Significant control provisions
Compliance deadlines
Limited grandfathering
Preventing tank venting
On February 23 2014 Colorado's Air Quality Control Commission approved amendments to Regulation 7 that will impose stringent hydrocarbon control requirements on oil and gas production operations, including a 'no venting' standard for most storage tanks, an increase in combustion device destruction efficiency to 98% and comprehensive periodic monitoring requirements.(1)
Owners and operators should be aware that the compliance timeline is very tight. In general, new facilities constructed on or after May 1 2014 must cpmply upon start-up and existing facilities must comply by May 1 2015. In light of the no venting standard, achieving compliance may involve the installation or modification of capital equipment, along with the lengthy time periods that often accompany capital projects.
The amendments represent a significant expansion of the scope of Regulation 7, which has historically been dedicated to the control of ozone via limits on precursors – nitrogen oxides and volatile organic compounds. In contrast, the new requirements will apply statewide, and not just in the ozone non-attainment area along the Front Range or near non-attainment areas.(2)
In addition, the new rule directly regulates methane, which, according to the commission, is a "negligibly reactive ozone precursor and potent greenhouse gas". Environmental advocacy groups will no doubt cite this precedent as they push other state and federal agencies to adopt greenhouse gas standards for oil and gas. In fact, advocacy groups recently cited the new Colorado rules during a hearing with the Bureau of Land Management.(3)
Significant control provisions
There are a number of significant control provisions:
- General requirement for prevention of emissions – all intermediate hydrocarbon liquids handling operations must be designed, operated and maintained to minimise the leak of hydrocarbons "to the extent reasonably practicable". Issues such as open or improperly sealed thief hatches would presumably violate this general standard. The new standard replaces a 'good engineering and maintenance practices' standard.
- Storage tanks – control requirements for storage tanks have been expanded to apply to crude oil and produced water, as well as condensate. The volatile organic compounds trigger threshold has been lowered from 20 tonnes to 6 tonnes per year of actual uncontrolled emissions from all tanks combined (the manifold aspect makes this threshold more stringent than New Source Performance Standard Subpart OOOO). In addition:
- controls are required for the 90 days after first production if projected volatile organic compounds emissions over that period are 1.5 or more tonnes per year;
- owners and operators must route all hydrocarbon emissions to controls without venting from the thief hatch or other access points during normal operation, unless venting is reasonably required for maintenance, gauging or safety;
- a storage tank emissions management system (STEM) plan is required for controlled tanks storing unstabilised liquids. STEM requirements include approved instrument monitoring method inspections (eg, flame ionisation, infrared camera) on a monthly, quarterly or annual basis, depending on emissions; and(4)
- audio, visual and olfactory inspections are required as often as once every seven days, depending on liquid load-out frequency.
- Control stringency – control efficiency has generally changed from 95% control of volatile organic compounds to 95% control of hydrocarbons, except for combustion devices which must now have a design hydrocarbon destruction efficiency of at least 98% (unless authorised by permit before May 1 2014). They must also be enclosed, have no visible emissions during normal operations and be equipped with an auto-igniter.
- Pneumatic controllers – all high-bleed pneumatic controllers will be phased out, except for those specifically approved based on safety and/or process needs. Low-bleed pneumatic controllers are allowed, unless on-site electrical grid power is used, in which case no-bleed controllers are required.
- Well production facilities – leak detection and repair instrument monitoring and audio, visual and olfactory inspections are required for well production facilities.(5) Depending on emissions, the leak detection and repair requirements range from a single monitoring event to monthly recurring events. Recordkeeping requirements will be extensive and there is no mechanism for reduced monitoring based on low-leak percentages. Audio, visual and olfactory inspections are required on a monthly basis. In addition:
- gas from a separator, produced in normal operation from newly constructed, hydraulically fractured or recompleted oil and gas wells must be controlled or routed to a gas gathering line; and
- owners and operators must use best management practices to minimise hydrocarbon emissions and the need for well venting associated with downhole well maintenance and liquids unloading, unless venting is necessary for safety.
