Shale Law Weekly Review - September 3, 2019

Written by:

Sara Jenkins - Research Assistant

Jackie Schweichler - Staff Attorney

The following information is an update of recent local, state, national, and international legal developments relevant to shale gas.

Pipelines: Nebraska Supreme Court Rules Keystone XL Pipeline Route is in the Public Interest 

On August 23, 2019, the Nebraska Supreme Court affirmed the Nebraska Public Service Commission’s (NPSC) determination that the Keystone XL pipeline’s alternative route is in the public interest (In re Application No. OP-0003, No. S-17-1331).  Landowners and environmental groups intervened, bringing this appeal after NPSC approved the “mainline alternative route” (MAR) for TransCanada’s Keystone XL pipeline.  Addressing the issues raised by the appellants, the court found that NPSC had jurisdiction to consider TransCanada’s application; that TransCanada “met its burden of proof;” that NPSC “properly considered the MAR;” and that the intervenors were given due process.  The court explained that the legislature gave NPSC the authority to determine which pipeline route was in the public interest.  The court determined that the NPSC provided enough evidence to support its decision and that the intervenors arguments were “without merit.”

State Regulation: Environmental, Citizen Groups Petition New Mexico Supreme Court to Stay New Energy Transition Act 

On August 26, 2019, several environmental and citizen groups filed a Petition asking the Supreme Court of New Mexico to stay the state’s recently-enacted Energy Transition Act (ETA) (New Energy Economy v. New Mexico Public Regulation Comm’n, No. S-1-SC-37875). Petitioners contend that ETA grants the Public Service Company of New Mexico (PNM) excessive discretion to determine what to charge ratepayers when old plants are closed.  The petitioners argue that this discretion undermines the New Mexico Public Regulation Commission’s (Commission) authority to protect consumers from exorbitant rates.  Specifically, Petitioners argue that sections 2H, 2S, 5, 8B, 11C, 22 and 31C of ETA are unconstitutional.  ETA seeks to establish “new minimum requirements for the conversion to renewable energy resources, and adopt[] a mechanism for ‘securitizing’ costs associated with the abandonment of old plants.”  Petitioners are requesting oral arguments to present their case before the court. 

Methane Emissions: EPA Issues Proposed Rule Amending New Source Performance Standards Methane Requirements

On August 28, 2019, the Environmental Protection Agency (EPA) issued a proposed rule amending methane requirements in the 2012 and 2016 New Source Performance Standards (NSPS).  According to EPA’s policy amendments fact sheet, the proposed rule was drafted in response to President Trump’s Executive Order on Promoting Energy Independence and Economic Growth issued March 28, 2017.  The proposal states that the amendments are “intended to continue existing protections from emission sources within the regulated source category, while removing regulatory duplication.”  The proposed rule includes both primary and alternative proposals.  The primary proposal would amend the 2016 NSPS by removing methane requirements for oil and gas production and processing. This proposal would also no longer regulate oil and gas transmission and storage as sources for volatile organic compounds or greenhouse gas emissions.  Alternatively, EPA suggests keeping the same source categories, but instead rescinding requirements for all industry related methane sources. 

Pipelines: FERC Order Allows Constitution Pipeline to Move Forward 

On August 28, 2019, the Federal Energy Regulatory Commission (FERC) issued an order finding that the New York State Department of Environmental Conservation (New York DEC) waived its authority to deny a water quality certification for the Constitution Pipeline.  Constitution Pipeline Co., LLC (Constitution) initially filed a Section 401 water quality certification with New York DEC in April 2015, but the certification was denied in April 2016.  Constitution petitioned FERC, arguing that New York DEC had waived its authority to deny the certification by failing to act within a reasonable period of time.  FERC denied Constitution’s petition, and the U.S. Supreme Court later denied Constitution's petition for writ of Certiorari.  In October 2018, FERC requested that the case be held in abeyance to await the result of the Hoopa case, which posed similar questions of law (Hoopa Valley Tribe v. FERC, D.C. Cir. No. 14-1271). The court in Hoopa issued its decision on January 25, 2019, holding that the state in that case had waived their authority by failing to act within the year. Accordingly, FERC requested that this case be remanded in order to reconsider its orders. 

