EPA Sets New Emission Standards for the Oil & Gas Industry

On April 17, 2012, the U.S. Environmental Protection Agency published its long-awaited new emission standards for the oil and gas industry.

The rules represent the federal agency’s first attempt to regulate emissions that escape into the air during the hydraulic fracturing, or fracking, process.

For your reference, five takeaways:

1. The EPA believes compliance will pay for itself in recovered natural gas:

“EPA touts many benefits associated with its rule. By 2015, EPA claims methane emissions will be reduced annually by 1.7 million tons, VOC emissions by 290,000 tons, and air toxics emissions by 20,000 tons. Perhaps more remarkable is EPA’s claim that, thanks to the rule, by 2015 industry will actually save $19 million per year because of the captured salable gas. Industry projections, however – at least based on EPA’s original proposal – have been that the requirements of the rule will actually cause significant decreases in production from shale resources.” (EPA Issues Final Rule Targeting Air Emissions from Oil and Gas Operations by Dinsmore & Shohl LLP)

2. The new rules may be inconsistent with state regulations:

“While operators may feel secure that many states already regulate much of the same equipment that is subject to the new rules, an overriding factor is that the rules have nationwide applicability. Operators need to be aware that the new regulations may impose essentially the same requirements as applicable state rules in certain areas, inconsistent requirements in other areas, and may impose new requirements not yet imposed in a particular state. Some states may already have permitting programs in place that address well completions and tanks, while other states may change their permitting programs based on the new rules.” (Oil And Natural Gas Production Subject To New Air Rules by Bryan Cave)

3. The changes affect more than fracking operations:

“In addition to the emissions controls and notification requirements for hydraulically fractured natural gas well completions, the rules also establish requirements for other equipment used at natural gas well sites. Specifically, the rule adopts NSPS requirements for new and modified high-bleed gas-driven pneumatic controllers (i.e., with a gas bleed rate greater than 6 standard cubic feet per hour), NSPS requirements for new storage tanks with annual VOC emissions of six tons or greater, and NESHAP requirements for small glycol dehydrators. The rule also retains existing NESHAP requirements for storage tanks with the potential for flash emissions and large glycol dehydrators at the well site.” (USEPA Issues New Air Regulations for Oil and Gas Industry by Spilman Thomas & Battle, PLLC)

4. It’s not all bad news:

“Significant exceptions from the final rule include:

  • Exploratory or delineation wells – REC does not apply
  • Low-pressure wells – REC does not apply
  • Compressors and pneumatic controllers at natural gas compressor stations
  • Storage tanks that do not have ‘flash’ potential
  • Low-bleed pneumatic controllers at natural gas well sites
  • Compressors using dry seals
  • Wells ‘drilled principally for the production of crude oil’

(Final EPA Oil and Gas Air Emissions Rule Adopts Phased Approach for “Green Completion” of Gas Wells by King & Spalding)

5. The new standards will be phased in over three years:

“The new rules require that ‘reduced emissions completions’ (RECs), also know as ‘green completions,’ be performed for all newly fractured or refractured gas wells… An initial EPA proposal would have had this requirement effective immediately; however, the final rules require that only those wells fractured or refractured after January 1, 2015 be subject to REC requirements. Until January 1, 2015, all newly fractured or refractured wells are required to use flares to reduce emissions of volatile organic compounds effective immediately.” (What You Need to Know About EPA’s Newest Oil and Gas Rules by Jackson Walker)

Related reading:

SMOG Check: EPA Implements The 2008 Ozone Standards (Greenberg Glusker Fields Claman & Machtinger LLP)

Proposed EPA Limits on CO2 Would Require Major Technology Advances for Coal-Fired Power Plants (Pillsbury Winthrop Shaw Pittman LLP)

What Will Proposed EPA Pollution Standards Mean for Power Companies? (John Scagnelli)

New Oil Pollution Deskbook Highlights OPA Rules (Patton Boggs LLP)

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