In 2021, new rules were issued and proposed to address safety and environmental issues concerning the midstream industry.  For safety issues, the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (the “PHMSA”) issued a final rule that subjects all gas gathering lines (even if previously unregulated) to federal oversight and federal minimum safety standards.  In regard to environmental issues, the EPA released a proposed rule that would limit emissions of methane from new and existing facilities in the production, gathering, processing, and transmission and storage segments of the oil and gas sector. 

I. PHMSA Final Rule

On November 2, 2021 PHMSA issued a final rule expanding federal oversight, which now includes certain major transmission and distribution pipelines, to also include all onshore gas gathering pipelines.¹  The final rule increases federal oversight in two ways: (1) for the first time, it requires operators of all onshore gas gathering lines to report safety incidents and file annual reports with PHMSA; and (2) it subjects previously unregulated gathering lines in rural areas to federal minimum safety standards by establishing a new category of regulated gathering line.² The final rule will become effective six months after its publication in the Federal Register.³  

With this rule, PHMSA states that it is seeking to close a “regulatory gap.”⁴ The agency notes that there are more miles of unregulated natural gas gathering lines than regulated transmission lines—and this rule aims to bring the more than 400,000 miles of such gathering lines under PHMSA oversight.⁵

Gas gathering lines are pipelines used to gather natural gas from production sites and deliver it to transmission lines or distribution main lines.  Unlike natural gas transmission lines, which are regulated regardless of their location, many natural gas gathering lines were exempt from federal safety regulation because they are typically lower-pressure, smaller-diameter pipelines located in lesser-populated, rural areas.⁶  However, increased natural gas production, together with substantial new or re-conceptualized natural gas transportation infrastructure built out over the last fifteen years, have resulted in the construction of gas gathering lines that share many of the same (or substantially similar) physical, functional, and operational characteristics and risks as gas transmission lines.⁷  This, along with the occurrence of incidents involving unregulated gathering lines, has prompted PHMSA to expand its oversight of gas gathering lines.⁸

As noted above, PHMSA’s final rule increases federal oversight through two primary means:

A. Reporting Requirements

The final rule requires operators of all onshore gas gathering lines to report incidents and file annual reports with PHMSA.⁹  Operators of newly regulated gathering lines must submit an annual report for the first time no later than March 15, 2023 that covers operations in 2022.¹⁰

PHMSA’s rationale for this requirement is that reports “will provide data for monitoring the safety performance of these pipelines and a sound basis for evaluating if future regulatory changes are needed.”¹¹

B. Creation of New Category of Regulated Gathering Pipelines and Associated Safety Requirements

The final rule creates a new classification of regulated gathering line known as Type C.¹²  Type C lines are gathering lines that: (1) are located in Class 1 locations, the most sparsely populated of PHMSA’s four-tier system, (2) have outer diameters of 8.625 inches or greater, and (3) operate at higher stress levels or pressures.¹³  Prior to the issuance of this rule, gathering lines in Class 1 locations were exempt from federal safety requirements.¹⁴  Under the rule, these gathering lines must meet federal minimum safety requirements which vary based on the outer diameter of the pipeline and its proximity to populated areas.¹⁵ These requirements are summarized in the table below.¹⁶

 

Applicability of Type C Requirements Based on Size and Location of a Given Segment17
Outside diameter	Not located near a building intended for human occupancy or other impacted site (§ 192.9(f))	Located near a building intended for human occupancy or other impacted site (§ 192.9(f))
Greater than or equal to 8.625 inches up to and including 12.75 inches	- Design, Construction, Initial Testing (new/replaced/relocated/changed lines) - Damage Prevention, - Emergency plans	- Design, Construction, Initial Testing (new/replaced/relocated/changed lines) - Damage Prevention - Emergency Plans - Corrosion Control - Line Markers - Public Awareness - Leakage Surveys
Greater than 12.75 inches up to and including 16 inches	- Design, Construction, Initial Testing (new/replaced/relocated/changed lines) - Damage Prevention - Emergency Plans	All Type C Requirements
Greater than 16 inches	All Type C Requirements	All Type C Requirements

 

 

In addition to the reporting requirements, operators of Type C gathering lines must take two actions to comply under the final rule.  First, operators must identify the endpoints of Type C lines on or before six months after the effective date of the final rule.¹⁸  Second, operators must achieve compliance with the applicable Type C requirements no later than 1 year after the effective date of this rule, unless PHMSA approves an alternative compliance schedule for the operator.¹⁹

PMHSA projects the rule will cost operators approximately $13.7 million in total per year, with new requirements for leakage surveys required for some Type C lines accounting for more than half of the annual costs.²⁰

II. EPA Proposed Rules

The EPA released a proposed rule on November 2, 2021 to impose additional restrictions on emissions of methane, or natural gas, from new and existing facilities owned by companies in the production, gathering, processing, transmission and storage segments of the oil and gas sector.²¹  This is the first time such restrictions would be extended to existing facilities.²²

Companies across the oil and gas industry should be somewhat familiar with the proposed rule and its potential impacts.²³  This proposed rule is not entirely new; the Obama Administration EPA promulgated a New Source Performance Standards (“NSPS”) rule in 2016 addressing methane emissions from new, modified, and reconstructed facilities in the oil and gas sector, which the Trump Administration EPA rescinded in 2020.²⁴  This proposed rule reintroduces the 2016 methane NSPS for new facilities and extends it to regulate existing facilities.²⁵  The EPA held hearings on the proposal in November/December 2021 and sought comments on the proposal, which were due in January 2022.²⁶  The EPA is currently reviewing those comments.²⁷

As compared to the 2016 standards promulgated by the Obama Administration, the proposed rule is greater in scope and more stringent, as indicated in the following table²⁸ and the descriptions below:

1. Key Features of Proposed Rule

   The EPA identifies the following as the key features of the proposed rule:

   • comprehensive monitoring program for new and existing well sites and compressor stations (as further described in Section II(B));
     
     
   • compliance option that allows owners and operators the flexibility to use advanced technology that can find major leaks more rapidly and at lower cost than ever before;
     
     
   • zero-emissions standard for new and existing pneumatic controllers (with a limited alternative standard for sites in Alaska), certain types of which account for approximately 30 percent of current methane emissions from the oil and natural gas sector (as further described in Section II(D));
     
     
   • standards to eliminate venting of associated gas, and require capture and sale of gas where a sales line is available, at new and existing oil wells (as further described in Section II(C));
     
     
   • proposed performance standards and presumptive standards for other new and existing sources, including storage tanks, pneumatic pumps, and compressors (as further described in Section II(E)); and
     
     
   • requirement that U.S. States meaningfully engage with overburdened and underserved communities, among other stakeholders, in developing state plans.²⁹
     
     
2. Leak Detection and Repair
   
   The proposed rule would require companies to undertake a monitoring program in order to detect and prevent methane emissions at well sites and compressor stations.³⁰  Any facilities that emit three or more tons of methane per year would be subject to a quarterly survey requirement.³¹
   
   
3. Venting and Flaring
   
   The proposed rule would stop producers from venting methane and associated gaseous hydrocarbons from oil wells, instead, requiring them to route the natural gas to a pipeline for sales.³²  Producers that do not have access to a pipeline would be required to use the natural gas on-site or else install and operate equipment to reduce the methane emissions by 95%.³³  However, the proposed rule does not ban flaring.³⁴
   
   
4. Pneumatic Controllers
   
   The proposed rule would regulate a greater number and variety of pneumatic controllers at all levels of production, gathering, processing, and transmission and storage facilities, requiring them to reduce methane emissions by 95%, and also considers the practicability of a requirement that pneumatic controllers have zero emissions.³⁵
   
   
5. Storage Tanks 
   
   The proposed rule would extend methane reduction requirements to tank batteries adjacent to natural gas storage tanks.³⁶  Tank batteries with methane emissions in excess of a certain volume would be required to reduce those emissions by 95%.³⁷  The proposal also would extend leak monitoring requirements to tank hatches or openings at tank batteries and storage tanks.³⁸

Baker Botts’ full-service energy practice regularly advises clients on federal regulatory compliance for gas gathering systems as well as other categories of pipelines.  If you need assistance with respect to the new PHMSA rule, the proposed EPA regulation, or any other matter related to the regulation, construction, or operation of U.S. pipelines and associated facilities, please contact Scott Looper at scott.looper@bakerbotts.com, Emil Barth at emil.barth@bakerbotts.com, or Gerry Morton at Gerry.morton@bakerbotts.com.

¹Final Rule: Safety of Gas Gathering Pipelines: Extension of Reporting Requirements, Regulation of Large, High-Pressure Lines, and Other Related Amendments - Federal Register Submission | PHMSA (last updated, November 2, 2021); Gas Gathering Final Rule Submission - 11.2.2021.pdf (dot.gov), 9.
²Gas Gathering Final Rule Submission at 9-10.
³The final rule has been submitted to the Office of the Federal Register for publication.  As of 11/4/21, it has not yet been published.
⁴Infra note 2, at 27.
⁵Id.
⁶Id. at 5.
⁷Id. at 6. 
⁸See id. at 26.
⁹Id. at 9.
¹⁰Id. at 41.
¹¹Id. at 82.
¹²Id. at 10.
¹³Id.
¹⁴Id. at 4.
¹⁵Id. at 67.
¹⁶Id. 
¹⁷Id.
¹⁸Id. at 59.
¹⁹Id. at 70.
²⁰Id. at 11.
²¹Proposed Rule: Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for Existing Sources: Oil and Natural Gas Sector Climate Review – Federal Register Submission | EPA, Docket No. EPA-HQ-OAR-2021-0317 (last updated November 15, 2021) (“Proposed Rule”); see EPA Proposes New Source Performance Standards Updates, Emissions Guidelines to Reduce Methane and Other Harmful Pollution from the Oil and Natural Gas Industry | US EPA, Nov. 2, 2021 (last visited Jan. 23, 2022) (“EPA Reference Page”); see also New EPA Methane Regulations for Oil and Gas Companies Proposed, National Law Review, https://www.natlawreview.com/article/epa-proposes-new-methane-regulations-oil-and-gas-facilities (last visited Jan. 23, 2022) (“New EPA Methane Regulations”).
²²See EPA Reference Page; see also New EPA Methane Regulations.
²³See New EPA Methane Regulations.
²⁴Id.
²⁵Id.
²⁶Id.
²⁷Id.
²⁸See EPA Reference Page.
²⁹U.S. to Sharply Cut Methane Pollution that Threatens the Climate and Public Health | US EPA, Press Release, Nov. 2, 2021 (last visited Jan. 23, 2021).
³⁰See New EPA Methane Regulations.
³¹Id.
³²Id.
³³Id.
³⁴Id.
³⁵Id.
³⁶Id.
³⁷Id.
³⁸Id.

Visit 2021 – Traditional Energy Rebounds and Increased Energy Transition, for the complete list of individual, detailed articles associated with this publication.

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