New Air Emission Regulations for Oil & Gas Facilities
By John Holden, Peter Wahl, and Pinar Dogru
The oil and gas industry may soon be required to quantify and report emissions of carbon dioxide, methane, and other “greenhouse gases” (“GHGs”) to the U.S. Environmental Protection Agency (“EPA”) under the EPA’s Mandatory Reporting of Greenhouse Gases Rule. Many oil and gas facilities in Texas are also expected to become subject to new air permitting requirements under Texas Commission on Environmental Quality (“TCEQ”) regulations. These new GHG reporting rules and, in Texas, the addition of new permitting requirements is expected to impose new and relatively onerous obligations on many oil and gas operations.
EPA Greenhouse Gas Monitoring and Reporting:
In October 2009, EPA finalized its Mandatory Reporting of Greenhouse Gases Rule, which requires monitoring and reporting of GHG emission from numerous sources.1 The rule requires 17 types of facilities, including those for production of petrochemicals and petroleum refineries, to report regardless of GHG emission quantity. The rule also identifies other types of facilities that must report if GHG emissions exceed 25,000 tons per year. Covered sources were required to begin quantifying GHG emissions starting January 1, 2010, with annual reports commencing in March 2011. The upstream and midstream oil and gas industry was specifically not included in this final rule. A Jackson Walker e-Alert regarding the Mandatory Reporting of Greenhouse Gases Rule and its expected impacts may be accessed here.
On March 22, 2010, EPA issued a proposed rule that would change the GHG reporting rule in a number of ways, including the addition of onshore and offshore oil and gas production and natural gas processing, compression, and underground storage facilities.2 Under the proposed rule, these operations would be required to report if they emit more than 25,000 tons per year of “CO2 equivalent.” EPA estimates that its proposed changes would cause 85% of all oil and gas industry emissions to be covered under the rule.
The “CO2 equivalency” of GHG emissions is particularly important in the oil and gas industry since methane is weighted much more heavily than carbon dioxide (“CO2”). The GHG reporting rule provides that one ton of methane is the equivalent of 21 tons of CO2.3 Thus, less than 1,200 tons of methane emissions alone would trigger reporting obligations under the proposed rule. The current EPA Administrator, Lisa Jackson, has publicly stated, “It's especially important to track potent gases like methane, which traps more than 20 times as much heat as carbon and accelerates climate change.” EPA has also indicated that this reporting information is a first step, and will “aid in identifying cost effective opportunities to reduce emissions in the future.”
The EPA is proposing that covered oil and gas facilities begin collecting emissions data starting on January 1, 2011 with annual reports submitted to the EPA no later than March 31, 2012. Public hearings will be held on April 19th and 20th in Arlington, Virginia and Washington, D.C. Public comments on the proposed rule are due within 60 days after it is published in the Federal Register, which is expected imminently.
Texas Commission on Environmental Quality (“TCEQ”) Permitting:
The TCEQ currently allows the vast majority of oil and gas production operations to use a “Permit by Rule” or “PBR” to authorize air emissions from such facilities. To be eligible to use a PBR, Texas regulations currently require that a facility meet emission limits for sulfur dioxide, sulfur compounds, volatile organic compounds (“VOC”), nitrogen oxide and carbon monoxide. Those facilities that emit greater than 25 tons per year of VOC or otherwise do not qualify for a PBR may still qualify to use a slightly stricter Standard Air Permit. The TCEQ now proposes to significantly overhaul these authorizations and to require more stringent requirements for oil and gas facilities.4
Whereas the previous oil and gas PBR requirements fit on one page, the proposed amendments increase the requirements by at least tenfold. Most notably, the TCEQ is proposing the following amendments for new or modified facilities:
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New “best management practices”, including quarterly and annual inspection and emission monitoring
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Quantification and reporting of emissions from planned maintenance, startup and shutdown operations
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Registration with TCEQ to include emission estimates
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Compliance with hourly and annual emission limits
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Maintenance of on-site records, with sampling results and compliance demonstration
The TCEQ will hold a stakeholder group meeting on its proposed permitting changes on April 8, 2010. The public may submit comments in writing until April 16, 2010.
If you have questions concerning these new proposed EPA and TCEQ rules or the issues discussed herein or how these matters may impact your business, please feel free to contact any of the following Jackson Walker attorneys:
John B. Holden, Jr. – 214.953.5961 – jholden@jw.com
Peter K. Wahl – 214.953.6101 – pwahl@jw.com
Pinar Dogru - 512.236.2048 – pdogru@jw.com
1 74 Fed. Reg. 56,260 (Oct. 30, 2009) (contained at 40 C.F.R. Part 98).
2 EPA Proposed Rule, Mandatory Reporting of Greenhouse Gases: Petroleum and Natural Gas Systems (Mar. 22, 2010).
3 40 C.F.R. Part 98, Table A-1.
4 For TCEQ's online summary of its proposed permitting changes, please CLICK HERE
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