United States: EPA Proposes New Rules To Regulate Air Emissions From Oil And Natural Gas Exploration, Production, Transmission, And Storage Facilities, Including Hydraulic Fracturing Operations

Originally published in V&E Shale/Hydraulic Fracturing Updates E-communication, July 29, 2011

On July 28, 2011, the United States Environmental Protection Agency (EPA) announced a proposal to greatly expand the scope of its regulation of air emissions from oil and natural gas exploration, production, transmission, and storage facilities. EPA proposes to promulgate a New Source Performance Standard (NSPS). This NSPS will apply not only to natural gas processing plants, which are covered by existing NSPS provisions, but also to oil and natural gas exploration and production operations, as well as gathering, transmission, and storage systems. The NSPS will, among other things, require the use of "reduced emissions completion" technology or pit flaring for all new and recompleted natural gas wells that are hydraulically fractured. EPA also proposes to amend and make more stringent its existing national emission standards for hazardous air pollutants (NESHAPS) that apply to oil and natural gas exploration, production, transmission, and storage operations. EPA contends that the new rules will result in a net cost savings to industry due to the amount of natural gas that will not be allowed to escape into the atmosphere and can instead be sold.

EPA announced that it will accept comments from the public on these proposed regulations for 60 days, beginning the day the proposal is published in the Federal Register. EPA also announced that it will hold public hearings on the proposed rules in Dallas, Denver, and Pittsburgh, but has not yet set the dates for these hearings.

EPA developed this proposal pursuant to a consent decree entered into between EPA and environmental groups. The groups sued EPA alleging that EPA had failed to re-evaluate existing NSPS and NESHAPS applicable to the oil and natural gas industries, as EPA must do under the Clean Air Act. Under the consent decree, EPA was required to propose the rule revisions by July 28, 2011, and it must promulgate final rules by February 28, 2012.

Below is a brief summary of the key provisions of the proposed rules. We will continue to follow this issue and provide additional analysis of the more than 600-page proposal and updates on the public comment process and the public hearings to be held in Dallas, Denver, and Pittsburgh.

Proposed NSPS

Under the proposal, EPA will promulgate a new NSPS at 40 C.F.R. 60, Subpart OOOO. The new Subpart OOOO will incorporate and make more stringent the existing NSPS provisions, 40 C.F.R. 60, Subparts KKK and LLL, which govern equipment leaks of volatile organic compounds (VOC) and sulfur dioxide (SO₂) emissions from natural gas processing facilities, respectively. The new NSPS will also include emission standards for several types of facilities that have never before been regulated on the federal level. Importantly, the new NSPS will apply to all new sources that begin construction or are modified after the date that the proposed rule is published in the Federal Register.

Hydraulically Fractured Natural Gas Wells

The new NSPS will require that all new hydraulically fractured natural gas wells and existing wells that are hydraulically fractured as part of recompletion operations employ controls. For wells that are not exploratory or delineation wells, "reduced emission completion" (REC) technology must be employed. According to the EPA, REC technology uses special equipment that separates gas and liquid hydrocarbons from flowback that comes from a well after it is hydraulically fractured. The gas and liquid hydrocarbons can be captured and sold. EPA contends that Wyoming and Colorado already require the use of REC technology, and that many operators already use the process through EPA's Natural Gas STAR program. For exploratory or delineation wells, operators must employ pit flares to control gas emissions from flowback after hydraulic fracturing is performed.

Compressors

New centrifugal compressors used in natural gas gathering and transmission operations must be equipped with dry seal systems. For reciprocating compressors, owners or operators will have to replace rod packing systems every 26,000 hours of operation.

Pneumatic Controllers

Under the proposed rule, each pneumatic controller at natural gas processing plants will be considered a separate affected facility. Thus, each new or replacement pneumatic controller installed after the effective date of the rule must have zero VOC emissions. To meet this standard, EPA will require the use of "non-gas-driven pneumatic controllers."

Condensate and Crude Oil Storage Tanks

Any new or modified condensate or crude oil storage tank with a throughput of at least one barrel per day of condensate or 20 barrels per day of crude oil will be required to reduce VOC emissions by 95 percent.

Natural Gas Processing Plants

New natural gas processing plants will be required to comply with more stringent leak detection and repair standards to reduce VOC emission from equipment leaks. Specifically, new plants will be required to comply with 40 C.F.R. 60, Subpart VVa. Additionally, any new natural gas processing plant with a sulfur feed rate of at least five long tons per day or a hydrogen sulfide concentration in the acid gas stream of at least 50 percent will be required to achieve an SO₂ control efficiency of 99.9 percent.

Proposed Amendments to NESHAPS

EPA also proposes to amend two existing NESHAPS. EPA proposes to amend 40 C.F.R. 63, Subpart HH, which applies to oil and natural gas production facilities, and to amend 40 C.F.R. 63, Subpart HHH, which applies to natural gas transmission and storage facilities. These amendments will only affect facilities that are considered "major sources," i.e., those that have a potential to emit 10 tons per year or more of any single HAP or 25 tons per year or more of any combination of HAPs. The provisions of Subpart HH that apply to "area sources" of HAPs will remain unchanged. The amendments will affect glycol dehydrators, storage tanks, and valves at oil and natural gas production and processing facilities that are major sources and glycol dehydrators at natural gas transmission and storage facilities.

Glycol Dehydrators

Small glycol dehydrators located at oil and natural gas production facilities that are major sources subject to Subpart HH and that are located at natural gas transmission and storage facilities that are major sources subject to Subpart HHH will be required to meet a unit-specific emission limit on emissions of benzene, toluene, ethylene, and xylenes. Small glycol dehydrators are those with an actual annual average natural gas flow rate less than three million standard cubic feet per day, or actual average benzene emissions less than one ton per year.

EPA also proposes to remove the one ton per year benzene compliance option for large glycol dehydrators at facilities subject to both Subparts HH and HHH. Thus, the proposed rules will require all large glycol dehydrators to reduce air toxic emissions by 95 percent.

Crude Oil and Condensate Storage Tanks

All crude oil and condensate storage tanks located at oil and natural gas production facilities that are major sources subject to Subpart HH will be required to control air toxics by at least 95 percent. Previously, Subpart HH only required controls for storage vessels with potential for flash emissions. Additionally, the amended rule will require that HAP emission from all storage vessels be included in the source's potential to emit to determine major source status.

Valves

The proposed rule will make more stringent the definition of a leak from valves located at oil and natural gas production facilities that are major sources subject to Subpart HH.

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