September 22, 2011
Proposed Oil and Natural Gas Sector:
New Source Performance Standards and National Emission Standards for Hazardous Air Pollutant Reviews
Introduction
On July 28, 2011, the Environmental Protection Agency (EPA) Administrator signed a suite of proposed new air regulations affecting Production / Processing and Transmission / Storage sectors of the oil and natural gas industry. The proposed rule requires the use of emission controls and work practices through two different air regulation programs – New Source Performance Standards (NSPS) and National Emission Standards for Hazardous Air Pollutants (NESHAP).
These new rules will regulate emissions from several types of emission sources that have never been subject to federal standards, including hydraulic fracturing operations, centrifugal and reciprocating compressors used in natural gas transmission operations, pneumatic controllers, condensate and crude oil storage tanks, and small glycol dehydrators.
EPA developed this proposed rule making pursuant to a Consent Decree entered into between EPA and environmental groups. The groups sued EPA alleging that EPA has failed to re-evaluate existing NSPS and NESHAPs applicable to the oil and natural gas industries, as required under the Clean Air Act (CAA). The Consent Decree requires that EPA promulgate final rules for the upstream oil and natural gas industry by February 28, 2012.
NSPS Standards
Under this rule making, EPA will promulgate a new NSPS at 40 C.F.R. 60, Subpart OOOO. The new Subpart OOOO will incorporate the existing NSPS standards cited in 40 C.F.R. 60 Subparts KKK and LLL and include more stringent provisions for each standard. Subparts KKK and LLL govern equipment leaks of volatile organic compound (VOC) and sulfur dioxide (SO2) emissions from natural gas processing facilities, respectively.
The new NSPS OOOO will apply to new affected facilities that begin construction after August 23, 2011, the date the proposed rule was published in the Federal Register. The rule will also apply to existing affected facilities that are modified or reconstructed after August 23, 2011.
Standards for Equipment Leaks at Onshore Natural Gas Processing Plants – NSPS KKK
New, modified, or reconstructed gas processing plants will be required to comply with more stringent leak detection and repair (LDAR) standards to reduce VOC emissions from equipment leaks. Specifically, as proposed in the standard, affected facilities will be required to comply with 40 C.F.R. 60, Subpart VVa, with a few exceptions. This includes establishing a leak rate of 500 parts per million (ppm) for valves and 2,000 ppm for pumps. Additionally, connectors will require annual monitoring.
In evaluating possible standards, EPA considered four options: 1) adopting 40 C.F.R. 60, Subpart VVa's lower leak rate definitions; 2) changes in standards for individual components; 3) the use of monthly optical gas imaging with a Method 21 check; and 4) the use of annual optical gas imaging with a Method 21 check. Because EPA was unable to determine the VOC emissions reduction achieved by an optical gas imaging program, the cost-effectiveness of options 3 and 4 was not able to be determined. Under the proposed rule, EPA will incorporate the Subpart VVa equipment leak requirements.
Standards for Sweetening Units at Onshore Natural Gas Processing Plants – NSPS LLL
Sweetening units located at an onshore natural gas processing plant will be required to control SO2 emissions to achieve a minimum control efficiency based on the facility's sulfur feed rate and the sulfur content of the acid gas. EPA proposes to "strengthen" the NSPS for SO2 by amending Subpart LLL to require a maximum initial and continuous efficiency of 99.9 percent for SO2 control systems with sulfur feed greater than 5-long tons per day and hydrogen sulfide (H2S) content equal to or greater than 50 percent.
Standards for Hydraulically Fractured Natural Gas Wells
The new NSPS will require, with a few exceptions, that all natural gas wells that are hydraulically fractured control emissions during flowback (i.e., "green completions"). The control standards will apply to both new natural gas wells that are hydraulically fractured and existing wells that are hydraulically fractured or refractured (i.e., modified sources). The proposed rule defines hydraulic fracturing as a "process of directing pressurized liquids, containing water, proppant, and any added chemicals to penetrate tight sands, shale, or coal formations that involve high rate, extended back flow to expel fractured fluids and sand during completions and well workovers. The proposed standards for hydraulically fractured natural gas wells define two subcategories of wells that are subject to different requirements. Subcategory 1 wells are non-exploratory and non-delineation wells, while subcategory 2 covers all exploratory and delineations wells. The subcategory 2 wells generally have no control requirements. The Administrator must be notified within 30 days of commencing well completions with hydraulic fracturing (although note that EPA preamble language states that EPA is targeting 30 day advance notice of well fracturing operations).
Standards for Compressors
Under the proposed rule, centrifugal compressors in natural gas gathering and transmission operations will be required to utilize dry seal systems. EPA has requested comment on this requirement combined with whether it is feasible for facilities to capture gas that escapes from compressor seals to be combusted as fuel gas. For reciprocating compressors, owners or operators will be required to continuously monitor operating hours and replace rod packing systems every 26,000 hours of operation. However, compressors located at "well sites" (i.e., area disturbed during drilling and/or operation of production facilities) are exempt from this requirement.
