Pittsburgh, PA

Legal Intelligencer

(by Gary Steinbauer and Christina Puhnaty)

Pennsylvania oil and gas producers and midstream operators are faced with yet another suite of federal air regulations following the U.S. Environmental Protection Agency’s recent finalization of its far-reaching Methane Rule. On December 2, 2023, EPA released a 1690-page, pre-publication version of the Methane Rule or the Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for Existing Sources: Oil and Natural Gas Sector Climate Review. The Methane Rule is aimed at strengthening existing and adding new regulations limiting emissions of methane and volatile organic compounds (VOCs) from the Crude Oil and Natural Gas industrial source category. These federal Clean Air Act (CAA) regulations will apply to a host of new and existing emission sources and activities within the oil and natural gas industry. With Pennsylvania producing more natural gas than any other state except Texas, oil and gas producers and midstream operators must contend with another slate of new, more stringent federal air requirements.

The Methane Rule will become effective within 60 days of publication in the Federal Register. While EPA released it in a single package, the Methane Rule is comprised of four related regulatory actions: (1) updated new source performance standards regulating VOC and methane emission sources for certain emission sources and activities constructed, reconstructed, or modified after December 6, 2022, which will be promulgated at 40 CFR Part 60, Subpart OOOOb; (2) a set of emission guidelines for states to follow when adopting performance standards to limit methane emissions from specified existing air emission sources within the oil and gas industry, which will be promulgated at 40 CFR Part 60, Subpart OOOOc; (3) revisions to previously promulgated requirements codified at 40 CFR Part 60, Subpart OOOOa, stemming from Congress’ disapproval of changes that were made in 2022; and (4) a final protocol for performing optical gas imaging (OGI) inspections to detect leaks from equipment used in the oil and gas industry. This article focuses on the first two components of the Methane Rule, which include new VOC and methane emission and performance standards for oil and gas producers and midstream operators.

The Methane Rule is rich with detail and demands close review and analysis by potentially impacted oil and gas operations and companies. A summary of the new and likely more stringent requirements in the Methane Rule is provided below:

