UNITED STATES ENVIRONMENTAL PROTECTION AGENCY R E SEARCH TRIANGLE PARK , NC 27711

Mr. Matthew Todd Reg ulatory and Scientific Affairs A merican Petroleum Institute 1220 L Street, NW Washington, D

. C. 20005

-4070 Dear Mr. Todd: 

## SEP 2 8 

## 2012

OFFICE OF AIR QUALITY PLANNING AND STANDARDS

Thank yo u for your letter of Ju l y 25, 2012, regarding the U.S. Environm e ntal Protection Agency's final rulemaking, " Oil and Na tural Gas Sector: New Source Performance Standa rd s and Natio nal Emission Standards for Hazardou s Air Pollutants Reviews." Your letter identified seve ral issues that the American Petroleum Institute (API) considers to be of immediate concern. You requested the EPA 's time ly clarification of its intent with regard to these is s ues. Be low are the iss ue s raised in your letter a long with our responses. The first i ssu e was presented in the body of your lette r ; the rema i ni n g issue s appeared in the attachment. We have retained the numbering from your attac hment for clarity. Page numbers used in our respon ses refer to the final rule published in the Federal Reg ister (77 FR 49490 , August 16, 2012). I ssue from the Body of the Letter 

### API Issue: "I also bring to your attention a separate issue that, we believe, could have significant and immediate implications sixty days from p ublication of the final ru l e in the F ederal Register. In the proposed ru l e, EPA c learly allowed venting of gas during t1owback when the combus tion of vapors i s infea s ib le and i t's our interpretation that the final ru le does not allow this. The same equipme nt to conduct a 'reduced emission completion' (REC) is needed to separate vapor s and route them to a combustion device during the initial per i ods of hydraulic fracture flowback

. As you know , the EPA provided a phase-in period for the REC requ i rements (until January 1, 2015) to allow adequat e time to manufacture this equipment to meet the new demands. 

### Therefore, we believe it is imperative that the EPA revise the regulatory text, prior to the effective date (60 days after publication in the Federal Register), to both allow venting and only require its minimization duri ng these periods." EPA Response: The ru l e does not prohibit venting of natural gas and vapo r during the ent i re flowback period following hydrau l ic fracturing, as your letter suggests. Al though th e regu latory language in sectio n 60.5375 i s not specific on this point, the recordkeeping req uire m ents for well completio n s in sect ion 60.5420(c)(l)(iii) exp licitly provide for logging , in hours , the " duration offlowback; d u ration of rec overy to the flow line ; duration of combustion; duration of venting

. . .''(e mpha s is added). This requirement confirms that the EPA antici pated some degree o f ve nting durin g so me portion ofthe flowback peri od.

lntemet Address (URL) • http://www.epa.gov Recycled/Recyclable • Printed with Vegetable 011 Based Inks on Recycled Paper ( Minimum 25% Postconsumer)2 We unders t and that the com p osition of the fl owback changes over ti m e during the flow back period

. Initi ally , the flowback consists of wate r , s and and frac turin g flui ds. Over tim e , liq uid fl ow decre ases and ga s and hydrocarbon va p or fl ow increases. See 76 FR 52738, 52757 (August 2 3 , 20 11 ). At so me point , th e a mo un t of gas reach es th e point that it is approachin g flammability and is of s uffi c ient vo lum e to operate a se p arator, wh ich is t h en u se d to s eparate and recover vario u s components of th e flowb ac k. Sec tion 60.5375(a) sets forth th e requirements for the handlin g of th e liquid and gas recovered from the separatio n pr ocess. Specifically , 60.5375(a)(l) requires that " recove red l iquid s" (crude o i l, co nd e n sate a nd produced water) be ro uted to their res pective storage vesse ls or re- in jected into the well or anot he r we ll. It requ ires that t h

