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EPA To Regulate Air Emissions from Hydraulic Fracturing As Industry Comes Under Scrutiny

May 29, 2012

EPA will begin imposing new emissions control requirements on natural gas wells that are developed using hydraulic fracturing (commonly called “fracking”) under final regulations adopted last month. New hydraulically fractured wells, and older wells that are refractured, must immediately employ emissions combustion (flaring) technology, and must be fitted with emissions capturing devices, known as “green completion” technology, by 2015. The new rules also impose a number of additional technical requirements intended to reduce fugitive emissions from natural gas transmission, storage, and processing plants and equipment. These are the first significant updates to natural gas clean air regulations since 1999, and the first national environmental regulations to specifically address hydraulic fracturing.

Background

The natural gas industry has traditionally enjoyed relatively light regulation under the Clean Air Act. EPA adopted performance standards for certain new natural gas industry emissions sources (New Source Performance Standards, or NSPS) in 1985, and adopted National Emissions Standards for Hazardous Air Pollutants (NESHAPs) for other industry sources in 1999. The new regulations are the product of EPA’s first review of these original emissions control determinations, and are coming now as the result of public interest litigation forcing EPA to act.

Prior EPA Regulation of Natural Gas Industry Air Emissions

Clean Air Act § 111[1] requires EPA to establish New Source Performance Standards for various categories of new and newly modified stationary sources[2] of air pollutants. EPA initially was required to compile a list of stationary source categories that, in EPA’s determination, “cause[], or contribute[] significantly to, air pollution which may reasonably be anticipated to endanger public health or welfare.”[3] For each such source category, EPA then was required to promulgate NSPS, which must reflect for each source category “the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and environmental impact and energy requirements) [EPA] determines has been adequately demonstrated.”[4] The standard is sometimes referred to as Best Demonstrated Technology (BDT).

Clean Air Act § 112[5] requires EPA to regulate emissions of hazardous air pollutants (HAPs). EPA initially was required to promulgate a list of all HAPs and their major sources.[6] Thereafter, EPA was required to establish NESHAPs reflecting “the maximum degree of reduction in emissions of [HAPs] (including a prohibition on such emissions, where achievable) that [EPA], taking into consideration the cost of achieving such emission reduction, and any non-air quality health and environmental impacts and energy requirements, determines is achievable for new or existing sources in the category .…”[7] The standard is often referred to as Maximum Achievable Control Technology (MACT).

EPA first listed the Crude Oil and Natural Gas Production industry as a Section 111 source category in 1979.[8] EPA promulgated NSPS for the industry in 1985, but the regulations covered only sulfur dioxide (SO2) and volatile organic compounds (VOC) emissions from natural gas processing plants and equipment.[9] EPA did not promulgate NSPS for gas wells, or for natural gas storage or transmission infrastructure. Similarly, EPA listed the Oil and Natural Gas Production industry in its major source HAP list in 1992,[10] and later created a separate category for Natural Gas Transmission and Storage.[11] In 1999, EPA promulgated NESHAPs for these source categories, but the rules applied only to a few specific types of industry equipment.[12]

Despite being required to review and, if warranted, revise its NSPS and NESHAPs determinations every eight years,[13] EPA did not reconsider or revise its natural gas industry NSPS or NESHAPs regulations between their adoptions in 1985 and 1999, and the end of the George W. Bush administration in January 2009.

The WildEarth Guardians Litigation

Between 1999 and 2008, advances in directional drilling and hydraulic fracturing technologies created a natural gas boom that saw major increases in natural gas production across the country. This, in turn, lead to increased concerns regarding the industry’s environmental impacts, and, ultimately, a broad effort to reexamine and roll back the industry’s favorable regulatory status. See Fractured: The Road to the New EPA “Fracking” Study, Marten Law Environmental News (Sept. 17, 2010). The ongoing public controversy over hydraulic fracturing is the most prominent result of this effort.

On January 14, 2009, six days before President Obama took office, an environmental group called WildEarth Guardians – with members primarily in New Mexico and Colorado, two states where natural gas air emissions have generated much public opposition – filed suit in the U.S. District Court for the District of Columbia seeking to force EPA to undertake its mandatory 8-year regulatory review of its natural gas emissions standards.[14] EPA initiated its review several months after the suit was filed,[15] and settled the litigation in February 2010 by agreeing to make final decisions on rulemakings by January 2011,[16] later extended to April 2012. EPA’s new rules, finalized April 17, 2012, are the direct product of that settlement.

