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By: Clare Bienvenu

On January 3, 2007, EPA promulgated a final rule amending 40 C.F.R. part 63, Subpart HH, “NESHAP (National Emission Standards for Hazardous Air Pollutants) for Source Categories from Oil and Natural Gas Production Facilities” to include the regulation of area sources. See 72 Fed.Reg. 26 (January 3, 2007).  The final rule is posted here.  Subpart HH has historically regulated various emissions points for major sources of air toxics in the oil and natural gas production industry. This amendment adds the regulation of benzene emissions from tetraethylene glycol (TEG) dehydration units at minor sources. The significance of this new rule is that all TEG dehydration units in the oil and gas production industry are now subject to Subpart HH unless they meet the exemption criteria provided in the regulations.  While the amendment adds the regulation of area sources, it does not alter any of the major source standards. Accordingly, any TEG dehydration unit already regulated under Subpart HH’s major source standards must continue to comply with those requirements. 

This article will first discuss control requirements for area source TEG dehydration units, which vary based on whether the unit is located within a high population density area, referred to as an “UA plus offset or UC.” The article will next discuss applicable compliance dates, which vary based on the date the TEG dehydration unit was constructed or modified and whether the unit is located in an “Urban 1 County” and/or a high population density area. Notably, this rule is immediately effective for any source constructed or modified on or after July 8, 2005 and for certain sources constructed or modified on or after February 6, 1998.

Control Requirements:

The final rule creates three subcategories of area sources with respect to control requirements: (1) Exempt TEG dehydration units; (2) Non-Exempt TEG dehydration units within “the UA plus offset or UC boundary;” and (3) Non-Exempt TEG dehydration units outside of “the UA plus offset or UC boundary.” The following will discuss the requirements for each of the subcategories.

1. Exempt TEG Dehydration Units

A TEG dehydration unit is exempt from Subpart HH regulation if its actual annual average natural gas flow rate is less than 85 thousand standard cubic meters per day (3 million standard cubic feet per day) OR it produces benzene emissions less than 0.90 Megagrams per year (1.0 ton per year). A facility must verify the actual annual gas flow rate by using either a flow measurement device or another method approved by EPA. Benzene emissions must be verified through either GRI-GLYCalc^TM, Version 3.0 or higher, or by direct measurement. If a TEG dehydration unit meets the exemption criteria, the owner/operator must maintain records of the applicable throughput or emissions determinations. The unit is exempt from all other recordkeeping and reporting requirements.

2. Non-Exempt TEG Dehydration Units

If a TEG dehydrator is not exempt, the owner/operator must first determine whether the unit is located within or outside of the “UA plus offset or UC” boundaries. The regulatory definitions of an Urbanized Area (UA) and an Urbanized Cluster (UC) are taken from the Census 2000 definitions. An UA consists of densely settled territory with a population of at least 50,000 people. An UC consists of densely settled territory with a population ranging from 2,500 to 50,000 people. The “UA plus offset and UC,” referred to in Subpart HH, is the area occupied by: (1) each UA, including a 2 mile offset from the boundary; and (2) each UC with a population of at least 10,000 people. 

EPA has posted two Implementation Documents to aid owner/operators in determining an affected unit’s proximity to an UA or UC: (1) a list of the population of UA and UC’s by state; and (2) instructions regarding how to use the Census Bureau’s website to determine a source location’s proximity to the nearest “UA plus offset or UC” boundary. Both documents may be accessed at: http://www.epa.gov/ttn/atw/oilgas/oilgaspg.html. (See “Names of Urban Clusters and Urbanized Areas” (12/22/06) and “Locating Urban Areas on Census Website” (12/22/07), respectively.) Lastly, the Bureau of Census Web site contains maps of each UA and UC, which can be used to calculate a unit’s location with respect to the nearest boundary. The UA maps can be accessed at http://www.census.gov/geo/www/maps/ua2kmaps.htm#s, and the UC maps can be accessed at http://www.census.gov/geo/www/maps/uc2kmaps.htm. 

            Based on the location of a non-exempt TEG dehydrator, the control requirements and reporting requirements mandated by Subpart HH vary as follows:

a.   Non-Exempt TEG Dehydration Units Within an “UA plus offset or UC”

The TEG dehydrator is subject to the same control requirements as major source glycol dehydrators. These requirements provide that the TEG dehydrator must be connected, through a closed vent system, to one or more emission control devices. The control devices must: (1) reduce HAP emissions by 95 percent or more (generally by a condenser with a flash tank); or (2) reduce HAP emissions to an outlet concentration of 20 ppmv or less (for combustion devices); or (3) reduce benzene emissions to a level less than 0.90 Mg/yr (1.0 tpy).

The owner/operator must submit an initial notification to the delegated state agency and the EPA. If the initial startup of the TEG dehydrator was prior to the effective date of the final rule (i.e. prior to January 3, 2007), initial notification is due by January 3, 2008. Otherwise, the initial notification is due 120 calendar days after the source becomes subject to the standard. The owner/operator must also submit a Notification of Compliance Status Report within 180 days of the unit’s compliance date (see discussion of compliance dates below). Periodic reports are to be submitted on an annual basis. Other reporting requirements mirror those already required for major sources (i.e. the date of a performance evaluation; the planned date of a performance test; and startup, shutdown, and malfunction reports). The TEG dehydrator is also subject to the pre-existing monitoring requirements of Subpart HH. 

