-----Forwarded by Melanie King/RTP/USEPA/US on 10/19/2010 10:31PM -----

To: LisaP Jackson/DC/USEPA/US@EPA From: "Holmstead, Jeff" <Jeff.Holmstead@bgllp.com>

Date: 10/19/2010 07:16PM Cc: Gina McCarthy/DC/USEPA/US@EPA, RobertJ Wayland/RTP/USEPA/US@EPA, Michael Horowitz/DC/USEPA/US@EPA, Melanie King/RTP/USEPA/US@EPA, Scott Fulton/DC/USEPA/US@EPA, <ossias.rich@epa.gov>, <Mike.Wasson@Exterran.com> Subject: SI RICE -- Petition for Reconsideration on One Issue

(See attached file: Exterran_Petition_for_Reconsideration.pdf)

I am submitting the attached Petition for Administrative Reconsideration on behalf of Exterran Energy Solutions, L.P., and EXLP Operating, LLC. As you will see, it addresses only one issue -- a requirement that companies install and operate very costly "continuous parametric monitoring systems" on engines located at area sources. As discussed our Petition, there are better (and much less expensive) compliance assurance mechanisms available for these engines.

The proposed rule did not include the CPMS requirement for area sources, and we believe that EPA would not have included this requirement in the final rule if the Agency had received public comments on this issue.BEFORE THE ADMINISTRATOR

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, DC

PETITION FOR ADMINISTRATIVE RECONSIDERATION

OF THE FINAL RULE

"NATIONAL EMISSION STANDARDS FOR

HAZARDOUS AIR POLLUTANTS FOR

RECIPROCATING INTERNAL COMBUSTION

ENGINES; FINAL RULE" 75 FED. REG. 51570 (AUGUST 20, 2010)

Exterran Energy Solutions, L.P. EXLP Operating, LLC

16666 Northchase Drive Houston, TX 77060

Petitioner

Jeff Holmstead

Rebecca J. Rentz

Bracewell & Giuliani LLP 2000 K Street, NW

Suite 500 Washington, DC 20006

Attorneys for Petitioners

October 19, 2010Exterran Petition for Administrative Reconsideration

NESHAP SI RICE Rule 75 Fed. Reg. 51570 (August 20, 2010)

-2- INTRODUCTION

Pursuant to Section 307(d) of the Clean Air Act and Sections 553-557 of the Administrative Procedure Act, and for the reasons set forth below, Exterran Energy Solutions, L.P. and EXLP Operating, LLC (collectively referred to herein as “Exterran”) petitions the Administrator of the United States Environmental Protection Agency ("EPA") to reconsider one aspect of the "National Emission Standards for Hazardous Air Pollutants for Reciprocating Internal Combustion Engines" 75 Fed. Reg. 51570 (August 20, 2010) (the "RICE Rule").

Specifically, Exterran seeks reconsideration of a provision in the final RICE Rule that requires continuous parametric monitoring systems ("CPMS") on four stroke lean burn ("4SLB") and four stroke rich burn ("4SRB") Spark Ignited ("SI") RICE greater than 500 horsepower ("hp") at area sources, as defined by the National Emission Standards for Hazardous Air Pollutants ("NESHAP") program in the federal Clean Air Act. The CPMS requirement for area sources is found in Table 6 to the final RICE Rule, item 10(ii)-(iv).

PETITION BACKGROUND AND SUMMARY

Exterran is a global leader in the natural gas contract compression business. Exterran owns and operates one of the largest fleets of compressors in North America, which are driven almost exclusively by natural gas-fired, spark-ignited (SI) engines. Over 10,000 of Exterran's engines are subject to the final RICE Rule. Exterran's fleet is typically deployed at relatively remote exploration and production operations and represents an application that is distinct from the compressors and engines used at natural gas pipelines, which are typically much larger and part of a more significant infrastructure of equipment and personnel.

The proposed RICE Rule was issued on March 5, 2009. The final RICE Rule includes stringent emission standards and operational requirements to ensure that engines are well maintained. At issue in this petition is a requirement that will impose substantial costs on regulated companies without providing any environmental benefit – a provision requiring that CPMS be installed on all 4SLB and 4SRB engines greater than 500 hp, even those located at area sources. EPA has estimated that CPMS will only cost $568 per engine, but this figure is more than an order of magnitude below the actual cost. As discussed below, the initial cost of purchasing andinstalling CPMS is $7,890 per engine. In addition, the annual operating cost (including laborintensive evaluation and reporting requirements) will be in the range of $6,000 - $8,000.