- Natural gas compressor stations – leak detection and repair instrument monitoring is required for natural gas compressor stations.(6) Depending on emissions, the monitoring frequency will be monthly, quarterly or annual. As with leak detection and repair requirements for well production facilities, recordkeeping requirements will be extensive and there is no mechanism for reduced monitoring based on low-leak percentages.
- Other equipment – the rule also includes control requirements for glycol natural gas dehydration equipment, open-ended lines, wet-seal centrifugal compressors and reciprocating compressors.
Specific compliance deadlines vary by equipment type but, in general, facilities constructed on or after May 1 2014 must comply upon start-up, and existing equipment must comply by May 1 2015. If applicability is triggered by an emissions increase, compliance is generally required within 60 days of discovering the increased emissions.
The general requirement that all intermediate hydrocarbon liquids handling operations be designed, operated and maintained to minimise the leakage of hydrocarbons "to the extent reasonably practicable" does not include an applicability date. Therefore, this good practice requirement for air pollution control will take effect on publication of the final rule. Open or improperly sealed thief hatches would presumably violate this requirement.
There is little grandfathering from the control and inspection requirements in the new rule. One significant exception is that combustion device controls authorised by permit prior to May 1 2014 are not required to meet the new 98% design destruction efficiency standard. Gas separator controls for well production facilities are not required unless the associated oil or gas well is newly constructed, hydraulically fractured or recompleted on or after August 1 2014.
The no venting requirement for controlled tanks could be one of the more challenging elements of the new rule. Although the rule explicitly exempts venting "reasonably required" for maintenance, gauging, or safety, this provision may have limited utility as it appears that the Colorado Department of Public Health and Environment will not allow exemption based on safety issues if the agency believes that the liquids handling equipment is under-designed.
For example, the revised general requirements for air pollution control equipment now state that equipment shall be adequately designed and sized to handle "reasonably foreseeable fluctuations in emissions of volatile organic compounds and other hydrocarbons during normal operations." In addition, the rule language explicitly states that fluctuations in emissions that occur when a separator dumps into a tank are reasonably foreseeable.
Based on the above language, owners and operators of controlled facilities will need to ensure that equipment can prevent or capture hydrocarbon vapours associated with routine flashing and pressure swings. This may require additional separation equipment designed to stabilise liquids and to thereby minimise flashing at the storage tanks, spring-loaded thief hatches, and/or vapour recovery equipment that pulls a slight vacuum on storage tanks.
For further information on this topic please contact Bob Greenslade at Fulbright & Jaworski LLP by telephone (+1 303 801 2700), fax (+1 303 801 2777) or email ([email protected]). The Fulbright & Jaworski LLP website can be accessed atwww.nortonrosefulbright.com.
Endnotes
(1) The commission also made modest changes to Regulation 3 and fully incorporated New Source Performance Standard Subpart OOOO into Regulation 6. The revised regulations can be accessed at www.colorado.gov/cs/Satellite/CDPHE-AQCC/CBON/1251647985820.
(2) For now, the new requirements are "state-only"; however, future revisions to the National Ambient Air Quality Standards for ozone could result in a move to incorporate the new requirements into the State Implementation Plan.
(3) The hearing was on the Bureau of Land Management's proposed venting and flaring rulemaking and was held in Golden, Colorado on March 19 2014.
(4) Consistent with the no venting standard, there is no numeric leak definition for storage vessels. Instead, the owner or operator must keep records, including the date and duration of any period where a thief hatch, pressure relief device or other access point is "found to be venting hydrocarbon emissions".
(5) For well production facilities, a 'leak' is defined as quantitative measurement (eg, Envoirnmental Protection Agency Method 21) of a hydrocarbon concentration of more than 500 parts per million (ppm) not associated with normal operations. For purposes of infrared camera monitoring or AVOs, a leak is any detectable emissions not associated with normal operations.
(6) For natural gas compressor stations, the numerical leak definition depends on the construction date of the facility. Facilities constructed before May 1 2014, have a leak definition of 2,000 ppm of hydrocarbons. Facilities constructed on or after that date have a leak definition of 500 ppm of hydrocarbons. If infrared camera inspections are used, and for audio, visual and olfactory inspections, a leak is any detectable emission not associated with normal operations.
