Ethylene Production – A Tale of Explosive Growth and Air Quality Compliance

ALL4’s Oil and Gas Sector Initiative was conceived in response to the renewal of the domestic oil and gas industry, associated primarily with the use of hydraulic fracturing (or fracking) and horizontal drilling in shale formations (e.g., Marcellus, Haynesville, Bakken, Eagle Ford) and the impact of greatly expanded oil and gas production on gathering/midstream operations, gas transmission/distribution systems, and domestic oil refining operations. With the United States now the largest producer of natural gas in the world , it is logical that the availability of natural gas liquids (NGL) associated with the processing of all of that natural gas is very high. The extraction of ethane, an NGL, from natural gas creates a feedstock for the production of ethylene (or ethene), which is the world’s highest volume produced chemical and the basis for bottles, toys, clothes, windows, pipes, carpet, tires, and many other products. In the U.S., it currently costs about $300 to make one (1) ton of ethylene, down steeply from $1,000 only a few years ago. According to an analysis by PricewaterhouseCoopers, it currently costs $1,717 to make ethylene in Asia, where plants depend on high-priced oil instead of natural gas, and $455 per ton to make ethylene in Saudi Arabia, using a combination of ethane and butane. Ethylene plants are also being built in Qatar, which, like the U.S., has an abundance of low cost natural gas. The U.S. Energy Information Administration (U.S. EIA) states that current expansion projects at existing facilities will increase U.S. ethylene production by 40% by 2018.

As domestic unconventional oil and gas development continues to expand, the supply of ethane available for ethylene production will continue to increase, and we see from our everyday lives that the demand for ethylene-based products continues to grow. However, ethylene is expensive to transport over long distances. Therefore, the next wave of domestic ethylene production plants will likely be greenfield (new plants) that are integrated with natural gas (and, therefore, ethane) production facilities or located near ethane pipelines to produce ethylene for use in the production of, for example, polyethylene for plastic bags or ethylene glycol for antifreeze. But whether we have an expansion to an existing ethylene production plant, or a Greenfield facility co-located or near to a natural gas production facility, there are air quality regulations and permitting requirements that must be evaluated before a project can proceed. For this article, we are going to briefly review the air quality regulatory history of some of the myriad of regulations that address emissions of hazardous air pollutants (HAPs) from ethylene production plants. We will also discuss some of the types of challenges that facilities may encounter along the way with respect to evolving testing, monitoring, and related compliance requirements.

Air Quality Regulatory History

Emissions of hazardous air pollutants (HAPs) from ethylene production are regulated by the U.S. Environmental Protection Agency (U.S. EPA) under its National Emissions Standards for Hazardous Air Pollutants (NESHAPs) regulations (40 CFR Part 63). In general, NESHAP regulations contain emissions standards based on maximum achievable control technology (MACT), and thus, are often referred to as MACT rules. MACT requirements for ethylene production plants were first promulgated in 2002, as part of U.S. EPA’s Generic MACT (40 CFR Part 63, Subpart YY; Ethylene MACT). A new Part 63 subpart (40 CFR Part 63, Subpart XX) was simultaneously promulgated and that specifies the requirements for ethylene process wastes and heat exchange systems. The Ethylene MACT applies to chemical manufacturing process units (CMPUs) in which ethylene and/or propylene are produced by separation from petroleum refining process streams or by subjecting hydrocarbons (e.g., natural gas and ethane) to high temperatures in the presence of steam and that are located at facilities that are major sources of HAPs. The Ethylene MACT regulates emissions of the following organic HAPs:

• Benzene
• 1,3-Butadiene
• Cumene
• Ethyl benzene
• Hexane
• Naphthalene
• Styrene
• Toluene
• o-, m-, and p-Xylene

The Ethylene MACT overlaps compliance elements from multiple other Part 63 regulations, such as, but not limited to:

• General Provisions (Subpart A)
• Equipment Leaks—Control Level 2 Standards (Subpart UU)
• Storage Vessels (Tanks)—Control Level 2 (Subpart WW)
• Closed Vent Systems, Control Devices, Recovery Devices and Routing to a Fuel Gas System or a Process (Subpart SS)
• Hazardous Organic NESHAP (HON; Subparts F, G and H)
• Refinery MACT I (Subpart CC)
• Benzene Waste Operations (BWON) NESHAP (40 CFR Part 61, Subpart FF)

