# Waste Emissions Charge for Petroleum and Natural Gas Systems

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URL: https://www.frixlaw.com/law-library/documents/fr%3A2024-00938

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** January 26, 2024
- **Citation:** 89 FR 5318

## Text

ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 2 and 99
[EPA-HQ-OAR-2023-0434; FRL-10246.1-01-OAR]
RIN 2060-AW02
Waste Emissions Charge for Petroleum and Natural Gas Systems

ACTION:

Proposed rule.

SUMMARY:

The Environmental Protection Agency (EPA) is proposing a regulation to implement the requirements of the Clean Air Act (CAA) as specified in the Methane Emissions Reduction Program of the Inflation Reduction Act. This program requires the EPA to impose and collect an annual charge on methane emissions that exceed specified waste emissions thresholds 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 the petroleum and natural gas systems source category requirements of the Greenhouse Gas Reporting Rule. The proposal would implement calculation procedures, flexibilities, and exemptions related to the waste emissions charge and proposes to establish confidentiality determinations for data elements included in waste emissions charge filings.

DATES:

Comments.
Comments must be received on or before March 11, 2024. Under the Paperwork Reduction Act (PRA), comments on the information collection provisions are best assured of consideration if the Office of Management and Budget (OMB) receives a copy of your comments on or before February 26, 2024.

Public hearing.
The EPA will conduct a virtual public hearing on February 12, 2024. See
SUPPLEMENTARY INFORMATION
for information on registering for a public hearing.

ADDRESSES:

Comments.
You may submit comments, identified by Docket ID No. EPA-HQ-OAR-2023-0434, by any of the following methods:

Federal eRulemaking Portal. https://www.regulations.gov
(our preferred method). Follow the online instructions for submitting comments.

Mail:
U.S. Environmental Protection Agency, EPA Docket Center, Air and Radiation Docket, Mail Code 28221T, 1200 Pennsylvania Avenue NW, Washington, DC 20460.

Hand Delivery or Courier (by scheduled appointment only):
EPA Docket Center, WJC West Building, Room 3334, 1301 Constitution Avenue NW, Washington, DC 20004. The Docket Center's hours of operations are 8:30 a.m.-4:30 p.m., Monday-Friday (except Federal holidays).

Instructions:
All submissions received must include the Docket ID No. for this proposed rulemaking. Comments received may be posted without change to
https://www.regulations.gov,
including any personal information provided. For detailed instructions on sending comments and additional information on the rulemaking process, see the “Public Participation” heading of the
SUPPLEMENTARY INFORMATION
section of this document.

The virtual hearing will be held using an online meeting platform, and the EPA has provided information on its website (
https://www.epa.gov/inflation-reduction-act/methane-emissions-reduction-program-merp
) regarding how to register and access the hearing. Refer to the
SUPPLEMENTARY INFORMATION
section for additional information.

FOR FURTHER INFORMATION CONTACT:

For questions about this proposed action, contact Mr. Shaun Ragnauth, Climate Change Division, Office of Atmospheric Programs (MC-6207A), Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460; telephone number: (202) 343-9142; email address:
merp@epa.gov.

World wide web (WWW).
In addition to being available in the docket, an electronic copy of this proposal will also be available through the WWW. Following the Administrator's signature, a copy of this proposed rule will be posted on the EPA's Inflation Reduction Act Methane Emissions Reduction Program website at
https://www.epa.gov/inflation-reduction-act/methane-emissions-reduction-program.

SUPPLEMENTARY INFORMATION:

Written comments.
Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2023-0434, at
https://www.regulations.gov
(our preferred method), or the other methods identified in the
ADDRESSES
section. Once submitted, comments cannot be edited or removed from the docket. The EPA may publish any comment received to its public docket. Do not submit to the EPA's docket at
https://www.regulations.gov
any information you consider to be confidential business information (CBI), proprietary business information (PBI), or other information whose disclosure is restricted by statute. Multimedia submissions (audio, video, etc.) must be accompanied by a written comment. The written comment is considered the official comment and should include discussion of all points you wish to make. The EPA will generally not consider comments or comment contents located outside of the primary submission (
i.e.,
on the web, cloud, or other file sharing system). Commenters who would like the EPA to further consider in this rulemaking comments relevant to this rulemaking that they previously provided on any other rulemaking or request for information (
e.g.,
the Greenhouse Gas Reporting Rule: Revisions and Confidentiality Determinations for Petroleum and Natural Gas Systems, Docket ID No. EPA-HQ-OAR-2023-0234, the Methane Emissions Reduction Program Request for Information, Docket ID No. EPA-HQ-OAR-2022-0875, and the Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for Existing Sources: Oil and Natural Gas Sector Climate Review, Docket ID No. EPA-HQ-OAR-2021-0317) must submit those comments to the EPA during this proposal's comment period. Please visit
https://www.epa.gov/dockets/commenting-epa-dockets
for additional submission methods; the full EPA public comment policy; information about CBI, PBI, or multimedia submissions, and general guidance on making effective comments.

Participation in virtual public hearing.
The EPA will begin pre-registering speakers for the hearing no later than one business day after publication in the
Federal Register
. To register to speak at the virtual hearing, please use the online registration form available at
https://www.epa.gov/inflation-reduction-act/methane-emissions-reduction-program
or contact us by email at
merp@epa.gov.
The last day to pre-register to speak at the hearing will be February 7, 2024. On February 9, 2024, the EPA will post a general agenda that will list pre-registered speakers in approximate order at
https://www.epa.gov/inflation-reduction-act/methane-emissions-reduction-program.

The EPA will make reasonable efforts to follow the schedule as closely as practicable on the day of the hearing; however, please plan for the hearings to run either ahead of schedule or behind schedule.

Each commenter will have 4 minutes to provide oral testimony. The EPA encourages commenters to provide the EPA with a copy of their oral testimony electronically (via email) by emailing it to
merp@epa.gov.
The EPA also recommends submitting the text of your oral testimony as written comments to the rulemaking docket.

The EPA may ask clarifying questions during the oral presentations but will not respond to the presentations at that time. Written statements and supporting information submitted during the comment period will be considered with the same weight as oral testimony and supporting information presented at the public hearing.

Please note that any updates made to any aspect of the hearing will be posted online at
https://www.epa.gov/inflation-reduction-act/methane-emissions-reduction-program.
While the EPA expects the hearing to go forward as set forth above, please monitor our website or contact us by email at
merp@epa.gov
to determine if there are any updates. The EPA does not intend to publish a document in the
Federal Register
announcing updates.

If you require the services of an interpreter or special accommodation such as audio description, please pre-register for the hearing with the public hearing team and describe your needs by February 2, 2024. The EPA may not be able to arrange accommodations without advanced notice.

Regulated entities.
This is a proposed regulation. If finalized, the regulation would affect 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
2
e) pursuant to the requirements codified at 40 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

Category

North American Industry
Classification System
(NAICS)

Examples of affected facilities

Petroleum and Natural Gas Systems

486210
221210
211120
211130

Pipeline transportation of natural gas.
Natural gas distribution facilities.
Crude petroleum extraction.
Natural gas extraction.

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 proposed action. 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 reporting requirements. To determine whether you would be affected by this proposed action, you should carefully examine the applicability criteria found in 40 CFR part 99, subpart A (General Provisions). 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.

