The Arrival of Subpart OOOOa for the Oil and Gas Industry

Since the promulgation of 40 CFR Part 60 Subpart OOOO – Standards of Performance for Crude Oil and Natural Gas Production, Transmission and Distribution in 2012, there has been a flurry of policy initiatives and subsequent regulatory activity targeting methane emissions and the oil and gas industry.  Activity began to accelerate with the announcement of the Administration’s Climate Action Plan in June 2013, the Strategy to Reduce Methane Emissions in March 2014, the five “White Papers” in April 2014, and the U.S. Environmental Protection Agency’s (U.S. EPA’s) Strategy for Reducing Methane and Ozone-Forming Pollution from the Oil and Gas Industry in January 2015.  The direct regulatory activities associated with the referenced policy documents include:

• September 18, 2015
  • Proposed updates to Subpart OOOO and proposed 40 CFR Part 60 Subpart OOOOa (Standards of Performance for Crude Oil and Natural Gas Facilities for which Construction, Modification or Reconstruction Commenced After September 18, 2015)
  • Draft Control Techniques Guidelines (CTG) for reducing volatile organic compound (VOC) emissions from existing oil and gas sources
  • Proposed Source Determination Rule (i.e., Aggregation Rule)
• November 4, 2015 – Request for Information related to Hazardous Air Pollutant (HAP) Emissions from the Oil and Natural Gas Industry
• May 12, 2016
  • Draft Information Collection Request (ICR) for the Oil and Natural Gas Industry
  • Signed final Subpart OOOO and new Subpart OOOOa regulations available online
  • Signed final Aggregation Rule available online
• June 3, 2016
  • Final Subpart OOOO and new Subpart OOOOa regulations in Federal Register
  • Final Aggregation Rule in Federal Register

ALL4 has been closely tracking the development of the above regulatory activities and has been involved in the regulatory development process, serving as a Small Entity Representative (SER) helper on the Small Business Advocacy Review (SBAR) panel for the proposed Subpart OOOOa rule. For background information related to the policy and regulatory activity related to the oil and gas industry, please see our recent blog activity by JP Kleinle, Megan Stroup, Sean Cunningham, and Kaitlyn Haynes and visit our Upstream Focus Area webpage.

Arguably, the primary regulatory change (of those identified above) that will impact the oil and gas industry is the finalization of Subpart OOOOa. The requirements of Subpart OOOOa incorporate the findings of the five “White Papers” and expand the breadth and scope of the rule for new, modified, and reconstructed affected facilities. Interestingly, the U.S. EPA’s cost analysis still reflects the net benefits of the rule which indicate a $35 million dollar benefit in 2020 and a $170 million dollar benefit in 2025, both based on a natural gas cost of $4 per thousand cubic feet (MCF). Along with the finalization of Subpart OOOOa, there were revisions to Subpart OOOO finalized to reflect the U.S. EPA’s administrative reconsideration petitions for several issues including the following examples:

• Storage vessel control device monitoring and testing
• Clarification of the due date for the initial annual report
• Clarification of flare design and operational standards (i.e., they are subject to the 40 CFR Part 60 Subpart A general provisions)
• The definition of capital expenditure (i.e., used when evaluating if a “reconstruction” will occur)
• Continuous control device monitoring requirements for storage vessels and centrifugal compressor affected facilities

The final Subpart OOOOa regulation also reflects the reconsideration provisions finalized in Subpart OOOO. The remainder of this article will identify the expanded scope of Subpart OOOOa, summarize several of the new requirements, and discuss several important changes in the rule since it was proposed.

Scope of Final Subpart OOOOa

A fundamental change implemented in Subpart OOOOa reflects the addition of greenhouse gases (GHGs), expressed as methane, as a regulated pollutant in addition to VOC and sulfur dioxide (SO2) (Subpart OOOO regulates emissions of VOC and SO2 only). Subpart OOOOa has been expanded to regulate sources of VOC and GHGs that are currently unregulated under Subpart OOOO including hydraulically fractured oil well completions, pneumatic pumps, and fugitive emissions (GHGs and VOC) from well sites and compressor stations. The rule has also been expanded to regulate VOC and GHG emissions from equipment that is only partially regulated (for VOC) under Subpart OOOO but that is used across the entire source category including pneumatic controllers, and compressors (reciprocating and centrifugal), except compressors located at well sites.

