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AIR QUALITY & PERMITTING RULESFor the Oil & Natural Gas Industry/KOGA 2015

Scott R. Smith September 24, 2015


PRESENTATION OVERVIEW

© Copyright 2015 Smith Management Group May 8, 2013 • 2


Topics Covered:• Update for NSPS Subpart 0000

• Proposed Climate Rules, Air Quality Rules, and Proposed Permitting Rules

“…Send lawyers, guns and money….”

PRESENTATION OVERVIEW

September 28, 2015 • 3© Copyright 2015 Smith Management Group


SUBPART 0000

© Copyright 2015 Smith Management Group September 28, 2015 • 4

Click to edit Master title styleSUBPART 0000Regulatory History

• August 16, 2012 Final NSPS

• April 12, 2013 Proposed Reconsiderations of NSPS

• September 23, 2013 Final Rule: Updates To Requirements for StorageTanks In Oil and Natural Gas Production

• July 17, 2014 Proposed Regulatory Amendment Clarification

• December 31, 2014 Final Amendments

• March 23, 2015 Re-proposed Definition of Low Pressure Gas Well

• July 31, 2015 Final Definitions of Low Pressure Gas Well & StorageVessel

May 8, 2013 • 5© Copyright 2015 Smith Management Group


Applicable to:• Storage vessels

• Gathering facilities

• On-shore gas processing facilities

SUBPART 00002012 Final NSPS


Click to edit Master title styleSUBPART 00002012 Final NSPS


Click to edit Master title styleSUBPART 0000September 2013 Final Rule (Update)

Requirements for Storage Tanks in Oil & Natural Gas Production• Group 1 storage vessels constructed, reconstructed or modified between

August 23, 2011 and April 12, 2013.

Must estimate emissions from the storage vessels to determine affected facility NLT October 15, 2013.

Notification be submitted with annual report by January 15, 2014

• For changes that potentially increase the tank’s emissions, controls to reduce VOC emissions by 95% needed to be installed:

By April 15, 2014 or

Within 60 days of installation.

• Extended compliance deadline to April 15, 2015.


Click to edit Master title styleSUBPART 0000September 2013 Final Rule (Update)

Requirements for Storage Tanks in Oil & Natural Gas Production• Group 2 storage vessels constructed, reconstructed or modified which

began after April 12, 2013 Compliance date extended to April 15, 2014.

• Alternative 4 TPY Uncontrolled Actual VOC Emissions Rate Instead of requiring controls to reduce VOC emissions by 95%.

Demonstrate uncontrolled actual VOC emissions have been below 4 tpy.

o Based on records of monthly determinations of actual emission rate

o 12 consecutive months

o Records must show that each month during that 12 month period have been below 4 tpy.

Evaluate monthly.


Click to edit Master title styleSUBPART 0000December 2014 Final Rule

Final Amendments• Additional detail on requirements of handling of gas and liquids during

well completion operations: 2 stages of well completion.

Specific requirements for handling gas & liquids.

• Initial flowback stage Beginning of flowback following fracturing or refracturing.

Ends when it is feasible for a separator to function.

• “Separation flowback stage”. Special equipment separates gas, liquid hydrocarbons and water.

Captured gas and hydrocarbons can then be treated and sold.



Final Amendments• Green Completions

Wells subject to green completions must use this technology NLT January 1, 2015.

Green completion ends when either the well is shut in or the startup of production.

• Clarified requirements for storage tanks Replacement storage tanks. Tanks to replace storage tanks already considered

“affected facilities” are immediately subject to the same requirements.

Storage tanks removed from service. EPA is requiring that the date a storage tank is removed from service and the date a storage tank is returned to service be included in the notification requirements in the annual report.

Storage tanks placed into/returning to service. When removed from service and then returned to service at a different location, potential emissions must be estimated at the new location.



Final Amendments• Defined low pressure wells.

• Clarified requirements for leak detection at natural gas processing plants.

• Updated requirements for reciprocating compressors.

• Updated the definition of “Responsible Official”. Certify that annual reports on well completions are true accurate and complete.

Officials responsible for facilities employing up to 250 employees and that have less than $25M gross annual sales can delegate authority after notifying the agency.

Officials responsible for facilities employing more than 250 employees or that have gross annual sales exceeding $25M remain unchanged.




PROPOSED CLIMATE, AIR QUALITY & PERMITTING RULES

Click to edit Master title stylePROPOSED CLIMATE, AIR QUALITY & PERMITTING RULESOverview of Rule

• Issued August 18, 2015 by EPA.

• Stated Purpose: combat climate change, reduce air pollution that harms public health and provides greater certainty about permitting requirements. “Common sense requirements.”