e " r ecovered gas " (gas and hydrocarbon vapors) be routed to a gas flow line or co ll ec ti on system , reinjected in to the we ll or an o ther well , o r used as a n onsite fuel sou rce o r " fo r anothe r usefu l purpose ...." Section 60.5375(a)(2) and ( 3 ) require that " all salab l e gas mu st be rou ted to a g as flow l in e as soon as practicable " and, " in cases where fl owback emissions cann ot be directed to the fl ow l in e ," the fl owbac k e mi ssio n s must be captured and directed to a combustion dev ice. Accordingly , the term " flowback e mi ssio n s , " as used in sectio n s 50.5375(a)(2) and (3), refers to the recovered g as and vapor after se paration that canno t be directed to th e flow lin e. T hi s is in keeping with our appro ach of promoting the reco very of gas with intrinsic va lue. Because the initia l gas an d vapor are not " flowb ac k emissio n s , " they are not sub ject to the co mpl etion combustion r equir e ment in sect i on 60.53 75(a )(2) and (3). Add itionall y , s ectio n 60.5375(a)(4) impo s e s " a ge neral duty to safely max imi ze reso ur ce r e covery and minimize releases to the atmos ph e r e during flowback and subsequ ent recovery. " Acco rdin gly , we expect owners or operato rs to ro ute the flowback to th e separator as soon as practicabl e to allow t h e separated gas and recove red liq ui d s to b e co ll ec ted and any fl owbac k emissio ns to be com busted. Issues from the Attachment 

### Gas Well Completions API 

### Question 1: " T he r equirement in 60.5375(a)(l) to ' route the recovere d liquid s into one or more storage vessels ' is caus in g s evera l con cerns , including EPA did not defin e r ecovered liquids and because storage vessel i s defined later in the rule w hi ch excludes portable tanks on s ite less than 180 days. API believes that th e term 'recovered liquids ' means saleab l e hydrocarbon liqu i ds such as co ndensate or c rud e o il. That was clearly EPA's intent i n the proposed ru l e and the re i s n o evidence to indicate a change in the final rul e . " 

### la. "Did EPA 

### intend ' r ecovered liquids ' to mean saleable hyd rocarbon liquids, s uc h as condensate o r crude oil? " lb. " The t e rm ' sto rage v e ss e l ' as defined in the rule excl udes portable tank s on site less than 180 d ays. Portable tanks are often used during flowback fo ll owing h ydrau l ic fracturing. 

### Did EPA 

### intend to require recovered liquids to be placed in permanent storage v essels as defined in the rul e or can temporary or portable 'fractu re tanks' be used?" EPA 

### Response: As explained above , the te rm " recovere d liquids" refers to conde n sate, crude oi l and produ ced water recovered through the s eparatio n process. A lthough neith e r the proposed nor the fin a l ru le s define "recovered l iqu id s ," the discussion of the proposed NSPS for s torage vesse l s describes the storage of"crud e oil , conde n sate and produced wate r. " 76 FR 72763. Th e fi nal rule acc uratel y reflects our intent to require th ese liquids to b e r outed to " storage vesse ls , " which ma y be s ubject to contro l i n the rule d epending o n their VOC em iss i o n s r at e. The initial flowback (prior t o recovery throu g h separation) may b e routed to temporary "fracture tanks " as long as separati on of the wat er, condensate ,3 crude oil and gas occurs as soo n as practicable, consistent with the general duty to maximize re so urce r e covery and minimize release s to the atmosphere as required in s ection 60.5375(a)(4).
API Question 2: " Digital Photo Requirements. T here are mul tiple co ncern s with the addition of digital photograp h requirement for record keeping f or co mpletions. " 2a. "Did EPA intend allow the digital photograph as an alterna t ive to t he recordkeeping and reporting requirements?" 2b. "There are o nl y a few camera models that are available w ith GIS coordinates. Eve n cameras that have GIS capab ility do not have the lat i tude a nd longitude in this speci fi c format and 5 decimal s of a degree of accuracy. Does the d ig ital photograph have to meet the requirements of 60.5420(a)(l)(i) for 'the latitude and longitude coordinates for each well in dec imal degrees t o an accuracy and precision of five (5) decimals of a degree using the North American Datum of 1983'?" 2c. "Becau se cameras ar e not intrin sically safe for ope ra tion i n a potentia ll y explosive atmosphe re , there w ill b e so me discrepancy b etween the lat/long coordinate of the camera relati ve to the REC equipment. Is it sufficient that the latitude and longitude of the photograph is clos e to the well latitude and longitude?" EPA Response: Yes, submission of digital photographs to document compliance is an alternativ e to the standard annual reporting requirements. T his alterna ti ve is exp l a ined on pages 49499 and 495 27 of the final rule preamble and provided i n section s 60.5420(b)(2)( i ) and 60.5420(c)( l )(v). Section 6 0.5420(c)( l )(v) refers to 60.5420(a)(4), which specifie s th e records of the di gital photographs to be reported in li e u ofthe standard annual reporting requirements. The digital photograph recordkeepin g requirement s in sec tion 60.541 O(a)(4) were meant to apply only i