Acronyms and abbreviations.
The following acronyms and abbreviations are used in this document.

AMLD Advanced Mobile Leak Detection

API American Petroleum Institute

ASTM American Society for Testing and Materials

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
4
methane

CO
2
carbon dioxide

CO
2
e carbon dioxide equivalent

e-GGRT electronic Greenhouse Gas Reporting Tool

EF emission factor

EG emission guidelines

EIA Energy Information Administration

EPA U.S. Environmental Protection Agency

ET Eastern time

FAQ frequently asked question

FR Federal Register

GHG greenhouse gas

GHGRP Greenhouse Gas Reporting Program

GOR gas-to-oil ratio

GRI Gas Research Institute

GWP Global Warming Potential

IRA Inflation Reduction Act of 2022

ICR Information Collection Request

ISBN International Standard Book Number

ISO International Standards Organization

LDC local distribution company

LNG liquified natural gas

mmBtu million British thermal units

MMscf million standard cubic feet

mt metric tons

N
2
O nitrous oxide

NAICS North American Industry Classification System

NGLs natural gas liquids

NIST National Institute of Standards and Technology

NSPS new source performance standards

OEM original equipment manufacturer

OGI optical gas imaging

OMB Office of Management and Budget

PBI proprietary business information

ppm parts per million

PRA Paperwork Reduction Act

RFA Regulatory Flexibility Act

RY reporting year

scfh standard cubic feet per hour

TSD technical support document

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. Requirements To Implement the Waste Emissions Charge

A. Proposed Definitions To Support WEC Implementation

B. Waste Emissions Thresholds

C. Common Ownership or Control for Netting of Emissions

D. Exemptions to the Waste Emissions Charge

III. General Requirements of the Proposed Rule

A. WEC Reporting 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

IV. Proposed Confidentiality Determinations for Certain Data Reporting Elements

A. Overview and Background

B. Proposed Confidentiality Determinations

C. Proposed Amendments to 40 CFR Part 2

D. Proposed Changes to Confidentiality Determinations for Data Elements Reported Under Subpart W

E. Request for Comments on Proposed Category Assignments, Confidentiality Determinations, or Reporting Determinations

V. Impacts of the Proposed 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. Determination under CAA Section 307(d)

I. Background

A. How is this preamble organized?

The first section (section I.) of this preamble contains background information regarding the proposed rule. This section also discusses the EPA's legal authority under the Clean Air Act (CAA) to promulgate implementing regulations for the waste emissions charge, proposed to be 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 proposed rule. Section II. of this preamble contains detailed information on the proposed provisions necessary to implement CAA section 136(c) through (g), including exemptions. Section III. of this preamble describes the general requirements for the proposed rule. Section IV. of this preamble discusses the proposed 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 the proposed part 99. Section VI. of this preamble describes the statutory and Executive order requirements applicable to this proposed 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 amended the CAA by adding section 136, “Methane Emissions and Waste Reduction Incentive Program for Petroleum and Natural Gas Systems.” CAA section 136(c) directs the Administrator of the EPA to impose and collect a “Waste Emissions Charge” on methane emissions that exceed statutorily specified waste emissions thresholds from owners or operators of applicable facilities. The waste emissions threshold is a facility-specific amount of metric tons of methane emissions calculated using the segment-specific methane intensity thresholds defined in CAA section 136(f)(1) through (3) and a facility's natural gas throughput (or oil throughput in certain circumstances). Facilities that have methane emissions below the threshold would not be required to pay the charge; facilities that have emissions above the threshold would be required to pay the charge. The waste emissions charge, or WEC, is specified in CAA section 136 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 years after. The WEC only applies to the subset of a facility's emissions that are above the waste emissions threshold.

The WEC program applies to facilities that report more than 25,000 mt CO
2
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).
1

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.
2

Congress structured the WEC so that it focuses on high-emitting oil and gas facilities (
i.e.,
those with emissions greater than 25,000 mt CO
2
e of greenhouse gases emitted per year and that have a methane emissions intensity in excess of the statutory threshold).

1
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 subpart W of part 98 of title 40, Code of Federal Regulations, regardless of the reporting threshold under that subpart.”).

2
42 U.S.C. 7436(d).

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 facility-specific waste emissions thresholds specified in CAA section 136(f).
3

Facility efficiency in terms of methane emissions per unit of production or throughput would have a large impact on the amount of the WEC owed, with more efficient facilities expected to have emissions falling below the specified thresholds.

3
42 U.S.C. 7436(f)(1-3).

Some facilities may have emissions that are below the waste emissions thresholds, and some facilities may have emissions above the thresholds. CAA section 136(f)(4) allows facilities under common ownership or control to net emissions across those facilities, which could result in a reduced total charge, or avoidance of the charge.
4

4
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).”).

In addition, there are three exemptions that may lower a facility's WEC or exempt the facility entirely from the charge. The first exemption, found in CAA section 136(f)(5), exempts from the charge 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.
5

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).
6

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 proposed methane emissions requirements from 2021.
7

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.
8

In this action, the EPA proposes specific requirements for eligibility for each of these exemptions.

5
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.”)

6
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.”).

7

Id.

8
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.”)

The EPA proposes to require that the WEC would be quantified and paid through a WEC filing submitted no later than March 31 of each calendar year for methane emissions that occurred in the previous calendar year (subpart W reporting year). The WEC filing would include information relevant to calculating the WEC, such as identification of facilities included in netting, eligibility for exemptions from WEC, and supporting information necessary for the EPA to verify information submitted regarding exemptions.

The proposed provisions of part 99 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. The WEC provides an incentive for the early adoption of methane emission reduction practices and technologies such as those that 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 OOOOb/EG OOOOc), which Congress expected to be promulgated pursuant to CAA section 111. The sooner facilities adopt the methodologies and technologies required in those rules, the lower their assessed WEC; at full implementation of those rules, the EPA expects many of the WEC-affected facilities will be below the WEC emissions thresholds. To further support the overall goal of reducing methane emissions, CAA section 136(a) and (b) also provides $1.55 billion to, among other things, help finance the early adoption of emissions reduction methodologies and technologies and to support monitoring of methane emissions. More detailed background information on the impacts of methane on public health and welfare and the related regulatory activities is provided in section I.C.1. of this preamble.

1. How does methane affect public health and welfare?

Elevated concentrations of greenhouse gases (GHGs) including methane have been warming the planet, leading to changes in the Earth's climate that are occurring at a pace and in a way that threatens human health, society, and the natural environment. 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 proposed 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.

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 2022, atmospheric concentrations of methane increased by nearly 17 parts per billion (ppb) over 2021 levels to reach 1,912 ppb.
9

This was the largest increase since the start of the NOAA atmospheric record in 1984, with current concentrations now more than two and a half times larger than the preindustrial level.
10

Methane is responsible for about one third of all warming resulting from human emissions of well-mixed GHGs,
11

and due to its high radiative efficiency compared to carbon dioxide, methane mitigation is one of the best opportunities for reducing near-term warming.

9
NOAA,
https://gml.noaa.gov/webdata/ccgg/trends/ch4/ch4_annmean_gl.txt.

10
Blunden, J. and T. Boyer, Eds., 2022: “State of the Climate in 2021.”
Bull. Amer. Meteor. Soc.,
103 (8), Si-S465,
https://doi.org/10.1175/2022BAMSStateoftheClimate.1,
103 (8), Si-S465,
https://doi.org/10.1175/2022BAMSStateoftheClimate.1.

