I G N I T I N G I N D U S T R Y . F U E L I N G C O M M E R C E . E D U C A T I N G C O M M U N I T I E S .

Volume II | Issue VI | 2014

IN THIS ISSUE

DESPITE THEAFFORDABLE CARE ACT EFS COMMUNITIES REMAIN MEDICALLY UNDERSERVED

OIL PATCH CHAPLAINS: INDIVIDUAL CARE IN A BIG WORLD

EXPANDING

SERVICES

COMPANIES EYE ALTERNATIVESTO USING FRESHWATER FOR FRACKING PG 22 PG 100

PG 48

AS NEW AIR REGULATIONS TAKE EFFECT, MORE ARE PROPOSEDBy Matthew J. Hazleton, TRC Companies, Inc.

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As operators in the Eagle Ford Shale work to comply with existing air quality regulations and the new Subpart OOOO oil and gas rules, it is advisable to keep an eye on the developing regulatory environment. An emerging methane standard and revision to the current ozone designations will have profound impacts on the oil and gas industry, especially in the Eagle Ford Shale. State and federal agencies are contemplating regulatory changes that are expected to have a formidable, if not burdensome, impact on oil and gas sector operators in the next three-to-five years.

The first potential impact is the upcoming ozone designation review. Two counties in the Eagle Ford region – Atascosa and Wilson counties – may not meet air quality standards for ozone. They are located within the San Antonio-New Braunfels Metropolitan Statistical Area, and due north of what is generally regarded as the center of production in the Eagle Ford Shale, Karnes County. The most recent air quality data shows that the statistical area has already exceeded the most recent average for ozone. This means that unless this area can reduce ozone concentrations, the Environmental Protection Agency will declare it, and perhaps the surrounding counties, as non-attainment. Such a designation would force operators regulated under this rule to take additional steps to reduce their emissions associated with the pollutants that cause ozone to form, i.e., Oxides of Nitrogen and Volatile Organic Compounds. In the Houston area, which already exceeds the ozone standard, oil and gas operations must control tanks and loading operations; monitor fugitive components (such as valves and flanges) for leaks; and calculate the emissions from each facility and report findings to the Texas Commission on Environmental Quality annually. As part of the review process, the EPA will also consider lowering the current ozone standard by up to 20 percent. Should that occur, more counties will probably fail to meet the standard and thus have to reduce ozone emissions. This review process will begin in late 2014, and the EPA is expected to issue final designations in October 2015.If counties associated with the Eagle Ford are designated as non-attainment, Texas would need to develop a state implementation plan to reduce the ozone levels. The plan will have to be approved by the EPA, which means that federally driven regulations will not be in place until 2016 or later. This delay may not amount to much as Texas could still establish interim control measures immediately while the plan is in the approval queue in an effort to get a jump on reducing ozone.

A second potential new regulation, concerned with reducing methane emissions, could have an even larger impact on the Eagle Ford Shale.

In March 2014, the White House announced its ‘Strategy to Reduce Methane Emissions,’ which heralded the onset of a focused effort by the federal government to curb methane emissions and thereby reduce greenhouse gas emissions. The strategy specifically targets the oil and sector and instructs the EPA to study the problem. The EPA has begun the process and has released some initial research as a series of white papers. Topics for these white papers include minimizing flaring and venting on public lands; increased use of the Natural Gas STAR Program (a voluntary program that encourages oil and gas companies to improve operational efficiency and reduce methane emissions); development of new technologies to reduce emissions; and enhanced partnership with environmental groups and community members. The research will guide the agency as it develops new methane reduction regulations. Any new methane regulations resulting from the strategy are not expected to be finalized until the end of 2016.

Concurrent to the federal activities exploring methane emission regulation is the initiation of the same at a state level. In April 2014, Colorado became the first state to pass air quality regulations that specifically target methane. Colorado’s rule requires Leak Detection and Repair for all of its wells. Additional aspects of these rules require emissions be mitigated during well maintenance activities and all valves must be retrofitted to low-bleed or no-bleed pneumatics. Some storage tanks would be subject to increased monitoring and reporting requirements. Increased inspections of well sites and other oil and gas facilities would also be conducted to enforce compliance with the new regulation. Several other states including Wyoming, Ohio and Pennsylvania are also directly or indirectly tackling methane emissions through their respective regulatory processes. Each of these states are at varying stages in the rule making process so it is possible for significant changes to occur in their approach and ultimately, their final decisions regarding how to regulate methane emissions.

Operators in the Eagle Ford should pay attention to these states as they begin to regulate methane. The state regulations are likely to drive the direction that a federal methane regulation would take. The new regulations may take three years to come, they may take five years, but they will come and operators that have paid attention to these new regulations as they are developed will be better prepared than those who have not.

About the Author

Matthew Hazleton is an Oil & Gas Air Quality Specialist based in TRC’s Denver office. He has extensive experience within the oil and gas industry, including air permitting and compliance actions for upstream, midstream, storage and transmission facilities in states including CO, KS, MI, ND, OH, OK, TX, UT and WY. Matthew works closely with TRC’s due diligence group and provides expert review and analysis of potential assets’ air quality permitting and compliance liabilities. Matthew has also conducted quality/compliance audits for Oil and Gas clients in CO and TX. In addition, he has experience with permitting of power generation facilities and foundry/steel mill permitting. Matthew received his B.E. in Chemical Engineering from the Colorado School of Mines.

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