Cindy Bishop presented on the implications of new air pollution regulations for the oil and gas sector. The new rules under the Clean Air Act will affect emissions from drilling, completions and production operations. Facilities will need to reduce emissions from equipment leaks, pneumatic controllers, compressors and storage vessels. The rules establish performance standards and require control technologies to reduce criteria pollutants and hazardous air pollutants. Companies must comply within 3 years for existing sources and immediately for new sources, or face civil and criminal penalties.

1. Implications of the New
NESHAP/NSPS (MACT) for the
Oil & Gas Sector
Presented by
Cindy Bishop
(B.S.Ch.E.)
American Institute of Chemical Engineers
Dallas Chapter
March 27, 2012
1

2. Implications of the New
NESHAP/NSPS (MACT) for the
Oil & Gas Sector
I. What Has Changed?
II. Who Is Affected?
III. What Needs to Be Done?
IV.When Does it Happen?
V. What If You Don’t Do it?
2

3. ORIGIN
 Clean Air Act Section 111
 EPA Must List Categories of Stationary
Sources That Cause or Contribute
Significantly to Air Pollution
 EPA Must Issue Performance
Standards for Each Category
 ―Best System of Emission
Reduction‖
 Cost
 Non-air Impacts
 Energy Requirements
3

4. ORIGIN
 NSPS (40 CFR Part 60) – New Source Performance
Standards
• New and Modified Sources
• Industry Specific
• Focus on Criteria Pollutants (VOCs, SO2)
• EPA Review Required Every 8 Years
4

5. ORIGIN
NSPS (continued)
1979 – Oil & Gas Production Placed on EPA’s
Priority List
June 24, 1985 - NSPS for leaking
components at gas processing plants (KKK)
October 1, 1985 – SO2 regulations from
natural gas processing (LLL)
5

6. ORIGIN
 Clean Air Act Section 112
 NESHAP (40 CFR Part 63) – National Emission
Standards for Hazardous Air Pollutants
• New and Existing Sources
• Industry Specific
• Major Sources
 MACT – Maximum Achievable Control Technology
 Top 12%
 No Cost Consideration
 EPA Review Required Every 8 Years
6

7. ORIGIN
NESHAP (continued)
July 16, 1992 – EPA Published List of Major
and Area Source Categories, including Oil &
Gas Production
February 12, 1998 – Natural Gas
Transmission and Storage Added to List
June 17, 1999 – MACT Issued (HH & HHH)
January 3, 2007 – Area Sources
7

8. WHY NOW?
 January 14, 2009 suit filed
 February 4, 2010 – Settlement:
• Proposed Standards by July 28, 2011
• Final Action by February 28, 2012
8

9. 9

10. Who Is Affected?
Operations from Well to Refinery or to Customer
•Onshore & Offshore
•Production (well completion and workover)
•Portable Equipment
•Storage
•Transmission
10

11. When Does it Happen?
• Aug. 23, 2011 Rule Proposed Published
• Oct. 24, 2011 Comment Deadline
• April 3, 2012 Final Rule
• ???
11

12. What Has Changed?
NSPS
 Revised:
• Equipment Leaks (KKK)
• SO2 (LLL)
 New (OOOO):
• Hydraulic Fracturing
• Gas-driven Pneumatic Devices, Centrifugal and
Reciprocating Compressors
• Storage Vessels
 Applies to new facilities that were constructed or
modified after August 23, 2011
12

13. What Has Changed?
NESHAP
 Revised
• Oil & Gas Production Facilities (HH)
• Gas Transmission and Storage (HHH)
 New
• Small Glycol Dehydrators
• Storage Vessels at Major Sources
 Must Notify EPA within 1 year after rule becomes
final
13

14. NSPS
Oil & Gas Production, Transmission, and Distribution
(OOOO)
Applies to all construction, modification or
reconstruction after August 23, 2011
Includes fracking or refracking existing wellhead
Compliance date: date of final rule publication.
14

15. NSPS
Oil & Gas Production, Transmission, and Distribution
(OOOO)
Reduced Emission Completion (―REC‖)
•Route gas during flowback into collection system
•Use sandtraps, surge vessels, separators, and tanks
during flowback and cleanout operations
•Capture and direct flowback emissions that cannot
be routed to a gathering line to a combustion device
(flare)
15

