New Air Quality Rules Challenge Oil & Natural Gas Industry
On July 28, 2011, the EPA Administrator signed a suite of proposed new air regulations affecting both the Production/Processing and Transmission/Storage sectors of the oil and natural gas industry. The proposed rules mandate the use of emission controls as well as work practices through two different air regulatory programs – New Source Performance Standards (NSPS) and National Emissions Standards for Hazardous Air Pollutants (NESHAP).
Promulgation of the proposed rules will result in new control equipment requirements as well as increased and potentially burdensome monitoring, recordkeeping, and reporting requirements for owners, operators, contractors, and vendors. EPA has been granted an extension of the final rule promulgation date to April 3, 2012. This leaves very little time for EPA to fully review and consider the extensive industry comments that are expected on the proposed rules. Furthermore, the proposed NSPS will apply to affected facilities constructed, reconstructed, or modified after August 23, 2011. At a minimum, affected sources should ensure the following in preparation for the rule:
- Review and analyze the final published rules, which are expected to differ greatly from the proposed rules
- Inventory all existing facilities, equipment, and operational characteristics to establish a basis for determining applicability of any new, modified, or reconstructed emission sources
- Train staff on operational, monitoring, recordkeeping, and reporting requirements
- Budget for increased costs associated with
installation of control equipment, more stringent maintenance and replacement schedules, and resources to handle increased monitoring, recordkeeping, and reporting requirements
- Acquire control equipment from vendors
The proposed NSPS and proposed amended NESHAPs are highlighted in the following sections, along with the anticipated impacts of the proposed regulations.
Proposed NSPS 40 CFR Part 60, Subpart OOOO
EPA has proposed new standards under NSPS Subpart OOOO: Standards of Performance for Crude Oil and Natural Gas Production, Transmission, and Distribution to regulate emissions of volatile organic compounds (VOCs) and sulfur dioxide (SO2) from the oil and natural gas industry.
The standards for onshore natural gas processing plants, currently found in NSPS Subpart KKK: Standards of Performance for Equipment Leaks of VOC from Onshore Natural Gas Processing Plants and NSPS Subpart LLL: Standards of Performance for Onshore Natural Gas Processing: SO2 Emissions, are proposed to be revised and consolidated into the new Subpart OOOO. The onshore natural gas processing plants standards consolidated under NSPS Subpart OOOO will apply only to newly affected sources. EPA proposes to modify the existing NSPS Subparts KKK and LLL to limit their applicability only to affected facilities already subject to those subparts.
The new NSPS Subpart OOOO will include, for the first time, federal emissions and work practice standards for completions of hydraulically fractured gas wells, pneumatic devices, compressors, and tanks newly constructed, modified, or reconstructed after August 23, 2011 and located anywhere in the natural gas system between the wellhead and the city gate. There is great uncertainty surrounding how owners and operators will comply for affected emissions sources that are new/modified/reconstructed before the rule is finalized. For example, if an owner/operator installs a high-bleed pneumatic controller between now and the final rule promulgation date of April 3, 2012, will they have to replace it with a low-bleed controller at the time the rule is finalized?
Currently, compressors and equipment components at onshore natural gas processing plants are regulated under NSPS Subpart KKK, which refers to the leak detection and repair (LDAR) program requirements of NSPS Subpart VV: Standards of Performance for Equipment Leaks of VOC in the Synthetic Organic Chemicals Manufacturing Industry for which Construction, Reconstruction, or Modification Commenced After January 5, 1981, and on or Before November 7, 2006.
EPA proposes to require newly constructed, modified, or reconstructed facilities at onshore natural gas processing plants to comply with NSPS Subpart VVa: Standards of Performance for Equipment Leaks of VOC in the Synthetic Organic Chemicals Manufacturing Industry for Which Construction, Reconstruction, or Modification Commenced After November 7, 2006. The Subpart VVa LDAR program is more stringent than Subpart VV, with lower component leak threshold definitions and more frequent monitoring. For example, Subpart VVa lowers the leak definition for valves from 10,000 parts per million (ppm) to 500 ppm. Additionally, Subpart VVa requires monitoring of connectors, which will be a new requirement for onshore natural gas processing plants. It should be noted that EPA has specifically exempted equipment that is not located at gas processing plants from the equipment leak VOC provisions of the rule.
