Impact of New NSPS and NESHAP Regulations on Oil & Gas Industry

Implications of the New NESHAP/NSPS (MACT) for the

Oil & Gas Sector

Presented by

Cindy Bishop(B.S.Ch.E.)

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American Institute of Chemical EngineersDallas ChapterMarch 27, 2012

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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?

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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

ORIGIN

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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

ORIGIN

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ORIGINNSPS (continued)

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

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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

ORIGIN

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ORIGIN

NESHAP (continued)

July 16, 1992 – EPA Published List of Major and Area Source Categories, including Oil & Gas ProductionFebruary 12, 1998 – Natural Gas Transmission and Storage Added to ListJune 17, 1999 – MACT Issued (HH & HHH)January 3, 2007 – Area Sources

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WHY NOW?

January 14, 2009 suit filed February 4, 2010 – Settlement:• Proposed Standards by July 28, 2011• Final Action by February 28, 2012

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Who Is Affected?

Operations from Well to Refinery or to Customer

•Onshore & Offshore

•Production (well completion and workover)

•Portable Equipment

•Storage

•Transmission

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• Aug. 23, 2011 Rule Proposed Published

• Oct. 24, 2011 Comment Deadline

• April 3, 2012 Final Rule

• ???

When Does it Happen?

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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

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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

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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.

NSPS

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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)

NSPS

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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)

NSPS

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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

NSPS

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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%)

NSPS

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LDAR (Subpart VVa instead of VV)

Applies to onshore gas processing plants

•Lower “leak” threshold•Monitoring connectors

NSPS

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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

NSPS

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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

NSPS

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NESHAP

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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

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NESHAP Subparts HH & HHH

Storage Vessels95% 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)

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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

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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.

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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

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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”

What If You Don’t Do it?

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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.

Conclusions

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Implications of the New NESHAP/NSPS (MACT) for the

Oil & Gas Sector

Presented by

Cindy Bishop

[email protected]

www.cbishoplaw.com