EPA Finalizes Air Rule Targeting Oil and Gas Industry Methane Emissions

Final Rule Includes New Source Performance Standards for Methane and Volatile Organic Compound Emissions and Emissions Guidelines for Methane Emissions from Existing Sources

Key Takeaways

  • What Is Happening? On December 2, 2023, during the United Nations Climate Change Conference (COP28), the U.S. Environmental Protection Agency (EPA) announced a final Clean Air Act (Act) rule designed to reduce emissions of methane and other pollutants from operations in the oil and natural gas industry. The rule includes New Source Performance Standards (NSPS) to reduce methane and volatile organic compound (VOC) emissions from new, modified, and reconstructed sources. (40 C.F.R. Part 60, Subpart OOOOb). It also includes first-time emissions guidelines (EG) to guide states in developing plans to address existing sources’ methane emissions. (40 C.F.R. Part 60, Subpart OOOOc).
  • Who Is Impacted? The rule applies to owners and operators of sources in the Crude Oil and Natural Gas source category. This source category covers sources involved in:
  1. Crude oil production, which includes the well and extends to the point of custody transfer to the crude oil transmission pipeline or any other forms of transportation; and
  2. Natural gas production, processing, transmission, and storage, which include the well and extend to, but do not include, the local gas distribution company custody transfer station (i.e., the city-gate).
  • What Should I Do? This rule is lengthy and complex, containing several new or revised standards relative to the earlier oil and gas NSPS. Accordingly, oil and gas source owners/operators covered by this rule should carefully review the rule to understand their compliance requirements. It is also important for oil and gas companies to understand the rule’s costs so that those costs can be appropriately considered in transactions where these sources are bought and sold.

Owners/operators should consider auditing a representative subset of their facilities to understand potential compliance needs across their operations. Sources that have recently commenced construction or performed work that could constitute a modification or reconstruction should assess whether and how the work subjects that source to these new requirements.

Given this rule’s focus on methane emissions and the Biden-Harris Administration’s commitment to addressing climate change and environmental justice issues, oil and gas source owners/operators should expect additional EPA and state scrutiny of their operations’ Clean Air Act compliance, especially compliance with these new or revised requirements. This enhanced scrutiny could come in the form of on-the-ground inspections, remote sensing inspections (including flyovers), information requests, and, where violations are identified, the initiation of formal enforcement actions.

  • Important Dates. The final rule will become effective 60 days after publication in the Federal Register. Any party planning to file a petition for judicial review of this final rule must do so within 60 days of the date the rule is published in the Federal Register.

Analysis and Notable Elements of the Final Rule

This rule has been in the works since the Biden-Harris Administration announced the U.S. Methane Emissions Reduction Action Plan at COP26 two years ago, and it is intended to work in tandem with the Inflation Reduction Act’s methane fee and programs to address emissions from a variety of sources and support methane monitoring programs. The final rule builds on the proposed rule EPA issued one year ago in conjunction with COP27, which proposed, among other measures, the novel and controversial Super Emitter Response Program.

EPA is finalizing four distinct actions through this rule:

  1. New Source Performance Standards regulating greenhouse gas (GHG) emissions from new sources (in the form of limitations on methane emissions) and VOC emissions under Section 111(b) of the Clean Air Act;
  2. Emissions guidelines for states to follow in developing, submitting, and implementing plans to limit GHG emissions (in the form of methane limitations) from existing sources under Section 111(d) of the Clean Air Act;
  3. Several related actions flowing from Congress’ June 30, 2021 joint resolution under the Congressional Review Act disapproving EPA’s 2020 Policy Rule (85 Fed. Reg. 57018); and
  4. A protocol under the general provisions of 40 C.F.R. Part 60 related to using optical gas imaging (OGI) for leak detection.

The final rule requires stringent equipment standards and work practices for new and existing sources. These include:

  • The Super-Emitter Program. The rule includes the much-discussed Super-Emitter Program. This Program is designed to identify and remedy abnormally large methane emission events known as “super-emitter” events (i.e., a methane leak that has a quantified emission rate of 100 kilograms per hour or more).

EPA initially proposed that an EPA-approved entity or regulatory authority could directly notify a responsible owner/operator of a potential super-emitter event. After receiving the third-party notice, the responsible owner/operator would have been required to perform a root cause analysis and take any necessary corrective actions to address the emissions identified in the third-party notice. Industry raised concerns with the proposed Program’s legality because it would create regulatory obligations based on unaffiliated third parties’ monitoring and notifications. Industry also expressed concern about a lack of standard methods for detecting super-emitter events.

