Rule2024-26643
Waste Emissions Charge for Petroleum and Natural Gas Systems: Procedures for Facilitating Compliance, Including Netting and Exemptions
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 18, 2024
Effective
January 17, 2025
Issuing agencies
Environmental Protection Agency
Abstract
The Environmental Protection Agency (EPA) is promulgating a regulation to facilitate compliance with the requirements of the Waste Emissions Charge in the Clean Air Act's (CAA) Methane Emissions Reduction Program (MERP). Enacted as part of the Inflation Reduction Act (IRA), this program requires the EPA to impose and collect an annual charge on methane emissions that exceed waste emissions thresholds specified by Congress.
Full Text
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[Federal Register Volume 89, Number 222 (Monday, November 18, 2024)]
[Rules and Regulations]
[Pages 91094-91195]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-26643]
[[Page 91093]]
Vol. 89
Monday,
No. 222
November 18, 2024
Part V
Environmental Protection Agency
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40 CFR Parts 2, 98, and 99
Waste Emissions Charge for Petroleum and Natural Gas Systems:
Procedures for Facilitating Compliance, Including Netting and
Exemptions; Final Rule
Federal Register / Vol. 89 , No. 222 / Monday, November 18, 2024 /
Rules and Regulations
[[Page 91094]]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 2, 98, and 99
[EPA-HQ-OAR-2023-0434; FRL-10246.1-03-OAR]
RIN 2060-AW02
Waste Emissions Charge for Petroleum and Natural Gas Systems:
Procedures for Facilitating Compliance, Including Netting and
Exemptions
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
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SUMMARY: The Environmental Protection Agency (EPA) is promulgating a
regulation to facilitate compliance with the requirements of the Waste
Emissions Charge in the Clean Air Act's (CAA) Methane Emissions
Reduction Program (MERP). Enacted as part of the Inflation Reduction
Act (IRA), this program requires the EPA to impose and collect an
annual charge on methane emissions that exceed waste emissions
thresholds specified by Congress.
DATES: This final rule is effective January 17, 2025.
ADDRESSES: The EPA has established a docket for this action under
Docket ID No. EPA-HQ-OAR-2023-0434. All documents in the docket are
listed in the <a href="https://www.regulations.gov">https://www.regulations.gov</a> index. Although listed in the
index, some information is not publicly available, e.g., confidential
business information (CBI) or other information whose disclosure is
restricted by statute. Certain other material, such as copyrighted
material, is not placed on the internet and will be publicly available
only in hard copy. Publicly available docket materials are available
either electronically in <a href="https://www.regulations.gov">https://www.regulations.gov</a> or in hard copy at
the EPA Docket Center, WJC West Building, Room 3334, 1301 Constitution
Ave. NW, Washington, DC. This Docket Facility is open from 8:30 a.m. to
4:30 p.m., Monday through Friday, excluding legal holidays. The
telephone number for the Public Reading Room is (202) 566-1744 and the
telephone number for the Air Docket is (202) 566-1742.
FOR FURTHER INFORMATION CONTACT: Jennifer Bohman, Climate Change
Division, Office of Atmospheric Protection (MC-6207A), Environmental
Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460;
telephone number: (202) 343-9548; email address: <a href="/cdn-cgi/l/email-protection#4f222a3d3f0f2a3f2e61282039"><span class="__cf_email__" data-cfemail="bfd2dacdcfffdacfde91d8d0c9">[email protected]</span></a>.
World wide web (WWW). In addition to being available in the docket,
an electronic copy of this final rule will also be available through
the WWW. Following the Administrator's signature, a copy of this final
rule will be posted on the EPA's Inflation Reduction Act Methane
Emissions Reduction Program website at <a href="https://www.epa.gov/inflation-reduction-act/methane-emissions-reduction-program">https://www.epa.gov/inflation-reduction-act/methane-emissions-reduction-program</a>.
SUPPLEMENTARY INFORMATION:
Regulated entities. This final regulation affects certain owners or
operators of facilities in certain segments of the petroleum and
natural gas systems industry that report more than 25,000 metric tons
(mt) of carbon dioxide equivalent (CO<INF>2</INF>e) pursuant to the
requirements codified at 40 Code of Federal Regulations (CFR) part 98,
subpart W (Petroleum and Natural Gas Systems) (hereafter referred to as
``part 98, subpart W''). Per the requirements of CAA section 136(d),
the industry segments to which the waste emissions charge may apply are
offshore petroleum and natural gas production, onshore petroleum and
natural gas production, onshore natural gas processing, onshore gas
transmission compression, underground natural gas storage, liquefied
natural gas storage, liquefied natural gas import and export equipment,
onshore petroleum and natural gas gathering and boosting, and onshore
natural gas transmission pipeline. Regulated categories and entities
include, but are not limited to, those listed in Table 1 of this
preamble:
Table 1--Examples of Affected Entities by Category
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North American Industry
Category Classification System Examples of affected facilities
(NAICS)
----------------------------------------------------------------------------------------------------------------
Petroleum and Natural Gas Systems.............. 486210 Pipeline transportation of natural
gas.
221210 Natural gas processing and
transmission compression.
211120 Crude petroleum extraction.
211130 Natural gas extraction.
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Table 1 of this preamble is not intended to be exhaustive, but
rather provides a guide for readers regarding facilities likely to be
affected by this final rule. This table lists the types of facilities
that the EPA is now aware could potentially be affected by this action.
Other types of facilities than those listed in the table could also be
subject to requirements. To determine whether you would be affected by
this action, you should carefully examine the applicability criteria
found in 40 CFR part 99, subpart A (General Provisions) and the
applicability criteria found in 40 CFR part 98, subpart A (General
Provisions) and subpart W (Petroleum and Natural Gas Systems). If you
have questions regarding the applicability of this action to a
particular facility, consult the person listed in the FOR FURTHER
INFORMATION CONTACT section.
The EPA must collect charges from owners or operators of applicable
facilities that both: (1) Report more than 25,000 metric tons (mt) of
carbon dioxide equivalent (CO<INF>2</INF>e) of greenhouse gases (GHGs)
per year pursuant to the petroleum and natural gas systems source
category requirements of the Greenhouse Gas Reporting Rule, and (2)
exceed methane emissions intensity thresholds set forth in CAA section
136 for different types of applicable facilities. This final rule
facilitates compliance with provisions of the CAA, including those
related to netting of emissions for purposes of determining the charge
and various exemptions to the charge; establishes confidentiality
determinations for data elements included in waste emissions charge
filings; and establishes filing and auditing procedures to facilitate
compliance with the statutory requirements.
Acronyms and abbreviations. The following acronyms and
abbreviations are used in this document.
BOEM Bureau of Ocean Energy Management
CAA Clean Air Act
CBI confidential business information
CEMS continuous emission monitoring system
CFR Code of Federal Regulations
CH<INF>4</INF> methane
CO<INF>2</INF> carbon dioxide
CO<INF>2</INF>e carbon dioxide equivalent
[[Page 91095]]
e-GGRT electronic Greenhouse Gas Reporting Tool
EG emission guidelines
EIA Energy Information Administration
EPA U.S. Environmental Protection Agency
ET Eastern time
FR Federal Register
GHG greenhouse gas
GHGRP Greenhouse Gas Reporting Program
GWP Global Warming Potential
IRA Inflation Reduction Act of 2022
ICR Information Collection Request
LDC local distribution company
LNG liquified natural gas
mmBtu million British thermal units
MMscf million standard cubic feet
mt metric tons
N<INF>2</INF>O nitrous oxide
NAICS North American Industry Classification System
NGLs natural gas liquids
NSPS new source performance standards
OMB Office of Management and Budget
PRA Paperwork Reduction Act
RFA Regulatory Flexibility Act
RY reporting year
scfh standard cubic feet per hour
U.S. United States
UMRA Unfunded Mandates Reform Act of 1995
UNFCCC United Nations Framework Convention on Climate Change
VOC volatile organic compound
WEC waste emissions charge
WWW World Wide Web
Table of Contents
I. Background
A. How is this preamble organized?
B. Executive Summary
C. Background and Related Actions
D. Legal Authority
II. Procedures for Facilitating Compliance, Including Netting and
Exemptions
A. Final Definitions To Support WEC Implementation and
Associated Revisions to Part 98, Subpart A
B. Common Ownership or Control for Netting of Emissions
C. Waste Emissions Thresholds
D. Exemptions to the Waste Emissions Charge
III. General Requirements of the Final Rule
A. WEC Filing Requirements
B. Remittance and Assessment of WEC
C. Authorizing the Designated Representative
D. General Recordkeeping Requirements
E. General Provisions, Including Auditing and Compliance and
Enforcement
F. Other Final Minor Revisions or Clarifications
IV. Final Confidentiality Determinations for Certain Data Reporting
Elements
A. Overview and Background
B. Final Confidentiality Determinations for New Data Elements
C. Final Amendments to 40 CFR Part 2
D. Final Reporting Determinations for Inputs to Emission
Equations
E. Changes to Confidentiality Determinations for Data Elements
Reported Under Subpart W
V. Impacts of the Final Rule
VI. Statutory and Executive Order Reviews
A. Executive Order 12866: Regulatory Planning and Review and
Executive Order 14094: Modernizing Regulatory Review
B. Paperwork Reduction Act (PRA)
C. Regulatory Flexibility Act (RFA)
D. Unfunded Mandates Reform Act (UMRA)
E. Executive Order 13132: Federalism
F. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
G. Executive Order 13045: Protection of Children From
Environmental Health Risks and Safety Risks
H. Executive Order 13211: Actions That Significantly Affect
Energy Supply, Distribution, or Use
I. National Technology Transfer and Advancement Act
J. Executive Order 12898: Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income
Populations and Executive Order 14096: Revitalizing our Nation's
Commitment to Environmental Justice for All
K. Congressional Review Act
L. Judicial Review
M. Determination under CAA Section 307(d)
N. Severability
I. Background
A. How is this preamble organized?
This first section (section I) of this preamble contains background
information regarding the final rule. This section also discusses the
EPA's legal authority under the Clean Air Act (CAA) to promulgate
implementing regulations for aspects of the waste emissions charge,
codified at 40 CFR part 99 (hereafter referred to as ``part 99'').
Section I of the preamble also discusses the EPA's legal authority to
make confidentiality determinations for new data elements included in
waste emissions charge filings (WEC filings) required by the final
rule. Section II. of this preamble contains detailed information on the
provisions in this final rule to facilitate implementation of CAA
section 136(c) through (g), in particular the netting and exemption
provisions. Section II. of this preamble also contains information on
the revisions to 40 CFR part 98, subpart A to harmonize part 99 and
part 98 reporting obligations. Section III. of this preamble describes
the general requirements for the final rule, including procedures to
facilitate filing and compliance. Section IV. of this preamble
discusses the final confidentiality determinations for new data
reporting elements for the proposed part 99 and also discusses
confidentiality determinations for two data elements reported under
part 98, subpart W. Section V. of this preamble discusses the impacts
of this action. Section VI. of this preamble describes the statutory
and Executive order requirements applicable to this final action.
B. Executive Summary
In August 2022, Congress passed, and President Biden signed, the
Inflation Reduction Act of 2022 (IRA) into law. Section 60113 of the
IRA created the Methane Emission Reduction Program (MERP) and amended
the Clean Air Act (CAA) by adding section 136, ``Methane Emissions and
Waste Reduction Incentive Program for Petroleum and Natural Gas
Systems''. CAA section 136, as designed by Congress, establishes a
three-part framework to help States, industry, and communities reduce
methane (CH<INF>4</INF>) emissions from the oil and gas sector. It
further complemented a recently finalized rule under section 111 of the
CAA (that was proposed at the time the Inflation Reduction Act was
passed) to reduce methane emissions from new and existing oil and gas
facilities. Oil and natural gas facilities are the nation's largest
industrial source of methane, a greenhouse gas (GHG) that is 28 times
more potent than carbon dioxide (CO<INF>2</INF>) and is responsible for
approximately one third of all warming resulting from anthropogenic
emissions of greenhouse gases.\1\ The three-part framework established
by Congress in CAA section 136 addresses these emissions by: (1)
directing the EPA to impose and collect a ``Waste Emissions Charge''
(WEC) on methane emissions from high-emitting and inefficient oil and
gas operations; (2) directing the EPA to update subpart W of the
Greenhouse Gas Reporting Program to ensure accurate reporting of
methane emissions by oil and natural gas facilities that is based on
empirical data; and (3) providing over $1 billion in financial and
technical assistance to assist the industry, States, and communities in
deploying methane mitigation and monitoring solutions. By implementing
provisions of the WEC, this final rule helps to fulfill one of the
pillars of this three-part framework. As Congress intended, the WEC,
including the provisions finalized in this final rule, will incentivize
a variety of near-term actions to reduce methane emissions from oil and
natural gas operations while the EPA and States
[[Page 91096]]
work to implement the EPA's recently finalized CAA section 111 methane
standards.
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\1\ IPCC, 2021: Summary for Policymakers. In: Climate Change
2021: The Physical Science Basis. Contribution of Working Group I to
the Sixth Assessment Report of the Intergovernmental Panel on
Climate Change [Masson-Delmotte, V., P. Zhai, A. Pirani, S.L.
Connors, C. P[eacute]an, S. Berger, N. Caud, Y. Chen, L. Goldfarb,
M.I. Gomis, M. Huang, K. Leitzell, E. Lonnoy, J.B.R. Matthews, T.K.
Maycock, T. Waterfield, O. Yelek[ccedil]i, R. Yu, and B. Zhou
(eds.)]. Cambridge University Press, Cambridge, United Kingdom and
New York, NY, USA, pp. 3-32, doi:10.1017/9781009157896.001.
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This action is also intended to work hand-in-hand with the other
two elements of the CAA section 136 framework. Earlier this year, the
EPA finalized a rule (89 FR 42062, May 14, 2024) (hereafter referred to
as the ``2024 Subpart W Final Rule'') that fulfills Congress's
directive in CAA section 136 to improve the reporting of GHG emissions
under subpart W of the Greenhouse Gas Reporting Program and ensure that
oil and gas facilities' reporting requirements are based on empirical
data and more accurately reflect emissions. Because CAA section 136
requires that the EPA utilize subpart W emissions reports as the basis
for determining the applicability of the WEC and calculating WEC
obligations for owners and operators of applicable facilities, the
EPA's recent revisions to subpart W are an important adjunct to this
final rule that will ensure WEC obligations are based on the most
accurate and comprehensive emissions data available. In addition, to
implement the third part of the CAA section 136 framework, the EPA is
partnering with the U.S. Department of Energy (DOE) to provide up to
$1.36 billion in financial and technical assistance to a broad range of
stakeholders to identify, measure, and mitigate emissions from the oil
and gas sector. As described in section I.C.2. of this preamble, the
EPA and its partners are acting expeditiously to award this funding
through a combination of formula and competitive grant processes. These
funds will accelerate the deployment of methane monitoring and
mitigation technologies that will reduce methane emissions from oil and
natural gas facilities and, potentially, help reduce or eliminate WEC
obligations for certain applicable facilities by lowering their
emissions intensity.
The WEC final rule requirements in this action are designed to meet
Congress's directive to provide an incentive for the early adoption of
methane emission reduction practices and technologies, including those
that are required under the Standards of Performance for New,
Reconstructed, and Modified Sources and Emissions Guidelines for
Existing Sources: Oil and Natural Gas Sector Climate Review (NSPS/EG),
which Congress expected to be promulgated pursuant to CAA section 111
at the time it created the WEC. CAA section 136 makes this connection
to the oil and gas methane emission standards clear by including an
exemption from the charge for operations that are subject to and in
compliance with final methane emissions requirements promulgated
pursuant to CAA sections 111(b) and (d). The WEC is thus an important
piece of a comprehensive national strategy established by Congress via
the IRA to reduce methane emissions. The WEC advances the reduction of
methane emissions from the oil and gas sector by providing for sources
covered under the CAA section 111 rules a set of emissions reduction
incentives that are in effect until full implementation of oil and gas
methane emissions standards promulgated by the EPA on March 8, 2024.
Those standards were, as Congress specifically acknowledged via
explicit reference in the IRA, under development at the time the WEC
was enacted. For methane emissions sources not covered by the CAA
section 111 rules, the emission reduction incentives created by the WEC
remain in place after full implementation of the CAA section 111
methane standards.
On January 26, 2024, the EPA proposed a regulation to facilitate
implementation of the provisions of the WEC, following the requirements
of CAA section 136(c)-(g) (89 FR 5318). The WEC program applies to
applicable facilities that report more than 25,000 mt CO<INF>2</INF>e
of greenhouse gases emitted per year pursuant to the Greenhouse Gas
Reporting Rule's requirements for the petroleum and natural gas systems
source category (codified as 40 CFR part 98, subpart W).\2\ An
applicable facility, as defined in CAA section 136(d), is a facility
within the following industry segments (as the following industry
segments are defined in part 98, subpart W): onshore petroleum and
natural gas production, offshore petroleum and natural gas production,
onshore petroleum and natural gas gathering and boosting, onshore
natural gas processing, onshore gas transmission compression, onshore
natural gas transmission pipeline, underground natural gas storage,
liquefied natural gas import and export equipment, and liquefied
natural gas storage.\3\
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\2\ 42 U.S.C. 7436(c) (``The Administrator shall impose and
collect a charge on methane emissions that exceed an applicable
waste emissions threshold under subsection (f) from an owner or
operator of an applicable facility that reports more than 25,000
metric tons of carbon dioxide equivalent of greenhouse gases emitted
per year pursuant to of part 98 of title 40, Code of Federal
Regulations, regardless of the reporting threshold under that
subpart.'').
\3\ 42 U.S.C. 7436(d).
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CAA section 136 defines three important elements of the WEC
program: (1) waste emissions thresholds; (2) netting of emissions
across different facilities; and (3) exemptions for certain emissions
and facilities. Facilities may owe a WEC obligation if their subpart W
reported emissions exceed the waste emissions thresholds specified in
CAA section 136(f) and they are not eligible for an exemption.\4\ The
waste emissions threshold is a facility-specific amount of metric tons
of methane emissions calculated using the methane intensity thresholds
specified by Congress in CAA section 136(f)(1) through (3) and a
facility's natural gas throughput (or oil throughput in certain
circumstances).
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\4\ 42 U.S.C. 7436(f)(1)-(3).
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Congress specifically laid out certain requirements in the text of
the statute. The waste emissions charge is specified in CAA section
136(e) to begin for emissions occurring in 2024 at $900 per metric ton
of methane exceeding the threshold, increasing to $1,200 per metric ton
of methane in 2025, and to $1,500 per metric ton of methane in 2026 and
subsequent years. The WEC only applies to the subset of a facility's
emissions that are above the waste emissions threshold.
Congress structured the WEC so that it focuses on high-emitting and
inefficient oil and gas facilities (i.e., those with emissions greater
than 25,000 mt CO<INF>2</INF>e of greenhouse gases emitted per year and
that have a methane emissions intensity in excess of the statutory
waste emissions threshold). Facility efficiency, reflected in the
amount of methane emissions per unit of production or throughput, can
directly affect a facility's WEC obligations since more efficient
facilities have emissions below the thresholds at which facilities are
required to pay a charge. The WEC therefore incentivizes more efficient
operations because the charge applies only to the least efficient and
most wasteful of oil and gas facilities (and only to the subset of
their emissions that exceed thresholds and are not exempt). CAA section
136(f)(4) allows facilities subject to the WEC that are under common
ownership or control to net emissions across those facilities, which
could result in a reduced total charge, or avoidance of the charge.\5\
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\5\ 42 U.S.C. 7436(f)(4) (``In calculating the total emissions
charge obligation for facilities under common ownership or control,
the Administrator shall allow for the netting of emissions by
reducing the total obligation to account for facility emissions
levels that are below the applicable thresholds within and across
all applicable segments identified in subsection (d).'').
