The Impacts of Air Quality Regulations

on the Pipeline Industry – An Overview

March 3, 2014

James Smith

Air Quality Director

Overview

Drivers for Increased Regulation

Air Quality Regulations

Enforcement

What’s Ahead?

2

Drivers for Increased Regulation

Boom in O&G production (fracking!) and low NG price

Has led to increase in capital projects across supply chain

Well-sites / CPFs

Pipelines (oil and NG)

NG fractionation plants

Refinery expansions

Terminal expansions

Increased pollutant

emissions

March 4, 2014 3

Drivers (cont’d)

O&G industry largest source of

industrial VOC

NOx and formaldehyde from gas-fired

sources of primary concern

Pipeline facilities a significant source of methane

(greenhouse gas)

Recent lawsuits have driven EPA to meet previously ignored

rulemaking schedules, so new/revised rules have proliferated

March 4, 2014 4

Eagle Ford Shale From ~zero to >1,000,000 BOE/day by end of 2013

Page 5

Page 6

Air Quality Regulations – Categories

EPA/State construction and operating permit rules (40 CFR 52, 70, 71)

Could trigger stringent emission controls – Best Available Control Technology (BACT) or

Lowest Achievable Emission Rate (LAER)

Interstate pipelines - different States can have different permitting procedures

Must conduct a permit review before moving engines from site to site

New Source Performance Standards (NSPS) (40 CFR 60)

New, modified, or reconstructed sources – rules target “criteria” pollutants

National Emission Standards for Hazardous Air Pollutants (NESHAP)

For Source Categories (40 CFR 63) – Maximum Achievable Control Technology (MACT)

Rules target defined HAPs at large (major) and small (area) facilities

Mandatory Greenhouse Gas Reporting (40 CFR 98)

Methane from leaks and vents is primary GHG of concern

National Ambient Air Quality Standards (NAAQS) (40 CFR 50)

Defined for six pollutants – NO2, CO, PM (PM10/2.5), Ozone, SO2, and Pb

“Nonattainment areas” do not meet the NAAQS for a particular pollutant (severities)

1-hr SO2 and NO2 (modeling issue)

March 4, 2014 7

Specific Air Regulations – List

Federal Rules That May Apply ….

NSPS (40 CFR 60) Subpart

A – General

GG – Stationary Gas Turbines

IIII – “Compression” Ignition Internal Combustion Engines (diesel)

JJJJ – “Spark” Ignition Internal Combustion Engines (gas)

KKKK – Stationary Combustion Turbines

OOOO – Crude Oil and Natural Gas Production, Transmission, and

Distribution

NESHAP for Source Categories (40 CFR 63) Subpart

A – General

R – Bulk Gasoline Terminals and Pipeline Breakout Stations

HH – Oil and Natural Gas Production Facilities

TT/UU – Equipment Leaks

March 4, 2014 8

Specific Air Regulations (cont’d)

Federal Rules That May Apply (cont’d) ….

NESHAP for Source Categories (40 CFR 63) Subpart

VV – Oil-Water Separators

HHH – Natural Gas Transmission and Storage Facilities

EEEE – Organic Liquids Distribution (Non-Gasoline)

YYYY – Stationary Combustion Turbines

ZZZZ – Stationary Reciprocating Internal Combustion Engines

DDDDD – Major Sources: Industrial, Commercial, and Institutional Boilers and

Process Heaters

BBBBBB – Gasoline Distribution Bulk Terminals, Bulk Plants, Pipeline Facilities

JJJJJJ – Industrial, Commercial, and Institutional Boilers (Area Sources)

GHG Mandatory Reporting Rule (40 CFR 98) Subpart

A – General

C – Stationary Fuel Combustion Sources

W – Petroleum and Natural Gas Systems

March 4, 2014 9

Consider State/Local Air Regulations

State and local rules can be more stringent than the

federal rules (cannot be less stringent)

Most States have one environmental

protection agency that handles AQ

(e.g. TCEQ, LDEQ, NYDEC, etc.)

