# E C 

# / R Incorporated Providing Environmental Technical Support Since 1989

1 MEMORANDUM

TO: Bruce Moore

, EPA/OAQPS/SPPD/CCG

FROM: Bradley Nelson, EC/R, Inc.

DATE: December 30 , 201 1

SUBJECT: Summary of the December 1 4

, 20 11

, Meeting with the American Petroleum

Institute (API) and the U.S. Environmental Protection Agency to D iscuss the Proposed Oil & Gas NSPS/NESHAP

I. INTRODUCTION

The American Petroleum Institute ( AP I) requested this meeting with EPA to discuss questions on the proposed Oil and Gas NSPS (40 CFR Part 60, subparts KKK, LLL, and OOOO) and NESHAP (40 CFR Part 63, subpart s HH and HHH ). This meeting summary will be available in the docket for this rulemaking (Docket ID No. EPA

- HQ

- OAR

- 20 1 0

- 0 505 ). The proposed rule

for the oil and natural gas sector wa s published in the Federal Register on August 23, 20 11 (7 6

FR 52738 ).

II. ATTENDEES

The following is a list of participants in the meeting.

U.S. Environmental Protection Agency

David Cozzie Greg Nizich Alex Macpherson

API and Member Organizations Matt Todd, API John Wagner, API Grover Campbell, Chesapeake Energy Marish Singh, Occidental Oil & Gas Christopher Colmen, Hess Corporation Darren Smith, Devon Energy Joe Leonard, Devon Energy Clint Gill, Conoco Phillips David Simpson, Mule Shoe Engineering2

Roger Zygment, Shell Jenny Yang, Marathon Reid Smith, BP Tom Monahan, XOM Dana Wood, BP Rob Ferry, TGB Clay Freeberg, Chevron Jeff Adams, BP

EC/R Incorporated

D avid Hendricks Bradley Nelson

III. SUMMARY OF DISCUSSION

David Cozzie opened the meeting by stating that the comment period for the proposed rules had

ended and EPA could answer clarifying questions from the group, but could not provide any responses to comments on the proposed rules. EPA received approximately 150,000 comments, however only about 150 of the comments that were received were considered to be substantive.

He also stated that the draft final rule would be sent to the Office of Management and Budget (OMB) in mid

- February for a 30

- day review and the final rule is scheduled to be promulgated on April 3, 2012.

API asked EPA if they had reviewed the comments and had a ny questions. EPA responded that they have reviewed some of the comments and did not have any questions at this time. Mr. Cozzie also noted that questions regarding the NSPS should be directed to Bruce Moore and questions regarding the NESHAP should be d irected to Greg Nizich.

API started the meeting by stating that their main comment was the breadth of the applicability of the proposed rules, most notably the requirements that include control technologies. The group believes that they will be unable to comply with the rule because of the unavailability of control equipment for well completions and storage vessels. EPA asked if any manufacturers of control equipment commented on the proposed rules. The API group responded that there was not enough time during the comment period to contact vendors regarding the availability of control equipment. One member noted that they had experienced issues with obtaining control equipment in WY.

API thanked EPA for the comment extension on the proposed rules. API stated that the general structure of their comments includes an executive summary that summarizes the main issues and includes sections on the general issues on each part of the proposed rules. The sections also include suggestions on revised text, which is also compiled in the appendix. If EPA has any questions or needs any additional information regarding a comment they should contact Matt

Todd at API.3

The first topic of discussion was the definitions used in the proposed rule. API believes that the definitions do not describe what is actually done in the field and may cause problems later with regulatory personnel. API included some revised definitions in their comments and asked EPA not to include applicability requirements in the definition.

The next topic focused on the comments on the economic analysis. API noted that the economic analysis was done using model plants which do not represent the oil and gas industry because of the variability between the different facilities. For an example the VOC content varies greatly between the type and source of the natural gas. They noted that 18% VOC by weight was used in the economic analysis, however many natural gas streams are below that VOC content. API also noted that the cost of compliance to the proposed rules was not included in the economic analysis. These exclusions include the cost of piping, the cost of monitoring equipment, and long

- term compliance costs.