Summary of Final Subpart OOOOa Requirements

The more significant revisions reflected in Subpart OOOOa relate to the inclusion of new, modified, or reconstructed affected sources that are currently unregulated under Subpart OOOO. As prime examples, Subpart OOOOa now requires Subcategory 1 hydraulically fractured oil wells to conduct reduced emissions completions (RECs) and requires semi-annual leak detection and repair (LDAR) surveys at new, modified, or reconstructed well sites and quarterly LDAR surveys at new, modified, or reconstructed compressor stations. The LDAR surveys also result in additional reporting requirements as results of LDAR surveys will be a required component of annual compliance reports. Another provision, discussed later in more detail, is the requirement for electronic reporting to U.S. EPA through the Electronic Reporting Tool (ERT) and the Compliance and Emissions Data Reporting Interface (CEDRI). A summary of the final Subpart OOOOa controls and standards is provided in Table 1.

Summary of Changes since Proposal

There have been many changes to Subpart OOOOa since its proposal, several of them that could be characterized as substantial. It is noteworthy that there were no changes to the rule provisions for compressors (centrifugal and reciprocating), pneumatic controllers, or equipment leaks at natural gas processing plants since proposal. The more significant changes associated with requirements for pneumatic pumps, well completions, and fugitive emissions at well sites and compressor stations are summarized below.

Pneumatic Pumps

Pneumatic pumps are newly regulated affected sources under Subpart OOOOa and were originally envisioned to be regulated across the entire sector. However several important revisions have been made regarding pneumatic pumps since rule proposal as summarized below:

• The final rule does not include requirements for pneumatic pumps located at gathering/ boosting or transmission/storage operations. U.S. EPA will reconsider this decision after additional information is received as a result of the upcoming ICR.
• The final rule includes an exemption for pneumatic pumps at well sites where capture and control of such emissions is technically infeasible. An assessment by a Professional Engineer is needed to document technical infeasibility. The exemption does not apply to “greenfield” sites where capture and control can be planned and engineered for.
• Emissions can be captured and routed to a control device that is less than 95% efficient if that is the only control available at a well site. Routing pneumatic pump emissions to such a device does not make the device subject to Subpart OOOOa.
• Pneumatic pumps at well sites that operate less than 90 days per calendar year are not affected facilities under Subpart OOOOa.
• Initial compliance for pneumatic pumps at well sites has been extended to November 30, 2016.

Well Completions

The requirement for RECs during well completion activities has been extended to hydraulically fractured oil wells by Subpart OOOOa. Wells are characterized as either Subcategory 1; non-wildcat and non-delineation wells or Subcategory 2; exploratory wells, delineation wells, and low pressure wells. Several key revisions have been made to the well completion requirements as follows:

• RECs are not required for Subcategory 1 wells if a separator cannot function. However, a separator must be available on-site. Separators are not required to be on-site for Subcategory 2 wells.
• For Subcategory 2 well completions, the completion options include the routing of all flowback to a completion combustion device (i.e., pit flare) or if a separator is used, route the gas to a combustion device while the separator is operational.
• Expanded recordkeeping is required when RECs are determined to be infeasible at Subcategory 1 wells. Records must include documentation of the technical infeasibility (e.g., lack of infrastructure, safety) and documentation of technical considerations regarding beneficial on-site use (e.g., re-injection, routing to a process, use as a fuel).
• The exclusion for oil wells exhibiting a low [i.e., less than 300 scf per barrel gas-oil ratios (GOR)] was not included in the final rule. Instead, low GOR wells remain an affected facility. The final rule requires that the records used to make the low GOR determination be retained and that a company official certify the low GOR determination.
• The definition of low pressure well was revised in the final rule to include three options:

1. 1. Use of Equation 2 in the rule (which was also revised) to make a determination
   2. A well is a low pressure well if the shut-in well static pressure is less than the flow line pressure
   3. A well is a low pressure well if it requires artificial lift

• Based largely on initial equipment availability concerns, the final rule requires combustion for Subcategory 1 oil well completions conducted before November 30, 2016 and RECs if technically feasible for completions thereafter.

