2015 Winter Meeting February 24 & 25, 2015

Seven Springs Mountain Resort Champion, PA 15622

RECENT AMENDMENTS TO FINAL 2012 NSPS (SUBPART OOOO)

Introduction

• Amendments issued in response to petitions for administrative reconsideration filed in connection with final 2012 NSPS and 2013 amendments to NSPS dealing with storage vessel implementation requirements.

• Change requirements applicable to well completions, storage vessels, rod packing emissions from reciprocating compressors, the definition of “responsible official” and the availability of the administrative affirmative defense to civil penalties.

• Took effect on December 31, 2014. • Subpart OOOO is applicable to crude oil and natural gas extraction,

distribution of natural gas and pipeline transportation of natural gas.

“Low Pressure Gas Well” Definition

• Definition contained in final 2012 NSPS. o A mathematical formula based on a relationship between well depth, reservoir pressure and

flowline pressure. o Wells that qualify are exempt from Reduced Emission Completion (“REC”) requirements.

• IPAA and PIOGA filed a joint petition for administrative reconsideration of the 2012 definition with EPA.

• IPAA and PIOGA submitted comments. • EPA re-reissued the 2012 definition without change as part of the 2014

amendments. • Reasons this may not be as bad as it might have been.

o EPA acknowledges receipt of the comments and that they were timely. EPA admits it did not consider the comments in reissuing the definition.

o Changes that EPA has made to well completion requirements in the 2014 amendments.

Well Completions

• Amendments divide flowback into two phases, an initial phase and a separation phase

o Initial Phase

o Separation Flowback Phase

Initial Phase

• Begins with the onset of flowback. • “During the initial flowback stage, there is no

requirement for controlling emissions from the vessel, and any gas in the flowback during this stage may be vented.” See Preamble to Final 2014 Amendments, 79 F.R. 79021 (December 31, 2014)

• “However, the operator must route the flowback to a separator unless it is technically infeasible for a separator to function”. Id.

• EPA has not identified criteria for determining when it is technically infeasible for a separator to function. If it is something other than the amount of gas present in the flowback, it must be a site specific technical issue (i.e., separator is overwhelmed by the flowback such that vapor space cannot be maintained; liquid drain unable to handle volume of liquid flowing through).

• Operator must direct flowback liquids to a “storage vessel” or a “well completion vessel.”

• “Well completion vessel” may include a lined pit or other vessel. Flowback may not be directed to an unlined pit or onto the ground.

Separation Flowback Stage

• Begins as soon as a separator is able to function.

• Recovered liquids must be directed to a “storage vessel”, a “well completion vessel”, a “collection system” or reinjected into the well or another well.

o “Collection system” means any infrastructure that conveys gas or liquids from the wellsite to another location for treatment, etc.

• During the separation phase, direct venting of gas to the atmosphere is prohibited.

• The operator must direct all salable quality gas to a flow line or collection system, inject it into the well or another well, use it as an on-site fuel source, or use it for any other useful purpose for which a purchased fuel or raw material may be used.

• If it is not feasible to direct the gas as stated the operator must combust it unless combustion would pose a fire or explosion hazard or negatively impact tundra, permafrost or waterways.

End of Flowback/ Start of Production

• The end of the separation flowback stage marks the end of flowback.

• It is defined as the time period when the well is shut in and flowback equipment is permanently removed or start-up.

• The start of production begins the thirty (30) day period for determining Volatile Organic Compound (“VOC”) Potential to Emit (“PTE”) of storage vessels for purposes of making the affected storage vessel facility determination. If the criteria are met and the vessel is determined to be an affected facility, compliance with applicable requirements (i.e., control, cover and closed vent system) must occur within sixty (60) days after start of production.

• During this period any recovered liquids must be directed to a storage vessel, a well completion vessel or a collection system.

• Use of a “well completion vessel” for more than sixty (60) days after start-up of production renders the vessel a “storage vessel” by operation of law and depending on the amount of emissions subject to control (i.e. control, cover and closed vent system requirements).

Storage Vessels

• Removal from service and PTE determinations.

o EPA has amended storage vessel requirements to require that the dates upon which storage vessel affected facilities are removed from service and returned to service be included when those events are required to be reported.

EPA has adopted a new definition of “removal from service”.

