With US EPA’s regulation of greenhouse gas emissions from fossil fuel–fired electric generation still hotly contested in the D.C. Circuit, US EPA is proceeding with the next step in its implementation of the White House’s Climate Action Plan by moving forward with additional greenhouse gas regulations, this time of the nation’s oil and gas infrastructure.  On May 12, 2016, the Administrator signed a suite of four rules covering new and modified sources, modifying its approach to new source review determinations for the sector, finalizing regulations covering New Source Review permitting for sources on Indian lands, and setting the stage for further regulation of existing sources under Section 111(d) of the Clean Air Act.

NSPS for Methane and VOC Emissions from New and Modified Oil and Gas Transportation

US EPA’s final New Source Performance Standards (NSPS) amends the current standards for the oil and gas sector (40 CFR Part 60, Subpart OOOO) and establishes new standards for methane and VOC emissions from the production, processing, transmission, and storage of natural gas (40 CFR Part 60, Subpart OOOOa).

While targeting primarily methane emissions, the rule also expands the coverage of US EPA’s 2012 VOC regulations to equipment used in the transmission and storage of oil and natural gas, regulating a number of sources for the first time under US EPA’s NSPS program. Under the new requirements, oil and gas companies will have to achieve strict capture and control standards at compressors, pneumatic controllers, pumps, and processing plants, as well as capture emissions from the completion of hydraulically fractured oil and gas wells and fugitive emissions from well sites and compressor stations.  US EPA’s final rule also rejects a proposed exemption for low production wells (less than 15 barrels of oil equivalent per day) bringing within the rule thousands of additional sources.

These regulations mark a significant next step in US EPA’s implementation of the White House’s 2013 Climate Action Plan and Strategy to Reduce Methane Emissions, as well as US EPA’s own stated goal of reducing methane emissions from the oil and gas sector by 40%-45% from 2012 levels.  The final rule also sets the stage for US EPA to mandate greenhouse gas limits on existing sources under Section 111(d) of the Clean Air Act. US EPA has already committed to promulgating such regulations.

Data Collection Request

Consistent with its aim to regulate existing sources in the oil and gas sector, US EPA has proposed a data collection request to accumulate the background information the Agency contends “will enable the development of effective standards for this entire industry under CAA section 111(d).”  As a starting point, US EPA is proposing to issue a general survey to all oil and gas operators, and a “detailed facility survey” to select onshore production, gathering and boosting, processing, compression and transmission, pipeline, natural gas storage, and liquefied natural gas (LNG) storage and import/export facilities.  US EPA is proposing to require selected facilities to provide “detailed unit-specific information on emission sources at the facility and any emission control devices or management practices used to reduce emissions,” which the Agency contends in its supporting fact sheet “will help the agency determine how to best reduce emissions” including “how equipment and emissions controls are, or can be, configured, and what installing those controls entails and the associated costs.”  US EPA is publishing the two-part survey and will be accepting public comments for 60 days after publication.

Aggregation Rule

US EPA is also changing its approach to aggregation of oil and gas facilities for purposes of New Source Review (NSR) and Title V permitting. Under US EPA regulations, accurately defining the boundaries of covered facilities or sources can be critical to determining the applicable permitting requirements. In determining which activities will be considered part of the same “stationary source” for purposes of New Source Review, or the same “major source” for purposes of Title V permitting, US EPA generally looks to three factors:  (1)  whether the activities belong to the same industrial grouping; (2) whether they are located on one or more “contiguous or adjacent properties”; and (3) whether they are under the control of the same person, or under common control.

In US EPA’s final source determination rule, the Agency is redefining the term “adjacent” for purposes of Parts 51, 52, 70, and 71 of the Code of Federal Regulations to specify that, for onshore activities belonging to SIC Major Group 13: Oil and Gas Extraction, activities shall be considered “adjacent” if they are “located on the same surface site; or if they are located on surface sites that are located within ¼ mile of one another (measured from the center of the equipment on the surface site) and they share equipment.”

While significant for the oil and gas industry, US EPA’s bright-line test for determining adjacency has potential significance for all sources covered by NSR and Title V. The definitions being amended apply to all sources within these programs and, while US EPA has set the rule up to limit the applicability of the bright-line evaluation of adjacency to a single SIC code, the question may soon arise whether US EPA can limit its approach in this way.

FIP for Indian County Minor NSR Permitting

Finally, EPA has finalized a rule establishing a Federal Implementation Plan (FIP) for its Indian Country Minor NSR program for oil and natural gas production.  The FIP incorporates requirements from eight federal rules, including the oil and gas new source performance standards finalized the same day, as well as standards for VOC liquid storage tanks, stationary compression ignition internal combustion engines, stationary spark ignition internal combustion engines, and new stationary combustion turbines, as well as the air toxics standards for industrial, commercial and institutional boilers and process heaters, oil and natural gas production facilities, and stationary reciprocating internal combustion engines.

The new federal program will be used in lieu of source-specific minor NSR preconstruction permits in Indian Country and will apply to all new and modified true minor sources in the oil and natural gas production and the natural gas processing segments of the oil and gas industry.