 2017, webinar.

By Environmental & Energy Litigation Committee – May 15, 2017

On February 22, 2017, the ABA Section of Litigation, Environmental and Energy Litigation Committee held a webinar titled “Controversy and Challenges with EPA’s New Source Performance Standards (NSPS) for Oil and Gas.” The speakers were Lee Fuller, executive vice president of the Independent Petroleum Association of America, and David Loring of Schiff Hardin LLP. The moderator was Karen Crawford of Nelson Mullins Riley & Scarborough LLP.

This article provides key highlights from the webinar which took a deep dive to understand the requirements under the Environmental Protection Agency’s (EPA) New Source Performance Standards (NSPS) for the oil and gas industry as well as provide details regarding the concerns raised by industry and market participants. In addition, the panelists discussed the impact of the new administration, including President Trump and his EPA chief Scott Pruitt on NSPS and other environmental-policy matters.

Historically, regulating air emissions from oil and natural gas production was not a high priority for the EPA. However, in recent years the EPA has increased attempts to regulate air emissions from the oil and gas industry, in keeping with its focus on climate change and stricter regulation of fossil fuels. At least some of this additional regulation coincided with the explosion of shale oil and gas production and the upstream segment of the industry. In 2009, a consent decree required the EPA to develop an NSPS affecting oil and natural gas production in 2012. The requirements address a number of emissions, including storage vessels, pneumatic controllers, compressors, and well completions for hydraulically fractured natural-gas wells.

In 2013, the Obama Administration Climate Action Plan (CAP) targeted air emissions from natural gas and crude oil, beginning with methane emissions as a greenhouse gas. CAP included a 45 percent methane reduction from “oil and natural gas systems” from 2012 to 2025. NSPS, Subpart OOOO (Quad O) provided this reduction for oil and natural gas production operations.

In 2016, the EPA released another NSPS (Subpart OOOOa) expanding and shifting oil and natural gas requirements. Using its authority to seek royalty revenues, BLM regulations mirror the EPA requirements for new sources and apply them to existing sources on federal land oil and natural gas production operations in November 2016.

In 2016, the EPA introduced measures to regulate additional existing sources regulation issues including the Control Technique Guidelines (CTG) in Ozone Nonattainment Areas and Nationwide Existing Source Regulations—section 111(d), which targeted methane as the emission compound opens a Clean Air Act regulatory path for a nationwide regulation. The oil and gas industry was concerned that the proposed regulation included marginal wells and small wells. Marginal wells dominate America’s crude oil and natural gas production, comprising about 80 percent of the crude-oil wells and 67 percent of the natural-gas wells, for an average of about 2.7 barrels per day of crude oil and 22 mcf/d of natural gas. Small wells are small emitters but are environmentalists’ targets. Small wells cannot sustain the costs of replacing existing equipment or a costly leak detection and repair (LDAR) program like the Subpart OOOOa program. Furthermore, a LDAR program will not be cost effective as oil and gas wells decline.

Additional recent environmental regulation proposed to expand significant controls on midstream sources. The EPA didn’t regulate compressors in the natural-gas transmission segment in 2012 VOC (Quad O) rules. Standards now extended to transmission. NSPS (Subpart OOOOa) extends regulation to cover methane from fugitive (leak) emissions for most midstream sources. Midstream compressor stations are required to rely on best available technology-driven improvements to reduce leakage and reroute methane/VOCs at various types of compressor stations. Recent regulation extended methane controls/reductions to midstream natural-gas processing plants and covers pneumatic controllers and pumps with zero-emissions limits and storage-vessels emission-reductions requirements of 95 percent.

Additional environmental regulations were expanded to the midstream sector for LDAR to apply to new, modified, reconstructed compressor stations. Regulations cover all fugitive components, including valves and connectors.

For existing midstream sources, Existing Source Performance Standard (ESPS) section 111(d) implemented two measures, including information-collection requests and control-technique guidelines. ESPS covers production and existing facilities—gathering, boosting, processing, transmission, and storage facilities.

The panelists discussed the impact of the new administration, including President Trump and EPA chief Scott Pruitt on NSPS and other environmental-policy matters. The panelists discussed the anticipated (and already evident) shift from a pro-green-energy to a pro-fossil-fuel federal policy platform. In addition, views expressed included the expectation to reduce the amount of environmental regulations for the oil and gas industry, including potentially rolling back some of the newly proposed requirements and reducing or eliminating the request for information gathering and reporting by industry related to existing emissions and compliance costs.

Some of the environmental regulations affecting the oil and gas sector that the Trump administration has rolled back or placed under further review include the following:

  • canceled a requirement for reporting methane emissions—March 2
  • withdrew guidance for federal agencies to include greenhouse gas emissions in environmental reviews—April 5
  • ordered "immediate re-evaluation" of the Clean Power Plan—March 28
  • ordered review of rule limiting methane emissions at new oil and gas drilling sites—April 18
  • ordered review of offshore drilling policies and regulations—April 28
  • voted to revoke limits on methane emissions on public lands—Feb. 3
  • Postponed changes to how oil, gas and coal from federal lands are priced—Feb. 22

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