On July 28, 2011, the US Environmental Protection Agency (“EPA” or “the Agency”) announced the release of a 604-page suite of proposed air regulations for oil and gas production, processing, transmission, and storage. Covered operations and equipment would include completions and recompletions of hydraulically fractured natural gas wells, compressors, pneumatic controllers, various storage tanks, and gas processing plants. The proposals are the result of a court settlement that also requires the Agency to issue final standards by February 28, 2012.
Under the Clean Air Act, EPA sets performance standards for categories of new and modified emissions sources (which are known as new source performance standards or “NSPS”), and for emissions of chemicals defined as hazardous air pollutants (“HAPs”) such as benzene, ethylbenzene, and n-hexane. For natural gas, the current NSPS date to 1985 and apply only to new and modified processing plants. EPA now would substantially expand this coverage. In addition, the Agency would augment HAP controls for both existing and new sources in the oil and natural gas production and natural gas transmission sectors.
Key features of the NSPS proposals include the following:
For oil and natural gas production sites and storage/transmission sites that qualify as “major” emitters of HAPs (those emitting 10 tons or more of any single HAP or at least 25 tons in combination), the key features of the HAP proposals include:
The estimated aggregate cost of the proposals through 2015 for all regulated sectors is $754 million; however, EPA is forecasting the value of the resulting natural gas and condensate available for sale to be $783 million. To reduce any associated compliance burden, the Agency is proposing to create an exemption so that the proposals by themselves would not necessarily trigger the obligation to obtain a “Title V” air emissions operating permit. The proposals make no change in EPA’s current approach to “source aggregation.” Permitting authorities still will make case-by-case decisions about whether two or more pollutant-emitting activities should be regulated in the aggregate as a single source (which currently is the subject of a citizen suit in Pennsylvania against a drilling company).
Air emissions from natural gas production have been stirring up controversy, particularly in the Barnett Shale around Fort Worth, Texas. While the proposals give EPA another hook for regulating the shale gas boom, and the more than 20,000 gas well completions and re-completions each year, initial industry reaction has been quiet. Written comments will be due 60 days after the proposals appear in the Federal Register. EPA also is planning public hearings for Dallas, Denver, and Pittsburgh.
For more information about the proposed regulations, or any other matter raised in this Legal Update, please contact at +1 202 263 3343, or your regular Mayer Brown lawyer.
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