On January 19, 2016, Pennsylvania Governor Tom Wolf announced a framework for reducing methane emissions from the oil and gas sector in the state. The Governor touted that as the second-largest producer of natural gas in the nation, “Pennsylvania is uniquely positioned to be a national leader in addressing climate change . . .” and pledged to implement some of the most stringent or “best-in-class” methane regulations in the country.
 
The need and legality of such regulations remains to be seen. According to Pennsylvania Department of Environmental Protection (“PADEP”), there are 545 compressor stations at Marcellus Shale facilities, 3,264 well pads and 12,000 miles of pipeline in the Commonwealth that were responsible for more than five million thousand cubic feet (almost 115,000 tons) of methane emissions from unconventional wells in Pennsylvania in 2014. On top of reported methane emissions, PADEP indicated a conservative estimate of 1 percent leakage of natural gas from Pennsylvania production equating to 900,000 tons of methane worth in excess of $60 million.
 
The Governor provided an overview of a four-point plan to reduce methane emissions:
 

• Issue a General Permit to replace the August 2013 Category No. 38 conditional permit exemption criteria issued for oil and gas exploration, development, and production facilities including well pads.

The new general permit will make Pennsylvania the national leader in controlling emissions from unconventional natural gas wells. PADEP intends to establish Best Available Technology (“BAT”) requirements at unconventional gas well pads for sources including dehydrators, engines, turbines for compressor engines at well pads, pigging operations, liquid unloading venting, gas processing units, storage tanks and truck load-outs.
 

• Revise the current general permit for new and modified Natural Gas Compression and/or Processing Facilities (“GP-5”) such that it becomes the model for other states.

PADEP will do the following:

• Update BAT requirements including the Leak Detection and Repair (“LDAR”) program for new sources.
• Amend the requirements for affected sources.
• Expand the applicability of GP-5 to cover sources located at natural gas transmission stations.
• Establish more stringent requirements for affected sources.

• Develop a regulation for consideration by the Environmental Quality Board that establishes stringent requirements for existing sources in the oil and natural gas industry.
• Establish Best Management Practice (“BMPs”), including LDAR programs, to reduce fugitive CH4 emissions from production, gathering, processing and transmission facilities.

The details of the proposed changes to Category No. 38 and GP-5 are vague at this point, but Appendix A to the Briefing Paper provides some insight on the direction of the Administration and is available on the PADEP’s website.
 
Governor Wolf’s proposal to issue a general permit to replace the August 2013 Exemption No. 38 could be of some benefit to industry, but the devil is in the details. The potential “benefit” also is dependent on how the Environmental Protection Agency (“EPA”) finalizes its proposed New Source Performance Standards for methane from the oil and natural gas sector (Subpart OOOOa).
 
As a whole, industry largely argued that compliance with state permitting programs for oil and natural gas sources should be deemed compliance with proposed Subpart OOOOa and finalized Subpart OOOO regulations. Since Exemption No. 38 does not constitute a “permit” and is not federally enforceable, converting Exemption No. 38 to a general permit could be a benefit to industry if EPA accepts industry’s state primacy argument as compliance with the new general permit would be deemed compliance with the federal regulations. The risk remains that PADEP will add additional and more stringent requirements beyond what is currently “required” in Exemption No. 38. Based on Attachment A, it appears Governor Wolf intends to do just that.
 
Most notably, the LDAR requirements would be considerably more stringent than the federal requirements – requiring quarterly LDAR inspections using a Forward Looking Infrared (“FLIR”) camera or “another DEP-approved device” and monthly audio visual olfactory inspections of the entire well site (not just the tank covers and closed vent system per federal regulations). Upon discovery of a leak, it appears PADEP proposes to require that the “first attempt” to repair the leak occur within five calendar days of the leak discovery as compared to 15 days under the federal regulations. In contrast to EPA’s proposed Subpart OOOOa regulation of pneumatic pumps driven by compressed natural gas, which require control of emissions only if there is an existing control device on site, PADEP seems prepared to require at least 95 percent reduction of emissions even if no control device currently exists at the site. Even EPA recognized such a requirement would be prohibitively expensive and not cost-effective.
 
Two other emissions sources where PADEP seems to be willing to “lead” the charge on controls are emissions associated with pigging and liquids unloading. Based on Attachment A, it appears PADEP will require the operations of pig launchers without venting methane and hydrocarbon into the atmosphere. Whether that is possible and at what cost has yet to be determined. Similarly, PADEP indicates it will require best management practices for liquids unloading. This is curious in that EPA acknowledged that the unique characteristics of each well make it difficult to dictate a particular emission control or set of controls for liquids unloading. Certain aspects of liquids unloading may lend themselves to best management practices. But, the diversity of techniques associated with liquids unloading and EPA’s findings to date seem to indicate it will be difficult to craft a “one-size-fits-all” approach to reducing emissions associated with liquids unloading.                   
Many of the issues associated with “converting” Exemption No. 38 to a general permit and discussed above carry over to Governor Wolf’s proposed “expansion” of the GP-5 (etc., controlling pigging emissions, LDAR, controls on pneumatic pumps). While it is clear PADEP intends to expand the scope of GP-5 to include natural gas transmission stations, it’s unlikely the proposed “updates” to the BAT requirements will be favorable to the industry. What is clear is that Governor Wolf is intent on aggressively regulating the oil and natural gas industry in Pennsylvania. The cost-effectiveness and legality of those proposed approaches has yet to be seen and likely will be challenged in court.

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