Sulfur Recovery Units
Currently, sulfur recovery units at onshore natural gas processing plants are regulated under NSPS Subpart LLL.
EPA proposes to increase the maximum initial and continuous efficiency from 99.8% to 99.9% for newly constructed, modified, or reconstructed facilities with sulfur feed rates greater than 5 long tons per day and hydrogen sulfide (H2S) content greater than or equal to 50%. No changes are proposed for facilities with sulfur feed rates less than 5 long tons per day and H2S content less than 50%.
Hydraulically fractured well completions on non-exploratory wells would be required to employ “green” completion techniques and/or pit-flaring for both newly fractured wells and existing wells where re-fracturing is performed. Green completions involve installing special equipment that captures and separates gas and liquid hydrocarbons that can then be treated and sold. This equipment may include tanks, gas-liquid-sand separator traps, and gas dehydration. Venting is proposed as an alternative only when pit-flaring poses a safety hazard, when the flowback gas contains high concentrations of nitrogen or carbon dioxide, or when other technical barriers exist.
Fractured exploratory and delineation wells are generally not within proximity to existing gathering lines. Therefore, EPA is proposing the use of pit-flaring for these wells. Again, venting is proposed as an alternative only when pit-flaring is deemed a safety hazard or when flowback gas is noncombustible.
Green completions have been used voluntarily by companies in states such as Wyoming, Colorado, and Utah. However, their technical and economic feasibility is still being evaluated. Many exploration and production companies question EPA’s proposal to apply a “one-size-fits-all” approach to controlling hydraulic fracturing, given the wide range of operations and gas VOC contents across the country.EPA has determined that VOC emissions from wellheads during production operations are very small, and therefore, is not proposing any controls during these operations.
EPA proposes to regulate each newly installed pneumatic device at processing plants, production sites, and other natural gas facilities. Pneumatic devices can be categorized as “high-bleed,” “low-bleed,” and “no-bleed.”
- High-bleed – a device that releases more than 6 standard cubic feet per hour (6 scfh) of gas
- Low-bleed – a device that releases less than or equal to 6 scfh of gas
- No-bleed – a device that uses a power source other than pressurized natural gas, such as compressed instrument air, and therefore releases no gas
EPA proposes that natural gas processing plants would be subject to a zero VOC emission standard by installing only no-bleed (or non-gas driven) controllers. No-bleed controllers require an existing electrical service to power an instrument air compressor. Therefore, EPA is proposing no-bleed controller installation at processing plants. At facilities other than natural gas processing plants, where electric power is not readily available, EPA is proposing the installation of low-bleed controllers.
The proposed regulations exempt devices requiring high-bleed controllers for specific reasons, including operational requirements and safety concerns due to their actuation response time or other operating characteristics.
EPA proposes to regulate both centrifugal and reciprocating compressors located anywhere between the wellhead and the city gate as VOC emission sources. Each newly constructed and replaced compressor would be an affected unit and would be subject to the proposed requirements.
As proposed, centrifugal compressors must be equipped with dry seal systems, as opposed to wet seal systems. EPA notes that it may allow wet seals if vented to closed vent systems and control devices.
Reciprocating compressors would need to meet operational standards, including the replacement of the rod packing every 26,000 hours of use. This would require monitoring of the hours of operation for each affected compressor. However, EPA is seeking comment on a leak threshold as a basis for rod packing replacement and the appropriateness of a fixed replacement frequency.
EPA proposes to regulate new and modified storage vessels with condensate throughput ≥ 1 barrel (bbl) per day or crude oil throughput ≥ 20 bbl per day. These tanks would be required to meet a 95% control efficiency using a vapor recovery unit (VRU) or a flare to control working, breathing, and flashing losses.