  • Super-Emitter Program: For the first time in a Clean Air Act regulation, EPA has established a regulatory mechanism that allows third parties to use EPA-approved remote sensing technologies to monitor emissions from affected facilities under OOOO, OOOOa, OOOOb, and OOOOc, report this monitoring data to EPA, and force action by owner or operator for measured “super emission events” (i.e., methane emission events of 100 kilograms per hour or more). EPA gave itself a heightened role under this Program in the final rule. Under the final rule, EPA will certify third-parties, receive and evaluate the third-party monitoring data, and notify owners and operators when data qualifies as a super-emissions event. Notified owners and operators will then need to investigate and determine the source of the super-emissions, take timely and appropriate corrective actions including repairing any leaks, and report the results of the investigation to EPA. EPA will make information from the Program available publicly. It remains to be seen whether states will be allowed to develop different and more stringent notification procedures in their OOOOc plans.
  • Fugitive Emissions Monitoring at Well Sites and Compressor Stations: For well sites, the Methane Rule will require fugitive emissions monitoring, commonly known as leak detection and repair (LDAR) requirements, at all well sites regardless of production. The frequency and type of fugitive emissions monitoring will depend on the configuration and number of wells at a site. Single wellhead only and small sites will be subject to quarterly audio, visual, and olfactory monitoring. Multi-wellhead only sites will be subject to quarterly AVO monitoring and semi-annual instrument- or camera-based monitoring. Well sites and centralized production facilities that contain major production and processing equipment will be subject to bi-monthly AVO monitoring and quarterly instrument- or camera-based monitoring. Fugitive emissions monitoring at all well sites, regardless of configuration, will need to continue until the site or facility is permanently closed in accordance with a newly required well closure plan. Lastly, compressor stations will be subject to monthly AVO monitoring and quarterly instrument- or camera-based monitoring.
  • Storage Vessel Emissions Capture and Control Requirements: EPA’s Methane Rule will expand the scope of regulated storage vessels, as compared to the current federal CAA oil and gas regulations. Applicability continues to be based on the “potential to emit” or PTE from storage vessels, but the PTE-based applicability threshold now applies to a single storage vessel or a “tank battery,” which is defined as a group of storage vessels that are adjacent and receive fluids from the same operation or are manifolded together. Therefore, storage vessels within a “tank battery” may be regulated despite having PTEs below the 6 tons per year (tpy) VOC threshold under OOOOb or the 20 tpy of methane threshold under both OOOOb and OOOOc. Owners and operators will have the compliance option of maintaining actual emissions of VOC or methane below certain thresholds. When actual emissions of VOC and methane cannot be maintained below the applicable actual emission thresholds, emissions from storage vessels must be routed to a control device through a closed vent system that is designed and operated with “no identifiable emissions.” Control devices used for storage vessel emissions must reduce VOC and methane emissions by 95 percent.
  • Process Controller Emission Standards: EPA has adopted a new term “process controller,” rather than the previously used term “pneumatic controller.” The substantive requirements for process controllers in the Methane Rule, however, continue to be the same – a zero-emission standard with limited exceptions. Owners and operators of process controllers that are subject to the OOOOb requirements will have one year following promulgation to meet the new zero-emission standards for OOOOb-affected process controllers.
  • Centrifugal and Reciprocating Compressor Emission Standards: Under OOOOb and OOOOc, centrifugal and reciprocating compressors will be subject to new emissions control requirements. Centrifugal compressors using wet seals must control VOC and methane emissions from the wet seal fluid degassing systems by 95 percent through the use of a control device that is connected to the compressor through a regulated closed vent system or route the collected gas to a process using a regulated closed vent system. Affected reciprocating compressors will be subject to new requirements for collecting and controlling methane and VOC emissions from rod packing. Under OOOOb and OOOOc, dry seal compressors, which currently are not regulated under EPA emission standards, will be subject to flow rate restrictions.
  • Requirements for Oil Wells with Associated Gas and Well Liquids Unloading: In another set of first-time requirements for the industry, EPA has finalized emissions control and performance standards for associated gas from oil well and well liquids unloading from gas wells. Owners and operators of affected oil wells will be required to route associated gas directly to a sales line, or if a sales line is inaccessible, to use such gas on-site as a fuel source, as a substitute for purchased fuel or raw material, or route such gas to a flare that reduces methane and VOC emissions by 95 percent. The Methane Rule provides a two-year “phase-in” period for these new associated gas requirements. Well liquids unloading, which is a common and often necessary practice within the industry, will be subject to new OOOOb and OOOOc standards requiring best management practices for minimizing or eliminating methane and VOC emissions.

Impacted oil and gas facilities and activities that may not be regulated under OOOOb will soon be subject to State plans developed to implement the OOOOc provisions, which in many respects mirror those established in OOOOb. States, like Pennsylvania, will have 24 months to develop and submit plans implementing the OOOOc provisions to EPA. According to the Methane Rule, these State OOOOc plans must require affected sources and activities to comply no later than 36 months following the deadline to submit the plans to EPA. In other words, existing oil and gas sources that are not otherwise subject to the new OOOOb requirements will have no longer than five years after EPA publishes the Methane Rule in the Federal Register to meet new state-implemented, OOOOc-based methane emission standards.

EPA has devoted significant resources towards regulating VOC and methane emission from the oil and gas industry. The Methane Rule is yet another suite of new, more stringent regulations for an industry that, in the last decade, has been the subject of several significant federal Clean Air Rule rulemakings establishing VOC and methane emission standards and requiring reporting of greenhouse gas emissions. It is imperative that Pennsylvania oil and gas operators fully evaluate the potential impact of the Methane Rule on their facilities and operations.

Gary Steinbauer is a shareholder and Christina Puhnaty is an associate in Babst, Calland, Clements and Zomnir’s environmental group. Their practices focus largely on matters arising under the Clean Air Act, analogous state clean air laws, and their implementing regulations. Contact them at gsteinbauer@babstcalland.com and cpuhnaty@babstcalland.com.

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Reprinted with permission from the December 14, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.