The Obama Administration is set to unveil its plan to address methane emissions from the oil and gas sector.
Here are five things to look for in the announcement:
1. Will the Administration opt for regulation, voluntary programs, or some combination?
Environmental groups are pushing for comprehensive regulation, but there are at least three reasons why the Administration might not commit to a 100 percent regulatory approach, at least for the near-term: (1) A Volatile Organic Compound (VOC) regulation already on the books – the 2012 OOOO New Source Performance Standards for the Oil and Gas Sector – is achieving significant “co-benefit” methane reductions; (2) The Administration might lack sufficient administrative and political resources – and even sufficient data – to promulgate a comprehensive methane regulatory program in its last two years; and (3) Perhaps most importantly, key industry players have stepped forward with proposals to achieve substantial additional voluntary reductions in lieu of regulation.
In the end, the Administration might opt for a hybrid: a regulatory program for new and modified sources of methane and a voluntary program for existing sources.
2. If the Administration regulates new sources, what approach will it take?
As discussed above, the Obama Administration could continue to rely on the 2012 OOOO Rule. Environmental groups, however, argue that the 2012 OOOO Rule leaves too many new methane sources uncovered, including some of the sources identified in EPA’s 2014 Methane White Papers, particularly downstream of the production sector. The Administration might respond with a more expansive OOOO Rule for VOCs – but such a rule would only target new and modified sources because of statutory prohibitions against using this authority to regulate VOC emissions from existing oil and gas infrastructure.
Alternatively, the Administration might opt to regulate methane directly using a new Clean Air Act Section 111(b) rule. If the Administration chooses this path, they could decide to target only new and modified sources of methane, but they also could announce their intention to regulate existing sources of methane. It would be important to assess the stringency, the sources covered, and the form of such a regulation.
Some have argued that EPA’s promulgation of a Section 111(b) methane rule for new oil and gas sector sources would compel EPA to follow up with a Section 111(d) rule addressing existing sources in the same category. However, even if that were so, case law suggests that EPA has discretion as to the timing and prioritization of such a rule. The reductions achieved by new voluntary programs could inform such prioritization, making it possible for the Administration to defer regulation of existing sources and recognize the voluntary reductions in any future regulation.
3. If there is a voluntary component, what will it cover?
The Administration already has announced plans to enhance an existing voluntary program. In addition, industry players have come forward with different proposals, ranging from different types of leak detection programs to more far-reaching commitments to reduce methane leakage as a proportion of gas throughput across the natural gas value chain.
4. If there is a voluntary program, how will it be constructed?
If the “stick” to promote participation in a voluntary program is imposition of regulations, what amount of participation or reductions is necessary to avoid that stick? Further, since no individual company can ensure collective, multi-company performance, what “carrots” will there be to promote participation? Options could include assurances that participation in the voluntary programs will count as a means of compliance with future methane regulations, or assurances of favorable treatment under other federal programs, such as future ozone regulations or the Council on Environmental Quality’s proposed climate-related NEPA requirements.
5. What other agencies will be involved?
The Pipeline and Hazardous Materials Safety Administration could have a role to play with respect to distribution pipelines. The Federal Energy Regulatory Commission might build on its recent policy proposal on rate recovery for replacement of older pipes. The Department of Energy is already working on efficiency standards for new natural gas compressors. Finally, the blueprint is likely to enlist the Bureau of Land Management (BLM) and the Bureau of Safety and Environmental Enforcement in managing methane emissions associated with oil and gas production on federal lands and in off-shore areas respectively. The BLM has been working on a new rule to address venting and flaring activities.
Van Ness Feldman closely monitors federal and state developments on climate change, air quality, and energy policy affecting the oil and gas sector, and is in a strong position to provide expert analysis and advice on emerging legislation and regulatory activity, the surrounding policy and political debate, and the implications for your organization. For more information, please contact Kyle Danish or any member of the firm’s Environment or Pipeline and LNG practices at (202) 298-1800.