EPA revised the proposed Program to address some of these concerns and strengthen its Program oversight. Under the final Program, EPA will certify third parties to collect data using approved remote-sensing technologies and submit notifications of the potential super-emitter event to EPA. EPA will receive and analyze the super-emitter notifications and data provided by third parties. When EPA determines that a notification has met specified conditions, it will notify the responsible owner/operator of the super-emitter event, and the owner/operator will have five days to initiate an investigation of the event and report results to EPA within 15 days after receiving the notification. If the source of the super-emitter event is subject to the NSPS or a state or federal plan under the EG, the owner/operator must address the leak consistent with applicable requirements.

  • Phasing Out Routine Natural Gas Flaring at New Oil Wells. Over a two-year period, the rule phases out and will eventually prohibit routine flaring of associated gas at new oil wells. Wells will be required to route the gas to a sales line, use it as an onsite fuel source or for another useful purpose, or reinject it into the well or another well. Existing sources have options for addressing routine flaring depending on their level of methane emissions. Sources should carefully review these requirements, including when associated gas may be routed to a flare or control device.

  • Legally and Practicably Enforceable Limits for Storage Vessels (Tank Batteries). For the first time, EPA is specifying criteria that must be satisfied for a permit limit or other requirement to qualify as a legally and practicably enforceable limit to determine whether a source is an affected facility covered by the NSPS or designated facility covered by the EG. If a facility is subject to emissions limits that are designed to keep emissions below the applicability threshold in a permit or through other regulatory requirements, and the limits meet the specified criteria, the facility does not have to comply with the NSPS or EG. A legally and practicably enforceable limit must include:
    • Quantitative production and/or operational limits for equipment;
    • A 30-day or less averaging period if a production limit is used;
    • Established parametric production and/or operational limits, and a compliance demonstration if a control device is used to meet an operational limit;
    • Ongoing parametric limit monitoring to demonstrate continuous compliance; and
    • Recordkeeping and periodic reporting demonstrating continuous compliance.

Owners/operators seeking to limit their emissions so that they are not subject to the NSPS or EG should carefully review these requirements to ensure that their emissions limits meet these criteria.

  • Leak Detection and Repair. The rule includes several important elements affecting leak detection and repair requirements. The nature of the facility (e.g., single well facility, multi-well facility, compressor station, onshore natural gas processing plant) determine the specific requirements. Related issues include the ability to use advanced methane detection technology work practices as alternatives to the specified leak detection requirements and the new OGI monitoring protocol, Appendix K to 40 C.F.R. Part 60 (Appendix K).
    • Advanced Methane Detection Technology Work Practices. Advanced methane detection technologies include satellite monitoring, aerial surveys, and continuous monitoring to detect leaks, including super-emitter events. These technologies operate as an alternative to ground-based OGI surveys, EPA Method 21 (an alternative to OGI), and audio, visual, olfactory (AVO) inspections. The rule includes a process for companies to seek EPA approval for using an advanced technology instead of the specified monitoring methods.
    • Appendix K. The rule contains a protocol for using OGI for leak detection. While the rule finalizes Appendix K, its application is broader. On its own, Appendix K does not apply to any sources; however, it is applicable when specified in a particular subpart. In the final rule, EPA requires Appendix K to be used for leak detection at onshore natural gas plants (EPA Method 21 may be used as an alternative) under both the NSPS and EG.
  • Use of Best Management Practices to Minimize or Eliminate the Venting of Emissions During Gas Well Liquids Unloading. New and existing gas wells must implement techniques or technologies to minimize or eliminate venting emissions to the atmosphere during gas well liquids unloading events.
  • State Plan Requirements for Existing Sources. The final rule includes emissions guidelines (presumptive standards for existing sources that define the minimum standards State Implementation Plans must meet) for states as they develop plans addressing existing oil and gas sources’ methane emissions. States will have 24 months to submit plans after publication of the rule. The final rule requires state plans to have designated facilities achieve compliance with applicable standards within 36 months of state plan submittal.
  • Other Important Elements. Other important rule provisions include:
    • For operations outside of Alaska, process controllers (formerly referred to as pneumatic controllers) must meet a methane and VOC emissions rate of zero; and
    • First-time standards for dry seal compressors.

Beveridge & Diamond’s Air and Climate Change practice group helps private and municipal clients navigate all aspects of compliance with Clean Air Act regulations for criteria pollutants, hazardous air pollutants, and greenhouse gases, rulemakings, and permitting processes. For more information, please contact the authors.