. n cases w h ere the owner or operator c hoo ses to take advantage of the s treamlined alternative annua l reporting opti o n . T he requirement for GIS coordinates to be speci fi ed to 5 decimal places exists only in the notific ation provis i ons at sec tion 60.5420(a)(2)(i) and do es not apply to the digital phot ographs described in sec ti on 60.54 10 (a)(4). With regard to lo cation ofthe camera, w e agre e that taking t he photo graph at a safe distance from the wellhead is prudent. Therefore, s ince sect ion 60.5410(a)(4) do es not require spec ification to 5 decima l pl aces , taking t he dig ita l photograph fro m a sa fe lo cation close to the well latitude and lo ngitude is acceptable as long as th e recorded l o n gitude and latitude are suffici ent to accuratel y id enti f y the s ubj ect well. API Question 3: "Processes during hydraulic fracturing

- There ar e proc esses performed durin g hydraulic fracturing that are not associated with flowback followin g hydraulic fracturing. API wou ld like confirm ation in guidance or the preamble that screenout s and coil tubing clean o uts are not s ubj ect to the requirements of the Oil and G a s NSPS for gas w ells ." 3a. "Screenouts- While infreque nt , a 'screen o ut' is the first attempt to clear the proppant (sand) that can plug the well bore. It involve s flowing th e well t o a fracture tank to achieve maximum ve lo city to carry the sand out of the we ll. A ltho ugh unlike l y, s mall amount s of gas and conden sate may b e part of the flowback fluids during screenout s. Are screen outs subject to the requirements of the Oil and Gas 

### NSPS for 

### gas wells? "4 3b. "Coil Tubing Cleanouts- If a screenout is unsuccessful in clearing the packed proppant (sand) from the we ll-b ore, then the we ll is typicall y ' jetted ' using a co il tubing unit. Th is invo lves running a strin g of coil tubing to th e proppant pack and jetting the well, typicall y with nitrogen gas, to di s lod ge the sand and provide su fficient li ft energy to flow it to s urface. Although not likely , it is possible to have small amounts of gas and/o r condensate in the flow-back fluids during suc h an operation. Are coil tubing cleanouts subject to the requirements of the Oil and Gas NSPS for gas wells?" EPA Response : The we ll completion standards fo r gas w ell affected fa c il iti es addr ess flowback emiss ions following hydraulic fracturing. As exp l a ined a bove , the term " flowback e mi ss ions," as u se d in sectio ns 50.5375(a)(2) and (3 ), refers to the recovered gas and vapor after separatio n that can not be d ir ected to the flow line

. Accordingly , any releases of gas or vapor during operation s tha t occ ur p rior to se paration , such as "screenouts" and "co il tubing cleanouts," are not " flow b ack e mi ss ions " and are not subj ect to the work practice standards for gas well affected facilities. API Question 4: "60.5375(a) s tate s ' for each well completion operation w i th hydraulic fracturing begun prior to January 1 , 2015, yo u must comply with the requirements of p aragrap hs (a)( 3) and (4) of thi s section

