EPA Looks to Follow Colorado’s Lead on Regulating Methane Emissions in the Oil and Gas Industry

On August 18, 2015, EPA proposed a new set of rules aimed to reduce emissions of methane and Volatile Organic Compounds (“VOCs”) in the oil and gas industry.  EPA’s goal is to curb methane emissions from the oil and gas sector by 40 to 45 percent by 2025.  This initiative is part of the Obama administration’s strategy to fight climate change, in part by targeting greenhouse gases.  This new proposal arrives just a few weeks after the President released his strategy to reduce carbon emissions from power plants.  In short, the proposed rules target these types of emissions by requiring companies to monitor emissions, perform leak detection and repair, and install controls to limit venting or leaks of VOCs and methane.

However, the EPA’s proposed rules will likely be nothing new for Colorado operations.  While these EPA proposals have fueled heated discussion across the rest of the country, similar regulations have already been implemented in Colorado.  A little over a year ago, Colorado adopted rules to reduce the emissions of VOCs and methane in the oil and gas industry, despite strong opposition from some in the oil and gas industry.  The Colorado regulations purportedly reduce emissions by requiring control devices and monitoring requirements to target operations that result in VOC and methane emissions, such as leaks and venting.  The Colorado regulations require controls, monitoring, and inspecting of storage tanks, compressors, and production facilities; storage tank emission management plans; and leak detection and repair.  According to Will Allison, the director of the Air Pollution Control Division in the Colorado Department of Health and Environment, the new rules will likely not require Colorado operators to do anything more than is already required in the state.  He believes the rules will “complement [Colorado’s] existing rules and put Colorado operators in a good position to comply with the new federal proposal.”

The EPA proposal may not impose an additional burden on operators in Colorado, but EPA acted before the full impact of the Colorado air regulations could be realized.  Since the regulations have only been in effect for just over a year, and many of the requirements on existing operations had a later “phase-in” period, the costs of these rules to oil and gas operators compared to the emissions benefit achieved has yet to be quantified or understood.  Last year, most of the oil and gas industry vigorously opposed the implementation of these new rules in Colorado, citing the substantial cost of implementing the rules compared to the emissions benefit, especially considering that the oil and gas industry has been voluntarily leading the charge in reducing methane and VOC emissions over the last decade.   More analysis regarding the EPA proposal is needed, but expect the oil and gas industry to challenge the EPA proposal on this basis.

Watch this space for periodic blog updates as rulemaking and developments regarding the new methane rules continue to arise.