IRRC echoes many of PIOGA’s concerns about DEP’s VOC rulemaking

The following is from the October 2020 issue of The PIOGA Press.

The state entity that reviews proposed regulations to ensure they are in the public interest and meet all statutory requirements has raised many of the same concerns as PIOGA over a Department of Environmental Protection rulemaking to control emissions of volatile organic compounds (VOCs) from existing oil and gas sources.

In particular, the Independent Regulatory Review Commission (IRRC) asked in comments published in the September 5 Pennsylvania Bulletin how the proposed regulations comply with Act 52 of 2016, which requires that regulations for conventional and unconventional operations be promulgated separately; ordered the Environmental Quality Board (EQB), the entity to formally promulgates regulations on behalf of DEP, to provide a revised estimate of the cost burden of the regulations using current data; asked EQB how it would respond to the current lifting of federal requirements that mandate the VOC regulations; and asked what the impact of the rule will be on small businesses. These issues are echoed in formal comments submitted by PIOGA on July 27 (August PIOGA Press, page 1).

IRRC reviews all regulations formally proposed by state agencies (except for the Game Commission and the Fish and Boat Commission) to make certain that the agency has the statutory authority to enact the rule and to determine whether the regulation is consistent with legislative intent. IRRC then considers other criteria, such as economic impact, public health and safety, reasonableness, impact on small businesses, and clarity. Agencies must consider IRRC’s comments as they develop the final version of regulations.

As described in depth in the June issue of The PIOGA Press, what is commonly known as the “CTG RACT Rule” was published by the EQB on May 23 and is based on the U.S. Environmental Protection Agency’s 2016 Control Techniques Guidelines (CTG) which provide reasonably available control technology (RACT) requirements for VOC emissions from existing oil and gas sources. The rule will impact most conventional and unconventional oil and gas operations with requirements that apply to storage vessels, natural-gas-driven pneumatic controllers, natural-gas-driven diaphragm pumps, compressors, fugitive emissions components and other equipment.

PIOGA’s July 27 comments assert the regulations are inappropriate, would disproportionately impact conventional producers and fail to comply with Act 52 of 2016, requiring separate regulations for conventional and unconventional operations.

IRRC’s comments

The commission looked both at the proposed regulation in broad terms and at specific provisions. These were among the broad concerns and observations:

Statutory authority. Act 52 requires any rulemaking concerning conventional oil and gas wells considered by the EQB must ”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.” The IRRC pointed out that lawmakers and commentators stated that the EQB has violated clear legislative directives by proposing a VOC emissions rule that includes requirements for conventional oil and gas well owners and operators, along with, not ”separately and independently” from requirements for unconventional well operations. Also, the EQB has not prepared or submitted the necessary Regulatory Analysis Form  (RAF) restricted to the need and impact of the rulemaking on the conventional oil and gas industry. Lawmakers request that the provisions that apply to the conventional oil and gas industry be withdrawn from the rulemaking. The IRRC directed the EQB to explain “how it has and will comply with the legislative directives of the Act.”

Economic or fiscal impacts. The fiscal analysis provided by the EQB estimates that the proposed regulation will cost operators approximately $35.3 million (based on 2012 dollars) without consideration of the economic benefit of natural gas captured because of the regulations. The value of the saved natural gas, in 2012 dollars, will yield a savings of approximately $9.9 million, resulting in a total net cost of $25.4 million. These figures were based on 2012 EPA cost estimates contained in the 2016 CTG.

The IRRC pointed out that commentators questioned the accuracy of the fiscal analysis because the supporting data is outdated and is not specific to Pennsylvania’s oil and gas industry.

“We agree with the concerns raised by interested parties,” the IRRC wrote. “In order for this Commission to determine whether this rulemaking is in the public interest, the EQB must submit a revised estimate of the costs and/or savings to the regulated community using data that is current and Pennsylvania industry-specific.”

Need for the regulation. Representatives from the oil and gas industry observe that no analysis has been shared by the EQB to support DEP’s conclusion that the proposed requirements that are more stringent than EPA’s 2016 CTG ”are reasonably necessary” to achieve or maintain the National Ambient Air Quality Standards (NAAQS). Commentators question the need to exceed the 2016 CTG when Pennsylvania is near universal compliance with the 1997, 2008 and 2013 ozone standards. They explain that the state is not required to rely on the recommendations of the 2016 CTG to establish the proposed rulemaking. Instead it could make RACT determinations for a particular source on a case-by-case basis considering the technological and economic feasibility of the individual source. Section 11 of the RAF also states that DEP determined that owners and operators must conduct quarterly LDAR inspections at their facilities, as opposed to the recommended semiannual frequency in the 2016 CTG.

“We ask the EQB, with each of the examples above, to explain the need for each provision and how determinations were made, as well what data was used to the justify the exemptions or more stringent regulations,” the commission wrote.

Impacts on small businesses. The Regulatory Review Act requires agencies to provide a regulatory flexibility analysis and to consider various methods of reducing the impact of the proposed regulation on small business. The IRRC pointed out that commentators do not believe that the EQB has met its statutory requirement of providing a regulatory flexibility analysis or considering how to reduce the impact the proposed regulation will have on small business. Further, it was noted that a number of commentors contend that the affected operators are indeed small businesses and that the cost burden of the regulations will not be minimal. The IRRC asked the EQB to provide the required regulatory flexibility analysis when it submits the final-form rulemaking.

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