... ; optionally , you ma y compl y w ith the requirements of paragraphs (a)(1) through (4) of this section. ' API believe s thi s means that compliance with (a)(l) and (2) i s not required and that any recovery of natural gas or hyd roca rb on liquid s is unregulated before January 1, 20 15. Others h ave o pin ed that this interpretation wo uld make the language about ' paragraph s (a)( 1 ) thro u gh (4)' unn e ces s ary and its inclu s ion mandates complyin g with (a)(1)-(4) if any n atural gas or hydrocarbon liquids are recovered. If (a)(1)-(4) can be enforceable , then API has c riti cal issues concerning (a)(l)-(2) that hav e not yet been define d that must be re so l ved imme diately. Did EPA intend that hydrocarbon recovery before January 1, 2015 to be unregulated?" EPA Response: No, it was not the EPA 's intent for hydrocarbon reco very prior to January 1 , 2015 , to be unregulated. Al though co mplian ce with sectio n 60.5375(a)(l) and (2) are no t required unti l January 1 , 2015, section 60.5375(a)(4) requires owners and operators "to safely maximize re so urce recovery and minim ize releases to the a tm osphere during flowback and s ub seq uen t recovery." Thi s gene ral duty applies to a ll gas well affected facilities beginning on the effec tive date of the rule , October 1 5,2012. As we exp l ained in our respon ses to API's questions re garding th e issues of venting and recov ered liquid s, we consider hydrocarbon gas and liquid s recovere d throug h the separation pro cess to be valuable products. Therefore, routing t he recovered gas to the sa l es line and the recovered liquid s to s torage vessels after separa tion would sati sfy the general duty required in sect ion 60.5375(a)(4). API Question 5: " EPA did not respond to our concern that the combust i o n provisions would conflict with local regulations in the RTC document, even though they did summarize this co mment (see p.58). Durango, CO does not allow flaring, but it is no t du e to fire or explo sion h azar d per se. Are areas with local regulations (state , city, county, etc.) precluding flari ng exempt fr om the flaring requirements?" EPA Response: Yes , sources locate d in areas f o r which flaring is prohibi ted by sta te or local r egulations due to an y cond ition provided in section 60.5375(a)(3) and (f)(2) woul d quali fy for the exemption pro v ided in those sections. Although federal requirements pre-empt state and local reg ulati ons on the same matter , the NS PS e xe mp ts affected sources from the flaring r e quirement for safety and other reason s th at we believe to be the b asis for prohibiting flaring a t the state and/or local le ve l in most instanc es. Sources located in areas with s uch prohibi tion wo u ld qualify for the exemption.5



### Stora ge Vessels API Question 6: " API continues to believe that NSPS S ubpart 

### 0000 will app ly to approximately 28,000 storage v esse l s/ye ar as currently written. EPA believes that Subpart 

### 0000 will apply to only 304 storage vessels as indi cated by the TSD. One po ss ible explanation for t he differe nce between tank co unt i s confus ion about the basis of the 6 tpy VOC control threshold. API has based its estimate on uncontrolled emissions as di scu sse d in the Response to Comments. However, the TSD s tated that man y vessels would be under the 6 tpy VOC thre s hold as a result of s tate or local reg ulation s. This appears to support a 'federall y e nforceab le PTE' basi s for the 6 tpy threshold. 

### Did EPA i ntend the 6 

### tpy threshold to be based on 'federally enforceable PTE'?" EPA Response: Yes , on l y s torage vessels with poten tial to emit (PTE) of at leas t 6 tons per year (tpy) ofVOC wo uld b e regulated under the NSPS. In det ermining the PTE, the sou rce can take into account e mi ssio n limits from a legally and practically enforceable state rule , operating permit or other mechanism. 

