By Corinne Snow and Nathan Campbell
On May 14, 2024, the U.S. Environmental Protection Agency (“EPA”) published the final version of its revisions to the Greenhouse Gas Reporting Program (“GHGRP”) regulations for the oil and gas sector, often referred to as “Subpart W.” EPA’s revisions are driven in large part by the Inflation Reduction Act of 2022 (“IRA”), which both imposed a waste emissions charge (“WEC”) on excess methane emissions at facilities that emit more than 25,000 metric tons of carbon dioxide equivalent (“CO2e”), as reported according to Subpart W, and directed EPA to revise the Subpart W reporting regulations to ensure that waste emissions charges are “based on empirical data” and “accurately reflect” the methane emissions from applicable facilities. As a result, Subpart W (and EPA’s ongoing revisions, now finalized) has taken on increased importance.
Here, we summarize several key elements of the final rule that impact Subpart W reporters going forward, including new emission source types added to Subpart W’s reporting segments, including “other large release events,” modifications to certain calculation methodologies, changes to the general reporting structure, and EPA’s treatment of advanced measurement technologies.
What is the WEC?
Starting in 2024, the WEC is a new fee imposed on methane emissions at facilities that emit more than 25,000 metric tons of CO2e, as reported in Subpart W, for: (1) the onshore and offshore production sector; (2) the onshore natural gas gathering and boosting, processing, transmission, and storage sector; and (3) the liquified natural gas (“LNG”) storage, export, and import sector. Subpart W rules define a “facility” in the production and gathering and boosting sectors as the combination of all individual units under common ownership or control in a single hydrocarbon basin.
The WEC is determined based on the methane emissions that an owner or operator reports for the facility under Subpart W and the amount of oil or gas sent to sale from the facility. As a result, EPA’s changes in the Subpart W reporting requirements will directly impact the amount that reporters owe. The WEC only applies to methane emissions that exceed an “emissions threshold,” which differs based on the type of facility being taxed. In plain terms, these emissions thresholds are congressionally approved methane emission rates that will incur no WEC. For example, production facilities are not taxed on emissions of up to 0.2 percent of the natural gas sent to sales, while gas processing, gathering and boosting, and LNG facilities are not taxed on emissions of up to 0.05 percent of natural gas sent to sale to or through the facility.
When do these reporting requirements go into effect?
The final rule will have a phased-in implementation schedule. The bulk of the rule’s revisions will become effective on January 1, 2025, and will be implemented by reporters beginning with reports prepared for RY 2025 (and submitted by March 31, 2026). This means the revised rule will impact the WEC amount for reporters starting in 2025.
One exception is the reporting of the quantities of natural gas, crude oil, and condensate product that is sent to sale in the calendar year for each well permanently taken out of production (i.e., plugged and abandoned); those provisions would become effective on January 1, 2025 and reporters must include that information in their reports prepared for RY 2024 (and submitted by March 31, 2025).
The final rule provides the option for reporters to use the new calculation methodologies finalized in the rule to quantify their RY 2024 emissions (for reports submitted by March 31, 2025). This is meant to allow reporters an empirical basis to demonstrate the extent to which a WEC is owed during the first year of the WEC program, which applies to RY 2024 emissions by virtue of the IRA. These optional calculation methodologies (listed at Table 5 in the preamble of the final rule) will become effective July 14, 2024.
New and Additional Emission Sources
The final rule both adds new emission sources to Subpart W and extends certain existing emission sources to new industry segments. By expanding the “sources” subject to reporting, EPA is also expanding the universe of emissions subject to the WEC. Those new emission sources (and their associated industry segment) include nitrogen removal units, produced water tanks, drilling mud degassing, and crankcase venting.
All charts are sourced from the EPA.
And the following industry segments will soon need to report emissions from the following existing emission sources:
In addition, for many of these existing emission sources, the final rule itself changes the associated calculation methodology and reporting requirements, meaning that newly included reporting segments will need to review those changes to ensure compliance with Subpart W and proper calculation and payment of the WEC.