Lastly, the regulations explicitly state that area sources are exempt from Title V permitting requirements, unless otherwise required by law. 

b. Non-Exempt TEG Dehydrators Outside of an “UA plus offset or UC”

The TEG dehydrator must operate at a glycol circulation rate less than or equal to the regulatory optimum circulation rate. The equation for the optimum circulation rate is provided in the regulations. If the unit is unable to meet the sales gas specification for moisture content using the determined rate, the owner/operator must calculate an alternate circulation rate using GRI-GLYCalc^TM, Version 3.0 or higher. The basis for the alternate rate must be documented and submitted with the initial notification. The owner/operator must maintain a record of circulation rate determinations. 

The owner/operator must submit an initial notification, which must include the following specific information: the source’s location as relative to the nearest “UA plus offset and UC” boundaries, the circulation rate determination, documentation of the alternate circulation rate if applicable, manufacturer and model of the circulation pumps, and a certified statement of future compliance. If the initial startup of the TEG dehydrator was prior to the effective date of the final rule (i.e. prior to January 3, 2007), initial notification is due by January 3, 2008. Otherwise, the initial notification is due 120 calendar days after the source becomes subject to the standard.

If operating conditions change and a modification to the optimum glycol circulation rate is required, the owner/operator shall prepare a new determination and resubmit all information that accompanies the initial notification. As stated above, the regulations explicitly state that area sources are exempt from Title V permitting requirements, unless otherwise required by law. 

Compliance Deadlines:

With respect to determining compliance deadlines, a source must first determine whether it is located in an “Urban 1 County.” EPA posted a memorandum listing urban and rural county classifications at: http://www.epa.gov/ttn/atw/oilgas/oilgaspg.html (See “Memo-Urban and Rural County Classifications” (6/28/05)). The following chart lists all compliance dates, which are determined by the unit’s location within an Urban 1 County and an UA plus offset or UC:

72 Fed.Reg. at 30. As mentioned above, this rule is immediately effective for any source constructed or modified on or after July 8, 2005 and for any source located within an “Urban 1 County” that was constructed or modified on or after February 6, 1998. These area sources must achieve compliance immediately upon initial startup or January 3, 2007, whichever date is later. 

Conclusion:

The new final rule amends Subpart HH to regulate area sources, as well as major sources, within the oil and natural gas production source category for NESHAPS. Area sources are only regulated with respect to TEG dehydration units. As a result of the new rule, all TEG dehydrators that are not exempt from regulation are subjects to some standards under Subpart HH. With respect to area sources, those TEG dehydration units that are located in high population density areas are subject to the same control requirements as major source dehydrators. Notably, the rule clarifies that all Subpart HH area sources are exempt from Title V permitting requirements.

On January 30, 2007, a class action settlement was approved in Turner v. Murphy Oil U.S.A., Inc., 05-4206 (E.D. La).  The Turner case asserted claims for property damage resulting from a release of oil from tanks located at Murphy’s Meraux, Louisiana refinery after Hurricane Katrina.  The $330 million settlement includes a $55 million buyout program, a $120 million compensation program, a credit for $83 million in compensation already paid, and a $71 million remediation program (including credit for $51 million already expended for remediation).  In addition, Murphy agreed to pay plaintiffs’ attorneys fees, which the court set at $33.7 million.  The Governor of Louisiana, Kathleen Blanco, testified in favor of the settlment at the Fairness Hearing.  To view the Court’s order approving the settlement, click here.

As a result of the breaches and overtopping of levees during Katrina, floodwaters up to 12 feet high swept into the Murphy Refinery, dislodging Tank 250-2, which ultimately ruptured.  Approximately 25,000 barrels of oil were released, and washed by floodwaters into the residential neighborhoods surrounding the refinery.  The court found that at least 1,800 properties were affected. 

Numerous suits were filed, and 27 class actions were consolidated under the Turner caption.  The court certified a class of residents and property owners within a designated geographic area.  The claims certified for class treatment included negligence, strict liability, violation of obligations of neighborhood, nuisance, trespass and groundwater contamination.  Plaintiffs’ claims under the Resource Conservation and Recovery Act (RCRA) and Oil Pollution Act (OPA) were dismissed as premature.  The court also dismissed claims for “fear of cancer” damages and allegations of fraud.  The court bifurcated the case into two phases:  trial common issues of liability and causation, to be followed by successive trials of specific causation and damages.  However, the parties reached settlement before trial. 

While the settlement amount was established in the Settlement Agreement, the amount of attorneys fees was not agreed upon.  The agreement provided only that Murphy would pay attorney fees and expenses on top of the settlement amount.  Plaintiffs’ counsel requested a 35% contingency fee, or $115 million, and Murphy countered that $13.6 million would be appropriate.  The court awarded $33.7 million in fees and $2.6 million in expenses.

The Louisiana Department of Natural Resources has issued a proposed amendment to Statewide Order 29-B that details the procedures the Department will follow in implementing oilfield clean-up plans referred to the Department under Act 312 of 2006.  The Legislature passed Act 312 in 2006 to address the problem that damages awards in oilfield remediation litigation were not required to be expended on remediation.  Under the Act, the Department is involved in formulating a remediation plan, and the remediation funds are to be deposited in the registry of the court and actually spent on remediation.  The Commissioner of Conservation will conduct a hearing on the proposed regulations on Wednesday February 28, 2007.  Comments may be submitted at the hearing, or may be submitted in writing up to March 7, 2007.  To view the proposed regulations, click here.  Most notably, the draft regulations state that remediation plans must comport with the standards set forth in Order 29-B.