There are several compliance assurance alternatives to CPMS that would be more effective than CPMS at ensuring that owners and operators immediately identify and remedy catalyst operational concerns at remote, usually unmanned, area sources. For example, a quarterly or monthly pressure differential check, together with a quarterly or monthly temperature reading and the required performance measurements, would provide multiple checks to evaluate compliance. Additionally, instead of retroactive or remote CPMS data logger evaluations that in many cases will be conducted months after the first reading is recorded, these manual temperature and pressure differential checks would allow the engine staff to observe the operating conditions in real time and perform any necessary maintenance immediately at the site.Exterran Petition for Administrative Reconsideration

NESHAP SI RICE Rule 75 Fed. Reg. 51570 (August 20, 2010)

-3- Reconsideration of the CPMS requirement is also warranted because EPA failed to provide adequate notice or consider appropriate compliance alternatives at smaller area sources, sites that often only have one engine. Neither the RICE Rule compliance requirements in Table 6 of the March 2009 proposed rule nor the Regulatory Impact Analysis ("RIA") for the proposed rule indicated that CPMS would be required at area sources. EPA should allow an additional administrative proceeding to review the technical challenges and cost that would be imposed by requiring CPMS at area sources.

BASES FOR ADMINISTRATIVE RECONSIDERATION

I. THE CPMS COSTS ARE NOT ACCURATELY REPRESENTED IN THE RICE

RULE DOCKET

NESHAP defines an area source as any source that emits less than 10 tons per year (tpy) or more of any single hazardous air pollutant ("HAP") or less than 25 tpy of any combination of HAPs. When considering controls on area sources, the federal Clean Air Act provides EPA with the ability to consider costs in order to avoid imposing unreasonable costs on smaller sources. EPA considered the costs of controls and relevant HAP emission reductions on area source engines, including the engines greater than 500 hp. However, EPA's final cost per ton calculations failed to include realistic CPMS costs associated with equipment purchase and operating expenses.

EPA estimates that CPMS equipment will cost $568 per engine. Impacts Associated with NESHAP for Existing Stationary SI RICE , p. 6 (June 29, 2010). This cost estimate is skewed not only because it fails to consider the actual purchase and operating cost of a CPMS, but also because it averages the cost to purchase CPMS equipment among four engines. Final RICE Rule Response to Comments , EPA Docket EPA-HQ-OAR-2008-0708 at p. 245 (August 10, 2010). Most area sources in the production and exploration sector will only have one engine at a site, as opposed to the larger midstream compressor stations which usually have multiple larger hp engines. Therefore, the assumption that four (4) engines will always exist at a site does not apply to most area sources

.

Using EPA's cost estimate, for area source sites with one engine the cost to purchase the necessary equipment for per engine increases from $568 to $1,067. However, even this estimate is well below the CPMS purchase and installation cost of $6,000 - $8,000 generated from recent discussions with CPMS vendors. (Table 1, below, lists the costs included in this estimate versus EPA's current cost estimates.) In addition underestimating purchase and installation costs, the EPA cost estimate fails to include the full expected annual operating expenses estimated of $5,900 - $7,900. 1 (Table 2, below, lists the costs included in the annual operational expenses.)

1 EPA assumes that 36 hours per year is required to operate, maintain and record information

from the CPMS. Impacts Associated with NESHAP for Existing Stationary SI RICE , p. 6 (June 29, 2010). Our research to date has not found the source of these annual operating estimates. Although still low for maintaining and reviewing data for any CPMS, EPA's estimates seem more appropriate for major sources with multiple engines and fall far short of the required manpower and time necessary to perform comparable operations for often remote, area sources with fewer engines per site.Exterran Petition for Administrative Reconsideration

NESHAP SI RICE Rule 75 Fed. Reg. 51570 (August 20, 2010)

-4- The operational costs are necessary to review and process the raw data generated by the CPMS and to evaluate operating events as required by the final RICE Rule.

The cost to evaluate temperature excursions compiled on a four-hour rolling average basis is a large annual operating expense that does not appear to be accurately included in EPA's cost estimate. Temperature excursions can occur based upon non-catalyst related events, such as ambient temperature, reduced engine loading or changes in fuel gas heating value. Likewise, production related events caused by changes in operating conditions, i.e., low suction pressure, high discharge pressure shutdowns or high liquid level shutdowns, will all produce excursions in the catalyst temperature. Mechanical shutdowns for safety and asset protection, such as excessive engine vibration and low engine oil pressure, will also trigger engine shutdown andresult in temperature changes to the catalyst. Under the final RICE Rule, these operationallyrelated temperature events must then be retroactively matched to the temperature excursion on the data logger. Any such retroactive data review requires significant labor resources or

contractor costs with no environmental benefit. Exterran believes that an alternative manual monthly or quarterly temperature check, as discussed below in Section II, would provide an equivalent compliance measurement with the added advantage of an immediate maintenance response at the site. Noteworthy, too, is the fact that the above-described pre-catalyst temperature excursions do not necessarily relate to or negatively impact catalyst performance and may not result in increased HAP emissions.

