# Addressing Air Emissions from the Oil and Natural Gas Sector: New Source Performance Standards 

# and National Emission Standards for Hazardous Air Pollutants



# Briefing for OMB June 22, 2011

# Overview • Background

– Litigation and Schedule

– Oil and gas operations overview



## – Strategy 

# • New source performance standard (NSPS) technology review and recommended improvements 

# • Risk and technology reviews (RTR) for maximum achievable control technology (MACT) standards

– Oil and Gas Production

– Natural Gas Transmission and Storage

– Recommended improvements 

# • Potential issues 2

Draft Deliberative: Do not cite, quote, or distribute.

# New Source Performance Standards (NSPS

# ) • Authority provided under section 111(b) of Clean Air Act • Regulate new (i.e., constructed or modified) sources; primarily 

# target the following pollutants:

– VOC (ozone precursors)

– NOx (ozone precursors)



## – Sulfur dioxide (SO 2

## )

– Nitrogen dioxide (NO 2

## )



## – Particulate matter (PM)

– Carbon monoxide (CO)

– Lead 

# • Concept 

# – make new facilities perform as well as the best existing 

# facilities (―best system of emission reduction‖) • Must be reviewed every 8 years to determine whether technology 

# advances warrant updating the requirements 3

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# National Emission Standards

for Hazardous Air Pollutants (NESHAP) • Section 112 of Clean Air Act requires EPA to control hazardous air pollutants (HAP) from new and existing sources 

## • Pollutants of primary concern from oil and natural gas sector:

– benzene, toluene, ethylbenzene, mixed xylenes (BTEX)



## – n - hexane 

## • Concept - Standards are technology- based; require the maximum 

## achievable control technology. • Requires risk and technology review (RTR) (CAA sections 112(f)(2) and 

## 112(d)(6))

– One -time residual risk assessment 8 years after promulgation to determine 

## if existing rule protects public health with an ample margin of safety

– Technology review every 8 years to determine if technology advances warrant updating the requirements 4

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# What We Have Done So Far
• Two NSPS rules

– 1985 NSPS – covers VOC leak detection and repair at gas processing 

## plants (facilities that remove natural gas liquids from field gas)

– 1985 NSPS – covers sulfur dioxide (SO 2

## ) emissions from gas processing 

## plants 

# • Two NESHAP rules

– Oil and Natural Gas Production • 1999 MACT – covers some glycol dehydrators, storage tanks, and leak 

### detection • 2007 Area Sources – covers only glycol dehydrators



## – Natural Gas Transmission and Storage • 1999 MACT – covers only glycol dehydrators 5 Draft Deliberative: Do not cite, quote, or distribute.

# Litigation and Schedule

• 2009 WildEarth Guardians and San Juan Citizens Alliance 

## deadline suit • February 2010 consent decree • Proposal July 28 (consent 

## decree deadline) • Final Feb. 28, 2012 (consent decree deadline)
6 Drilling Rig Draft Deliberative: Do not cite, quote, or distribute.Source: Adapted from American Gas Association and EPA Natural Gas STAR Program 

# Oil and Natural Gas Operations

Crude Oil to Refineries (not in this sector) 

### Production & Processing 1. Drilling and Well Completion 2. Producing Wells 3. Gathering Lines 4. Gathering and Boosting Compressors 5. Gas Processing Plant

7 3 1 2

4 5 6 7 8 10a 10b 10c 10d 9 

## Transmission & Storage 6. Transmission Compressor Stations 7. Transmission Pipeline 8. Underground Storage 

## Distribution (not covered by these rules) 9. Distribution Mains 10. Regulators and Meters for: a. City Gate b. Large Volume Customers c. Residential Customers d. Commercial Customer Oil and natural gas systems encompass wells, gas gathering and processing facilities, storage, and transmission and distribution pipelines. These components are all important aspects of the natural gas cycle — the process of getting natural gas out of the ground and to the end user.

# Oil and Natural Gas Sector in Perspective

• 1.1 million producing oil and gas wells

– 500,000 producing gas wells

– 11,400 new fractured gas wells completed per year

– 14,000 existing gas wells re -fractured and completed per year 

### • 600 gas processing plants 

### • 3,000 gas transmission compression stations (there are thousands more gathering and boosting stations not 

### included in this number) • 1.5 million miles of gas pipelines Pollutant Emissions (tpy) (excludes engines and boilers) 

### NOx 

### 15,000 SO 2 

### 28,000 VOCs 3,000,000 

### HAP 130,000 GHG (Methane) 16 million tons (300 MMTCO 2

### e)
8 

## Note: The Oil and Natural Gas Sector accounts for 40% of all U.S. methane emissions. This is about 4% of all U.S. GHG emissions.