Other Large Release Events
For all industry segments, EPA finalized a new emission source meant to include methane emissions (and other activity data) from “other large release events,” which includes both intentional and unintentional release events that are not fully accounted for elsewhere in Subpart W. The threshold for “other large release events” includes only events with an instantaneous methane emission rate of 100 kilograms per hour (“kg/hr”) or greater, or (for events associated with calculation methods elsewhere in Subpart W) with instantaneous methane emission rates of 100 kg/hr greater than the emissions estimated using those other Subpart W methods.1 For those who were following the proposed rule, this eliminates the per-event reporting threshold of 250 metric tons CO2e, which EPA declined to finalize due to concerns that it could capture events with relatively small emission rates that occur for prolonged periods of time and that would otherwise be captured by source-specific Subpart W requirements. In another change from the proposed rule, EPA excluded blowdowns for which emissions are already calculated under Subpart W at section 98.233(i).
Despite pulling back from some proposed requirements, reporting “other large release events” is likely to create challenges, as highlighted by EPA’s instructions for just how to measure the emissions from these events. Reporters are to use measurement data, if available, or a combination of engineering estimates, process knowledge, and best available data, when measurement data are not available. Reporters are permitted to use advanced measurement technologies (e.g., systems mounted on vehicles, drones, helicopters, airplanes) to help estimate the total volume of emissions released during the event, although the system must be capable of identifying events at the 100 kg/hr threshold at a 90 percent probability of detection as demonstrated by controlled release tests.
To calculate the start date of an “other large release event,” reporters are to use sudden changes in monitored process parameters (e.g., pressure, temperature). If such process parameters are not available, reporters are to either (1) assume the release started on the date of the most recent monitoring or measurement survey, including advanced technology surveys or voluntary surveys, that confirms the source was not emitting at the rates above the other large release event reporting threshold, or (2) assume a start date 91 days prior to the date of identification, whichever start date is the most recent.
EPA also finalized reporting requirements related to the “Super-Emitter Response Program,” which was recently finalized as part of EPA’s new source performance standards and emissions guidelines for the oil and gas sector, colloquially referred to as “Quad Ob” and “Quad Oc.” Specifically, if a reporter receives a Super-Emitter Response Program notification from EPA,2 the reporter must include the emission event identified in the notification unless the reporter can show that the facility does not own or operate the emitting equipment at the location identified in the notification, or unless EPA has determined that the notification contains “demonstrable error,” through the process outlined in Quad Ob/Oc. Ultimately, the reporter will need to identify whether the emissions from the event identified in the notification are included as an “other large release event,” as another source required to be reported under subpart W, or not included.
Revised Calculation Methodologies
For several existing emission source types, EPA has revised and/or supplemented the emissions calculation methods. Some of those changes include:
- Equipment leaks: Reporters’ options to calculate emissions from equipment leaks can be broadly categorized into calculations based on equipment leak surveys and calculations based on population counts. In both cases, the EPA has finalized new default emission factors. For leak surveys, though, EPA finalized a procedure by which reporters can develop facility-specific emission factors based on data collected from direct measurement at the facility. EPA also finalized new calculation approaches based on direct measurement, such as bagging or a high-volume sampler. Reporters, however, cannot mix and match emission factors and direct measurements.
- Pneumatic devices and pumps: In a slight departure from the proposed rule, reporters will be able to use emission factors and population counts for all pneumatic device types (including intermittent bleed devices).3 Reporters will also be permitted to calculate emissions using direct measurement, based on readings of continuous flow monitoring devices at natural gas supply lines.
- Thief hatches: EPA revised the calculation methodologies for atmospheric storage tanks to quantify emissions from open thief hatches. As a result, where a thief hatch is open or partially open, such that there is a visible gap between the hatch cover and hatch portal, reporters are to assume that no emissions are captured by the controlled device (i.e., zero percent capture efficiency). EPA clarified in the final rule that this assumption does not apply where the leaks from an open thief hatch are only identifiable using OGI technologies. Additionally, to determine the duration that a thief hatch is open, reporters must use a thief hatch sensor, a tank pressure sensor, or periodic visual inspections to account for whether a thief hatch is open.
Site-Specific Reporting for Some Subpart W Reporters
For the Onshore Petroleum and Natural Gas Production and the Onshore Petroleum and Natural Gas Gathering and Boosting industry segments, EPA will now require reporters to collect and report emissions and activity data at the well-pad or site level. This contrasts with the reporting framework currently in effect, which generally aggregates emissions and activity data at the sub-basin and basin levels.