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In addition, Congress created three exemptions that may lower a
facility's WEC obligation or exempt the facility entirely from the
charge. The first exemption, found in CAA section 136(f)(5), exempts
from the charge
[[Page 91097]]
emissions occurring at facilities in the onshore or offshore petroleum
and natural gas production industry segments that are caused by
eligible delays in environmental permitting of gathering or
transmission infrastructure.\6\ The second exemption, found in CAA
section 136(f)(6), exempts from the charge, if certain conditions are
met, those facilities that are subject to and in compliance with final
methane emissions requirements promulgated pursuant to CAA sections
111(b) and (d).\7\ This exemption becomes available only if a
determination is made by the Administrator that such final requirements
are approved and in effect in all States with respect to the applicable
facilities, and that the emissions reductions resulting from those
final requirements will achieve equivalent or greater emission
reductions as would have resulted from the EPA's methane emissions
requirements proposed in 2021.\8\ The third exemption, found in CAA
section 136(f)(7), exempts from the charge reporting year emissions
from wells that are permanently shut in and plugged.\9\
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\6\ 42 U.S.C. 7436(f)(5) (``Charges shall not be imposed
pursuant to paragraph (1) on emissions that exceed the waste
emissions threshold specified in such paragraph if such emissions
are caused by unreasonable delay, as determined by the
Administrator, in environmental permitting of gathering or
transmission infrastructure necessary for offtake of increased
volume as a result of methane emissions mitigation
implementation.'').
\7\ 42 U.S.C. 7436(f)(6) (``Charges shall not be imposed
pursuant to subsection (c) on an applicable facility that is subject
to and in compliance with methane emissions requirements pursuant to
subsections (b) and (d) of section 7411 of this title upon a
determination by the Administrator that--(i) methane emissions
standards and plans pursuant to subsections (b) and (d) of section
7411 of this title have been approved and are in effect in all
States with respect to the applicable facilities; and (ii)
compliance with the requirements described in clause (i) will result
in equivalent or greater emissions reductions as would be achieved
by the proposed rule of the Administrator entitled ``Standards of
Performance for New, Reconstructed, and Modified Sources and
Emissions Guidelines for Existing Sources: Oil and Natural Gas
Sector Climate Review'' (86 FR 63110 (November 15, 2021)), if such
rule had been finalized and implemented.'').
\8\ Id.
\9\ 42 U.S.C. 7436(f)(7) (``Charges shall not be imposed with
respect to the emissions rate from any well that has been
permanently shut-in and plugged in the previous year in accordance
with all applicable closure requirements, as determined by the
Administrator.'').
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As a result of these key design features of the WEC, the EPA
anticipates that many facilities in the oil and natural gas sector will
not be subject to WEC obligations. Many oil and natural gas facilities
already fall below the annual emissions threshold and waste emissions
thresholds that would cause them to be subject to the WEC, or are
likely to avail themselves of the netting provisions in this final rule
to reduce or eliminate WEC obligations. Further, as the EPA and States
implement the CAA section 111 2024 Final NSPS/EG for new and existing
sources, many oil and natural gas facilities are likely to qualify for
the regulatory compliance exemption. The CAA section 111 2024 Final
NSPS/EG as well as the financial and technical assistance the EPA is
administering under section 136 of the CAA, are also expected to drive
methane emission reductions that will help applicable facilities reduce
or eliminate their WEC obligations. The charge, then, will primarily
serve as an incentive, particularly to high-emitting and inefficient
facilities, to reduce their emissions of methane.
The EPA received over 50,000 comments in response to the proposal.
After consideration of the public comments, the EPA has made several
changes in this final rule that are described in section I.B. and in
sections II. and III. of this preamble. While some of these changes
represent a meaningful shift from the proposed approach, all changes
were within the scope of notice provided through the EPA's request for
comment, and discussion, at proposal. Moreover, these changes result in
a final rule that better aligns with the statutory purpose and
structure of the WEC. Specifically, the final rule is designed to
achieve several goals: (1) Provide a strong incentive for early action
to reduce methane by States, companies, and facilities, as Congress
directed; (2) appropriately implement the exemptions specified by
Congress; (3) give additional clarity to regulated entities; and (4)
streamline implementation. By harmonizing the WEC regulations with
implementation of the CAA section 111 requirements, this final rule
encourages early emissions reductions and reduces the WEC burden on
facilities that are in compliance with applicable CAA section 111
requirements. Furthermore, this final rule aims to increase flexibility
so that accessing the exemptions created by Congress is not unduly
restrictive, while still maintaining the integrity of the program.
Finally, this rulemaking allows for expanded netting compared to the
proposal while providing more specificity on the conditions under which
netting may occur to minimize the potential for fraud.
The EPA is revising the regulatory compliance exemption in response
to the many commenters that suggested changes to better align with
Congress' purpose to incentivize States to move promptly toward full
implementation of the CAA section 111 program, and to motivate
regulated facilities to achieve emissions reductions as quickly as
possible. This Congressional intent is illustrated in the language of
the law and in the suite of incentives for expeditious methane
emissions reductions it creates. The principal change to the regulatory
compliance exemption in this final rule addresses when the exemption
becomes available. The EPA concludes that allowing the exemption to be
available for each State once it has fully implemented the methane
emissions requirements promulgated pursuant to CAA sections 111(b) and
(d), rather than all at once after the last State's plans are approved,
is both a better reading of the law and has greater fidelity to the
Congressional purpose. Industry commenters emphasized that a State-by-
State approach would incentivize States to move quickly to develop and
submit approvable State plans implementing the section 111 emissions
guidelines, furthering Congress's intent in enacting the compliance
exemption. Making the compliance exemption available to facilities in a
State as soon as all CAA section 111(b) and (d) facilities within that
State are subject to all of their applicable methane emissions
requirements will provide an incentive for every State to move
expeditiously, and avoid delays in effectuating the compliance
exemption that might occur if the slowest State sets the pace. At the
same time, to fully implement Congress' intention that the WEC serve as
a mechanism for incentivizing emissions reductions until sources begin
to comply with all of their emissions control obligations, the final
rule provides that the regulatory compliance exemption becomes
available in each State only after sources are required to comply with
all of their State plan requirements. As described in more detail in
section II.D.2. of this preamble, these changes ensure the regulatory
compliance exemption reflects the facts on the ground for facilities
operating in each State, while tying the exemption to the date actual
emissions reductions are achieved as Congress intended.
In response to the information provided in comments, the EPA is
also finalizing other changes to the regulatory compliance exemption
that help ensure the WEC and the CAA section 111 rules work together as
intended. As noted by commenters, it is important that the WEC
incentivize early action before compliance deadlines and then relieve
from the charge those facilities operating in compliance with the CAA
section 111 rules. In this final rule, as many
[[Page 91098]]
commenters suggested, the EPA is limiting the types of noncompliance
that would cause a facility to lose the regulatory compliance
exemption, reducing the timeframe for which the exemption would be lost
in the event of noncompliance, and narrowing the scope of emissions
that would lose the exemption in the event of noncompliance for
facilities in segments with unique, basin-wide facility definitions.
The final rule will thereby create a stronger incentive for facilities
to meet the requirements of the CAA section 111 rules while making the
regulatory compliance exemption more accessible.
To reflect comments persuasively suggesting that a more expansive
approach to netting would reflect a better reading of the legislative
text, the final rule changes the approach from the proposal to apply
netting to encompass facilities under common ownership or control at
the parent company level. One of the key provisions of the WEC created
in CAA section 136(f) relates to the ability of facilities under common
ownership or control to net emissions, such that facilities with
emissions below the waste emissions threshold can offset emissions from
facilities above the threshold to reduce the overall WEC burden. The
EPA proposed that a facility's owner or operator would be the regulated
entity under WEC as well as the entity used for netting of emissions
across facilities under common ownership or control. As commenters
highlighted, the text of section 136(f) suggests Congress supported
broad application of netting, and commenters also noted that broader
application of netting may help incentivize emission reductions by
allowing companies to take advantage of cost-effective reduction
opportunities across their entire operations rather than being limited
by reductions that can be achieved across a smaller number of
facilities. The EPA received significant comments that restricting the
netting provisions to the owner or operator was inconsistent with the
intent of the provision, since parent companies both own and control
subsidiaries. As described in more detail in section II.B.1., the final
regulations continue to define a facility's owner or operator as the
regulated entity under WEC (i.e., responsible for the payment of the
WEC), consistent with CAA section 136(c). However, these final
regulations reflect that the best reading of the statute entails a
broader interpretation of the term ``common ownership or control,'' and
so the final rule expands the use of netting to the parent company
level by allowing owners and operators with a common parent to transfer
negative emissions amongst each other. This approach of maintaining the
WEC regulatory obligations at the owner and operator level, while
allowing the transfer of negative emissions or ``netting'' across
owners and operators with a common parent, reconciles the difference in
statutory language in CAA sections 136(c) and 136(f).
The EPA is also making a number of changes to improve the
implementation of the WEC in response to logistical and feasibility
concerns raised in response to the proposal. For example, the EPA is
specifying WEC filing and resubmittal deadlines of August 31 and
December 15, respectively. These dates are later than the proposed
deadlines, thereby allowing for more accurate reporting prior to WEC
submission, reducing the number of resubmissions and corrections, and
reducing overall burden.
In this final rule, the EPA is also making modifications to the
implementation of the unreasonable delay and plugged well exemptions,
as well as revisions to definitions and calculations to support the
finalized rule. We are also finalizing revisions to 40 CFR part 98,
subpart A (general provisions) for all facilities that report under
subpart W to harmonize reporting responsibilities in part 98 with the
reporting responsibilities and WEC obligation in part 99 such that
responsibility to report and resubmit reports under part 98 if errors
are identified in the part 98 report align with the obligated party
under part 99. The final provisions of part 99 and part 98 under this
rulemaking are described in further detail in sections II. and III. of
this preamble.
C. Background and Related Actions
Congress designed the WEC to work in tandem with several related
EPA programs. Together, these actions are expected to greatly reduce
methane emissions. This section discusses the impacts of methane on
public health and welfare and provides more details on the EPA programs
relevant to methane emissions from oil and gas systems.
1. How does methane affect public health and welfare?
Elevated concentrations of greenhouse gases (GHGs) including
methane have been warming the planet, leading to harmful changes in the
Earth's climate that are occurring at a pace and in a way that
threatens human health, our economy and infrastructure, and the natural
environment, both in the United States (U.S.) and at a global level.
While the EPA is not statutorily required to make any particular
scientific or factual findings regarding the impact of GHG emissions on
public health and welfare in support of the WEC, the EPA is providing
in this section a brief scientific background on methane and climate
change to offer additional context for this rulemaking and to help the
public understand the environmental impacts of GHGs such as
methane.\10\
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\10\ The EPA did not and is not reopening previous
determinations regarding endangerments to public health and welfare
in providing this background in this rulemaking.
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As a GHG, methane in the atmosphere absorbs terrestrial infrared
radiation, which in turn contributes to increased global warming and
continuing climate change, including increases in air and ocean
temperatures, changes in precipitation patterns, retreating snow and
ice, increasingly severe weather events, such as hurricanes of greater
intensity, and sea level rise, among other impacts. Methane also
contributes to climate change through chemical reactions in the
atmosphere that produce tropospheric ozone and stratospheric water
vapor. In 2023, atmospheric concentrations of methane increased by
nearly 11 parts per billion (ppb) over 2022 levels to reach 1922
ppb.\11\ Concentrations are now more than two and a half times larger
than the preindustrial level of 729 ppb.\12\ Methane is responsible for
about one third of all warming resulting from human emissions of well-
mixed GHGs,\13\ and due to its high radiative efficiency compared to
carbon dioxide, methane mitigation is one of the best opportunities for
reducing near-term warming. In the U.S., the oil and gas sector is the
largest source of industrial methane emissions.\14\
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\11\ NOAA, <a href="https://gml.noaa.gov/webdata/ccgg/trends/ch4/ch4_annmean_gl.txt">https://gml.noaa.gov/webdata/ccgg/trends/ch4/ch4_annmean_gl.txt</a>. Accessed 8/22/24.
\12\ Blunden, J. and T. Boyer, Eds., 2022: ``State of the
Climate in 2021.'' Bull. Amer. Meteor. Soc., 103 (8), Si-S465,
<a href="https://doi.org/10.1175/2022BAMSStateoftheClimate.1">https://doi.org/10.1175/2022BAMSStateoftheClimate.1</a>, 103 (8), Si-
S465, <a href="https://doi.org/10.1175/2022BAMSStateoftheClimate.1">https://doi.org/10.1175/2022BAMSStateoftheClimate.1</a>.
\13\ IPCC, 2021: Summary for Policymakers. In: Climate Change
2021: The Physical Science Basis. Contribution of Working Group I to
the Sixth Assessment Report of the Intergovernmental Panel on
Climate Change [Masson-Delmotte, V., P. Zhai, A. Pirani, S.L.
Connors, C. P[eacute]an, S. Berger, N. Caud, Y. Chen, L. Goldfarb,
M.I. Gomis, M. Huang, K. Leitzell, E. Lonnoy, J.B.R. Matthews, T.K.
Maycock, T. Waterfield, O. Yelek[ccedil]i, R. Yu, and B. Zhou
(eds.)]. Cambridge University Press, Cambridge, United Kingdom and
New York, NY, USA, pp. 3-32, doi:10.1017/9781009157896.001.
\14\ EPA (2024). Inventory of U.S. Greenhouse Gas Emissions and
Sinks: 1990-2022 U.S. Environmental Protection Agency, EPA 430R-
24004. <a href="https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-1990-2022">https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-1990-2022</a>.
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[[Page 91099]]
Major scientific assessments continue to be released that further
advance our understanding of the climate system and the impacts that
methane and other GHGs have on public health and welfare both for
current and future generations. According to the Intergovernmental
Panel on Climate Change (IPCC) Sixth Assessment Report, ``it is
unequivocal that human influence has warmed the atmosphere, ocean and
land. Widespread and rapid changes in the atmosphere, ocean, cryosphere
and biosphere have occurred.'' \15\ Recent EPA modeling efforts \16\
have also shown that impacts from these changes are projected to vary
regionally within the U.S. For example, large damages are projected
from sea level rise in the Southeast, wildfire smoke in the Western
U.S., and impacts to agricultural crops and rail and road
infrastructure in the Midwest and Northern Plains. Scientific
assessments, the EPA analyses, and updated observations and projections
document the rapid rate of current and future climate change and the
potential range impacts both globally and in the United States,\17\
presenting clear support regarding the current and future dangers of
climate change and the importance of GHG emissions mitigation. The
Methane Emissions Reduction Program is intended to respond to and
mitigate these impacts by improving availability of and access to
monitoring and emission reduction technologies and incentivizing
methane emissions reductions from oil and gas systems.
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\15\ Id.
\16\ (1) EPA. 2024. Technical Documentation on the Framework for
Evaluating Damages and Impacts (FrEDI). U.S. Environmental
Protection Agency, EPA 430-R-24-001.
(2) Hartin C., E.E. McDuffie, K. Novia, M. Sarofim, B. Parthum,
J. Martinich, S. Barr, J. Neumann, J. Willwerth, & A. Fawcett.
Advancing the estimation of future climate impacts within the United
States. EGUsphere doi: 10.5194/egusphere-2023-114, 2023.
\17\ (1) USGCRP, 2023: Fifth National Climate Assessment.
Crimmins, A.R., C.W. Avery, D.R. Easterling, K.E. Kunkel, B.C.
Stewart, and T.K. Maycock, Eds. U.S. Global Change Research Program,
Washington, DC, USA. <a href="https://doi.org/10.7930/NCA5.2023">https://doi.org/10.7930/NCA5.2023</a>.
(2) IPCC, 2021: Summary for Policymakers. In: Climate Change
2021: The Physical Science Basis. Contribution of Working Group I to
the Sixth Assessment Report of the Intergovernmental Panel on
Climate Change [Masson-Delmotte, V., P. Zhai, A. Pirani, S.L.
Connors, C. Pe[acute]an, S. Berger, N. Caud, Y. Chen, L. Goldfarb,
M.I. Gomis, M. Huang, K. Leitzell, E. Lonnoy, J.B.R. Matthews, T.K.
Maycock, T. Waterfield, O. Yelek[ccedil]i, R. Yu and B. Zhou
(eds.)]. Cambridge University Press.
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2. Related Actions
Congress designed the WEC to work in tandem with several related
EPA programs, in particular the Greenhouse Gas Reporting Program and
the CAA section 111 requirements. As mandated by CAA section 136(c) and
(d), the scope and effect of the WEC is closely related to the EPA's
long-standing Greenhouse Gas Reporting Program requirements for oil and
natural gas facilities, which are codified in subpart W of the EPA's
GHGRP regulations. Specifically, the applicability of the WEC is based
upon the quantity of metric tons of CO<INF>2</INF>e emitted per year
pursuant to the requirements of subpart W. Further, CAA section 136(e)
requires that the WEC amount be calculated based upon methane emissions
reported pursuant to subpart W. In order to ensure that WEC charges are
based on methane emissions data that is as accurate and comprehensive
as possible, section 136(h) further required the EPA to undertake a
rulemaking to review and revise subpart W as necessary to ensure that
reporting is ``based on empirical data,'' ``accurately reflect[s] the
total methane emissions and waste emissions from applicable
facilities,'' and ``allow[s] owners and operators of applicable
facilities to submit empirical emissions data.'' As a result, this
final action builds upon previous subpart W rulemakings.
In the 2024 Subpart W Final Rule, the EPA finalized revisions to
subpart W consistent with the authority and directives set forth in CAA
section 136(h) as well as the EPA's authority under CAA section 114. In
that rulemaking, the EPA finalized revisions to require reporting of
additional emissions or emissions sources to address potential gaps in
the total methane emissions reported by facilities to subpart W. For
example, these revisions added a new emissions source, referred to as
``other large release events,'' to capture large emission events that
are not accurately accounted for using the existing methods in subpart
W.\18\ See section II.B. of the preamble to the 2024 Subpart W Final
Rule (89 FR 42062) for more information on this source category. The
emissions from these events and other newly added sources are required
to be included in the total emissions reported under subpart W starting
with reporting year 2025. The EPA also finalized revisions to add or
revise existing calculation methodologies to improve the accuracy of
reported emissions, incorporate additional empirical data, and allow
owners and operators of applicable facilities to submit empirical
emissions data that could appropriately demonstrate the extent to which
a charge is owed in implementation of CAA section 136, as directed by
CAA section 136(h). The EPA also finalized revisions to existing
reporting requirements to collect data that will improve verification
of reported data, ensure accurate reporting of emissions, and improve
the transparency of reported data. For clarity of discussion within
this preamble, unless otherwise stated, references to provisions of
subpart W (i.e., 40 CFR 98.230 through 98.238) reflect the language of
that subpart as effective January 1, 2025.