EPA is not proposing any controls or operational standards for storage vessels with condensate throughput < 1 bbl per day or crude oil throughput < 20 bbl per day.
Several companies are concerned with the low condensate throughput threshold, given the wide range of liquid VOC contents across the country. Additionally, there is a concern that vendors will not be able to meet the increased demand of control equipment installations that will be required, which could result in facilities operating out of compliance until control equipment becomes available.
Recordkeeping and Reporting Requirements
EPA is proposing a number of new and potentially burdensome recordkeeping and reporting requirements for emission sources affected under NSPS Subpart OOOO, such as:
- Construction, startup, and modification notifications
- 30-day notification prior to each well completion
- Records documenting full compliance with all applicable NSPS Subpart OOOO standards
- Annual or semi-annual reports, depending on the emission source type
- Annual compliance certifications
Staff will need training on new recordkeeping and reporting requirements. Furthermore, many companies may not have the environmental management software needed to track the associated data for each affected emission source.
Proposed Amendments to NESHAP 40 CFR Part 63, Subparts HH and HHH
Amendments to the two natural gas industry NESHAPs (Subpart HH: National Emission Standards for Hazardous Air Pollutants From Oil and Natural Gas Production Facilities and Subpart HHH: National Emission Standards for Hazardous Air Pollutants From Natural Gas Transmission and Storage Facilities) are proposed as a result of EPA’s periodic residual risk review. The proposed rule amendments would affect equipment not previously subject to NESHAP such as small dehydrators in both sectors as well as certain storage vessels in the production sector. A number of other updates are proposed relating to the compliance demonstration requirements. EPA is proposing to amend the standards for major sources of HAPs but not for area sources of HAPs.
In both the production and transmission/storage sectors, small dehydrators were previously exempt from the rules. EPA is proposing to remove the 1 tpy benzene alternative compliance option for major sources. Table 1 below, shows the proposed changes for small dehydrators in each NESHAP Subpart.
Currently, NESHAP Subpart HH regulates HAP emissions from storage vessels with the potential to flash. EPA is proposing to require 95% emission reduction to every storage vessel located at major source oil and natural gas production facilities, even those that do not have the potential for flash emissions. In addition, emissions from those tanks must now be counted toward determining the facility’s major source status.
In both sectors, EPA is also proposing an alternate compliance option for non-flare combustion devices allowing manufacturers to demonstrate the destruction efficiency for a specific model in lieu of facilities conducting site-specific tests for those specific model devices. In addition, the following compliance related changes are proposed:
- Revisions to the parametric monitoring calibration provisions
- Addition of periodic performance testing where applicable
- Removal of the allowance of a design analysis for all control devices other than condensers
- Removal of the requirement for a minimum residence time for an enclosed combustion device
- Addition of recordkeeping and reporting requirements to document carbon replacement intervals
EPA is also proposing to eliminate the startup, shutdown, malfunction (SSM) exemptions such that the established standards in these two NESHAPs apply at all times. In conjunction with this change, EPA proposes to add a provision for affirmative defense to civil penalties for exceedances of emission limits caused by malfunctions.
The proposed new NSPS and amended NESHAP standards will impact not only owners and operators of oil and natural gas facilities, but contractors and vendors as well. The industry will face increased operational, monitoring, recordkeeping, and reporting requirements, in addition to associated costs. The proposed rules may disproportionately affect small businesses, which will be competing with larger companies for vendor and consultant assistance.
In response to public request, EPA has extended the public comment deadline to November 30, 2011. Additionally, EPA has been granted an extension of the final rule promulgation date to April 3, 2012. These extensions will allow industry to provide additional technical and economic analysis of the proposed rules, and will allow EPA more time to review the extensive comments already made and further expected. However, extension of the final rule promulgation deadline leaves more uncertainty for those sources that become affected under the proposed rule after August 23, 2011 but before April 3, 2012.