The New Regulations

EPA’s new rules phase out 40 C.F.R Part 60, subparts KKK and LLL (dealing with equipment leaks and SO2 emissions at natural gas production facilities), incorporating and expanding on the prior restrictions in new subpart OOOO (NSPS for natural gas production, transmission, and distribution). The rules also revise 40 C.F.R. Part 63, Subparts HH and HHH (NESHAPs for natural gas production, transmission, and storage facilities). The new regulations will consume many pages of the Federal Register,[17] are highly technical, and should be consulted directly regarding specific requirements. The remainder of this article describes the new green completion rule, and summarizes the more significant new fugitive emissions controls.

Green Completions

In a sense, the entire purpose of a natural gas well is to produce emissions. Natural gas is a mixture of hydrocarbon gases, including generally 70 to 90 percent methane, with most of the remainder comprised of ethane, propane, and butane,[18] all of which is emitted from the well by design. However, once completed, a natural gas well is not itself a significant source of air emissions, because the gas is captured, processed for beneficial use, and eventually burned as a relatively low-emission fossil energy source. EPA’s new rules therefore address well emissions before the well top is fitted with collection equipment and routed to a distribution network (the production stage). This period, called the “completion” stage, is the time during which a well is prepared for production.

Hydraulic fracturing occurs during the completion stage. Operators seal sections of a newly or previously drilled well and pump volumes of hydraulic fracturing fluid into the space at high pressure, breaking open the gas-bearing formation to release the gas. Once this is done and the well is unsealed, natural reservoir pressure will usually begin to force whatever is in the well back to the surface. Since the well now contains large volumes of fracturing fluid, the hydraulic fracturing process entails a “flowback” period, generally about three to ten days during which the well produces a mixture of natural gas and hydraulic fracturing fluid – a mixture that cannot be routed directly into a pipeline.

There are essentially three things that can be done with the natural gas mixed with the fracturing flowback: let it escape into the atmosphere, burn it immediately (flaring), or separate it from the water/sand/chemical flowback mixture and capture it for commercial use. Prior to EPA’s new rules, there was no national requirement for producers to flare or immediately capture the gas, and it has not been uncommon for operators to simply let the gas escape while managing the flowback waters. The increasingly widespread use of hydraulic fracturing therefore has increased completion stage air emissions, and EPA’s rules require both flaring and separation/capture (“green completions”) going forward.

The legal hook for the green completion rules is EPA’s regulation of VOCs from the natural gas production source category under the NSPS. Consequently, the rules apply only to new and modified sources, meaning those wells drilled, fractured, or refractured after the issuance of the proposed regulations (August 23, 2011).[19] EPA has defined the regulated source facility as the well itself (not downstream equipment),[20] and the rules apply during the flowback period, beginning after hydraulic fracturing and ending with the earlier of either well shut-in or when the well continuously flows to the flow line or storage vessel for collection.[21]

The regulations effectively set up three compliance categories. First, hydraulically fractured wildcat (exploration) and delineation wells and wells with insufficient reservoir pressure to permit green completion are required only to utilize flaring equipment.[22] Second, all other wells fractured or refractured prior to January 1, 2015, are required to use flaring technology and are “encouraged” to use green completion technology as well.[23] Third, as of January 15, 2012, all new fracturing must employ green completion combined with flaring (for any gas deemed unsuitable for commercial use).[24]

As NSPS rules, these new regulations reflect EPA’s determination that these technologies are the Best Demonstrated Technology for this source category. As explained above, that determination requires EPA to identify the emissions reduction system that has been “adequately demonstrated,” accounting for cost. EPA explains that it considered the rule to result in net cost savings to industry, because the approximately $170 million annual compliance cost would be more than offset by additional revenues from additional recovery of natural gas under current price forecasts.[25] The technology has been adequately demonstrated as several states and major cities already require green completions, and many operators voluntarily employ them, to the extent that EPA estimates that approximately half of all fractured wells currently already employ green completions.

However, EPA was swayed by comments raising concerns about the availability of green completion equipment and trained personnel, should the rule immediately go into effect nationwide.[26] The technology is provided by a few suppliers and moved from well to well over time, and EPA concluded that the nationwide equipment stock is currently insufficient, and that the shortfall likely would not be made up until the end of 2014. For this reason, EPA pushed its compliance deadline off to January 1, 2015 – a decision that has earned the agency widespread, if somewhat muted, criticism from environmental interests.