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\18\ As defined at 40 CFR 98.238, effective January 1, 2025, an
other large release event means any planned or unplanned
uncontrolled release to the atmosphere of gas, liquids, or mixture
thereof, from wells and/or other equipment that result in emissions
for which there are no methodologies in 40 CFR 98.233 other than
under 40 CFR 98.233(y) to appropriately estimate these emissions.
Other large release events include, but are not limited to, well
blowouts, well releases, pressure relief valve releases from process
equipment other than hydrocarbon liquids storage tanks, storage tank
cleaning and other maintenance activities, and releases that occur
as a result of an accident, equipment rupture, fire, or explosion.
Other large release events also include failure of equipment or
equipment components such that a single equipment leak or release
has emissions that exceed the emissions calculated for that source
using applicable methods in 40 CFR 98.233(a) through (h), (j)
through (s), (w), (x), (dd), or (ee) by the threshold in 40 CFR
98.233(y)(1)(ii). Other large release events do not include
blowdowns for which emissions are calculated according to the
provisions in 40 CFR 98.233(i).
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Under the Greenhouse Gas Reporting Program, the EPA also finalized
a separate rule (89 FR 31802, April 25, 2024), which included updates
to the General Provisions of the Greenhouse Gas Reporting Rule to
reflect revised global warming potentials (GWPs), reporting of GHG data
from additional sectors (i.e., non-subpart W sectors), and revisions to
source categories other than subpart W that improve implementation of
the Greenhouse Gas Reporting Rule. The revision to the GWP of methane
(from 25 to 28) is expected to lead to a small increase in the number
of facilities (<188 facilities) \19\ that exceed the subpart W 25,000
mt CO<INF>2</INF>e threshold and thus become subject to the part 99
requirements. This final Greenhouse Gas Reporting Program rule is not
expected to otherwise impact subpart W reporting requirements as they
pertain to the applicability or implementation of the part 99
requirements.
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\19\ In the 2024 Final GHGRP Rule, the EPA estimated that 188
additional facilities would be subject to subpart W due to the
increase in GWP. However, many of these facilities would also report
under other subparts, such as subpart C, and for some of these
facilities, reported emissions to subpart W will be below the WEC
applicable threshold of 25,000 metric tons CO<INF>2</INF>e.
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Separately, on November 15, 2021 (86 FR 63110), the EPA proposed
under CAA section 111(b) standards of performance regulating GHGs (in
the
[[Page 91100]]
form of limitations on emissions of methane) and volatile organic
compounds (VOCs) for certain new, reconstructed, and modified sources
in the oil and natural gas source category (proposed as 40 CFR part 60,
subpart OOOOb) (hereafter referred to as ``NSPS OOOOb''), as well as
emissions guidelines regulating emissions of methane under CAA section
111(d) for certain existing oil and natural gas sources (proposed as 40
CFR part 60, subpart OOOOc) (hereafter referred to as ``EG OOOOc'').
The November 15, 2021 proposal (covering both NSPS OOOOb and EG
OOOOc)--which Congress explicitly referred to in section 136(f)(6)--
will be referred to hereafter as the ``2021 NSPS/EG Proposal.'' The
2021 NSPS/EG Proposal sought to strengthen standards of performance
previously in effect under section 111(b) of the CAA for new, modified
and reconstructed oil and natural gas sources, and to establish
emissions guidelines under section 111(d) of the CAA for States to
follow in developing plans to establish standards of performance for
existing oil and natural gas sources.
On December 6, 2022, the EPA issued a supplemental proposal to
update, strengthen, and expand upon the 2021 NSPS/EG Proposal (87 FR
74702). This supplemental proposal modified certain standards proposed
in the 2021 NSPS/EG Proposal and added proposed requirements for
sources not previously covered.\20\ Among other things, the
supplemental proposal sought to encourage the deployment of innovative
and advanced monitoring technologies by establishing more flexible
performance requirements than the 2021 NSPS/EG Proposal, and also
included provisions to establish a process for certified expert
monitoring to identify ``super-emitters'' for prompt mitigation.
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\20\ Examples of some of the changes the 2022 Supplemental
proposed included proposed requirements that all well sites are
monitored for leaks, requirements to ensure the proper operation of
flares, zero-emission requirement for process controllers and pumps,
standards for dry seal centrifugal compressors, and a super-emitter
response program, among other things.
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On March 8, 2024, the final NSPS OOOOb and EG OOOOc rules
(hereafter referred to as the ``2024 Final NSPS/EG'') were published in
the Federal Register (89 FR 16820). First, the EPA finalized NSPS OOOOb
regulating methane and VOCs emissions from new, modified, and
reconstructed sources in the Crude Oil and Natural Gas source category
pursuant to CAA section 111(b)(1)(B). Second, the EPA finalized
emission guidelines, including presumptive standards in EG OOOOc that
would limit methane emissions from existing sources in the Crude Oil
and Natural Gas source category, as well as requirements under the CAA
section 111(d) for States to follow in developing, submitting, and
implementing State plans to establish performance standards.\21\ Among
other things, the final rule strengthens standards, phases out routine
flaring of natural gas from new oil wells, requires all well sites and
compressor stations to be routinely monitored for leaks, requires
storage vessels to reduce emissions by 95 percent, sets standards for
certain facilities that have not been previously regulated, and
provides companies greater flexibility to use innovative and cost-
effective methane detection technologies. It will also utilize data
collected by certified third parties to identify and address ``super
emitting'' sources and eliminate or minimize emissions from common
pieces of equipment used in oil and gas operations such as process
controllers, pumps, and storage tanks.
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\21\ In this action, the EPA also finalized several related
actions stemming from the joint resolution of Congress, adopted on
June 30, 2021, under the CRA, disapproving the 2020 Policy Rule, and
also finalized a protocol under the general provisions for use of
Optical Gas Imaging.
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Congress envisioned a strong connection between EPA programs for
methane emissions from oil and gas systems. The 2024 Final NSPS/EG is
relevant to this WEC final rule in two ways: first, implementation of
the CAA section 111(b) and (d) standards will help drive methane
emissions reductions that can help many facilities achieve methane
emission levels that are below the thresholds specified by Congress
(described in section II.B. of this preamble), thereby enabling
applicable facilities to reduce or avoid charges under the WEC program;
and second, compliance with the CAA section 111(b) and (d) standards
may (if certain criteria are met) exempt facilities from the WEC under
the regulatory compliance exemption outlined at CAA section 136(f)(6)
(discussed in section II.D.2. of this preamble). The WEC thus serves as
an important bridge and backstop to the full implementation of the 2024
Final NSPS/EG, and an additional incentive thereafter to continue to
comply with the CAA section 111 rules.
In addition to creating the WEC and directing the EPA to revise
subpart W, Congress also established the MERP under section 136 of the
CAA to provide financial and technical assistance to reduce methane
emissions from the oil and gas sector. To implement this program, the
EPA is partnering with the U.S. Department of Energy (DOE) to provide
up to $1.36 billion in financial and technical assistance. On December
15, 2023, the EPA and the DOE announced the award of $350 million in
formula grant funding to 14 States help measure and reduce methane
emissions, supporting industry efforts to cut methane emissions from
low-producing, marginal conventional wells on non-Federal lands and
support environmental restoration of well sites. On June 21, 2024, the
EPA and the DOE announced the availability of $850 million in federal
funding to help measure and reduce methane emissions from the oil and
gas sectors. This competitive solicitation will enable a broad range of
eligible U.S. entities to apply, including industry, academia, non-
governmental organizations, Tribes, State and local government, and
others. As designed by Congress, these resources and incentives were
intended to complement the regulatory programs and to help facilitate
the transition to a more efficient petroleum and natural gas industry.
D. Legal Authority
In August 2022, the IRA was signed into law. Section 60113 of the
IRA amended the CAA by adding section 136, and the EPA is finalizing
this rulemaking under the authority provided by that section. As noted
in section I.B. of this preamble, the IRA added CAA section 136,
``Methane Emissions and Waste Reduction Incentive Program for Petroleum
and Natural Gas Systems,'' which requires that the EPA impose and
collect an annual specified charge on methane emissions that exceed an
applicable waste emissions threshold from an owner or operator of an
applicable facility that reports more than 25,000 mt CO<INF>2</INF>e of
greenhouse gases emitted per year pursuant to subpart W of the GHGRP.
Under CAA section 136, an ``applicable facility'' is a facility within
nine of the ten industry segments subject to subpart W, as currently
defined in 40 CFR 98.230 (excluding natural gas distribution).
The EPA is also finalizing elements of this rulemaking under its
authority provided in CAA section 114. CAA section 114(a)(1) authorizes
the Administrator to require emissions sources, persons subject to the
CAA, or persons whom the Administrator believes may have necessary
information to monitor and report emissions and provide other
information the Administrator requests for the purposes of carrying out
any provision of the CAA (except for a provision of title II with
respect to
[[Page 91101]]
manufacturers of new motor vehicles or new motor vehicle engines).
Thus, CAA section 114(a)(1) additionally provides the EPA authority to
require the information in this final rule because the information is
relevant for carrying out CAA section 136.
The Administrator has determined that this action is subject to the
provisions of section 307(d) of the CAA. Section 307(d) contains a set
of procedures relating to the issuance and review of certain CAA rules.
In addition, pursuant to sections 114, 301, and 307 of the CAA, the
EPA is publishing final confidentiality determinations for the new data
elements required by this final regulation.
II. Procedures for Facilitating Compliance, Including Netting and
Exemptions
A. Final Definitions To Support WEC Implementation and Associated
Revisions to Part 98, Subpart A
In accordance with CAA section 136(d), applicable facilities under
part 99 are those facilities within certain industry segments as
defined under part 98, subpart W. To support implementation of the WEC,
we are finalizing several definitions within the general provisions of
40 CFR 99.2 which follow from the statutory text.
1. Applicable Facility and WEC Applicable Facility Definitions
The EPA received comments expressing support for the proposed
definitions for ``applicable facility'' and ``WEC applicable
facility.'' Certain commenters disagreed that the statutory text
requires alignment of the definition of an ``applicable facility'' in
the proposed WEC rule with the subpart W facility definitions, and
stated that CAA section 136(d) leaves room for interpretation as to the
definition of an ``applicable facility.'' After consideration of
comments received, the EPA is finalizing as proposed a definition of
``applicable facility'' as specified by the statute to mean a facility
within one or more of the following industry segments: onshore
petroleum and natural gas production, offshore petroleum and natural
gas production, onshore petroleum and natural gas gathering and
boosting, onshore natural gas processing, onshore natural gas
transmission compression, onshore natural gas transmission pipeline,
underground natural gas storage, Liquified Natural Gas (LNG) import and
export equipment, or LNG storage, as those industry segments are
defined in 40 CFR 98.230 of subpart W.\22\ The EPA does not agree with
the commenters that the statute leaves open for interpretation the
meaning of ``applicable facility;'' rather, the agency concludes that
the statute expressly defines ``applicable facility'' in the same
manner as the term ``facility'' has long been defined under 40 CFR part
98 and applied to the nine industry segments listed in CAA section
136(d). In addition to reflecting the plain language of the statutory
text, aligning the definition of an applicable facility with the
definitions of a facility within the industry segments in subpart W,
for each corresponding industry segment, simplifies implementation and
reduces burden on industry and the EPA. The approach supported by some
commenters would have established different definitions of ``facility''
for subpart W and WEC, requiring the EPA to establish new reporting
requirements for certain industry segments and requiring industry to
calculate and report emissions for the same equipment twice. The EPA
also received comments requesting that we clearly state that oil and
gas producers generating less than 25,000 tons of CO<INF>2</INF>
equivalent are not required to submit documentation to the regulatory
body proving that the emissions threshold was not exceeded. After
consideration of comments, the EPA is finalizing with clarifying
revisions a definition of ``WEC applicable facility'' in 40 CFR 99.2,
which means an applicable facility, as defined in this section, for
which the owner(s) or operator(s) of a part 98 reporting facility was
required to report GHG emissions under part 98, subpart W of this
chapter of more than 25,000 metric tons CO<INF>2</INF>e for the
reporting year. This final definition clarifies that the obligation for
reporting under part 98 may apply to multiple owners or operators for a
facility, that the status as a WEC applicable facility is based upon
reporting in compliance with part 98, and that whether or not a part 98
reporting facility is a WEC applicable facility is based upon a
specific reporting year. This definition is taken from the threshold
set in the statute. Only WEC applicable facilities are required to
report under part 99.
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\22\ See 42 U.S.C. 7436(d).
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A single reporting facility under part 98, subpart W, typically
consists of operations within a single petroleum and natural gas
industry segment. However, a single reporting facility may represent
operations in two or more industry segments. Facilities that may
potentially have operations representing multiple industry segments and
would report as the same facility if co-located include facilities that
have co-located operations in the onshore natural gas processing,
onshore natural gas transmission compression, underground natural gas
storage, LNG import and export equipment, and LNG storage industry
segments. We are finalizing as proposed that such operations would be
considered a single WEC applicable facility under part 99.
In cases where a subpart W facility reports under two or more of
the industry segments listed in the previous paragraph, the EPA is
finalizing as proposed that the 25,000 mt CO<INF>2</INF>e threshold is
evaluated based on the total facility GHG emissions reported to subpart
W across all the relevant industry segments (i.e., the facility's total
subpart W GHGs). As discussed in section II.C.1. of this preamble, the
waste emissions threshold is the facility-specific quantity of annual
emissions, based upon the relevant intensity thresholds specified by
Congress, above which the EPA must impose and collect the WEC. For the
purposes of determining the waste emissions threshold for a WEC
applicable facility that operates within multiple industry segments,
the EPA is finalizing as proposed that each industry segment is
assessed separately (i.e., using industry segment-specific throughput
and methane intensity threshold) and then summed together to determine
the waste emissions threshold for the facility. The EPA is finalizing
as proposed that this approach is used in all cases where a WEC
applicable facility contains equipment in multiple subpart W industry
segments.
The EPA considered an alternative definition of WEC applicable
facility as it applies to subpart W facilities that report under two or
more industry segments. This alternative approach would have assessed
these facilities against the 25,000 mt CO<INF>2</INF>e applicability
threshold using the CO<INF>2</INF>e reported under subpart W for each
individual segment at the facility rather than the total facility
subpart W CO<INF>2</INF>e reported across all segments. CAA section
136(d) defines an applicable facility as ``a facility within the [nine]
industry segments'' subject to the WEC and does not specify that an
applicable facility is in one and only one industry segment. The EPA
understands this to mean that an applicable facility constitutes an
entire subpart W facility, including those that report under more than
one segment. Thus, based on the statutory text, the EPA is finalizing
as proposed to assess WEC applicability based on the entire subpart W
facility's emissions that are reported under subpart W.
[[Page 91102]]
Based on subpart W data for the 2022 reporting year, no more than two
dozen facilities report data for multiple segments, and when total
subpart W CO<INF>2</INF>e is summed across all segments at these
facilities, almost all of these facilities remain below the 25,000 mt
CO<INF>2</INF>e threshold. Historic data also show that the industry
segments (onshore natural gas processing, onshore natural gas
transmission compression, and underground natural gas storage) located
at these facilities that report data for multiple segments generally
have methane emissions below the waste emissions thresholds. The final
approach of using total subpart W facility CO<INF>2</INF>e for
determining WEC applicability therefore should not result in a
significant number of facilities being subject to the WEC compared to
an approach that assessed applicability using subpart W CO<INF>2</INF>e
for each individual industry segment at a facility. Based on historic
data, the EPA does not expect the very small number of facilities with
operations in multiple subpart W segments that could be subject to the
WEC under the final approach to experience a substantially different
financial impact than they would have under this alternative approach.
2. Facility Applicable Emissions, WEC Applicable Emissions, Net WEC
Emissions, and Net WEC Emissions After Transfers Definitions
We are finalizing as proposed a definition for ``facility
applicable emissions'' in 40 CFR 99.2 which means the annual methane
emissions from a WEC applicable facility that are either equal to,
below, or exceeding the waste emissions threshold for the facility
prior to consideration of any applicable exemptions. We are also
finalizing as proposed a definition for ``WEC applicable emissions'' in
40 CFR 99.2, which means the annual methane emissions from a WEC
applicable facility after consideration of any applicable exemptions.
The calculation methodology for WEC applicable emissions is addressed
in section II.C.3. of this preamble.
The EPA is also finalizing definitions of ``net WEC emissions'' and
``net WEC emissions after transfers'' to clarify the total amount of
methane that is subject to charge and to account for revisions from the
proposal to netting requirements. The EPA is finalizing a definition of
``net WEC emissions'' in 40 CFR 99.2 to mean the sum of WEC applicable
emissions from facilities with the same WEC obligated party, as
calculated pursuant to 40 CFR 99.22 using equation B-8. If a WEC
obligated party only has one WEC applicable facility, net WEC emissions
are equal to that facility's WEC applicable emissions. The EPA is
finalizing a definition of ``net WEC emissions after transfers'' to
mean the total quantity of methane emissions subject to charge for a
WEC obligated party. If the WEC obligated party is not eligible to, or
elects not to, transfer or receive negative net WEC emissions pursuant
to 40 CFR 99.23, the net WEC emissions after transfers are determined
pursuant to 40 CFR 99.22 and are equal to net WEC emissions. If the WEC
obligated party transfers or receives negative net WEC emissions
pursuant to 40 CFR 99.23, the net WEC emissions after transfers reflect
such transfers subject to the requirements of 40 CFR 99.23. If a WEC
obligated party does not participate in any transfer of net WEC
emissions with other WEC obligated parties with a common parent
company, that WEC obligated party's net WEC emissions after transfers
are equal to its net WEC emissions.
3. WEC Obligated Party Definition
We are finalizing the definitions of ``WEC obligated party'' and
``WEC applicable facility''. The EPA received comment requesting that
we recognize the differences between ownership and operatorship as well
as the complexity of ownership and operator agreements, including
acknowledging the dynamics of these across basins, facilities, and
individual wells. After consideration of the comments received, and in
addition to finalizing the definition for WEC applicable facility
discussed earlier in this section, we are finalizing with revision a
definition for the term ``WEC obligated party'' in 40 CFR 99.2. As
finalized, the term WEC obligated party refers to the owner or operator
of one or more WEC applicable facilities. The WEC obligated party of a
WEC applicable facility must be one of the owners or operators of that
facility under subpart W, as reported under 40 CFR 98.3(c)(14). We note
that although there are differences in the common definitions of
ownership and operatorship and there may be complex agreements between
owners and operators, for the purposes of subpart W, there are specific
definitions for owner(s) and operators(s) in subpart A and subpart W of
part 98, with some segments, such as onshore natural gas production,
having unique definitions.\23\ We are finalizing the term ``WEC
obligated Party'' to be consistent with these definitions. For WEC
applicable facilities that have more than one owner or operator, we are
finalizing that the WEC obligated party is an owner or operator
selected by a binding agreement among the owners and operators of the
WEC applicable facility. The EPA anticipates that such an agreement
would be similar to those used in carrying out 40 CFR 98.4(b) under the
GHGRP. We are finalizing as proposed that the WEC obligated party must
be one of the owners or operators of the WEC applicable facility as of
December 31 of the reporting year, with one exception. This exception
is related to the circumstances in which a WEC applicable facility is
involved in a transaction(s) subsequent to the end of the reporting
year (i.e., between January 1 and December 31 of the year following the
reporting year) that results in all of the owners or operators (of the
facility as of December 31 of the reporting year) ceasing to exist
prior to the WEC filing date. In this case, the WEC obligated party
would be one of the owner(s) or operator(s) that acquired the facility
as a result of the transaction(s) to be selected by mutual agreement
among all of the acquiring owner(s) or operator(s). This revision is
necessary to avoid cases in which there is no eligible owner or
operator to serve as the WEC obligated party. We note that in case of
transactions where only one owner or operator ceases to exist and that
entity was the WEC obligated party, the remaining owners or operators
of the WEC applicable facility that were the owners or operators as of
December 31 of the reporting year would need to select a new WEC
obligated party. Additionally, we have finalized clarifying language in
the definition of WEC obligated party to make clear that each WEC
applicable facility must have only one WEC obligated party for a
reporting year. This requirement was included in the proposed rule
under proposed 40 CFR 99.4, but we are further clarifying by making it
explicit in the definition of WEC obligated party. The EPA notes that
WEC obligated parties may only net for the applicable
[[Page 91103]]
reporting year for which they are reporting; in other words, emissions
occurring before December 31 should not be netted with emissions
occurring after December 31.
