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As reported in The Nickel Report, on Thursday, the Senate confirmed Susan Parker Bodine as the Assistant Administrator of the Environmental Protection Agency’s Office of Enforcement and Compliance Assurance (“OECA”). OECA, the chief enforcement arm of EPA, coordinates the agency’s enforcement of numerous federal environmental laws within its authority.

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As reported in The Nickel Report, the United States Court of Appeals for the D.C. Circuit last week dismissed an interstate natural gas pipeline company’s challenge to the State of New York’s delay in issuing a water quality certification under section 401 of the federal Clean Water Act (CWA). The case is one of several pending across the country that involve a state’s authority to issue, deny, or waive a CWA water quality certification for interstate natural gas pipeline projects.

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In an effort to advance White House climate change targets, EPA recently finalized methane rules for new, heavily modified or reconstructed oil and natural gas facilities.  The Clean Air Act New Source Performance Standards (NSPS) new rules, among other things, will require monitoring to detect and repair methane and volatile organic compound (VOC) leaks at new oil and gas wells, production, gathering and boosting stations, gas processing plants, and gas pipeline compressor stations.  In addition, the Agency moved toward regulation of existing onshore facilities by issuing a draft information collection request for information on how equipment and emissions controls are, and can be, configured and the associated costs, natural gas venting in conjunction with maintenance activities, equipment malfunctions and flashing emissions from storage tanks.

Continue Reading Final Rules Require Methane Monitoring at New and Modified Oil and Gas Facilities

PHMSA’s oil spill response regulations have been subject to increased scrutiny by Congress, the NTSB and citizen groups since the 2010 Deepwater Horizon and Marshall, Michigan incidents.  The National Academy of Sciences (NAS) recently published a diluted bitumen study which concludes that while diluted bitumen does not pose an increased risk in transportation, it behaves differently than lighter crude oils following a spill.  As a result, NAS made recommendations to various federal agencies with oil spill response oversight and oil pipeline operators to ensure adequate responses to spills of diluted bitumen.  In response, PHMSA announced that it will convene a public workshop on April 12, 2016 on these and other oil spill response planning issues covered by its pipeline regulations (Part 194) and rail and motor carrier regulations (Part 130).

Continue Reading Oil Spill Response Planning Developments

Consistent with President Obama’s “Climate Action Plan,” the Bureau of Land Management (BLM) recently released proposed rules intended to significantly curb emissions from new and existing oil and gas production wells on federal and tribal lands. In total, BLM proposes to cut natural gas emissions (from both intentional and unintentional releases) associated with oil and gas wells on all federal public lands by 50%. This will be accomplished through modernizing the current regulations (which are over 30 years old) by requiring operators to adopt best practices and updated technologies.

Continue Reading BLM Proposes Sweeping Rules to Curb Methane Emissions

Amid considerable controversy, the U.S. EPA and Army Corps of Engineers (the agencies) issued a Final Rule on May 27, 2015, re-defining and expanding the definition of jurisdictional “waters of the U.S.” under the federal Clean Water Act.  That term affects the scope of activities requiring permits under Section 402 (NPDES) and Section 404 (wetland) programs, and it affects what releases or other incidents must be reported to the federal government and states.  Although the agencies claim the scope of the new rule is ‘narrower than existing regulations’ and would include ‘fewer waters’ in the jurisdictional reach of the CWA than under existing regulations, those statements are misleading, as illustrated by the maps EPA itself made available to Congress last year (under congressional pressure) to show the scope of the new “waters” definition.  Congress is already preparing legislation to send the rule back to the agencies for revision, and although President Obama is expected to veto that, several trade groups from various industries are also planning to challenge the new rule in court.  If the rule goes into effect, the oil and gas pipeline industry will surely be impacted, perhaps most keenly with respect to permitting for construction, maintenance and repair activities in or near “waters of the U.S.”

Continue Reading How Will EPA’s New Definition of “Waters of the U.S.” Affect Oil & Gas Pipelines?

Regulators and researchers alike have long been trying to accurately estimate leakage rates from natural gas infrastructure, in order to understand the potential effects of such emissions on climate and human health.   EPA’s Office of Inspector General reported last year that methane leaks from distribution pipelines accounted for more than 10% of total methane emissions from natural gas systems, and it recommended, among other things, that EPA work with PHMSA to address methane leaks from a combined environmental and safety standpoint.  Earlier this year, the Obama administration announced as part of its Climate Action Plan new goals to cut methane emissions from the oil and gas sector 40 to 45% from 2012 levels by 2025, and stated that new PHMSA standards for natural gas pipelines expected in 2015, while focused on safety, “are expected to lower methane emissions as well.”

A new study (led by Brian Lamb at the Laboratory for Atmospheric Research at Washington State University) posits that EPA’s model for estimating the amount of methane leaked from the nation’s gas distribution systems is outdated.  Direct Measurements Show Decreasing Methane Emissions from Natural Gas Local Distribution Systems in the United States, Lamb et al., at p. 5161.  EPA does not directly measure methane emissions for its yearly estimates.  These emissions figures are instead based on a 1992 study in which the Agency, in conjunction with the Gas Research Institute (GRI), compiled “emissions factors” for natural gas industry components, which are multiplied by an estimate of the number of such components across the U.S. to create a national estimate of methane emissions for the industry.  Id.  EPA annual emissions inventories are based upon the original emissions factors from the EPA/GRI study, which have not been revised in more than 20 years to reflect replacement and/or upgrades of metering and regulating facilities, reduction in miles of older cast iron and unprotected steel pipeline, increases in protected steel and plastic pipeline miles, and improvements in leak survey methods.  Id. at 5162. 