A storage vessel affected facility is considered to have been removed from service when it is isolated and physically disconnected from the process for a purpose other than maintenance, completely emptied and degassed and no longer used to store crude oil, condensate, intermediate hydrocarbon liquids or produced water.

o PTE determinations upon return to service. o Storage Vessels in Parallel

When two or more storage vessels are receiving liquids in parallel, the total through put is shared between or among them. The PTE of an individual vessel is a fraction of the total PTE of the combined vessels. In that case, EPA considers the parallel storage vessels to be a single vessel with the PTE equal to the sum of the PTEs of the individual vessels.

Other Storage Vessel Amendments

• PTE for storage vessels using vapor recovery under a legally and practically enforceable emission limit.

o Exclusion only applicable when vessel not subject to legally and practically enforceable emission limit and meets other requirements.

• Thief hatch.

o Thief hatch must be equipped, maintained and operated with a weighted mechanism or equivalent to insure that the lid remains properly seated - purpose is to encourage innovation and flexibility.

Routing Emissions from Reciprocating Compressor Rod Packing to a Process • The amendments recognize a new technology to address

rod packing emissions from reciprocating compressors. • The technology involves the collection of rod packing

emissions under negative pressure and the routing of such emissions through a closed vent system that meets the requirements of existing NSPS to a process that burns gas for augmentation of regular fuel supply.

• The operator may choose between the three alternatives (two work practice, one technology) the most appropriate in the circumstances.

Equipment Leaks at Gas Processing Plants

• Small gas processing plants.

o Amends leak detection requirements of Subpart OOOO to add “connectors” to the list of equipment that is exempt from routine leak detection requirements at small gas processing plants.

o Small gas processing plants are defined as those plants which do not have the design capacity to process at least 10,000,000 standard cubic feet of field gas per day.

The Definition of “Responsible Official”

• Replaced the term “Responsible Official” with the term “Certifying Official” and the term “Permitting Authority” with the term “Administrator”. EPA believed that the use of the terms Responsible Official and Permitting Authority too closely mirrored the language of Title V and could cause confusion. 79 F.R. 79027-79028 (December 13, 2014).

• EPA dropped the requirement of preapproval for a delegation by an entity employing less than 250 persons or having gross sales of less than $25,000,000.

• Delegation is now effective upon advance notification to the Administrator for those facilities (<250 person or <$25M).

Affirmative Defense

• EPA removed the regulatory affirmative defense to civil penalties contained in the 2012 final NSPS.

• EPA stated it believed that its enforcement discretion on a case-by-case basis was sufficient to provide the flexibility needed when a violation results from a malfunction beyond the owner or operator’s control.

EPA and Methane

Roy Rakiewicz Senior Consultant

All4 Inc.

How Did We Get Here?

• President’s June 2013 “Climate Action Plan”

– Prepare the United States for the impacts of climate change

– Lead international efforts to address global climate change

– Cut carbon pollution in America

June 2013 Climate Action Plan

• Cut Carbon Pollution in America – Deploying clean energy

– Building a 21st century transportation sector

– Cutting energy waste in homes, businesses, and factories

– Leading at the Federal level

– Reducing “other” GHG emissions

June 2013 Climate Action Plan

• Reducing Other Greenhouse Gas Emissions

– Curbing emissions of hydrofluorocarbons

– Preserving the role of forests in mitigating climate change

– Reducing methane emissions

June 2013 Climate Action Plan

• Reducing Methane Emissions – Interagency methane strategy – Collaborative approach to reduce emissions – Targets identified for methane reduction:

• Coal mines • Landfills • Farms • Oil and gas development

Federal Agency Methane Strategy • March 28, 2014 – “Strategy to Reduce Methane Emissions”

Released • Targets: Landfills, Coal Mines, Agriculture, and Oil and Gas • Oil and Gas Specifics:

– Introduction of “White Papers” to be completed and released for public review and comment

– Ozone “linkage” to non-methane VOC – Likely regulatory pathways and 2016 deadline

• Section 111 • Control technique guidance (CTG) documents

Additional Methane Strategy Actions

• Reduced venting and flaring on public lands for new and existing wells

• Natural gas pipeline safety standards

• Develop/demonstrate leak detection technology for transmission and distribution systems

• Modernize transport and distribution infrastructure

• Miscellaneous voluntary efforts

The White Papers

• April 5, 2014: EPA “White Papers” on Oil and Gas Sector Methane and Non-methane VOC Emissions

• Five Documents Covering: – Compressors – Completions and ongoing production of hydraulically

fractured oil wells – Leaks – Liquids unloading – Pneumatic devices

The Fact Sheet • January 14, 2015: Administration Takes Steps Forward on

Climate Action Plan by Announcing Actions to Cut Methane Emissions

• Methane emission reduction goal of 40-45% from 2012 levels by 2025

• Methane comprises 10% of U.S. GHG emissions • 30% of methane emissions attributed to the oil and gas

industry • How will reductions be achieved?