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\23\ For example, 40 CFR 98.238 defines Facility with respect to
onshore petroleum and natural gas production for purposes of
reporting under this subpart and for the corresponding subpart A
requirements as all petroleum or natural gas equipment on a single
well-pad or associated with a single well-pad and CO<INF>2</INF> EOR
operations that are under common ownership or common control
including leased, rented, or contracted activities by an onshore
petroleum and natural gas production owner or operator and that are
located in a single hydrocarbon basin as defined in 40 CFR 98.238.
Where a person or entity owns or operates more than one well in a
basin, then all onshore petroleum and natural gas production
equipment associated with all wells that the person or entity owns
or operates in the basin would be considered one facility.
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In addition to establishing the entity regulated under the WEC, the
EPA is finalizing the temporal bounds for which a WEC obligated party
is responsible for its facilities and their associated emissions, as
well as establishing obligations for transacted assets. For the
purposes of submitting the WEC filing, we are finalizing that the WEC
obligated party's (including through binding agreement) WEC applicable
facilities are the WEC applicable facilities for which it is the owner
or operator, as of December 31 of each reporting year. Under the final
rule, the WEC obligated party is responsible for any WEC applicable
emissions from facilities for which it was the facility owner or
operator as of December 31 of the corresponding reporting year. The EPA
recognizes that facilities may be acquired or divested at any time in a
given reporting year, and that under the final rule the year-end WEC
obligated party, or the WEC obligated party selected by mutual
agreement among all of the acquiring owner(s) or operator(s) if the
existing WEC obligated party ceases to exist, would be responsible for
data and any corresponding WEC obligation for the entire reporting
year. The EPA believes that this approach is both reasonable and
necessary for implementation of the WEC program. Subpart W data
reporting uses the same approach for circumstances where facilities are
acquired or divested during a given reporting year; the facility owner
or operator as of December 31 is responsible for reporting emissions
for the entire year. Because the subpart W data is inextricably linked
to the WEC filing, the EPA assessed that it would complicate and
potentially be inappropriate to have different parties be liable for
the legal obligations of the same facility under each regulation.
Specifically, different entities being legally liable for the same
facility under subpart W and the WEC program could lead to challenges
for WEC filings and associated data verification, increase industry
burden by requiring significant coordination between different
companies, and lead to situations where separate entities are
responsible for reporting subpart W data and paying any charge
calculated from that data. The EPA therefore believes it would be
neither practical nor accurate for the reporting responsibility and
potential WEC obligation for a single facility to be split among
multiple WEC obligated parties in such circumstances.
The EPA also recognizes that a facility's owner or operator may
change between December 31 of a given reporting year and August 31 of
the following year, when WEC filings are due, or later in the year and
prior to when corrections may occur. In such situations, under the
final rule the WEC obligated party associated with a facility as of
December 31 of a given reporting year is responsible for accounting for
that facility in its WEC filing and is responsible for any WEC
obligation associated with that facility for that reporting year. The
new owner or operator after the transaction would only become the new
WEC obligated party starting with the year of purchase, assuming they
are still the owner or operator as of December 31 of the year of the
transaction. The EPA received several comments related to the acquiring
of a WEC obligated party by another WEC obligated party prior to the
WEC filing such that the WEC obligated party as of December 31 for the
applicable reporting year ceases to exist. One commenter stated that
the proposal was ambiguous as to whether companies that purchase WEC
applicable facilities (and thus would become WEC obligated parties, as
of December 31 of the reporting year) would be responsible for
retaining records, and all associated obligations, that were generated
by the previous owners or operators of those facilities. Another
commenter suggested that the responsibility for reporting emissions
under the WEC should remain with the party responsible for
recordkeeping for a facility at the time the emissions occur at the
facility, rather than the time reporting would be required. After
consideration of the comments received, we are further clarifying from
proposal that under this final rule, in cases where a facility has a
single owner or operator and that WEC obligated party is acquired by
single WEC obligated party such that the WEC obligated party as of
December 31 for the applicable reporting year ceases to exist, the
acquiring WEC obligated party assumes responsibility for the acquired
WEC obligated party's WEC applicable facilities for that reporting
year. In cases where a facility has a single owner or operator and that
WEC obligated party is acquired by multiple owners or operators
following a transaction that results in the WEC obligated party as of
December 31 for the applicable reporting year to no longer exist, the
post-transaction owners or operators must select among themselves by
binding agreement which owner or operator will be the facility's WEC
obligated party for that reporting year.
4. Gathering and Boosting Related Definitions
The EPA is revising the definitions for ``gathering and boosting
system'' and ``gathering and boosting system owner or operator'' under
40 CFR part 99. The EPA received comments indicated that proposed
definitions of ``gathering and boosting system'' and ``gathering and
boosting system owner or operator'' under part 99 do not match the
revisions under subpart W. The EPA agrees these definitions should
align with subpart W. Therefore, the EPA is revising from proposal the
definition for ``gathering and boosting system'' to mean a single
network of pipelines, compressors and process equipment, including
equipment to perform natural gas compression, dehydration, and acid gas
removal, that has one or more connection points to gas and oil
production or one or more other gathering and boosting systems and a
downstream endpoint, typically a gas processing plant, transmission
pipeline, LDC pipeline, or other gathering and boosting system.
Additionally, the EPA is revising from proposal the definition of
``gathering and boosting system owner or operator'' to mean any person
that holds a contract in which they agree to transport petroleum or
natural gas from one or more onshore petroleum and natural gas
production wells or one or more other gathering and boosting systems to
a downstream endpoint, typically a natural gas processing facility,
another gathering and boosting system, a natural gas transmission
pipeline, or a distribution pipeline, or any person responsible for
custody of the petroleum or natural gas transported.
5. Revisions to 40 CFR Part 98, Subpart A Related to WEC Obligated
Party Definition
As part of these final amendments, the EPA is also finalizing
revisions to 40 CFR part 98, subpart A, for all facilities that are
subject to the GHGRP and report under subpart W. On August 1, 2023 (88
FR 50282), the EPA proposed revisions to 40 CFR 98.4 to address changes
in the owner or operator of a facility in the four industry segments in
subpart W (Petroleum and Natural Gas Systems) that have unique
definitions of facility. The proposed provisions would define which
owner or operator is responsible for current and future reporting
years' reports and clarify how to determine responsibility for
revisions to annual reports for reporting years prior to
[[Page 91104]]
owner or operator changes for specific industry segments in subpart W,
beginning with RY2025 reports. In the 2024 Subpart W Final Rule, the
EPA finalized the provisions regarding current and future reporting
years' reports in 40 CFR 98.4(n). However, the EPA did not take action
on proposed amendments related to responsibility for revisions to
annual reports for reporting years prior to owner or operator changes
for specific industry segments in subpart W and indicated the intent to
consider those proposed revisions in coordination with the 2024 WEC
rulemaking and take action, if finalized, on these requirements at the
same time.
The current regulations at 40 CFR 98.4(h), which cover changes in
owners and operators, absent the changes being finalized in this
rulemaking, state that in the event an owner or operator of the
facility or supplier is not included in the list of owners and
operators in the certificate of representation under this section for
the facility or supplier, such owner or operator shall be deemed to be
subject to and bound by the certificate of representation, the
representations, actions, inactions, and submissions of the designated
representative and any alternate designated representative of the
facility or supplier, as if the owner or operator were included in such
list. 40 CFR 98.4(h) goes on to additionally state that within 90 days
after any change in owners or operators of the facility or supplier
(including the addition of a new owner or operator), the designated
representative or any alternate designated representative shall submit
a certificate of representation that is complete under this section
except that such list shall be amended to reflect the change. Thus the
owners and operators of facilities are bound to the actions, inactions
and submissions of the designated representative of the facility when
they become an owner or operator of the facility, as defined in 40 CFR
part 98. The current regulations at 40 CFR 98.4(g), absent the changes
being finalized in this rulemaking, state that if there is a change in
the designated representative or alternate designated representative,
then all representations, actions, inactions, and submissions by the
previous designated representative or the previous alternate designated
representative of the facility are binding on the new designated
representative and the owners and operators of the facility or
supplier. Thus, any new owners and operators are bound to the actions
and submissions of the previous designated representatives, including
historical submissions for the facility prior to becoming an owner or
operator. However, the responsibility for reporting under part 98 could
potentially be inconsistent with the WEC obligated party responsible
for reporting under 40 CFR part 99, as described earlier in this
section.
Many commenters recommended that no new owner should be responsible
for the WEC generated by the prior owner and that emissions reporting
should remain the responsibility of the owner or operator who generated
the reportable emissions. The EPA believes that preparation and
submission of multiple reports by different entities related to the
same emission sources would lead to duplicative burden and raise the
potential for inconsistencies in reported data. After consideration of
comments received, and in alignment with 40 CFR part 99, in this final
rule, the EPA is making changes to the regulations for facilities that
report under subpart W to specify that, with two exceptions, the
owner(s) and operator(s) as of December 31 of the reporting year, will
remain responsible for that reporting year, even after sale of the
facility. These changes are intended to ensure that the entity
responsible for subpart W data for specific reporting years under
various transaction scenarios is aligned with the WEC obligated party
responsible for WEC filing and any WEC obligation in those years. The
EPA is also clarifying that for the first transaction after January 1,
2025, the sellers will also remain responsible for historic reporting,
(i.e., reporting years prior to 2024). Specifically, in this final
rule, the EPA is adding 40 CFR 98.4(o), which applies in lieu of the
last sentence of 40 CFR 98.4(g) for facilities that report under
subpart W, starting with transactions that occur on or after January 1,
2025, to address responsibility for reporting years prior to a year in
which there is a change in the owners and operators. According to the
new paragraph, when there is a change in the owner(s) or operator(s) of
a subpart W facility on or after the effective date of this final rule
that involve the owner(s) or operator(s) as of December 31 of the year
prior to the year of the transaction, the owners and operators as of
December 31 of the year prior to the year of the transaction, i.e., the
sellers, must select a historic reporting representative who will be
responsible after the transaction(s) for that reporting year and if it
is the first transaction after January 1, 2025, for all prior years. In
these cases, the owner(s) and operator(s) of the facility as of
December 31 of the year prior to the year in which the facility is sold
are bound to the actions of the historic reporting representative and
any previous designated representative or historic reporting
representative for the relevant years. The historic reporting
representative is selected by an agreement binding on the selling
owner(s) and operator(s), unless the owner(s) or operator(s) selling
the facility ceases to exist and/or is acquired as a result of a
transaction(s), in which case all of the owners or operators involved
in that transaction shall select at the time of sale a historic
reporting representative by an agreement binding on each of the owners
and operators involved in the transaction. The second exception is that
for changes in owners or operators that occur after December 31, 2024
and before the effective date of this final rule that involve the
owner(s) and operator(s) as of December 31, 2024, the buying and
selling owners and operators must jointly select a historic reporting
representative. In these cases, the owners and operators of the
facility as of December 31 of the year prior to the year in which the
facility is sold and the acquiring owners and operators are bound to
the actions of the historic representative. In any of these scenarios,
it is the EPA's intent for this person to be the WEC obligated party
designated representative or represent the WEC obligated party
corresponding to the applicable part 98 reporting year, for a facility
that is a WEC applicable facility as defined in 40 CFR 99.2, so that
there is alignment between WEC obligated parties and the owner(s) and
operator(s) responsible for reporting for facilities that report under
subpart W while also clarifying historical reporting requirements. The
final provisions of 40 CFR 98.4(o) also specify that for cases where an
entire facility is merged or acquired by a new owner(s) or operator(s),
the seller must notify the EPA of the date of the last transaction
resulting in the change to the owner(s) or operator(s) and that the
acquiring owner or operator must notify the EPA of the e-GGRT ID number
of the facility acquired in transaction. This additional information is
necessary to determine when a historical reporting representative is
required and maintain the ability to verify year-to-year changes in
annual emissions for facilities post-transaction.
The final provisions of 40 CFR 98.4(o)(6) specify the reporting
years for which a historic reporting representative is responsible.
Based on the effective date of these amendments, these provisions will
first apply to transactions that occur in calendar year 2025. For the
first transaction that occur after January 1, 2025, the historic
[[Page 91105]]
reporting representative is responsible for submissions (if they have
not occurred prior to the transaction) and revisions to annual GHG
reports under 40 CFR 98.3(h) for all reporting years prior to the
reporting year in which the transaction occurred. For subsequent
transactions, the owners or operators of a facility that reports under
subpart W as of December 31 of each reporting year are responsible for
reporting and revisions to annual GHG reports corresponding to that
reporting year. We note that these revisions do not impact how
reporting responsibility for years prior to reporting year 2024
transfer upon a change in ownership prior to the effective date of this
final rule. The existing provisions of subpart A (specifically 40 CFR
98.4(g)) continue to apply, so that the designated representative or
alternate designated representative or historic reporting
representative, as applicable, of the facility for reporting year 2024
maintain responsibility for the submissions of the previous designated
representative and any necessary revisions to reports for reporting
year 2024 and earlier. The final provisions of 40 CFR 98.4(o)(6) also
specify that if the responsible owner(s) or operators(s) are acquired
such that the owner(s) or operator(s) cease to exist as a result of a
transaction, the acquiring owners would become responsible for
submission (if not already submitted before the transaction) and any
revisions to annual reports for the reporting year prior to the
transaction and, if applicable, annual GHG reports under 40 CFR 98.3(h)
for additional reporting years prior to the transaction as specified in
paragraphs 40 CFR 98.4(o)(6)(i) and (ii).
6. Additional Definitions To Support WEC Implementation
The EPA is adding definitions in 40 CFR 99.2 for ``parent
company,'' ``United States parent company,'' ``qualified professional
engineer,'' and ``well identification (ID) number,'' which were not
included as proposed part 99 regulatory definitions in the proposed
rule. Commenters stated that definitions are necessary to implement CAA
section 136 and create regulatory harmony. After consideration of
comments, the EPA believes it will provide clarity to add definitions
for these terms to implement the WEC. In alignment with part 98 subpart
A, we are finalizing the definition of ``United States parent company''
to mean the highest-level United States company, as reported under 40
CFR 98.3 for a WEC applicable facility, with an ownership interest in
the facility as of December 31 of the year for which data are being
reported. Additionally, for ease of understanding, the EPA is
finalizing the definition of ``parent company'' to be the United States
parent company.
We are also finalizing a definition for the term ``Administrator''
to mean the Administrator of the United States Environmental Protection
Agency or the Administrator's authorized representative. This
definition is aligned with the definition of the same term in part 98
subpart A. We proposed to define the term ``e-GGRT ID number'' as the
identification number assigned to a facility by the EPA's electronic
Greenhouse Gas Reporting Tool for submission of the facility's part 98
report. We are instead finalizing the defined term as ``Facility ID
number'' for consistency of terminology in the final rule and with
revised definition referring to the Greenhouse Gas Reporting Program
where the proposal referred to the associated reporting tool and
omitting the reference to submission of reports as these identifiers
are not used solely for report submission.
The EPA also received comments stating that the proposed rule did
not include sufficient detail regarding the certification criteria for
third-party auditors. After consideration of comments and as discussed
in section III.B.2., the EPA is requiring that auditors be qualified
professional engineers, and is finalizing the definition for
``qualified professional engineer,'' in alignment with the definition
of ``qualified professional engineer'' in NSPS OOOOb, to mean an
individual who is licensed by a State as a Professional Engineer to
practice in one or more disciplines of engineering and who is qualified
by education, technical knowledge, and experience to review and
interpret the records required under 40 CFR 99. Additionally, to align
with the definition under part 98 subpart W, we are also finalizing the
definition for ``well ID number,'' to mean the unique and permanent
identification number assigned to a petroleum or natural gas well.
Under the final definition, if the well has been assigned a U.S. Well
Number, the well ID number required in this subpart is the US Well
Number. Under the final definition, if a U.S. Well Number has not been
assigned to the well, the well ID number is the identifier established
by the well's permitting authority.
B. Common Ownership or Control for Netting of Emissions
One of the important flexibilities created by Congress in section
136(f)(4) allows for facilities to reduce their overall WEC payments by
transferring emissions from facilities that are below the waste
emissions threshold to facilities that have emissions that are above
the waste emissions threshold (otherwise known as ``netting''). The EPA
proposed that the owner or operator of the facility should be both the
WEC obligated party (i.e., the entity responsible for paying the WEC
obligation) and the highest-level organization across which this
netting should be allowed. The EPA received numerous comments arguing
that netting should be allowed at the parent company level to maximize
flexibility in implementation. After careful consideration of the
comments and further review of the statutory language, the EPA is
finalizing provisions that increase access to the netting provisions by
allowing for the netting of emissions across facilities that are under
common ownership or control of a parent company, rather than an owner
or operator as proposed. However, the EPA is finalizing as proposed
that the owner or operator is the WEC obligated party, thereby making a
distinction in this final rule that the WEC obligated party and the
corporate level at which netting may occur do not have to be one and
the same. Although the EPA is allowing for additional access to netting
in this final rule by allowing netting to occur at the parent company
level, the EPA is also providing more specificity on the parameters and
conditions under which this netting may occur. Additionally, the EPA is
finalizing requirements for the treatment of net WEC emissions used in
netting that are subsequently revised or invalidated.
1. EPA Interpretation To Implement ``Common Ownership or Control'' for
the Purposes of Part 99
CAA section 136(c), which establishes the methane charge, states
that ``the Administrator shall impose and collect a charge on methane
emissions that exceed an applicable waste emissions threshold under
subsection (f) from an owner or operator of an applicable facility. .
