EPA Strengthens Its Proposed Methane Rule to Reduce Emissions from Oil & Gas Sector

On December 6, 2022, the Environmental Protection Agency (“EPA”) published a supplemental proposal to reduce methane and volatile organic chemicals (“VOCs”) emissions from the oil and gas sector. 87 Fed. Reg. 74,702 (Dec. 6, 2022) (the “2022 Proposed Rule”). This proposed rule strengthens and expands on EPA’s November 2021 proposed revisions to the New Source Performance Standards (“NSPS”) program, established under Section 111 of the Clean Air Act (“CAA”). If adopted, the 2022 Proposed Rule will have significant impacts on the oil and gas sector, including—among other things— requiring owners and operators to conduct a root cause analysis and take corrective actions for large methane emission events known as “super-emitter events”; requiring ongoing fugitive monitoring at all well sites until the site has been closed; and restricting flaring to instances where the owner or operator has demonstrated a sales line is not available and alternative beneficial uses are technically feasible.

As with EPA’s November 2021 proposal, the 2022 Proposed Rule sets forth three actions under the CAA that would apply to new and existing oil and gas sources. The below chart outlines the three categories of proposed rules, the sources to which they apply, and their applicable date:

Unlike the proposed revisions to Quad Ob regulations, the emission standards set forth under Quad Oc require each state to create plans to regulate methane from existing oil and gas sources. Specifically, the Proposed Rule requires states to submit plans for EPA’s review within 18 months after EPA publishes the final Quad Oc regulation in the Federal Register. In addition, states must then establish a compliance deadline for existing sources within 36 months after the plan is due. The November 2022 Proposed Rule contemplates that these state plans would be finalized (at the latest) within 4.5 years after the publication of the final rule. EPA proposes that an existing source’s compliance with a state or federal plan implementing Quad Oc would constitute compliance with Quad O and Quad Oa because the presumptive standards for Quad Oc result in the same or greater emissions reductions.

The remainder of this alert focuses on some of the 2022 Proposed Rule’s major revisions to the Quad Ob and Quad Oc regulations proposed in November 2021. The below requirements would apply to both new and existing sources under the revised Quad Ob and Quad Oc regulations:

• Super-Emitters: The 2022 Proposed Rule creates a “super-emitter response program” to prevent or detect and mitigate super-emitter emissions event (defined as quantified emissions of 100 kg/hour or greater of methane). The proposed rule will allow an EPA-approved third-party or regulatory authority to identify these super-emitter events and notify owners and operators when they detect an event. Upon notification, the owner or operator must conduct a root cause analysis and take corrective actions to mitigate the emissions.
• Fugitive Emissions: EPA’s proposal expands the requirements of the November 2021 proposal by requiring regular leak inspections at all well sites, regardless of their estimated emissions. The 2022 Proposed Rule expands the types of equipment to which the fugitive emissions monitoring requirements apply. For instance, a single wellhead-only site and small well sites must undergo quarterly audio, visual, and olfactory (“AVO”) inspections. Well-head only sites with two or more wellheads must conduct quarterly AVO inspections and semi-annual optical gas imaging (“OGI”) monitoring. Sites with major production and processing equipment and centralized production facilities must conduct bimonthly AVO inspections and quarterly OGI monitoring. Compressor stations must conduct monthly AVO inspections and quarterly OGI monitoring.
• Well Closures: EPA’s proposal requires owners and operators to continue fugitive emissions monitoring until all wells have been closed, including plugging the wells and submitting well closure reports. Owners or operators will also be required to conduct final surveys of the well sites using OGI once the sites are closed to ensure emissions have ceased.
• Pneumatic Pumps and Controllers: EPA’s proposal requires the use of “zero-emission” pneumatic controllers and pumps at new and existing sources. Based on comments received in response to the November 2021 proposal, EPA seeks to expand the proposed standard for pneumatic pumps. The 2022 Proposed Rule prohibits the use of natural gas to power pneumatic pumps at an affected facility. At sites without electricity, the proposed rule allows owners or operators to use natural gas-driven pneumatic pumps only if they demonstrate that it is not technically feasible to use pneumatic pumps not driven by natural gas. For pneumatic controllers, EPA’s proposal expands the definition of a “pneumatic controller affected facility” to include the “collection of natural gas-driven pneumatic controllers at a site.”
• Flaring Requirements: The 2022 Proposed Rule strengthens flaring regulations, prohibiting any flaring of associated gas from oil wells unless the operator can show that a sales line is not available and other beneficial uses are not technically feasible. In addition, the proposed rule adds compliance requirements to ensure that flares meet all requirements for “good flare performance,” including continuous monitoring to confirm the pilot flame is always burning.

• Centrifugal Compressors: EPA’s proposal sets new flow rate requirements, except for those compressors located at well sites. These were previously not regulated under NSPS.

The below requirement would also apply to existing sources under the revised Quad Oc regulations:

• Well Liquids Unloading: The 2022 Proposed Rule no longer considers liquids unloading to be a modification. EPA’s proposal instead creates a presumptive standard of zero methane and VOCs emissions for liquids unloading at existing wells. If performing liquids unloading with zero methane and VOC emissions is not feasible, owners and operators will be required to employ best management practices to minimize venting of emissions.

EPA expects to issue finalize the 2022 Proposed Rule in 2023. Comments are due on February 13, 2023.