California has CARB, part of Cal/EPA

35 local AQ management districts

each with its own set of Air rules

March 4, 2014 10

Sections Of An Air Regulation

Applicability/Exemptions

Emission Limits

Operating Limits

Work Practice Standards

Performance Testing

Monitoring

Recordkeeping

Reporting

March 4, 2014 11

Overview of RICE MACT (“Quad Z”)

Rule originally issued in 2004, revisions in 2008, 2010, 2011, and 2013

Requires reduction of criteria and HAP emissions

from stationary ICE By 2013, US-wide reductions of:

CO by 248,400 tpy

PM10 by 6,500 tpy

VOC by 27,000 tpy

HAP by 6,600 tons per year (tpy) mainly formaldehyde, methanol, acrolein, acetaldehyde

Applies to “existing” and “new” CI (diesel-fired) and SI (gas-fired) engines

located at “major” and “area” sources of HAP emissions SI engines – two vs four stroke, and rich burn vs lean burn (e.g. 2SLB, 4SRB)

Major HAP source – emits ≥ 10 tpy single HAP or 25 tpy combination of HAPs

Area HAP source – source that is not major

March 4, 2014 12

RICE MACT (cont’d)

March 4, 2014 13

“Existing” engine

Area HAP source: Engines constructed/reconstructed before June 12, 2006

Major HAP source:

o Engines ≤ 500 bhp constructed/reconstructed before June 12, 2006

o Engines > 500 bhp constructed/reconstructed before Dec 19, 2002

“New” engine – constructed/reconstructed on or after the above dates

Emission and operating limits, and work practices,

found in the twelve appendix tables

Convoluted rule! EPA has a question-based

navigation tool to walk you through rule applicability

and requirements for your specific operating

scenarios

RICE MACT (cont’d)

March 4, 2014 14

Typical after-treatment technologies include Oxidation Catalyst for CO, or

Non-Selective Catalytic Reduction (NSCR) for NOx

Use only Ultra Low Sulfur Diesel (ULSD) Fuel for Existing Non-

Emergency CI Engines > 300 HP and <30 liter/cylinder displacement

located at a Major HAP source

Engines > 300 hp must be equipped with closed or open crankcase

filtration system to reduce metallic HAP emissions (e.g. nickel, mercury)

For certain new/reconstructed engines, compliance with RICE MACT is

met by compliance with NSPS Subparts IIII (CI engines) and JJJJ (SI

engines)

GHG MRR Subpart W

March 4, 2014 15

Rule applies to …..

Offshore and Onshore Petroleum and Natural Gas

Production

Onshore Natural Gas Processing

Onshore Natural Gas Transmission Compression

Underground Natural Gas Storage

LNG Storage

LNG Import and Export Equipment

Natural Gas Distribution – pipelines and metering stations operated by a

Local Distribution Company within a single State (i.e., downstream of “city

gate”)

GHG MRR Subpart W (cont’d)

March 4, 2014 16

Onshore NG Transmission Compression “….means any stationary combination of

compressors that move natural gas from

production fields, natural gas processing

plants, or other transmission compressors

through transmission pipelines to natural gas

distribution pipelines, LNG storage facilities,

or into underground storage. In addition, a

transmission compressor station includes

equipment for liquids separation, and tanks

for the storage of water and hydrocarbon

liquids. Residue (sales) gas compression

that is part of onshore natural gas processing

plants are included in the onshore natural gas

processing segment and are excluded from this segment.”

GHG MRR Subpart W (cont’d)

March 4, 2014 17

Rule does not set GHG emission limits, only reporting requirements

GHGs are Carbon Dioxide (CO2), Methane (CH4), Nitrous Oxide (N2O)

Applicability threshold is 25,000 metric tons (MT) Carbon Dioxide

Equivalent (CO2e), applied to each compressor station

CO2e (MT/yr) obtained by multiplying individual GHG emission rate

(GHGi) with the GHG’s defined Global Warming Potential (GWPi)

GWPCO2 = 1

GWPCH4 = 25

GWPN2O = 298

GHG MRR Subpart W (cont’d)

March 4, 2014 18

For NG transmission sector, report GHG emissions from

Reciprocating Compressors (rod packing vent line)

Centrifugal Compressors (wet seal degassing vent)

Transmission Storage Tank Vents

Blowdown Vent Stacks

NG Pneumatic Bleed Devices (high and low bleed)

Fugitive emissions from pipeline component leaks

(Also any other combustion sources, e.g. flares)