.'' Congress directly requires that a facility owner or operator, which
has a distinct and established legal meaning, be the entity on which
the WEC is imposed and from which a charge is collected. Therefore, the
EPA is finalizing its determination that the WEC obligated party for a
particular applicable facility shall be the owner or operator of that
applicable facility; or if more than one owner or operator exists, the
owners or operators of that facility must designate an entity to be the
WEC obligated party. The netting provision at CAA section 136(f)(4),
meanwhile, allows WEC applicable facilities under
[[Page 91106]]
``common ownership or control'' to net ``emissions by reducing the
total obligation to account for facility emissions levels that are
below the applicable thresholds within and across all applicable
segments'' listed in section 136(d) and as defined in subpart W. In
this final rulemaking, the EPA is interpreting this language to allow
netting at the parent company level. Notably, sections 136(c) and
136(f)(4) employ different language--while 136(c), which establishes
the WEC obligated party, refers specifically to an ``owner or
operator'' of an applicable facility, section 136(f)(4) refers to
facilities ``under common ownership or control.'' The statute therefore
requires that the facility owner or operator must be the WEC obligated
party but provides for netting at the parent company level. The final
requirements for netting are designed to align with both of these
statutory directives. In this section, the EPA details the overall
approach for application of common ownership or control and the
justification for use of a facility's owner or operator as the WEC
obligated party with netting based on common parent company.
The EPA proposed that netting would be limited to the WEC obligated
party level. That is, the owner or operator would be both the WEC
obligated party and the highest-level entity across which emissions
could be netted. We received comments on the proposed use of the owner
or operator as the highest-level entity across which facilities could
net their emissions. Certain commenters disagreed with the proposed
interpretation to define ``common ownership or control'' at the owner
or operator level and stated that a parent company approach would not
only reflect Congressional intent but would also align with legal
precedent and the EPA's application of ``common ownership or control''
under other programs. These commenters also stated that a parent
company approach would better incentivize methane emissions reductions,
as parent companies could more effectively allocate resources across
their operations for methane mitigation--and would have an incentive to
do so if netting were allowed at the parent company level. Other
commenters were supportive of the proposed approach and believed it was
aligned with the statutory text. After consideration of comments
received, the EPA is finalizing revisions from the proposed approach
such that the facility owner or operator remains the WEC obligated
party, but netting is allowed across owners or operators with the same
parent company.
The EPA interprets the netting provision at CAA section 136(f)(4)
to mean that amongst WEC obligated parties with a common parent
company, WEC obligated parties with metric tons of methane below the
waste emissions thresholds (i.e., the difference between emissions
equal to the waste emissions threshold and reported emissions) may
transfer ``negative net WEC emissions'' to one or more WEC obligated
parties with facilities with metric tons of methane emissions that
exceed the waste emissions thresholds (i.e., positive net WEC
emissions).\24\ For the purposes of establishing common ownership or
control under CAA section 136(f)(4), the EPA is finalizing a definition
of ``WEC obligated party'' in 40 CFR 99.2. The EPA is finalizing that
each WEC applicable facility be associated with a single WEC obligated
party (though each WEC obligated party may be associated with multiple
WEC applicable facilities), which is reported under the requirements at
40 CFR 99.7.
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\24\ As further explained in section II.C.3., to calculate the
amount by which a WEC applicable facility is below or exceeding the
waste emissions threshold, the EPA is finalizing as proposed to use
equation B-6 of 40 CFR 99.21(a), in which the facility waste
emissions threshold, as determined in 40 CFR 99.20, is subtracted
from total methane emissions from the WEC applicable facility. This
calculation results in a value of metric tons of methane, the total
facility applicable emissions, that is positive for facilities
exceeding the waste emissions threshold (``positive net emissions'')
and negative for facilities below the waste emissions threshold
(``negative net emissions'').
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As discussed in section II.A. of this preamble, the EPA is
finalizing the definition of ``WEC obligated party'' to mean the WEC
applicable facility's ``owner or operator'' as defined in 40 CFR 99.2
for the applicable industry segment as of December 31 of the reporting
year or that became an owner or operator of the WEC applicable facility
in a transaction occurring subsequent to the end of the reporting year
(i.e., between January 1 and December 31 of the year following the
reporting year) that resulted in the owner or operator of the facility
as of December 31 of the reporting year ceasing to exist. For WEC
applicable facilities with more than one owner and/or operator, the WEC
obligated party must be selected by binding agreement following the
provisions of 40 CFR 99.4. Each WEC applicable facility must have only
one WEC obligated party for any given reporting year. WEC obligated
parties may only net for the applicable reporting year for which they
are reporting. The EPA is finalizing definitions for owner or operator
that are applicable to the onshore petroleum and natural gas
production, offshore petroleum and natural gas production, onshore
petroleum and natural gas gathering and boosting, onshore natural gas
processing, onshore natural gas transmission compression, onshore
natural gas transmission, underground natural gas storage, LNG import
and export equipment, and LNG storage industry segments at 40 CFR 99.2.
These definitions are identical to the corresponding definitions in 40
CFR part 98; that is, the owner or operator (or one of the owners or
operators, selected by binding agreement between all existing owners or
operators) associated with a subpart W facility as reported under 40
CFR 98.3(c)(14) and included in the relevant COR as directed in 40 CFR
98.4(i)(3) would also be the WEC obligated party for that facility.
In some cases, a WEC applicable facility may have multiple owners
and/or operators. In these situations, the EPA is finalizing as
proposed a system by which the facility owner or operators must
designate one of the owners and/or operators as the WEC obligated party
for that facility, as detailed in 40 CFR 99.4. The process for
selection of the WEC obligated party at facilities with multiple owners
or operators is similar to the approach for selecting a designated
representative under 40 CFR part 98. This process requires selection of
a single WEC obligated party for the WEC applicable facility by an
agreement binding on each of the owners or operators associated with
the facility. The final requirements for facilities with multiple
owners or operators allocate all facility-level methane emissions below
or exceeding the waste emissions thresholds to a single WEC obligated
party for each facility.
The EPA proposed that a facility owner or operator would be both
the WEC obligated party, and the entity used to define common ownership
or control. Comments received by the EPA on the proposed approach
focused on the entity used for netting, and did not distinguish between
the concepts of the WEC obligated party and the netting entity. Many of
these comments focused on the proposed interpretation of common
ownership or control rather than the WEC obligated party; though it is
likely that commenters assumed that they would be the same entity. In
other words, the EPA did not receive comments critical of defining the
WEC obligated party as a facility's owner or operator outside the
broader discussion of common ownership or control. Instead, commenters
supported defining the WEC obligated party as the parent company
because they supported the
[[Page 91107]]
use of netting at the parent company level.
In this final rule, the EPA recognizes that the appropriate
corporate level at which netting is allowed need not be the same as the
WEC obligated party. The EPA is finalizing the use of facility owner or
operator as the WEC obligated party for three reasons. First, the plain
text of the statute specifies that an ``owner or operator of an
applicable facility'' is the entity on which a charge is imposed and
from which a charge is collected. Second, as noted in the proposed
rule, designating the owner or operator as the WEC obligated party
aligns with the approach used in subpart W of the Greenhouse Gas
Reporting Program, under which the facility owner or operator is
responsible for reporting the annual emissions which, pursuant to
requirements under CAA section 136(c), will be used to calculate the
charge under this program. Third, the agency appreciates that a parent
company is often a separate legal entity from a facility's owner or
operator, which could be a wholly owned subsidiary or company of which
a parent company has partial ownership.\25\ Depending on the structure
of the corporate family and the applicable corporate laws, the
liabilities of an owner or operator may not transfer to the parent
corporate company, even if that parent company fully owns the owner or
operator. Furthermore, while a parent company may have ownership or
control over certain aspects of a subsidiary's operations or corporate
decisions, it does not necessarily have control over the subsidiary's
assets (such as a facility). In light of Congress's specific reference
to the ``owner or operator of an applicable facility'' as the entity
from which the WEC be imposed and collected, and the limitations on the
extent to which parent companies can assume liabilities held by their
corporate subsidiaries, the EPA does not believe it is consistent with
the statute to define the WEC obligated party as a parent company.
---------------------------------------------------------------------------
\25\ The EPA notes that in some cases, the owner or operator of
a facility may be a parent company. In these instances, the WEC
obligated party would by default be a parent company.
---------------------------------------------------------------------------
Although the statute expressly requires the EPA to treat the owner
or operator of an applicable facility as the WEC obligated party, it
does not limit netting solely to facilities belonging to the same owner
or operator. Further, based upon our consideration of the public
comments, the EPA has concluded that netting amongst WEC obligated
parties with the same parent company, rather than at the level of an
owner or operator, is best supported by the statutory text. There is no
language in CAA section 136(f)(4), or any other part of CAA section
136, that limits the definition of ``common ownership or control'' for
the purposes of netting. The proposed approach of limiting netting
solely to facilities belonging to the same owner or operator would have
represented a narrower interpretation of ``common ownership or
control'' than the statute requires, and in many instances reduced the
number of ``common'' facilities available for netting relative to a
parent company approach. In this case, the complete text 136(f)(4)
states that ``in calculating the total emissions charge obligation for
facilities under common ownership or control, the Administrator shall
allow for the netting of emissions by reducing the total obligation to
account for facility emissions levels that are below the applicable
thresholds within and across all applicable segments identified in
subsection (d).'' The EPA believes that the best reading of this
provision would allow for netting at the parent company level, because
the statutory text does not put any limitations on the definition of
``common ownership or control.'' Instead, the full text of the
provision suggests that the term ``common ownership or control'' should
be read broadly in this context because 136(f)(4) directs the EPA to
allow for netting ``with and across all applicable segments . . .'' The
number of ``common'' facilities will usually be higher when the parent
company approach is used, and lower when the owner or operator approach
is used--and owners or operators under common ownership or control of a
parent company will tend to have operations across more applicable
segments; the owner or operator of a facility is less likely to also
own or operate facilities in different industry segments. Congress's
reference to netting ``within and across'' all applicable segments
indicates an intent that netting be available across a broader
geographic area, which supports the parent company approach.
Therefore, the EPA is finalizing that netting may occur via
transfer of negative net WEC emissions from a WEC obligated party to
one or more WEC obligated parties with the same parent company that
have positive net emissions, since these WEC obligated parties (i.e.,
owners or operators) are under common ownership or control. The
requirements finalized in this rulemaking define the WEC obligated
party at the owner or operator level while allowing for netting to
occur across owners or operators with a common parent company. This
approach reconciles the statutory language in CAA section 136(c) and
136(f)(4) in a manner that is implementable and provides the EPA with a
means to verify netting activities to ensure the integrity of the final
WEC rule. The use of parent company for determining ``common ownership
or control'' in this final rule is specific to part 99 and the WEC
program and does not affect how ``common ownership or control'' is
defined under other existing EPA or Federal regulations, or in any way
limit how ``common ownership or control'' may be defined in future
regulations.
While the EPA is finalizing a regulatory structure that allows for
netting to occur across owners or operators with a common parent
company, the EPA understands that the control a parent company has over
its subsidiaries (i.e., owners or operators) to take action and to
participate in netting may vary. Parent/subsidiary relationships are
heterogeneous and governed by various corporate law structures and/or
other legal constraints that this rulemaking is not intended to impact
or alter. Although commenters stated that parent companies have control
over subsidiaries and make resource allocations across the
subsidiaries, the EPA cannot confirm whether that is true in all cases.
This rulemaking allows owners and operators with a common parent
company to net emissions, provided such netting is not constrained or
prohibited by other rules or laws.
2. Facilities Eligible for the Netting of Emissions
The EPA is finalizing which facilities are eligible to participate
in netting, as allowed by CAA section 136(f)(4). We are finalizing
netting eligibility criteria based on a facility's total reported
subpart W GHG emissions, status in relation to the regulatory
compliance exemption, and overall regulated status under the GHGRP. In
our final approach to netting, we chose interpretations which are the
most consistent with a plain reading of the CAA, were reasonable from a
policy perspective, and were the most transparent and straightforward
to implement. As described in more detail in the following sections,
the final approach establishes that if a facility's emissions are not
subject to the WEC, either because the facility is not a WEC applicable
facility, or because a WEC applicable facility has zero WEC applicable
emissions, as a result of application of one or more eligible
exemptions, that facility's emissions
[[Page 91108]]
would not factor into the netting of emissions for a WEC obligated
party. In other words, only WEC applicable facilities may net, and only
WEC applicable emissions may be netted. As explained further in this
section of the preamble, we believe this interpretation is consistent
with CAA section 136(f)(4), ``the Administrator shall allow for the
netting of emissions by reducing the total obligation to account for
facility emissions levels that are below the applicable thresholds
within and across all applicable segments identified in subsection
(d),'' since the reference to ``applicable thresholds'' and
``applicable segments'', which reflect other subsections under CAA
section 136, implies that only WEC applicable emissions should be
considered in the netting calculation. We note that for applicable
facilities eligible for any exemptions, emissions associated with these
exemptions are removed from any emissions exceeding the waste emissions
threshold prior to netting calculations.
The WEC proposal explained that certain categories of subpart W
facilities are not eligible for netting because they are out of the
scope of the WEC program. There are two categories of subpart W
facilities that report annually under the GHGRP but may have subpart W
emissions less than or equal to 25,000 mt CO<INF>2</INF>e. These
include subpart W-only facilities that are on the GHGRP offramp due to
an emissions level below 25,000 mt CO<INF>2</INF>e, and subpart W
facilities with total emissions from all GHGRP subparts equal to or
exceeding 25,000 mt CO<INF>2</INF>e but subpart W emissions less than
or equal to 25,000 mt CO<INF>2</INF>e. The EPA proposed that these
facilities would not be subject to the WEC, would not be WEC applicable
facilities, and would not be eligible for netting. The EPA received
comments supporting an approach that would allow these facilities to
net with facilities under common ownership or control whose subpart W
emissions are above 25,000 mt CO<INF>2</INF>e (i.e., WEC applicable
facilities). Commenters also supported allowing facilities not required
to report under subpart W to voluntarily report emissions and include
those facilities in netting. In all of these suggested approaches, only
those emissions below the waste emissions thresholds would be brought
into the netting pool; any additional facilities with subpart W
emissions equal to or less than 25,000 mt CO<INF>2</INF>e would not
increase potential exposure to charge because charges for such
facilities are specifically prohibited by the statute. A facility with
subpart W emissions equal to or less than 25,000 mt CO<INF>2</INF>e
would, by statute, not be subject to charge. Other commenters were
supportive of the proposed approach to only allow facilities with
subpart W emissions greater than 25,000 mt CO<INF>2</INF>e to
participate in netting. After consideration of comments received, the
EPA is finalizing the proposed requirements delineating the types of
facilities that are eligible for netting. Sections II.B.2.a-d of this
preamble provide detailed information on the final requirements for
netting eligibility and the EPA's justification for not expanding
netting eligibility.
a. Facilities Required To Report to GHGRP and That Have Subpart W
Emissions Greater Than 25,000 Metric Tons of CO<INF>2</INF>e
In accordance with CAA section 136(c) and the definition of ``WEC
applicable facility'' in 40 CFR 99.2, we are finalizing as proposed
that subpart W facilities that have subpart W emissions greater than
25,000 mt CO<INF>2</INF>e are eligible for netting, with the exception
of those that are receiving the regulatory compliance exemption for the
entire year (as discussed in section II.D.2. of this preamble).
Facilities that report 25,000 mt CO<INF>2</INF>e or less under subpart
W are not subject to the WEC, and the EPA is finalizing as proposed
that such facilities are not eligible for netting. These types of
facilities are discussed in greater detail in section II.B.2.c. of this
preamble. The final approach follows what the Agency considers to be
the best reading of the plain text of, and the relationship between,
CAA sections 136(d), 136(c), and 136(f) (which includes subsections
136(f)(4) and 136(f)(1)-(3)). The final approach also represents a
reasonable policy choice in line with the EPA's understanding of
Congress's intent that the WEC program constitute a meaningful
incentive to reduce methane emissions. Accordingly, the following
sections provides an overview of the relevant statutory text, and the
corresponding legal basis for the final approach under which only WEC
applicable facilities may net, and only WEC applicable emissions may be
netted, under CAA section 136(f)(4). This section also explains the
policy rationale behind the EPA's final approach.
CAA section 136(d) introduces the nine industry segments within
which all subpart W facilities must fall in order to be evaluated for
WEC applicability. Importantly, facilities within these segments are
``applicable facilities'', per CAA section 136(d), but they are not
necessarily ``WEC applicable facilities'', subject to possible WEC
obligation, unless they report over 25,000 mt CO<INF>2</INF>e per year
under subpart W. CAA section 136(c) clarifies this point. Specifically,
CAA section 136(c) requires the Administrator to impose and collect a
charge on the owner or operator ``of an applicable facility that
reports more than 25,000 metric tons of carbon dioxide equivalent of
greenhouse gases emitted per year pursuant to subpart W''. Thus,
building upon the CAA section 136(d) definition, CAA section 136(c)
establishes that only facilities which both fall within one or more of
the nine CAA section 136(d) industry segments and report more than
25,000 mt CO<INF>2</INF>e under subpart W are subject to the WEC
program. For clarity, in this rulemaking the EPA refers to these
facilities as ``WEC applicable facilities''.
CAA section 136(f), which is entitled ``Waste Emissions
Threshold'', includes a series of subsections under this heading.
Subsections 136(f)(1)-(3) illustrate the meaning of ``waste emissions
threshold'' in this context and explain that these are actually a
series of thresholds which determine when and how to impose a charge on
methane emissions from WEC applicable facilities, depending on which
industry segment or segments they fall under. Specifically, the nine
CAA section 136(d) industry segments are categorized into four groups,
and a waste emissions threshold is applied to each of the four. CAA
section 136(f)(1) covers offshore and onshore petroleum and natural gas
production (industry segments (1) and (2) under CAA section 136(d)),
and further divides this category depending on whether or not natural
gas is sent to sale: ``With respect to imposing and collecting the
charge under subsection (c) for an applicable facility in an industry
segment listed in paragraph (1) or (2) of subsection (d), the
Administrator shall impose and collect the charge on the reported
metric tons of methane emissions from such facility that exceed (A)
0.20 percent of the natural gas sent to sale from such facility; or (B)
10 metric tons of methane per million barrels of oil sent to sale from
such facility, if such facility sent no natural gas to sale.'' \26\
---------------------------------------------------------------------------
\26\ 42 U.S.C. at 7436(f)(1).
---------------------------------------------------------------------------
CAA sections 136(f)(2) and (3) follow the same model: section
136(f)(2) establishes thresholds for nonproduction petroleum and
natural gas systems (industry segments (3), (6), (7), and (8) under
section 136(d),\27\) and
[[Page 91109]]
imposes a charge on ``the reported metric tons of methane emissions
that exceed 0.05 percent of the natural gas sent to sale from or
through such facility''; \28\ and section 136(f)(3) establishes
thresholds for natural gas transmission (industry segments (4), (5),
and (9)) \29\ and imposes a charge on ``the reported metric tons of
methane emissions that exceed 0.11 percent of the natural gas sent to
sale from or through such facility.'' \30\ But each industry-specific
threshold is introduced in the same way: ``With respect to imposing and
collecting the charge under subsection (c) for an applicable facility
in an industry segment listed in paragraph (x) of subsection (d),
[charges shall be imposed as follows].'' Following this plain text, it
is clear that the CAA section 136(f) waste emission thresholds apply
only to WEC applicable facilities--that is, facilities within one or
more of the nine WEC industry segments listed in CAA section 136(d)
which emit more than 25,000 mt per year CO<INF>2</INF>e under subpart
W, and thus may be subject to charge under CAA section 136(c).
---------------------------------------------------------------------------
\27\ Specifically: (3) onshore natural gas processing; (6)
liquefied natural gas storage; (7) liquefied natural gas import and
export equipment; and (8) onshore petroleum and natural gas
gathering and boosting.
