Muddying the Upstream and Midstream Waters
In the last several years, EPA has issued numerous rules impacting the oil and gas industry. While petroleum refineries in the downstream segment face new compliance challenges with the first ever fenceline monitoring requirement for benzene, regulations imposed on the upstream and midstream segments seek to curb emissions of greenhouse gases (GHGs) and volatile organic compounds (VOC). As if these new challenges were not enough, the EPA has strongly signaled through information collection efforts that more regulations on the upstream and midstream segments are forthcoming.
The 2012 NSPS
In 2012, EPA issued new source performance standards (the 2012 NSPS) aimed at reducing VOC emissions at a variety of upstream and midstream sources. See 77 Fed. 49490 (August 16, 2012); 40 CFR Subpart OOOO. Most notably, these regulations required reduced emissions completions (also known as ‘green completions’) during the flowback period at hydraulically fractured natural gas wells. They also applied to specific equipment at specific sites: natural gas and oil well sites: pneumatic controllers and storage tanks; production gathering and boosting stations: compressors, pneumatic controllers, and storage tanks; natural gas processing plants: compressors, pneumatic controllers, equipment leaks, and storage tanks; and storage tanks at natural gas compressor stations (transmission and storage). Since issuing the rule, EPA has updated and clarified the regulation on several occasions, mainly as they relate to storage tanks related to crude oil and natural gas production and transmission.
The 2016 NSPS
Most recently, EPA amended and added to the 2012 NSPS, setting standards for methane and VOCs and regulating equipment and activities at sources previously addressed under the 2012 NSPS (the 2016 NSPS). 81 Fed. Reg. 35824 (June 3, 2016), 40 CFR Subpart OOOOa. It limited the applicability of the 2012 NSPS to sources that were constructed, modified, or reconstructed between August 23, 2011 and September 18, 2015. Subpart OOOOa applies to sources that are new, modified, or reconstructed after September 18, 2015.
EPA added a ‘green completions’ requirement to hydraulically fractured oil wells and, to the extent not addressed in the 2012 NSPS, added regulations to the equipment and sites noted above. Importantly, though, the rule added standards designed to address methane emissions from these sources, making them the first GHG standards to apply to upstream and midstream sources. The rule also created a fairly stringent leak detection program for equipment and storage tanks. Fugitive emissions (defined as any visible emission observed using optical gas imaging or an instrument reading of 500 ppm or greater using Method 21) must be monitored and, if detected, repaired promptly. Equipment leaks at natural gas processing plants must be monitored in accordance with and meet the stringent requirements set forth in Subpart VVa, which are those applicable to the synthetic organic chemical manufacturing industry.
The reduction of methane in the oil and gas industry is important to the President’s and EPA’s overall efforts to address climate change. Methane has a global warming potential twenty-five times that of carbon dioxide. EPA estimates that 232 million metric tons of carbon dioxide equivalent are released from the oil and gas sector, accounting for roughly 32% of all methane emission in the United States in 2014. Source: 81 Fed. Reg. 35838 (June 3, 2016), Table 3. As a result, the 2016 NSPS is the culmination of policy pronouncements, beginning in 2013 with the President’s Climate Action Plan and continuing with the January, 2015 strategy for reducing methane from the oil and gas industry. The 2016 NSPS is also part of a larger pledge made by the President under the Paris climate agreement to cut overall greenhouse gases, including carbon dioxide and other pollutants, by 26 to 28 percent from the 2005 level by 2025.
The 2012 NSPS and 2016 NSPS applied to new, modified, or reconstructed sources. However, existing sources will not escape additional regulation for long.
EPA has already requested data on storage vessels without potential flash emissions and data on hazardous air pollutants (excluding benzene, toluene, ethylbenzene, and xylene) from regulated small glycol dehydrators. 80 Fed. Reg. 74068 (November 27, 2015). According to EPA, this data was not available when the 2012 NSPS was issued.
Information Collection Request No. 1
On the same day it published the 2016 NSPS, EPA also announced it intended to send an Information Collection Request (ICR) to the Office of Management and Budget for approval. 81 Fed. Reg. 35763 (June 3, 2016). It requested comments on the proposed ICR, which had to be submitted prior to August 2, 2016. EPA stated that it is seeking information so that EPA may develop “effective standards for this entire industry.” Additionally, the information will “support the Agency’s effort to explore proposing standards for new and modified units not currently covered by NSPS OOOOa.” 81 Fed. Reg. at p. 35764.
Part 1 of the ICR is referred to as the operator survey. It is specifically designed to obtain information from onshore oil and gas production facilities to better understand the number and types of equipment at production facilities. EPA will seek facility-level information, such as facility name, location, contact information, and number of wells, tanks, and compressors. It will be sent to all known operators of oil and gas production wells. The information obtained from Part 1 “will allow the Agency to obtain the information necessary to identify and categorize all potentially affected oil and gas production facilities.” 81 Fed. Reg. at p. 35764.
Part 2 of the ICR is referred to as the detailed facility survey and will be sent to selected oil and gas facilities across the different industry segments, including onshore production, gathering and boosting, processing, compression/transmission, pipeline, natural gas storage, and liquefied natural gas (LNG) storage and import/export facilities. The list of recipient of the Part 2 ICR will be generated so that only a statistically significant number of facilities within each industry segment will be required to complete the Part 2 detailed facility survey. Part 2 will seek detailed information about, among other things, well sites, tanks, separators, pneumatic equipment, and equipment leaks.
The ICR will be sent out under authority of CAA Section114. EPA anticipates that they will be sent by October 30, 2016. Part 1 must be completed within 30 days and Part 2 within 120 days. EPA estimated that 22,500 operators representing 698,800 facilities will receive Part 1 and only 3,385 will receive Part 2.
Information Collection Request No. 2
On July 18, 2016, EPA published a request, “inviting all parties to provide information on innovative technologies to accurately detect, measure, and mitigate emissions from the oil and natural gas industry.” 81 Fed. Reg. 46670, 46671 (July 18, 2016). Responses are due November 15, 2016.
Among several items, EPA is seeking information regarding efforts to develop and use more advanced monitoring and leak detection equipment, similar to the optical gas imaging required in the 2016 NSPS. EPA also wants to know how these advanced monitoring technologies could be broadly applicable to existing sources. Finally, EPA is interested in information on technologies that could allow for effective emissions controls at well sites or other co-located facilities.
The use of these advanced monitoring technologies is not new. Advanced monitoring has been incorporated into many recent rules, including the 2016 NSPS. EPA, as part of its Next Generation Compliance initiative, has fully embraced the use of advanced monitoring to detect leaks from tanks, valves, and other components.
Indeed, EPA issued a Compliance Alert in September, 2015 stating that it had concerns about significant emissions from storage vessels at onshore oil and natural gas production facilities. Using advanced monitoring equipment, such as infrared video cameras, EPA detected numerous instances of detectable emissions caused by inadequate design and sizing of vapor control systems and inadequate operation and maintenance of those systems.
As a result, it seems unlikely that the emphasis on the use of advanced monitoring technology will abate soon. EPA’s Compliance Alert suggests a coming crack-down on emissions that previously had gone undetected. The ICR signals that EPA will utilize existing and new technology to do so.
The upstream and midstream portions of the oil and gas industry have already been the subject of intense regulatory efforts to curb emissions of VOCs and methane. The ICRs signal that existing sources within those segments will face additional regulation and enforcement using a variety of emerging technologies. Proactive actions at this time to adequately design, size, operate, and maintain vent and control systems, including internal checks using advanced monitoring to detect emissions, could reduce the potential for violations and help stave off enforcement actions.