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On April 17, 2012, the U.S. Environmental Protection Agency issued final air emission standards for oil and natural gas operations. Many of EPA’s new requirements reflect a toughening of standards already on the books. But EPA’s new rule also extends to sources of emissions not previously regulated, including fractured and refractured wells. Highlights of the rule are noted below.
Industry players should be aware that the determinative date for “new sources” that are subject to the non-toxics portion of the rule is the date the proposed rule was published – August 23, 2011 – meaning that any new sources constructed since August 23rd must comply. Expect the final rule to be published in the Federal Register in three to four weeks; the rule is effective 60 days after that publication date.
Proposed New Source Performance Standards (NSPS)
Under section 111 of the Clean Air Act (CAA), EPA must set performance standards for new, modified or reconstructed sources in categories of stationary sources that EPA has determined cause or contribute significantly to air pollution. Historically, for the oil and gas sector, EPA has only regulated the air emissions from new and modified natural gas processing plants. But EPA has now added requirements to several points along the journey from wellhead to citygate.
Perhaps the most notable new source of air emissions that EPA has targeted is that of well completions and recompletions, that is, the process of preparing gas wells for production. This means that hydraulically fractured wells are subject to federal air regulations for the first time. Specifically, beginning January 1, 2015, all newly fracked wells or existing wells that are refracked must, in most instances, be “green” completed, where the flowback water, sand, hydrocarbon condensate and natural gas are separated to reduce the natural gas and volatile organic compounds (VOC) vented to the atmosphere, and the VOC condensate and salable natural gas are recovered. Because equipment for green completions currently is in short supply, until 2015, EPA gives operators the option instead to flare their gas using a completion combustion device.
Other standards require centrifugal natural gas compressors with wet seals to achieve a 95% reduction in VOC emissions through flaring or capture, and reciprocating compressors now must undergo periodic rod packing changes. Gas-driven pneumatic devices are subject to a zero emission limit or a 6 scf/hr limit, depending on location. Storage tanks with more than six tons of annual emissions have a year to achieve a 95% reduction in VOC emissions; additional time is allotted to tanks at well sites with no wells already in production. EPA has also tightened its existing NSPS for processing plants.
Notably, EPA is requiring sources to comply with the standards even during times of “start-up, shutdown and malfunction.” EPA states this is because its emission standards must be continuous. EPA also offers streamlined reporting options. Generally, the compliance deadline for the new standards is 60 days after publication in the Federal Register.
National Emissions Standards for Hazardous Air Pollutants
EPA has also revised its air toxics standards for existing and new “major” stationary sources in the oil and gas arena. The air toxics at issue in the oil and gas industry include benzene, toluene, ethylbenzene, xylene (collectively, “BTEX”) and n-hexane.
Among other things, EPA has expanded its definition of major source for air toxics, meaning more sources will be subject to “maximum achievable control technology” requirements. Specifically, for production field facilities, EPA now includes emissions from all storage vessels, regardless of whether they have the potential for flash emissions. The largest glycol dehydrators at production facilities and transmission and storage sources must reduce their total air toxics by 95%, or alternatively reduce benzene emissions to less than one ton per year. Small dehydrators must meet unit-specific BTEX limits. Storage vessels other than those with the potential for flash emissions now must achieve a 95% reduction in emissions (namely through closed vent systems). EPA has also tightened its existing air toxics standards for equipment leaks.
Like with the NSPS, the new toxics standards apply even during start-up, shutdown and malfunction. The compliance deadline for the new standards varies depending on the emissions source.
Stated Benefits of the Proposed Rule
EPA touts many benefits associated with its rule. By 2015, EPA claims methane emissions will be reduced annually by 1.7 million tons, VOC emissions by 290,000 tons, and air toxics emissions by 20,000 tons. Perhaps more remarkable is EPA’s claim that, thanks to the rule, by 2015 industry will actually save $19 million per year because of the captured salable gas. Industry projections, however – at least based on EPA’s original proposal – have been that the requirements of the rule will actually cause significant decreases in production from shale resources.
What’s next?
Stay tuned as states implement the new requirements and perhaps impose, along with local governments, additional restrictions or attempt to sharpen their enforcement tools. A proactive approach for dealing with your state regulators – particularly if they have delegated authority under the Clean Air Act – is a must.
© 2013 Dinsmore & Shohl LLP. All rights reserved.