\28\ Id. at section 7436(f)(2).
\29\ Specifically, (4) onshore natural gas transmission
compression; (5) underground natural gas storage; and (9) onshore
natural gas transmission.
\30\ Id. at section 7436(f)(3).
---------------------------------------------------------------------------
Finally, the netting provision itself, CAA section 136(f)(4),
states that ``in calculating the total emissions charge obligation for
facilities under common ownership or control, the Administrator shall
allow for the netting of emissions by reducing the total obligation to
account for facility emissions levels that are below the applicable
thresholds within and across all applicable segments identified in
subsection (d).'' The EPA is finalizing as proposed that this netting
provision applies to WEC applicable facilities and WEC applicable
emissions only, for three reasons.
First, the EPA believes that under the best reading of the statute,
the term ``applicable thresholds'' refers to the waste emission
thresholds outlined in CAA section 136(f)(1)-(3). This is important
because, the waste emissions thresholds apply only to WEC applicable
facilities--they determine whether, and how, a charge shall be imposed
on methane emissions from a facility which has already been triggered
into the WEC program by virtue of its emissions being greater than
25,000 mt per year CO<INF>2</INF>e in subpart W. The thresholds do not
apply to facilities which emit 25,000 or fewer metric tons per year of
CO<INF>2</INF>e under subpart W, because under CAA section 136(c), no
charge may be imposed or collected on such facilities. Because methane
emissions from facilities that emit 25,000 or less metric tons per year
of CO<INF>2</INF>e under subpart W are not WEC applicable emissions,
they cannot be compared to the waste emissions thresholds, and they
cannot be considered to fall either above or below these thresholds.
As previously stated, the EPA's conclusion that the term
``applicable thresholds'' in CAA section 136(f)(4) refers to the waste
emissions thresholds outlined in CAA section 136(f)(1)-(3) is supported
by both the text and structure of the statute. The structure of the
statute strongly supports the presumption that CAA section 136(f)(4)
refers to netting based on a facility's relationship to the waste
emissions thresholds because CAA section 136(f)(4) appears as part of
CAA section 136(f), under the ``waste emissions threshold'' heading,
and immediately following CAA section 136(f)(1)-(3)'s establishment of
the specific waste emissions thresholds for each industry segment. It
follows that CAA section 136(f)(4)'s reference to ``applicable
thresholds'' refers to these industry segment-specific requirements,
and accordingly ``applicable segments'' refers to the industry segments
identified in CAA section 136(f)(1)-(3).
The text also strongly supports this interpretation because CAA
section 136(f)(4) refers to facility emissions levels that are ``below
the applicable thresholds,'' plural. The use of the plural, and the use
of the term ``applicable,'' both indicate that Congress was referring
here to the multiple waste emissions thresholds introduced in CAA
sections 136(f)(1) through (3), which specifically and separately apply
to WEC applicable facilities within various subsets of industry
segments, defined in CAA section 136(d). Again, these separate
thresholds only apply to WEC applicable facilities, which emit over
25,000 metric tons per year of CO<INF>2</INF>e.
In addition to the ``applicable thresholds'' question, the EPA
believes that Congress's use of the term ``applicable segments'' in
stating that the EPA may ``redu[ce] the total obligation to account for
facility emissions levels that are below the applicable thresholds
within and across all applicable segments identified in subsection
(d),'' is significant here. While CAA section 136(d) introduces the
nine relevant ``industry segments'' within which all WEC applicable
facilities must fall, CAA section 136(f)(4) classifies these segments
into four groups, and is the only provision to use the term
``applicable segments.'' CAA section 136(f) establishes a set of
requirements determining when and how to impose a charge on those
facilities triggered into the program, depending on their industry
segment and the amount of methane they emit. It follows that CAA
section 136(f)(4)'s reference to ``applicable thresholds'' refers to
these four group-specific thresholds, and ``applicable segments''
refers to the nine segments within the four segment groups. In other
words, each group of segments constitutes the ``applicable'' segments
to their corresponding applicable threshold. This is important, again
because the four groups laid out under CAA section 136(f) include only
WEC applicable facilities.
Finally, Congress's statement that netting shall be employed ``in
calculating the total emissions charge obligation for facilities under
common ownership or control'', further indicates that only WEC
applicable facilities may be netted. Logic indicates that only WEC
applicable facilities, with WEC applicable emissions, would be relevant
to a determination of total emissions charge obligation. As regards the
WEC program, WEC obligated parties are concerned with methane emissions
for the WEC applicable facilities for which they are responsible--not
various other subpart W facilities for which a WEC charge can never be
imposed.
In addition to this stated legal rationale, the final approach also
represents a reasonable policy choice in line with the EPA's
understanding of Congress's intent that the WEC program constitute a
meaningful incentive to reduce methane emissions. Specifically, should
the WEC program allow netting from subpart W facilities emitting 25,000
mt CO<INF>2</INF>e per year or less under subpart W, WEC obligated
parties would lose an incentive to reduce emissions at WEC applicable
facilities that exceed their waste emissions thresholds. Negative
emissions from facilities with subpart W emissions of 25,000 mt
CO<INF>2</INF>e or less could be used to net out positive emissions
from WEC applicable facilities, allowing WEC obligated parties to zero
out WEC obligations without actually reducing emissions overall. Given
that many subpart W facilities that report 25,000 mt CO<INF>2</INF>e or
less under subpart W would also be well below their waste emissions
threshold, allowing these facilities to net could add significant
negative tons to the WEC program such that actual methane emissions
from WEC applicable facilities could increase without increasing WEC
obligations.
[[Page 91110]]
b. Facilities With Subpart W Emissions Greater Than 25,000 Metric Tons
of CO<INF>2</INF>e That Are Receiving the Regulatory Compliance
Exemption
The EPA is finalizing as proposed that during such time that a
facility receives the regulatory compliance exemption, that facility
would have zero WEC applicable emissions and thus would not be able to
participate in the netting of methane emissions across facilities under
common ownership or control of a WEC obligated party. The final
approach is based on a plain reading of the statutory text, and follows
the same reasoning outlined in section II.B.2.a. of this preamble,
which explains that under the best reading of the text, only WEC
applicable facilities may net. This section will further expand upon
the EPA reasoning that only WEC applicable emissions may be netted, and
clarify this point for purposes of the regulatory compliance exemption.
CAA section 136(f)(6)(A) states that ``[c]harges shall not be
imposed pursuant to subsection (c) on an applicable facility that is
subject to and in compliance with methane emissions requirements
pursuant to subsections (b) and (d) of section 111'' if specific
criteria are met (these criteria are discussed in section II.D.2. of
this preamble). The EPA's interpretation of the regulatory compliance
exemption is that, for a WEC applicable facility meeting the exemption
criteria, the entire facility is exempted, and therefore the facility
does not generate WEC-applicable emissions. In order to net, facilities
must be WEC applicable facilities (they must emit over 25,000 mt
CO<INF>2</INF>e per year under subpart W) and they must also generate
WEC applicable emissions (methane emissions, as reported under subpart
W, below or above the WEC emissions thresholds that are subject to
charge.) Again, this follows from the text. Section 136(f)(4) applies
``in calculating the total emissions charge obligation'' only.
Emissions which are subject to an exemption are by definition not
subject to charge. WEC applicable emissions are only those subpart W
methane emissions subject to charge under section 136(c). Because WEC
applicable facilities that receive the regulatory compliance exemption
for the entire year would have zero WEC applicable emissions, these
facilities would by default not be able to participate in netting
(i.e., they would have no emissions to net). The approach of facilities
with the regulatory compliance exemption for the entire year having
zero WEC applicable emissions allows for the practical implementation
of the exemption within the broader framework of the WEC calculations.
Clarifying that, pursuant to the statutory directive, exempted
facilities generate zero WEC applicable emissions ensures that charges
shall not be imposed on these facilities without interfering with
netting calculations or removing facility-specific reporting elements
necessary for WEC implementation. Such facilities continue to be
included in WEC filings reported under part 99 as long as they remain
WEC applicable facilities. Further, if such facilities fall out of
compliance such that the regulatory compliance exemption no longer
applies and they again generate WEC applicable emissions, such
facilities can again be included in netting. Similarly, for WEC
applicable facilities that have partial eligibility for the regulatory
compliance exemption, as described in section II.D.2.f. of this
preamble, such that they have positive WEC applicable emissions, those
facilities would also be included in netting.
The EPA notes that facilities with emissions below the waste
emissions threshold would not have positive WEC applicable emissions
and therefore would not benefit from the exemption. In this final rule,
facilities with emissions below the waste emissions threshold would not
receive the regulatory compliance exemption, and thus these facilities
would always have WEC applicable emissions and be able to participate
in netting across facilities under common ownership or control. Section
II.D.2.f. of this preamble discusses the regulatory compliance
exemption in relation to facilities that are below the waste emissions
threshold.
c. Exclusion of Facilities Reporting 25,000 or Fewer Metric Tons of
CO<INF>2</INF>e to Subpart W of Part 98
Per CAA section 136(c), the WEC shall only be imposed on owners or
operators of applicable facilities that report more than 25,000 mt
CO<INF>2</INF>e under subpart W. A large number of facilities that
report under the GHGRP have subpart W emissions below 25,000 mt
CO<INF>2</INF>e because they report emissions under multiple subparts
(e.g., subpart W and subpart C) and have total emissions greater than
25,000 mt CO<INF>2</INF>e across multiple subparts. In addition, some
part 98 subpart W facilities have reduced their emissions over time and
are allowed to cease reporting or ``offramp'' due to meeting either the
15,000 mt CO<INF>2</INF>e level or the 25,000 mt CO<INF>2</INF>e level
for the number of years specified in 40 CFR 98.2(i) based on the
CO<INF>2</INF>e reported, as calculated in accordance with 40 CFR
98.3(c)(4)(i) (i.e., the annual emissions report value as specified in
that provision).
We are finalizing as proposed that subpart W facilities with
subpart W emissions equal to or below 25,000 mt CO<INF>2</INF>e are not
WEC applicable facilities and are therefore excluded from netting. This
approach aligns with a plain reading of the requirement in CAA section
136(c) that only applicable facilities with subpart W emissions
exceeding 25,000 mt CO<INF>2</INF>e are subject to the WEC--facilities
below this threshold are not subject to the WEC and therefore do not
generate WEC applicable emissions and are not eligible to net
emissions.
d. Exclusion of Facilities Not Required To Report to the GHGRP
Per CAA section 136(c) and (d), CAA section 136(f)(4), and the
definition of ``WEC Applicable Facility'' in 40 CFR 99.2, which
reflects the statutory text at CAA section 136(d), we are finalizing as
proposed that facilities that are not required to report to the GHGRP,
and thus are not WEC applicable facilities, are not eligible for
netting. Again following the reasoning outlined in section II.B.2.a. of
this preamble, this approach is based on a plain reading of CAA section
136(f)(4), which states that netting is allowed within and across the
nine subpart W industry segments identified in CAA section 136(d);
section 136(d), which states that ``applicable facility(ies)'' are
facilities within industry segments ``as defined in subpart W''; and
section 136(c), which states that the WEC is only applicable to subpart
W facilities that report more than 25,000 mt CO<INF>2</INF>e per year
under subpart W. Following the plain text, only facilities subject to
subpart W may be evaluated as possible WEC applicable facilities, and
only WEC applicable facilities (subpart W facilities emitting over
25,000 mt CO<INF>2</INF>e under subpart W) can have WEC applicable
emissions that may be subject to charge. As explained in section
II.B.2.a. of this preamble, only WEC applicable facilities are eligible
to net, and only WEC applicable emissions may be netted. Further, CAA
section 136(c) states that the WEC is only applicable to certain
facilities that report under subpart W of the GHGRP.
C. Waste Emissions Thresholds
Congress established waste emissions thresholds for certain oil and
gas operations to incentivize emissions reductions and efficient
production, processing, and transport of hydrocarbons. These waste
emissions thresholds are applied to individual oil and gas facilities;
facilities that exceed
[[Page 91111]]
the thresholds may be subject to charge, while facilities that are
below the threshold are not subject to charge. Building upon the
definitions described in section II.A. of this preamble, this section
explains the mechanics of the WEC calculations.
The waste emissions thresholds are defined in terms of industry
segment-specific methane intensity thresholds applicable to certain
facilities that report GHG emissions under subpart W of the GHGRP. The
industry segment-specific methane intensity thresholds specified in CAA
136(f) and listed in Table 2 of this preamble are based on a rate of
methane emissions per amount of natural gas or oil sent to sale from or
through a facility. The industry segment-specific methane intensity
thresholds are generally defined in terms of a percentage of throughput
(e.g., 0.002 percent of natural gas sent to sale). However, since the
WEC is based on metric tons of methane (e.g., $900/metric ton) that
exceed the threshold, for the purposes of calculating the number of
metric tons that are subject to charge, we are finalizing as proposed
an approach that calculates the facility waste emissions thresholds in
metric tons of methane.
The EPA proposed specific calculation methodologies and data input
elements for the WEC calculations. The EPA received comments supportive
of the proposed approaches for the WEC calculations. We also received
comments suggesting revisions to the proposed approaches for the waste
emissions threshold calculation, the methane emissions metric used to
determine facility tons above or below the waste emissions threshold,
and the treatment of facilities with zero throughput. However, the
proposed changes suggested by commenters would not be consistent with
the plain reading of the CAA and would make the calculations much more
complicated to implement without necessarily improving accuracy.
Therefore, the EPA is finalizing the approaches discussed in this
section of the preamble as proposed, with the exception of the
treatment of certain facilities with zero throughput.
For the onshore and offshore petroleum and natural gas production
industry segments, CAA section 136(f) differentiates based on whether
the facility is sending natural gas to sale or only sending oil to
sale, and if the facility does not send natural gas to sale, the
threshold is based on methane emissions per amount of oil sent to sale.
For facilities that are not in the onshore or offshore production
industry segments, the industry segment-specific methane intensity
thresholds are based on the amount of natural gas sent to sale from or
through the facility. The industry segment-specific methane intensity
thresholds are applied to the natural gas or petroleum throughput
attributable to that industry segment to calculate facility-specific
waste emissions thresholds. See Table 2 for an overview of how the
waste emissions thresholds are calculated. When determining whether a
facility has WEC applicable emissions, the owner or operator of an
applicable facility must compare the facility's reported methane
emissions, as reported under subpart W, to the facility's waste
emissions threshold. Facilities with methane emissions that exceed the
waste emissions threshold may be subject to charge. For WEC applicable
facilities with the same WEC obligated party, the WEC applicable
emissions for each facility are summed to calculate the net WEC
emissions for that WEC obligated party. For WEC obligated parties with
the same parent company, WEC obligated parties with negative net
emissions may transfer those negative emissions to WEC obligated
parties with positive net emissions. A WEC obligated party's total WEC
obligation is based on its total emissions at the end of this transfer
of any negative emissions.
Subpart W requires reporting of natural gas throughput by thousand
standard cubic feet, oil by barrels, and methane by metric ton. As a
practical matter, since the WEC is based on a dollar per metric ton of
methane, the waste emissions thresholds must generally be converted
into metric tons of methane for comparison against reported methane,
generally by multiplying the thresholds by the density of methane.
Table 2--Industry Segment Throughput Metrics and Methane Intensities
------------------------------------------------------------------------
Industry segment-
Industry segment Throughput metric \a\ specific methane
intensity
------------------------------------------------------------------------
Onshore petroleum and natural The quantity of 0.20 percent of
gas production. natural gas produced natural gas
from producing wells sent to sale
that is sent to sale from facility;
in the calendar year, or 10 metric
in thousand standard tons of methane
cubic feet 40 CFR per million
98.236(aa)(1)(i)(B); barrels of oil
or the quantity of sent to sale
crude oil produced from facility,
from producing wells if facility
that is sent to sale sends no
in the calendar year, natural gas to
in barrels, if sale.
facility sends no
natural gas to sale
under 40 CFR
98.236(aa)(1)(i)(C)
\b\.
Offshore petroleum and natural The quantity of ................
gas production. natural gas produced
from producing wells
that is sent to sale
in the calendar year,
in thousand standard
cubic feet 40 CFR
98.236(aa)(2)(i); or
the quantity of crude
oil produced from
producing wells that
is sent to sale in
the calendar year, in
barrels, if facility
sends no natural gas
to sale under 40 CFR
98.236(aa)(2)(ii).
Onshore petroleum and natural The quantity of 0.05 percent of
gas gathering and boosting. natural gas natural gas
transported through sent to sale
the facility to a from or through
downstream endpoint facility.
such as a natural gas
processing facility,
a natural gas
transmission
pipeline, a natural
gas distribution
pipeline, a storage
facility, or another
gathering and
boosting facility in
the calendar year, in
thousand standard
cubic feet under 40
CFR
98.236(aa)(10)(ii).
Onshore natural gas processing The quantity of ................
residue gas leaving
that has been
processed by the
facility and any gas
that passes through
the facility to sale
without being
processed by the
facility in the
calendar year, in
thousand standard
cubic feet under 40
CFR 98.236(aa)(3)(ix)
\b\.
Onshore natural gas The quantity of 0.11 percent of
transmission compression. natural gas natural gas
transported through sent to sale
the compressor from or through
station in the facility.
calendar year, in
thousand standard
cubic feet under 40
CFR 98.236(aa)(4)(i).
Onshore natural gas The quantity of ................
transmission pipeline. natural gas
transported through
the facility and
transferred to third
parties such as LDCs
or other transmission
pipelines in the
calendar year, in
thousand standard
cubic feet under 40
CFR
98.236(aa)(11)(iv).
Underground natural gas The quantity of ................
storage. natural gas withdrawn
from storage and sent
to sale in the
calendar year, in
thousand standard
cubic feet under 40
CFR 98.236(aa)(5)(ii).
[[Page 91112]]
LNG import and export For LNG import 0.05 percent of
equipment. equipment, the natural gas
quantity of LNG sent to sale
imported that is sent from or through
to sale in the facility.
calendar year, in
thousand standard
cubic feet; for LNG
export equipment, the
quantity of LNG
exported that is sent
to sale in the
calendar year, in
thousand standard
cubic feet under 40
CFR 98.236(aa)(6) and
(7).
LNG storage................... The quantity of LNG ................
withdrawn from
storage and sent to
sale in the calendar
year, in thousand
standard cubic feet
under 40 CFR
98.236(aa)(8)(ii).
------------------------------------------------------------------------
\a\ Throughput metrics in this table are based on the subpart W
reporting elements as effective January 1, 2025 and would apply for
assessment of WEC beginning with reporting year 2025. Instances where
the citation for the throughput metric for reporting year 2024 differs
are noted in additional footnote. Note that in instances where there
is no change to the citation for the segment-specific throughput
metric, the EPA has amended the verbiage of subpart W, effective
January 1, 2025, for consistency with CAA section 136. Refer to
section III.U. of the preamble to the 2024 Subpart W Final Rule for
full discussion of these amendments.
\b\ For reporting year 2024, the applicable subpart W throughput
reporting element for the onshore natural gas processing industry
segment is 40 CFR 98.236(aa)(3)(ii).
