Articles, Newsletters and Advisories
On June 28, 2016, the U.S. Environmental Protection Agency (EPA) published a rule entitled “Effluent Limitation Guidelines and Standards for the Oil and Gas Extraction Point Source Category,” which prohibits the discharge of unconventional wastewater to publicly owned treatment works (POTWs). The rule went into effect on August 29, 2016.
The prohibition, now codified in 40 C.F.R. §§ 435.33 and 435.34, applies to “wastewater pollutants associated with production, field exploration, drilling, well completion or well treatment for unconventional oil and gas extraction.” The phrase “unconventional oil and gas extraction” (UOG) is defined in the rule to mean oil and natural gas produced from “a shale and/or tight formation (including, but not limited to, shale gas, shale oil, tight gas, tight oil).”
Subsequently, the rule was challenged in court and has been remanded to EPA for review and possible revision. The legal challenge to the rule, described in detail below, relates to its applicability to Pennsylvania-defined “conventional” oil and gas operators. However, EPA’s administrative review of the rule could affect oil and gas wastewater disposal options for both conventional and unconventional operators in Pennsylvania.
Implementation deadline extension
In the preamble to the publication of the final rule, EPA stated that no operators subject to the rule were currently discharging to POTWs. Based on this understanding, the rule was to go into effect within 60 days of publication. Following promulgation of the rule, EPA received letters indicating that there were facilities likely discharging UOG wastewater to POTWs in Pennsylvania. As a result, EPA issued a final rule on December 7, 2016, to extend the implementation deadline for existing sources that were lawfully discharging wastewater to POTWs between April 17, 2015, and June 28, 2016. For such existing sources, the compliance date for the rule is now August 29, 2019.
Legal challenge to the rule
At the time of publication, EPA stated that the rule was not intended to address standards for conventional oil and gas extraction facilities and that EPA would consider standards for the conventional industry in a future rulemaking.
In Pennsylvania, the rule’s definition of UOG (i.e., including “tight gas” and “tight oil”) likely draws in the majority of conventional oil and gas operations because EPA identified the Berea-Murrysville, Bradford-Venango Elk and Clinton/Medina-Tuscarora formations as “UOG resources.” Pennsylvania’s conventional operators have been extracting oil and natural gas from these formations for more than 100 years and are not considered to be part of the “unconventional oil and gas extraction” industry by the Pennsylvania Department of Environmental Protection (DEP). Conventional operators suddenly risked violating EPA’s effluent limitations for discharging to POTWs, despite the fact that such discharges were never considered by EPA during rule development and were being lawfully conducted under the oversight of DEP.
In November 2016, the Pennsylvania Grade Crude Oil Coalition (PGCC) filed a petition for review of the rule in the U.S. Court of Appeals for the Third Circuit. PGCC sought a revision of the rule’s definition (or other form of clarification) that would exclude tight oil and gas formations in Pennsylvania from the definition of UOG resources. Such an exclusion would be consistent with Pennsylvania law, which provides separate rules for Pennsylvania-defined conventional operators and unconventional operators. It also would allow Pennsylvania-defined conventional operators to continue discharging wastewater to POTWs, consistent with past practice and DEP approvals. In the lawsuit, PGCC argued that EPA made a number of fundamental errors in the rule’s development, including incorrectly finding that there were no existing discharges to POTWs by the entities subject to the rule and failing to consider costs and burdens imposed on small businesses affected by the rule.
Pennsylvania-defined conventional operators, some of whom had ongoing discharges to POTWs at the time the rule was finalized, were the impetus for EPA’s final rule extending the compliance date in December 2016. However, because the implementation extension applies only to operators who were discharging during a certain period of time (i.e., between April 17, 2015, and June 28, 2016), and because the ban remains in effect for those operators beginning in 2019, the extension does not address or alleviate concerns about the rule.
In August 2017, EPA filed a motion for a voluntary remand of the rule to the agency, without vacating the rule. The stated purpose of the remand was to allow EPA to “further develop the administrative record to consider new information received after the close of rulemaking.” The motion also noted that a remand would allow EPA to seek public comments on new information and “take other actions as appropriate.” Because the rule was not vacated as part of the remand, it remains in effect in its current form (with the delayed implementation date for a subset of operators) during EPA’s review.
Administrative review of the rule
According to status reports filed with the Third Circuit Court of Appeals, EPA’s administrative proceedings reviewing the rule are ongoing. In a February 2018 status report, EPA indicated that it was continuing “its data collection efforts.” In the same month, EPA sent out information request letters under Section 308 of the Clean Water Act to nine Pennsylvania conventional operators. The letters requested information about the operators’ wells, wastewater disposal methods and disposal costs. Responses are being compiled by EPA and will likely inform EPA’s review of the rule.
In addition to filing the lawsuit described above, PGCC also filed a petition with EPA in August 2017 requesting a rulemaking to reconsider and administratively stay the rule. EPA responded in December 2017, declining to commit to a rulemaking to stay the rule. Rather, EPA noted that there was “no imminent need for such a stay.” Because of the three-year compliance period allowed for existing facilities, EPA believes that it has “sufficient time to consider the new information” before compliance is required for operators currently discharging to POTWs.
PIOGA and other trade groups have also submitted requests to EPA related to the rule. In September 2017, the American Petroleum Institute, the Independent Petroleum Association of America and the American Exploration & Production Council submitted a joint letter to EPA supporting PGCC’s petition and arguing that a true pre-treatment rule is more appropriate than a ban, which forecloses the development of technologies that in the future may be more environmentally friendly than current disposal options. In December 2017, PIOGA submitted a request for rulemaking to EPA, asking that the agency reconsider the rule and administratively stay or suspend its enforcement for Pennsylvaniadefined conventional oil and gas operators. In response to all letters and petitions, EPA has engaged in meetings and conversations with various industry representatives.
The timeline for EPA’s administrative review of the rule remains uncertain, but it appears to be targeting August 2019, the extended compliance deadline, to complete its review and propose revisions, if any, to the rule. Opportunities for public comment may be forthcoming, and all stakeholders in both conventional and unconventional industries can assist or seek additional information through PIOGA’s Environmental Committee, which is closely monitoring the situation.