Must report prior year’s total GHG (CO2e)

emissions by March 31 using EPA’s

electronic reporting tool (e-GGRT)

Potential Enforcement

March 4, 2014 19

EPA’s Six National Enforcement Initiatives for 2014 – 2016 o Keeping raw sewage and contaminated stormwater out of our nation’s waters

o Preventing animal waste from contaminating surface and ground waters

o Cutting toxic air pollution that affects communities’ health

o Reducing widespread air pollution from the largest sources, especially the

coal-fired utility, cement, glass, and acid sectors

o Reducing pollution from mineral processing operations

o Assuring energy extraction sector compliance with

environmental laws

For HAPs, EPA focused on three areas of reduction (based

on historical non-compliance) 1. Leak Detection and Repair (LDAR)

2. Reducing volume of waste gas to flare and flare control efficiency

3. Excess emissions, including those from Startup, Shutdown, and Malfunction

Potential Enforcement (cont’d)

March 4, 2014 20

EPA Office of Enforcement and Compliance Assurance (OECA) …

“An unprecedented acceleration of natural gas development has led to a

significant rise in air pollution throughout the intermountain West.

Geospatial analysis suggests that a similar rise in air pollution is possible

elsewhere as unconventional gas development grows in other shale plays.”

EPA will enforce based upon Clean Air Act, Clean Water Act, Safe

Drinking Water Act, and other authorities

Air regulations (e.g. GHG MRR) have language stating that a violation of

any part of the rule constitutes a violation of the Clean Air Act

Each day of a violation constitutes a separate violation

Civil penalties can range anywhere from zero to $25,000 – $35,000/day

What’s Ahead?

March 4, 2014 21

Lowering of Ozone NAAQS (primary)

0.12 ppmv (1-hr) for many years

0.08 ppmv (84 ppbv) (8-hr) in 1997

0.075 ppmv (75 ppbv) (8-hr) in 2008

Pending: 60 – 70 ppbv (8-hr)?

Timetable: EPA proposes new standard by Dec 2014

Finalizes new standard by Oct 2015

Will create more Ozone “nonattainment” areas in US

Ozone NAAQS

March 4, 2014 22

EPA Ozone Nonattainment Map – 75 ppbv

Ozone NAAQS

March 4, 2014 23

EPA Ozone Nonattainment Map – 60 ppbv (projected)

What’s Ahead? (cont’d)

March 4, 2014 24

GHG-related issues

PSD Tailoring Rule – On Feb 24, 2014 US Supreme Court heard

arguments on EPA’s authority to limit GHG in air permits

EPA developed GHG rules for motor vehicles and said the CAA forced

similar rules for stationary sources

Observers expect high court to curb EPA’s authority to limit GHGs in

permits

140 facilities already have GHG PSD permits, TX has 80 pending

Mandatory Reporting Rule, Subpart W – Proposed revisions

to expand use of site-specific gas composition data, revise calc.

methods for compressors that have safety or operational concerns,

remove use of alternative monitoring methods

What’s Ahead? (cont’d)

March 4, 2014 25

Pollutant Emission Factor Revisions?

On Feb 25, 2014 EPA settled lawsuit by TX/LA

community groups who claim factors are too low

(emissions are underestimated) EPA has agreed to review/revise factors for emissions of VOC, CO, and

NOx from liquid storage tanks, industrial flares, and wastewater

treatment systems at refineries and petrochemical plants

More Scrutiny of Methane Emissions – U.S. Energy Secretary

Moniz wants closer look at methane emissions from transmission and

distribution systems (says actual emissions higher than EPA’s estimates)

Questions?

James Smith

Golder Associates Inc.