### API Ouestion 7: " The pro visions of §60.53 9 5(a)( l )&(2) and §60.54 1 0(e) ( l)-(4) appl y the stan dard s to storage vesse l s ' at a we ll s ite .' Furthermo re, §60.5 412 (a) c ites §6 0.5 395(a)( l )&(2), and is thus spec i fi c to storage vesse ls at a we ll site. " 

### 7a

. "Did EPA only intend these sections to apply only to storage tanks at well sites?" 7b. "What if any requirements apply to storage vessels at other production facilities , such as at compressor stations a nd gas plants?" EPA Response: The EPA d id not intend only sto rage vessels located at well s ites to be subject to t he NSPS. Sect i on 60 .5395 c on t ai n s standard s for "sto rage vessel affected faciliti e s ," w hich the final rule d efines to includ e no t only those at w e ll sites but " each single storage vessel located in the oi l and natural gas production segment, natural gas proce ssing seg ment, or natural gas trans mission and storage seg ment" 60.5365(e). Sec tion 60.5395 requires 95 pe rcent reduction ofV OC e mi ss ions if the affected fac ility emits 6 tpy or more of VOC. The pro visions at 60.5935(a)(l) and (2) sp ec ifi c to "well sites" prescribe th e timing for d etermining the V OC emission rate and, if applicable, compliance with 95 percent red uction requirement fo r storage vesse l affected facilities at well s ites. Specifically, wher e there are no we lls already in p roduc tion, the fmal rules prov ide a 30 -day period fr om startup for determinin g the VOC emission rate and , if the V OC emissio n rate i s determined to be 6 tpy or more , another 3 0 d ays for the contro l device to be installed and operationa l. 

### 77 FR 49498. The VOC e mi ssio n determination and compliance are required upon startu p if the affected facility is located w here there are one or mo re we ll s already in production. As explained in the preambl e to the final rule , the 30 -day estimation and in stallation periods are not necess ary where one or more we ll s are in produc ti on b ecause VOC emission es timate s can be made u si ng information on the li quid production characte ri sti cs of the existing well s. 

### 77 FR 49500. See also Response to Comment, pages 140-141.

### 6 API Question 8: "A common practice for controlling storage vessel emis s ions in the o il and natural gas production segment is to route vapors from the storage vessels back to the i nlet line of a separator , to a sale s gas line, or to some other line carrying hydrocarbon fluids. A compressor is used to boost the recovered vapors into the line, that is often referred to as a 'vapor recovery unit ' (VRU), even though it does not invo l ve an end-of- line contro l device. EPA did not include exc l usion for this type of a VRU , but also did not provide any regulatory text regulating this type of VRU. Did EPA intend to exclude VRUs that recycle gas back to the process similarly to NESHAP, Subpart HH?" EPA Response: We do not consider VRUs that route recovered gas and v apor back to the process to be control devices, which is consistent with their treatment under NESHAP subpart HH

. As your letter note s, the final amended storage vessel standards in subpart HH include an option for conveying emissions through a closed-vent s ystem to a proces s natural gas line, as rec ommended by a commenter. See s ection 63.766(b)(3) (77 FR 4967 1); see also RTC page 260. A l though this option is not specifically provided in subpart 

### 0000 , storage vessel affected sources are no t prohibi ted from using this option to meet the 95 percent VOC reduction standard in s ubpart 

### 0000. We believe that compliance with the NSPS can be demonstrated with this option for a s torage vessel equipped with a cover that meets the conditions in §60.5411 (b ) and connected to a proce ss line through a closed-ve nt s ystem that meets the c o nditions in§ 60.5411(a). Performance Testing API Question 9: "Initial performance testing requirements and the storag e vessel comp li ance date appear to be in conflict. §60.5410(e)(5) specifies that initial performance tests must be conducted with I 80 days of initial startup or within 180 days of publication of the rule in the Federal Register. However, s torage vessels are not required to be equipped with controls until 1 year a fter publication in the Federal Regi s ter, per §60.5395. Does EPA intend to reconcile these schedules?" EPA Response: This date wa s corrected and is accurate in the published fin a l rule. Section 60.541 O(e)(5) now spec i fie s"

... within 180 day s after initial startup or wi t hin 180 days of October 1 5 , 2013 , whichever is later