Draft Deliberative: Do not cite, quote, or distribute.

# Sector Strategy
• CAA limits what we can achieve through MACT

– Cannot aggregate wells and associated equipment to make a major source

– Generally cannot list wells as area sources 

## • Get significant volatile organic compound (VOC), hazardous air pollutant (HAP), and methane reductions through rule improvements

– NSPS: control 1 million tpy VOC from new and modified sources (including completion and workover of fracked wells); 36,000 tpy HAP co - benefits

– MACT: control 1,300 tpy HAP at new and existing sources; VOC and methane co benefits 

## • Achieve methane co - benefits from new/modified sources

– 3.4 million tons, ~ 65 MMT CO2e



### – About 22% of this sector’s methane emissions 

## • One FR package

– Review of two NSPS rules (significant expansion of VOC NSPS)

– Risk and technology review of two MACT rules (significant improvements) 9

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# NSPS Review
• Existing NSPS covers only natural gas processing plants

– No technology update is warranted for the SO 2 

## NSPS

– Propose revision to reflect advancement in VOC equipment leak control at gas processing plants 

# • There are many unregulated VOC emission sources

– Well completions (and re - completions)



## – Liquid unloading from gas wells

– Equipment leaks at upstream (exploration and production) operations



## – Reciprocating and centrifugal compressors

– Pneumatic devices



## – Storage vessels (condensate and crude oil tanks)

– Produced water ponds 10

Draft Deliberative: Do not cite, quote, or distribute.

# Recommended NSPS Improvements
• Completion of new hydraulically fractured gas wells

– About 9,600 completions of new wells annually are not controlled 

## • Re - completion of existing (pre - NSPS) fracked gas wells are ―modifications‖

– Completion following re -fracking is the same process as a new completion and has emissions of similar magnitude and composition as an original completion



### – About 10,600 re - completions annually would fit our criteria but are not controlled 

## • Recommendation: Regulate all completions of fracked wells (new and modified)

– Require combination of ―reduced emissions completion‖ (REC -- also referred to as ―green completion‖) and flaring for most fracked wells • achieves 95% VOC reduction and 90% recovery of salable natural gas



### – Require flaring in situations not meeting criteria for REC where flaring is not a hazard

– Control is not cost effective for oil wells and non -fracked gas wells

11 Reduced Emissions Completion (REC) Equipment Draft Deliberative: Do not cite, quote, or distribute.

# Recommended NSPS Improvements (cont’d) • Compressors (gathering/boosting through transmission/storage)

– Centrifugal – require dry seals, seek comment on controlled wet seals as equivalent

– Reciprocating – require replacement of rod packing at 24,000 hours of operation (3 years for most compressors in regular use)

– Not cost effective for well pad compressors 

### • Storage vessels (crude oil and condensate tanks)

– Throughput > 1 bpd condensate or 21 bpd crude (6 tpy VOC) – require 95% control

– Throughput < 1 bpd condensate or 21 bpd crude (<6 tpy VOC) – low emissions and high costs do not warrant control 

### • Pneumatic devices

– Require non - gas - actuated devices (instrument air systems) at gas processing plants

– Require ―low- bleed‖ controllers (gas emissions < 6 scfh ) at other facilities

– Exempt applications requiring high - bleed controllers due to functional requirements 

### • Equipment leaks

– Leak detection and repair (LDAR) already required for gas processing plants under existing NSPS

– Upgrade LDAR to lower leak threshold (500 ppm vs. 10,000 ppm) at gas plants

– LDAR not cost effective for production or transmission/storage segments

– Seek comment on ―look and fix‖ screening using IR camera at production facilities 

### • Produced water ponds

– Not enough data to propose controls at this time

– Raise in preamble; solicit comment and data on emissions and control techniques for later consideration 12

Draft Deliberative: Do not cite, quote, or distribute.Emission Point

or Activity VOC

Reduction (tons/yr) Methane

Reduction (tons/yr) VOC Cost

Effectiveness ($/ton) Methane Cost

Effectiveness (($/ton) Total

Nationwide Costs (w/o savings) ($ million/yr) Total Nationwide Costs (w/ savings) ($ million/yr) Well Completions 0.9 million 3.3 million (49) to 782 (14) to 217 712 (45) Processing Plants (equipment leaks) 392 1,411 2,508 to 3,343 697 to 928 1.3 1.0 Compressors (reciprocating) (centrifugal) 2,466 337 12,915