1. Facility Waste Emissions Thresholds
CAA section 136(f)(1) through (3) establishes facility-specific
waste emissions thresholds above which the EPA must impose and collect
the WEC. The CAA defines waste emissions threshold requirements, and
establishes the method for calculation of the charge, for nine segments
of the oil and gas industry.
CAA section 136(f)(1) requires the EPA to impose and collect the
WEC on facilities in the onshore petroleum and natural gas production
and offshore petroleum and natural gas production industry segments
with methane emissions, in metric tons, that exceed either 0.20 percent
of the natural gas sent to sale from the facility or, if no natural gas
is sent to sale, 10 metric tons of methane per million barrels of oil
sent to sale from the facility. To determine the waste emissions
threshold from a WEC applicable facility in the onshore petroleum and
natural gas production and the offshore petroleum and natural gas
production industry segments, the EPA is finalizing as proposed two
equations based on whether the facility sends natural gas to sale,
which reflect the statutory text at 136(f)(1)(A) and (B). For onshore
and offshore petroleum and natural gas production WEC applicable
facilities that send natural gas to sale, we are finalizing as proposed
equation B-1 of 40 CFR 99.20(a). This equation multiplies the annual
quantity of natural gas sent to sale from a WEC applicable facility by
0.002 (i.e., 0.20 percent) and the density of methane (0.0192 metric
tons per thousand standard cubic feet).\31\ For onshore and offshore
petroleum and natural gas production facilities that have no natural
gas sent to sale, we are finalizing as proposed equation B-2 of 40 CFR
99.20(b). In equation B-2, the annual quantity of oil sent to sale from
a WEC applicable facility is multiplied by 10 metric tons of methane
per million barrels of oil.\32\
---------------------------------------------------------------------------
\31\ Equation B-1 reflects the statutory text at 136(f)(1)(A),
which states: ``With respect to imposing and collecting the charge
under subsection (c) for an applicable facility [in the onshore
petroleum and natural gas production and offshore petroleum and
natural gas production industry segments], the Administrator shall
impose and collect the charge on the reported metric tons of methane
emissions from such facility that exceed (A) 0.20 percent of the
natural gas sent to sale from such facility. . .'' 42 U.S.C.
7436(f)(1)(A).
\32\ Equation B-2 reflects the statutory text at 136(f)(1)(B),
which states: ``With respect to imposing and collecting the charge
under subsection (c) for an applicable facility [in the onshore
petroleum and natural gas production and offshore petroleum and
natural gas production industry segments], the Administrator shall
impose and collect the charge on the reported metric tons of methane
emissions from such facility that exceed. . . (B) 10 metric tons of
methane per million barrels of oil sent to sale from such facility,
if such facility sent no natural gas to sale.'' 42 U.S.C.
7436(f)(1)(B).
---------------------------------------------------------------------------
For WEC applicable facilities in the onshore petroleum and natural
gas gathering and boosting, onshore natural gas processing, LNG import
and export equipment, and LNG storage industry segments, CAA section
136(f)(2) requires the EPA to impose and collect a WEC on facilities
with reported methane emissions, in metric tons, that exceed 0.05
percent of the natural gas sent to sale from or through such facility.
To determine the waste emissions threshold from a WEC applicable
facility in these industry segments, we are finalizing as proposed
equation B-3 under 40 CFR 99.20(c). This equation multiplies the annual
quantity of natural gas sent to sale from or through a WEC applicable
facility by 0.0005 (i.e., 0.05 percent) and the density of methane
(0.0192 metric tons per thousand standard cubic feet) to determine the
facility-level waste emissions threshold.\33\ The EPA notes that
certain facilities in the gathering and boosting and natural gas
processing industry segments may have zero throughput values using this
approach, because these facilities either receive no natural gas, or
process or dispose of natural gas received in a manner that results in
sending zero quantities of natural gas to sale. Treatment of these
facilities is discussed in section II.C.6. of this preamble.
---------------------------------------------------------------------------
\33\ Equation B-3 reflects the statutory text at 136(f)(2),
which states: ``With respect to imposing and collecting the charge
under subsection (c) for an applicable facility in [the onshore
petroleum and natural gas gathering and boosting, onshore natural
gas processing, LNG import and export equipment, and LNG storage
industry segments], the Administrator shall impose and collect the
charge on the reported metric tons of methane emissions that exceed
0.05 percent of the natural gas sent to sale from or through such
facility.'' 42 U.S.C. 7436(f)(2).
---------------------------------------------------------------------------
CAA section 136(f)(3) requires the EPA to impose and collect a
waste emissions charge on WEC applicable facilities in the onshore
natural gas transmission compression, onshore natural gas transmission
pipeline, and underground natural gas storage industry segments with
methane emissions, in metric tons, that exceed 0.11 percent of the
natural gas sent to sale from or through such facility. We are
finalizing as proposed equation B-4 under 40 CFR 99.20(d) to calculate
the waste emissions threshold from a WEC applicable facility in these
industry segments. Equation B-4 multiplies the annual quantity of
natural gas sent to sale from or through a WEC applicable facility by
0.0011 (i.e., 0.11 percent) and the density of methane (0.0192 metric
tons per thousand standard cubic feet) to determine the facility-level
waste emissions threshold.\34\
---------------------------------------------------------------------------
\34\ Equation B-4 reflects the statutory text at 136(f)(3),
which states: ``With respect to imposing and collecting the charge
under subsection (c) for an applicable facility in [the onshore
natural gas transmission compression, onshore natural gas
transmission pipeline, and underground natural gas storage industry
segments], the Administrator shall impose and collect the charge on
the reported metric tons of methane emissions that exceed 0.11
percent of the natural gas sent to sale from or through such
facility.'' 42 U.S.C. 7436(f)(3).
---------------------------------------------------------------------------
The annual quantity of natural gas sent to sale from or through a
facility reported under subpart W is reported in units of thousand
standard cubic feet of
[[Page 91113]]
natural gas per year, while facility methane emissions are reported in
metric tons. The EPA interprets the industry segment-specific methane
intensity thresholds (i.e., 0.20 percent, 0.05 percent, and 0.11
percent) indicated in CAA section 136(f)(1) through (3) to be in units
of thousand standard cubic feet of methane emissions per thousand
standard cubic feet of natural gas. This requires reconciliation of
methane emissions reported on mass basis and throughput reported on a
volumetric basis. Because the waste emission charge is assessed using
dollars per metric ton, the amount by which a facility is below or
exceeding the waste emissions threshold must ultimately be converted to
metric tons. The approach in equations B-1, B-3, and B-4 calculates
facility waste emissions thresholds in metric tons by calculating the
volume of gas at the given industry segment-specific methane intensity
and then calculating what the mass of that volume would be if it were
methane by multiplying by the density of methane (0.0192 metric tons
per thousand standard cubic feet at standard temperature and pressure
of 60 [deg]F and 14.7 psia). This allows the waste emissions threshold
to be directly compared to reported metric tons of methane. This
approach is mathematically equivalent to, but simpler than, an approach
that would convert reported methane emissions to volume, subtract a
volumetric waste emissions threshold from that reported volume, and
then convert the resulting value back to metric tons methane. The EPA
notes that the approach used in this final rule does not require
information on the constituents or density of natural gas throughput.
As described in this section of the preamble, the waste emissions
thresholds are calculated at the facility level, using the industry
segment-specific methane intensity threshold given in CAA sections
136(f)(1) through (3), and specific industry segment throughput metrics
reported under part 98, subpart W. The vast majority of facilities
report as a single subpart W facility to a single subpart W industry
segment. However, as discussed in section II.A. of this preamble, there
are a small number of reporters that report as a single subpart W
facility to multiple subpart W industry segments. Specifically, for
facilities that report to multiple industry segments under a single
subpart W facility, we are finalizing in 40 CFR 99.20(e) that the
facility-level waste emissions threshold is determined as the sum of
the waste emissions thresholds for each industry segment within which
the facility operates.
The EPA is finalizing as proposed its interpretation of ``natural
gas sent to sale'' to mean the amount of natural gas sent to sale from
a facility in the onshore or offshore petroleum and natural gas
industry segments, as reported under subpart W. The EPA is finalizing
as proposed its interpretation of ``natural gas sent to sale from or
through'' to mean the natural gas throughput volume for a facility not
in the onshore or offshore petroleum and natural gas industry segments
that aligns with the movement of gas through a facility (e.g., gas
transported rather than gas received), as reported under subpart W. For
facilities in the onshore and offshore petroleum and natural gas
production industry segments that do not send natural gas to sale, the
EPA is finalizing as proposed its interpretation of ``barrels of oil
sent to sale'' to mean the quantity of crude oil sent to sale, as
reported under subpart W.
The EPA is aware of and received comment on other approaches for
calculating ``methane intensity'' currently in use. These include
methodologies that allocate total methane emissions between the
petroleum and natural gas value chains and/or use methane rather than
natural gas as the throughput value. CAA section 136(f)(1) through (3)
refers to reported facility emissions and does not discuss allocation
of emissions between petroleum and natural gas. In the case of the
methane charge program established in CAA section 136, the statutory
text is clear that facilities that produce only oil are to calculate
the waste emissions threshold based on only on the quantity of oil sent
to sale. The statutory text is clear that in all other cases, the
quantity of natural gas sent to sale is the appropriate throughput
value.\35\ Further, the final approach can be implemented with data
currently reported under subpart W, while alternative methane intensity
methodologies would require reporting of additional data and increase
the burden on the oil and gas industry. For example, an approach that
calculates intensity as methane emissions divided by the methane in
natural gas throughput would require facilities to collect and report
additional information of the methane content of natural gas. Again,
this approach would not be aligned with the statute, which defines the
intensity as methane emissions as a percentage of natural gas, not
methane emissions as a percentage of methane. An approach that
calculates methane intensity as the mass of methane emissions divided
by the mass of natural gas would also not align with a plain reading of
the statutory text or standard conventions. The natural gas sent to
sale from or through a facility is reported under subpart W in thousand
standard cubic feet, a volumetric unit of measure. Congress was aware
of this metric when it established the waste emissions thresholds.
Further, all percentage-based methane intensity metrics that the EPA is
aware of are volume-based rather than mass-based, and while natural gas
throughput is commonly reported both in terms of volume and energy
content, it is not common practice to report throughput in terms of
mass. Such an approach would also require facilities to collect and
report detailed information on all of the constituents of natural gas
throughput. Finally, an approach that allocates methane emissions
between the petroleum and natural gas value chains based on energy
content would not be aligned with the statute, which does not make any
mention of allocating total facility methane emissions to the petroleum
and natural gas value chains and assessing the WEC using a subset of
total facility emissions. This approach would also require facilities
to collect and report detailed data on the constituents and energy
content of all hydrocarbon throughput. The EPA therefore believes that
the approaches finalized in this rulemaking not only follow a plain
reading of CAA section 136(f) but are also the best and most reasonable
approaches.
---------------------------------------------------------------------------
\35\ See 42 U.S.C. 7436(f)(1)-(3).
---------------------------------------------------------------------------
2. Facility Methane Emissions
To determine the total methane emissions from a WEC applicable
facility, the EPA is finalizing as proposed to use facility-level
methane data as reported under subpart W. Facility methane emissions
must be calculated using methods or data required by subpart W and by
this final rule for the emissions year covered by the annual WEC
filing. For example, for the first year of the WEC (2024 emissions),
WEC calculations are based on the subpart W requirements effective for
the 2024 reporting year, and emissions year 2025 emissions and beyond
are based on subpart W requirements effective in reporting year 2025 or
any future revisions. The final approaches for calculating waste
emissions thresholds and facility methane emissions align with the text
of CAA section 136(f). CAA section 136(f)(1) through (3) states that
the WEC is to be calculated based ``on the
[[Page 91114]]
reported metric tons of methane emissions from such facility that
exceed'' specified percentages of the ``natural gas sent to sale from
such facility'' or ``natural gas sent to sale from or through such
facility'' (or for onshore and offshore petroleum facilities that do
not send gas to sale, ``ten metric tons of methane per million barrels
of oil sent to sale from such facility''). The EPA is finalizing its
interpretation of ``reported metric tons of methane emissions'' to mean
all reported methane emissions from a facility, as reported under
subpart W, except in cases when emissions for stationary combustion
emissions reported under 40 CFR 98.236(z) double-count emissions
reported for an other large release event under 40 CFR 98.236(y), in
which case the ``reported metric tons of methane emissions'' are
adjusted according to the provisions finalized at 40 CFR
99.7(b)(2)(ix). This value, only adjusted to prevent double-counting as
specified, is an input to equation B-6 of 40 CFR 99.21.
We are finalizing these provisions to adjust the subpart W methane
emissions to prevent double-counting in the unlikely event that a
stationary combustion source emits at the level requiring reporting as
an other large release event in the subpart W report for a WEC
applicable facility. In general, we did not expect that any stationary
combustion source would have emissions above the threshold required to
be reported under the provisions at 40 CFR 98.236(y) for other large
release events. To qualify for reporting as an other large release
event, the stationary combustion source must have methane emissions of
100 kg/hr or greater. We note that this emission rate would be
evaluated on a per individual stationary combustion source basis unless
they have a single root cause and we do not believe any single
stationary combustion source would emit methane at this level unless it
was significantly malfunctioning. Therefore, we expect that stationary
combustion sources would be reported under the provisions of other
large release events only under rare circumstances. For sources other
than stationary combustion sources that have calculation methods in
subpart W, the 100 kg/hr threshold is evaluated incremental to the
emissions estimated using the methods in subpart W and subpart W
contains provisions in 40 CFR 98.233(y)(1)(ii) to prevent double-
counting of emissions reported under other large release events and
these other subpart W calculation methods. However, stationary
combustion emissions are subject to direct assessment of the 100 kg/hr
threshold as specified in 40 CFR 98.233(y)(1)(i) with no provisions to
revise emissions calculated under 98.233(z) for the period of time the
stationary source was malfunctioning and emitting methane at rates
exceeding 100 kg/hr. Therefore, it is possible, however unlikely, that
there may be some double-counting of emissions being reported under 40
CFR 98.236(y) and (z) and we are finalizing part 99 provisions to
ensure that the total methane emissions (and the total CO<INF>2</INF>e
emissions) for the facility are corrected for part 99 purposes to
prevent this potential for double-counting of emissions under the WEC
program. In the exceedingly unlikely event that the total
CO<INF>2</INF>e for a facility drops below the 25,000 mt
CO<INF>2</INF>e WEC reporting threshold as a result of this adjustment
for double-counting of emissions, we are finalizing 40 CFR
99.7(b)(2)(ix) related to the reporting requirements and assessment of
WEC for such facilities. In this circumstance, the total facility
applicable emissions and WEC applicable emissions for the facility
would be defined as zero, and the facility would not be subject to
reporting requirements beyond those necessary to link the facility to
subpart W reporting and substantiate the existence of double-counting
of emissions due to the reporting of stationary combustion source
emissions as an other large release event.
3. Facility WEC Calculation
To calculate the amount by which a WEC applicable facility is below
or exceeding the waste emissions threshold, the EPA is finalizing as
proposed to use equation B-6 of 40 CFR 99.21(a), in which the facility
waste emissions threshold, as determined in 40 CFR 99.20, is subtracted
from facility total methane emissions. This calculation results in a
value of metric tons of methane, the total facility applicable
emissions, that is negative for facilities below the waste emissions
threshold and positive for facilities exceeding the waste emissions
threshold. The remainder of 40 CFR 99.21 describes how to determine the
WEC applicable emissions below or exceeding the waste emissions
threshold considering any exemptions that may apply for WEC applicable
facilities with total facility applicable emissions greater than 0 mt
CH<INF>4</INF> (see section II.D. of this preamble for more information
on the exemptions). As discussed in section II.D.2. of this preamble,
the EPA is finalizing as proposed that WEC applicable facilities
receiving the regulatory compliance exemption for the entire year are
exempted from the WEC, and therefore have zero WEC applicable
emissions. Section II.D.2.g. of this preamble also explains the
facility-level WEC applicable emissions calculation for facilities with
partial eligibility for the regulatory compliance exemption. For
facilities with total facility applicable emissions greater than 0 mt
CH<INF>4</INF> that are eligible for the unreasonable delay or plugged
well exemptions, any methane emissions associated with those exemptions
are subtracted to calculate WEC applicable emissions. See sections
II.D.1.b and II.D.3.b of this preamble for explanation of how the
quantity of methane emissions that qualify for exemption due to the
unreasonable delay and plugged well exemptions, respectively, are
calculated. These calculations rely upon methane emissions data
reported to subpart W and calculation methodologies specified in this
final rule. For all other facilities, facility applicable emissions are
equal to WEC applicable emissions (unless the facility is receiving the
regulatory compliance exemption).
4. Calculation Procedures for Netting
As described in section II.B., the EPA is finalizing that the owner
or operator is the WEC obligated party while allowing for netting among
WEC obligated parties with the same parent company. This structure
creates a potential mismatch in liability should one owner or operator
incorrectly calculate their subpart W emissions and/or their WEC
obligation, and then magnifies this error by netting emissions with
another owner or operator with the same parent company. Therefore, in
this section, the EPA is providing additional details and restrictions
on how the netting calculations must be done when netting is used, and
how the netting transactions must be tracked and reported.
As described in section II.A.3. of this preamble, if a WEC
applicable facility has multiple owners or operators, those entities
must elect among themselves by binding agreement a single owner or
operator as the WEC applicable facility's WEC obligated party for a
given year. Similarly, if a WEC applicable facility has multiple parent
companies, that facility's WEC obligated party must indicate in its
certificate of representation for the reporting year and its annual WEC
filing which parent company is selected for the purposes of designating
the WEC obligated party's (i.e., owner's or operator's) netting pool.
If a WEC applicable facility has multiple owners or operators and
multiple parent companies, the owner or operator selected as the WEC
obligated party and
[[Page 91115]]
the parent company selected for netting must be related (e.g., the WEC
obligated party must be a subsidiary or at least partially owned by the
parent company selected for netting). These requirements are included
as part of the contents of the certificate of representation submitted
by the WEC obligated party for the reporting year pursuant to the
finalized requirements of 40 CFR 99.4(i) as well as the annual WEC
filing pursuant to the finalized requirements of 40 CFR 99.7(b). Within
the certificate of representation, the WEC obligated party must
identify the WEC applicable facilities for which they are responsible
for the reporting year as well as the parent company for which these
facilities would be included in netting. Within the annual WEC filing,
the WEC obligated party must indicate whether any of the WEC applicable
facilities were acquired in transactions that resulted in the owners or
operators for the facility as of December 31 of the reporting year
ceasing to exist, and whether such facilities were associated with a
parent company that is different from the WEC obligated party's parent
company pursuant to the finalized requirements of 40 CFR
99.7(b)(1)(iv). This reporting is required because as a result of the
finalized requirement of 40 CFR 99.4, a WEC obligated party may become
responsible for the reporting of a WEC applicable facility for which
they were not an owner or operator of as of December 31 of the
reporting year, and which may not have been under the common ownership
or control of the WEC obligated party's parent company as of December
31 of the reporting year.