API asked if there were plans to request for an extension of the final rule prom ulgation. EPA responded that there were no discussions regarding a rule extension. API believes that a 1

- year extension is needed to make the necessary revisions to the final rule. They stated that there are dramatic impacts and complications for small businesses that were not addressed in the proposed rule. EPA asked if any small businesses commented on the proposed rules. API responded that some trade associations that represent small businesses commented on the proposed rules. API noted that many s mall businesses do not have the time or knowledge to know what is going on with the proposed rules and rely on outside contractors for environmental compliance. API stated that nearly 60% of oil and gas production is small business operated.

The next top ic of discussion was the average VOC content used by EPA in the emission reduction calculations. API stated that many gas streams have little or no VOC content and noted that reduced emission completions (REC) for gas streams with less than 12% were not c ost effective. API suggested that a 10% VOC threshold be used for applicability throughout the

NSPS. API also stated that this VOC content issue is relevant to the NESHAP and believes that the 10% VOC applicability should also be used. EPA asked if a VO C threshold could be determined for each basin. API responded that the VOC content varies broadly in each basin and that the VOC content can also change an average of 7% over time as the well is depleted

.

API remarked that the types of affected facilitie s are different than what has traditionally been regulated in previous versions of the NSPS. As an example, a pneumatic controller is a small component of a larger system. API stated that there are approximately 100,000 pneumatic

controllers in the field and believes they are a small source of emissions. In addition, API believes that the definition for pneumatic controllers is confusing. API believes that if the definitions are clear and concise, then the regulations will be easier to follow. Other so urces that are being proposed to be regulated are well completions. API stated that well completions are part of the well construction and believe that this operation is similar to boiler commissioning.

API also believes that the General Provisions shoul d not apply to wells in remote areas.

The term best system of emission reduction (BSER) used in the proposed NSPS was the next topic of discussion. API noted that this is a departure from the term best demonstrated technology (BDT) that has been used i n previous EPA regulations and asked if the precedents for4

BDT are applicable to BSER. EPA stated that the terms are comparable and is simply a reflection of the actual language in the Clean Air Act (CAA). API stated that phased in compliance would be ne eded to obtain the control equipment to meet the requirements. They believe the phased in approach used in subpart JJJJ is a reasonable approach to meeting the NSPS requirements. API proposed a 2

- year phase

- in approach so that industry can determine

what applies to a given well. This approach would also ease the burden on the availability of control equipment supplies. As proposed, the oil and gas industry does not believe it can get the wells into compliance because of control equipment availability.

Well completion s w ere the next topic of discussion. API believes that EPA should not specify the type of equipment to be used for well completions in the proposed NSPS. They believe that options should be included such as, “ reverse circulation ” completio n for low pressure wells. They also noted that the proposed rule would not allow any well completions for late life coal

bed methane wells. They stated that the Colorado rule has a pressure threshold, but would rather have a requirement for a management plan. They noted that a management plan could be allowed under CAA 111(h), and asked EPA to look at subpart Ja for an example of the requirement. They also pointed out there are many issues with accessing a collection line including: third party owner, l ow pressure, unsalable gas, and the availability of a collection line. API would like the option of combusting the gas for sources that do not have access to a collection line. They also noted that under the proposed rule “appraisal wells” would not be

a llowed under the rule.

API stated that availability of equipment was an issue in the proposed rule. They believe there is a shortage of equipment and skilled staff to do reduced emission completions (REC). They believe it will take at least 2 years to train the staff or contractors, and roughly 7 years to manufacture enough equipment to do RECs. Therefore in their comments, API proposed a 2

- year well completion extension to develop equipment and train personnel. They asked if the 2

- year extension wou ld be possible in the final rule. EPA responded that they would need to have discussions with the Office of General Counsel (OGC) about this change.

Timing of requirements was the next issue that was discussed. API noted that the rule would require reco rdkeeping from well s completed after August 23, 2011. They also noted that the rule

is not limited to onshore sources and the costs for complying with the requirements for offshore sources was not included in the Technical Support Document (TSD). EPA sta ted that the proposed rule was meant to be limited to onshore sources. API stated that they believe the recompletions should not be considered a modification because there is no emissions change and

believes that EPA should reference 63.14 for the definit ion of modification. They also noted that the proposed rule would require 4

- 5 notifications for each well completion, which they feel is excessive. They propose submitting a monthly report of the well completion activities. They also requested that EPA provide clearer definitions in the final rule. They also requested that EPA remove the requirement for determining the distance to the nearest gathering line.