For more details, see the Shale Law Weekly Review for March 4, 2019, or the Shale Law in the Spotlight: Constitution Pipeline Project - An Overview of Status and Current Legal Developments (April 25, 2018).   

Production and Operation: Energy Information Administration Data Shows United States as the Global Leader in Petroleum and Natural Gas Production 

On August 20, 2019, the U.S. Energy Information Administration published data showing the United States now leads the globe in petroleum and natural gas production.  U.S. production reached record levels in 2018, with petroleum increasing by 16% and natural gas increasing by 12%.  Petroleum production in 2018 was 80% crude oil and lease condensate with natural gas plant liquids accounting for the other 20%.  Crude oil production set a new record in 2018, reaching 11 million barrels per day.  Dry natural gas production reached record amounts for the second straight year, reaching 28.5 billion cubic feet per day.  The United States has led natural gas production since surpassing Russia’s production in 2011.  The United States exceeded Saudi Arabia’s petroleum production in 2018, after the record production growth.

From the National Oil & Gas Law Experts:

Charles Sartain and Paul Yale, North Dakota: A Different Rule for Post-Production Costs In a State Lease, (August 27, 2019)

John McFarland, Energy – the Big Picture, (August 26, 2019)

Penn State Research: 

“Researchers Develop Affordable, Less-Intensive Methane Detection Protocol” – Penn State News

Follow us on Twitter at PSU Ag & Shale Law (@AgShaleLaw) to receive ShaleLaw HotLinks:

“State Pledges Improvement to Spill Reporting Site” - E&E News 

“Oil and Gas Defenders, Critics Test Colorado’s New Law” - Associated Press

“Agency Cites Atlantic Coast Pipeline for Construction Problems” - Shale Gas Reporter

“US LNG Export Plans Hit Trade War Snags” - Bloomberg

“Drilling Down: Exxon Mobil Shows No Sign of Cooling Off in Permian Basin” - Houston Chronicle

“Shell Pipeline Completes Big Segment of Falcon Pipeline” - Pittsburgh Business Times 

“Canada Establishes Energy Information Web Site” - Oil & Gas Journal 

“Permian Frac Tracker Sees Bipolar Market” - Rigzone 

“Shale Gas Producers Help Fuel US LNG Exports Rise To Top” - Hart Energy 

“Kan. Regulators Investigate Quake Cluster” - E&E News

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Shale law in the Spotlight – Overview of Recent Amendments to the EPA Methane Emissions Rule

Written by Chloe Marie - Research Specialist

This article provides a detailed overview of the recent administrative changes and proposed changes to the EPA Methane Emissions Rule initiated by the Trump Administration since the beginning of 2018. 

Background

The “Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources” – also known as the Methane Emissions Rule – was published on June 3, 2016, as part of President Obama’s Climate Action Plan to progressively reduce greenhouse gas emissions, including methane emissions.

Pursuant to President Trump’s Executive Order on Promoting Energy Independence and Economic Growth issued in March 2017, former EPA Administrator Scott Pruitt announced on April 19, 2017, that EPA would reconsider the New Source Performance Standards for fugitive methane emissions. Consequently, EPA issued a notice dated June 16, 2017, proposing to stay certain requirements of the Methane Emissions Rule for a two-year term, including fugitive emissions, pneumatic pump standards, and professional engineer certification requirements, to allow time for a complete reconsideration of the rule by the agency.
 
The March 2018 Final Rule

The U.S. Environmental Protection Agency (EPA) issued a final rule in the Federal Register on March 12, 2018, amending two fugitive emissions requirements contained in the Methane Emissions Rule dated June 3, 2016. The final rule became effective on the day of its publication in the Federal Register.