500 Century Plaza Drive, Ste. 190

Houston, TX 77073

(281) 821-6868

james_smith@golder.com

March 4, 2014 26

Backup Slides

March 4, 2014 27

Number Air Permit Applications Received (TCEQ)

196 240 225 173 154 139

1,863

3,183

3,559

4,512

5,338 5,155

5,623

5,295

4,492

6,945

9,276

9,664

0

2,000

4,000

6,000

8,000

10,000

12,000

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

Ap

pli

cati

on

s R

eceiv

ed

Oil and Gas Projects

Total NSR Projects

Consider State/Local Air Regulations

Ozone Transport Commission (OTC)

Multi-state organization tasked with advising EPA

on how to solve pollutant transport and ozone

NAAQS compliance problem in the northeast

Developing “model rule” for NOx control from

equipment in O&G E&P sector, including compressors

Evaluated reciprocating gas-fired (SI) engines (2SLB, 4SLB, 4SRB),

diesel-fired (CI) engines, and combustion turbines

Found that largest sources of NOx emissions from existing recip engines

and combustion turbines

March 4, 2014 29

Typical Emission Sources / Pollutants

Combustion Sources – NOx, CO, PM10/2.5, VOC, HAPs, GHG

Engines (Diesel-Fired, Gas-Fired)

Gas Turbines

Compressors

Heaters and Boilers

Flares

Glycol Dehydrators – VOC

Storage Tanks – VOC, GHG

Equipment Leaks (aka “Fugitives”) – VOC, GHG

Valves, flanges, pump/compressor seals, sampling stations, pneumatic

devices, open-ended lines, etc.

March 4, 2014 30

RICE MACT – Example Tables

March 4, 2014 31

Emission Limits for Existing, New, and Reconstructed 4SRB RICE > 500 HP at Major HAP Source

Emission Limits for New and Reconstructed 2SLB and CI RICE > 500 HP, and New and Reconstructed

4SLB RICE ≥ 250 HP at Major HAP Source

For each

You must meet the following emission limitation, except during

periods of startup . . . During periods of startup you must . . .

1. 4SRB stationary RICE a. Reduce formaldehyde emissions by ≥ 76%. If you commenced

construction or reconstruction between December 19, 2002 and June 15,

2004, you may reduce formaldehyde emissions by ≥ 75 % until June 15,

2007 or

Minimize the engine's time spent at idle and

minimize the engine's startup time at startup to a

period needed for appropriate and safe loading of

the engine, not to exceed 30 minutes, after which

time the non-startup emission limitations apply.1

b. Limit the concentration of formaldehyde in the stationary RICE exhaust to

≤ 350 ppbvd at 15% O2

For each

You must meet the following emission limitation, except during periods of

startup . . . During periods of startup you must . . .

1. 2SLB stationary RICE a. Reduce CO emissions by ≥ 58%; or

b. Limit concentration of formaldehyde in the stationary RICE exhaust to ≤ 12

ppmvd at 15% O2. If you commenced construction or reconstruction between

December 19, 2002 and June 15, 2004, you may limit concentration of

formaldehyde to ≤ 17 ppmvd at 15% O2 until June 15, 2007.

Minimize the engine's time spent at idle and

minimize the engine's startup time at startup to a

period needed for appropriate and safe loading of

the engine, not to exceed 30 minutes, after which

time the non-startup emission limitations apply.1

2. 4SLB stationary RICE a. Reduce CO emissions by ≥ 93%; or

b. Limit concentration of formaldehyde in the stationary RICE exhaust to ≤ 14

ppmvd at 15% O2

3. CI stationary RICE a. Reduce CO emissions by ≥ 70%; or

b. Limit concentration of formaldehyde in the stationary RICE exhaust to ≤

580 ppbvd at 15% O2

GHG MRR Subpart W (cont’d)

March 4, 2014 32

TABLE W-3 OF SUBPART W OF PART 98—DEFAULT TOTAL HYDROCARBON EMISSION FACTORS FOR

ONSHORE NATURAL GAS TRANSMISSION COMPRESSION

Onshore natural gas transmission compression Emission factor (scf/hour/component)

Leaker Emission Factors—Compressor Components, Gas Service

Valve1 14.84

Connector 5.59

Open-Ended Line 17.27

Pressure Relief Valve 39.66

Meter 19.33

Leaker Emission Factors—Non-Compressor Components, Gas Service

Valve1 6.42

Connector 5.71

Open-Ended Line 11.27

Pressure Relief Valve 2.01

Meter 2.93

Population Emission Factors—Gas Service

Low Continuous Bleed Pneumatic Device Vents2 1.37

High Continuous Bleed Pneumatic Device Vents2 18.20

Intermittent Bleed Pneumatic Device Vents2 2.35

Ozone NAAQS

March 4, 2014 33

Interstate and Intrastate Pipelines With Compressor Stations