API believes the 10% estimate that EPA used for recompletions is incorrect in the proposed rule

and believes it is closer to 1

- 2%. They noted that the Regulatory Impacts Analysis (RIA) states that fracking is a new method for natural gas extraction and they stated that nearly 95% of wells are now fracked. They stated that that categorizing of conv entional and unconventional wells is5

not relative to the proposed rules and is not an industry concept. The group also noted that in the RIA, it was assumed emissions captured through RECs would otherwise be vented to the atmosphere. They stated that the value of the gas/liquids is high enough that it is advantageous to capture these gas/liquids.

The next issue was the availability of equipment and personnel to do RECs. They noted that t he 70% of wells doing RECs listed in the RIA is not for all wells and only represents about only 40% of production. They stated that many of the smaller companies are not doing RECs because of lower quality wells. They estimated the REC equipment to be a pproximately $ 1.3 million and

take roughly 56 weeks to be delivered.

Glycol dehydrators were the next topic that was discussed. API believes that EPA did not need to redo the floor for these units, and EPA should have not removed the 1 TPY limit. They n oted that the CAA only requires EPA to review new technology and not re

- do the floor. They also

noted that changing out technology to meet the new limit would increase the costs higher than EPA estimated in the proposed rule. They suggested using a work practice option for small dehydrators. API also stated that the equation used will require controls regardless of emissions. EPA noted that they planned to look at the emission limit using an upper predictive limit (UPL)

to address the issue of variabilit y.

Storage tanks were the next topic that was discussed in the meeting. API stated that EPA needed to clarify the applicability requirements in the final rule. They believe these requirements should be in the applicability section of the rule and not in the definition portion. They also believe that the rule should limit the requirements to the oil and natural gas sector. They noted that the oil and natural gas production sector has been historically understood as being distinct from the transportati on sector, but Subpart OOOO has fail ed to delineate the sector to which the storage vessel provisions apply. They also noted that EPA has proposed removing the distinction of “prior to custody transfer” from NESHAP HH, thereby unnecessarily obscuring the boundaries

that had been previously established . API also stated that there should be a bright line between what is defined as a temporary storage tanks and what is a permanent storage tank and suggested 180 days could be used.

API also requested that the cutoff in OOOO should be 12 TPY using the EPA guidance for cost instead of the 6 TPY in the proposed rule. They also stated that the method of specifying threshold should be based on estimated emissions using EMP Tanks or other software that EPA

belie ves would be appropriate. They noted that measuring throughput is difficult and over time as the production decreases; the flow rate will eventually decrease where it is no longer cost effective to control. They stated that Wyoming has a provision that r equires no controls when the emissions drop below 8 TPY. Other thresholds could be based on vapor pressure or capacity. They also stated that the NSPS Kb threshold could be used for the proposed rule with a requirement to control if emissions are greater than 12 TPY. They also asked that EPA exclude mobile tanks, such as railcars. EPA noted that the Kb requirements would not work with the final rule because some mobile tanks would be exempt even though they are permanently located

at the well site. API suggested that the rule require 30 days to evaluate production to determine if the storage tank is required to implement controls.6

Another issue with storage tanks is the proposed recordkeeping and reporting requirements. API stated that the proposed ru le has over 50 recordkeeping requirements for tanks vented to a control device. They noted that many of these tanks are located at unmanned sites and it would burdensome to generate and maintain these items. They suggested that EPA require semiannual

rep orts for exceedances only. They also stated the rule requires that the pilot flame always be present and does not include any options for electric ignition. They also suggested that EPA use vapor pressure thresholds and allow the use of floating roof tan ks as in other rules.

Another topic that was discussed was pneumatic controllers. API believes that the definitions need to be improved and change the affected facility of a single controller to a process unit. This was done in the subpart YYY rule, where multiple components were grouped into a single process unit. They also have reconstruction issues for pneumatic controllers if parts are replaced. API stated that intermittent cannot be controlled as described in the preamble and the 6 sc fh

thresho ld is not realistic and is based old data from Natural Gas STAR. They also asked EPA to include a provision that allows facilities using instrument air to document the facility rather than each individual controller. They asked EPA to allow the use of co ntinuous bleed controllers for 180 days if switching to instrument air. They also asked EPA to clarify whether an actual guarantee of emissions is required for controllers. They stated that they would prefer a design requirement.

