May 23, 2016
The Clean Power Plan Temporarily Takes A Back Seat To EPA’s New Methane Rules For The Oil And Natural Gas Industry
By Mercury Strategies

The EPA’s Clean Power Plan (CPP) has dominated the discussion of federal administrative action on greenhouse gas (GHG) emissions since it was published in October of 2015. The Clean Power Plan is a highly complex and sweeping rule regulating emissions of carbon dioxide from existing fossil fuel-fired power plants. A recent report published by the Congressional Research Service called it one of the more singularly controversial environmental regulations ever promulgated. The rulemaking is in the midst of a prodigious multi-party litigation in which all but four states are actively participating (either in favor or against) and punctuated by a U.S. Supreme Court stay pending a decision on the merits.

Meanwhile, on May 12, 2016 the EPA issued a suite of final rules governing methane emissions from new and modified oil and natural gas sources. EPA accompanied the methane rules with a draft Information Collection Request (ICR) for methane emissions from existing oil and gas sources. This recent administrative activity serves as a two-part reminder that EPA’s authority to address GHG emissions by regulating carbon dioxide under the Clean Power Plan is not a singular pursuit. Additional actions affecting the oil and natural gas industry, as well as other categories of stationary sources, are sure to follow.

EPA’s authority to address GHG emissions from stationary sources (e.g. power plants, oil and natural gas production facilities, natural gas processing, transmission and storage facilities) is rooted in Section 111 of the Clean Air Act (CAA or Act), 42 U.S.C. §7411. Section 111(b)(1)(A) of the Act directs EPA to list categories of stationary sources that cause or contribute to “air pollution which may reasonably be anticipated to endanger public health or welfare.” 42 U.S.C. §7411(b)(1)(A). Once EPA makes such an “endangerment finding” for a pollutant, the agency is cleared to promulgate new source performance standards (NSPS) for new or modified sources of the pollutant within any such category. NSPS pursuant to Section 111(b) may thereafter trigger emissions guidelines for existing sources of the pollutant under Section 111(d) of the Act.

In 2009, EPA issued such an “endangerment finding” for GHGs. The endangerment finding followed the U.S. Supreme Court’s ruling in Massachusetts v. EPA, a seminal Supreme Court case affirming EPA’s authority to regulate GHG emissions under the Act. The Clean Power Plan rulemaking governing carbon dioxide emissions from existing power plants – a GHG pollutant from a listed source category — soon followed.

EPA’s new methane rules for oil and natural gas sources are an additional piece of a broad based strategy to address GHGs contributing to climate change under Section 111 of the Act. These new rules comprise multiple parts and, in addition to setting emissions limits for methane, cover emissions of volatile organic compounds (VOCs) and certain toxic air pollutants which emanate from oil and natural gas sources. The rules are designed to reduce methane and VOCs from new and modified sources by both requiring the use of technologies that EPA has determined will meet specified emissions limits and by requiring owners and operators to find and repair leaks along the natural gas production, processing, distribution, and storage supply chain. In addition, EPA’s accompanying Final Source Determination Rule clarifies when multiple pieces of equipment and activities in the oil and natural gas industry must be deemed a single source when determining whether related major source permitting programs apply. Other portions of the rule address oil and natural gas sources located in Indian country.

EPA’s companion draft Information Collection Request seeks a variety of information related to emissions control technologies and associated costs on existing oil and natural gas operations. Once the ICR is finalized, industry sources will be legally required to respond. The information ultimately collected will provide the technical and legal foundation necessary for developing regulations to reduce emissions from existing oil and gas sources.

Immediate stakeholder reaction to the methane rules and draft ICR has been varied. Environmental groups are generally applauding a number of important changes between the final rule and the proposed rule that EPA issued last year. These changes include the elimination of an exemption for some smaller sources and an increase in the frequency of leak detection activities. Oil and natural gas interests are condemning the rules as unnecessary in light of voluntary industry progress on emissions. According to industry trade groups, the rules may stifle broader efforts to control emissions by source owners and operators who are independently motivated to prevent methane leaks since it is a valuable commodity. However, while the regulated community is closely reviewing the administrative record, no immediate legal challenge has materialized.

Electricity power plants are not the only category of stationary sources identified by EPA that cause or contribute to air pollution which may endanger public health or welfare. Moreover, carbon dioxide is not the only pollutant identified as a GHG subject to EPA’s 2009 endangerment finding. Along with carbon dioxide emissions from power plants, the Obama Administration has focused on methane as a top line GHG pollutant. The White House explicitly singled out methane emissions reductions as a part of its climate change agenda as far back as its 2013 Climate Action Plan. In March 2014, the White House followed the Climate Action Plan with its more targeted Strategy to Reduce Methane Emissions. In addition to oil and natural gas sources, this document discusses emissions from landfills, coal mining, and the agricultural sector.

While the public understandably remains focused on EPA’s Clean Power Plan as it navigates through the courts, the new methane rules and draft Information Collection Request for the oil and natural gas industry are a reminder that EPA continues to address numerous greenhouse gas pollutants across a variety of industry sectors.