June 8, 2015 Page 1

INCENTIVIZING VOLUNTARY PARTICIPATION IN

THE ENHANCED NATURAL GAS STAR PROGRAM

One important element of EPA’s methane reduction strategy is the development of the 

Enhanced Natural Gas STAR (ENGS) program, the agency’s voluntary program to 

reduce further methane emissions from existing sources across the oil and gas sector. 

Successful implementation of the ENGS program, however, is dependent on the 

willingness of oil and gas producers to participate. A critical consideration will be 

whether participating companies will receive emissions reduction credits (ERCs) under 

the Clean Air Act (CAA or Act) for the voluntary VOC emission reductions achieved as 

a co-benefit of controlling methane under the ENGS program. 

The incentive for companies to participate in the ENGS program could be significantly 

undercut by EPA’s proposed plan to issue Control Technique Guidelines (CTGs) that 

would require state regulation of VOC emissions from existing oil and gas sources 

located in ozone nonattainment areas (classified as moderate and above) and potentially 

transport regions. As described below, if the VOC reductions accompanying methane 

reductions under the ENGS are considered “mandatory” because they are required by 

states pursuant to the CTGs, then they would not be available to use as ERCs for 

meeting CAA requirements in areas designated nonattainment for ozone. This would 

eliminate an important benefit that industry could obtain from voluntary reductions 

under the ENGS and thereby create a major disincentive for participation in the 

voluntary program.

1

EPA has the ability to address these concerns. The discussion below outlines a federal

framework for ensuring that companies can participate in a voluntary methane 

reduction program and, at the same time, generate VOC ERCs that can be used for CAA 

compliance.

2

 These comments reflect our initial thinking; we expect to have further 

input once we have had the opportunity to review the design elements of the upcoming

EPA proposals for establishing the ENGS program and CTGs for the oil and gas sector.

 

1 The importance of generating VOC ERCs will not only be for the benefit of permitting new oil and gas 

projects in nonattainment areas, but also for the benefit of other industrial sectors that may need these 

ERCs for CAA compliance. While many new minor source oil and gas projects may not need VOC 

emission offsets as condition for obtaining their air construction permits, ERCs generated by existing oil 

and gas sources could be useful to other sectors that need them and have limited opportunities to 

generate ERCs.

2 The federal framework proposed in this paper would apply equally to oil and gas sources located on

either state or tribal lands.
June 8, 2015 Page 2

CAA REQUIREMENTS

The CAA establishes specific rules for the generation of ERCs. One key requirement is 

that the emission reductions must not otherwise be required by some other CAA 

program or regulation.3 EPA has also established federal guidance providing that to the 

extent that the emission reductions are in fact required by CAA, those reductions are 

not “surplus” and consequently may not be used to generate ERCs.

4

As discussed below, there is concern that voluntary VOC emission reductions achieved 

under the ENGS program will not be considered surplus if they are made now or in the 

future by existing oil or gas sources that are subject to new VOC emission reduction 

requirements over the next few years. 

In releasing its methane strategy of January 14, 2015, EPA announced its plan to 

develop CTGs that will guide states toward adopting VOC controls for those existing

sources located in ozone nonattainment areas under the CAA. In particular, 

section 182(b)(2) of the CAA requires states to set performance standards based on

“reasonably available control technology” (RACT) for each category of existing VOC 

emission sources for which EPA has developed CTGs for controlling VOC emissions. 

These RACT requirements would then be incorporated in State Implementation Plans

(SIPs) and be enforceable against covered sources. EPA is now working on draft CTGs

and intends to release them for comment in the next few months.

Viewed in this context, there is concern that the voluntary VOC reductions achieved 

under the ENGS program may not be surplus and thus be ineligible for the generation 

of ERCs. This could occur if EPA or states were to determine that these voluntary VOC 

reductions were otherwise required by another provision of the CAA – specifically, as 

discussed above, the VOC RACT requirements imposed through section 182(b)(2) of 

the Act.

 

3 Section 173 (c)(2) of the CAA (providing that “Emission reductions otherwise required by this chapter 

shall not be creditable as emissions reductions for purposes of any such offset requirement”). See also

Emissions Trading Policy Statement; General Principles for Creation, Banking and Use of Emission

Reduction Credits, 51 Fed. Reg. 43,814, (December 4, 1986) [hereinafter “EPA ERC Policy”].

