December 7, 2012
Benjamin Rhem
Jackson Walker L.L.P.
brhem@jw.com• 512.236.2012
Environmental and Clean Air Regulations
M IDSTREAM E NERGY L AW C ONFERENCE : M EETING THE
D EMAND FOR I NFRASTRUCTURE
H OUSTON , T EXAS

• Federal Clean Air Act Basics
• Greenhouse Gas Regulations
• Texas Air Permitting Structure
• Aggregation of Oil and Gas Sites
• EPA and TCEQ Legal Conflict Regarding
Regulation of Oil and Gas Operations
• Compliance Best Practices

• National Ambient Air Quality Standards
• New Source Performance Standards
• National Emission Standards for
Hazardous Air Pollutants
• State Implementation Plans

• On August 16, 2012, the following new air regulations were published in the Federal
Register
– NSPS Subpart OOOO, Crude Oil and Natural Gas
Production, Transmission and Distribution
– NESHAP Subpart HH, Oil and Natural Gas
Production
– NESHAP Subpart HHH, Natural Gas Transmission and Storage

• What facilities are covered under Subpart
OOOO?
– Production sites
– Gathering stations
– Natural gas plants
– Transmission compression
– Underground natural gas storage

• NSPS OOOO
– LDAR – natural gas processing plants are subject to more stringent definition of “leak,” more frequent monitoring, and monitoring of more components
– SO2 Emissions – natural gas processing plants with sulfur feed rates of more than 2 long tons/day must control emissions up to 99% depending on feed rate and concentration

• NSPS OOOO
– Natural gas wells using hydraulic fracturing must control VOC emissions with green completions by
2015, but until then may use flares
– Centrifugal and reciprocating compressors are subject to certain seal and packing requirements
– All storage vessels are required to control VOC and HAPS emissions to 95%

• NESHAP HHH
– Retains requirement that Large Glycol
Dehydrators must reduce benzene emissions to less than 1 ton per year or reduce total air toxics by 95%
– Small Glycol Dehydrators must meet unit specific limits for BTEX based on throughput and gas composition

• NSPS (40 CFR, Subpart OOOO)
– EPA’s recently finalized NSPS for oil and gas facilities require flaring of emissions associated with flowback from hydraulic fracturing operations.
– When this flowback contains high concentrations of sulfur compounds, the flaring process can actually create significant
SO2 emissions.
• NAAQS (CAA § 109)
– In some areas with a high density of fracking operations, TCEQ is concerned that the required flaring operations may cause an exceedance of the SO2 NAAQS.

• Reporting Rule
• GHG Permitting a.
Mass. v. EPA b. Endangerment
Finding c.
Tailpipe Rule d. Tailoring Rule e.
Texas’ Challenge

• De Minimis Sources
• Permits By Rule
• Standard Permits
• New Source Review Permits
• MSS Authorizations

• Title V
– Federal Program – delegated to TCEQ
– Only applies to “major sources”
• NSPS
• NESHAPS

• EPA regulations, 40 C.F.R. 52.21(b)(6), require
– aggregation into a single source based upon:
• Common control, by the same person
• Located on contiguous or adjacent properties
• Same Industrial SIC grouping

Nos. 09-4348,10-4572, Decided August 7, 2012, 6 th Circuit Court of Appeals
• EPA determined that 100 sour gas wells that were within a roughly 40 square mile area constituted a single stationary source because they were "adjacent."
– Some of the wells and flares were located up to 8 miles from the sweetening plant
– Furthermore, the operator did not own all the land between the plants and wells
• The 6th Circuit found that EPA's reliance on whether sources were functionally related in determining whether those sources should be aggregated was contrary to the plain meaning of "adjacent."

• Legal Challenges
– On October 12, 2012, Texas filed a petition for review of the EPA’s Final Oil and Gas
NSPS and NESHAP rules
• SIP Gap
– TCEQ adopts rules and incorporates them into the SIP, but the EPA has not approved

• What is an operator supposed to do when presented with differing regulations from the federal and state environmental agencies, or when a state challenges federal regulations?
– Example of the TCEQ Flex Permitting Program
– Texas and other petitioners have been winning a fair share of their challenges to EPA regulations, further complicating the decision operators face

• No easy solution
• Environmental-specific compliance manager
– Don’t assume safety manager will be knowledgeable about and able to handle all environmental issues
• Proactive approach
– Waiting for a TCEQ or EPA investigator to show up at your site is rarely the right answer

Notice of Audit
+ Conduct Audit
+ Disclosure of Violations
+ Corrective Action Plan
Immunity from penalties associated with those disclosed violations
EPA to greatly reduce its implementation of its audit policy.

brhem@jw.com