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Climate Change Hero

Climate Change Blog

  • 21
  • August
  • 2015

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EPA Proposes Regulations to Require 40 to 45% Reduction in Methane Emissions from the Oil and Gas Sector

On April, 18, 2015, EPA proposed rules that would directly regulate methane emissions from the oil and gas sector, including from new or modified wells, and compressor stations. The proposal is a layer of additional regulation beyond the regulation of VOCs from oil and natural gas regulations that EPA finalized as subpart OOOO to the New Source Performance Standards (“NSPS”) in 2012. EPA released several proposed rules, the first is a proposed new source performance standard that would set new methane emission limitations on many sources, including new wells. It would also apply VOC and methane emission limitations to certain sources that were not previously regulated by the NSPS including wet seal centrifugal compressors and reciprocating compressors used in transmission and storage of natural gas and in crude oil pipelines. In addition, these regulations call for upstream and mid-stream operations to undertake a robust regime of monitoring for leaks and fugitive emissions, which are defined more broadly than industry and prior regulatory concepts include.

Another proposal involves a set of control technique guidelines that would apply to VOC emissions in certain ozone nonattainment areas. In addition, EPA also proposed to re-define when a group of operations should be considered a “single source” instead of individual sources under the Clean Air Act. This change could have very significant impacts on the type of permitting that is required and the nature (and cost) of the pollution controls needed for upstream and gathering operations. These proposals are described by the EPA as “a key component . . . needed to set the Administration on track to achieve its goal to cut methane emissions from the oil and gas sector by 40 to 45 percent from 2012 levels by 2025.” 

The Wall Street Journal is reporting that while some have criticized the rules as duplicative of the VOC NSPS under subpart OOOO, some companies are already voluntarily pursuing the methane control measures that will be required under the rules. The New York Times points out that the EPA’s proposals will cost the oil and gas industry up to $420 million to implement but 2025, but that EPA believes implementing the controls required in the rule will yield a net benefit of $150 million.  

EPA reached this conclusion by using a measurement akin to the Social Cost of Carbon that places a value on reductions in Greenhouse Gas emissions. By using a 3 percent discount rate, EPA concluded that the estimated reductions in emissions resulting from the proposed rule would create a “methane-related monetized climate benefits are estimated to be $200 to $210 million in 2020 and $460 to $550 million in 2025.” Notably, EPA used a different (7 percent) discount rate to evaluate the total capital costs and estimated annualized engineering costs associated with complying with the proposal’s new requirements.

The currently available versions of each of these proposals call for comments to be received within 60 days of publication in the Federal Register, which has not happened as of the date of this posting. Vinson & Elkins attorneys are currently analyzing thousand-plus pages of materials released with these proposals, so please check back in the coming weeks for more information.  

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Author

Margaret E. Peloso

Margaret E. Peloso Partner