4 EPA ERC Policy at 43,832. In addition to being surplus, the emission reductions must meet other criteria 

in order for the emission reductions to generate ERCs. These criteria include requirements for the 

reductions to be actual, quantifiable, enforceable, and permanent. Id.
June 8, 2015 Page 3

PROPOSED FRAMEWORK FOR GENERATION OF VOC ERCS

So that EPA’s development of the CTGs does not undermine the incentives for industry 

participation in the ENGS program, EPA should provide clarification that VOC 

reductions that occur as a co-benefit of voluntary methane reductions under the ENGS 

program will be deemed to be “surplus” and thereby be able to generate VOC ERCs

under the CAA. 

The most straightforward way for providing certainty on this issue is through the 

definition of the CTG source category. Specifically, EPA should define the oil and gas

source category covered by the CTGs to exclude those existing oil and gas sources that 

have implemented “best management practices” (BMPs) for methane under the ENGS 

program and have thereby reduced their VOC emissions to low levels that would meet

or exceed the minimum VOC RACT control levels that, as noted above, states would 

need to adopt in response to the CTGs under CAA section 182(b)(2).

5

 

In this case, the establishment of an exemption for existing sources controlling VOCs 

through ENGS-specified BMPs would mean that states would not be required to set

VOC RACT standards for these sources based on the control measures specified in the

CTGs. Since such sources would be excluded from the oil and gas source category to 

which the CTGs would apply, states would have no legal obligation to establish VOC 

RACT standards for these sources under the CAA. This means that the VOC emission 

reductions achieved by these sources would not result from the imposition of any 

mandatory CAA reduction requirement imposed by states or EPA. Rather, the 

reductions will be achieved through the voluntary implementation of BMPs or other 

equivalent work practice measures under the ENGS program and thereby would be 

“surplus” reductions for purposes of generating ERCs under the CAA.

6

In addition to demonstrating that the emissions reductions are surplus, owners and 

operators of existing oil and gas sources would have to meet the other criteria for 

generating creditable VOC ERCs under the CAA. These other criteria include

 

5 Notably, this approach is similar to the exemption that EPA has provided for new and modified sources

under the NSPS Subpart OOOO regulations. In the case of the Subpart OOOO regulations, EPA has 

defined the “affected facility” to exclude “highly-controlled” sources that meet certain performance 

criteria specified in the NSPS regulation.

6 Furthermore, by providing this guidance in the CTGs, states would also have the assurance that EPA 

would approve their nonattainment SIP RACT provisions with respect to the adoption of a BMP 

exemption for ENGS participation. It would also provide EPA regions with oversight of tribal lands 

needed assurance to include equivalent provisions in nonattainment federal implementation plans that 

EPA must adopt for ozone nonattainment areas.
June 8, 2015 Page 4

requirements for the associated VOC reductions to be actual, quantifiable, enforceable, 

and permanent.7 For companies participating in the ENGS program that wish to 

generate creditable VOC ERCs as co-benefits of methane reductions, a process for 

quantifying and documenting these voluntary VOC reductions would be helpful and 

reduce uncertainties down-the-road. EPA should, therefore, develop federal guidance 

for the quantification and accounting of voluntary VOC reductions from oil and gas 

sources that could be used to generate ERCs under the CAA. This guidance would not 

only be helpful to companies wishing to obtain VOC ERCs but would also encourage 

consistency in quantifying and crediting VOC reductions by states (and EPA regions 

managing tribal lands) that are responsible for establishing ERC programs as part of 

NAAQS implementation. Adherence to these procedures in the federal guidance could 

then be considered sufficient for generating creditable VOC ERCs so long as the 

reductions also voluntarily become federally enforceable through a permit condition or 

other applicable regulatory requirement imposed by the state or EPA. 

VOLUNTARY METHANE EMISSION REDUCTIONS

The primary objective of the ENGS program is to encourage participating companies to 

achieve significant voluntary reductions in methane emissions from their existing oil 

and gas sources. To encourage maximum participation under the ENGS program, EPA 

should establish a clear and straight forward process for participating companies to 

receive ERCs for the co-benefit VOC emissions reductions achieved under the ENGS 

program. The generation of such VOC credits is therefore a critical component of the 

ENGS program that should be included in order to preserve industry’s ability to meet

its ozone compliance obligations under the CAA.

In addition to the ability to generate VOC ERCs, the extent to which companies 

participate in the voluntary program will depend on a variety of other important

considerations, including the overall mix of incentives and benefits provided for 

achieving voluntary methane emissions reductions. Although outside the scope of this 

paper, there will undoubtedly be further dialogue regarding these incentives and 

benefits once the draft ENGS program is released for comment with the goal of crafting 

a program that encourages robust industry participation in the ENGS program and

thereby the achievement of substantial methane reductions. We look forward to 

discussing with EPA possible approaches to achieving this important objective once we 

have had the opportunity to review the proposed design elements of the ENGS 

program.

 

7 EPA ERC Policy at 43,832.