11
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. Péan, 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. Yelekçi, 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.

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.”
12

Recent EPA modeling efforts
13

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 Northern Plains. Scientific assessments, 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,
14

presenting clear support regarding the current and future dangers of climate change and the importance of GHG emissions mitigation.

12

Id.

13
(1) EPA. 2021.
Technical Documentation on the Framework for Evaluating Damages and Impacts (FrEDI).
U.S. Environmental Protection Agency, EPA 430-R-21-004.

(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.

14
(1) USGCRP, 2018:
Impacts, Risks, and Adaptation in the United States: Fourth National Climate Assessment, Volume II
[Reidmiller, D.R., C.W. Avery, D.R. Easterling, K.E. Kunkel, K.L.M. Lewis, T.K. Maycock, and B.C. Stewart (eds.)]. U.S. Global Change Research Program, Washington, DC, USA, 1515 pp. doi: 10.7930/NCA4.2018. Available at
https://nca2018.globalchange.gov.

(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. Péan, 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. Yelekçi, R. Yu and B. Zhou (eds.)]. Cambridge University Press.

2. Related Actions

As mandated by CAA section 136(c) and (d), the applicability of the WEC is based upon the quantity of metric tons of CO
2
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. As a result, this proposed action builds upon previous subpart W rulemakings.

On August 1, 2023, the EPA proposed 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 (88 FR 50282) (hereafter referred to as the “2023 Subpart W Proposal”). In that rulemaking, the EPA proposed 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 proposed revisions would add a new emissions source, referred to as “other large release events,” to capture large emission events that are not accurately accounted for using existing methods in subpart W. The EPA also proposed 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 proposed revisions to existing reporting requirements to collect data that would 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 as proposed in the 2023 Subpart W Proposal. The EPA's intention in this proposed rulemaking is that the final WEC rule would update the proposed cross-references to subpart W to be consistent with the final Subpart W rule resulting from the 2023 Subpart W Proposal.

Under the Greenhouse Gas Reporting Program, the EPA also recently issued a supplemental proposal to a 2022 proposed rule (88 FR 32852, May 22, 2023), which included proposed updates to the General Provisions of the Greenhouse Gas Reporting Rule to reflect revised global warming potentials (GWPs), proposed reporting of GHG data from additional sectors (
i.e.,
non-subpart W sectors), and proposed revisions to source categories other than subpart W that would improve implementation of the Greenhouse Gas Reporting Rule. The proposed revision to the GWP of methane (from 25 to 28) is expected to lead to a small increase in the number of facilities that exceed the subpart W 25,000 mt CO
2
e threshold and thus become subject to the proposed part 99 requirements. This supplemental proposed rule is not expected to otherwise impact subpart W reporting requirements as they pertain to the applicability or implementation of the proposed part 99 requirements.

In addition, on November 15, 2021 (86 FR 63110), the EPA proposed under CAA section 111(b) standards of performance regulating 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)—and which Congress explicitly referred to in section 136—will be referred to hereafter as the “NSPS OOOOb/EG OOOOc 2021 Proposal.” The NSPS OOOOb/EG OOOOc 2021 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 limit methane emissions from existing oil and natural gas sources.

On December 6, 2022, the EPA issued a supplemental proposal to update, strengthen and expand upon the NSPS OOOOb/EG OOOOc 2021 Proposal (87 FR 74702). The December 6, 2022 supplemental proposal will be referred to hereafter as “NSPS OOOOb/EG OOOOc 2022 Supplemental Proposal.” This supplemental proposal modified certain standards proposed in the NSPS OOOOb/EG OOOOc 2021 Proposal and added proposed requirements for sources not previously covered. Among other things, the supplemental proposal sought to: ensure that all well sites are routinely monitored for leaks, with requirements based on the type and amount of equipment on site; encourage the deployment of innovative and advanced monitoring technologies by establishing performance requirements that can be met by a broader array of technologies; prevent leaks from abandoned and unplugged wells by requiring documentation that well sites are properly shut-in and plugged before monitoring is allowed to end; leverage qualified expert monitoring to identify “super-emitters” for prompt mitigation; and strengthen requirements for flares.

On December 2, 2023, in an action titled, “Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for Existing Sources: Oil and Natural Gas Sector Climate Review,” the EPA finalized these two rules to reduce air emissions from the Crude Oil and Natural Gas source category under section 111 of the Clean Air Act. First, the EPA finalized NSPS OOOOb regulating GHG (in the form of a limitation on emissions of methane) and VOCs emissions for the Crude Oil and Natural Gas source category pursuant to CAA section 111(b)(1)(B) (hereafter, “NSPS OOOOb”). Second, the EPA finalized presumptive standards in EG OOOOc to limit GHG emissions (in the form of methane limitations) from designated facilities 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 (hereafter, “EG OOOOc”).
15

15
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.

The NSPS OOOOb/EG OOOOc 2021 Proposal and Final NSPS OOOOb/EG OOOOc are relevant to this WEC

proposal in two ways: first, WEC applicable facilities containing CAA section 111(b) and (d) facilities that are in compliance with the applicable standards are likely to have emissions below the thresholds specified in section II.B. of this preamble due to mitigation resulting from meeting the methane emissions requirements of NSPS OOOOb or EG OOOOc-implementing state and Federal plans, and therefore would not be expected to incur charges under the WEC program; and second, compliance with applicable standards (if certain criteria are met) may 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). As a part of the NSPS OOOOb/EG OOOOc 2022 Supplemental Proposal, the EPA requested comment on the criteria and approaches that the Administrator should consider in making the CAA section 136(f)(6)(A)(ii) equivalency determination, which is discussed at section II.D.2. of this preamble.

The EPA also opened a non-regulatory docket on November 4, 2022 and issued a Request for Information (RFI) seeking public input to inform program design related to CAA section 136.
16

As part of this request, the EPA sought input on issues that should be considered related to implementation of the WEC. The comment period closed on January 18, 2023.

16
Docket ID No. EPA-HQ-OAR-2022-0875.

The 2023 Subpart W Proposal, the NSPS OOOOb/EG OOOOc 2021 Proposal, the NSPS OOOOb/EG OOOOc 2022 Supplemental Proposal, and the November 2022 request for information are relevant to this proposal. While the EPA has reviewed or will review relevant comments submitted as part of the rulemaking actions and request for information, the EPA is not obligated to respond to those comments in this action since the comment solicitations did not accompany a proposal regarding the WEC. Commenters who would like the EPA to formally consider in this rulemaking any relevant comments previously submitted must resubmit those comments to the EPA during this proposal's comment period.

In addition to the WEC requirement, and the related revisions to subpart W to facilitate accuracy of reporting and charge calculation, as noted in section I.C. of this preamble, CAA sections 136(a) and (b) provide $1.55 billion for the Methane Emissions Reduction Program, including for incentives for methane mitigation and monitoring. The EPA is partnering with the U.S. Department of Energy and National Energy Technology Laboratory to provide financial assistance for monitoring and reducing methane emissions from the oil and gas sector, as well as technical assistance to help implement solutions for monitoring and reducing methane emissions. As designed by Congress, these 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

The EPA is proposing this rule under its newly established authority provided in CAA section 136. 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
2
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 proposing elements of this rule under its existing CAA authority provided in CAA section 114, as well as CAA section 301. 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 manufacturers of new motor vehicles or new motor vehicle engines). Thus, CAA section 114(a)(1) additionally provides the EPA broad authority to require the information that would be required by this proposed rule because the information is relevant for carrying out CAA section 136. Additionally, CAA section 301(a)(1) provides that the EPA is authorized to prescribe such regulations “as are necessary to carry out [its] functions under [the CAA].”

