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A Trio of Air Quality Developments Affecting Oil & Gas Facilities

May 10, 2018

Three recent air quality developments of particular note involve (1) important new guidance in Colorado for oil and gas operators of storage tanks, (2) the proposed revision of the Environmental Protection Agency's ("EPA") Audit Policy to provide auditing incentives and an agreement template for new owners of oil and gas facilities, and (3) a recent federal Clean Air Act (“CAA”) consent decree addressing emissions from midstream gas gathering activities involving pipeline pigging. Each of these developments is addressed more specifically below, with links to relevant documents.

Colorado Oil Storage Tank Guidance

On May 4, 2018, the Colorado Air Pollution Control Division finalized and published the Storage Tank and Vapor Control Systems Guidelines ("Guidelines"). The Guidelines are the result of a multi-year joint effort between the Division and the oil and gas industry and describe the technical and practical considerations for design, operation, and maintenance of vapor controls systems in Colorado. Specifically, the Guidelines aim to provide oil and gas operators regulatory certainty for compliance with Colorado’s air emission regulations, particularly, the “minimize leakage” and “operate without venting” standards in Regulation No. 7.

The Guidelines encompass two topics: (1) facility design and (2) operation and maintenance. The facility design procedures provide guidance to conduct an engineering and design analysis to ensure that vapor control systems have sufficient capacity to properly manage storage tank emissions. The operating and maintenance guidelines detail both preventative maintenance procedures and operational practices, including inspections and predictive analyses.

It is important to note that the Guidelines are, as the Division states, recommendations. The Guidelines do not create strict standards or practices for operators to follow. However, importantly, the Guidelines state that “the division expects in most instances where emissions from storage tanks are observed, a showing by the owner or operator that it has followed these guidelines will be sufficient to establish the observed emissions do not constitute a violation of the ‘operate without venting’ and ‘minimize leakage’ requirements of Regulation Number 7.”

As noted in the Guidelines, DGS attorneys were significantly involved in the development of these Guidelines and can provide clients with valuable legal assistance regarding compliance going forward.

New Owner Audit Policy Revisions for Oil & Gas Facilities Proposed

The EPA is developing a New Owner Clean Air Act Audit Program specific to the oil and gas industry in the hopes of streamlining disclosures of non-compliance by new owners of oil and gas assets. See New Owner Clean Air Act Audit Program for Oil and Natural Gas Exploration and Production Facilities: New Owner Audit Program. The program will initially be made available to upstream exploration and production sites where the EPA alleges it has seen “significant noncompliance.” Related to this, the EPA recently released a standard audit program agreement template. It is unclear at this time whether the EPA envisions that the newly released agreement template will merely supplement the EPA’s existing New Owner Audit Policy and Corporate Audit Agreement, or whether this template agreement will be the exclusive mechanism for oil and gas operators to disclose to potential violations to the EPA related to new acquisitions. It is also unclear if the provisions in the released agreement template are negotiable, and if so, to what extent.

One particularly notable feature of the standard audit program agreement template is the provision that apparently requires companies to assess storage tank battery vapor control system engineering and design under the requirements outlined in Appendix B of the template. Indeed, the EPA states that a “key program component” of the New Owner Clean Air Act Audit Program will require that companies “assess storage tank battery vapor control system design as part of the audit process.” The engineering and design requirements in Appendix B are very similar to the requirements identified in several recent consent decrees the EPA has entered with various operators in Colorado and North Dakota related to these issues. Inclusion of these requirements in this new program suggests that the EPA, to some extent, believes these requirements apply nationwide and expects companies to be assessing engineering and design compliance when purchasing new facilities, regardless of the jurisdiction.

The EPA is currently seeking feedback from states, tribes, the regulated community, environmental NGOs, and other stakeholders about the template. The EPA will accept comments on the draft standard audit program agreement until Monday, June 4, 2018.

Gathering Line Maintenance Settlement

Another recent development of note is the settlement of alleged Clean Air Act violations by MarkWest Liberty Midstream and Resources, LLC and Ohio Gathering Company, LLC (“MarkWest”) in a consent decree with the U.S. Department of Justice, U.S. EPA, and Pennsylvania Department of Environmental Protection. This decree is unique in its focus on gas gathering pipelines and their maintenance through line “pigging.” Line pigging operations involve the insertion of a “pig” that travels through the line under pressure from the gas being gathered. As the pig travels through the pipeline, residual and pooled liquids and scale are pushed through the line ahead of the advancing pig. Pigs are routinely inserted and removed from various pipelines through use of pig launcher and receiver chambers that are constructed for this purpose when the pipeline is first installed.

In the consent decree lodged April 24, 2018, MarkWest agreed to significantly reduce emissions associated with its gathering line maintenance through use of jumper lines to drop pressures in pig receivers and launchers before opening them; to use proprietary “pig ramps” in existing and modified receivers and launchers to reduce liquid buildup and associated flashing losses when opening them, and to use combustors to reduce emissions at certain locations to below permitting thresholds, among other terms and conditions. The settlement also requires payment of $610,000 in civil penalties, and the supplemental environmental project provisions are valued at approximately $2.4 million. Emission reductions associated with the settlement are estimated at 706 tons per year of VOCs, including a drop of 84.7% in pigging-related emissions. The proposed consent decree is open to public comment for 30 days following publication in the Federal Register, and may be downloaded here.

The Environmental Group of Davis Graham & Stubbs LLP handles air quality regulatory, transactional, and litigation matters for its clients in the oil & gas and other industry sectors. Please contact John Jacus, Randy Dann, Shalyn Kettering, Will Marshall, or your DGS attorney if you would like to discuss these three developments further, or other air quality matters of concern to your company.