The study’s authors implemented a national sampling program, directly measuring methane emissions from underground pipeline leaks and metering and regulating facilities of 13 local distribution companies (representing 19% of distribution pipeline mileage) across the country.  Id.  Sampling results led to the development of emissions factors generally lower than those used in the 1992 EPA/GRI study (particularly for underground pipeline leaks and plastic mains), attributable to improvements in leak detection technology, replacement of older pipes, and better maintenance since the 1990s.  Id. at 5163.  The study concludes that between 0.10% and 0.22% of total gas delivered via the national’s distribution pipeline network is lost through leaks, an estimate 35% to 70% lower than EPA’s estimate in its 2011 emission inventory.  Id. at 5167. 

The study comes on the heels of recent efforts in several states (California, Massachusetts, and New York, for example) to require natural gas pipeline operators to monitor and/or address leaks on their systems, both for environmental and public safety reasons.  Despite indications in the study that methane emissions from gas distribution systems have decreased in recent years, given the current interest in climate change and safety impacts associated with gas pipeline leaks, EPA and PHMSA regulatory efforts to address pipeline-related emissions are likely in the near future.  System operators and the public should be aware of this new information when new rulemaking proposals are made available for comment.

Effective October 1, 2015, the Federal Energy Regulatory Commission (FERC) will allow interstate natural gas pipelines to seek to recover certain capital expenditures involving changes to pipeline system infrastructure that enhance system reliability, safety and regulatory compliance.  In a Policy Statement issued on April 16, 2015, FERC provided guidance on how it will evaluate such cost recovery proposals.  The intent is to encourage replacement of old and inefficient pipelines or pipeline components, such as compressors, to enhance the safe operation of pipeline systems.
Continue Reading FERC Implements New Cost Recovery Policy for Gas Facility Modifications

The US oil and gas industry has been transformed over the past few years by development of new shale resources.  The US is now the world’s largest producer of natural gas and on track to be the world’s largest producer of oil.  These changes have affected America’s energy future, as well as global markets.  With so much new production on the market, and continuing economic stagnation in Europe and China reducing demand, the global price of oil dropped dramatically in the last half of 2014.  As Pulitzer Prize-winning analyst Daniel Yergin observed recently, America has now unexpectedly replaced OPEC as the world’s “swing producer” of oil and gas.  As a result, US oil and gas producers must now make new decisions about investment, production and rate of return ratios.  Against this backdrop, there are, as always, many other issues that will affect decisions and the market landscape.

Continue Reading Pipeline Law 2015: The Year Of Living Uncertainly

In a report issued on July 25, 2014, EPA’s Office of Inspector General (OIG) issued a series of recommendations for EPA to increase its efforts to reduce methane emissions from natural gas distribution pipelines, including partnering with PHMSA to develop a joint strategy.  According to the report, pipeline leaks accounted for more than 10 percent of total methane emissions from natural gas systems, equating to a loss of more than $192 million of gas in 2011.  EPA does not directly regulate methane, and the report was undertaken to review EPA’s progress in implementing the Obama administration’s 2013 Climate Action Plan, which calls for EPA to develop a comprehensive interagency methane strategy.  (See prior pipelinelaw alert here).

The OIG recognized that EPA currently maintains a voluntary program (Natural Gas STAR) to address methane leaks across the gas industry, but concluded that its efforts have produced limited results from local distribution companies because of financial and policy disincentives.  These include the fact that operators have little financial interest in repairing leaks that do not pose safety hazards, because costs of fugitive emissions are passed on to customers.  As a result of these findings, the OIG report recommends that EPA:  (1) partner with PHMSA to address methane leaks from a combined environmental and safety standpoint, (2) develop a strategy to address the financial and policy barriers that hinder reductions from the distribution sector, (3) establish performance goals, (4) track distribution sector emissions and use that data to help determine if future regulation is appropriate, and (5) assess whether data from ongoing studies should be used to update distribution sector emission factors.

With regard to PHMSA coordination, the report urges EPA to consult closely with PHMSA as it develops any future regulations, noting that “the lack of coordinated action between the EPA and PHMSA hinders an effective partnership where PHMSA’s technology and regulations could be used to produce additional environmental benefits.”  The report also recommends that EPA work with state utility commissions to develop and expand policies that encourage mitigation of leaks, especially from aging cast-iron and unprotected pipes.

EPA was provided an advance draft of the OIG report and has confirmed its willingness to work more closely with PHMSA and to determine by the second quarter of FY 2016 whether potential new regulations beyond voluntary efforts are appropriate.  The status of the implementation of several other recommendations of the OIG report remains unresolved, with resolution efforts in progress.  Despite EPA’s commitment to work with PHMSA, the agencies have not yet conferred on this issue.  Because both PHMSA and EPA have regulatory jurisdiction over different aspects of natural gas pipelines, it will likely take some time for the agencies to develop a proposed path forward and it is unclear at this time whether that will include additional regulation.