• Focus on methane and VOC reductions from hydraulically fractured oil wells.

• EPA also issued Draft Control Techniques Guidelines for states to use to reduce VOC emissions from existing processes & equipment at natural gas well sites.



FIVE Distinct Regulatory Areas1. Oil Well Sites & Equipment Used

In Oil Production;

2. Processes & Equipment at Natural Gas Well Sites;

3. Processes & Equipment at Natural Gas Production Gathering & Boosting Stations;

4. Requirements For Equipment at Natural Gas Transmission Compressor Stations;

5. Requirements for Processes and Equipment at Natural Gas Processing Plants.

PROPOSED CLIMATE, AIR QUALITY & PERMITTING RULESOverview


Click to edit Master title stylePROPOSED CLIMATE, AIR QUALITY & PERMITTING RULESIssues where EPA is Seeking Comment

EPA has asked for comment on (examples):

Criteria to help define the availability of gathering lines.

Exempting low production wells.

Is there a sufficient supply of green completion equipment & personnel that would be available by established dates?

Should green completion requirement be phased in?

Criteria that could be used to determine whether a corporate wide leak detection & repair program could be deemed to meet the requirements of the proposed rule.

Should operators be able to conduct the leaks monitoring survey using EPA Method 21 as an alternative to optical gas imaging?



Defining the term “adjacent”:

• “Adjacent” is one of three factors used to determine if activities are considered part of a source that is subject to major source permitting under the Clean Air Act.

• EPA is proposing two options for the definition: Defined by proximity; ex. ¼ mile (prefers)

Close together or related by function (connected by a pipeline)



Establishing Independent Third Party Verification:• To certify to a regulator that a regulated entity is meeting compliance

obligations.

• Rule would ensure that reviewers are competent, independent and accredited.



Requiring Professional Engineer Certification.• Would require PE Certification for:

Closed Vent Systems; and

Control Device Design and Installation

• EPA has noted problems with design of closed vent systems.

• EPA recorded venting from thief hatches or other parts of control systems at over 60% of tank batteries.

• Another series of inspections revealed 23 of 25 tank batteries experiencing fugitive emissions.



What About Costs?• Control measures will be $76

million annually.

• 2025 costs $320M‐$420M.

• EPA estimates climate benefits of $200M to $550M.

• Camera costs: $95,000.

PROPOSED CLIMATE, AIR QUALITY & PERMITTING RULESOverview


Click to edit Master title stylePROPOSED CLIMATE, AIR QUALITY & PERMITTING RULESOil Well Sites & Equipment Used In Oil Production

Completions of Hydraulically Fractured Oil Wells• During “flowback” gas flows to the surface, along with water, frac fluids,

condensate & crude oil.

• EPA is proposing to capture the natural gas that escapes into the air.

• This would be accomplished through the use of “reduced emissions completion” or “green completion”. EPA says this is a “proven” technology.



Completions of Hydraulically Fractured Oil Wells• “Green Completions” would not be required for:

New exploratory (wildcat) wells

Delineation wells.

Low pressure wells.

Other hydraulically fractured oil wells if it is not feasible to get the gas to a pipeline.

Wells with a gas to oil ratio of less than 300 standard cubic feet of gas per barrel of oil.

Low production wells with an average daily production equivalent to 15 barrels a day or less.


Click to edit Master title stylePROPOSED CLIMATE, AIR QUALITY & PERMITTING RULESOil Well Sites & Equipment Used in Oil Production

Completions of Hydraulically Fractured Oil Wells• Refractured & recompleted wells would not be considered to be

“modified” if: Well owners and operators use green completions to reduce emissions.

Owners and operators meet notification and reporting requirements for new wells.

• In some states, this would allow owners and operators to re-fracture wells without triggering state permitting requirements.



Finding and Repairing Leaks• “Optical Gas Imaging” is

proposed to conduct leak monitoring surveys.

• New Well Sites‐conduct survey within 30 days after the end of the first well completion or date the site begins production.

• Modified Sites‐Survey would need to be conducted within 30 days of modification.

• Following first survey, leak monitoring will be conducted either twice/year or yearly.

PROPOSED CLIMATE, AIR QUALITY & PERMITTING RULESOil & Gas Well Sites & Equipment Used In Oil Production



Finding and Repairing Leaks• Provides efficient real time leak

analysis.

• Greater element of operator safety over method 21.

• Chief limitations:

Calibration of camera.

Daily instrument checks.

EPA/States may require accredited formal training.

High initial equipment costs.