Industry stakeholders welcomed this final rule. The American Petroleum Institute (API), for example, expressed its support for EPA’s amendments to the Methane Emissions Rule in a statement dated March 2018, and wrote that these amendments “will provide regulatory certainty for [the oil and gas] industry.”

This final rule removes the requirement for completion of delayed repairs at well sites and compressor stations during unscheduled or emergency vent blowdowns. Initially, operators could delay repairing or replacing defective components after detection of fugitive emissions under certain situations described in the 2016 Final Rule, as long as delayed repairs were “completed during the next compressor station shutdown, well shutdown, well shut-in, after an unscheduled, planned, or emergency vent blowdown or within 2 years, whichever is earlier.” EPA contended that “the requirement to complete delayed repairs during an unscheduled or emergency vent blowdown could lead to a number of unintended negative consequences. In particular, emissions from requiring delayed repairs during an unscheduled or emergency shutdown, shut-in, or vent blowdown could result in greater emissions than the leaks that are to be repaired …” Operators, however, remain ultimately responsible for the repairs or replacement during the next compressor station shutdown, well shutdown, well shut-in, after a planned vent blowdown, or within 2 years, whichever is earlier.

Under the 2016 Final Rule, the monitoring survey of fugitive emissions components at a new well site must have been conducted within 60 days of startup production at the new well site. This same 60-day initial monitoring requirement applied for the collection of modified fugitive emissions components after the modification. Semi-annual monitoring was required thereafter.  

The final rule now provides that monitoring surveys at new or modified well sites that start production between September and March must be performed within 6 months of startup production or by June 30, whichever is later. The 60-day initial monitoring requirement as provided in the 2016 Final Rule applies to well sites with a startup production between April and August. The final rule also requires annual monitoring of fugitive emissions thereafter for all well sites located on the Alaskan North Slope. EPA made such changes to the monitoring schedule after receiving comments, which pointed out that the monitoring instruments for EPA Method 21 could not “reliably detect methane emissions at well sites on the Alaskan North Slope for a significant portion of the year due to the lengthy period of extreme cold temperatures.”  

The September 2018 Proposed Rule

On September 11, 2018, EPA proposed another set of measures described as “targeted improvements” to the Methane Emissions Rule. These proposed amendments are intended to reduce some of the regulatory costs associated with duplicative regulatory actions between EPA and state agencies. According to EPA Acting Administrator Andrew Wheeler, “removing these excessive regulatory burdens will generate roughly $484 million in cost savings and support increased domestic energy production – a top priority of President Trump.”

The proposed rule would amend Subpart OOOOa of the 2016 New Source Performance Standards (NSPS) for the oil and gas industry to review fugitive emissions requirements, but this time would focus on monitoring frequencies. EPA would implement annual monitoring for non-low production well sites and for compressor stations located on the Alaska North Slope; biennial monitoring for low production well sites; and co-proposing semiannual and annual monitoring for compressor stations. EPA also proposed to rescind the requirement that monitoring is necessary for wellhead only well sites after all major production and processing equipment has been removed. 

In addition, the proposed rule would provide review of the well site pneumatic pump standards and certification requirements for closed vent systems as well as clarification on the provisions relating to well completions, onshore natural gas processing plants, storage vessels, recordkeeping, and reporting.

The President of the Western Energy Alliance, Kathleen Sgamma, declared that both EPA actions – the March 2018 final rule and September 2018 proposed rule – are a “neat pair” before adding that the Methane Emissions Rule is “the definition of red tape. It was a record-keeping nightmare that was technically impossible to execute in the field,” as stated to the New York Times.

This proposed rule has yet to be published in the Federal Register. 

This project is funded by the National Agricultural Library, Agricultural Research Service, U.S. Department of Agriculture.