On August 13, 2020, the U.S. Environmental Protection Agency (EPA) issued two final rules—a Methane Policy Rule and an Inspection Rule —rolling back portions of its New Source Performance Standards (NSPS) for the oil and gas industry. In explaining these changes, EPA Administrator Andrew Wheeler stated that the EPA rescinded portions of the Methane Policy Rule because those portions were based on an impermissibly broad interpretation of the Clean Air Act (CAA).

Updated methane regulations rescind methane standards and ease emissions requirements

Under the new Methane Policy Rule, the EPA rescinded methane and volatile organic compound (VOC) emissions standards for new and modified oil and gas transmission and storage infrastructure, including methane limits for new and modified oil and gas production and processing equipment.

Under the Inspection Rule, the EPA relaxed requirements for oil and gas operators to monitor emissions leaks. This Rule excludes low production well sites (“where the total combined oil and natural gas production for the well site is at or below 15 barrels of oil equivalent per day”) from fugitive emissions monitoring, as long as operators maintain records to demonstrate well production remains at or below the requisite threshold. Additionally, all fugitive emissions monitoring may stop when all major production and processing equipment is removed from the well site.

New ‘Significant contribution finding’ prerequisite to future air pollutant regulations

In addition to its methane-specific changes, the Methane Policy Rule also adds a new analysis the EPA must perform prior to regulating new air pollutants from existing source categories. It concludes that, as a prerequisite for newly regulating any air pollutant that the Agency did not consider when initially regulating the source category under the CAA, the EPA must make a finding that emissions of that air pollutant form the source category “cause or contribute significantly” to air pollution that may “reasonably be anticipated to endanger public health or welfare.” The Rule terms this prerequisite finding as the ‘significant contribution finding’ (SCF).

Litigation impacts

The day after issuing the new rules, the EPA filed a memorandum in support of its motion for summary judgment in litigation brought by a coalition of states to force further methane regulations. The EPA argued that it no longer makes sense to continue the litigation after the EPA’s decision that it lacks authority to issue regulations on methane emissions. Litigation challenges to the new rules from non-governmental organizations and possibly industry groups are expected.

Split response to the methane rollbacks

Response to the new rules has been split among the key stakeholders. While environmental groups have already stated their intention to fight the EPA’s new rules in court, the oil and gas industry is divided between supporting the changes or criticizing them. The American Petroleum Institute and smaller oil and gas companies have previously argued that methane regulations are redundant and too costly; however, larger oil and gas companies have previously urged the federal government to regulate emissions directly.