Equipment leaks were th e next topic of discussion. API believes that the emission reductions that EPA determined for connectors is too high an d therefore the cost effectiveness should be higher. They estimated the cost effectiveness to be $7,800 per ton of VOC using EPA costs and API emission reductions and $8,400 per ton of VOC using API costs and emission reductions. Based on these results, they do not believe that connector monitoring is cost effective. API also stated that a leak definition of 500 ppm is not cost effectiv e for valves. They stated that the emissions reductions are based on uncontrolled emissions rather than subpart KKK emissions. API believes that the 10,000 ppm should be used in the final rule with quarterly monitoring. The industry stated they would ag ree to a high leaker program that identifies leaking components above 10,000 ppm that have been found leaking for 3 straight quarters. These high leaker components would then either be replaced or refurbished. If EPA intends to keep the 500 ppm leak definition, API requests that EPA allow facilities 1 year to implement the LDAR program. EPA asked why additional time would be needed to implement an LDAR program. API responded that modifications or replacement of equipment that were not intended to meet a 500 ppm leak definition would be needed to meet the requirements.

Compressors were the next topic of discussion. API is concerned t hat the relocation of compressor equipment would trigger NSPS requirements. They request exclusions for reciprocating compressors at storage and transmission stations and centrifugal compressors at gathering and boosting stations. API also believes that rod packing should be replaced on reciprocating compressors every 5 years to coincide with major engine overhaul. They also requested the inclusion of a preventive maintenance program to determine when packing is failing. They also request the ability to use wet seals for centrifugal compressors.7

A separate meeting took place at EPA to discuss the testing requirements in the proposed NSPS and NESHAPs. The EPA personnel that attended this meeting include: Rachel Agnew, Gerri Garwood, Stef Johnson, and Ja son DeWees

.

API stated that the requirements for testing are confusing and have many contradictions. They stated that many of these facilities are small sources in remote areas and it is not technically feasible to perform some of the testing requirement s. API suggests using a carbon balance or mass balance to show compliance with the requirements. They noted that it was difficult to measure flow rate and are detailed in their comments in Attachment H. They also noted that many of these issues are the same for the compliance testing of glycol dehydrators. API

recommends that EPA specify the use of E&P TANK or a process simulation model such as ProSim or HySys to determine the inlet flow and composition of a waste gas stream routed to an

enclosed combus tion device from a storage tank and GlyCalc 3.0 or higher dehydrator model or a process simulation model such as ProSim or HySys to determine the inlet flow and composition of a waste gas stream routed to an enclosed combustion device from either a small

o r large dehydrator. They also noted that the m anufacturers certification testing must show approximately 99.97% destruction which is unreasonable and certainly not supportable from the standpoint of rule cost effectiveness. API asked why propene was used for certification of the combustors. EPA responded that propene is similar to BTEX (benzene, toluene, ethyl benzene, xylenes) and is difficult to combust. API noted that propene is difficult to obtain in some places, notably Wyoming.

API stated that s torage tank temperature monitoring is different from the temperature monitoring requirements in subpart ZZZZ and JJJJ. They believe that EPA should e liminate the proposed rule revisions that change the temperature m onitoring device accuracy requirements f rom +/

- 2 to

+/

- 1 percent of the temperature being monitored expressed in degrees C.

API asked why an i nitial performance test that demonstrates that the combustion zone profile has

a minimum temperature of 760°C was included in the final rule. EPA resp onded that this requirement was included for compliance assurance with the standards. API believes that the requirements need to be rewritten and offered to assist EPA in the revision of the testing requirements.

API believes that the monthly Method 22 t esting for glycol dehydrators is excessively

burdensome and not needed to assure combustor compliance because continuous monitoring of combustion control ignition is already required and the materials being combusted are inherently

combustible . API noted that states require visual inspection only in the cases where visible emissions are present. They believe that final rule should tell the operators what to do, not how

to do it.

API believes the final rule should be simple and easy to understand. They n oted that many operators are small businesses and they don’t have the resources to try and understand a complex rule. API stated that the compliance assurance requirements need to be measures that are already conducted by the industry.8

API will provide test reports to EPA that outlines some of the methods and data from facilities that are complying with state rules.