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E&P Envtl. Issues to Track in 2013: Air, Waste, Data and Due Diligence Pat Larkin Strasburger & Price, LLP Gulf Coast Regulatory Environmental Affairs.

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Presentation on theme: "E&P Envtl. Issues to Track in 2013: Air, Waste, Data and Due Diligence Pat Larkin Strasburger & Price, LLP Gulf Coast Regulatory Environmental Affairs."— Presentation transcript:

1 E&P Envtl. Issues to Track in 2013: Air, Waste, Data and Due Diligence Pat Larkin Strasburger & Price, LLP Gulf Coast Regulatory Environmental Affairs Group January 10, 2013

2 Overview: Numerous Issues to Track in 2013 (as always) Air Emissions – New Permitting and Controls Obligations for OGS’ Public Data Reporting – Federal initiatives; States falling in line. Waste, Wastewater and Water Quality – disposal costs; GW diligence. Litigation and Miscellaneous Challenges – need to track cases, worst case outcomes. Managing Compliance and Enforcement Risks - need to define and eliminate enforcement exposures arising from these issues/developments.

3 Air Emissions Issues to Track in 2013: Aggregation of Emissions – Accumulating Federal Major Source Status (Title V, MACTs) TCEQ PBR and Standard Permits – notifications and MSS PBR NSPS Subpart OOOO – Green Completions, Tank Controls and Obligation to Flare new VOC sources. Tex RR Commn SWR 32: flaring permits and prohibitions RICE MACT – amended applicability and new compliance requirements State Ozone Controls targeting E&P operations – Ozone non-attainment areas may target VOC from E&P

4 Air Emissions Issues to Track in 2013: Aggregation of Emissions Issue: States may use case-by-case criteria to aggregate “adjacent” and related air sources to apply “major source” Title V and MACTs –States using narrow defn of “adjacent” (1/4 mi. by TCEQ/PA) –EPA (or enviro-activists) may disagree/demand aggregation of dispersed sources. –If broad aggregation achieved, PBR/SP programs could be voided. Status: 6 th Cir. Fed Appeals Court in Summit v. EPA (8/7/12) rejected EPA aggregation of OGS sites in 8 mile radius, EPA’s emphasis on inter-dependence to define “adjacency.” –Summit does not void EPA position outside 6 th Cir. States (KY, MI, OH, TN) Risks to Monitor: –EPA may revise aggregation guidance – may use NAAQS impacts (NOX/SOX) as basis for using functional relationship to define adjacency. –EPA/enviros could assert that non-aggregation allows NAAQS exceedences. –EPA could amend 40 CFR 52.21(b)(6)

5 Air Emissions Issues to Track in 2013: TCEQ Oil & Gas PBR and Standard Permits – MSS Emissions Current O&G PBR/SPs do not include MSS emissions in authorized emissions. –ex. SP for Barnett Shale counties which requires MSS emissions in applicability limits Includes MSS BMPs as enforceable permit terms TCEQ will issue a draft MSS PBR rule for 2/2013 Commn. Agenda –Intended to be a “bolt on” addition to existing permits – no additional quantification of MSS emissions to show applicability/authorization. Issues to track in MSS PBR rulemaking: BMPs – recommendations or mandates? Stacking of PBRs and emissions [additional 25 tpy?] Will PBR define the line between MSS v. reportable “upset” emissions? Will PBR include requirements to address MSS in non-attainment areas? How will MSS PBR coordinate with prior MSS claimed in other PBRs/SPs?

6 Air Emissions Issues to Track in 2013: NSPS Subpart OOOO Basic Requirements: Controls required on new Nat Gas facilities (start-up or modified) after 8/15/12. Email notice to EPA/state 2 days prior to well completion/flowback VOC emissions from each hydro-fracked well(s). VOC must be controlled by RECs after 1/1/2015. VOC must be flared from startup, until 1/2015 –Venting allowed if flaring prohibited by local/state law for safety purposes. Additional Controls for Storage Vessel VOCs and other affected sources at sites. Pneumatic Controllers must reduce VOC to max. of 6 cu. ft./hr. Vessels w/ 6tpy VOC must control to 95% reduction –Affected “storage vessels” are non-temporary tanks (at site >180 days) –“Existing” vessels must control VOC (and HAPs) by 10/13. –“New” vessels – have 30 days to make 6 TPY trigger calculation, 30 days to install controls