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 proposed confidentiality determinations for the new data elements required by this proposed regulation.

II. Requirements To Implement the Waste Emissions Charge

This section summarizes the EPA's proposed approach to calculating WEC, including how WEC would be calculated at the facility level, how netting of emissions from facilities under common ownership or control would be applied, the EPA's interpretation of common ownership or control, and how the exemptions established in CAA section 136(f) would be implemented.

A. Proposed Definitions To Support WEC Implementation

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. Thus, we are proposing several definitions within the general provisions of 40 CFR 99.2. First, as the statute specifies, we are proposing a definition of “applicable facility” 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, LNG import and export equipment, or LNG storage, as those industry segments are defined in 40 CFR 98.230 of subpart W.
17

A single reporting facility under part 98, subpart W, typically consists of operations within a single industry segment. However, for certain industry segments a single reporting facility may represent operations in two or more industry segments. Industry segments that potentially may exist within the same reporting facility are onshore natural gas processing, onshore natural gas transmission compression, underground natural gas storage, LNG import and export equipment, and LNG storage. To accommodate for such facilities, we are proposing within the definition of “applicable facility” that such operations would be considered a single applicable facility under part 99.

17

See
42 U.S.C. 7436(d).

We are also proposing a definition of “WEC applicable facility” in 40 CFR 99.2, which would mean an applicable facility for which the owner or operator of the subpart W reporting facility reported GHG emissions under subpart W of more than 25,000 mt CO
2
e—the amount set in the statute. In cases where a subpart W facility reports under two or more of the industry segments listed in the previous paragraph, the EPA proposes that the 25,000 mt CO
2
e threshold would be evaluated based on the total facility GHG emissions reported to subpart W across all of the industry segments (
i.e.,
the facility's total subpart W GHGs). As discussed in section II.B.1. of this preamble, the waste emissions threshold is the facility-specific threshold, based upon an industry segment-specific methane intensity threshold, 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 proposes that each industry segment would be 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 proposes that this approach would be used in all cases where a WEC applicable facility contains equipment in multiple subpart W industry segments.

The EPA requests comment on 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 assess these facilities against the 25,000 mt CO
2
e applicability threshold using the CO
2
e reported under subpart W for each individual segment at the facility rather than the total facility subpart W CO
2
e reported across all segments. CAA section 136(d) defines an applicable facility as one “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 proposes to assess WEC applicability based on the entire subpart W facility's emissions. Based on historic subpart W data, no more than two dozen facilities report data for multiple segments, and when total subpart W CO
2
e is summed across all segments at these facilities, almost all of these facilities remain below the 25,000 mt CO
2
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 generally have methane emissions below the waste emissions thresholds. The proposed approach of using total subpart W facility CO
2
e for determining WEC applicability therefore would not result in a significant number of facilities being regulated under WEC compared to an approach that assessed applicability using subpart W CO
2
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 proposed approach to experience a substantially different financial impact under the alternative approach.

We are also proposing a definition for “WEC applicable emissions” in 40 CFR 99.2, which would mean the annual methane emissions, as calculated using equations specified in part 99, from a WEC applicable facility that are either equal to, below, or exceeding the waste emissions threshold for the facility after consideration of any applicable exemptions. The proposed calculation methodology for WEC applicable emissions is addressed in section II.B.2. of this preamble. We are also proposing a definition for “facility applicable emissions” in 40 CFR 99.2 which would mean the annual methane emissions, as calculated using equations specified in part 99, 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.

The proposed provisions of this part would apply to WEC obligated parties and WEC applicable facilities. In addition to the proposed definition for WEC applicable facility discussed earlier in this section, we are proposing a definition for the term WEC obligated party in 40 CFR 99.2. The term WEC obligated party refers to the owners or operators of one or more WEC applicable facilities. For WEC applicable facilities that have more than one owner or operator, we are proposing 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.

For the purposes of submitting the WEC filing, we are proposing that the WEC obligated party's WEC applicable facilities are the WEC applicable facilities for which it is the owner or operator (including through binding agreement as noted above), as of December 31 of each reporting year. Under the proposed approach, the WEC obligated party would be responsible for any WEC obligation from facilities for which it was the facility owner or operator as of December 31 of the reporting year. The EPA recognizes that facilities may be acquired or divested at any time in the year, and that under the proposed approach the year-end owner or operator 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. First, subpart W data reporting uses the same approach; the facility owner or operator as of December 31 is responsible for emissions for the entire year. Because the subpart W data is inextricably linked to the WEC filing, it would be inappropriate to have different facility owners or operators under each regulation. Specifically, different owners or operators for the same facility under subpart W and the WEC program could lead to challenges for WEC filings and associated data verification, and increase industry burden by requiring significant coordination between different companies. Second, subpart W data are reported on an annual basis, and there is no means by which methane emissions could be accurately allocated across multiple owners or operators in a single year. For example, emissions could not be pro-rated based on time of ownership over the reporting year because emissions do not occur uniformly over time, and emissions from certain sources cannot be linked to specific times. Similarly, there is not a direct relationship between methane emissions and oil and natural gas production, so temporal data on hydrocarbon production could not be used to accurately allocate emissions. 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.

The EPA also recognizes that a facility's owner or operator, and thus its WEC obligated party, may change between December 31 and March 31. In such situations, under the proposed approach the WEC obligated party associated with a facility as of December

31 would remain responsible for accounting for that facility in its WEC filing and be responsible for any WEC obligation associated with that facility.

The EPA invites comments on these proposed definitions and whether additional definitions would help with the implementation of the WEC. The EPA requests comment on the proposed definition of WEC obligated party being responsible for all facilities for which it was the facility owner or operator as of December 31, regardless of when in the reporting year it became a facility's owner or operator. The EPA requests comment on alternative definitions of WEC obligated party, including those that would allocate facility subpart W data to multiple WEC obligated parties and a definition that would place the WEC obligation and reporting requirements on the WEC obligated party that was a facility's owner or operator at the time of the WEC filing (
i.e.,
as of March 31 of the year following the reporting year rather than December 31 of the reporting year). For alternative definitions that would allocate subpart W data, the EPA requests comment on potential methodologies that would accurately split the annual subpart W data across multiple WEC obligated parties.

B. Waste Emissions Thresholds

The CAA establishes a waste emissions threshold that is 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 the WEC, we are proposing to calculate the facility waste emissions thresholds in metric tons of methane.

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. Facility waste emissions thresholds are compared to reported methane emissions; facilities with methane emissions that exceed the waste emissions threshold may be subject to the WEC. For WEC applicable facilities under common ownership or control of a single WEC obligated party, the WEC applicable emissions for each facility are summed to calculate the net emissions for that WEC obligated party.

