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Oil and Gas Alert: U.S. EPA issues first-ever fracking standards

On April 17, 2012 the U.S. Environmental Protection Agency (EPA) issued its long awaited rules setting air emission standards for oil and gas hydraulic fracking operations. This standard is the first significant federal regulation imposed on fracking operations. The Federal EPA had been pushed to issue the standard in a lawsuit filed by several environmental groups (WildEarth Guardians v. EPA, d.d.c., no. 09-00089). The new fracking standard is part of a larger group of New Source Performance Standards (NSPS) that will cover new and modified oil and gas production, processing, transmission, and storage. The U.S. EPA is required by the Federal Clean Air Act to establish this standard as part of the National Emission Standards for Air Pollutants (NESAPs) program. 

VOC emissions

The particular emissions covered under this standard are those emitted when a fracked well is ready for production. Fracking occurs when a horizontal gas well is drilled and large amounts of water containing chemicals and sand are injected into the well to fracture rock and shale formations to release accumulated gasses for recovery. Once these gasses are encountered, the injected fracking fluids, consisting of water and chemicals, must be removed to put the well in production mode. These recovered waters and chemicals are referred to as flowback water. The recapture of flowback water also brings significant amounts of methane and other volatile organic compound (VOC) gasses to the surface. Under current practices, these gasses are often vented to the ambient air. The U.S. EPA considers methane among the most serious of greenhouse gasses, finding it 20 times more damaging than CO2 emissions when released to the ambient air.

New standard requirements

The new standard requires all fracking operations to treat all flowback water and accompanying gasses with a process known as Green Completion, which is a specialized technology determined by the U.S. EPA to be the best control technology for fracking operations. The special equipment in the Green Completion process separates gas and liquid hydrocarbons from the flowback water generated when a well is being readied for production. The segregated gas and liquid hydrocarbons can then be treated and either used on the site or otherwise sold. Government estimates suggest that revenues from selling gas that currently goes to waste will offset the cost of Green Completion implementation. The U.S. EPA had originally proposed requiring Green Completion when this final NSPS rule was issued. However, industry pressure and threats of litigation convinced the EPA to push the requirement for implementing Green Completion to January 1, 2015, when the technology and equipment are available in greater supply. Until that date, fracking operations are required to control emissions created by flowback water recovery through the use of flares. Those flares must be of sufficient design and capacity to burn off at least 95 percent of the methane and VOC gas emissions.

Ohio EPA

On a related note, last February the Ohio EPA issued the final version of a general permit-to-install for gas and oil well operations. This new permit does not address the emission standards and new source performance standards for fracking operations established in the U.S. EPA’s April 17, 2012 rulemaking. Rather, Ohio’s general permit is intended to cover the emission-generating equipment used for production activities at fracking sites. This equipment could include glycol dehydration units, natural gas-fired spark ignition internal combustion engines, diesel-fired compression ignition internal combustion engines, water and/or petroleum liquid flash/storage tanks, and flaring equipment. The general permit allows the installation and use of such equipment, and provides emission limits for the various pollutants they would produce.

Coverage under the general permit is obtained by submitting a prescribed application available at the Ohio EPA’s website. The state anticipates that confirmation of coverage will be issued within a matter of weeks from the receipt of a completed application. Prior to the development and finalizing of the state’s general permit, an application for individual permits for equipment associated with fracking operations would typically take six months or more. It should be noted that the state’s general permit covers only those operations and types of equipment covered under its terms and conditions. Any operations or equipment not covered by those terms and conditions will require a separate individual permit.

Summary

In all likelihood, these regulatory actions mark only the beginning of how governmental agencies will attempt to deal with the many new environmental challenges the burgeoning oil and gas exploration industry presents. We will continue to keep you apprised of new regulatory issues as they evolve.

For more information, please contact:

Michael L. Snyder
Co-chair, Energy Practice
216.348.5754
msnyder@mcdonaldhopkins.com

Michael W. Wise
Co-chair, Energy Practice
216.430.2034
mwise@mcdonaldhopkins.com

Theodore J. Esborn
216.348.5735
tesborn@mcdonaldhopkins.com

Jeffrey R. Huntsberger
216.348.5405
jhuntsberger@mcdonaldhopkins.com

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© 2012 McDonald Hopkins LLC All Rights Reserved. This Alert is designed to provide current information for our clients, friends and their advisors regarding important legal developments. The foregoing discussion is general information rather than specific legal advice. Because it is necessary to apply legal principles to specific facts, always consult your legal advisor before using this discussion as a basis for a specific action.