The Obama Administration (Administration) on January 14, 2015 unveiled new plans to regulate methane emissions from the nation’s oil and natural gas sector.  Specifically, it announced a new goal to cut methane emissions from the sector by 40 – 45 percent from 2012 levels by 2025.

The Administration noted that natural gas – of which the U.S. is now the world’s largest producer – is a pivotal piece of a secure energy future and aims to meet the new goal without hampering the growth of an industry that has been a national economic driver.  Since 2005, domestic oil production has nearly doubled and natural gas production has risen by about 50%, according to the U.S. Energy Information Administration.  While the Administration supports this growth, it fears a dramatic increase in methane emissions – to a level equivalent to over 620 million tons of carbon dioxide (CO2) pollution in 2030 according to its own estimate – absent regulation.

The Administration made this announcement as part of a broader effort to address climate change as outlined generally in the Climate Action Plan (June 2013) and more specifically in the Climate Action Plan “Strategy to Reduce Methane Emissions” (March 2014).  Methane – the primary component of natural gas – only accounted for 9% of U.S. greenhouse gas emissions in 2012 (of which nearly 30% came from the oil and gas sector), but has 25 times the global warming potential as carbon dioxide so is a potent greenhouse gas.

The President’s “Strategy to Reduce Methane Emissions” includes a number of actions, the centerpiece of which will be a rulemaking to regulate methane and volatile organic compounds (VOC) from new and modified sources.  The United States Environmental Protection Agency (EPA) intends to propose the rule in the summer of 2015 and finalize it in 2016.  This rulemaking is premised on five peer-reviewed white papers EPA released in April, 2014 on compressors, hydraulic fractured oil well completions, leaks, liquids unloading processes and pneumatic devices.

EPA’s rulemaking will likely be met with controversy from both environmentalists and the oil and gas industry because it seeks to impose first-time regulations on a booming industry, but only seeks to impose those regulations on new and modified – not existing – sources.

In addition to the rulemaking, the Administration’s set of actions to achieve its goal include:

New Guidelines to Reduce Volatile Organic Compounds

The Administration expects EPA to develop new guidelines to assist states in reducing ozone-forming pollutants from existing oil and gas systems in areas that do not meet the National Ambient Air Quality Standards (NAAQS) and in states in the Ozone Transport Region.  These guidelines are expected to reduce methane emissions in these areas.  The Administration expects EPA will do this by issuing Control Techniques Guidelines that provide an analysis of the available, cost-effective technologies for controlling VOC emissions from covered oil and gas sources.  States would have to address these sources as part of state plans for meeting the NAAQS.

Consider Enhancing Leak Detection and Emissions Reporting

The Administration expects EPA to expand its Greenhouse Gas Reporting Program to include all segments of the oil and gas industry.  EPA is expected to assess potential regulatory opportunities for applying remote sensing technologies and other innovations in measurement and monitoring technology to improve the identification and quantification of emissions and improve the accuracy and transparency of reported data.

Lead by Example on Public Lands

The Administration is requiring the Department of Interior’s Bureau of Land Management to update standards for both new and existing oil and gas wells on public lands to reduce wasteful venting, flaring, and leaks of natural gas.  These standards are expected in the spring of 2015.

Reduce Methane Emissions While Improving Pipe Safety

The Administration is requiring the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration to propose gas pipeline safety standards that will focus on safety, but are expected to lower methane emissions as well.  These standards are expected in 2015.

Drive Technology to Reduce Natural Gas Losses and Improve Emissions Quantification

The President’s FY 16 Budget will propose $15 million in funding for the Department of Energy (DOE) to develop and demonstrate more cost-effective technologies to detect and reduce losses from natural gas transmission and distribution systems, including repairing leaks and developing next generation compressors.  The budget will also propose $10 million to launch a program at DOE to enhance the quantification of emissions from natural gas infrastructure for inclusion in the national Greenhouse Gas Inventory.

Modernize Natural Gas Transmission and Distribution Infrastructure

The Administration is asking DOE to take steps to encourage reduced emissions from natural gas transmission and distribution, including issuing energy efficiency standards for natural gas and air compressors, advancing research and development to bring down the cost of detecting leaks, working with FERC to modernize natural gas infrastructure, and partnering with NARUC and local distribution companies to accelerate local pipeline repair and replacement.

Release a Quadrennial Energy Review (QER)

The Administration will release the first installment of the QER, which focuses on policy actions that are needed to modernize energy transmission, storage, and distribution infrastructure.  This installment of the QER will include additional policy recommendations and analysis on the environmental, safety, and economic benefits of investments that reduce natural gas system leakage.

While the prospective rulemaking only addresses new and modified sources, the Administration seeks to support voluntary industry actions to reduce methane already underway at existing sources, including the Natural Gas STAR program, One Future Initiative and Downstream Initiative.

The Administration’s fact sheet on its methane reduction plan is accessible at: http://www.whitehouse.gov/the-press-office/2015/01/14/fact-sheet-administration-takes-steps-forward-climate-action-plan-anno-1

Please contact any member of the Schiff Hardin Environmental Group with questions regarding this plan.