On April 17, 2012, the United States Environmental Protection Agency ("USEPA") finalized its long-anticipated updated New Source Performance Standards ("NSPS") and National Emissions Standards for Hazardous Air Pollutants ("NESHAP") for the oil and gas sector, which include first-time federal air standards for hydraulically fractured natural gas wells. This suite of regulations, issued under the federal Clean Air Act, was finalized pursuant to a Consent Decree entered by the D.C. District Court in conjunction with a lawsuit filed against USEPA in January 2009 by WildEarth Guardians and the San Juan Citizens Alliance. The rules will be published in the Federal Register in the coming weeks, and will take effect 60 days following publication.

Perhaps most significantly, the new rule package ultimately requires owners and operators of natural gas wells that are hydraulically fractured to reduce emissions of volatile organic compounds ("VOCs") during well completion operations through the use of reduced emissions completions ("RECs" or "green completions"). For purposes of the new regulations, "reduced emission completion" is defined as "well completion following fracturing or refracturing where gas flowback that is otherwise vented is captured, cleaned, and routed to the flow line or collection system, re-injected to the well or another well, used as an on-site fuel source, or used for other useful purpose that a purchased fuel or raw material would serve, with no direct release to the atmosphere." Green completions are not required for new exploratory wells or delineation wells, or for hydraulically fractured "low pressure" gas wells, which instead must capture and direct flowback emissions to a completion combustion device.

In response to comments from the industry, USEPA has established a two-phased approach to implementing this requirement to allow sufficient time for the order and manufacture of the necessary REC equipment. During the initial phase, which lasts until January 1, 2015, owners and operators can elect to reduce VOC emissions by flaring using a completion combustion device that burns off the gas that would otherwise escape as an alternative to RECs, unless state or local requirements prohibit such combustion or combustion would be a safety hazard. Owners and operators who pursue this option remain subject to "a general duty to safely maximize resource recovery and minimize releases to the atmosphere during flowback and subsequent recovery." The second (and final) phase begins on January 1, 2015, at which point owners and operators must achieve VOC emissions reductions through RECs. To encourage the use of green completions earlier than required, the new rules provide that refractured and recompleted natural gas wells will not be considered "modified"-and therefore will not be considered affected facilities-if well owners and operators use RECs rather than flaring to reduce emissions following such refracturing, as long as the advance notification, recordkeeping and annual reporting requirements for new wells are met. In justifying this exemption in the Preamble to the final rule, USEPA reasons that the increase in emissions from natural gas wells that have implemented these controls will be de minimis.