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

Throughput metric
a

Industry segment-specific methane intensity

Onshore petroleum and natural gas production
Offshore petroleum and natural gas production

The quantity of natural gas produced from producing wells that is sent to sale in the calendar year, in thousand standard cubic feet; 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
0.20 percent of natural gas sent to sale from facility; or 10 metric tons of methane per million barrels of oil sent to sale from facility, if facility sends no natural gas to sale.

Onshore petroleum and natural gas gathering and boosting
The quantity of natural gas transported through the facility to a downstream endpoint 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
0.05 percent of natural gas sent to sale from or through facility.

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

Onshore natural gas transmission compression
The quantity of natural gas transported through the compressor station in the calendar year, in thousand standard cubic feet
0.11 percent of natural gas sent to sale from or through facility.

Onshore natural gas transmission pipeline
The quantity of 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

Underground natural gas storage
The quantity of natural gas withdrawn from storage and sent to sale in the calendar year, in thousand standard cubic feet

LNG import and export equipment
For LNG import equipment, the quantity of LNG imported that is sent to sale in the 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
0.05 percent of natural gas sent to sale from or through facility.

LNG storage
The quantity of LNG withdrawn from storage and sent to sale in the calendar year, in thousand standard cubic feet

a
Throughput metrics in this table are based on the proposed subpart W reporting elements in the 2023 Subpart W Proposal (88 FR 50282).

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 proposing 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 proposing to use 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).
18

For onshore and offshore petroleum and natural gas production facilities that have no natural gas sent to sale, we are proposing to use equation B-2 of 40 CFR 99.20(b). Similar to proposed equation B-2, the annual quantity of oil sent to sale from a WEC applicable facility would be multiplied by 10 metric tons of methane per million barrels of oil.
19

18
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).

19
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 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 proposing to use equation B-3 under 40 CFR 99.20(c). This equation would multiply 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.
20

The EPA notes that certain facilities in the gathering and boosting and natural gas processing industry segments may have zero throughput values using the proposed 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.B.6. of this preamble.

20
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 WEC 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 proposing that equation B-4 under 40 CFR 99.20(d) be used to calculate the waste emissions threshold from a WEC applicable facility in these industry segments. Using proposed equation B-4 the EPA would multiply 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.
21

21
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 natural gas per year, while facility methane emissions are reported in metric tons. The EPA is proposing to interpret 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 of 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 EPA's proposed 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 °F and 14.7 psia). This allows the waste emissions threshold to be directly compared to reported metric tons of methane. The proposed 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 proposed approach does not require information on the constituents or density of natural gas throughput.

As described in this section of the preamble, we are proposing to calculate waste emissions thresholds at the facility level, using the industry segment-specific methane intensity threshold given in CAA sections 136(f)(1) through (3), and the industry segment throughput 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 proposing 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 that the facility operates within.

The EPA proposes to interpret “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 proposes to interpret “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 proposes to interpret “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 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. With the exception of production facilities that only produce oil, the statutory text clearly lists natural gas as the throughput value. Further, the proposed 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. An approach that calculates methane intensity as the mass of methane emissions divided by the mass of natural gas would 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 require facilities to collect and report detailed data on the constituents and energy content of all hydrocarbon throughput. The EPA therefore believes that the proposed approaches not only follow a plain reading of CAA section 136(f) but are also the best and most reasonable approaches.

The EPA invites comments on our proposed approach for calculating the waste emissions thresholds, particularly our proposed methodology and the underlying assumptions used to calculate the waste emissions threshold in metric tons of methane.

2. Facility Methane Emissions

To determine the total methane emissions from a WEC applicable facility, the EPA proposes to use facility-level methane data as reported under subpart W. On August 1, 2023, the EPA proposed 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 (88 FR 50282). Facility methane emissions (and any emissions associated with exemptions from the WEC) would be calculated using methods and data required by subpart W for the emissions year covered by the annual WEC filing. For example, for the first year of the WEC (2024 emissions), WEC calculations would be based on the Subpart W requirements effective in 2024, and emissions year 2025 emissions and beyond would be based on Subpart W requirements effective in 2025 or any future revisions. The proposed 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 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 proposes to interpret “reported metric tons of methane emissions” to mean all reported methane emissions from a facility, as reported under subpart W. This value is an input to equation B-6.

3. Facility WEC Calculation

To calculate the amount by which a WEC applicable facility is below or exceeding the waste emissions threshold, the EPA proposes to use equation B-6 of 40 CFR 99.21, 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 proposed 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
4
(see section II.D. of this preamble for more information on the exemptions). As discussed in section II.C.2.b. of this preamble, the EPA proposes that WEC applicable facilities receiving the regulatory compliance exemption would be exempted from the WEC, and therefore would have zero WEC applicable emissions. For facilities in the onshore petroleum and natural gas production and offshore petroleum and natural gas production industry segments with total facility applicable emissions greater than 0 mt CH
4
, any methane emissions associated with applicable exemptions would be subtracted to calculate WEC applicable emissions. For all other facilities, facility applicable emissions would equal WEC applicable emissions (unless the facility was receiving the regulatory compliance exemption).

The EPA invites comments on the proposed approach for calculating WEC applicable emissions.

4. Netting

The metric tons of methane emissions equal to, below, or exceeding the waste emissions threshold, or WEC applicable emissions, for each WEC applicable facility would be determined as specified in 40 CFR 99.21. CAA section 136(f)(4) allows for the netting of emissions at facilities below the waste emissions thresholds with emissions at facilities exceeding the waste emissions thresholds for facilities under common ownership or control within and across all applicable industry segments identified in 136(d). The EPA proposes to implement netting using equation B-8 at 40 CFR 99.22. Equation B-8 would sum the WEC applicable emissions from all WEC applicable facilities under the

common ownership of control of a WEC obligated party to calculate net WEC emissions for that WEC obligated party. The EPA's proposed interpretation of common ownership and control and definition of WEC obligated party are discussed in section II.C. of this preamble.

5. Waste Emissions Charge Calculation

CAA section 136(e) establishes annual $/metric ton charges for all methane emissions from WEC applicable facilities exceeding the waste emissions thresholds. The EPA proposes that a WEC obligated party's total annual WEC, or WEC obligation, would be calculated by multiplying its net WEC emissions, as determined by proposed Equation B-8, by the annual $/metric ton charge. WEC obligated parties with net WEC emissions less than or equal to zero would not have a WEC obligation. WEC obligated parties with net WEC emissions greater than zero would have a WEC obligation and be required to pay a waste emissions charge. WEC obligation calculations would be made for calendar years 2024, 2025, 2026, and each year thereafter as per proposed 40 CFR 99.23.

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 proposed 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. Under the proposed approach, all reported methane emissions from facilities with no reported throughput would be considered to be exceeding the waste emissions threshold. The EPA notes that the proposed approach is based on a plain reading of the statutory text; because these facilities would have a calculated waste emissions threshold of zero, all reported methane would by default be exceeding the threshold. The EPA requests comment on the treatment of gathering and boosting and natural gas processing facilities that do not report any volumes for the proposed WEC throughput metrics. The EPA requests comment on the proposed approach that would consider all reported methane from these facilities to be above the waste emissions threshold. The EPA also requests comment on an alternative approach that would consider all reported methane emissions from these facilities to be below the waste emissions threshold.

