American Oil and Gas Reporter - December 2022 - 33

them a template, but states have been
moving differently on this issue, " Fuller
observes. " How do those state regulations
mesh with the proposed rule? What does it
take for EPA to approve them? "
The rule gives states 18 months to develop
the regulatory structure for a complicated
web of activities and operations
that includes multiple sources of varying
types. Then, compliance must be completed
within three years.
" But do the state regulatory development
requirements work that fast? " Fuller
poses. " Before a rule can take effect,
states all have their own parallel hearings,
drafts, proposed rules, hearings, final
rules, reproposed rules and more. Is 18
months enough? "
Further confounding the matter, he
considers, is a 111(d) provision that gives
states the right to alter the emission guidelines,
which are based on the NSPS technology
requirement. " It's not reasonably
available control technology, but a best
system of emissions reduction, which is
a higher standard than is typical for existing
sources, " Fuller details. " Section 111(d)
has a provision that allows a state to alter
the requirements based on a facility's remaining
useful life and other factors. "
EPA offers states a series of considerations
for determining whether a site
qualifies for looser requirements. However,
Fuller points out, the question of remaining
useful life for an oil and gas production
facility is subject to many unpredictable
variables. " That's a tricky question, " he
considers. " A lot of 1 bbl/d wells can run
a long time or shut down tomorrow. "
The customary approach requires a
state to assess whether EPA's requirements
will affect the remaining useful life of
the state's existing facilities and then
allows states to adjust according to how
they weigh environmental impacts against
the rule's economic burden, Fuller explains.
" EPA turns this on its head in this
proposal and says the state will look at a
facility and determine its remaining useful
life and, if it's shorter than EPA's determined
payback period, the state can adjust
the rule, " he says. " Facilities under that
scenario would face less stringent standards
during their remaining useful lives, but
basically must shut down after that. "
The interpretation of the remaining
useful life authority may be very significant
for some smaller wells, Fuller comments.
How much the interpretation matters will
depend on the collective burden imposed
by the final fugitive emissions program,
pneumatic controller and storage tank requirements,
he indicates.
" I assume EPA is looking for a state
to come up with a procedure as to how it
will make these decisions and EPA will
judge if that procedure is consistent with
its view of its authority, " he evaluates.
" However, reading the proposal explanation
suggests that EPA is asking the state
to come up with a list of sites to which it
will give remaining useful life flexibility.
That may prove unfathomably complicated
in a state such as Texas, which has more
than 200,000 low-production wells. "
IRA Methane Fee
According to Fuller, EPA has attempted
to harmonize its proposal with the methane
fee provision in the Inflation Reduction
Act. The law contains a provision that
exempts operators in compliance with
EPA's rules according to a three-tiered
assessment:
· The first exempts operators with
CO2-equivalent emissions beneath 25,000
tons a year across a basin.
· The second threshold, for production
operations, applies if methane emissions
fall below 0.2% of natural gas sales.
· The third threshold specifies that
operations above that 0.2% still may be
exempt if they comply with standards at
least as rigorous as EPA's 2021 proposal.
" Obviously, the question of whether
you have accurately calculated emissions
and sales are auditable events, through
which EPA can enforce penalties, " Fuller
notes. " A producer's tax is based on the
emissions above 0.2%. EPA says if these
rules are finalized as proposed and the
states adopt them, operators should be
able to benefit from that carve-out. But
that raises issues going back to Subpart
W, which is the basis for calculating
those emissions and making those judgements,
for which there are numerous accuracy
issues. "
Comments And Hearings
EPA indicates it will accept comments
on the supplemental proposal until Feb.
13, adding that it will host virtual trainings
to help communities, tribes and small
businesses understand the supplemental
proposal and how to participate in the
public comment process. The agency says
it will hold a virtual public hearing Jan.
10 and 11. EPA expresses plans to issue
a final rule in 2023.
Fuller deems the Feb. 13 comments
deadline a welcome choice. " Providing
roughly 90 days probably eliminates
the recurring problem in which commenters
often have to ask for an extension, "
he clarifies. " It's the usual 30
days that prompts us to say we need 90
and EPA gives extensions. The agency
has given us three months to hammer
through this. "
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American Oil and Gas Reporter - December 2022

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