Analysis by Energy Workforce President Tim Tarpley
After a significant comment period and review, EPA Administrator Michael Regan released a comprehensive final methane rule during COP28, which he called a big part of the Biden Administration’s climate change efforts to reach net zero by 2050. In short, the final rule creates a brand new methane monitoring and reporting program that will be applied to certain oil and gas facilities starting 60 days after the rule is published in the federal register.
Covered facilities will be required to begin monitoring for methane starting in 2024. It is important to note that if this rule survives legal scrutiny and goes into full effect, it will work in conjunction with the Methane Emissions Reduction Program (MERP) that was passed as part of the Inflation Reduction Act. Beginning in 2025, MERP will implement a charge (or tax) on the reported prior-year tons of methane emissions from oil and natural gas systems that exceed more than 25,000 metric tons of carbon dioxide equivalent gas. The charge will phase up over time to a fee of $1,500 for each excess ton of methane emissions.
Routine Flaring
Of particular interest to our sector, the rule includes a requirement to entirely phase out routine flaring at new oil and gas wells going forward. The EPA received multiple comments from industry on this aspect and ended up choosing 24 months from the effective date of the final rule for the implementation of this provision. The EPA explains that it has chosen new wells as its target, arguing that new owners drilling new wells have the ability to plan ahead to ensure that the associated gas is routed to a slates line, used onsite for fuel, or injected/reinjected.
For wells that came online between December 22, 2022 and the date of enactment, the EPA will allow for routine flaring if the owner/operator can certify that it is technically infeasible to re-route gas. Note that the date of enactment for the rule will be 60 days after it is published in the Federal Register (which has still not happened). Of note is that for wells going on after the date of enactment, there does not appear to be an exemption process in place as drafted.
Who Has to Report?
Generally speaking, the owner/operator of a designated facility is required to have a “certifying official” report emissions to the EPA; this individual is defined as a president, secretary, treasurer or vice president of the corporation in charge of a principal business function of a covered entity. Service companies contracted to work on a facility would typically not meet this definition in most scenarios.
How Will EPA Enforce the Rule?
The EPA has identified a series of “covered facilities” that have varying degrees of reporting requirements and timelines. The full list of reporting and facilities can be found here. The facilities that will require reporting are: single wellhead sites, multi-wellhead sites, major production sites with major production and processing equipment and centralized production facilities, compressor stations, single storage vessel or tank, process controllers, well liquid unloading, wet seal centrifugal compressors, dry seal compressors, natural gas driven pumps, well completions, natural gas processing plants, new and existing wells of varying size, and sweeting units. Depending on the type of facility, the rule lays out different reporting and monitoring requirements.
The final rule, depending on the type of facility, has specifications for what kind of monitoring and reporting needs to occur and in what time interval.
EPA Super Emitter Program
One of the sections of the proposed rule which generated multiple comments from industry groups, including Energy Workforce was the “super emitter” program. This program was proposed in the draft rule and would have set up a mechanism to allow third-party groups to monitor methane emissions around the country to monitor for large methane release events.
In the final rule, the EPA proposed two frameworks for how to set up the system. Based on multiple concerns as to the potential to allow third-party groups enforcement authority under the law, the EPA has tried to alleviate these concerns by giving the agency greater control over certifications for participation in the program. The EPA will now take a greater role in receiving notifications from certified third parties and verifying that these notifications are complete and have properly documented the existence of an event before sending them to the appropriate owner or operator.
Additionally, the EPA will be the entity that approves monitoring technologies, certifying and de-certifying notifiers, requiring that third parties submit notifications within a limited timeframe, and obligating operators to subsequently respond in a timely manner.
While these changes are certainly improved compared to the system proposed in the draft rule, significant concerns still exist for this program. It remains to be seen if such a third-party enforcement structure (even with EPA “certifying” the entities) will survive legal scrutiny and if it can really be done in a fair and consistent manner. Third-party verifiers may have their own political agendas and will not necessarily have a duty to be fair and impartial. Even with EPA “certifying” the entities, many questions remain. We can expect multiple legal challenges to this framework that could delay the implementation of these provisions.
Conclusion
The final rule is more than 1,600 pages and creates multiple new reporting requirements and legal frameworks. Energy Workforce is continuing to read and digest this document with a specific eye toward effects on the service and equipment sector. We plan to release additional documents and will host issue-specific webinars in the coming days and weeks detailing the implications of this important rule going forward.
Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.