4,949 (297) to 445

(9,102) to 951 (57) to 94

(620) to 65 1.2 0.3 (0.7)

(3.1) Pneumatics (production) (trans/storage) 25,210 6 90,685

212 (821) to 13

262 (228) to 4

7 0.3

<0.1 (20.7)

<0.1 Storage Vessels ( > 6 tpy VOC ) 29,654 6,490 143 to 149 652 to 680 4.4 4.2 TOTAL 1.0 million 3.4 million

65 MMT CO2e $ 738 million ($ 45 million) (Net Savings) 

# Estimated Impacts of NSPS Improvements

13 Note: ―Savings‖ above are realized through recovery of salable natural gas product and through reductions in operation and maintenance costs. Total costs shown include $18.8 million of reporting and recordkeeping costs. Draft Deliberative: Do not cite, quote, or distribute.14



# MACT Source Categories
• Oil and Natural Gas Production

– Tanks with flash emissions

– Equipment leaks

– Glycol dehydrators (area sources subject to GACT) 

## • Natural Gas Transmission and Storage

– Glycol dehydrators 

## • Highest HAP emission levels: 

## benzene, toluene, ethylbenzene, xylenes (BTEX), and hexane 

## • Both MACTs provide exemptions and cutoffs, leaving significant emissions unregulated Glycol Dehydrator Draft Deliberative: Do not cite, quote, or distribute.

# MACT Analysis
• No revision based on RTR review

– Advancement in controlling equipment leaks not cost effective

– No technology advancement is identified for glycol dehydrators and storage tanks 

# • Propose MACT for currently unregulated emissions



# – Glycol dehydrators • Establish limits for small dehydrators (<3 MMcfd Production; <10 

## MMcfd Trans/Storage)



# – Storage tanks • Regulate all crude oil and condensate tanks at major sources • Remove throughput, API gravity, and gas/oil ratio criteria 15 Draft Deliberative: Do not cite, quote, or distribute.Emission Point or

Activity Facilities

Requiring Control HAP

Reduction (tons/yr) HAP

Reduction (percent) HAP Cost

Effectiveness ($/ton) Total Costs ($ million/yr) Small Dehydrators (Production) 115 458 57 7,600 3.5 Small Dehydrators (Transmission/Storage) 19 243 88 1,500 0.4 Storage Vessels 376 589 72 16,600 9.8 TOTAL 1,290 $16 million * 

# Estimated Impacts of proposed MACT for currently unregulated emissions

16 * Note: Total cost includes $2.3 million in reporting and recordkeeping costs

Draft Deliberative: Do not cite, quote, or distribute.

# Conclusions from the Risk Review • Acceptability Determination – Baseline

– Actual emissions for the Production category pose acceptable risks (maximum individual risk (MIR) = 40 in one million, noncancer risks low); Allowable emissions from the current compliance alternative to MACT standard pose unacceptable risks (MIR = 400 in one million) • Proposal – remove the existing alternative to bring allowable well below 100 in one million

– Actual & allowable emissions from the Transmission category pose acceptable risks 

### (MIRs up to 90 in one million, noncancer risks low

## ) 

## • Ample Margin of Safety Determination

– Recommended changes to the MACT are cost effective and will reduce HAP emissions, including benzene, thereby reducing cancer risks • MIR based on actual & allowable emissions will be 40 in one million (for Production) 

### and 20 in one million (for Gas Transmission) after the proposed controls

– Proposed changes will reduce the worst - case acute hazard quotients for benzene from 10 and 9 to 6 and 9 for the two categories (based on the REL), and to 0.1 and 0.07 

### (based on the AEGL- 1)

– Facility-wide: population with risks above 1 in one million is higher; this will be addressed by the RICE MACT 

## • After changes, the standards will provide an ample margin of safety to protect public health 17

# Demographic Distribution of Cancer Risks

• For the Transmission category, results suggest African Americans may bear a disproportionate facilitywide risk burden; however, the majority of this burden is due to RICE • For the Production category, results suggest some minorities (primarily Other & Multi - racial & Hispanic or Latino) may bear a disproportionate risk burden; however, the MIR is well below 100 in 1 million (MIR = 30) Total All Minority (%) African

American (%) Other and

Multiracial (%) Hispanic

or Latino (%) Native

American (%) Below

Poverty Level (%) Over 25

w/o HS Diploma (%) Nationwide Demographic Breakdown 285,000,000 25 12 12 14 1 13 13 MIR (in1 million) Population With Risk Greater Than 1 - in - 1 million at Baseline Transmission/Storage Source Category 90 2,500 8 6 1 1 0.1 17 20 Transmission/Storage Facility-wide 90 99,000 42 40 2 2 0.2 20 15 Production Source Category 30 160,000 38 12 25 22 0.7 14 10 Production Facility-wide 30 597,000 39 8 30 34 1.3 19 16
18

Draft Deliberative: Do not cite, quote, or distribute.

