Report of the Environmental Regulation Committee

Energy Law Journal, July 1, 2012 | Go to article overview

Report of the Environmental Regulation Committee


The following is the report of the Environmental Regulation Committee, the successor to the Climate Change and Emissions Committee. In this report, the Committee summarizes key developments in Federal and State environmental regulation from June 2011 to June 2012 that may be of particular interest to practitioners.*

I. OIL AND GAS SECTOR

A. NSPS/NESHAPS

Overview. On April 17, 2012, the Environmental Protection Agency (EPA) promulgated a final rule significantly revising its New Source Performance Standards (NSPS) and National Emission Standards for Hazardous Air Pollutants (NESHAP) for facilities in the oil and natural gas sector.1 Proposed in August 2011, the rule limits emissions of volatile organic compounds (VOCs), sulfur dioxide (SO2), and hazardous air pollutants (HAPs) from a variety of equipment located at natural gas processing plants, oil and natural gas production facilities (including certain hydraulically fractured wells), and natural gas transmission compressor stations.2 The rule does not apply to equipment located downstream of transmission pipelines.3

Statutory Authority and Litigation History. The EPA's action is authorized by sections 111 and 112 of the Clean Air Act (CAA), which respectively require the establishment of NSPS for non-hazardous pollutants and NESHAP for hazardous pollutants.4 The CAA also requires that the EPA review and consider revisions to the NSPS and NESHAP standards at least once every eight years.5 In early 2009, two environmental non-governmental organizations (NGOs) brought suit to compel the EPA to adhere to this statutory timetable.6 As a result of the litigation, the timing of this rule was dictated by a consent decree entered by the United States District Court for the District of Columbia in February 2010.7

Key Elements. Many of the sources regulated under the new rule have not been previously subject to nationwide emission standards.8 Major requirements include:

* With some exceptions, newly fractured or refractured natural gas wells must use "green completion" practices to control VOC emissions after January 1, 2015.9

* New or modified storage vessels that exceed a certain VOC emissions threshold must reduce emissions by 95% within one year of the effective date of the rule.10

* New or modified centrifugal compressors that use wet seals must achieve a 95% reduction in VOC emissions. For reciprocating compressors, the rule requires replacement of rod packing every 26,000 hours of operation or every thirty-six months.11

* New or modified pneumatic controllers at natural gas processing plants must use zero-VOC technologies. Pneumatic controllers located at facilities upstream of the transmission pipeline must use "low bleed" designs after a 1-year phase in period.12

* Natural gas processing units must implement more stringent leak detection and repair (LDAR) measures to control VOC emissions and HAPs.13

* Existing SO2 emission standards for "sweetening" units at natural gas processing plants were slightly strengthened.14

* Standards for HAP emissions from new and existing small glycol dehydrators, which were previously unregulated under the NESHAP.15

The rule will take effect on October 15, 2012, sixty days after its publication in the Federal Register.16 Existing facilities that become subject to the new NESHAP requirements will have up to three years to come into compliance, with the potential for a one-year extension.17 Oil and gas facilities that are newly built, modified, or reconstructed after August 23, 2011 will be required to comply with the NSPS for SO2 and VOC emissions at varying dates.18 At the time of this writing, the EPA was reported to be considering a supplemental rulemaking to clarify key terms and requirements of this rule.19

Costs and Benefits. Although the EPA estimates the annual gross costs of compliance with the new NSPS will reach $170 million (in 2008 dollars), the Agency claims that the standards will actually have a negative cost after taking into account the incremental recovery of saleable product that will result from "green completion" and other emission control devices. …

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