EPA Announces Final Rules on Methane from Oil & Gas Sector

May 12, 2016 – In keeping with President Obama’s Climate Action Plan commitments, EPA released three final rules to reduce emissions of methane, as well as volatile organic compounds (VOCs) and toxic air pollutants, from new, modified and reconstructed sources in the oil and gas sector.  The first rule builds on a 2012 regulation under Clean Air Act Section 111(d) to regulate VOC emissions by ratcheting down New Source Performance Standards, making them applicable to methane (which should not require the installation of any additional controls) and expanding the requirements for both pollutants to cover not only hydraulically fractured and refractured natural gas wells but also hydraulically fractured oil wells and additional equipment and activities in the oil and gas production process.  The rule also includes requirements for finding and repairing leaks.  Among the changes EPA made to the final rule from the proposal are ones setting a fixed schedule for monitoring leaks; allowing an alternative approach (Method 21) for detecting leaks; offering owners/operators the opportunity to use emerging innovative technologies to monitor leaks, subject to EPA approval; and phasing in requirements for using “green completion” to capture emissions from hydraulically fractured oil wells.  EPA expects this rule will reduce methane emissions by 510,000 short tons in 2025 and yield climate benefits of $690 million in 2025 as compared to the $530 million estimated cost.  The agency anticipates VOC reductions of 210,000 tons and air toxics reductions of 3,900 tons in 2025.  The second rule issued by EPA is the Source Determination Rule, which clarifies the agency’s permitting regulations as they apply to the oil and gas sector.  In particular, this rule clarifies when oil and gas equipment and activities must be considered a single source, and therefore subject to major source permitting, by deeming equipment and activities under common control and located within a quarter mile of each other as “adjacent.”  The third rule establishes a Federal Implementation Plan to implement EPA’s Indian Country Minor New Source Review program for the oil and gas sector, seeking to streamline the preconstruction permitting process.  In addition to issuing these three final rules for new sources, EPA also released a draft Information Collection Request (ICR) to gather a broad range of data from facilities to inform the agency’s forthcoming effort to develop regulations to reduce methane emissions from existing oil and gas sources.   Once the draft ICR is published in the Federal Register, EPA will accept public comment for 60 days.  EPA will then refine the draft ICR and submit it to the Office of Management and Budget, which will publish the second draft ICR for a 30-day public comment period.  EPA expects to issue the final ICR in fall 2016 and seek responses by late 2016 and early 2017.