On April 18, 2012, the U.S. Environmental Protection Agency (EPA) released a final rule that establishes new Clean Air Act (CAA) emissions standards for activities within the oil and natural gas industry, including the first-ever federal limitations on air emissions associated with hydraulic fracturing completions for natural gas wells. Specifically, EPA is creating new Subpart OOOO in the New Source Performance Standards (NSPS) program and revising existing Subparts HH and HHH in the National Emission Standards for Hazardous Air Pollutants (NESHAPS) program to expand the scope of the regulations.^[1]

NSPS for Oil and Gas Facilities

Section 111 of the CAA authorizes the EPA to regulate criteria pollutants from new stationary sources that the EPA has determined cause or contribute significantly to air pollution that may reasonably be anticipated to endanger public health or welfare. In 1985, the EPA promulgated NSPS Subparts KKK and LLL to regulate emissions of volatile organic compounds (VOCs) resulting from equipment leaks^[2] and sulfur dioxide (SO₂) emissions,^[3] from onshore natural gas processing plants that commenced construction, reconstruction or modification after January 20, 1984.

New Subpart OOOO (Crude Oil and Natural Gas Production, Transmission, and Distribution)

New Subpart OOOO establishes VOC emission standards for new and re-fractured wells, compressors, pneumatic controllers, and condensate and crude oil storage vessels, as well as SO₂ emission standards for new crude oil facilities with certain sulfur feeds (collectively, the affected facilities) that are constructed, reconstructed or modified after August 23, 2011. Equipment currently subject to NSPS Subparts KKK and LLL may continue to meet these standards until the equipment is reconstructed or modified, at which time the equipment will become subject to Subpart OOOO. The different types of affected facilities and associated standards are summarized below.

• Natural Gas Wellheads: Each single gas wellhead is a separate affected facility; however, triggering Subpart OOOO applicability for a wellhead does not by itself trigger applicability for associated or downstream equipment. Requirements apply to flowback following hydraulic fracturing operations, with each recompletion of a fractured or refractured existing gas well considered a modification triggering Subpart OOOO applicability. Wildcat, delineation, and low-pressure wells require a combustion device during flowback. Other wells must also combust emissions and, beginning on January 1, 2015, route flowback to a gas-gathering line or collection system and employ sand traps, surge vessels, separators, and tanks (EPA calls this recovery process a "green completion").
• Centrifugal Compressors: Each wet-seal centrifugal compressor located between a wellhead and the point where gas is delivered to the transmission source category, excluding compressors located at a well site, is a separate affected facility, with the date of compressor installation used as the date of construction. Rotating compressor shaft may be equipped with a dry seal system, or a wet seal system that reduces VOC emissions by 95% .
• Reciprocating Compressors: Each reciprocating compressor located between a wellhead and the point where gas is delivered to the transmission source category, excluding compressors located at a well site, is a separate affected facility, with the date of compressor installation used as the date of construction. Owners and operators must monitor hours of operation and replace compressor rod packing before 26,000 hours of operation has elapsed or after 3 months.
• Pneumatic Controllers: Each single pneumatic controller is an affected facility. Of note, pneumatic controllers are exempt from the initial notification requirements in 40 CFR § 60.7. Zero-emission pneumatic controllers are required at onshore natural gas processing plants, absent a demonstration to the EPA that a high-bleed controller is needed. Other pneumatic controllers must have emissions of no more than 6 standard cubic feet of natural gas per hour. 
• Storage Vessels: Each storage vessel is an affected facility. Storage vessels must meet NESHAP Subpart HH requirements (95% control of VOC emissions—see below), except that storage vessels with VOC emissions of less than 6 tons per year (tpy) are exempt. 
• Onshore Natural Gas Processing Plants: Similar to Subpart KKK, each compressor in VOC or wet gas service at an onshore gas processing plant is an affected facility, as is the group of all equipment (except compressors) within a process unit. Other associated equipment, such as compressor stations, dehydration units, and gathering systems, are also affected facilities, if located at an onshore gas processing plant. In general, owners and operators must comply with the leak detection and repair requirements in NSPS Subpart VVa (40 CFR § 60.480a, et seq.).
• Natural Gas Sweetening Units: Similar to Subpart LLL, each onshore sweetening unit or combination of sweetening unit and sulfur recovery unit is an affected facility, except that facilities with a design capacity of less than 2 long tons per day of hydrogen sulfide and facilities processing gas for reinjection are largely exempt. For each affected facility, owners and operators must achieve a minimum SO₂ emission reduction efficiency established based on sulfur feed rate and sulfur content of the inlet gas. This reduction efficiency is designed to be 99.9%. 

