The U.S. Environmental Protection Agency (EPA) released a packet of measures targeting methane emissions from operations of the oil and gas industry on May 12, 2016. These measures include three final regulations affecting new and modified oil and gas wells and gas processing and transmission facilities, and one proposal that kicks off EPA's program to regulate methane from existing oil and gas facilities. Methane—the principal component of natural gas—is a potent greenhouse gas, with more than 25 times the “global warming potential” of carbon dioxide, the most prevalent greenhouse gas. These measures are a key component of EPA’s climate change commitment to cut methane emissions by 40 to 45 percent by 2025.

The final measures are significantly more stringent that those originally proposed by EPA in September 2015. The proposals prompted more than 900,000 comments from industry, environmental groups, and other members of the public. While environmental groups complained that the principal rule proposal was too lenient, the industry criticized the cost-effectiveness of the proposal, which would have required labor-intensive inspections even where the possibility of significant leaks was low. The industry also expressed concern that the proposal would lock in leak detection technologies, making it difficult for the industry to take advantage of new, cost-saving technology that might emerge.

EPA doubled down on leak detection in the final rule, literally doubling the inspection frequency for natural gas compressor stations and eliminating the proposed exemption for low-producing wells, where low methane output makes the cost-effectiveness of the inspection requirements even more dubious. Overall, EPA expects the rule to cost the industry $530 million per year by 2025, but claims annual benefits of $690 million by 2025.

As significant as the new regulations are, the biggest blow to the industry may be yet to come. EPA proposed a far-reaching Information Collection Request (ICR) regarding existing oil and gas wells, storage and transmission equipment, and other operations. All recipients of the ICR will be legally obliged to respond, and EPA states that "the information…will provide the foundation necessary for developing comprehensive regulations" for existing oil and gas operations. The proposed ICR will be open for public comment for 60 days after publication in the Federal Register.

With EPA’s Clean Power Plan regulating greenhouse gas emissions from the electric power sector stayed while that rule makes its way through the courts, EPA is focusing its efforts to address climate change on other sectors of the economy, in particular oil and gas and transportation. EPA is expected to release regulations impacting the air transportation sector later this year. Meanwhile, like the Clean Power Plan, EPA’s new methane rules are likely to face a long court battle from industry.

Ballard Spahr’s Environment and Natural Resources Group advises on national and regional compliance, permitting, development, business planning, and contamination matters arising in connection with environmental and natural resources laws and claims, including a particular focus on climate change and sustainability.

Copyright © 2016 by Ballard Spahr LLP.
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