By Robert E. Holden and Carlos J. Moreno
On August 16, 2012, EPA published a new rule that revises the NESHAP Subpart HH standards for the oil and gas industry. 77 Fed. Reg. 159 (Aug. 16, 2012). The Final Rule wassigned on April 17, 2012, but publication in the Federal Register did not occur until August 16, 2012, making the rule effective on October 15, 2012. The new rule contains many changes and new requirements for the industry. One important change is how the new definition of “associated equipment” modifies the aggregation rule for Hazardous Air Pollutants (HAP), which in turn modifies the applicability of the “major source” definition for oilfield operations, in particular as it applies to oil and gas wells, tanks and glycol dehydrators. Under the new rules, storage tank emissions will not be aggregated with well emissions, and storage tank and glycol dehydrator emissions may be aggregated separately.
Section 112(n)(4) of the Clean Air Act, 42 U.S.C. § 112(n)(4), establishes a non-aggregation standard for exploration and production facilities, specifying that HAP emissions from oil and gas wells and compressor stations should not be aggregated for major source determinations. (Note that this rule does not apply to major source determinations for new source review or Title V.)42 U.S.C. § 7412 (n)(4)(A).Section 112(n)(4) provides:
[E]missions from any oil or gas exploration or production well (with its associated equipment) and emissions from any pipeline compressor or pump station shall not be aggregated with emissions from other similar units, whether or not such units are in a contiguous area or under common control, to determine whether such units or stations are major sources, and in the case of any oil or gas exploration or production well (with its associated equipment), such emissions shall not be aggregated for any purpose under this section.
42 U.S.C. § 7412(n)(4) (emphasis added); see also 40 C.F.R. § 63.761 (definition of “major source”).
The 1999 EPA NESHAP standard for oil and natural gas production facilities (Subpart HH) specified the equipment to be considered to be “associated” with oil and gas wells for purposes of the regulation. 64 Fed. Reg. 116 (Jun. 17, 1999). The 1999 standard defined the term “associated equipment” as:
Associated equipment, as used in this subpart and as referred to in section 112(n)(4) of the Act, means equipment associated with an oil or natural gas exploration or production well, and includes all equipment from the wellbore to the point of custody transfer, except glycol dehydration units and storage vessels with the potential for flash emissions.
Id. (emphasis added). For purposes of the rule, the point of custody transfer is defined as the point where hydrocarbon liquids or natural gas enter a pipeline or any other form of transportation, or the point where hydrocarbon liquids or natural gas enter a natural gas processing plant. Id.
Focusing on wells and storage tanks, the 1999 rule allowed the aggregation with well emissions of HAP emissions from tanks that do not have the potential for flash emissions (e.g., pressurized tanks).
New Oil & Gas Rule
The new rule modifies the definition of “associated equipment” by removing the “potential for flash emissions” qualifier after “storage vessels.” The definition now reads as follows: “Associated equipment, as used in this subpart and as referred to in section 112(n)(4) of the Act, means equipment associated with an oil or natural gas exploration or production well, and includes all equipment from the wellbore to the point of custody transfer, except glycol dehydration units and storage vessels.” Now the emissions of a larger universe of storage tanks, including those with no potential for flash emissions, may potentially be considered part of (and thus aggregated with) compressor station and pump station emissions, including those from glycol dehydrators.
EPA acknowledges that some “existing” production field facilities (constructed before August 23, 2011, the date of proposal of the new rules) that were previously “area sources” (i.e., non-major sources under Section 112), but that may now be major sources once the HAP emissions from storage tanks without the potential for flash emissions, are included. Thus, the new rule gives these facilities three (3) years from the effective date of the rule to comply with the relevant emission standards. Therefore, these facilities must be in compliance no later than October 15, 2015.
In light of the new rules, oil and gas operators should perform compliance reviews of their operations. As part of those reviews, industry should be alert to the effects of the modification of the aggregations rules for storage tanks. It remains to be seen what effect the recent decision from the Sixth Circuit on aggregation of Oil & Gas sources in the Title V context could have on future major source determinations under the revised NESHAP Subpart HH. See Lesley Foxhall Pietras, Air Permitting: Sixth Circuit Vacates Single Stationary Source Aggregation Determination for E&P Facilities Due to EPA’s Unreasonable Interpretation of Adjacent, The Energy Law Blog, Aug. 16, 2012.