Most of the news regarding the oil and gas activity in Pennsylvania and West Virginia, and now tapping into Ohio shale plays, has focused on water concerns. But regulators also are eyeing air impacts. New or revised air regulations affecting the oil and gas industry are looming on the horizon, while the impact of other recent issuances is still being played out.
Coming Soon: New Source Performance Standards and Air Toxics Standards
By month's end, U.S. EPA is scheduled to issue four air
emission proposals impacting the oil and gas industry.
Specifically, EPA is reviewing two new source performance standards
for onshore natural gas processing plants governing repairs, leaks
of volatile organic compounds and sulfur dioxide emissions. EPA is
considering changes that address well completion, compressors,
storage vessels and pneumatic devices. Also under review are two
air toxics standards. One rule applies to flash-emission tanks,
leaks and glycol dehydrators at production operations. The other
air toxics rule applies to dehydrators at major natural gas
transmission and storage operations.
EPA has stated it is "taking a broad look" across the oil
and gas sector "to identify sources of air pollution
emissions, quantify those emissions, and consider how they could be
reduced." The extent to which this broad look will expand
EPA's regulatory reach of course is the big unknown; its
proposal at the end of this month will shed light on just how
aggressive EPA's look is.
Aggregation and Source Determination
"Aggregation" involves grouping two or more
pollutant-emitting activities together as a single emissions
source. Smaller units that ordinarily would not trigger permitting
could, if aggregated, constitute a "major" source subject
to tougher requirements (although the Clean Air Act precludes
aggregation of oil and gas wells or pipeline facilities for
purposes of air toxics rules).
In September 2009, EPA's top air official (Gina McCarthy)
issued a memorandum stressing that – with respect to
aggregation – EPA would now consider equally whether
activities are under common control; are located on one or more
contiguous or adjacent properties; and belong to the same
industrial grouping. (Previously a proximity-laden approach had
been in place.)
The impact of the McCarthy Memorandum is not yet clear; if
anything, EPA seems to be establishing a "dedicated
interdependence" standard when analyzing contiguity and
adjacency. For example, Region 5 found Summit Petroleum's gas
wells, sweetening plant and flares in Mount Pleasant, Michigan to
constitute a single source, due primarily to interconnections. The
Region noted the "relationship between the facilities and the
degree of interdependence between them"; also, Summit had not
shown that the farthest well points could provide product to any
plants other than the plant at issue.
In contrast, EPA's Region 8 did not aggregate the wells and
compressor stations in a permit renewal for a BP facility in
Durango, Colorado. Region 8 explained that though the wells could
supply the BP station, they could also supply gas to non-BP
facilities "and thus do not have the type of dedicated
interrelatedness that was determinative in other EPA statements on
the issue".
On the state front, Colorado determined that an Anadarko compressor
station and other emission sources "did not have a unique or
dedicated interdependent relationship and were not proximate and
therefore were not contiguous and adjacent" (a decision EPA
affirmed in February 2011). And the West Virginia Air Quality Board
in May 2011 rejected an appeal urging it to vacate permits issued
to Appalachia Midstream Services; the appellant unsuccessfully
argued that the DAQ should have aggregated the natural gas
compressor stations with other nearby pollutant-emitting
activities.
Many states – such as New Mexico in May 2010 and Texas in
August 2010 – have recentlyissued new or revised
guidelines on source determinations. Pennsylvania, however, has
see-sawed on the issue. Last year it issued guidance urging
Department of Environmental Protection personnel to consider
aggregating sources where appropriate. But the guidance was
rescinded in February; DEP is soliciting comment on whether any
guidance should be issued regarding source determinations.
Aside from the "dedicated interrelatedness" concept that
seems to be surfacing, another result of the McCarthy Memorandum
seems to be that draft air permits are drawing more comments
calling for aggregation of pollutant-emitting activities.
Accordingly, any oil and gas company seeking a permit should be
well-braced to defend its source determinations. Further, industry
participants should heed the McCarthy Memorandum's caution that
"no single determination can serve as an adequate
justification for how to treat any other source determination for
pollutant-emitting activities with different fact-specific
circumstances."
Other Air Issues
Add to the mix the complicating factor of greenhouse gas
regulation. Here the source-determination issue particularly comes
into play; if multiple units are aggregated, they are more likely
to trigger the current threshold for GHG regulation – a
potential-to-emit 100,000 tons per year of CO2-equivalent emissions
(a lower benchmark is expected from EPA this year). And EPA has
been urged to address methane emissions in the revised NSPSs due
this month. Also relevant to the oil industry is EPA's current
reconsideration of its refinery NSPS, where EPA is obligated to
address GHG emissions. Meanwhile, those in the petroleum and gas
industry now must report GHG emissions to EPA; such data will help
EPA determine where to direct its attention next in its attempts to
curb GHGs.
Oil and gas activities have been blamed for contributing to
exceedances of existing national ozone standards, yet EPA proposed
even tougher ozone standards in January 2010. EPA has stated that
final standards will be issued this month. If EPA finalizes its
proposed level, most of the country will be
"nonattainment", meaning that permitting for any new
ozone-producing activities will be far more difficult. EPA also is
expected to propose a new PM2.5 NAAQS yet this year.
Recall too that EPA recently issued standards directed at toxic air
emissions from existing stationary reciprocating internal
combustion engines, subjecting even engines at smaller sources to
certain maintenance practices.
Only the Beginning
For the federal actions noted above, stay tuned for what they look like in final form, how the states implement them, and whether they and local governments impose additional restrictions. Even better, actively participate as these rules and policies are developed, to push for common sense, risk-based approaches. It will take some considerable time and effort, but perseverance on this regulatory front will pay off for everyone in the long run.
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