2011 Aug. 25: EPA Issues Proposed New Emission Standards for Oil and Natural Gas Sector

On August 23, 2011, the Environmental Protection Agency published proposed rules in the Federal Register to update air regulations for the oil and natural gas sector. These rules would establish new emission standards for multiple operations within the oil and gas sector for both small and large sources.
 

 

EPA Issues Proposed New Emissions Standards for Oil and Natural Gas Sector

Print PDFJanet Anderson
August 25, 2011

INTRODUCTION

On August 23, 2011, the Environmental Protection Agency (EPA) published proposed rules in the Federal Register to update air regulations for the oil and natural gas sector. The package is entitled: “Oil and Natural Gas Sector: New Source Performance Standards (NSPS) and National Emission Standards for Hazardous Air Pollutants (NESHAP) Reviews.” These rules would establish new emission standards for multiple operations within the oil and gas sector for both small and large sources. Notably, the proposed standards would cover hydraulically fractured wells for the first time.
Comments are due October 24, 2011 (60 days after publication). EPA will hold 3 public hearings on the proposed rules in or near Denver, Dallas, and Pittsburgh, with dates and times to be announced. Under a consent decree deadline, EPA plans to issue a final rule by February 28, 2012. Companies will have up to 3 years to bring their existing facilities into compliance with the air toxics requirements, with the potential for a 1 year extension. Oil and gas facilities that are newly built or modified after August 23rd would be required to comply with the NSPS upon startup. A copy of the proposed rule package can be accessed at: http://www.epa.gov/airquality/oilandgas/

BACKGROUND

NSPS – Regulation of Criteria Pollutants
Clean Air Act (CAA) Section 111(b) authorizes EPA to issue NSPS for categories of new and modified sources which EPA has determined cause, or contribute significantly to, air pollution that may reasonably be anticipated to endanger public health or welfare. The NSPS must reflect the application of the “best system of emissions reductions” (BSER) that has been adequately demonstrated. The existing NSPS for the oil and natural gas sector were issued in 1985 and cover sulfur dioxide (SO2) and volatile organic compounds (VOC) emissions from natural gas processing plants. The CAA requires review of NSPS every eight years.
The proposed rules would extend beyond the processing sector to apply BSER to all hydraulically fractured wells (new and re-fractured wells), compressors, pneumatic controllers, and condensate and crude oil storage vessels for emissions of VOC and SO2.
NESHAP – Regulation of Air Toxics
CAA Section 112(d) directs EPA to set NESHAP for each category of major sources and area sources of air toxics listed by the Act. A “major source” is a stationary source or group of sources in the same location and under common control, that emits 10 tons per year of any one hazardous air pollutant (HAP) or 25 tons per year of any combination of HAPs; an “area source” is any stationary source that is not a major source. The standards also are known as “MACT” standards because they are required to reflect “maximum achievable control technology.” MACT standards are set based on the best performing (lowest emitting) sources. The CAA requires review and revision, if necessary, of MACT standards every eight years. The current technology standards for oil and gas production and for transmission and storage were set in 1999. The CAA also requires an assessment of residual risk associated with the emissions of air toxics. This review must be conducted one time, eight years after a standard is issued, to determine whether more protective standards are necessary to protect public health and welfare.
The air toxics standard review covered tanks, equipment leaks, and glycol dehydrators.

