3/14/14

Oil and Gas Alert: EPA Proposes Revisions to GHG Reporting Rule for Oil and Gas Industry

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On March 10, 2014, U.S. EPA published proposed revisions and confidentiality determinations for the petroleum and natural gas source category of the Greenhouse Gas (GHG) Reporting Rule, 40 CFR Part 98, Subpart W.  The proposed revisions to Subpart W include amendments of general applicability, revised calculation methods and reporting requirements for specified emission sources within the source category, and confidentiality determinations for the new and substantially revised data elements associated with the proposed amendments to the rule.  While the proposed amendments are intended to provide clarity of reporting requirements and improve data collection, the revisions may result in increased reporting burdens for the industry.

EPA is proposing four amendments of general applicability to Subpart W.  First, EPA is proposing to revise the units of emissions reported in 40 CFR 98.236 to require reporting in metric tons, rather than the carbon dioxide equivalent (CO2e) based on global warming potentials, of methane, carbon dioxide and nitrous oxide.  In conjunction with this revision, EPA would amend each calculation method that requires the calculation of emissions in CO2e. 

Second, EPA is proposing to revise the source category definition of the onshore production source category under 40 CFR 98.230(a)(2) to mean “all equipment on a single well-pad or associated with a single well-pad. . . used in the production, extraction, recovery, lifting, stabilization, separation or treating of petroleum and/or natural gas (including condensate).”  EPA specified in the definition a nonexclusive list of equipment1, which EPA claims is not intended to add or remove sources currently covered from the reporting requirements, but to provide “a more accurate description of the industry segment” (79 FR 13397).  

EPA is also proposing to revise the definition of “sub-basin category” in 40 CFR 98.238 to distinguish between high permeability gas and tight gas reservoirs, which will ultimately determine whether a particular well in a sub-basin category is a gas well or an oil well. 

Finally, EPA is proposing to eliminate all provisions in 40 CFR 98.234(f) allowing the use of best available monitoring methods (BAMM) because the agency “expect[s] facilities would be able to comply with the monitoring and QA/QC methods required under subpart W after this proposed rule is finalized and effective” (79 FR 13404).  EPA’s expectation is based on the assumption that compliance with the monitoring requirements under subpart W will be technically feasible by January 1, 2015 when the proposed revisions would be effective.

As an initial matter, with respect to the proposed changes to calculation methods and reporting requirements under 40 CFR 98.236, EPA is proposing to reorganize the entire reporting section by source type, and for each industry segment, list which source types must be reported. 79 FR 13397.  This will specify the data elements that must be reported by each facility.  EPA has proposed the following source-specific changes to the calculation methods and/or reporting requirements (79 FR 13398-13404):

EPA also proposed several confidentiality determinations for the new and substantially revised data elements contained in the proposed amendments to the rule.  Specifically, EPA proposed 234 new or revised data elements to the appropriate direct emitter data categories created in the 2011 CBI Rule.  For the 101 data elements that could not be categorically assigned, EPA    proposed confidentiality determinations on a case-by-case basis (See Table 2, 79 FR 13407-13417).

If finalized, the amendments would become effective on January 1, 2015.  EPA’s proposed revisions to Subpart W are intended to provide clarity and reduce reporting burdens.  However, some of the revisions are based on assumptions that may not be accurate or technically feasible.  To prevent potentially overly burdensome GHG reporting requirements, the oil and gas industry should carefully review these revisions and, where necessary, provide EPA with additional information to properly address these issues.

Comments must be submitted to U.S. EPA on or before April 24, 2014.

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1 Compressors, generators, dehydrators, storage vessels, engines, boilers, heaters, flares, separation and processing equipment, and portable non-self propelled equipment which includes well drilling and completion equipment, workover equipment, maintenance and repair equipment, and leased, rented, or contracted equipment.