Under the new rule, reporters in the Onshore Petroleum and Natural Gas Production segment will need to report emissions and activity data for emission source types directly related to wells (i.e., well venting for liquids unloading, completions and workovers with (or without) hydraulic fracturing, associated gas venting or flaring, and well testing) at the level of each individual well. And for both segments, emission source types that have been reporting emission and activity data at either the facility (or basin) or sub-basin levels will soon need to be reported according to “well-pad ID,” for the Production segment, or “gathering and boosting site ID,” for the Gathering and Boosting segment. Well-pad IDs and gathering and boosting site IDs are new data elements, which are to include a unique name or ID number and (depending on the type of well-pad or site) locational data such as state, county, and/or latitude and longitude. For emission source types that report at the unit level (e.g., acid gas removal units, dehydrators, flares), there is no change to the reporting level.
In an addition from the proposed rule, EPA has finalized a slight reporting delay for reporters in the Onshore Petroleum and Natural Gas Production segment with wildcat and/or delineation wells — i.e., exploratory wells. Recognizing that data from these wells are generally considered sensitive by those in the oil and gas industry, EPA provides a 2-year reporting delay for various inputs to emission equations for wildcat and/or delineation wells — specifically, certain equation inputs related to completions and workovers with (or without) hydraulic fracturing, well testing, and associated gas venting and flaring. Importantly, this does not allow reporters to delay reporting of emissions data, only certain equation inputs.
Advanced Measurement Technologies
Numerous commenters to the proposed rule requested that EPA allow the use of advanced (sometimes referred to as “top-down”) technologies to detect and quantify emissions from Subpart W emission sources. Examples of those advanced technologies include satellite, aerial, drone, vehicle, and stationary platforms that utilize remote sensing or continuous monitoring systems. But despite the great interest in integrating those advanced technologies into Subpart W to quantify emissions from sources besides the newly added “other large release events” source, EPA declined to do so. EPA concluded that the advanced technologies identified by commenters are most suited for providing emissions data for large discrete emissions events, rather than for the majority of Subpart W emission sources, which typically generate emissions for a longer duration and with a much lower emissions rate (as compared to “other large release events”). Thus, the final rule uses advanced measurement data only to help identify and quantify other large emissions events.
EPA, though, plans to take additional regulatory steps in light of the comments it received regarding advanced measurement technologies. According to the Fact Sheet accompanying the final rule, EPA plans to issue a request for information (“RFI”) and open a non-regulatory docket during Summer 2024 to solicit input on the use of advanced measurement data and methods in Subpart W; the feedback it receives may inform future rulemaking efforts. EPA also plans to conduct additional stakeholder outreach (e.g., RFIs, workshops) on a biennial basis to take into account the ever-improving and ever-evolving nature of advanced measurement technologies and methods.
Changes in Ownership
EPA largely finalized its proposed scheme for reporting emissions when facilities transfer ownership, making the new owner or operator (as of December 31 of the reporting year) responsible for submitting the annual report for the facility for the entire reporting year. Notably, EPA has decided not to address the question of who will be responsible for revising or correcting past reports. EPA states that it is considering its proposed revisions “in coordination with the 2024 WEC rulemaking and [will] take action, if finalized, on these requirements at the same time.”
Next Steps
The changes to Subpart W will directly impact how emissions are reported and how much reporters owe in “WEC” for methane emissions starting for FY 2025. Given the new financial penalties that EPA has proposed surrounding the WEC, industry members should familiarize themselves with the new requirements before they go into effect. Those interested in measuring through advanced technologies should also prepare to provide information to EPA this summer to help inform EPA’s future decisions to potentially include additional technologies as approved methods to measure emissions.
1 In this latter situation, reporters would report the emissions as an “other large release event” and exclude them from the source-specific calculation under the applicable Subpart W provision.
2 EPA modified its Super-Emitter Response Program under Quad Ob/Oc such that EPA will review notifications from local regulatory agencies or private third parties regarding super-emitter events; if the notification is found to be complete, timely, and sufficiently accurate, EPA (rather than the third party or local agency) would notify the owner or operator.
3 For intermittent bleed pneumatic devices, EPA also finalized an alternative calculation methodology based on the results of inspections or surveys that monitor for malfunctioning devices, analogous to the “leaker factor” approach used for equipment leaks. This alternative methodology is limited to reporters in the Onshore Petroleum and Natural Gas Production and the Onshore Petroleum and Natural Gas Gathering and Boosting industry segments.