In addition, affected facilities are subject to a number of notification, testing, monitoring, recordkeeping, and reporting requirements, including a two-day advance notification before completing a natural gas production well.

NESHAPS for Oil and Gas Facilities

Section 112 of the CAA established the NESHAPS program which regulates emissions of hazardous air pollutants (HAPs) from new and existing stationary sources. In 1999, the EPA promulgated NESHAPS Subparts HH and HHH, which regulated HAP emissions from the following equipment located at oil and natural gas production facilities (Subpart HH) and natural gas transmission and storage facilities (Subpart HHH) that commenced construction or reconstruction on or after February 6, 1998:  glycol dehydration units, storage vessels with potential flash emissions, ancillary equipment, compressors intended to operate in volatile HAP service, and certain triethylene glycol dehydration units at area sources. 

Revised NESHAPS Subpart HH (HAPs from Oil and Natural Gas Production Facilities) ^[4]

Due to the unavailability of cost-effective technologies, revised NESHAPS Subpart HH does not require additional emission controls on glycol dehydrators or storage tanks for oil and gas production; however, more stringent controls are being required for emission leaks. In addition, revised NESHAP Subpart HH expands the regulation to cover small glycol dehydrators at major sources. A summary of significant control requirements follows:

• Large Glycol Dehydrators: Large glycol dehydration units are those with a natural gas flowrate of three million standard cubic feet per day (scfd) or more. The revised subpart retains the exemption for large glycol dehydrators with actual benzene emissions of 0.90 megagrams per year (Mg/yr). Control requirements are unchanged.
• Small Glycol Dehydrators: Small glycol dehydration units are those with a natural gas flowrate of less than three million scfd or benzene emissions of less than 0.90 Mg/yr and were previously exempt. Under the revised Subpart HH, existing units must meet a BTEX limit of 3.28 x 10^-4 grams per standard cubic meter-parts per million by volume (g/scm-ppmv) and new units must meet a BTEX limit of 4.66 x 10^-4 g/scm-ppmv.
• Storage Vessels: The revised subpart only applies to storage vessels with the potential for flash emissions, in contrast to the proposal, which would have expanded coverage to all storage vessels. Control requirements are unchanged—storage vessels must still operate with zero emissions (i.e., pressure vessels) or be equipped with a closed vent system and control device to reduce emissions by 95%.
• Equipment Leaks: The revised subpart lowers the leak definition for valves from 10,000 ppmv to 500 ppmv.

Revised NESHAPS Subpart HHH (HAPs from Natural Gas Transmission and Storage Facilities) ^[5]

Similar to revised NESHAPS Subpart HH, revised NESHAP Subpart HHH expands the scope of the requirements applicable to glycol dehydrators.

• Large Glycol Dehydrators: For Subpart HHH, large glycol dehydration units are those with a natural gas flowrate of 10 million scfd or more. Like Subpart HH, the revised subpart retains the exemption for units with actual benzene emissions of 0.90 Mg/yr. Control requirements are unchanged.
• Small Glycol Dehydrators: Under Subpart HHH, small glycol dehydration units are those with a natural gas flowrate of less than three million scfd or benzene emissions of less than 0.90 Mg/yr and were previously exempt. With the revision, existing units must meet a BTEX limit of 5.44 x 10-4 g/scm-ppmv, and new units must meet a BTEX limit of 3.01 x 10-5 g/scm-ppmv.

