Environmental Protection Agency Archives

Environmental Protection Agency

EPA Releases Final Fracturing Air Rule

by McDermott Will & Emery | Apr 19, 2012 | Environmental, Hydraulic Fracturing

The U.S. Environmental Protection Agency (EPA) released final regulations on April 17 to reduce certain emissions at hydraulically fractured wells by 95 percent. The rule, a product of a February 2010 consent decree with WildEarth Guardians and the San Juan Citizens Alliance, adds New Source Performance Standards (NSPS) and amends existing National Emissions Standards for Hazardous Air Pollutants (NESHAPS) for the oil and gas industry.

NSPS Standards

The NSPS standards will reduce by 95 percent volatile organic compound (VOC) emissions during the completion phase of hydraulically fracturing a well. In addition, although not a regulated substance under NSPS, the new rules have the effect of reducing fugitive methane emissions by 25 percent. These VOC and methane emissions reductions will be attained by requiring that all newly fractured or refractured wells incorporate reduced emissions controls (RECs). In total, EPA estimates that the rule will result in reductions of 11,000 tons of Hazardous Air Pollutants (HAPs), 190,000 tons of VOCs, and 1 million tons of methane, with a net benefit of $15 million as a result of the increased profit from captured methane sales.

The final rule adopts several changes suggested during the public comment period, most important of which is the delayed deadline of January 1, 2015 for requiring the use of RECs. While REC technology currently exists, EPA recognized that the number of REC units required to meet the new regulations far exceeds those actually in existence today. Until then, well operators or owners can achieve specified VOC reductions using flaring or other approved combustion methods.

The final rule also modifies the definition of "well completions," limiting the REC requirement to that period when fracing operations end and flowback begins. The requirement remains in effect until the well is either continuously flowing to the flow line or storage vessel for collection (in which case there should be no fugitive emissions) or shut in, whichever occurs first.

In addition, EPA has exempted low-pressure wells from the REC requirement in response to comments that it is unfeasible to require RECs for low-pressure wells. For low-pressure wells, as well as wildcat (or exploratory) and delineation wells, which are also exempted from the REC requirement, operators can continue to use flaring to achieve specified reductions.

EPA also has rewarded early adopters of REC technology, and encourages others to join early, by redefining actions that constitute "modifications" triggering NSPS requirements. Some states require that any source subject to federal NSPS must get a state minor source air permit. This new definition allows owners and operators of existing wells employing RECs to refracture without changing state permit status, thus avoiding delays and costs associated with the state permitting process.

Finally, but importantly, the rest of EPA’s new rules are not delayed, and take effect 60 days from publication in the Federal Register.

NESHAPS Standards

While EPA adopted many of the comments about the NSPS rules, stakeholders were less successful in obtaining changes to the proposed [...]

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EPA Proposes to Require Carbon Capture and Sequestration; Creates Uncertainty for the Future of Coal

by McDermott Will & Emery | Apr 12, 2012 | Environmental, Project Development and Finance

by Ari Peskoe

The U.S. Environmental Protection Agency (EPA) proposed the first ever CO2 emissions limits for newly constructed power plants last month. Under the proposal, power plants that have already acquired a preconstruction permit from the EPA and commence construction by March 27, 2013 do not need to comply with the rule.

The emissions limit, set at 1,000 pounds per megawatt-hour, would effectively require all new coal-fired plants to cut CO2 emissions in half from current rates. The only plausible technology for enabling such drastic cuts is carbon capture and sequestration (CCS). EPA’s proposed rule allows a new plant to implement CCS ten years after beginning operations, so long as its emissions after CCS are below 600 lb/MWh. That gives the coal industry some extra time to work through the many legal and regulatory issues currently facing the technology.

Like any large-scale energy development, a sequestration project would trigger state and Federal environmental reviews. While there is extensive experience around the country reviewing and approving projects that involve injecting substances into the ground, no other project is designed to store vast quantities of gas underground for hundreds of years. It’s not clear how legislators, environmental agencies and the public will evaluate this risk.

Long-term liabilities relating to leaks are another legal hurdle. According to a Federal interagency task force report published in 2010, some businesses are uncomfortable with the risk but also unsure of how to quantify it. Insurers, and particularly investors, are fixed on short-term thinking, and 10 or 20 years is considered “long-term” in business decision making. But sequestered carbon must stay underground for centuries. There is no agreement on how to account for this time horizon.

A 2010 paper by a Harvard Law School professor and student researchers proposed a range of regulatory incentives to spur development of large scale test projects. The suggestions included establishing a trust fund paid for by industry to cover liabilities, developing sites on Federal land to streamline the approval process, imposing caps on liability and preempting nuisance and trespass claims. Regardless of the specifics, instituting any new regulatory system takes time. Fracing is a multi-billion dollar business in the U.S., and yet after a decade of widespread use its legal framework is not yet firmly established. As EnergyBusinessLaw.com has been documenting, legal norms are still developing, and all three branches of government are issuing new rules and decisions that have major impacts on the industry.

Without an impetus to do so, governments will probably ignore CCS, and the lack of legal certainty will hinder development. Perhaps EPA’s rule, if implemented, will motivate action. Until then, rather than urging governments to enact rules that create legal certainty for CCS, the coal industry is likely to fight tooth and nail to kill yet another attempt by Washington to regulate CO2 emissions from the power sector.