# Potential Issues • Industry

– Completions of re -fracked existing gas wells (have been assumed by industry not to be modifications under NSPS)

– Removal of throughput, API gravity, and gas/oil ratio criteria from the definition of ―storage vessel‖ under the MACT

– Elimination of exemption and throughput thresholds for dehydrators 

# • Environmental groups

– Public groups will be strongly supportive of broad improvements to these rules

– Litigants and others will likely be disappointed that GHG is not 

## regulated directly and that most existing sources are not affected 19 Draft Deliberative: Do not cite, quote, or distribute.

# Appendix

20

# Oil and Gas NSPS and NESHAP Outreach: Industry

21 

### • Public Stakeholder meetings in CO and TX in August 2010


### • In addition to public meetings, EPA has met extensively with interested industry stakeholders since March 2010:

– American Petroleum Institute (API), Interstate Natural Gas Association of America 

### (INGAA), British Petroleum, Chevron, ConocoPhillips, Devon, Encana, Enterprise, ExxonMobil, Marathon Oil, Shell
• API has been very active in providing pre - proposal comments to EPA:

– Represents more than 400 oil and gas member companies



### – Meeting discussion topics included: available emissions data and estimation methodologies, latest control technologies and applicability, rule timeline/status, etc.

– Submitted detailed pre - proposal comments and supporting information to EPA 

### (February 2011); major comments addressed by EPA in development of proposal *Note: All meeting summaries and pre - proposal comments will be available in docket MarchApril 2010 • Four informational meetings: API, BP and Devon • INGAA Meeting and Presentation to EH&S Managers July 2010

• Meeting with API on emission control technologies Aug 2010

• Public Meetings in TX and CO • Targeted public meeting notice to major trade associations Sept. 2010

• Conference call with API on available information on emission sources and emission controls Oct. 2010

• API meeting follow-up to September conference call Jan. 2011

• Conference call with API to notify of revised timeline Feb. 2011

• API submits pre-proposal comments • Follow-up call with API on preproposal comments June 2011

• API follow-up meeting on preproposal comments Draft Deliberative: Do not cite, quote, or distribute.

# Oil and Gas NSPS and NESHAP Outreach:

NGOs, States, and Tribes

22 

### • In addition to public meetings, EPA met extensively with interested stakeholders 

### from NGOs, states and tribes:

– NGOs: Environmental Defense Fund (EDF), WildEarth Guardians, Wyoming Outdoor Council (WOC), Oil & Gas Accountability Project (OGAP), Natural Resources Defense Council (NRDC), several others

– States and State Entities: Region 3 and Region 6 states , WY, CO, Western 

### States Air Resource Council (WESTAR), Western Regional Air Partnership (WRAP)

– Tribes: National Tribal Forum, regional tribal conferences, Alaska tribes
• NGOs, States, and Tribes have expressed strong support of EPA’s early outreach efforts to date on NSPS and NESHAP Feb.
– April 2010
• Presentation at WESTAR /WRAP Meeting • Presentation to Region 6 States • Presentation to Region 3 States July 2010
• Presentation to National Tribal Forum on Air Quality • Presentation at InterTribal Environmental Council Annual Meeting • EPA Multi-NGO conference call Aug 2010

• Public Meetings in TX and CO • Presentation to WRAP • Meetings with CO and WY • Presentation at Fort Belknap Tribal Energy Conference Sept. 2010

• Follow-up calls with CO and WY • Region 10 Tribal Leaders Summit Oct. 2010

• Region 10 Alaska Tribes conference call • EPA OAQPS meeting with EDF, WOC, and OGAP Dec. 2010

• EPA AA meeting with EDF, WOC, and OGAP Draft Deliberative: Do not cite, quote, or distribute.

# What is Involved in the Technology Review?

• The CAA requires that we review MACT standards, considering advances in practices, processes, and control technologies.
• This allows us to tighten existing MACT standards with cost - effective 

## controls.

23

# What is Involved in the Risk Review? • Decision process for residual risk

– If maximum individual cancer risk (MIR) is less than one - in - 1 million and there are no other health impacts, then no further assessment is needed.