7 Air Emissions Issues to Track in 2013: NSPS Subpart OOOO API, TXOGA and Enviros suits: –API seeking extension of Vessel VOC control deadline –EPA estimates 600 “affected” vessels need controls, API estimate: several 1000 Clarification of venting prohibition during flare controls period –Sierra Club and State AGs (NE States) Demanding formal EPA position on “methane endangerment” and that CH4 be controlled in NSPS. Related suit challenging lack of controls on other E&P related air toxics in NESHAP rule Watch for: Local and State SIP rules prohibiting flaring that may trigger SO2 non-attainment (or Non-attainment area NSR permitting) An EPA voluntary stay/extension of compliance dates (but don’t count on it)

8 Air Emissions Issues to Track in 2013: Tex RR Commn SWR 32: venting & flaring permits and prohibitions 16 TAC Sec. 3.32: All nat gas must be recovered and used if it can be readily measured by routine metering devices. –Exceptions: blowdown, tank vapor, fugitives, completion-related emmns. –Must flare if releases >24 hrs. –May vent if <24 hr. release – unless prohibited by law or safety –Maximum release 10 days post-completion Administrative extension with cause – max. 180 days RRC Hearing required if request >180 day extension Commission Increasing Enforcement of SWR 32 - if no permit/extensions obtained –NOVs auto-mailed if Production Report shows flaring without SWR 32 Permit –Daily penalties of up to $10k/ well –Failure to correct/progress on collection/connection = cause for Severance Letter RRC Commnr. Porter announced Initiative to “Modernize” Flare Rules –No draft rule to-date Rep. Keffer, Chair of Texas House Energy Res. Committee –intends to submit flaring legislation (Austin 82d Leg. Session underway!) Watch For: Legislation/RRC Rules to specifically invoke NSPS O4“safety exception” to allow venting: limit flaring where TCEQ SIP rules/SO2 limits violated? Possibly adopt NSPS control technology for extended venting?

9 Air Emissions Issues to Track in 2013: RICE MACT – amended applicability and new 2013 compliance requirements Initial RICE MACT – limited to Major Sources w/ > 500 HP3 2010 RICE MACT update imposes controls and/or O&M requirements across spectrum of RICE (Area Sources, Emerg. Engines, sizes from 500HP) Next control-installation deadline: May, 2013 To identify potentially required controls and compliance obligations for each engine, operator will need to confirm and cross-reference all of these factors: –HAP Major source or an Area Source? –Engine size –Engine type (lean/rich feed, 2 or 4 stroke, etc.) –Fuel type –Annual hours of service –Date first in service –Emergency or Continuous ops. More than 70 interrelated applicability scenarios may be considered for each engine. Watch For: May 3 will come quickly for RICE operators

10 Public Data Reporting – 2013 Compliance and Rulemaking EPCRA Toxic Release Inventory (TRI) The TRI regulations require most industries to report to the EPA significant uses and releases of toxic substances. Oil and gas facilities are not required to report to the TRI. On 10/24/2012, the Environmental Integrity Project filed a formal petition with the US EPA – requesting that EPA begin rulemaking to require TRI data collection and reporting by E&P operators. TRI Reporting would require calculation/reporting, by site, of air, water, waste releases of up to 600 chemicals, if above threshold quantities. Ongoing Development of State-Required fracking fluid disclosures – California –Cal-DOGGR “Discussion Draft” of Fracking Rule released December 18 –SCAQMD Proposed Fracking Air emissions Rulemaking – fluid content disclosures and green completions Ohio, Colorado, Utah – Frack Fluid Disclosure Rules – FRACFOCUS posting Watch For: TRI rulemaking; mandated public posting of fluids, air emissions and GWM data, and any complaints.

11 Waste, Wastewater and Water Quality UIC Disposal Standards State GW Regulators Assn advocating reviews and update of state UIC requirements: -Include seismicity impact analysis -Incorporate EPA Diesel Fracking permitting Guidance Waste and Wastewater Recycling - TxRRC promulgates water and mud recycling regulations – demand for services? -EPA considering return of E&P waste to RCRA Sub. C program - manage E&P waste as HW – manifesting - disposal in UIC Class I wells: Class II re-permitting/closures? -E&P Waste and Wastewater recycling -Demand and complexity greatly increase (no land application?) - RCRA Status Subject to Congressional Approval – No way! -No legislation needed for RCRA Subtitle D. regulation of E&P wastes. Watch For: UIC, RCRA devts. (state or federal) could quickly boost water mgmt. costs e.g., Ohio Exec Order imposes UIC seismicity, integrity and monitoring standards on Class II disposal wells.