Drilling Down on Hydraulic Fracturing; EPA Dismisses “Emergency Powers” Claim in Latest Regulatory Twist

by McDermott Will & Emery | Apr 11, 2012 | Hydraulic Fracturing, Renewables

by James A. Pardo and Brandon H. Barnes

The practice of hydraulic fracturing (fracing) for natural gas is arguably the most visible and controversial energy/environmental issue of the day. Federal, state and local regulators across the country are racing each other to regulate. Academic, industry, environmental, community and a myriad of other interest groups and non-governmental entities are attempting to influence the regulatory process. The media, and the plaintiffs’ trial bar, is circling.

In “Drilling Down on Hydraulic Fracturing,” presented at the 63rd Annual Oil & Gas Law Conference in Houston in February 2012, McDermott trial partner, James A. Pardo, provides an overview of the most significant issues and recent developments that may effect fracing in 2012 and beyond. These issues are of potential importance not only to oil, gas and energy companies, but to any company with a "stake in the game" on fracing: financial institutions, private equity investors, pension funds, hedge funds, developers, etc.

In the weeks since that presentation, several developments have occurred which touch on one or more of the topics discussed in this paper. In one of the latest developments, the U.S. Environmental Protection Agency (EPA) announced on March 30 that it was dismissing claims that fracing by Range Production Company (RPC, a subsidiary of Range Resources Corporation) had contaminated groundwater near Fort Worth, Texas.

In December 2010, EPA issued a Safe Drinking Water Act (SDWA) emergency order requiring RPC to halt fracing activity and undertake remediation of the groundwater. Because fracing largely is exempted from the SDWA, the agency acted against RPC by invoking the “emergency powers” it retains under that statute to act when it believes a company’s activity may pose an imminent and substantial danger to human health. Fracing stakeholders have been concerned that EPA was using the action against RPC as a test case for broader “emergency powers” regulation of fracing that, in effect, would allow the federal agency to circumvent Congress’ SDWA exemption.

Considering that the facts in this action were particularly weak for EPA, the agency’s decision to drop enforcement of its emergency order (and a companion lawsuit) against RPC should not be interpreted as EPA disclaiming SDWA “emergency powers” entirely. Unless and until Congress revokes the SDWA exemption, EPA can be expected to continue its efforts to regulate fracing from several different angles. We would not be surprised to see the agency file another "emergency powers" action on better facts, and against a less-motivated opponent, in the coming weeks or months.

Nevertheless, EPA’s dismissal unquestionably is a setback for the agency that has been forced to beat two other retreats from fracing-related regulatory efforts in recent weeks (e.g., Pavillon, WY; and Dimock, PA).

Hydraulic Fracturing: Air Joins Water as Point of Contention

by McDermott Will & Emery | Apr 10, 2012 | Environmental, Hydraulic Fracturing

by James A. Pardo and Brandon H. Barnes

The public and regulators alike continue to scrutinize the impact of hydraulic fracturing on water resources – e.g., possible contamination of drinking water; volume of water used; and disposal of used fracing wastewater. These water issues have dominated the debate for some time, overshadowing concerns that some have raised about potential impacts from an air quality perspective. Recent events, however, indicate that air emissions are likely to become a fracing issue.

On April 3, Henry Waxman (D-CA) and Diana DeGette (D-CO) wrote to Environmental Protection Agency (EPA) Administrator Lisa Jackson asking the agency to consider a recent Colorado School of Public Health (CSPH) study linking air emissions from hydraulic fracturing activities to increased risks of cancer and non-cancer illnesses. The letter comes one day after EPA delayed publication of final rules for air emissions from oil and gas extraction activities to give itself time to review the more than 156,000 public comments submitted on the draft rules.

The CSPH study found that residents of Battlement Mesa who reside within 1/2 mile of a hydraulically fractured well have an increased risk of contracting illnesses due to volatile organic compounds (VOC) that drilling operations release into the air. The study methodology and analysis have been criticized by stakeholder groups for using data gathered before enactment of stricter state air standards; for assuming that residents remain in town for 350 days per year, 24 hours per day, thus receiving 24-hour doses; and, for disregarding VOC contributions from local highway traffic.

The study was commissioned by Garfield County in 2010 at the request of Battlement Mesa residents, then decommissioned by the county in May 2011 after questions were raised by the County Department of Public Health. CSPH scientists continued with the analysis on their own, and are scheduled to publish the results in an upcoming edition of the magazine, Science of the Total Environment. Garfield County, however, disavows any connection to the study.

Battlement Mesa residents are part of what is widely considered the test case for class actions alleging harm from hydraulic fracturing. The suit contends that residents have suffered health impacts from air and water contamination as a result of natural gas development at a well pad near the community, and stand to endure further environmental effects and diminution of property value because of plans to drill up to 200 additional wells within town limits..

The CSPH study follows a National Oceanographic and Atmospheric Administration (NOAA ) study on fracing emissions, reported in the Journal of Geophysical Research in February. The NOAA study concluded that fugitive natural gas emissions from drilling operations ranged from 3 to 5 percent. These findings were roughly in line with an earlier Howarth (Cornell University) study and were above industry reported levels. Critics of the industry quickly pointed to the study as evidence that fracing is making significant contributions to greenhouse gas emissions, invoking the results as a basis for increased federal regulation.