• How the Increasing Focus on Methane Emissions in President Obama’s Climate Plan and Related Agency Actions May Impact Your Energy Operations
  • July 15, 2013
  • Law Firm: Holland Hart LLP - Denver Office
  • On June 25, 2013, President Obama outlined plans to address climate change through a variety of executive actions, including reduction of methane emissions from oil and gas production and processing operations as well as pipelines and coal mines (the Climate Plan). The President's Climate Plan, coupled with recent regulatory initiatives and ongoing litigation filed by states and environmental groups hoping to force the Obama Administration to regulate methane emissions from a variety of source categories, signal a new focus on methane emissions that could pose substantial regulatory risk to a broad array of sources. The ramifications of the Administration's focus on emissions of methane include:

    • Methane emission reductions from existing equipment are likely to become an area of focus;
    • Sources emitting high levels of methane will be subject to increased scrutiny, including during the Clean Air Act (CAA) permitting process;
    • Project opponents will demand analysis and regulation of methane emissions as a requirement for project approval;
    • Agencies will focus regulatory efforts on methane emissions from oil and gas production and processing, pipelines, and coal mines, including emissions associated with equipment leaks, fugitives, flowback or waste;
    • Actions taken by one agency for a specific industry will establish a precedent for other agencies and industry sectors;
    • Estimates of both the Global Warming Potential (GWP) and the social costs associated with methane emissions will be closely scrutinized, and changes could impact permitting of existing sources under the CAA as well as agencies' existing regulations for source categories with high methane emissions.
    • Litigation addressing regulation of methane brought by states, environmental groups, and industry will affect both the timing and substance of the Administration's regulation of methane emissions.

    The Climate Plan directs the Environmental Protection Agency and the Departments of Agriculture, Energy, Interior, Labor, and Transportation to draft an interagency methane reduction strategy and commits the Administration to collaborate with industry, states, and tribes to achieve methane emission reductions from multiple sectors through infrastructure improvements and government loans.

    Industry groups have been quick to criticize the Climate Plan, claiming it will increase energy costs, cause plant closures and job losses, and may unfairly punish sources that have already taken voluntary action to reduce greenhouse gas (GHG) emissions. Some environmental groups also criticize the Climate Plan for its overt support of natural gas, claiming unmeasured methane leaks undermine any claimed improvements over GHG emissions from burning coal. While supportive of natural gas expansion, President Obama also promises to address methane concerns: "[Drilling advances have] helped drive our carbon pollution to its lowest levels in nearly 20 years . . . and we'll keep working with the industry to make drilling safer and cleaner, to make sure that we're not seeing methane emissions."1

    The Climate Plan follows on the heels of recent administrative actions in April and May of 2013 addressing GHG emissions, including methane. In April, EPA proposed a rule to increase the GWP of methane from 21 to 25 (CO2 is 1). If adopted, this rule would require sources to increase their GHG emission estimates from methane by nearly 20%. EPA did not, however, address the proposed rule's potentially significant impact on permitting of stationary sources under the CAA. For example, increasing the GWP of methane may trigger major source permitting requirements for sources that previously qualified as minor sources, including the requirements to apply for Title V permits and comply with Prevention of Significant Deterioration (PSD) requirements. Additionally, previously exempt sources may now exceed minor source permitting triggers under the Indian minor source permitting program.

    In related action in May of 2013, the Interagency Working Group on the Social Cost of Carbon (including EPA, Department of Energy, and the Council on Environmental Quality) increased estimates of the social cost of carbon emissions, providing greater economic incentives and justification for Administrative actions to reduce GHG emissions. In reaction, Representatives Duncan Hunter (R-CA) and Nick Rahall (D-WV) introduced a bi-partisan House Bill (H.R. 2593) to require public comment before a Regulatory Impact Analysis such as the cost of carbon document can be adopted.

    President Obama's Climate Plan comes as the Administration is facing pressure from industry, states, and environmental groups to address emissions of methane:

    • In December of 2012, seven northeastern states filed a notice of intent to sue EPA for failure to regulate methane emissions from the oil and gas sector. In response, 13 mid- and western states sent a letter to EPA cautioning the agency against regulating methane emissions through a "sue-and-settle" approach.
    • Environmentalists have filed suits against EPA as well as the Bureau of Land Management (BLM), demanding regulation of methane emissions from the oil and gas sector.2 The BLM suit was recently dismissed on standing grounds by a Montana District Court, which held that the environmental groups did not establish that methane emissions from the challenged BLM leases will cause local impacts through global warming.
    • This week, environmentalists filed a petition for review in the D.C. Circuit Court demanding that EPA take action to limit methane emissions from coal mines and develop a new source performance standard for coal mine emissions.3
    • An industry suit filed in November 16, 2012 alleges that EPA has overestimated the global warming potential of methane.4

    1President Obama, quoted in Kevin Begos, Obama Fracking Support In Climate Speech Worries Environmental Groups, Associated Press, June 27, 2013.
    2See NRDC v. EPA, USCA Case No. 12-1409, filed Oct. 15, 2012 in the D.C. Circuit Court of Appeals; Montana Envtl. Info. Ctr. v. U.S. Bureau of Land Mgmt., Case No. 4:11-cv-00015 (D. Mont. June 14, 2013).
    3Wildearth Guardians v. E.P.A., Petition for Review, filed with the D.C. Circuit Court, July 8, 2013.
    4Am. Forest & Paper Ass'n v. EPA, filed with the D.C. Circuit Court, Nov. 16, 2012.