..." Compressors API Question 10: " In § 60.5420(a)(l) , EPA specifically excluded gas well, pneumatic controller, and s torag e vessel affected fa c ilities from the notification requirements in §60.7(a) ( l ), ( a)(3) and a(4). However, EPA did not specificall y exclude reciprocating and centrifugal c o mpre s sor affected faciliti es in the same paragraph. Did EPA intend for owners or operators to submit notifications required in §60.7(a)(l), (a)(3) and a(4) for centrifugal and reciprocating compressor affected facilities? If so, what is unique about compressors to justify the additional notification requirements?" EPA Response: Yes, compressors are subject to the General Provisions noti fi cation requirements. However , we believe the impacts will be small , given the simplicity of the no tification requirements and relatively small number of aff e cted compressors anticipated. Equipment Leaks API Question 11: " Definition ofEquipment. As currently defined in §60. 5 4 3 0 , 'Equipment means e a c h pump , pressure relief devi ce, open-ended valve or lin e, valve , and .flange or othe r connector that is in7 VO C s ervice or in w e t ga s s ervice, and any devi ce or s y s tem required b y th is s ubpart. ' Witho ut a clarification from EPA and a revision to t he rule language , this same phras e in Subpart 

### 0000 cou ld be interpreted as to include not only any device or s ystem required by the equ i pment leaks provisions of the rule, but also those required by provisions for storage vessels, compressors , comp letions, e tc. This would grea tly expand the scope of the equipment leaks program under Subpart 

### 0000 when compared with Subpart KKK. API believes this was not EPA's intent. 

### Did EPA intend the phrase 'any device or system required by tlzis subpart' 

### in the definition of 'equipment' to be limi t ed to the device or system required by the equipment leak provisions of §§60.5400, 60.5401, and 60.5402?" EPA Response: The equipment leak provisions in subpart 

### 0000 apply o n ly at onshore gas proces s ing plants. The phrase " any device or system required by this subpart" means only the equipment (except compressors) within a proce ss unit as presented in the " affected facility" description in section 60.5365(f). These requirements , which refer only to onshore gas processin g plants, inc lude only the equipment leak provi sions in sectio n s 60.5400,60.5401, and 60.5402 as API mentioned and the associated recordkeeping and reporting provisions for onshore gas process i ng plants in sections 60.5421 and 60.5422. The definition of "equipment " in section 60.5430 i s not meant to prescribe the scope of coverage under the equipment leak standards. Con verse ly , the scope of the coverage of the equipment leak s tandards is dependent on the defini tion of the affected facility as expl ained abo ve. 

### Other API Question 12: " Prior to rule proposal, EPA had indicated to [API] that provisions in the rule would be made for new, alternative control technologies. Currently, the final rule i s prescriptive for storage ves s el controls , and there are no provisio n s in the rule for new or alternative te chnologies. This would s ee m to stifle innovation of emissions control. 

### Was it EPA's intent to explicitly prohibit any new control technologies from ever being used or is it an inadvertent omission to not include language that allows for review and adoption of new technology?" EPA Response: The pe rformance standards for storage vessels in section 60

. 5395 require 95 percent control of VOC emissions but do not prescribe the means of achieving that reduction. Although section 60.5395(b) presents requirements that must be followed that correspond to various means of emissions control, this section doe s not limit the operator to the spec ific controls mentioned. For example , if an operator chooses to use a combustion de vice to achieve 95 percent control , then the operator must provide a cover for the storage vessel and a closed vent system to route emi ss ion s to the combustor

. Howeve r , the rule does n o t limit the operator to the te chno l ogies listed. Regarding provisions for review and adoption of new or alternative techn o log ies , we solicited comment in the proposal on approaches to allow temporary field testing of technolo gie s in deve lopment. We sought suggestions that may include not only established procedures under the C lean Air Act and its implementing regulations , but also new approaches to app ly or interpret these provisions to avoid impeding innovation w hi le remain in g environmentally responsible and legal.8 We rece ived very few comments and, while all were supportive of al l owin g testing of innovative technology , none provided s ubstant ive suggestions on potential app roache s. Thus, we did not include provisions in the final ru le. Again , th ank you for yo u r letter. I hope th e above responses h e lp clar i fy t he E PA ' s inte nt in t he fi na l rule.

cc: Dav id Cozzie, SPPD Bruce Moore, SPPD Sector Po lic ies and Pr og rams Divis i on