Week Ending August 14, 2020

EPA Methane Rules Praised by Producers, Panned by Others, Pegged for Lawsuit

This Article Appears as Published in Foster Report No 3312
EPA Methane Rules Praised by Producers, Panned by Others, Pegged for Lawsuit

The August 13 methane rules from the Environmental Protection Agency (EPA) are much like the proposed rules issued in 2019 to reduce regulatory burdens, and the early reactions from different groups are similar to what was said nearly a year ago.

A few large oil and natural gas majors say they are not needed, producer groups support them, Democrats on Capitol Hill blasted them, and environmental groups vowed to challenge them in court.

The American Petroleum Institute (API) and the Independent Petroleum Association of America (IPAA) pointed to existing federal and state rules that control volatile organic compounds (VOCs) and methane, the flawed provisions in the 2016 regulations put in place late in the Obama administration, voluntary measures that are limiting methane emissions, and the incentive they have to capture methane as natural gas.

Industry groups and others who support the new EPA rules referred to the 2016 New Source Performance Standards (NSPS) not aligning with the proper authority under the Clean Air Act. Those standards were rapidly pushed into place, and “the technical changes made by the EPA regulations are important corrections that are necessary to address flawed programs resulting from the politically driven rush to complete the 2016 regulations,” said Lee Fuller, executive vice president at IPAA.

Small producers have been adamant that the regulations were too costly and unneeded, and EPA Administrator Andrew Wheeler touted the regulatory rollback for the industry when the rules were announced. “Regulatory burdens put into place by the Obama-Biden Administration fell heavily on small and medium-sized energy businesses. Today’s regulatory changes remove redundant paperwork, align with the Clean Air Act, and allow companies the flexibility to satisfy leak-control requirements by complying with equivalent state rules,” Wheeler said.

Wheeler announced the final rules at an event in Pittsburgh with Deputy Secretary of Energy Mark Menezes, Rep. Guy Reschenthaler (R-Pa.) and others. The event highlighted the importance of the Marcellus and Utica shales in the region, and Pennsylvania is a key battleground state in the upcoming presidential election.

IPAA has a lot of small producer members, and the final rules allow exemptions for wells with limited production – less than 15 barrels/day. “The issue for producers has never been whether regulations were necessary; it has always been whether the regulations were sound and cost effective,” Fuller said, noting that the regulations remaining in place will manage both methane and VOCs.

Large producers that include BP, Royal Dutch Shell and ExxonMobil have said over the past year or so that they support direct regulation of methane emissions, and Shell officials in the days leading up to the announcement told news outlets that they do not want to see the regulations rescinded because doing so puts the natural gas industry in a negative light for public perception. The harmful effects of methane emissions are well known “so it’s frustrating and disappointing to see the administration go in a different direction,” Gretchen Watkins, president of Shell in the U.S., told NPR.

The two final rules follow the directive from President Donald Trump’s executive order to promote energy independence and economic growth, EPA said. The first rule, dubbed the “policy package” by EPA, finds that the methane regulations for the transmission and storage segments were improper and rescinds them. It says the upstream sector will still be required to reduce emissions of VOCs in the production and processing segments, but removes methane control requirements. Those requirements are removed “because the pollution controls used to reduce VOC emissions also reduce methane emissions, making clear that the separate regulation of methane imposed by the 2016 rule was both improper and redundant,” EPA said.

The first rule establishes EPA’s position that the Clean Air Act requires EPA to make a finding that a pollutant contributes significantly to air pollution before setting NSPS requirements, and in the 2016 rule EPA failed to properly make that finding for methane emissions in the upstream sector. The rule adopts an interpretation of Clean Air Act Section 111 under which the EPA, as a predicate to promulgating NSPS for certain air pollutants, must determine that the relevant pollutant causes or contributes significantly to dangerous air pollution.

In the policy package describing the elimination of methane requirements for the upstream sector, “EPA is concluding that those methane requirements are redundant with the existing NSPS for VOC and, thus, establish no additional health protections. The emission source control technologies that apply to the sources achieve reductions in both methane and VOC emissions, and the recordkeeping and other requirements overlap as well.”