Table 1

Capital Expense Description Cost/Rate Qty/Hours Parts/Labor Total

Cost EPA

estimate Data Logger(s) $ 2,000 1 Parts $ 2,000 $ 614 CPMS Site plan development (contractor) $ 125 40 Labor $ 5,000 Not

estimated

DP sensors $ 250 1 Parts $ 250 $ 225

Data Logger installation $ 80 8 Labor $ 640 Not

estimated Thermocouple charge $ - 0 Parts $ - $ 40 Other (software, etc) $ - 0 $ - $ 188

Total $ 7,890 $ 1,067

Exterran recognizes that the labor costs for CPMS installation and operating expenses, in particular justifying the temperature excursions, are uncertain and may vary over time as new technological and less-labor intensive methods of evaluating data appear on the marketplace. However, any such technological solution is expected to bear a substantial cost itself and may not be viable for all companies. Future technological solutions notwithstanding, at this time the hours required to evaluate and compare temperature excursions to operation data is unknown and is represented in Table 2 as a range, with the lowest point in the range represented in the total

costs.Exterran Petition for Administrative Reconsideration

NESHAP SI RICE Rule 75 Fed. Reg. 51570 (August 20, 2010)

-5- Table 2

Operating Expense Description Cost

per Hour Hrs Total

cost per

hour Events

per year Total

hours

per

year Total Annual Operational Costs

Calibrate the Tcouple read device and other general

CPMS maintenance requirements* $ 80 1

$ 80 4 4

$ 320

Pull data from logger $ 80 5 $ 320 9** 45 $ 3,600 Justify temperature

excursions (contractor) $ 125 8-

16 $ 1,000 – $ 2,000 2 16 -

37 $ 2,000 – $ 4,000

Total 65 - 86 $ 5,920 – $7,920
* Additional annual and operating requirements may not be accurately represented on this preliminary chart and is subject to additional discussion upon further review by Exterran. ** This excludes three months every year because of currently existing preventive maintenance requirements.

Without providing any additional HAP reductions, the CPMS purchase and installation costs together with the labor intensive evaluation and reporting requirements increases EPA's expected cost per engine from $568 to $7,890 for purchase and installation only – plus an additional $6,000 - $8,000 for annual operating costs.

As allowed by the Clean Air Act, the high CPMS costs merit another review of the compliance costs imposed on 4SRB and 4SLB greater than 500 hp at area sources. This cost is especially burdensome considering the lack of any additional environmental benefit associated with the CPMS operation and the available alternatives to determining proper catalyst operation both already in the rule or readily available for consideration by EPA.

II. ALTERNATIVES TO CPMS AT AREA SOURCES WERE NOT ADEQUATELY

REVIEWED BY EPA

Given the multiple alternative means of compliance assurance, we question whether EPA considered all the viable alternatives to the additional cost, potential unreliability and technical challenges associated with installing and relying upon CPMS at area sources.

CPMS does not measure the emission reductions but rather continuously records the catalyst inlet temperature, ostensibly as an indicator of catalyst performance. However, as describedExterran Petition for Administrative Reconsideration

NESHAP SI RICE Rule 75 Fed. Reg. 51570 (August 20, 2010)

-6- above in Section I and as further detailed below, temperature is not necessarily the most reliable indicator of proper or improper catalyst performance and should be viewed together with other measurements, such as the differential pressure and performance tests, to more effectively evaluate compliance. Under the final RICE Rule, the CPMS temperature data must be measured every 15 minutes and then averaged on a four (4) hour rolling basis. The four (4) hour averages must be collected, evaluated and reported to the rule administrator every six (6) months.

Of course, the most direct evidence of compliance is the performance test currently required by the RICE Rule every 8,760 hours of operation. Beyond performance testing, the monthly measurement of differential pressure across a catalyst is the best indicator for catalyst performance. The differential pressure is better than temperature monitoring because it indicates whether a catalyst is plugged (as indicated by high pressure differential) or has been blown out or

d amaged by an engine backfire (as indicated by low pressure differential).