These collective regulations impose requirements on the following emission sources at ethylene production plants as follows:

• Heat Exchange Systems – the Ethylene MACT requirements are similar to HON; however they may be subject to certain more stringent testing and monitoring requirements under the Ethylene MACT.
• Waste Operations – the Ethylene MACT requires BWON compliance with more widespread control requirements for certain operations.
• Storage Vessels – requirements are based on size and vapor pressure (VP), with the requirements ranging from submerged fill pipes to internal and external floating roofs (IFR and EFR, respectively), or closed vent systems routed to a control device.
• Process Vents – applicability is driven by flowrate and HAP concentration. Control requirements include the reduction of organic HAP to 98% by weight or 20 parts per million by volume via control devices that meet the Subpart SS requirements. Subpart SS has further requirements for flares, absorbers, condensers, carbon adsorbers, boilers, incinerators, process heaters, and closed vent systems, as well as other control devices.
• Transfer Racks – requirements are based on throughput and HAP VP.
• Equipment Leaks – requirements are based on equipment that contains or contacts an organic HAP at specific weight percent concentrations. Subpart UU imposes monitoring requirements for valves, pumps, connectors, agitators, and pressure relief devices. Additional requirements exist for compressors and sampling connection systems.

With this overview of the Ethylene MACT behind us, let’s discuss where this rule is headed.

____________________________________________________________________________________

1http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=3&pid=3&aid=1&cid=all,&syid=2009&eyid=2013&unit=BCF
2http://www.technologyreview.com/news/509291/shale-gas-will-fuel-a-us-manufacturing-boom/ (Technology Review)
3http://www.pwc.com/us/en/industrial-products/publications/shale-gas-chemicals-industry-potential.jhtml (PWC)
4http://www.eia.gov/todayinenergy/detail.cfm?id=19771 (U.S. EIA)
5Technology Review.

The Future of the Ethylene MACT

In a previous article, ALL4 described the U.S. EPA’s residual risk and technology review (RTR) process, in which the Clean Air Act (CAA) requires U.S. EPA to review and revise individual NESHAP, as necessary, taking into account developments in practices, processes and control technologies. The RTR process has an eight (8)-year review cycle for each NESHAP. On February 3, 2015, Earthjustice submitted a Notice of Citizen Suit Concerning Clean Air Act Deadlines to U.S. EPA for its failure to implement the RTR process for over 30 NESHAPs, including the Ethylene MACT. In anticipation of the lawsuit, U.S. EPA issued a CAA §114 Information Collection Request (ICR) to Ethylene MACT-affected facilities to support the upcoming technology review. This ICR was followed by another request to facilities to review and update, as necessary, their reporting year 2011 National Emissions Inventory (NEI) data for the risk portion of the review. U.S. EPA collaborated with the American Chemistry Council (ACC) and the American Fuel & Petrochemical Manufacturers (AFPM) to expand the request outside of the original ICR recipients. On March 24, 2015, U.S. EPA proposed an extension to the ICR to solicit additional public comments.

So what is U.S. EPA’s next move? Obtaining source-specific emissions testing data is the next step in the RTR process, most likely through the ICR process. In addition, ALL4 has heard discussions about the potential to develop initial emissions standards for emissions points in the ethylene production source category, such as air emissions from ethane cracking furnaces, including emissions during decoking operations.