The second rule is referred to as the “technical package,” with changes to the NSPS “that will directly benefit smaller oil and gas operators who rely on straightforward regulatory policy to run their businesses,” EPA said. It exempts low-producing wells from monitoring and addressing methane leaks, reduces monitoring at all wells, gathering facilities and compressor stations from quarterly to twice annually and allows operators to meet certain state requirements instead of complying with EPA regulations. The changes mean producers in those states only have to comply with one set of regulations, EPA said.

Environmental Defense Fund (EDF) and others have produced studies that methane emission monitoring from industry operators is limited and emissions are under-reported, and many state efforts lack resources and requirements to control emissions.

Like the proposed rules, the final rules remove requirements to use new and more efficient emission reduction technologies “to allow industry to innovate,” EPA said. They also allow methane leak repairs to be deferred beyond a 30-day requirement if a repair within that time is not technically feasible and reduce or remove certain reporting requirements.

The 2016 regulation covered production, processing, pipelines and storage facilities. The two new final rules eliminate the pipeline and storage sector requirements, rescind the methane regulation in the NSPS for the production and processing sectors and revise the VOC regulations for those two sectors.

In its regulatory impact analysis, EPA said the two rules combined would yield $750 million to $850 million in net benefits from 2021-2030, which includes cost savings.

In a statement, API said it supports the new rules because they are consistent with the requirements of the Clean Air Act. The group referred to voluntary measures like The Environmental Partnership, where actions taken by members in the partnership have reduced methane emissions by more than 60% from 2011 to 2018, even as production increased dramatically during that time.

“Under these modified rules, operators will still be required to control emissions, and the industry continues to make progress in reducing methane emissions through new technologies,” API said. For nearly 10 years, EPA officials have maintained that targeting VOC emissions would also decrease methane emissions, and regulations for methane alone were not needed, API said.

Plenty of others countered that the harm from methane emissions, estimated to be more than 25 times as potent at trapping heat than carbon dioxide, requires regulation and reduction. EDF, Natural Resources Defense Council and Sierra Club were among the groups saying they will pursue all legal avenues to challenge the rules. The Trump administration “has no scientific or public health basis for taking this action, and EDF will forcefully oppose it in court,” said Fred Krupp, president of EDF.

Investors, states and leading oil and gas producers have called on EPA to retain the methane regulations, and like other Trump administration regulatory moves that have been rejected by the courts, the new rules ignore the public health impacts and low-cost solutions available, Krupp said.

“Reducing methane from the oil and gas supply chain is the fastest, most effective way to slow the rate of global warming right now — but the rules signed today would instead allow an estimated additional 4.5 million metric tons of methane pollution into the atmosphere each year,” Krupp said. Over a 20-year span, that methane emission level has the climate warming potential equal to about 100 coal-fired power plants, he said.

On Capitol Hill, the top Democrat on the Senate Environment and Public Works Committee said EPA under the Trump administration is pursuing policies that are harmful to the climate and American citizens. Sen. Tom Carper (D-Del.) said the rules are a departure from the science-based view that regulators should protect people from the dangers of methane emissions.

Because EPA knows that the oil and gas industry is the largest source of methane emissions, “it’s clear this rollback is about boosting the bottom line for the oil and gas industries, not about protecting the American people. This rule gives the green light to oil and gas companies to waste our nation’s natural gas reserves and pollute our air to boost their bottom line,” Carper said.

Rep. Frank Pallone (D-N.J.), chairman of the House Energy and Commerce Committee, also criticized EPA’s move as gutting the common-sense regulations that were in place. “Weakening these protections in the midst of a respiratory illness pandemic that the President has failed to adequately address is beyond unconscionable,” Pallone said. “Sadly, this is exactly the kind of irrational and self-serving behavior we have come to expect from the Trump Administration, but that makes it no less jarring or dangerous,” he said.

By Tom Tiernan ttiernan@fosterreport.com

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