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

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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.

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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
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 Dont Do it? 2
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
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
ORIGIN NSPS (continued) 1979 Oil & Gas Production Placed on EPAs 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
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
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
WHY NOW? January 14, 2009 suit filed February 4, 2010 Settlement: Proposed Standards by July 28, 2011 Final Action by February 28, 2012 8
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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 10
When Does it Happen? Aug. 23, 2011 Rule Proposed Published Oct. 24, 2011 Comment Deadline April 3, 2012 Final Rule ??? 11
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
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
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
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
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
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
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
NSPS LDAR (Subpart VVa instead of VV) Applies to onshore gas processing plants Lower leak threshold Monitoring connectors 19
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
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
NESHAP 22
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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 損 control device or closed- vent system 25
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
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
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
What If You Dont 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
EPA Region 6 20112013 National Enforcement Initiatives 1. Keeping raw sewage and contaminated stormwater out of our nations 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
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
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

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

  • 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 Dont 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 EPAs 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 損 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 Dont 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 20112013 National Enforcement Initiatives 1. Keeping raw sewage and contaminated stormwater out of our nations 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