Introduction

On December 11, 2012, seven states—New York, Connecticut, Delaware, Maryland, Rhode Island, Vermont, and Massachusetts—notified the U.S. Environmental Protection Agency (EPA) of their intent to sue the agency for its failure to adopt New Source Performance Standards (NSPS) for methane emissions from the oil and natural gas sector. These states contend that EPA is required under the federal Clean Air Act to determine whether it is appropriate to adopt performance standards for such sources of methane emissions and, if so, EPA must (i) adopt revised standards for new oil and gas sector sources, and (ii) issue guidelines for the control of methane emissions from existing sources. The states' 60-day notice comes less than two months after industry and environmental organizations filed multiple lawsuits seeking judicial review of EPA's recently finalized NSPS and National Emission Standards for Hazardous Air Pollutants (NESHAP) for the oil and gas sector. Given this newly threatened litigation and the petitions for judicial review filed by numerous other parties, there is considerable uncertainty regarding the future of these broad and complex federal air quality requirements for the oil and gas industry.

EPA Review Of NSPS For Oil And Gas Operations

The oil and natural gas industry comprises a wide range of operations and equipment that include wells, natural gas gathering lines, processing facilities, storage tanks, and pipelines. On August 16, 2012, EPA finalized its NSPS revision for the oil and gas sector to regulate volatile organic compound (VOC) emissions from gas wells, centrifugal compressors, reciprocating compressors, pneumatic controllers and storage vessels (the "Oil & Gas NSPS and NESHAP").1 As part of the Oil & Gas NSPS and NESHAP, EPA also revised NSPS for VOC emissions from leaking components and for sulfur dioxide (SO2) emissions from natural gas processing facilities. EPA did not, however, take final action as part of this rulemaking to address methane emissions from such operations. Rather, the agency decided to "continue to evaluate the appropriateness of regulating methane with an eye toward taking additional steps if appropriate." 77 Fed. Reg. 49,513. In their 60-day notice letter, the states contend that EPA has unreasonably delayed any evaluation of whether to adopt NSPS for methane emissions from new oil and gas sources. According to the states, EPA must "decide one way or another" whether it is appropriate to adopt performance standards to regulate methane from new oil and gas sources. By not undertaking such an evaluation, the states assert that EPA failed to satisfy its "nondiscretionary duty" under Section 111(b) of the Clean Air Act to review and revise its NSPS for emissions from a listed source category "at least every 8 years." See 42 U.S.C. § 7411(b)(1)(B). Specifically, the states argue that, because EPA has determined that emissions of greenhouse gases (GHG), such as methane, endanger public health and welfare, EPA must determine whether it is appropriate to adopt standards for methane emissions from new oil and gas operations. Thus, the states contend that EPA has failed to make the required "appropriateness" determination and that its delay in doing so is unreasonable.

Appropriateness Of Adopting NSPS For Methane Emissions From New Oil And Gas Sources

While a lawsuit by the states would seek to compel EPA to make such a determination, these states assert in their notice of intent to sue that there is ample evidence to support an appropriateness determination by EPA, given the contribution of methane emission from the oil and gas sector and the availability of cost-effective control methods. In particular, the states note that oil and gas operations are the largest source of methane emissions in the United States, accounting for approximately 5% of nationwide carbon dioxide (CO2) equivalent emissions (the 100-year global warming potential for methane is 25 time that of CO2). In addition, the states contend that, while the regulation of VOC and hazardous air pollutant (HAPs) under the Oil & Gas NSPS and NESHAP will have the incidental benefit of controlling some methane emissions, the vast majority of methane emissions will remain uncontrolled. The states cite to EPA's own analysis in support of their assertion that "there are readily available methods to reduce methane emissions", including the "more than 100-cost effective technologies and practices" that EPA has identified through its work with oil and gas companies in its voluntary Natural Gas STAR Program. Significantly, given the high methane content of such uncontrolled emissions, the states assert that emission controls would be cost-effective—or even profitable—to the oil and gas sector because they could recover and sell the methane.

Control Of Methane Emissions From Existing Oil And Gas Sources

By not making the appropriateness determination, the states also assert that EPA is unlawfully failing to adopt guidelines for controlling methane emissions from existing oil and gas sources. In particular, the states contend that Section 111(d) of the Clean Air Act requires EPA to establish procedures or guidelines under which states must submit plans to EPA establishing performance standards for existing sources of a pollutant, when EPA determines to regulate that pollutant under the NSPS for a category of sources. Thus, the states claim that "EPA's failure to make an appropriateness determination also has prevented EPA from fulfilling its duty to publish emissions guidelines covering methane emissions from existing facilities in the oil and gas sector."

Multiple Petitions Filed Challenging EPA's Oil & Gas NSPS And NESHAP

Separate and apart from the states' threatened lawsuit, a variety of environmental groups, including the Natural Resources Defense Council and the Sierra Club, have filed petitions seeking judicial review of the Oil & Gas NSPS and NESHAP in the U.S. Court of Appeals for the District of Columbia Circuit. Like the states' 60-day notice, these groups are expected to assert that EPA should have included requirements to control methane emissions as part of the Oil & Gas NSPS. In addition, these organizations are expected to challenge the adequacy of EPA's risk assessment for air toxics from drilling operations. Also, numerous industry groups and trade organizations, including the American Petroleum Institute, Gas Processors Association, Independent Petroleum Association of America, Western Energy Alliance, along with the oil and gas associations of Indiana, Illinois, Kentucky, Ohio, Pennsylvania, Texas, and West Virginia, have filed petitions for review seeking to overturn EPA's Oil & Gas NSPS and NESHAP. All of the petitions have been consolidated in State of Texas, et al v. EPA, No. 12-1417 (D.C. Cir.).

Conclusion

There is growing concern among many in the Northeast that extreme weather is linked to anthropogenic climate change. Given the recent devastation caused by Hurricane Sandy, the threatened litigation by these Northeastern states should not come as a surprise. Separately, several environmental groups and organizations representing the oil and gas industry have already filed lawsuits in the U.S. Court of Appeals for the D.C. Circuit challenging various aspects of EPA's complex and lengthy Oil & Gas NSPS and NESHAP. Given the large number of parties and issues raised, however, it is too soon to predict the likely outcome in that consolidated case. However, if the states and environmental organizations are successful, one potential outcome is that EPA could be required for the first time to regulate methane emissions from the oil and gas sector.

Footnotes

1 EPA combined the NSPS and NESHAP elements of the rulemaking into a single Federal Register notice. See 77 Fed. Reg. 49490 (Aug. 16, 2012).

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