American Oil and Gas Reporter - September 2016 - 26

Methane Regulation

Industry Challenges EPA's Final Rule
WASHINGTON-The oil and natural
gas industry has unleashed a pair of legal
challenges to the U.S. Environmental Protection Agency's methane regulations contained in its final rule, "Oil and Natural Gas
Sector: Emission Standards for New, Reconstructed, and Modified Sources."
A coalition that includes the Independent Petroleum Association of America and a number of state oil and gas associations has announced a lawsuit filed
Aug. 3 in the U.S. Court of Appeals for the
District of Columbia Circuit. They argue
the Clean Air Act's regulatory scheme imposed by the methane New Source Performance Standards under Subpart
OOOOa is "excessive, uneconomic, and
threatening to the long-term production of
oil and natural gas in the United States
without corresponding environmental
benefits."
The associations point out that while
Subpart OOOOa regulations apply only to
new or modified methane sources, they are
important because they must be promulgated under the CAA before EPA can
promulgate standards for existing sources.
Subpart OOOOa, as finalized, will
have a disproportionate impact on independent operators, especially those counted as small businesses under the Regulatory Flexibility Act, the coalition asserts.
It raises challenges in two categories:
* Issues entitled to reconsideration under the CAA that could not be objected to
during the public comment period or after that period, but within the time specified for judicial review that are of central
relevance to the rule; and
* Issues that EPA failed to address in
the final rule that will have significant impacts to the exploration and production industry, if not addressed.
"After more than a year of trying to
communicate industry's concerns to the
EPA on the economic burdens associated
with this new rule, during an already economically challenging time for the industry, independent producers were compelled to pursue legal pathways since the
final rule omits flexibility for smaller, independent companies," says IPAA Executive Vice President Lee Fuller.
Other Suits
A number of the oil and gas associations working with IPAA also filed a request for EPA to reconsider its final
methane emissions rule for new and modified sources.
In addition, several states-including
26 THE AMERICAN OIL & GAS REPORTER

West Virginia and Oklahoma-also filed a
lawsuit challenging EPA's actions, while
Texas and North Dakota sued the agency
in a separate filing. The Texas Railroad
Commission and Texas Commission on
Environmental Quality joined the state's
attorney general in the petition.
According to Oklahoma's attorney
general, the states assert EPA is acting outside its statutory framework.
The American Petroleum Institute filed
a petition in the same court on the same
day, arguing U.S. consumers were seeing
significant savings through lower energy
costs driven mainly by domestic shale gas
production. The EPA's costly and duplicative regulations could discourage natural
gas production and disrupt the nation's
progress in reducing methane emissions,
API cautions.
Many states also submitted formal
comments to EPA on its information-gathering request on industry operations
preparatory to issuing methane regulations
for existing oil and gas sources. The information request is the first step for federal regulatory action required under the Paperwork Reduction Act (see accompanying story).
Administrative Reconsideration
In its request that EPA reconsider the
methane emissions rule, the coalition of
IPAA and state associations argue the
agency should reinstate the low-production well exemption from leak detection
and repair (LDAR) and reduced-emission
completions (REC) requirements. In the
agency's initial proposal, the group notes,
EPA planned to exclude wells producing
fewer than 15 barrels of oil equivalent a
day from LDAR and REC requirements.
Independent producers supported that
position, and the agency originally accepted industry arguments that those low-volume wells generally had lower fugitive
emission rates.
The exemption apparently was removed because of nonindustry comments
that contended fugitive emission levels
should be based on the number of pieces
of equipment and components on a site,
not the operating parameters such as
pressure or volume, the coalition says. That
rationale conflicts with the agency's justification for what constitutes a modification for a well site, it notes.
"EPA assumes that fracturing or refracturing an existing well will increase emissions because of the additional production,
i.e., the additional pressure and volume,"

the coalition states. "EPA cannot ignore the
laws of physics to the detriment of low-production wells in one instance and then 'honor' them in another context to eliminate an
'emissions increase' requirement in the traditional definition of 'modification.'"
If EPA proposed to correlate fugitive
emissions at low-production sites with the
number or types of components, it should
have discussed that relationship during the
rule's development or sought comments,
the coalition holds. It recommends the
agency impose a stay on the LDAR and
REC requirements, pointing out the regulations' impacts on marginal wells are immediate, and those sites are likely to be
shut in if forced to conduct costly LDAR
surveys.
Final Rule
One of the requirements that unexpectedly showed up in the final EPA regulations mandates operators have separators
on site during the entire flowback period,
the industry groups observe. From the start
of the Subpart OOOO rule-making
process, the oil and gas coalition says, independent operators have told EPA that operating parameters during flowback of certain hydraulically fractured wells are such
that a separator doesn't work, and the costs
far outweigh any environmental benefits.
Despite the pushback, the final regulations
included the on-site requirement.
The latest Subpart OOOOa rules also
add requirements associated with "technical infeasibility" that were not mentioned
in the proposed rule. These will increase
compliance costs, with disproportionate impacts on independent operators, the industry group says. One example it cites is requiring certification by a professional engineer for connections of pneumatic pumps
and closed-vent systems, which it argues is
not technically feasible at brownfield sites.
Most independent operators don't have
the in-house ability to meet those requirements, and will be forced to depend on thirdparty contractors, industry says. "As EPA
pushes the envelope on new/additional requirements, economies of scale favor the
larger operators, and to the extent the contractors are available for hire, it comes at a
premium cost for the smaller entities and/or
independent operators," the group argues.
Without discussion in the proposed
rule, EPA also has removed the "technically infeasible" option for controls at
greenfields, the comments point out. Neither the proposed rule nor Subpart OOOOa
define what constitutes a brownfield ver-



Table of Contents for the Digital Edition of American Oil and Gas Reporter - September 2016

Contents
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