Fugitive Emissions Controls

Beyond the green completion requirements discussed above, EPA’s revised NSPS and NESHAPs contain a number of new and revised requirements designed to reduce so-called fugitive emissions – unintentional leaks from pressurized equipment and vessels. The most significant new reductions are:

  • New, modified, or reconstructed stationary natural gas storage vessels emitting 6 tons per year or more VOC must reduce emissions by 95 percent.[27]
  • Individual, continuous bleed, natural gas-driven pneumatic controllers between the wellhead and pipeline must achieve 6 standard cubic feet per hour bleed rate, while such controllers at natural gas processing plants must achieve 0 csfh bleed.[28]
  • Wet seal centrifugal compressors between the wellhead and pipeline must achieve 95 percent VOC reduction.[29]
  • Previously unregulated “small” glycol dehydrators are now regulated and must meet specific limits on BTEX emissions.[30]
  • The rule adopts VOC leak detection and repair requirements previously developed for the synthetic organic chemicals manufacturing industry at processing facilities.

Conclusion

EPA estimates that the new regulations will reduce emissions by 190,000 tons VOC, 12,000 tons HAP, and 1.0 million tons methane per year.[31] While not directly designed to regulate greenhouse gas (GHG) emissions, EPA states that it will consider whether to directly regulate GHG emissions from natural gas operations in the future, and that its final decision will be informed based on reports provided under the federal Greenhouse Gas Reporting Program after the new rules take full effect.[32]

The “immediate” requirements of the new rule go into effect 60 days after the rule’s publication in the Federal Register, and parties have until that date to challenge the rule in the Federal District Court of the District of Columbia.[33]

For more information, please contract any member of Marten Law’s Energy or Air Quality practice groups.

[1] 42 U.S.C. § 7411.

[2] A “stationary source” is “any building, structure, facility, or installation which emits or may emit any air pollutant,” as distinguished from moving sources such as cars, trucks, and aircraft. 42 U.S.C. § 7411(a)(2).

[3] 42 U.S.C. § 7411(b)(1)(A).

[4] 42 U.S.C. § 7411(a).

[5] 42 U.S.C. § 7412.

[6] 42 U.S.C. §§ 7412(b), (c)(1).

[7] 42 U.S.C. § 7412(d)(2).

[8] Priority List and Additions to the List of Categories of Stationary Sources, 44 Fed. Reg. 49,222 (Aug. 21, 1979); see also 40 C.F.R. § 60.16 (listing crude oil and natural gas production as priority source category).

[9] Equipment Leaks of VOCs From Onshore Natural Gas Processing Plants, 50 Fed. Reg. 26,122 (June 24, 1985) (codified 40 C.F.R. Part 60, subpart KKK); Onshore Natural Gas Processing SO2 Emissions, 50 Fed. Reg. 40,158 (Oct. 1 1985) (40 C.F.R. Part 60, Subpart LLL).

[10] Initial List of Categories of Sources Under Section 112(c)(1) of the Clean Air Act Amendments of 1990, 57 Fed. Reg. 31,576 (July 16, 1992).

[11] National Emission Standards for Hazardous Air Pollutants; Revision of List of Categories of Sources and Schedule for Standards Under Section 112 of the Clean Air Act, 63 Fed. Reg. 7155 (Feb. 12, 1998).

[12] National Emission Standards for Hazardous Air Pollutants: Oil and Natural Gas Production and Natural Gas Transmission and Storage, 64 Fed. Reg. 32,610 (June 17, 1999) (codified 40 C.F.R. Part 63, subparts HH and HHH).

[13] 42 U.S.C. § 7411(b)(1)(B) (NSPS); 42 U.S.C. § 7412(d)(6) (NESHAPs).

[14] WildEarth Guardians v. Jackson, Case No. 1:09-cv-89 (D.D.C. Jan. 14, 2009); see also EarthJustice Press Release, Groups Sue EPA for Not Protecting Citizens from Oil, Gas Drilling (Jan. 15, 2009).

[15] See NSPS regulatory timeline at this link.

[16] Consent Decree available here.             

[17] As of this writing, the new regulations have not been published in the Federal Register. Therefore, citations to the rule, and specifically EPA’s discussion in the rule’s Preamble, are made by reference to sections of the document currently available on EPA’s website at this link.

[18] See NaturalGas.org, What Is Natural Gas?

[19] Rule Preamble § II.C.1; see also 42 U.S.C. § 7411(a)(2) (defining “new source” by same criteria)

[20] Id. pp. 42-43.

[21] Id. p. 41.

[22] Id. § 4.A.

[23] Id.

[24] Id.

[25] Id. pp. 238-241.

[26] Id. pp. 150-158.

[27] Id. pp. 47-48.

[28] Id. pp. 46-47.

[29] Id. pp. 44-46.

[30] Id. pp. 65-66.

[31] Id. p. 19.

[32] Id. p. 128.

[33] Id. § II.E., CAA § 307(b)(1).

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