12 Waste, Wastewater and Water Quality Site-Focused Protection of Water Quality Pre-Lease GW Monitoring – 3 states with GWM, 2 w/ post-drill montg. Setback Requirements – variable per relative urbanization Recent State Proposals & Adoptions Colorado GWM Rule proposed Oct., 2012; Final Rule Issued January 7, 2012. requires sampling up to four water wells within one-half mile of a new oil and gas well prior to drilling, requires samples of wells post-completion at 6-12 months and after 5-6 years, a requirement unprecedented among other states. Proposed Setbacks Rule issued Nov. 9, 2012 Proposed Rule in Hearings before COGCC (1/7 – 1/10). Alaska - GWM Rule proposed Dec. 20, 2012 – pre and post completion monitoring. Ohio – S.B. 315 (6/2012) mandates pre-drill GWM w/in 1500 ft. of site California - DOGGR “Discussion Draft ” of Rule issued 12/18/12 focus on well integrity analysis and testing no set-back or GWM requirements Watch For: More state GWM requirements - two’s a pattern, three is a trend!

13 Litigation and Miscellaneous Litigation and Rulemaking Petitions NSPS OOOO and NESHAP – Methane Endangerment finding Prairie Chicken & Earless Lizard Petitions – possible US FWS rulemaking to protect E&P habitats TRI/EPCRA Petition – annual report of all toxics from E&P sites NEPA/CEQA litigation v. Cal. DOGGR – no frack permits without EIS of cumulative impacts LNG Terminal Challenges (LA & MD) – Sierra Club demands EIS of increased nat gas production Preemption Litigation: States challenge fracking bans by NY, PA towns; City Setback Ordinance in Colo. Springs Activist Litigation Focuses: Block Markets – LNG cases Strand Wells – FERC Pipeline cases Limit or Prohibit Flaring of Stranded Gas – State AG’s NSPS Suit to include CH4 in NSPS Endangered Species Listing in Drilling Habitat – Chicken/Lizard Require NEPA review of Fracking Cumulative Impacts - Delay permit programs and block issuance of drill permits Watch For: be aware of “live” cases in operating jurisdictions and worst-case scenarios for each!

14 Managing Compliance and Enforcement Risks Biggest Enforcement Risks: Acquired Assets – Hidden Non-Compliance and Penalty Liability! Uncertainty of Litigated or Conflicting Applicable Standards! –E.g. – NSPS OOOO: Tanks in? – REC needed now? –Flaring required by NSPS but possibly prohibited by NAAQS? Solutions and Strategy: Compliance Audit to Establish Penalty Immunity (right or wrong, no penalty and time to plan and comply). –Texas Environmental Audit Statute Notice, Audit, Disclose, Correct w/in reasonable time = Penalty Immunity –USEPA Audit and Self-Disclosure Policy Prompt disclosure (21 days), EBEN and prompt corrections.

15 Managing Compliance and Enforcement Risks Coordinate Due Diligence and Compliance/Immunity Auditing: Existing Well Assets -Air Emissions: Permitted and Controlled? (Tanks, Flares, RICE in use, Progress on REC use, State Aggregation policy, MSS strategy, capacity upgrades trigger permit amendments…?) -Flowback water management? (UIC permitted, diesel guidance apply, recycling service available/permitted…?) -Water Quality Impacts (complaints, baseline/monitoring of supply wells, abandoned wells ID’d, fluid disclosures filed,…?) Acquiring New Drilling Sites -Pre-construction Air Permitting (Minor Source v. Aggregation potential; REC, VRU and flaring plans…?) -Local controls: (setbacks met, impact fees, bans or preemption established…?) -Fluid Disposal Strategy: (Formulation require UIC permit, adequate water supply…?) -Pre-lease GW Water Monitoring: (Mandatory v. Risk management baseline?)

16 Q&A? Patrick J. Larkin Partner and Practice Leader, Environmental Practice Group Strasburger & Price, L.L.P. 901 Main Street Suite 4400 Dallas, Texas 75202 Patrick.larkin@strasburger.com T: 214-651-2132 Cell: 214-770-3881 Fx: 214-659-4075


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