Compliance Deadlines

The final rule will become effective 60 days after its publication in the Federal Register. Although applicability traces back to the August 23, 2011, proposal date for the new rules, a number of requirements will not take immediate effect. Significant deadlines are summarized below. 

NSPS Subpart OOOO

New wet-seal centrifugal compressors, reciprocating compressors, and sweetening units must comply with the relevant emission standards upon startup following construction, reconstruction, or modification. 

New storage vessels that are not exempt (i.e., VOC emissions are 6 tpy or more) may phase-in controls that achieve 95% reduction efficiency over one year, beginning on the date the final rule is published in the Federal Register. Thereafter, the compliance deadline for new, reconstructed, or modified tanks will depend on whether there is already one or more associated wells. If there is an associated well, compliance is required upon startup. If there are no associated wells, the owner/operator will be given 30 days after startup to determine whether VOC emissions from storage vessels exceed the 6 tpy exemption threshold. Any required controls must then be installed within another 30 days.  

Pneumatic controllers may also be phased-in over 1 year beginning on the date the final rule is published in the Federal Register. As noted above, natural gas wellheads will be required to move to "green completion" technology by January 1, 2015, unless they are low-pressure or are wildcat/delineation wells. 

NESHAPS Subparts HH and HHH

New affected facilities (those that commenced construction or reconstruction on or after August 23, 2011) must comply with the relevant emission standards upon initial startup or on the effective date of the standards, which will be 60 days after the final rule is published in the Federal Register, whichever is later.

Existing small glycol dehydration units that are subject to Maximum Achievable Control Technology (MACT) for the first time (i.e., those that commenced construction before August 23, 2011) must comply with the relevant emission standards by no later than 3 years and 60 days after the final rule is published in the Federal Register.

An affected source at a production field facility that constructed before August 23, 2011, that was previously determined to be an area source but becomes a major source 60 days after the final rule is published in the Federal Register due to the amendment to the associated equipment definition in 40 CFR part 63, Subpart HH, must comply with the relevant emission standards by no later than 3 years and 60 days after the final rule is published in the Federal Register.

Valves at existing natural gas processing plants, constructed before August 23, 2011, due to the amendment to the leak definition in 40 CFR part 63, Subpart HH, must comply with the relevant emission standards by no later than 1 year and 60 days after the final rule is published in the Federal Register.

Potential Implications for New Source Review

Generally, new stationary sources that are subject to the NSPS program are also subject to the New Source Review (NSR) preconstruction permit program. The promulgation of new NSPS Subpart OOOO has placed in the forefront for the first time the issue of whether flowback emissions following the hydraulic fracturing of a natural gas well or other wellhead activities are subject to the NSR permitting requirements. Historically, EPA has not required such emissions to be authorized in a NSR permit, and most states have considered these emissions to be temporary or de minimis in nature and part of the construction process for which no permit authorization was required. Two or three states have indicated wellheads are NSR sources, however, these states authorize the emissions under a permit by rule or exemption from the permit process.

At this time, EPA has provided no indication of whether EPA will now consider flowback emissions following the hydraulic fracturing of a natural gas well or other wellhead activities to be subject to NSR preconstruction review. However, in light of the EPA's statement in the preamble to the final rule that flowback after hydraulic fracturing can result, on average, in 23 tons of VOC emissions per event from a single natural gas well, the oil and gas industry should expect this issue to be revisited, most likely after the November presidential election.

This article was prepared by Patricia Finn Braddock and Robert K. Greenslade (rgreenslade@fulbright.com or 512 536 5241) of the firm's Environmental Practice. For further information please contact any of the authors listed above.

[1] This rulemaking has not yet been published in the Federal Register. A pre-publication version of this rule is available at http://www.epa.gov/airquality/oilandgas.

[2] 40 C.F.R. §§60.630 - 60.636.

[3] 40 C.F.R. §§ 60.640 - 60.648.

[4] 40 C.F.R. §§63.760 – 63.779.

[5] 40 C.F.R. §§63.1270-63.1289.