Regulatory Revisions

• Standards for Methane and Non-methane VOC emissions

– New/modified “White Paper” sources - likely Subpart OOOO revisions

– Oil and gas production, processing, and transmission

– Proposal summer 2015

– Final by end of 2016

New Control Technique Guidelines (CTGs)

• CTGs for oil and gas non-methane VOC emissions

• Developed by contractors for U.S. EPA

• Represent “Ready to Adopt” control measures for states

• States can adopt and apply to existing sources in ozone non-attainment areas

New Reporting Requirements

• Enhanced Leak Detection and GHG Emission Reporting

– Expanded GHG reporting for oil and gas industry

• Subpart expansion is already proposed

– Remote sensing technologies and other “enhancements” including optical sensing

What Is PIOGA Doing?

• U.S. EPA forming a Small Business Advocacy Review (SBAR)

• PIOGA - Small Entity Representative (SER)

• SERs provides advice/recommendations regarding potential rule impacts on small entities

• Panel will also include federal representatives from: – Small Business Administration (SBA)

– Office of Management and Budget (OMB)

40 CFR Part 98 Subpart W – Petroleum and Natural Gas Systems

Meghan Barber

Project Engineer

All4 Inc.

History of 40 CFR Part 98 Subpart W

• November 30, 2010

– Finalization of 40 CFR Part 98 Subpart W requirements

– Applicable to eight (8) different industry segments

• Since 2010 – Subpart W has been revised EIGHT (8) separate time

• Most recent revisions:

– November 25, 2014 (finalized)

– December 9, 2014 (proposed)

November 2014 Finalized Revisions • Amendments became effective January 1, 2015

– Affects reports due March 31, 2016

• Amendments expected to reduce reporters’ burden:

– Various revisions to calculation methods within each of the industry segments

– Use of optical gas imaging for screening tool to detect emissions from reciprocating and centrifugal compressors

– Guidance around missing data procedures

November 2014 Finalized Revisions • Amendments expected to reduce burden:

– Removal of existing Best Available Monitoring Method (BAMM) and transitional BAMM provisions • If a request for extension was not filed by January 30, 2015,

reporters must conduct measurements according to the new rules by April 1, 2015

• Amendments expected to increase burden:

– Revisions to calculation and reporting methods for completions and workovers, and flare stacks

November 2014 Finalized Revisions • Amendments expected to increase reporters’ burden:

– Addition of 247 new data elements, revision of 13 data elements, and deletion of 34 data elements required to be reported

• Revisions do not specifically change monitoring requirements; however, these may have been inadvertently changed in different areas of the subpart.

December 2014 Proposed Revisions

• Intent is to finalize amendments by end of 2015

– Affects reports due March 31, 2017

• Onshore Petroleum and Natural Gas Production Segment

– Required to monitor and report emissions from oil well, not just gas well, completions and workovers completed with hydraulic fracturing • 50 new reporters (nationally) expected to trigger Subpart W

• Affect 246 existing reporters

December 2014 Proposed Revisions

• Onshore Petroleum and Natural Gas Production Segment

– Required to report Well Identification Number

• Two (2) new industry segments:

– Onshore Petroleum and Natural Gas Gathering and Boosting • 200 new reporters (nationally) expected to trigger Subpart W

December 2014 Proposed Revisions

• Proposed Two (2) new industry segments:

– Onshore Natural Gas Transmission Pipeline • 150 new reporters (nationally) expected to trigger Subpart W

• None of the newly proposed elements are entitled to confidential protection

• Comments accepted through today, February 24, 2015

SOURCE AGGREGATION

Source Terms

• Authority to aggregate arises from source terms in EPA’s Title V, PSD and nonattainment NSR programs (adopted in pertinent part by Pennsylvania).

• Title V – May not operate a “major source” of air emissions without a permit.

• “Major source” – any stationary facility or source which directly emits or has the potential to emit 100 tons per year of any air pollutant.

• “Stationary Source” - any building, structure, facility or installation which emits or may emit a regulated air pollutant.

