Regulation in the Air: The Latest Federal & State Developments

by Spilman Thomas & Battle, PLLC

It seems that new developments are always on the horizon in the world of the Clean Air Act and oil and gas development.  Just over a year ago, on April 17, 2012, the United States Environmental Protection Agency (“USEPA”) finalized its highly anticipated updated New Source Performance Standards (“NSPS”) and National Emissions Standards for Hazardous Air Polliutants (“NESHAP”) for the oil and gas sector, which included first-time federal air standards for hydraulically fractured natural gas wells.  Following publication in the Federal Register on August 16, 2012, this comprehensive suite of regulations became effective on October 15, 2012.            

Unsurprisingly, the controversial rules package became the subject of legal challenges before the D.C. Circuit Court of Appeals, with petitions for review filed by both environmental organizations and industry representatives.  IOGA, together with the Independent Petroleum Association of America (“IPAA”) and a coalition of six other state associations, also filed petitions for reconsideration and review of the final NSPS regulations.  Granting an unopposed motion from USEPA, the D.C. Circuit issued an order that, among other things, (1) severed the legal challenges to the NSPS and NESHAP into two separate cases and (2) held the NSPS litigation in abeyance until August 30, 2013 pending the agency’s administrative reconsideration of certain NSPS issues, with final action to be taken on certain issues related to the regulation of storage vessels by July 31, 2013.  USEPA also has indicated that it likely will undertake a second administrative reconsideration of the NSPS rules to address additional issues raised by petitioners, with proposed amendments to be signed by December 17, 2013.

Pursuant to this schedule, on March 28, 2013, USEPA proposed several revisions to the NSPS requirements for storage vessels adopted in the agency’s original proposal.   Under the current regulations, owners/operators of storage vessels constructed, modified or reconstructed after August 23, 2011 with emissions of volatile organic compounds (“VOCs”) equal to or greater than 6 tons per year (“tpy”) must reduce VOC emissions by 95% by October 15, 2013.  In light of additional information provided by the industry regarding the high number of facilities anticipated to be subject to these new rules and the current shortage of available emissions controls on the market, USEPA proposed a two-tiered approach to the regulation of storage tanks in an effort to dedicate the limited control equipment currently available to those tanks likely to have the highest VOC emissions.  More specifically, for those storage vessels constructed between August 23, 2011 and April 12, 2013 with VOC emissions of 6 tpy or greater (termed “Group 1” facilities), USEPA would require only the submittal of a notification identifying each tank, including its location, by October 15, 2013.  However, if an event occurs that reasonably could be expected to increase VOC emissions from a Group 1 storage vessel—such as the addition of a well supplying the tank or the refracture of an existing well—the owner/operator of that tank would be required to install controls to reduce VOC emissions by 95% within 60 days of the change or by April 15, 2014, whichever is later.  For those tanks that come online after April 12, 2013 with VOC emissions of 6 tpy or greater (i.e., “Group 2” storage vessels), controls to reduce emissions by 95% would have to be in place by April 15, 2014 or within 60 days of startup, whichever is later. 

Among the other proposed revisions is an alternate emissions limit that would allow owners/operators to remove controls from storage tanks upon a demonstration that VOC emissions have been below 4 tpy for the preceding 12 consecutive months, without considering controls.  This alternate emissions limit is intended to reflect the decline in emissions that occurs at most storage tanks over time, while allowing owners/operators of affected facilities to shift control equipment to higher-emitting tanks where necessary.  If emissions increase above 4 tpy at a tank subject to the alternate emissions limit, however, controls would have to be reinstalled within 30 days.  The public comment period for this rulemaking closed on May 28, 2013.  Comments on the proposed revisions were filed by IPAA, with input from IOGA.

Important developments continue at the state level as well.  In March, the West Virginia Department of Environmental Protection (“WVDEP”) released for public comment its draft Class II General Permit G70-A for natural gas production facilities located at the well site.  When finalized, the general permit should streamline the air permitting process for oil and gas facilities and reduce the time necessary to obtain permit coverage.  Notably, however, the draft general permit as currently proposed will incorporate by reference various federal rules, including the NSPS requirements for well completions and storage vessels currently being re-evaluated by USEPA in conjunction with the ongoing litigation.  Accordingly, to the extent that USEPA revises the NSPS regulations in response to the outstanding petitions for reconsideration after the general permit is finalized, it is imperative that WVDEP respond quickly to modify the general permit to harmonize the federal and state requirements.  IOGA and WVONGA filed extensive joint comments on the draft general permit.    

Developments in the air arena show no signs of slowing.  As these critical issues continue to evolve, we will work closely with the Environmental & Safety Committee to keep IOGA’s membership apprised of the latest developments. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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