EPA Proposes New, Broad Ranging Air Regulations Applicable to the Oil and Gas Source Category

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On July 28, 2011, the United States Environmental Protection Agency (“EPA”) proposed broad ranging andstringent air regulations applicable to the Oil and Natural Gas Production source category including for the first time performance standards applicable to hydraulic fracturing operations.1 The proposed regulations are in the form of either New Source Performance Standards (“NSPS”) proposed under Section 111 of the Clean Air Act (“CAA”) or National Emission Standards for Hazardous Air Pollutants (“NESHAP”) proposed under Section 112. The proposed regulations follow from a lawsuit filed by environmental groups on January 24, 2009, alleging that EPA failed to meet its obligations under CAA Sections 111(b) (1)(B), 112(d)(6) and 112(f)(2) to take actions relative to the review/revision of the NSPS and the NESHAP for the Oil and Natural Gas Production source category. On February 4, 2010, the court in the case approved a consent decree setting a deadline of July 28, 2011 for EPA to sign proposed standards or determinations not to issue standards pursuant to CAA Sections 111(b)(1)(B), 112(d)(6) and 112(f)(2) and a second deadline of February 28, 2012 to take final action.

Currently, NSPS regulations are applicable only to natural gas processing facilities. The proposed regulations would expand the reach of NSPS to include: (1) oil and gas production including hydraulic fracturing operations; (2) natural gas processing; (3) natural gas transmission including underground storage; and (4) natural gas distribution. The EPA is proposing an expansive definition of production equipment which would include the wells and related casing heads, tubing heads and piping, as well as pumps, compressors, heater treaters, separators, storage vessels, pneumatic devices and dehydrators. Production operations also would include well drilling, well completion and workover processes. Further, the proposed regulations would regulate emissions of volatile organic compounds (“VOCs”) as precursors to ozone and particulates, sulfur dioxide (“SO2”), and Hazardous Air Pollutants (“HAPs”).

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