### – If MIR is greater than 100 - in - 1 million or other significant health impacts are identified, risks are ―unacceptable‖ and must be reduced (this is not a bright 

### line; uncertainties and other health factors need to be considered in this decision).

– If MIR is between one and 100 - in - 1 million, we tighten the standards if cost 

### effective controls are available to provide an ―ample margin of safety.‖

– Also consider other endpoints, including noncancer effects, population risks, 

### facility wide risks, and environmental impacts.
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# Cancer Risk Assessment:



# Baseline and Post- Control Risk Estimates Source Category and Number of Facilities Modeled Cancer MIR (in - 1 million) Cancer Incidence (cases per year) Population with cancer risks at or above 1 - in - 1 million Based on actual emissions Based on allowable emissions Baseline After

Control Baseline After

Control Baseline After

Control Baseline After Control Oil and Natural Gas Production – 990 Facilities 40 40 400 40 0.02 0.02 160,000 160,000 Natural Gas Transmission and Storage - 321 Facilities 90 20 90 20 0.001 0.0002 2,500 600 

## ► Cancer risk estimates are between one and 100 - in - 1 million (based on actual emissions); benzene is the primary risk driver.

# Chronic and Acute Noncancer Risk Assessment:

Baseline and Post - Control Risk Estimates Source Category and Number of Facilities Modeled Max Chronic Noncancer HI Max Acute Noncancer HQ Based on actual emissions Based on allowable emissions Baseline After

Control Baseline After Control Baseline After Control Oil and Natural Gas Production (ONGP) – 990 facilities 0.2 a 0.7 a 10 (REL) b (benzene) 0.1 (AEGL- 1) (benzene) 6 (REL)

(benzene) 0.1 (AEGL- 1) (benzene) Natural Gas Transmission and Storage (NGTS) – 321 facilities 0. 4 a 0.8 a 9 (REL) c (benzene) 0.07 (AEGL- 1) (benzene) 9 (REL) c

(benzene) 0.07 (AEGL- 1) (benzene) Footnotes : a The max Chronic Noncancer HI is less than 1; therefore risks after controls were not estimated.

b 46 Production facilities (5% of total) had baseline Acute HQs > 1 using the Reference Exposure Level (REL) c 15 Transmission & Storage facilities (5% of the total) had a baseline HQ > 1 (using the REL). Interpretation of Acute Risk Results : • The REL is quite protective; exceeding it does not necessarily indicate an adverse health effect. • The highest estimated exposure after controls is about 5 times lower than the AEGL- 1 (Max HQAEGL- 1 = 0.2 ). • Acute exposure estimates are worst- case. • Overall, we conclude acute noncancer adverse effects are unlikely, especially after controls.27 

# Overall, we conclude significant acute adverse effects are unlikely:

– Acute exposure estimates are worst case • Assumed 10 times actual hourly emission rate for peak short -term emissions 

## • Assume peak emissions, worst - case meteorology, and human presence directly downwind coincide 

## • More uncertain than chronic risk estimates • Facilities commonly located in sparsely populated areas, so human presence less likely



## – The REL is quite protective for acute noncancer risks; exceeding it 

## does not necessarily indicate an effect

– Max exposure is 5X lower than the AEGL - 1 (i.e., max HQ AEGL- 1 

## = 0.2) • The AEGL- 1 is a level at which mild effects can occur after short -term exposure. These effects are not disabling and are reversible upon cessation of exposure. 

# Interpretation of Potential Acute Noncancer 

# Risks for both source categories

## • Chronic Cancer Risk

– 33 facilities have facility-wide cancer MIR of 10 or higher (17 in Production, 16 in Transmission & Storage)

– Maximum facility-wide cancer MIR for oil and natural gas production is 100 in - a- million • Driven by nickel from oil -fired boilers and formaldehyde from RICE



### – Maximum facility-wide cancer MIR for natural gas transmission and storage is 200 in - a

### million • Driven by formaldehyde from RICE



### – Where facility-wide risks are higher than 100 in a million, the source category contribution is low

– RICE emissions are being addressed by the RICE MACT 

## • Chronic Non - cancer Risk • Maximum facility-wide HI for oil and natural gas production is 9; for natural gas transmission and storage it is 80

– Driven by acrolein from RICE

– The source category contributes less than 0.4 to the HI in all cases 

# How do the Facility-wide Risks Compare to the Source



# Category Risks?

28