OVERVIEW OF PROPOSED RULES

NSPS
The proposed rule seeks to limit VOC emissions from gas wells and would apply to all new hydraulically fractured wells and refractured existing wells. The rule would require a combination of “green completion” (also known as reduced emissions completion – REC) and flaring for most wells. REC refers to techniques that reduce the amount of emissions of natural gas and VOC released to the atmosphere during well completions. These methods can include tankage, special gas-liquid-sand separator traps and gas dehydration. EPA believes that adoption of REC can achieve 95% reduction in VOC as well as 90% recovery of natural gas that can then be sold. These technologies are already required in several states.
The proposed NSPS would also establish new requirements for compressors (centrifugal and reciprocating), pneumatic controllers at gas processing plants and compressor stations, storage tanks at wells and other production facilities, and strengthened leak detection and repair requirements of the existing NSPS. EPA seeks comment on four options for BSER for VOC leak detection and repair. These range from lowering the threshold volume of emissions that would constitute a “leak” to using optical imaging equipment to identify leaks. At natural gas processing plants, the BSER for control of SO2 was changed to 99.9% continuous efficiency for facilities with a sulfur feed rate greater than 5 long tons per day and hydrogen sulfide content equal or greater than 50%. There are no changes proposed for SO2 emissions at facilities under those thresholds. Because the Agency does not believe it is feasible to set numeric emission standards for this sector, the proposal consists mostly of operational standards.
As methane is the primary component of natural gas and a potent greenhouse gas, EPA projects that implementation of this proposal will result in an annual reduction of 65 million metric tons of carbon dioxide equivalent (CO2e), a 20% reduction in the sector’s emissions. The industry-wide reductions in VOC emissions are predicted to be 25%.
NESHAP
The technology review for air toxics emissions covered tanks, equipment leaks, and glycol dehydrators. EPA’s review found no available, cost-effective technologies for controlling emissions from glycol dehydrators and storage tanks for oil and gas production beyond the current standards. The proposed standard for equipment leaks, by contrast, has been made more stringent. EPA’s review found that several currently unregulated emission points could be controlled; thus, the proposal would establish limits for small glycol dehydrators at major sources and regulate all crude oil and condensate tanks at major sources.
The risk review determined the potential cancer or other serious health risks from oil and gas production emissions allowed by the current standards to be as high as 400 in 1 million (a risk EPA does not consider acceptable) and 90 in 1 million for the gas transmission and storage sector. The additional requirements in the proposed rule are anticipated to substantially lower the risk in both sectors—to 40 in 1 million and 20 in 1 million respectively—by eliminating the 1 ton per year benzene emissions compliance option for glycol dehydrators at major sources. Air toxics emissions would be reduced by nearly 30% under the proposed rule.

IMPLICATIONS

The Administration believes these proposed rules promote its goal of “responsible oil and gas exploration.” EPA asserts there are cost-effective existing technologies that can substantially reduce emissions of VOC, methane, and benzene within the oil and gas sector. The bulk of these reductions occur from the capture of natural gas which can then be sold. EPA estimates that the revenues from the sale of the captured gas will be sufficient to offset the costs of the technologies required by the proposal.
The proposed NSPS requires a 30-day advance notification of each completion or recompletion of a hydraulically fractured gas well to allow for inspections or audits to certify or verify that the operator will use appropriate controls during the completion. EPA is seeking comment on how much advance notification is needed and the most effective method of providing sufficient and accurate advance notification of well completion.
EPA also seeks comment on third party verification of industry’s use of the required Electronic Reporting Tool (ERT). In addition, the Agency proposes to exempt “non-major” sources from Title V permitting requirements if those sources would have been required to obtain Title V permits solely as a result of being subject to one or more of the proposed NSPS standards.

COSTS

Using 2015 as the implementation year, EPA estimates the nationwide annual cost of compliance with the NSPS requirements of the proposal to be $740 million (2008$). The total includes recordkeeping and reporting costs of $18.8 million. In addition to reducing VOC emissions, many of the control requirements also would capture methane and condensates, which could then be sold. Using a price estimate of $4 per thousand cubic feet for natural gas and $70 per barrel of condensate (2008$), EPA estimates that the NSPS proposal would result in a net $45 million in additional revenue to the industry in 2015. For the proposed NESHAP amendments, EPA estimates the annualized costs to be $16 million (2008$) in 2015. The controls required in the NESHAP proposal would not capture significant quantities of natural gas that could be directed into the production stream. The total includes recordkeeping and reporting costs of $2.4 million.

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