C. Common Ownership or Control for Netting of Emissions

1. EPA Interpretation and Proposal To Implement “Common Ownership or Control” for the Purposes of Part 99

CAA section 136(f)(4) allows WEC applicable facilities under “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. The EPA interprets this to mean that for all eligible WEC applicable facilities under common ownership or control, the amount of metric tons of methane below the waste emissions thresholds (
i.e.,
the difference between emissions equal to the waste emissions threshold and reported emissions) at facilities below the waste emissions threshold may be used to net against the amount of metric tons of methane emissions that exceed the waste emissions thresholds at facilities above the waste emissions threshold. For the purposes of establishing common ownership or control under CAA section 136(f)(4), the EPA proposes to define “WEC obligated party” in 40 CFR 99.2. The EPA proposes that each subpart W facility would be associated with a single WEC obligated party (though each WEC obligated party may be associated with multiple subpart W facilities), which would be reported under the proposed requirements at 40 CFR 99.7. As discussed in section II.B.4. of this preamble and proposed in 40 CFR 99.22, all WEC applicable facilities associated with a common WEC obligated party would be able to net emissions for the purposes of calculating the WEC obligated party's net emissions and total WEC obligation.

The EPA proposes that the WEC obligated party be the subpart W facility “owner or operator” as reported under 40 CFR 98.4(i)(3). The EPA proposes definitions for facility “owner” and “operator” that are applicable to the offshore petroleum and natural gas production, onshore natural gas processing, onshore natural gas transmission compression, underground natural gas storage, LNG import and export equipment, and LNG storage industry segments at 40 CFR 99.2. The onshore petroleum and natural gas production, onshore petroleum and natural gas gathering and boosting, and onshore natural gas transmission pipeline industry segments each have separate definitions for facility “owner or operator” proposed at 40 CFR 99.2. These proposed definitions are identical to the corresponding definitions in 40 CFR part 98; the EPA proposes that the owner or operator associated with a subpart W facility as reported under 40 CFR 98.4(i)(3) (regarding the list of owners or operators of the facility for the certification of representation of the designated representative) would also be the WEC obligated party for that facility. The EPA believes that the proposed approach for using facility owner or operator for the purpose of defining common ownership or control aligns with a plain reading of the statutory text. CAA section 136(c) states that a charge on methane emissions that exceed the waste emissions threshold shall be imposed and collected “from an owner or operator of an applicable facility.” Further, in the context of required revisions to the subpart W methodologies used to calculate methane emissions, CAA section 136(h) states that those revisions must be made to “allow owners and operators of applicable facilities to submit empirical emissions data, in a manner to be prescribed by the Administrator, to demonstrate the extent to which a charge under subsection (c) is owed.” Thus, CAA section 136(c) requires the charge to be imposed and collected on a facility owner or operator, and CAA section 136(h) presumes that owners and operators are responsible for submitting empirical data. Furthermore, since the list of owners or operators for each facility is directly reported under 40 CFR 98.4(i)(3), an established program at the time that Congress drafted CAA section 136, the EPA proposes that under the best reading of the statutory text, the facility owner or operator would be used as the entity for establishing common ownership or control of subpart W facilities within and across all applicable subpart W industry segments.

Although the EPA believes that the owner or operator approach is the most appropriate for netting under WEC, we seek comment on an alternative approach that would use the parent company of a facility's owner or operator for the WEC obligated party and determining common ownership or control of facilities. For each subpart W facility, the facility owner or operator

and parent company are reported under 40 CFR 98.4(i)(3) and 40 CFR 98.3(c)(11), respectively. The parent company represents the highest-level company based in the United States with an ownership interest in the facility. For parent company reporting, the percent ownership in the facility is also reported under 40 CFR 98.3(c)(11). Because a parent company has an ownership interest in a subpart W facility, multiple facilities may be said to be owned by the same parent company and might also be considered as being under common ownership or control of that parent company. So, one difference between using the owner or operator rather than a parent company for establishing common ownership or control is the number of facilities that may be brought under common ownership or control in each approach. For most facilities, the reported owner or operator is a subsidiary of the reported parent company. A single parent company may have multiple different owners or operators (
i.e.,
subsidiaries) associated with facilities within and across subpart W industry segments. For example, an onshore petroleum and natural gas production facility and onshore natural gas processing facility owned by the same parent company may each have a different owner or operator. The number of “common” facilities is usually higher when the parent company is used, and lower when the owner or operator is used. The parent company approach would therefore provide a broader interpretation of common ownership or control relative to use of owner or operator. However, it is important to note that at the time CAA section 136 was enacted in 2022, the term “common ownership or common control” was a term used in the subpart W regulations. Under the subpart W regulations, the EPA has used the term “common ownership or control” to refer to the owner or operator, not to the parent company. Congress was likely aware of this definition when it enacted section 136. Therefore, the EPA is proposing to use facility owner or operator for the purpose of establishing common ownership or control based on a plain reading of CAA section 136(c), and believes that this is the better reading of the text in context with subpart W. However, the EPA requests comment on both the proposed approach using facility owner or operator and on an alternative approach using facility parent company for determining common ownership or control of WEC applicable facilities.

In some cases, a WEC applicable facility may have multiple owners or operators reported under 40 CFR 98.4(i)(3). In these situations, the EPA proposes that the facility owners or operators would designate one of the owners or operators as the WEC obligated party for that facility, as proposed in 40 CFR 99.4. Under the proposed approach, the process for selection of the WEC obligated party at facilities with multiple owners or operators would be similar to the approach for selecting a designated representative under 40 CFR part 98. This process would require selection of a single WEC obligated party for the facility by an agreement binding on each of the owners or operators associated with the facility. The proposed approach for facilities with multiple owners allocates all facility-level methane emissions below or exceeding the waste emissions thresholds to a single WEC obligated party. We request comment on the proposed approach of allocating all methane emissions below or exceeding the waste emissions thresholds from a facility with multiple owners or operators to a single WEC obligated party. We request comment on other approaches that could be used to allocate emissions to owners or operators at facilities with multiple owners or operators. We request comment on the proposed approach of requiring the group of facility owners or operators to determine which owner or operator is the WEC obligated party, and alternative approaches for designating the WEC obligated party, at facilities with multiple owners or operators.

The EPA also evaluated an approach that would allocate facility methane emissions below or exceeding the waste emissions thresholds at facilities with multiple owners to parent companies based on their reported percent ownership in the facility. Some subpart W facilities with multiple owners have parent companies with very small (
i.e.,
less than one percent) equity shares. The minority owners may include individuals and small oil and gas companies with no operational control over the facility. Allocating methane emissions below or exceeding the waste emissions thresholds based on facility ownership would expose a larger number of individuals and small companies to potential WEC obligations. We note that allocating methane emissions from facilities with multiple owners to each owner based on facility ownership would only be possible using a parent company approach and not using the proposed owner or operator approach because GHGRP reporting does not currently include data on owner or operator facility equity share or include direct linkages between owners or operators and parent companies that could be used to assign facility ownership percentages to owners or operators. There may also be situations in which the facility owner or operator is a third-party operator with no ownership in the facility either directly or through their parent company.

We request comment on an alternate approach that would allocate methane emissions to parent companies using percent ownership in the facility as well as other possible allocation methodologies for facilities with multiple parent companies. We request comment relevant to understanding other appropriate approaches for allocating emissions from a facility with multiple parent companies or owners or operators to a single WEC obligated party or multiple WEC obligated parties. For example, how are costs allocated at such facilities, and are they usually shared by parent companies (
e.g.,
based on percent ownership in the facility), entirely borne by the facility operator, or does cost sharing vary based on facility-specific contractual agreements?