Compliance Elements

While we await the proposed amendments to the Ethylene MACT following the RTR process, it provides an opportunity to discuss certain compliance requirements within the rule that are unique, or at the very least, different from the “normal” NESHAP requirements, particularly as it relates to continuous emissions and parametric monitoring. Readers of ALL4’s recent blogs and 4 The Record articles concerning NESHAPs such as Boiler MACT and the Portland Cement MACT have been exposed to discussions on the requirement to prepare site-specific monitoring plans and performance testing plans. The content of the plans required by the Boiler MACT and Portland Cement MACT are specified within the rules themselves, but also include cross-references to Subpart A. As specified in 40 CFR §63.11000(b), the general provisions in Subpart A related to performance testing and monitoring requirements (40 CFR §§63.6, 63.7 and 63.8), respectively, do not apply to sources subject to Subpart YY. This is not to say that an emissions testing program (including performance evaluation procedures for parametric monitoring systems) is not required for review and approval by your state or local air permitting authority. Rather, the provisions of Subpart SS govern the testing and monitoring requirements associated with the closed vent systems and control devices used by Subpart YY-affected sources. Similarly, Subpart A also does not apply to Subpart SS requirements. Subpart SS contains continuous emissions monitor system (CEMS) installation, operation, and maintenance requirements, as well as performance test requirements. The performance test requirements are different than, and include flexibility not present in, the typical Subpart A performance test procedures. Therefore, there is a bit of a learning curve for those new to the Subpart YY community. ALL4 has been working with clients in this area recently, particularly related to the waiver from performance testing requirements perspective, as well as relying on the use of prior performance tests to substitute for initial performance tests.

Contrary to recent revisions to many NESHAP requirements, Subpart YY retains startup, shutdown, and malfunction (SSM) provisions. SSM is very popular in the air quality legal news lately, largely related to the removal of affirmative defense provisions from NESHAPs, as well as the ongoing process for 36 states to remove SSM exemptions from their State Implementation Plans (SIPs). Subpart YY is one (1) of a handful of NESHAPs that specifies SSM and SSM Plan-related requirements, as opposed to making general cross-references to the SSM provisions contained in Subpart A (which, not so coincidentally, are also not incorporated by reference by Subpart YY). Control requirements under Subpart YY do not apply during periods of SSM. Instead, compliance with an SSM Plan is required for process vents, including furnace and decoking vents, as well as closed vent systems and control devices. The purpose of the SSM Plan is to have procedures in place for owners and operators to correct malfunctions as soon as practical to minimize emissions and to reduce the reporting burden associated with periods of SSM. This is akin to the “good old days” when SSM Plans were required by NESHAPs and SSM was more like a four (4) letter word. But what will happen to the SSM provisions following the RTR process? If we look at other source categories regulated by Subpart YY (Acrylic and Modacrylic Fibers Production, Polycarbonate Production, and Amino/Phenolic Resins Production), we see that the October 8, 2014 amendments to those affected sources eliminated the exemptions to emissions limits and standards during periods of SSM to ensure the standards are consistent with the District of Columbia Circuit Court’s vacatur of similar provisions in other rules. It is expected that the updated Ethylene MACT also will include the removal of the SSM provisions.

Last and certainly not least, the ever-present challenge of New Source Review (NSR) permitting will certainly impact ethylene production projects. The most notable challenges are expected to be the air dispersion modeling aspect of NSR, particularly where an ethylene production plant is co-located with an existing facility, or where one (1) will be constructed in an already industrialized area. In addition, in areas that are not attaining compliance with the National Ambient Air Quality Standards or NAAQS (now, or in the immediate future should the expected tightening of NAAQS occur), the NSR process will likely require that emissions increases of nonattainment pollutants and precursors be offset. In many instances, facilities will need to purchase emissions reduction credits, which can be on the order of tens of thousands of dollars per ton in certain areas of the country that will attract ethylene production plants. The explosive growth demands for the industry must be adequately balanced with the efforts and timing associated with NSR-related permitting.

Parting Thoughts

As described in the beginning of this article, construction of new ethylene production plants is expected (and is already occurring) because of the favorable supply and price of domestic ethane. Ethylene production plants are subject to many different NESHAPs (and we did not even discuss New Source Performance Standards) that are not as common as others. ALL4’s Oil and Gas sector initiative has allowed us to stay ahead of the curve to assist clients with this important domestic growth market. With our presence in Texas and Pennsylvania, we are right in the thick of the expanding domestic oil and gas industry, which also means we are ideally located to support the development of ethylene production plants that are anticipated to take place. Furthermore, the complexity of the regulations that apply to ethylene production plants present an on-going challenge to the industry that will not get any easier moving forward.

Please contact the following individuals with questions or comments regarding ethylene production: