On May 12, 2016, the United States Environmental Protection Agency (EPA) issued its final Methane Rule, mandating new limits on methane gas emissions, volatile organic compounds (VOCs) emissions and other by-products such as benzene associated with oil and natural gas production wells and storage tanks. The new EPA rule is meant to apply to new as well as existing, reconstructed and modified oil and gas wells and even those wells producing fewer than 12 b/d of oil. Methane is a major component of natural gas. The stated goal of the new rule is to reduce methane and other toxic gas emissions by 40% to 45% of 2012 levels by the year 2025.
Unfortunately, but not unexpectedly, the EPA’s Methane Rule is a one-size fits all scheme that is meant to be adopted across the board by oil and gas producers in all states. When the EPA announced its final rule on this matter, many groups were openly and adamantly critical of the new rule. Many in the oil and natural gas industry voiced concern about the financial stress that the new rule would put on producers. For instance, the rule is especially burdensome for stripper and marginal well operators, and given the low price of oil and gas these days, there are many more marginal well operators these days.
Fifteen States Object to the EPA’s New Rule And File A Lawsuit
Over the summer, several states decided to sue the EPA over the new rule, taking the position that the new rule goes beyond the EPA’s its authority under the Clean Air Act. North Dakota was the first state to take a stance against the EPA, calling the new rule “arbitrary, capricious, an abuse of discretion and not in accordance with the law.” Texas has filed suit as well. The State of Texas, the Texas Railroad Commission, and the Texas Commission on Environmental Quality have all filed a petition in the United States Court of Appeals for the District of Columbia Circuit over the EPA methane emissions rule. After North Dakota and Texas filed suit, thirteen other states took as stand against the EPA and the Obama administration as well, including Alabama, Arizona, Kansas, Kentucky, Louisiana, Michigan, Montana, North Carolina, Ohio, Oklahoma, South Carolina, West Virginia and Wisconsin. In addition, the North Carolina Department of Environmental Quality and the Kentucky Energy and Environment Cabinet joined the suit.
A Case To Watch Closely
This litigation has important ramifications for not just the oil and gas industry, but also for mineral owners and consumers. First, the case will examine the limits of the EPA’s authority and whether the EPA’s expansive view of its authority under the federal clean air and clean water legislation is appropriate. Secondly, the EPA is well known for adding additional regulations in areas that are already thoroughly regulated by the states. If oil and gas producers are going to be subject to yet another layer of regulation, often in conflict with state regulation, compliance is going to cost money, which means oil and gas products are going to be more expensive for consumers. Those products include everything from gasoline for the car to plastics that are part of many things that we buy, from cell phones to computers to children’s toys. To impose yet another set of poorly planned regulations on top of what is usually effective regulation by the states probably ends up hurting consumers the most. Not the best use of our federal tax dollars!