Pneumatic Controllers
Under the proposed rule, each pneumatic controller will be considered a separate affected facility. Each new or replaced pneumatic controller installed at a natural gas processing facility after the effective date (August 23, 2011) must have zero VOC emissions. To meet this standard, EPA will require the use of "non-gas driven" pneumatic controllers.
Each new or replaced pneumatic controller installed at a location other than at a natural gas processing plant, after the effective date (August 23, 2011) must have natural gas emissions of six standard cubic feet per hour or less (e.g., low bleed 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 (bpd) of condensate or 20 bpd of crude oil will be required to install emission controls that reduce VOC emissions by 95 percent. As proposed, condensate is defined as a liquid with an American Petroleum Institute (API) gravity of 40 or greater. API gravity is a measure of how light or heavy a petroleum liquid is compared to water. Storage vessels that are subject to the rule must have closed vent systems that vent to a control device.
Startup, Shutdown, and Malfunction Provisions
Under the proposed rule, the exemption for compliance with emission standards during periods of startup, shutdown, and malfunction cited in the NSPS "general duty clause" 40 C.F.R. 60, Subpart A will not apply. Therefore, compliance with the limits will be required at all times. In addition, the proposed NESHAP will provide only a limited affirmative defense to civil penalties for periods of non-compliance during malfunctions. To establish the affirmative defense, the operator will be required to demonstrate a number of elements, including that the malfunction was unavoidable, that repairs were made expeditiously, and that excess emissions were minimized to the extent possible. The operator must also conduct and document a root cause failure analysis, notify EPA within two business days of non-compliance, and submit a written report to EPA within 45 days of the event demonstrating that the facility or operator has met all of the affirmative defense criteria.
Notification and Reporting Requirements
For each individual affected facility, including individual hydraulically fractured natural gas wells, centrifugal and reciprocating compressors, and storage vessels, but excluding pneumatic controllers, the owner or operator will be required to submit to EPA a written notification of the date of construction, reconstruction, and startup. For existing affected facilities that become subject to the NSPS because of modification, including existing natural gas wells that become subject to the rule because they are hydraulically fractured, the owner or operator must submit written notification to EPA describing the modification and providing other information at least 60 days or as soon practicable before the modification commences. For all hydraulically fractured natural gas wells, the owner or operator must notify EPA "within 30 days of the commencement of the well completion operation," including the date of commencement of the well completion operation and the longitude and latitude of the well. The proposed rule will also require detailed annual reports providing specified information for each affected facility.
Standards for Glycol Dehydrators – NESHAP Subparts HH and HHH
The current Subparts HH (National Emission Standards for Hazardous Air Pollutants from Oil and Natural Gas Facilities) and HHH (National Emission Standards for Hazardous Air Pollutants from Natural Gas Transmission and Storage Facilities) contain emission limits for hazardous air pollutants (HAPs) from glycol dehydrators. The current standards do not apply to small glycol dehydrators – generally those dehydrators 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 (see the proposed rule for specific information). Under the proposal, small glycol dehydrators located at major sources subject to Subpart HH - Subpart HHH will be required to meet a unit specific emission limit on annual emissions of benzene, toluene, ethylbenzene, and xylenes (BTEX). For both the oil and gas production and natural gas transmission and storage sectors, EPA proposes to set the emission limitation at the maximum achievable control technology (MACT) floor as a total BTEX value, in megagrams per year, calculated by multiplying a specified emission factor by the annual average daily throughput in standard cubic meters per day and the BTEX concentration of the natural gas at the inlet of the glycol dehydration unit in parts per million by volume (ppmv). EPA's MACT floor and emission limits were calculated based upon previous evaluations used to determine the current standards in Subpart HH and HHH.
Crude oil and condensate storage tanks located at major sources subject to Subpart HH will be required to control emissions to 95 percent or greater. The proposed rule includes a leak definition of 500 ppm for valves located at facilities subject to MACT HH. The proposed rules also contain a number of new monitoring, recordkeeping, and reporting requirements to demonstrate compliance with NESHAPs. Most significantly, the proposed rule expands the requirements for performance testing of control devices. In addition, the proposed rule requires that all storage tank emissions be considered in determining whether a source is classified as "major" and subject to the NESHAP requirements.
Public Comment
EPA announced that it will accept comments from trade associations and the public on these proposed regulations for 60 days, beginning August 23, 2011. Comments must be received by EPA on or before October 24, 2011. EPA will accept comments via the internet at www.regulations.gov.
For more information regarding the proposed regulations, contact Lynn Olson, Cal Niss, or Jay Christopher at 800-359-0251. Visit our website at www.trihydro.com to learn more about our upstream oil and natural gas air permitting greenhouse gas (GHG) compliance team. Stay tuned as Trihydro is planning an upcoming webinar on the proposed NSPS OOOO standard.