Aggregation Criteria

• Authority to aggregate emissions from multiple emissions activities arises if and only if the following three criteria are met:

1. Share same two digit SIC code; 2. Located on one or more contiguous or adjacent properties; and 3. Owned by the same person or persons under common control.

• Common ownership and SIC code criteria are often not in dispute, but whether emissions’ activities are “adjacent” often is.

• “Adjacent” and “contiguous” are not defined in the regulations. • EPA has developed a test (not part of its regulations) to determine if

multiple sources are “adjacent”. • The test is known the functional interrelationship test.

• Under the test sources are considered adjacent if they work together to produce a unified product irrespective of the distance between them.

• The result of “aggregation” can be increased administrative burden if two or more minor sources are combined and become a “major source”.

Major Court Decisions and Administrative Action

• Summit Petroleum v. EPA, 690 F.3d 733 - Summit Petroleum sought review of EPA’s determination that its sour gas wells and sweetening plant were a single stationery source. The closest well to the plant was 500 feet and the most distant well was 8 miles. o EPA determined that the wells and plant worked together as a unit to produce a single product

(i.e., natural gas), such that the wells and plant were one source for air permitting purposes. o The Sixth Circuit disagreed - held that the term “adjacent” is unambiguous and that the EPA’s

use of the functional interrelationship test, to determine if sources are adjacent, irrespective of distance, undermined the plain meaning of the word “which demands, by definition, that would-be aggregated facilities have physical proximity.”

o The court remanded the case back to EPA for a redetermination of the Source consistent with the court’s opinion.

• EPA’s Summit Directive: o “Because of the court’s decision (Summit) … the EPA

may no longer consider interrelatedness in determining adjacency … in areas under the jurisdiction of the 6th Circuit …”

o Outside the 6th Circuit … EPA does not intend to change its long-standing practice of considering interrelatedness …”

• National Environmental Development Association’s Clean Air Project v. EPA, 752 F.3d 999. o National Environmental Development sought review of EPA’s

Summit Directive. o Contended that it placed members outside the 6th Circuit at a

competitive disadvantage. o Also contended that directive violated EPA’s regional consistency

regulations which require EPA to assure fairness and uniformity by its regions in application of criteria policy and procedures to implement and enforce the Act.

o The D.C. Circuit agreed and vacated EPA’s Summit Directive.

• On the Horizon – Proposed Regulations o Office of Information and Regulatory Affairs in February

published Notice of EPA’s intention to propose source terms within the PSD and nonattainment NSR programs as they apply to the oil and gas extraction industry.

o “The lack of clarity regarding the term ‘source’ has resulted in confusion for the regulated community and for permitting authorities, including EPA’s regions.”

o A bit of good news - appears to be forward-looking only.

MODIFICATIONS TO GP-5

Proposed Modifications • Proposed addition of General Condition A9.(d), “the owner or operator of

the facility shall annually submit to the Department a certification of compliance with the terms and conditions in the GP-5…”

• Certification must state, “based on information and belief formed after reasonable inquiry, the statements and information in the document are true, accurate and complete.”

• PIOGA’s comments. o PIOGA commented PaDEP was without authority under the Clean Air Act or

otherwise. o Self-certification unnecessary given that the PaDEP can readily ascertain

compliance and the information the operator is already required to report the records operator is required to maintain.

Final Action

• On January 17, 2015 PaDEP issued final modifications to GP-5 without significant change.

PaDEP Comment Response Document

• PaDEP’s general response was:

o PaDEP has authority under the Air Pollution Control Act (“APCA”) to issue a general permit.

o Operator is required to comply with the terms and conditions of GP-5.

o If an operator objects to self-certification the operator can submit a full blown application for plan approval or operating permit.

• In response to PIOGA’s argument that PaDEP lacked authority PaDEP relied on Section 6.1(d) of APCA.

o PaDEP’s reliance is misplaced.

o Section 6.1(d) of APCA imposes an obligation upon a permit applicant to provide in the design of the source an, “adequate means of verification of compliance, including source testing or alternative means to verify compliance.” It authorizes PaDEP to compel nothing.

o Assuming arguendo it does authorize PaDEP to compel something PaDEP would have to demonstrate that the means of compliance verification already provided in the design of the source is not adequate before requiring self-certification.

Ron Cusano Schnader Harrison Segal & Lewis LLP

Fifth Avenue Place Pittsburgh, Pa 15222

rcusano@schnader.com (412)577-5203