Proposed EPA Rule: Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources Review (84 FR 50244)

Policy Details

Policy Details

Last Action
Published in the federal register.
Date of Last Action
Sep 24 2019
Date Introduced
Aug 29 2019
Publication Date
Aug 29 2019
Date Made Public
Aug 29 2019

SciPol Summary

On August 28, 2019, the EPA released a proposed rule rolling back Obama-era Clean Air Act (CAA) new source performance standards (NSPS) for methane and volatile organic compounds (VOCs) emitted by the oil and gas industry.  Under Clean Air Act Section 111, the EPA has the authority to establish emissions standards for stationary sources that “[cause], or [contribute] significantly to, air pollution which may reasonably be anticipated to endanger public health or welfare.”  The Obama EPA used this authority to regulate VOCs and methane emitted by the oil and gas industry in 2012 and 2016.  

The proposed rule represents the Trump EPA’s third attempt to roll back these regulations. First, in June 2017, following the dictates of a March 2017 executive order calling on executive branch agencies to review and rescind existing regulations that “unduly burden” “the development or use of domestically produced energy resources”, EPA tried to “stay” the fugitive emissions requirements for methane and VOC NSPS established by the 2016 Obama rule, but was blocked in federal court.  Second, in September 2018, the EPA released a proposed rule easing the requirements of the 2016 Obama rule, allowing extensions of time to make leak repairs, decreasing monitoring frequency, and allowing operators to abide by state rather than federally set emissions reductions standards.  The 2018 proposed rule nonetheless continued some regulation of fugitive methane emissions under the CAA.  

Now, the EPA appears to have abandoned the 2018 proposed rule without finalizing it.  The current proposed rule would instead:

  • Rescind the NSPSs for both methane and VOCs applicable to transmission and storage of oil and gas which includes equipment such as “transmission compressor stations, pneumatic controllers, and underground storage vessels.”
  • Redefines the oil and gas production “source category” to end at the “point of transfer to the transmission pipeline”, at which point no NSPSs are applicable
  • Rescind the NSPS for methane applicable to oil and gas production and processing. 

If the proposed rule is finalized, the transmission and storage segment of the oil and natural gas industry will not be considered a “source category” or therefore subject to regulation under the CAA Section 111. In addition, the rule completely ends federal attempts to control fugitive methane emissions from any part of the oil and gas industry (although VOC emissions from oil and gas production and processing would still be regulated) .  

To justify the first move, EPA claims that it “erred when expanding the source category in the 2012 and 2016 rules to include oil and gas transmission and storage” and that “the Agency would need to make a separate finding that the transmission and storage segment contributes significantly to air pollution that is anticipated to endanger public health or welfare before those sources in that segment could be listed for regulation.” 

To justify the second move, the EPA argues that because methane and VOC emissions reduction techniques are similar, having separate methane and VOC emissions regulations are redundant.  

As an alternative, the EPA proposes maintaining oil and gas transmission and storage as a “source category” but “rescind[ing] all methane requirements in the NSPS for oil and gas sources.”  The alternative plan would have the same effect as the primary plan except it would maintain VOC emissions controls on oil and gas transmission and storage, as well as oil and gas production and processing. The rationale for that would be again, that methane control measures are redundant with methods for controlling VOC for all oil and gas sources.  

The EPA’s cost-benefit analysis of the proposed rule predicts benefits from the rule of $97-123 million from 2019-2025, made up of cost savings to the oil and gas industry from not having to comply with the Obama methane regulations, minus the “forgone value of natural gas that would not be recovered” as a result of the rolled back regulations.  This is a small fraction of the the total net income of US oil and gas companies, which currently stands at $28 billion a year.  

At the same time, the EPA estimates that the proposed rule would result in an increase of emissions from 2019-2025 of:

  • 370,000 short tons of methane (8.4 million metric tons of CO2 equivalent), or the equivalent of adding 300,000 cars to the road over that time period
  • 10,000 short tons of VOCs
  • 300 short tons of hazardous air pollutants (HAPs)

Because the Trump administration has abandoned the social cost of carbon (SCC) figure created by the Interagency Working Group on Social Cost of Greenhouse Gases (IWG) created during the Obama administration, the EPA estimates that the social costs of this increase in emissions would only be $13-52 million from 2019-2025, based on an assumed cost of [$X] per metric tons of CO2 equivalent.  However, using the Interagency Working Group’s (IWG) average price of methane equivalent emissions of $1440 per ton of methane, the cost of the proposed rule would be $530 million.  

            The reaction from the oil and gas industry to the new proposed rule has been split.  Smaller oil and gas companies and large industry groups support the measure while larger firms are backing away from the administration’s decision.  Erik Milito, the VP of Upstream and Industry Operations at the American Petroleum Institute voiced his group’s support directly in the EPA press release for the proposed rule, stating that the industry “welcomes smart regulations that protect public health and the environment, and provide the flexibility to develop and deliver affordable and reliable American energy.”  Smaller operators also were supportive due to the higher relative compliance costs of the existing regulations. Darlene S. Wallace, the president of Columbus Oil, told the New York Times that compliance requires “extremely expensive equipment and procedures that will hinder [small wells] from making a profit.”

In contrast, larger oil and gas firms including Exxon Mobil, Shell, and BP have come out against the rollbacks.  “We will continue to urge the E.P.A. to retain the main features of the existing methane rule,” said Scott Silvestri, a spokesman for Exxon Mobil. Their support of continued methane regulation, which would lessen though not remove the climate-changing effects of extracting and burning natural gas, comes at a time when they are touting the climate benefit of natural gas in a lower carbon future.  

            Additionally, there has been bipartisan pushback against the rollback.  Sen. Collins (R-ME) and Sen. Murphy (D-CT) along with Rep. Peters (CA-52) and Rep. Gaetz (FL-1) wrote a letter in opposition to the rule change, stating that, “this proposal will roll back the progress the industry is already making in detecting and fixing leaks.”  Further, the group was “skeptical that the proposed rule would lead to significant cost savings” and expressed concern that the move to exclude oil and gas transmission and storage from the NSPS source category could “create a concerning precedent for regulating other greenhouse gas emissions.” Along with the letter, these four members cosponsored the Super Pollutants Act, introduced in July 2019, which would codify the Obama-era 2016 NSPS final rule into law.  

Even though burning natural gas emits half the CO2 of coal for the same amount of energy, methane is a byproduct of natural gas production, and a potent greenhouse gas with 28-36 times the warming potential of CO2 over 100 years.  Methane leaks from the oil and gas industry make up one-third of overall US methane emissions, and a recent study has found that the EPA estimates are underreporting actual emissions by up to 60%. Ben Ratner of the Environmental Defense Fund has elucidated what is at stake, stating that “the reputation of American natural gas is at the precipice, and methane rollbacks are the shove.”