16. NSPS
Oil & Gas Production, Transmission, and Distribution
(OOOO)
Compressor standards
•Rotating compressor: dry seal system
•Reciprocating compressor: replace rod packing
before 26,000 operating hours
Pneumatic controller: zero emissions of natural gas if
at gas processing plant, otherwise no more than 6 scfh
(switch to compressed air driven from gas controller)
16

17. NSPS
Oil & Gas Production, Transmission, and Distribution
(OOOO)
Condensate and Crude Oil Storage Tanks
If :
•At least one barrel per day condensate
or
•At least 20 barrels per day crude oil;
Then, 95% VOC emission reduction
17

18. NSPS
Sulfur Recovery Units at Onshore Gas Processing
Plants
SO2 standards:
• Feed rates of 5 tons per day or greater or
• With an acid gas stream H2S concentration of
50% or greater
•SO2 emission reduction of 99.9% (was 99.8%)
18

19. NSPS
LDAR (Subpart VVa instead of VV)
Applies to onshore gas processing plants
•Lower ―leak‖ threshold
•Monitoring connectors
19

20. NSPS
Startup, Shutdown, Malfunction
•No ―Free Pass‖ During Startup and Shutdown
•Affirmative Defense for Malfunctions
•Sudden
•Infrequent
•Not reasonably preventable
•Not caused by poor maintenance or careless
operation
20

21. NSPS
Registration/recordkeeping
•Construction, startup, and modification notifications
•Well registration and 30-day notification prior to each
well completion
•Annual Compliance Certification
•Third Party verification
•Electronic reporting
•Over 20,000 completions and recompletions annually
21

22. NESHAP
22

23. 23

24. 24

25. NESHAP Subparts HH & HHH
Addition of Small Glycol Dehydrators
•Oil & Gas Production: gas flowrate < 85,000 scmd or
0.90 Mg/yr benzene emissions
•Existing sources: 1.10 x 10-4 g BTEX/scm
•New sources: 4.66 x 10-6 g BTEX/scm
•Gas Transmission & Storage: gas flowrate < 283,000 scmd or
0.90 Mg/yr benzene emissions
•Existing sources: 6.42 x 10-5 g BTEX/scm
•New sources: 1.10x 10-5 g BTEX/scm
•Types of control: process vent » control device or closed-
vent system
25

26. NESHAP Subparts HH & HHH
Storage Vessels
95% reduction of HAPs for all storage vessels
•Process modifications
•Flare
•Incinerator
•Carbon Filter
•Condenser
Performance Testing of Control Device
Elimination of Startup, Shutdown & Malfunction
Exemption (See NSPS)
26

27. NESHAP Subparts HH & HHH
Compliance dates:
Existing sources: 3 years after the date of final rule
publication
New sources (commenced construction on or after August
23, 2011): immediately upon startup or the date of final
rule publication, whichever is later
27

28. What has industry said?
Rules will slow drilling, cut natural gas production
and reduce royalties (API)
Equipment for capturing emissions during
completions is unlikely to be as readily available as
EPA assumed, and equipment would have to spend
more time at each site than estimated.
28

29. What If You Don’t Do it?
• EPA can make you do it
• Civil Penalties up to $25,000/day/violation
• Criminal Penalties $250,000 per day per
violation and up to five years in jail.
Corporations are subject to up to $500,000 per
day per violation.
• $10,000 bounty
29

30. EPA Region 6 2011—2013 National Enforcement Initiatives
1. Keeping raw sewage and contaminated stormwater out of our nation’s
waters
2. Preventing animal waste from contaminating surface and ground waters
3. Cutting Toxic Air Pollution that Affects Communities’ Health
4. Reducing Widespread Air Pollution from the Largest Sources, especially the
Coal-Fired Utility, Cement, Glass, and Acid Sectors
5. Reducing pollution from mineral processing operations
6. ASSURING ENERGY EXTRACTION SECTOR COMPLIANCE WITH
ENVIRONMENTAL LAWS
―To address these emerging problems, EPA will develop an initiative to
assure that energy extraction activities are complying with federal
requirements‖
30

31.  Stay on top of the rules –be organized!
 Look for exemptions
 Start reviewing operations now – do not wait until
the rules are final.
 Look for innovative/emerging technology
 EPA favors those who voluntarily disclose
problems.
31

32. Implications of the New
NESHAP/NSPS (MACT) for the
Oil & Gas Sector
Presented by
Cindy Bishop
214-893-5646
cbishop@cbishoplaw.com
www.cbishoplaw.com
32