Oil and Gas NSPS and NESHAP Rule Sent for White House Review

On Friday, March 2, 2012, the EPA sent the White House a revised draft of its long-delayed expansions to the NSPS and NESHAP standards for the oil and gas sector.

This is the last step in the rule-making process prior to issuance and publication, so it appears that the EPA may actually be on schedule to issue the standards by April 3, 2012, the revised deadline in the agency’s consent decree with environmental plaintiffs groups.

This is a highly significant rule for the oil and gas industry because the rulemaking expands the definition of the oil and gas source category to, essentially, all upstream operations, including drilling and hydraulic fracturing completions.

The rule would require “green completions” for the hydraulic fracturing of wells in established fields and flaring for completions on exploratory wells.  Other requirements address such equipment as tanks and glycol units and even pneumatic controls.

The EPA’s proposal to expand the oil and gas source category has also given rise to concerns that the EPA believes drilling and fracturing emissions should be authorized in New Source Review (NSR) permits.

If the agency can mandate controls on fracture flowbacks under NSPS, what if anything prevents regulation of these emissions under NSR?

At the (highly criticized ) VOC emission rates represented in the proposal, many fracturing completions would not qualify for the exemptions or permits by rule that, in most states, have long been assumed to be sufficient authorizations for new oil and gas wells.

Also important, there may, for a considerable period of time, be insufficient equipment on the market to meet the “green completion” requirements in the proposed rule.

If this requirement takes effect without a phase-in period, fracking completions could slow to a trickle.
Even worse, the EPA could also implement the rule with NSPS applicability based on the August 2011 publication of the proposal, resulting in retroactive noncompliance for a number of existing facilities.

The EPA received a substantial number of public comments on the proposed rule, including comments from the oil and gas industry and state regulatory agencies.

Many of these comments conceded that the various controls concentrated on applicability dates were technically feasible, but argued that it would take time for the oil and gas industry to implement them.

The EPA also held public hearings on the proposed rule in Pittsburgh, Denver, and Arlington, Texas in September 2011.  The extent to which the EPA has addressed the concerns raised during the public comment period in the draft rule sent to the White House remains to be seen.

This article was prepared by Bob Greenslade (rgreenslade@fulbright.com or 512 536 5241) from Fulbright's Environmental Law Practice Group.