2. Facilities Eligible for the Netting of Emissions

The EPA's proposed implementation of CAA section 136(f)(4) would define which types of applicable subpart W facilities are eligible to net emissions. We propose to establish 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 proposed approach to netting, we chose interpretations which were the most consistent with a plain reading of the CAA, as well as the most transparent and straightforward to implement. As described in more detail in the following sections, our approach assumes 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 receives the regulatory compliance exemption, that facility's emissions do 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 will be explained further in section II.C.2.a. of this 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 with unreasonable delay or plugged well exemptions, under the proposal, emissions associated with these exemptions would be removed from any emissions exceeding the waste emissions threshold prior to netting calculations.

a. Facilities Required To Report To GHGRP and That Have Subpart W Emissions Greater Than 25,000 Metric Tons of CO
2
e

In accordance with CAA section 136(c) and the proposed definition of “WEC applicable facility” in 40 CFR 99.2, we are proposing that subpart W facilities that have subpart W emissions greater than 25,000 mt CO
2
e are eligible for netting, with the exception of those that are receiving the regulatory compliance exemption (as discussed in section II.D.2. of this preamble). Facilities that report less than 25,000 mt CO
2
e under subpart W are not subject to the WEC, and the EPA proposes that such facilities would not be eligible for netting. These types of facilities are discussed in greater detail in section II.C.2.c. of this preamble. The EPA's proposed 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 following sections will provide an overview of the relevant statutory text, and the corresponding basis for the EPA's belief that only WEC applicable facilities may net, and only WEC obligated emissions may be netted, under CAA section 136(f)(4).

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
2
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
2
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.”
22

22
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)),
23

and 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;”
24

and section 136(f)(3) establishes thresholds for natural gas transmission (industry segments (4), (5), and (9))
25

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.”
26

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
2
e under subpart W, and thus may be subject to charge under CAA section 136(c).

23
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.

24

Id.
at section 7436(f)(2).

25
Specifically, (4) onshore natural gas transmission compression; (5) underground natural gas storage; and (9) onshore natural gas transmission.

26

Id.
at section 7436(f)(3).

Finally, in 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)”. As noted above, the EPA is proposing that this netting provision applies to WEC applicable facilities and WEC applicable emissions only, for three compelling reasons.

First, the EPA believes that per 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, as noted above, 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 25,000 mt per year CO
2
e in subpart W. The thresholds do not apply to facilities which emit fewer than 25,000 mt per year of CO
2
e under subpart W, because under CAA section 136(c), no charge may be imposed or collected on such facilities. Facilities which emit less than 25,000 mt per year of CO
2
e under subpart W may emit any amount of methane, but these methane emissions are not WEC applicable emissions: they cannot be evaluated according to the waste emissions

thresholds, and they cannot be considered to fall either above or below these thresholds. Thus, in “
account[ing] for facility emissions levels that are below the applicable thresholds
”, the EPA understands that it must account for WEC applicable emissions from WEC applicable facilities which fall below the waste emissions thresholds, and produce a negative value under Equation B-6 (see above at section II.B.3.).

As previously stated, 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. First, 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).

A close reading of the text also strongly supports our presumption regarding the waste emissions thresholds, 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 tons per year of CO
2
e per year.

In addition to the “applicable thresholds” question, the EPA believes that Congress's use of the term “applicable segments” in stating that 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) classes these segments into four groups, and is the only provision to use the term “applicable segments”. As noted above, 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. Accordingly, the EPA believes that under the best reading of this provision WEC obligated parties may net WEC applicable methane emissions between facilities in different segments, as long as all facilities are WEC applicable facilities.

b. Facilities With Subpart W Emissions Greater Than 25,000 Metric Tons of CO
2
e That Are Receiving the Regulatory Compliance Exemption

The EPA proposes 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 EPA's proposed approach is based on a plain reading of the statutory text, and follows the same reasoning outlined in section II.C.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 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 CO
2
e per year under subpart W) and they must also generate WEC applicable emissions (methane emissions 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 emissions subject to charge under section 136(c). Because, under the proposed approach WEC applicable facilities with the regulatory compliance exemption 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 proposed approach of facilities with the regulatory compliance exemption having zero WEC applicable emissions allows for the practical implementation of the exemption within the broader framework of the proposed WEC calculations. Assigning exempted facilities 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 would 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 would again be included in netting.

The EPA notes that under the proposed approach, facilities with emissions below the waste emissions

threshold would not receive the regulatory compliance exemption (see discussion in section II.D.2.f. of this preamble), and thus these facilities would always have WEC applicable emissions and would be able to participate in netting across facilities under common ownership or control.

The EPA requests comment on the proposed approach in which WEC applicable facilities receiving the regulatory compliance exemption would have zero WEC applicable emissions. The EPA requests comment on other options for WEC applicable facilities receiving the regulatory compliance exemption and their treatment in the context of netting.

c. Exclusion of Facilities Reporting 25,000 or Fewer Metric Tons of CO
2
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
2
e under subpart W. A large number of facilities that report under the GHGRP have subpart W emissions below 25,000 mt CO
2
e. A part 98 subpart W facility is generally allowed to cease reporting or “offramp” due to meeting either the 15,000 mt CO
2
e level or the 25,000 mt CO
2
e level for the number of years specified in 40 CFR 98.2(i) based on the CO
2
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). Some facilities have dropped below 25,000 mt CO
2
e in total reported emissions to part 98 and are continuing to report while on the reporting offramp. Other facilities report emissions under multiple subparts (
e.g.,
subpart W and subpart C) and have total emissions equal to or greater than 25,000 mt CO
2
e across both subparts, but subpart W emissions below 25,000 mt CO
2
e. The latter category includes processing plants, transmission compressor stations, underground storage facilities, LNG storage facilities, and LNG import and export facilities that report their combustion emissions under subpart C. Many of these facilities have total GHGRP emissions exceeding 25,000 mt CO
2
e, but subpart W emissions that alone fall below this threshold.

We are proposing that subpart W facilities with subpart W emissions equal to or below 25,000 mt CO
2
e are not WEC applicable facilities and are therefore excluded from netting. This proposed 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
2
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 able 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 proposed definition of “WEC Applicable Facility” in 40 CFR 99.2, which reflects the statutory text at CAA section 136(d), we are proposing that facilities that are not required to report to the GHGRP, and thus are not WEC applicable facilities, would not be eligible for netting. Again following the reasoning outlined in section II.C.2.a. of this preamble, the EPA's proposed 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 CO
2
e per year. 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 CO
2
e) can have WEC applicable emissions that may be subject to charge. As explained in section II.C.2.a. of this preamble, only WEC applicable facilities may 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.