The EPA is finalizing rules and requirements at 40 CFR 99.23 to
govern the transfer of net WEC emissions across WEC obligated parties
with a common parent company. The first step in the finalized netting
process is the calculation of metric tons of methane emissions equal
to, below, or exceeding the waste emissions threshold, or WEC
applicable emissions, for each WEC applicable facility as specified in
40 CFR 99.21. The next step is summing WEC applicable emissions across
all of a WEC obligated party's WEC applicable facilities. This
calculation, finalized at 40 CFR 99.22(a) using equation B-8, yields
net WEC emissions for each WEC obligated party. In circumstances where
a WEC obligated party became responsible for facilities for which they
were not an owner or operator of as of December 31 of the reporting
year, the requirements at 40 CFR 99.2(b) and (c) would instead apply
and the WEC obligated party would determine separate net WEC emission
totals for their WEC applicable facilities that shared the same parent
company as identified in the certificate of representation and those
WEC applicable facilities that did not share the same parent company.
The final step involves optional netting of emissions across WEC
obligated parties with the same parent company. In this process, WEC
obligated parties with negative net WEC emissions (as calculated using
Equation B-8) may transfer those negative net WEC emissions to WEC
obligated parties (with positive net WEC emissions) with the same
parent company. After the negative net WEC emissions have been
transferred as determined by each of the WEC obligated parties with a
common parent company, each WEC obligated party's net WEC emissions
after transfers, or total methane emissions above or below the waste
emissions threshold is finalized. This final amount of metric tons
methane is used to determine if a WEC obligated party owes a WEC
obligation for the given year.
Since the owner or operator is the WEC obligated party, they are
ultimately responsible for the entire WEC payment associated with their
total emissions above the waste emissions threshold. Although an
individual owner or operator's WEC obligation may be reduced based on
netting with another owner or operator that has WEC applicable
emissions below the waste emissions threshold within the parameters
specified, if those negative quantities of net WEC emissions are later
invalidated, the WEC obligated party who received the negative WEC
emissions to reduce their WEC obligation would be required to resubmit
their WEC filing to remove the negative WEC emissions from their
calculations and would have to adjust their payment accordingly.
Provisions applicable to this scenario are finalized at 40 CFR
99.23(f)(2).
A key element of WEC obligated party netting is that WEC obligated
parties with zero or negative net WEC emissions cannot be subject to
charge. A WEC obligated party with negative net WEC emissions may
transfer negative quantities of net WEC emissions to WEC obligated
parties with whom it shares the same parent company as finalized at 40
CFR 99.23(a), but it can never receive positive emissions. Similarly,
the WEC obligation of a WEC obligated party can never exceed the charge
that would be calculated using their net WEC emissions. The WEC
obligated party's positive net WEC emissions after transfers can
decrease but can never increase as a result of netting. In other words,
only negative quantities of net WEC emissions can be transferred, and
positive quantities of net WEC emissions cannot be transferred as
finalized at 40 CFR 99.23(b). Further, negative net WEC emissions and
negative net WEC emissions after transfers cannot be banked or
otherwise saved for a future WEC filing year; all negative net WEC
emissions and negative net WEC emissions after transfers are valid only
for the WEC filing year in which they were created.
The EPA is also finalizing requirements to address impacts to
netting that result from WEC filing resubmissions. While the EPA
expects that most questions related to unverified subpart W data will
be resolved by the time of the WEC filing, continued revisions to
subpart W reports or WEC filing resubmissions that impact emissions
(e.g., revisions to exemption data) could impact a WEC obligated
party's net WEC emissions and thus netting. These include situations in
which revisions invalidate negative net WEC emissions that have been
transferred and situations in which revisions result in additional
negative net WEC emissions that become available for transfer. As
discussed in section III.B. of this preamble, resubmissions of WEC
filings, including the applicable subpart W data, will not be accepted
after December 15 unless the resubmission is related to eligibility for
the regulatory compliance exemption, resolution of the verification
process (including third-party auditing), or otherwise permitted by the
Administrator.
The EPA is finalizing that any WEC obligated party that receives
negative net WEC emissions loses the benefit of those negative net WEC
emissions if they are later invalidated. For example, if WEC obligated
party A transferred negative 10 metric tons of methane to WEC obligated
party B with the same parent company, but a revision to the WEC filing
for the WEC obligated party A results in the 10 metric tons of negative
emissions being eliminated, the final WEC emissions of the WEC
obligated party B that received the emissions will revert to the number
it was before the 10 metric tons were subtracted from the total. This
means that in this circumstance, the final WEC emissions of receiving
WEC obligated party B would increase by 10 metric tons.
To determine how previously transferred negative net WEC emissions
that are later invalidated are removed from netting when multiple WEC
obligated parties receive negative tons, the order in which transfers
were approved by the designated
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representative of the WEC obligated party receiving the transfer in
accordance with the finalized requirement of 40 CFR 99.23(c) will be
used on a ``last in first out'' basis. This indicates the order and
amount of negative net WEC emissions that are removed from the net WEC
emissions after transfers of a WEC obligated party that receives any
negative net WEC emissions, should any of the negative net WEC
emissions be invalidated. Affected WEC obligated parties would be
required to submit a revised WEC filing and pay any new charge or
increase in charge pursuant to the finalized requirements of 40 CFR
99.7(e) and 99.8(d). In situations where revisions to WEC filings
result in additional negative net WEC emissions becoming available for
netting, the applicable WEC obligated party with newly available
negative net WEC emissions for transfer may transfer those negative net
WEC emissions to another eligible WEC obligated party. The receiving
WEC obligated party may then refile. The EPA will then provide any
applicable refunds post verification of the amended report. Provisions
applicable to the change in availability of transferred WEC emissions
as a result of revisions to the WEC filing for the WEC obligated party
that provided the transfers are finalized at 40 CFR 99.23(f). All of
these requirements are designed to allow for netting at the parent
company level while addressing the potential mismatch in WEC
obligations should one owner or operator incorrectly calculate their
WEC obligation and then magnify this error by netting with another
owner or operator with the same parent company.
The EPA is finalizing reporting and recordkeeping requirements at
40 CFR 99.23 for WEC obligated party emissions netting. As finalized at
40 CFR 99.23(c), each transfer of negative quantities of net WEC
emissions must be completed in an electronic format specified by the
Administrator. The EPA anticipates that these transfers will occur in
an electronic system similar to the existing e-GGRT system used by the
GHGRP. Each transfer must be initiated by the designated representative
of the WEC obligated party that is transferring the negative quantities
of net WEC emissions. The transfer will be considered to have occurred
at such time that the designated representative of the WEC obligated
party that is receiving the transfer approves receipt of the transfer.
The electronic system will record the metric tons of negative WEC
emissions that are transferred, the WEC obligated parties involved in
each transfer, and the time that the designated representative of the
WEC obligated party receiving the transfer approved receipt. These
records will establish the order of precedence for these metric tons
under the finalized requirement of 40 CFR 99.23(f)(2) related to
transfers that are later invalidated. These electronic records are
essential to establish the requirements for facilities to participate
in netting, as allowed by CAA section 136(f)(4). Finally, WEC obligated
parties that transfer and receive negative net WEC emissions must
maintain all records associated with the transactions, including but
not limited to any value exchanged, if applicable, for emissions
transferred to each WEC obligated party under the finalized requirement
of 40 CFR 99.23(g).
5. Waste Emissions Charge Calculation
CAA section 136(e) establishes annual $/metric ton charges for all
methane emissions for which a charge is owed. The EPA is finalizing as
proposed that a WEC obligated party's total annual WEC obligation is
calculated by multiplying its net WEC emissions after transfers, as
determined by Equation B-8 and after any transfer of emissions pursuant
to 40 CFR 99.23, by the annual $/metric ton charge. WEC obligated
parties with net WEC emissions after transfers less than or equal to
zero do not have a WEC obligation. WEC obligated parties with net WEC
emissions after transfers greater than zero have a WEC obligation and
are required to pay a waste emissions charge. WEC obligation
calculations are to be made for calendar years 2024, 2025, 2026, and
each year thereafter as per 40 CFR 99.24.
6. Gathering and Boosting and Processing Facilities With Zero Reported
Throughput
The EPA is aware of a small number of gathering and boosting and
natural gas processing facilities that emit methane and report under
subpart W, but do not send gas to sale. As a result, these facilities
would report zero natural gas volumes for the throughput metrics used
in the waste emissions threshold calculations. For the gathering and
boosting industry segment, these may be facilities that receive natural
gas but then reinject it underground or otherwise do not transport any
natural gas. For the processing industry segment, these may be
fractionation plants that only receive and process natural gas liquids
(NGLs) and do not handle natural gas. We proposed that all reported
methane emissions from facilities with no reported throughput would be
considered to be exceeding the waste emissions threshold. We received
comments disagreeing with the EPA's proposed approach and
interpretation of the statutory text, indicating that WEC applicable
facilities that do not send gas to sale are not contemplated by the
statute and that it is inappropriate for the EPA to impose a charge in
the absence of an applicable threshold. After continued review of the
statutory text and consideration of comments received on the treatment
of these facilities, we are finalizing a determination that these
facilities do not generate WEC applicable emissions, and therefore will
not be subject to charge. Using Equation B-3 under 40 CFR 99.20(c),
gathering and boosting and processing facilities with zero natural gas
throughput would have a waste emissions threshold of 0 mt; all reported
methane emissions from these facilities would therefore be exceeding
the threshold. However, CAA section 136(f)(2), the statutory text from
which Equation B-3 is derived, states that the waste emissions
threshold is calculated using the ``natural gas sent to sale from or
though'' a facility. These specific types of gathering and boosting and
processing facilities do not send any natural gas to sale. Therefore,
based on the language in CAA section 136(f)(2), it would not be
appropriate to subject these facilities to charge. Although the EPA is
not aware of facilities in industry segments other than gathering and
boosting and processing that would report emissions to subpart W of
more than 25,000 mt CO<INF>2</INF>e while having zero throughput of
natural gas or oil sent sales, the EPA believes the same interpretation
should apply that they would not be subject to charge. The EPA is
finalizing language at 40 CFR 99.21 that for a WEC applicable facility
for which the waste emissions threshold is zero, the total facility
applicable emissions (i.e., the methane emissions equal to, below, or
exceeding the waste emissions threshold for a WEC applicable facility
prior to consideration of any applicable exemptions) and the WEC
applicable emissions (i.e., the methane emissions equal to, below, or
exceeding the waste emissions threshold for a WEC applicable facility
after consideration of any applicable exemptions) are both zero.
D. Exemptions to the Waste Emissions Charge
Congress created three exemptions to the WEC to reduce or eliminate
the charge under certain circumstances. The first exempts emissions
that result from eligible delays in environmental permitting. The
second exempts from
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charge those facilities that are in compliance with applicable CAA
section 111 regulations, once certain criteria are met. The third
exempts emissions from wells that are permanently plugged. The EPA
received numerous comments indicating that the proposal made accessing
the exemptions designed by Congress infeasible and impractical. In this
final rule, the EPA has made a number of changes to the exemptions, in
particular the regulatory compliance exemption, to ensure that access
to, and implementation of, these exemptions is appropriate and
consistent with the best reading of the statute. In addition, the EPA
is clarifying in this final rule that a WEC obligated party may elect
whether or not to submit a claim for exemption for a WEC applicable
facility that meets the applicability requirements for each exemption.
1. Exemption for Emissions From Eligible Delays in Environmental
Permitting (CAA Section 136(f)(5))
The permitting delay exemption created by CAA section 136(f)(5)
allows for production facilities to reduce their WEC obligation if the
permitting of natural gas offtake infrastructure is delayed
unreasonably. Congress identified unreasonable delays in approval of
permits for offtake infrastructure as a possible barrier to methane
mitigation for WEC obligated parties, particularly because these delays
could prevent increased volumes of natural gas from being routed to a
sales line, and therefore directed the EPA to determine what
constitutes an unreasonable delay. In this action, the EPA is
finalizing provisions that clarify the definition of an unreasonable
delay for the purposes of this exemption, under what circumstances the
permitting delay exemption will be available to WEC obligated parties,
and what emissions (i.e., from what sources) are eligible for the
exemption.
CAA section 136(f)(5) establishes an exemption for emissions
resulting from delay in environmental permitting by stating, ``Charges
shall not be imposed pursuant to paragraph (1) on emissions that exceed
the waste emissions threshold specified in such paragraph if such
emissions are caused by unreasonable delay, as determined by the
Administrator, in environmental permitting of gathering or transmission
infrastructure necessary for offtake of increased volume as a result of
methane emissions mitigation implementation.''
This provision exempts from the charge certain emissions occurring
at facilities in the onshore and offshore production segments where
permitting has been unreasonably delayed. Paragraph (1) referenced in
the exemption refers to CAA section 136(f)(1), which establishes the
waste emissions threshold for applicable facilities in the production
sector, as discussed in section II.B. of this preamble. The exemption
is limited to emissions occurring as a result of certain delays in
environmental permitting of gathering or transmission infrastructure
necessary for offtake of increased volume as a result of methane
emissions mitigation implementation. The EPA interprets ``gathering or
transmission infrastructure necessary for offtake'' to include
gathering and transmission pipelines and compressor stations, and
``increased volume as a result of methane emissions mitigation
implementation'' to include increased amounts of natural gas at on- or
offshore production facilities available for transport that would have
otherwise been emitted if not for an unreasonable delay in the
environmental permitting of offtake infrastructure.
a. Emissions Eligible for the Permitting Delay Exemption
To assist in defining and determining ``unreasonable delay''
related to environmental permitting, the EPA is finalizing a set of
four criteria for applying the unreasonable delay exemption established
by CAA section 136(f)(5). These criteria only apply in the context of
determining eligible emission exemptions for the implementation of CAA
136(f)(5) and this final rulemaking; they are not intended to speak to
the reasonableness of a permitting delay in any other context. The EPA
understands that the issue of what constitutes an unreasonable delay is
multi-faceted and may be quite different under different regulatory and
factual circumstances. At the same time, the EPA believes it is
important in the context of this program to provide a definition that
is consistent with the statutory charge, practical for the EPA to
administer, and straightforward for applicable facilities to follow.
With those caveats in mind, the EPA is finalizing the following four
criteria for implementing this exemption, largely as proposed: (1) the
facility must have emissions that exceed the waste emissions threshold;
(2) the entity seeking the exemption must have not contributed to the
delay in permitting; (3) the exempted emissions must be those resulting
from gas used as an onsite fuel source, gas used for another useful
purpose that an otherwise purchased fuel or raw material would have
served, gas reinjected into a well, or gas flared, if that gas would
have been routed to a gas gathering flow line or collection system to a
sales line without the permit delay; and (4) a period of 36 months must
have passed from the time a submitted permit application was determined
to be technically complete by the applicable permitting authority.
The EPA believes this approach aligns with the statutory text and
meets the Congressional intent of this exemption, while also providing
reporting facilities with a clear and predictable set of criteria that
the EPA can apply in a timely manner. The EPA requested and received
comment on numerous aspects of this exemption. Comments on the four
proposed criteria for determining exemption eligibility are discussed
in the following paragraphs. Several commenters recommended that the
EPA retain strong and clear criteria in the final rule for operators
seeking an exemption based on unreasonable environmental permitting
delays. Separate from the four criteria, several commenters were
opposed to the proposed approach of using defined criteria for
assessing exemption eligibility and recommended that the EPA evaluate
each eligibility claim on a case-by-case basis. These commenters stated
that the circumstances of each individual permitting delay are unique
such that they can only be assessed on a case-by-case basis. The EPA
decided against such an approach in this final rule for several
reasons. Reviews of the individual circumstances of each situation
would run counter to Congressional intent because facilities would be
unable to predict what they owe, take action to limit any applicable
charge, or settle their WEC obligation in a timely manner, potentially
leading to payments that were later found subject to this exemption.
The approach the EPA is adopting means that payments are more likely to
align with amounts owed, including applicable exemptions, and thus more
closely track the purpose for which Congress included this exemption. A
case-by-case approach would also create a significant time and resource
burden for both regulated entities and for the EPA. We expect that many
types of permitting situations can arise, with many permutations. If
industry were required to demonstrate unreasonable delay on a case-by-
case basis, the review process would have resulted in uncertainty for
industry and could have led to a significant backlog, thus making the
annual calculation of the WEC obligation unduly burdensome. In
addition, case-by-case decision making would require repeated exercise
of judgment, which could lead
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to inconsistent results and protracted disputes, interfering with the
Congressional purpose in including this exemption. In order to ensure
that the unreasonable delay exemption can be administered in an
efficient manner, and to provide industry with clear and predictable
requirements that must be met to receive this exemption, the EPA is
finalizing the proposed approach of utilizing four set criteria to
evaluate eligibility for the unreasonable delay exemption. As described
in this section, the EPA has finalized certain changes to the
individual criteria, after consideration of comments, to increase the
accessibility and practicality of implementing this exemption.
The EPA notes that the four criteria used to evaluate eligibility
for the WEC unreasonable delay exemption, including the timeframe, are
for the purpose of defining the emissions eligible for an exemption for
the purposes of the implementation of CAA 136(f)(5) and this rulemaking
only and are not applicable for defining an unreasonable delay outside
of this context. The criteria in this section do not apply to the
determination of unreasonable delay for purposes of the National
Environmental Policy Act (NEPA), the Administrative Procedure Act
(APA), or any other law involved in permitting processes or any other
agency actions. In particular, the timeline criterion should not be
considered applicable or informative to the determination of
unreasonable delay in any context other than determining emission
exemptions for the implementation of CAA 136(f)(5) and this rulemaking.
The first criterion, that the facility must have emissions that
exceed the waste emissions threshold, is based on CAA 136(f)(5), which
states that ``charges shall not be imposed pursuant to paragraph (1) on
emissions that exceed the waste emissions threshold specified in such
paragraph if such emissions are caused by unreasonable delay.'' A
straightforward reading of this language limits the exemption to
emissions exceeding the waste emissions threshold. Since charges will
not be imposed if emissions are below the waste emissions thresholds,
an exemption is unnecessary in such cases and, as per the statutory
text, not applicable. For facilities that exceed the waste emissions
threshold, emissions eligible for the permitting delay exemption will
be subtracted from the facility emissions that exceed the waste
emissions threshold. The exempted emissions will not be used to reduce
emissions totals below the threshold (i.e., the lowest possible WEC
applicable emissions for a facility with the exemption are zero).
The second criterion relates to responsiveness on the part of the
production sector WEC applicable facility that is reporting emissions
caused by a delay in gathering or transmission infrastructure: the
entity potentially eligible for the exemption (i.e., a WEC obligated
party's WEC applicable facility in the onshore or offshore production
sector) cannot have contributed to the unreasonable delay in
permitting. We proposed that neither the WEC obligated party seeking
the exemption, nor the entity responsible for seeking the permit, may
have contributed to the delay. Several commenters explained that the
production facilities seeking the exemption are often separate from the
midstream entities seeking the permit, and that the production
companies may have no control or influence over the midstream company's
interaction with permitting authorities. After consideration of
comments received on this criterion, we recognize that there may be
limited or no control by the WEC obligated party seeking the exemption
over the responsiveness of a separate permittee. Therefore, to increase
the accessibility of this WEC exemption, the EPA is finalizing that
only the WEC obligated party seeking the exemption is relevant for the
criteria of contribution to delay in the environmental permitting
process.
Contributions to the delay by the WEC obligated party seeking to
exempt a portion of their emissions from one or more WEC applicable
facilities due to an unreasonable delay will be determined based upon
the timeliness of response to requests for additional information or
modification of the permit application, as applicable. A
[…truncated; see source link]Indexed from Federal Register on November 18, 2024.
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