Fugitive Emissions from Well Sites

One of the most contentious components of Subpart OOOO during the regulatory development process was the requirement to conduct regular LDAR surveys using optical gas imaging (OGI) technology at affected well sites. This requirement was particularly troublesome for many small operators in Pennsylvania who operate “conventional”1 wells. As proposed, Subpart OOOOa exempted “low production” [i.e., less than 15 bbl oil equivalent (boe) averaged over the first 30 days of production] wells from the fugitive emissions requirements. Many of the conventional wells in Pennsylvania would apparently meet the low production well definition and therefore would have been exempted from the LDAR requirements for new, modified, and reconstructed well sites. The final version of the rule removed the low production exemption based upon comments received during the comment period. There were numerous additional revisions to the fugitive emissions requirements for well sites as highlighted below:

• The final rule allows the optional use of Method 21 in lieu of OGI technology (OGI was specified in the proposed rule). However, a leak when using U.S. EPA Reference Method 21 is defined as 500 ppm.
• LDAR monitoring surveys at affected facilities are required on a semiannual basis, with no provisions for results-oriented “step-downs” in frequency.
• The leak repair requirement has been revised to 30 days (from 15 days) with a 2-year extension if technically infeasible to repair in 30 days.
• The final rule allows alternative leak repair screening (i.e., soap test).
• There is a new definition of fugitive components at a well site and a new definition of “well site” for fugitive emissions standards.
• The timing of initial LDAR surveys has been revised to June 3, 2017 or 60 days from start-up, whichever is later.
• The final monitoring plan requirements specify “area” monitoring plans versus corporate monitoring plans. Area plans can encompass company-defined areas based on proximity, common site characteristics, basin, contracted LDAR firms, and related parameters.
• Leaking components that cannot be immediately repaired must be tagged, photographed, or filmed.
• Provisions for “alternative technology” proposals have been included to allow facilities to petition for the use of “equivalent” LDAR monitoring techniques. The alterative technology provisions are how U.S. EPA addressed comments regarding concerns over the alignment of State and Federal LDAR programs, where such state programs exist.

Fugitive Emissions from Compressor Stations

The final rule includes requirements for LDAR surveys at compressor stations. The changes since proposal are similar to the changes identified for well sites with a few exceptions summarized below.

• The requirement for quarterly monitoring surveys was finalized.
• A modification occurs at a compressor station when a compressor is added or if one or more compressors are replaced with compressors of greater horsepower.
• The requirement for quarterly LDAR surveys is waived if two of the three consecutive months within a quarter have an average ambient temperature below 0 degrees Fahrenheit (°F).
• New definition of fugitive components at a compressor station.

Please refer to the above discussion regarding fugitive emissions from well sites for a summary of the additional changes at compressor stations.

Electronic Reporting Requirements (ERT/CEDRI)

As mentioned earlier, U.S. EPA has begun to promulgate regulations under 40 CFR Parts 60 and 63 that require facilities to use electronic reporting, or “E-Reporting”, which requires the use of U.S. EPA’s ERT and CEDRI systems. Because both Subpart OOOOa and Subpart OOOO include electronic reporting requirements, a short description of the U.S. EPA’s electronic reporting tools is provided.

Facilities subject to E-Reporting requirements must electronically submit performance test results, monitoring data, ongoing compliance reports, air emissions reports, and/or certain notifications. Performance tests are first compiled using ERT and are then uploaded to CEDRI. Compliance reports, air emissions reports, and notifications are completed within CEDRI itself. Once final reports are uploaded to and/or completed in CEDRI, they must be signed, submitted, and validated using U.S. EPA’s Central Data Exchange (CDX) Cross-Media Electronic Reporting Regulation (CROMERR) service. Reports are stored in the CROMERR archive and are immediately available for review by the applicable regulatory authorities. After a review period, the reports are available for public access through the U.S. EPA WebFIRE database. For additional information related to electronic reporting, please reference Kayla Turney’s January 2016 article and December 2015 blog post.

Conclusion

The finalization of Subpart OOOOa is the first of several regulatory salvos that will hit the oil and gas industry over the next several months and possibly years. One primary take away from Subpart OOOOa is that U.S. EPA is very serious about monitoring, recordkeeping, reporting, and transparency and is following through with their Strategy for Reducing Methane and Ozone Forming Pollution from the Oil and Gas Industry. Consequently, monitoring techniques are becoming more sophisticated and electronic reporting makes the environmental performance of regulated entities available to anyone who may be interested. Please contact Roy Rakiewicz at (610) 933-5246, extension 127 or at rrakiewicz@all4inc.com if you have any questions.

1 Pennsylvania defines “conventional” and “unconventional” wells at 25 Pa. Code Chapter 78 Subchapter A, §78.1 – Definitions. The characterization of a well as conventional or unconventional is based upon whether the borehole is drilled into an unconventional formation, also defined at §78.1.