Conventional oil and gas producers sue to halt VOC rulemaking

The following article will appear in the May 2022 issue of The PIOGA Press. Note: This posting was updated on May 6 to include new developments.

PIOGA has joined with the state’s two conventional oil and gas producers’ associations in a Commonwealth Court lawsuit to halt implementation of regulations controlling emissions of volatile organic compounds (VOCs) from existing oil and gas operations. PIOGA, the Pennsylvania Grade Crude Oil Coalition (PGCC) and the Pennsylvania Independent Petroleum Producers (PIPP) charge that the Environmental Quality Board (EQB) and the Department of Environmental Protection have failed to follow a law requiring that rulemakings concerning conventional oil and gas wells and unconventional wells must be promulgated separately.

In a pair of April 25 filings, the associations ask the Commonwealth Court to immediately halt final publication of the rulemaking known as “Control of VOC Emissions from Oil and Natural Gas Sources” unless the scope of the rule is clarified to apply only to unconventional wells, well sites and associated equipment and emissions sources. EPA estimates that only 14 percent of well site fugitive emissions come from sites with lower-producing wells―those that produce less than 15 barrels of oil equivalent (boe) a day.

The regulation, which has been under development since early 2019 even though the federal guidelines driving the rulemaking were issued in 2016, adopts what is known as reasonably available control technology requirements (RACT) and RACT emission limits for new and existing oil and natural gas sources of VOC emissions. By reducing VOC emissions, methane emissions are also reduced. The rule would require oil and gas operators that produce above the 15 boe/day threshold to use leak detection and repair (LDAR) equipment to identify and address leaks, as well as employ other equipment designed to reduce emissions (January PIOGA Press, page 1). DEP estimates the rule will cost the oil and gas industry $31.7 million annually, but EQB did not separately and independently attribute the amounts to conventional oil and gas wells and unconventional wells.

By a vote of 17-2, the EQB on March 15 approved the final regulation and submitted it to the Independent Regulatory Review Commission (IRRC), which was scheduled to consider the final rule at its May 19 public meeting. However, on May 4 EQB withdrew, without explanation, the final rule from IRRC’s consideration at that meeting, stating that the “rulemaking will be resubmitted at a later time.”

Act 52

Section 7(b) of Act 52 of 2016 provides that:

Future rulemaking ― Any rulemaking concerning conventional oil and gas wells that the Environmental Quality Board undertakes after the effective date of this act shall be undertaken separately and independently of unconventional wells or other subjects and shall include a regulatory analysis form submitted to the Independent Regulatory Review Commission that is restricted to the subject of conventional oil and gas wells. (Emphasis added)

Pennsylvania’s conventional oil and natural gas wells differ substantially from their unconventional counterparts in many ways—the well site footprint, associated equipment, production volumes and, in this case, VOC emissions. It’s only proper that regulations consider the two types of operations separately, as has been the stated public policy of the Commonwealth since the enactment of Act 126 of 2014 and reconfirmed by Act 52 in 2016.

PIOGA, PGCC and PIPP assert in the April 25 Commonwealth Court petition that the EQB, the entity that formally promulgates DEP’s regulations, “failed to undertake the VOC Rule separately and independently of unconventional wells or other subjects when it adopted the proposed rule for publication in the Pa. Bulletin on May 23, 2020, and has proceeded with its unlawful rulemaking to this day.”

Additionally, the EQB did not make RACT determinations for VOC emissions sources related to conventional oil and gas wells separately and independently of those for unconventional wells.

Further, as part of the rulemaking package the board failed to submit a regulatory analysis form (RAF) restricted to the justification for, and impact of, the rule on conventional oil and gas wells, “and the failure to provide that statutorily required information to IRRC and the public continues to this day,” the three associations told the court.

Previous PIOGA and PGCC comments

This is not the first time PIOGA has objected that EQB, acting through DEP, is not complying with Act 52 with this rulemaking. When EQB published the proposed VOC rule for public comment in May 2020, PIOGA submitted comments highlighting the department’s noncompliance with Act 52. Similarly, PCGG submitted comments concluding that based on its understanding of Section 7(b) of Act 52, the proposed rule would not apply to conventional oil and gas operations, and provided this concise explanation of the basis for the associations’ lawsuit:

The procedural failure to treat the conventional industry via a separate regulatory framework and the consequential failure to properly interface with the industry, has corrupted the rulemaking process, at least to the extent the process purports to relate to the conventional oil and gas well industry. That corruption is a bell that cannot be unrung no matter what comments PGCC submits today and no matter what response DEP might provide to those comments. Indeed, the substantive comments PGCC submits, below, are necessarily handicapped because PGCC lacks the benefit of interface with DEP to understand the applicability of the proposed rule, its scope, what conditions DEP assumed to arrive at cost estimates, what data, if any, DEP has assembled relative to conventional oil and gas industry emissions, and the like, and DEP lacks the interface with the industry to have appropriately discussed need, costs, prevailing conditions, data, alternatives and the like.

Despite these objections, the EQB on March 15, 2022, approved the rulemaking without limiting the scope to preclude its application to the conventional industry.

Flawed reasoning for disregarding Act 52

Indeed, in the comment and response document prepared ahead of consideration of the final rule, the EQB uses reasoning and arguments that fall apart under even minimal scrutiny. For example, the EQB discounts the applicability of the 2016 law, by attempting to distinguish a “well” from a “well site” in a misplaced effort to avoid Act 52’s unambiguous mandate. “But the plain meaning of the phrase ‘concerning conventional oil and gas wells’ is clear and unambiguous, and it must include well sites, as a well cannot exist without a well site,” the three associations state in the petition to the Commonwealth Court. EQB also mistakenly relies upon provisions of Act 52 applicable to the PA Crude Development Advisory Council (CDAC) and DEP to try to limit the scope of the clear language of the provisions applicable only to EQB.

“Act 52 plainly requires EQB rulemakings concerning both conventional oil and gas wells and unconventional wells to be undertaken in a manner that separately and independently address the differences between the two types of wells,” the producer groups assert.

The producers’ filing also points out there is no conflict between the EQB’s obligations under Act 52 and its obligations under the federal Clean Air Act (CAA) and the U.S. Environmental Protection Agency’s 2016 Oil and Gas Control Technique Guidelines (CTG) that were the impetuous for Pennsylvania’s VOC rulemaking. The CAA and the EPA’s 2016 CTG allow and require consideration of alternatives within source categories.

“EQB could have complied with both federal substantive law under the CAA and the 2016 O&G CTG and Pennsylvania procedural law mandated by Section 7(b) of Act 552 and the RRA, but it chose not to do so,” the associations state. “The failure of EQB to formulate the regulations required by the CAA and the 2016 O&G CTG in a timely manner to avoid the imposition of federal sanctions is the fault of EQB—not the Conventional Producers and their members—and does not excuse EQB’s failure to comply with the mandated of Section 7(b) of Act 52.”

The three associations ask that the Commonwealth Court declare the VOC rulemaking unlawful to the extent that it applies to conventional oil and gas wells, well sites and associated equipment and emission sources as well as to immediately halt final implementation of the regulation if its applicability is not limited to unconventional wells, well sites and associated equipment and emission sources.

A hearing on the associations’ requests for expedited relief and a preliminary injunction against publication of the final rule as it is now written was scheduled for May 10 in Commonwealth Court.

On May 5, DEP/EQB filed an answer to the association’s requests. PIOGA General Counsel Kevin Moody had these comments on that filing: “It doesn’t answer the factual statements in our petition, and it addresses issues involved in the 2016 PIPP litigation concerning the 2014 Fiscal Code provision that required separate regulatory treatment for conventional wells, and even attaches a copy of the judge’s decision in that litigation. But it doesn’t help the court’s consideration of our requests because it doesn’t address the issues involved in this litigation.”

On May 6, the associations and DEP/EQB asked the court to continue the May 10 hearing and stay all deadlines concerning the hearing, as DEP is reevaluating the final rulemaking and intends to resubmit it to EQB. The May 6 joint filing also asks the court to require the associations and DEP/EQB to file, no later than June 3, a status report regarding their settlement discussions.

PIOGA, PIPP and PGCC are represented by PIOGA member Babst Calland in this action.

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