Daily GPI / NGI The Weekly Gas Market Report / Regulatory

Natural Gas, Oil Industry Methane Rules Halted by EPA

The U.S. Environmental Protection Agency (EPA) on Wednesday ordered a 90-day stay over parts of proposed rules governing new sources of methane emissions from the oil and natural gas industry while the agency works through a reconsideration process.

The EPA said it was issuing a hold over the fugitive emissions, pneumatic pumps and professional engineer certification requirements outlined in updates to the New Source Performance Standards (NSPS), which the agency first unveiled during the Obama administration in May 2016. The NSPS was designed to reduce methane, volatile organic compounds (VOC) and toxic air pollutants.

"Sources do not need to comply with these requirements while the 90-day stay is in effect," the EPA said, later adding that "as part of the reconsideration process, EPA expects to prepare a proposed rule, which will allow for public comment."

In April the EPA said it would reconsider the rules in order to comply with an executive order (EO) signed by President Trump on March 28. The EO included a directive for EPA to immediately review regulations on energy sources, and then to either suspend, revise or rescind them.

In mid-May, an appellate court granted the Trump administration's request to delay a series of lawsuits over proposed rules to give the EPA more time to review them. The U.S. Court of Appeals for the District of Columbia agreed to hold several consolidated lawsuits in abeyance pending further review of the lead case, American Petroleum Institute (API) et al v. EPA et al [No. 13-1108].

The decision is certain to upset environmental groups, a coalition of which sent a letter to EPA Administrator Scott Pruitt last week urging him to keep the rules in place. Signatories included Earthjustice, the Environmental Defense Fund, the League of Conservation Voters, the National Resources Defense Council and the Sierra Club.

"Suspending these requirements would allow thousands of newly drilled or modified wells and compressor stations across the country to continue leaking large volumes of this harmful air pollution, posing serious health risks to communities, families, and workers," the coalition wrote. "Such an action would leave the people living and working in these communities unprotected while delaying modest compliance expenditures by the oil and gas companies that own and operate new and modified wells -- expenditures that represent a tiny fraction of these companies' tens of billions of dollars in annual revenues."

Conversely, industry groups were encouraged with the decision.

"API welcomes this action and we look forward to working with the administration and Congress on forward-looking policies that recognize our industry as part of the solution to U.S. economic, environmental and national security goals," API spokesman Reid Porter told NGI's Shale Daily on Wednesday. "As demonstrated through previous regulatory efforts, EPA's focus should be on cost-effective regulations that target emissions of VOCs, providing the co-benefit of methane emission reductions."

GPA Midstream’s Matthew Hite, vice president for government affairs, added that his organization was “very pleased with this result, and it is consistent with EPA’s April 18 letter granting [our] petition for reconsideration and request for stay.”

Under the EO, Pruitt has 45 days to submit a review plan to the White House's Office of Management and Budget. A draft report on the EPA's actions is due within 120 days of the EO being enacted, and a final report is due within 180 days.

The rules were designed to help meet a goal by the Obama administration to slash by 2025 methane emissions from the oil and gas sector by 40-45% from 2012 levels.

EPA built NSPS upon VOC emission reduction requirements for new oil and gas wells that the agency first unveiled in April 2012. Those requirements called for a two-phase process to reduce VOCs: requiring flaring followed by "green completions," a term that means deploying equipment to capture and sell natural gas emissions that are otherwise lost.

EPA previously said it expected the NSPS to reduce 510,000 short tons of methane in 2025, which is the equivalent of reducing 11 million metric tons of carbon dioxide. The rules were also expected to reduce other pollutants, including 210,000 tons of VOCs and 3,900 tons of air toxics, by 2025.

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