D. Exemptions to the Waste Emissions Charge

1. Exemption for Emissions From Eligible Delays in Environmental Permitting Under CAA Section 136(f)(5)

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 would exempt from the charge certain emissions occurring at facilities in the onshore and offshore production segments. 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 permitting of gathering or transmission infrastructure necessary for offtake of increased volume as a result of methane emissions mitigation implementation. Infrastructure necessary for offtake would include gathering and transmission pipelines and compressor stations. Increased volume as a result of methane emissions mitigation implementation would include increased natural gas amounts available for transport that would have otherwise been emitted.

a. Emissions Eligible for the Permitting Delay Exemption

Given the complexity of defining and determining “unreasonable delay” related to environmental permitting, the EPA is proposing a simplified approach of establishing a set of four criteria for applying the unreasonable delay exemption established by CAA section 136(f)(5). These criteria would only apply in the context of determining eligible emission exemptions for the implementation of CAA 136(f)(5) and this proposed 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 factual circumstances. At the same time, the EPA believes it is important in the context of this program to propose a definition that is both consistent with the statutory charge and administrable within the capabilities of the EPA. With those caveats in mind, the EPA proposes the following four criteria for implementing this exemption: (1) the facility must have emissions that exceed the waste emissions threshold; (2) neither the entity seeking the exemption, nor the entity responsible for seeking the permit, may have contributed to the delay; (3) the exempted emissions must be those (and only those) resulting from the flaring of gas that would have been mitigated without the permit delay, and the flaring that occurs must be in compliance with all applicable local, state, and Federal regulations regarding flaring emissions; and (4) a set period of months must have passed from the time a submitted permit application was

determined to be complete by the applicable permitting authority.

The EPA believes this approach meets the Congressional intent of this exemption while creating a program that can be implemented annually allowing for collection of WEC in a timely manner. The proposed approach is intended to reduce burden on the companies and government compared with an approach that would not specify a timeframe or other criteria but would rely on decisions made on a case-by-case basis to determine whether the timing and other circumstances of an individual permitting action constitutes an unreasonable delay. We note, however, that these criteria outlined above, including the timeframe, are proposed for the purpose of defining the emissions eligible for an exemption for the purposes of the implementation of CAA 136(f)(5) and this proposed rulemaking only and are not applicable for defining an unreasonable delay outside of this context. The criteria introduced 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 proposed 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. In addition, since charges would not be imposed on emissions below the threshold, an exemption is unnecessary in cases where facility emissions are below the threshold. The EPA proposes that emissions from facilities that are below the waste emissions threshold would not be exempted. The EPA proposes that for facilities that exceed the waste emissions threshold, emissions eligible for the permitting delay exemption would be subtracted from the facility emissions that exceed the waste emissions threshold. The exempted emissions would not be used to reduce emissions totals below the threshold (
i.e.,
the lowest possible WEC applicable emissions for a facility with the exemption would be zero).

The second criterion relates to responsiveness on the part of the production sector WEC applicable facility reporting emissions caused by a delay in gathering or transmission infrastructure and the gathering or transmission infrastructure permit applicant: neither the entity potentially eligible for the exemption (
i.e.,
a WEC applicable facility in the onshore or offshore production sector) nor the entity seeking the environmental permit (
e.g.,
an entity seeking a permit for gathering or transmission infrastructure) has contributed to the delay in permitting.

The EPA is proposing that contributions to the delay by either the production entity potentially eligible for the exemption or the entity seeking the environmental permit would be determined based upon the timeliness of response to requests for additional information or modification of the permit application. Delays in response exceeding the response time requested by the permitting agency, or requested by the relevant production or gathering or transmission infrastructure entity seeking the permit, or responses that exceed 30 days from the request if no specific response time is requested, would be considered to contribute to the delay in processing the permit application. Note that this proposed determination of what would constitute a delay eligible for the exemption in environmental permitting would be specific solely to implementation of CAA section 136(f)(5) and this proposed rulemaking for part 99, and would not necessarily be applicable to any other section of the CAA, or any permitting program administered by the EPA or by a state or local permitting authority.

The third criterion is that the exempted emissions must be those resulting from the flaring of gas that would have been mitigated without the permit delay—and that exempted emissions must be in compliance with all applicable local, state, and Federal regulations regarding flaring emissions. The EPA believes that this approach reasonably follows from the text of section 136(f)(5), which exempts emissions caused by unreasonable delay in the permitting of “gathering or transmission infrastructure
necessary for offtake of increased volume as a result of methane emissions mitigation implementation.
”
27

Following this statutory directive, the EPA is proposing that exempted emissions are flaring emissions which (1) would otherwise be captured in accordance with applicable regulations but (2) are not captured due to a delay in the permitting necessary for offtake. It is anticipated that operations seeking the exemption could include oil production sites planning to send gas to sale, rather than flaring the emissions, or facilities that produce natural gas, condensate or natural gas liquids and that expand operations and are flaring gas because a pipeline is not yet available. Only flaring emissions caused by the unreasonable delay in permitting, and occurring in compliance with all applicable regulations, would be exempt. Other emissions occurring at the wellsite would not be exempt because they are not associated with the delay or because they do not occur in compliance with applicable regulations. For example, fugitive emissions from leaks would occur with or without the delayed infrastructure, and venting emissions is widely restricted due to Federal, state, or local regulations on venting.

27
42 U.S.C. 7436(f)(5) (emphasis added).

Flaring emissions that occur as a result of flaring that is not in compliance with applicable regulations are ineligible for the exemption. This approach accords with the text of section 136(f)(5), which states that the exemption is for emissions occurring as a result of unreasonable delay in permitting required for the build out of infrastructure “necessary for offtake of increased volume
as a result of
methane emissions mitigation.”
28

Regulations limiting flaring and venting will result in an increased volume of gas that must be captured and transmitted, compared with a circumstance without methane emissions mitigation implementation, in which gas is flared or vented on site. Thus, the EPA understands that this provision is designed to exempt flaring done in compliance with regulations, where sources are prepared to capture gas but cannot yet do so due to lack of offtake infrastructure. However, a delay in permitting does not allow exemption from other applicable local, state, and Federal regulations regarding flaring. Thus, the flaring emissions exempt under 136(f)(5) cannot exceed flaring emissions allowable under other applicable local, state, and Federal regulations.

28
42 U.S.C. 7436(f)(5)

The fourth criterion is that an eligible “unreasonable delay” would be a delay that exceeds a set period of months specified in the final rule. The EPA's current assessment is that this time period would likely fall somewhere between 30 and 42 months from the date that a submitted permit application

was determined to be complete by the relevant permitting authority. This time period is not tied to the timing of the WEC; a facility that meets all four criteria would be eligible for the exemption in the first year of the WEC if the time period requirement has been met. The relevant permitting authority could be the United States Federal Energy Regulatory Commission (FERC), or other federal, state or local agencies that issue environmental permits. The environmental permitting process can require multiple steps including, but not limited to: the entity preparing and submitting a permit application; the entity responding to comments with supporting information; the regulatory agency preparing a draft permit; public comment; and preparation and issuance of the final permit. Target dates for permit actions can vary by regulatory agency and depend, for example, on whether the relevant permit is for a new or existing source, or whether the action is a major or minor modification. The EPA is proposing to set a timeframe for unreasonable delay that is not specific to particular permitting actions or agency timelines.

The EPA is proposing to set a timeline somewhere in the range of 30 to 42 months, with the default to be specified in the final rule after consideration of comments received. This preliminary range is based on the EPA's current understanding of timelines for oil and gas permitting across Federal agencies. In particular, the preliminary range is informed by the EPA's review of data made available through the Federal Permitting Improvement Steering Council (FPISC) through Title 41 of the Fixing America's Surface

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2024-00938. Public record. Not legal advice.