PROPOSED CLIMATE, AIR QUALITY & PERMITTING RULESOptical Gas Imaging Technology



Finding and Repairing Leaks• What Would I have to Survey?

Valves

Connectors

Pressure relief devices

Open-ended lines

Access doors

Flanges

Crank case vents

Pump seals or diaphragms

Closed vent systems

Compressors

Separators

Dehydrators

Thief hatches

PROPOSED CLIMATE, AIR QUALITY & PERMITTING RULESOil & Gas Well Sites & Equipment Used In Oil & Gas Production



Finding and Repairing Leaks• EXEMPTIONS

Low Production Well Sites‐combined oil and natural gas production of less than 15 bbls of oil equivalent per well per day.

Sites that contain only wellheads‐Christmas Trees.

PROPOSED CLIMATE, AIR QUALITY & PERMITTING RULESOil & Gas Well Sites & Equipment Used In Oil & Gas Production


Click to edit Master title stylePROPOSED CLIMATE, AIR QUALITY & PERMITTING RULESNatural Gas Well Sites

Finding and Repairing Leaks• Most of the proposed requirements for finding & repairing leaks are the

same as those mentioned in the oil & gas industry section.

• Additional requirements for the Natural Gas Industry not found in the Oil industry requirements: Equipment that vents natural gas as part of normal operation are not considered to be

leaking and are not part of this requirement.

Leak surveys can help operators detect malfunctions in these venting devices, i.e. pneumatic controllers.



Finding and Repairing Leaks• Leaks found would need to be repaired within 15 days, OR

• If repair would require shutting down production, repairs to need to be performed at the next scheduled shutdown

• Incentives for minimizing leaks: If leaks are found from less than 1% of covered components during 2 surveys, owners

and operators may conduct the monitoring survey yearly instead of every 6 months;

1‐3% of leaks found continue monitoring every 6 months;

+ 3% would have to monitor every three months.


Click to edit Master title stylePROPOSED CLIMATE, AIR QUALITY & PERMITTING RULESIssued August 18, 2015

Requirements for Equipment at Natural Gas Transmission Compressor Stations

• New and modified compressors – not covered under 2012 VOC rules. This rule covers both methane & VOCs.

• EPA is proposing that two types of compressors be covered: Centrifugal compressors;

Reciprocating compressors.



New and Modified Compressors

• New and modified compressors were not covered under 2012 VOC rules. This proposed rule covers both methane & VOCs.

• EPA is proposing that two types of compressors be covered: Centrifugal compressors;

Reciprocating compressors.

PROPOSED CLIMATE, AIR QUALITY & PERMITTING RULESRequirements for Equipment at Natural Gas Transmission Compressor Stations



New and Modified Compressors

• Centrifugal compressors• Requires 95% reduction in VOC

emissions with wet seal systems by

Flaring

Routing captured gas back to the compressor intake.

• Compressors with dry seal systems would not be covered by the proposed rule.

EPA encourages use of dry seal systems.

• Reciprocating compressors• EPA wants rod packing systems in

reciprocating compressors replaced at a certain frequency of either:

Every 26,000 hours of operation or

Every 36 months.

PROPOSED CLIMATE, AIR QUALITY & PERMITTING RULESRequirements for Equipment at Natural Gas Transmission Compressor Stations


Click to edit Master title stylePROPOSED CLIMATE, AIR QUALITY & PERMITTING RULESRequirements for Equipment at Natural Gas Transmission Compressor Stations

Finding and repairing leaks

SAME REQUIREMENTS AS FOR OIL AND GAS WELLS



NSPS Requirements for New and Modified Pneumatic Pumps

• EPA wants to encourage use of electric pumps Proposing to set a zero emissions

limit for most natural gas pumps.

Electric and solar powered pumps are not subject to the rule.

Notification requirements for installation of pumps subject to the rule.

PROPOSED CLIMATE, AIR QUALITY & PERMITTING RULESRequirements for Processes and Equipment at Natural Gas Processing Plants


Click to edit Master title stylePROPOSED CLIMATE, AIR QUALITY & PERMITTING RULESRequirements for Processes and Equipment at Natural Gas Processing Plants

Draft Control Techniques Guidelines

• Apply in ozone nonattainment areas classified as Moderate and above and throughout the Ozone Transport Region. None currently in Kentucky.

• Guidelines for reducing VOC emissions from oil and gas industry.

• Recommendations for state and local air agencies to determine Reasonable Available Control Technology (RACT).




QUESTIONS?

Scott R. Smith [email protected](859)231-8936 x116


THANK YOUfrom Smith Management Group


LEXINGTON859-231-8936

LOUISVILLE502-587-6482

www.smithmanage.com

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