On November 2, 2021, the Environmental Protection Agency (“EPA”) proposed a suite of New Source Performance Standard (“NSPS”) program rules that, if adopted, will have a significant impact on the upstream and midstream oil and gas sectors, reversing some Trump administration rules that had reversed Obama administration rules regulating volatile organic compound (“VOC”) and methane emissions from the sector.
EPA’s broad proposal is comprised of three distinct pieces. First, the proposal will update the existing NSPS Subpart OOOOa (“Quad Oa”) rules to address a June 30, 2021 Congressional Joint Resolution adopted under the Congressional Review Act, which disapproving the Trump administration’s 2020 Policy Rule. The Trump-era Policy Rule rescinded VOC and methane emission standards for transmission and storage sectors and rescinded methane emission standards for the production and processing sectors. With passage of the resolution and EPA’s proposed revisions, it is as though the 2020 Policy Rule never took effect. The methane standards adopted prior to the 2020 Policy Rule will be reinstated. Ultimately, the Quad O/Oa proposals are expected to include the original 2016 methane standards for applicable production and processing oil and gas segments.
Second, EPA proposed a new subpart, Subpart OOOOb (“Quad Ob”), that will impact new, modified, and/or reconstructed sources in the oil and natural gas sector. The applicability date of the rules for these sources will be determined by the publication of the final rule in the Federal Register. NSPS Quad Ob will create several new requirements at applicable sites, including:
- Storage Vessels: EPA’s proposal changes the NSPS applicability for a storage vessel to depend on the VOC emissions from the storage tank battery. For new, modified, and reconstructed storage tanks or tank batteries with a PTE of 6 or more tons of VOC per year, owners and operators would be required to reduce VOC and methane emissions by 95 percent. This proposal will likely expand the number of storage vessels subject to NSPS applicability and requirements.
- OGI Inspections: EPA’s proposal would require more frequent optical gas imaging (“OGI”) inspections to find and fix fugitive emissions at applicable facilities. EPA’s proposal would require quarterly OGI inspections at facilities with methane emissions greater than 8 tons per year and semi-annual OGI inspections at facilities with methane emissions greater than 3 tons per year. That said, EPA has requested comment to evaluate whether it should shift from the proposed quarterly OGI monitoring to a monitoring program using alternative measurement technologies.
- Well Liquids Unloading: EPA’s proposal also includes an increase in well liquids unloading control and best management practices. The proposal would require that well liquids unloading activities result in zero emissions, unless technically infeasible or unsafe. If an operator can demonstrate technical infeasibility or safety issues, the well liquids unloading activities would be subject to the use of best management practices. Importantly, although included in Quad Ob (as applicable to new, modified and/or reconstrued facilities), EPA notes that any instance of an existing facility conducting a well unloading activity would be considered a modification. Accordingly, from the date of that unloading activity, an existing facility would be subject to these proposed requirements.
- Pneumatic Controllers: EPA’s proposal also targets pneumatic controllers, requiring new and existing sources to use “zero-emission” pneumatic controllers.
- Flaring Requirements: EPA’s proposal prohibits flaring of natural gas unless the operator shows that a gas sales line is not accessible. EPA does not clearly define what determines whether a sales line is “accessible,” but it solicits comment on this question.
Third, EPA has proposed NSPS Subpart OOOOc (“Quad Oc”), which would create emission guidelines that target existing oil and natural gas sources. These emission guidelines are intended to inform state regulators regarding the development, submittal, and implementation of state specific plans that meet or exceed emission reduction standards for oil and natural gas facilities. The Quad Oc requirements largely mirror the Quad Ob proposal, with different applicability thresholds. EPA’s Quad Oc proposal includes:
- Storage Vessels: For existing storage tanks or tank batteries with a PTE of 20 or more tons of methane per year, owners and operators would be required to reduce VOC and methane emissions by 95 percent.
- OGI Inspections: EPA’s proposal would require more frequent optical gas imaging (“OGI”) inspections to find and fix fugitive emissions at existing facilities. For well sites, EPA creates three tiers of inspection frequencies. For well sites with less than 3 TPY, EPA’s proposal would require verification of the facility’s actual emissions. For well sites greater than 3 TPY, EPA proposed two alternatives. The first would require quarterly inspections at all facilities greater than 3 TPY. Alternatively, EPA proposed semi-annual inspection frequency for facilities with PTE between 3 and 8 TPY, while requiring quarterly inspections at all facilities with PTE greater than 8 TPY. The proposal would also require quarterly inspections at compressor stations.
- Well Liquids Unloading: As noted above, any single instance of a well unload will subject any existing facility to the Quad Ob requirements.
- Pneumatic Controllers: Similar to Quad Ob, Quad Oc also targets pneumatic controllers, requiring the use “zero-emission” pneumatic controllers at existing facilities.
- Flaring Requirements: Once again similar to Quad Ob, QuadOc prohibits flaring of natural gas unless the operator shows that a gas sales line is not accessible.
Following the finalization of the Quad Oc emission guidelines, each state must create regulations that meet EPA’s proposal. Following the promulgation of the final Quad Oc regulation, states are expected to take several years to develop and submit their plans. Following submittal, EPA will then review and potentially approve the plan. This process will likely extend to 2025 or beyond.
In addition to the sources and regulations described above, EPA is soliciting comment on several other potential emission sources that may be included in a supplemental rule. EPA is evaluating several different emissions sources, including:
- Financial assurance and fugitive emissions monitoring at plugged and abandoned wells.
- Reducing the frequency of pigging events, eliminating or reducing the volume of gas vented during pigging blowdowns, and/or using add-on controls that are applied to blowdown emissions during pigging.
- Require emission controls during truck loadout operations.
- Additional avenues to ensure control devices are operating functionally, including additional flare monitoring or testing.
The precise timing and next steps of Quad Ob and Quad Oc remain unclear. EPA did not propose rule language or create firm deadlines for its requests for additional comments. However, EPA has scheduled training sessions to discuss these proposals in the coming weeks. Stakeholders can reasonably expect that EPA will publish its proposal and rule language in the Federal Register in the first half of 2022. Following that publication, stakeholders will have 60 days to comment on the proposed rule, including specific items for which EPA has requested feedback. After the 60-day comment period, EPA will evaluate these comments before publishing the final rule. Quad Ob will likely be final and effective in late 2022. However, state regulations addressing EPA’s Quad Oc emission guidelines may not be promulgated until 2025 or later.
Lastly, recent developments in the U.S. Supreme Court may have additional implications for the oil and gas sector. On October 29, 2021, the U.S. Supreme Court agreed to review the D.C. Circuit’s decision striking down the Trump administration’s rollback of Obama-era greenhouse gas (“GHG”) emissions standards for existing power plants in four separate cases. In its review of these cases, the Supreme Court will review the scope of EPA’s authority to regulate GHGs under Section 111(d) of the Clean Air Act. And while the Supreme Court’s ruling in these cases will be specific to the power sector, it could also have legal implications for other existing sources of GHGs, like those in the oil and natural gas sector affected by the proposed regulations in Quad Ob and Oc, and EPA’s future development of Control Technique Guidelines following the adoption of those additional NSPS subparts.