In lieu of the CPMS data collection and associated retroactive data review, we suggest that quarterly or monthly temperature checks, together with the required pressure readings and performance tests, would be more appropriate for the rural, unmanned sites that are area sources because it would provide for on-the-spot checks and immediate maintenance actions, as opposed to after the fact, data analysis conducted for each semi-annual report submittal.

Additionally, performance testing has documented instances where the engine exhaust temperature is within the allowed range for effective catalyst performance but the emission levels still exceed the allowed limitations. On the other hand, temperature excursions can occur based upon non-catalyst related events, such as ambient temperature, or a change in fuel gas quality without a detrimental impact to emissions.

As described above, there are several alternatives to the CPMS monitoring requirement which would achieve EPA’s goal of ensuring proper catalyst performance and effective emission reductions. EPA should reopen an administrative review for a full review of the alternatives instead of imposing costly CPMS measurements that do not add any additional benefit.

III. EPA FAILED TO PROVIDE ADEQUATE NOTICE OF AND OPPORTUNITY TO COMMENT ON CPMS REQUIREMENTS AT AREA SOURCES

Given the costs associated with CPMS at area sources, EPA failed to provide adequate notice or consider appropriate compliance alternatives at area sources, sites which usually have only one engine. The RICE Rule compliance requirements in Table 6 of the March 2009 proposed rule did not include CPMS requirements for SI RICE greater than 500 hp at area sources. Likewise, the Regulatory Impact Analysis ("RIA") for the proposed rule also failed to apply CPMS to area sources. Instead, the RIA stated that CPMS would be required for "large engine facilities." "Large engine facilities" was undefined in the RIA and without further definition in the RIA there was no clear indication that CPMS would apply to area sources. See Regulatory Impact Analysis (RIA) for Existing Stationary Reciprocating Internal Combustion Engines (RICE)

NESHAP , February 2009, Section 4.8.5, p. 4-35.Exterran Petition for Administrative Reconsideration

NESHAP SI RICE Rule 75 Fed. Reg. 51570 (August 20, 2010)

-7- Because neither the compliance requirements in Table 6 of the proposed RICE Rule nor the February 2009 RIA explicitly referenced CPMS for area sources, it did not appear that EPA was proposing to require CPMS for area sources. The distinction between area sources and major sources is significant because major sources are larger sites that typically already have infrastructure in place to more cost effectively implement a CPMS system (i.e., manned facilities with telemetry/monitoring already in place). It is only in the final RICE Rule that EPA applied CPMS requirements to area sources. Therefore, the objections raised in this petition "arose after the period for public comment." 42 U.S.C. § 7607(d).

Because affected parties such as Exterran did not know that EPA was proposing to require CPMS at area sources, EPA has not had the opportunity to review comments and data that would shed light on whether this requirement is justified. The CPMS requirement does not achieve any emission reductions that might warrant the cost imposed is without an accurate record evaluating or justifying its actual cost. EPA has failed to meet its legal obligation to justify its regulatory decisions with data, analysis and demonstrably rational decision-making. Motor Vehicle Manufacturers Ass'n v. State Farm Mutual Insurance Co., 463 U.S. 29, 43 (1983). To remedy this oversight, EPA should allow an additional administrative proceeding to review the costs of

and alternatives to CPMS at area sources.

IV. CONCLUSION

EPA promulgated several requirements in the final RICE Rule that will reduce emissions and improve engine performance through emission standards, work practice standards, and compliance and reporting requirements. However, EPA failed to provide adequate notice that CPMS would be required to demonstrate compliance for 4SLB and 4SRB SI RICE greater than 500 hp at area sources. Additionally, EPA failed to adequately respond to the cost concerns submitted during the comment period for CPMS application to major sources, which differ in many regards to the application of the same at area sources. Subsequent research indicates that EPA's estimate of $568 per engine is grossly underestimated for area sources. Exterran estimates that the full installation and labor costs applied on a single engine basis (versus averaged across four engines) increases the CPMS cost per engine to $7,890 for purchase and installation only, plus an additional $6,000 - $8,000 for CPMS annual operating costs.

EPA is faced here with a procedural violation that can easily be cured by reopening an administrative procedure to receive additional comments on the cost of alternatives and relative reliability to CPMS at area sources. In an administrative proceeding on the record, EPA should address the significant CPMS purchase and installation costs and operating expenses, including those described in this Petition. For all of the foregoing reasons, EPA should grant reconsideration of the relevant provisions of the RICE Rule to address the procedural and substantive failings of the CPMS requirement in an orderly fashion consistent with its obligations under the Clean Air Act, the Administrative Procedure Act, and other applicable

laws.