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EPA’s New Refinery Rule—Next Generation Compliance in Action

The U.S. Environmental Protection Agency (EPA) signed a new air pollution rule in September that illustrates how EPA is implementing its next generation compliance ideas.  The rule governs hazardous air emissions from petroleum refineries, but features several “next gen” tools that are relevant to other types of facilities, especially chemical plants and oil and gas storage facilities.

Next Gen Tools Found in the New Refinery Rule

EPA’s next generation compliance initiative seeks to modernize the agency’s regulations and enforcement efforts.  The initiative encourages the use of new technologies for detecting air emissions, aims to incentivize compliance and emissions reductions, rather than relying primarily on the threat of enforcement, and also encourages greater public disclosure of environmental data.  Many of these ideas are on display in the new refinery rule.

First, the rule requires “fenceline monitoring” of benzene concentrations and corrective action if benzene levels are detected above a baseline level.  This is the first time EPA has required fenceline monitoring and related corrective action measures on such a large scale.

Second, the rule requires electronic reporting of the fenceline monitoring data.  That is important not simply because it will enhance EPA’s ability to bring timely enforcement actions, but also because it is a prelude to public disclosure of the monitoring data.  EPA has explained that it intends to develop a publically accessible database of the fenceline monitoring results.

Third, the rule illustrates EPA’s evolving approach toward so-called “upset” or “malfunction” events.  Historically, many EPA air regulations excused compliance during periods of equipment malfunction.  EPA has begun rolling back those malfunction exceptions and, in the new refinery rule, the agency adopts an approach to malfunction events that it will likely seek to apply to other industrial facilities going forward, especially those that use flares and pressure relief devices (PRDs).  The new rule aims to minimize the use of flares and PRDs, in part because of recent studies suggesting that flares and PRDs can themselves be large sources of air pollution.  The rule limits the number of flaring and PRD events that are permitted, requires refinery operators to develop flare management plans (to reduce flare use) and requires certain corrective actions to be taken after each flaring or PRD event.

Fenceline Monitoring Issues

The rule’s fenceline monitoring and corrective action requirements deserve special attention.  Those features of the rule are intended to improve the control of so-called “fugitive” emissions, emissions that, generally speaking, leak out of industrial equipment rather than being expelled out an exhaust stack where they can be more easily subjected to pollution control devices.  Many other types of facilities experience fugitive emissions, including chemical plants, distilleries, oil and gas storage terminals, and wastewater treatment plants.  Thus, the new refinery rule provides a glimpse of a possible regulatory future for many other industrial activities.

A critical issue in this context is how the fenceline monitoring data will be used.  Do high levels of a hazardous air pollutant, standing alone, establish a violation, or is something more required?  In the [...]

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EPA’s Next Generation Compliance Initiative – The Agency’s Latest Proposed Rule for Refineries Shows the Initiative in Action and Provides a Glimpse of the Future for Other Industries

The U.S. Environmental Protection Agency (EPA) recently released a proposed rule that illustrates several of the agency’s Next Generation Compliance ideas in action.  The proposed rule concerns hazardous air pollutant (HAP) emissions from refineries, but should be studied by anyone who wants to gain a better understanding of what “Next Generation Compliance” means as a practical matter.  Most importantly, the proposed rule shows the direction in which the agency is likely headed with respect to “fugitive” air emissions at other types of facilities – chemical plants, paper mills, distilleries, etc.

EPA uses the term “Next Generation Compliance” to cover several ideas:  (i) the use of new, advanced technologies to identify and measure emissions, (ii) electronic reporting of environmental data rather than paper reporting, (iii) greater disclosure of environmental data to the public, and (iv) regulations that contain fewer exceptions and more built-in incentives for compliance.

Many of those ideas are on display in EPA’s May 15 proposed rule for refineries, but two features of that rule stand out as being especially relevant to other industries, and as good examples of what Next Generation Compliance means in practice:

First, the proposed rule would impose emission limits that apply at all times; there are no exceptions for startups, shutdowns and malfunctions.  Under this approach, which, because of recent court decisions, will likely be standard for all HAP rules going forward, regulated parties will no longer be automatically shielded from penalties in the event they exceed emission limits because of an equipment malfunction.  But those parties may still be able to convince the agency, on a case-by-case basis, that they should not be penalized, based on the event-specific facts.

Second, the proposed rule would require refinery owners and operators to monitor ambient air quality at the fenceline of their facilities, and it encourages the use of new technologies to conduct that monitoring.  The agency explains, in the draft rule’s preamble, that this approach is intended to provide a flexible means of locating and controlling fugitive emissions – emissions that cannot easily be captured to pass through a stack or vent and that are usually estimated based on engineering judgments rather than measured directly.

Fenceline monitoring is a controversial topic.  Regulated parties sometimes fear that data from fenceline monitoring will be used to impose penalties for emissions that are not in fact unlawful, or that such monitoring will be used to support state law tort claims against the owners and operators of industrial facilities.  But in some situations, fenceline monitoring might provide a defense to state law nuisance and trespass claims, or otherwise exonerate a regulated party from blame for local air pollution problems.  In all events, a critical question is how the fenceline monitoring data will be used.  Does the data establish violations?  Does it trigger corrective action duties?  Does it trigger reporting duties?

The refinery proposal addresses each of those questions, but with mixed results.  Most importantly, there are places where the draft regulatory text and EPA’s explanation [...]

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