Oil and Gas Regulations and TCEQ Lessons Learned

Oil and Gas Regulations and TCEQ Lessons Learned City of Dallas Gas Drilling Task Force Meeting July 26, 2011 Keith Sheedy, P.E. Technical Advisor Chief Engineer s Office Texas Commission on Environmental Quality

What information is going to be provided? Quick background information on Barnett Shale Who regulates oil and gas activities in Texas? TCEQ lessons learned Page 2

426,235 - Active Oil and Gas Wells Page 3

24 county 24 county Barnett Shale Barnett Shale and ozone area nonattainment area

Barnett Active Oil Shale and wells Gas inwells the 24 in the county 24 county area area

Dallas city limits Page 6

Barnett Shale Special Inventory Point source emissions inventory equipment counts for the 23 county Emission Source Equipment Counts Separators Vented to Atmosphere * Total Oil Storage Tanks * Total Condensate Storage Tanks * Total Produced Water Storage Tanks * Total Slop Storage Tanks * Total Storage Tanks 651 Uncontrolled Glycol Dehydrators 81 Controlled Glycol Dehydrators 64 Total Stationary Engines 900 Turbines 22 Flares 38 Frac tanks * Piping Component Fugitive Areas 307 Process Vents * Blowdown Vents 191 Heaters/boilers 277 Other Stationary Equipment 486 Total Emission Sources 3,017 Page 7 *Equipment counts could not be determined for the indicated sources from point source inventory data.

Point Source Engines

Barnett Shale Special Inventory 9,796 leases responded to the Phase One inventory. The equipment totals by source type: Emission Source Number of Sources Separators Vented to Atmosphere 16 Total Oil Storage Tanks 852 Total Condensate Storage Tanks 4,143 Total Produced Water Storage Tanks 14, 997 Total Slop Storage Tanks 132 Uncontrolled Glycol Dehydrators 31 Controlled Glycol Dehydrators 120 Total Stationary Engines 2,653 Turbines 15 Flares 40 Frac tanks 27 Piping Component Fugitive Areas 15,517 Process Vents 1,191 Blowdown Vents 7,299 Heaters/boilers 616 Other Stationary Equipment 1,372 Total Emission Sources 49,021

Barnett Shale EI - Engines

All Barnett Reported Shale Engines wells and Engines

Barnett Shale Special Inventory Barnett Shale equipment Totals for all inventory types. Emission Source Number of Sources Separators Vented to Atmosphere 16 Total Storage Tanks 20,775 Uncontrolled Glycol Dehydrators 112 Controlled Glycol Dehydrators 184 Total Stationary Engines 3,553 Turbines 37 Flares 78 Frac tanks 27 Piping Component Fugitive Areas 15,824 Blowdown Vents 7,490 Process Vents 1,191 Heaters/boilers 893 Other Stationary Equipment 1,858 Total Emission Sources 52,038 Page 12

Who Regulates Oil and Gas Activities in Texas? (RRC, TCEQ, or???) The Railroad Commission of Texas (RRC) has primary regulatory jurisdiction over the oil and gas (O&G) industry. The Texas Commission on Environmental Quality (TCEQ) is the environmental agency for the state. There is a Memorandum of Understanding (MOU) between the RRC and TCEQ detailing jurisdictions of O&G activities. http:/info.sos.state.tx.us/pls/pub/readtac$ext.viewtac) Common Environmental Requirements for Regulated O&G Operations - Publication RG 482 http://www.tceq.texas.gov/publications/rg/rg-482.html Page 13

Who Regulates Oil and Gas Activities in Texas? Water Issues (RRC, TCEQ, or???) Process wastewater discharge and storm water run-off from O&G sites - EPA Process wastewater discharge from non O&G sites TCEQ Drinking water Private wells suspected contamination by O&G should be reported to the RRC Public water supply concerns should be reported to the TCEQ Dam safety - TCEQ Reclaimed water from municipal or industrial sources used for hydraulic fracturing, after which the water must be disposed of by deep well injection TCEQ and RRC Page 14

Surface Water Rights Before initiating any diversion, impoundment, taking, or use of surface water, or construction for those activities, a permit must be acquired from the TCEQ. There are areas of the state where it may be difficult to find water available on a permanent, term, or temporary basis due to existing permits and specific conditions in the stream. Page 15

Surface Casing The Railroad Commission of Texas may require a groundwater-protection recommendation letter from the TCEQ, if someone is drilling: an oil and/or gas well, Class II disposal well, cathodic protection well, or seismic shot hole. They will be provided with the estimated depth to the base of usable-quality groundwater, so the appropriate level of surface casing can be installed. Page 16

Who Regulates Spills at Oil and Gas Sites? (RRC, TCEQ, or???) Classification of the spill determines which agency has jurisdiction Spills associated with exploration, development, and production of O&G RRC Hazardous substances - TCEQ Refined petroleum products TCEQ Abandoned containers of unknown substances that are not leaking TCEQ Texas Oil Spill Prevention and Response Program Texas General Land Office Page 17

Who Regulates Waste at Oil and Gas Sites? (RRC, TCEQ, or???) In general wastes from O&G related activities are regulated by RRC. The exceptions are: Waste associated with transportation of crude oil and natural gas by railcar, truck, barge, or oil tanker Refined petroleum products by pipeline Wastes generated at oil field service facilities that provide equipment, materials, or services to the O&G industry Wastes that are processed, treated, or disposed of at a solid waste management facility authorized by the TCEQ Page 18

What about the dust, noise, and traffic associated with O&G sites? Dust from public roads should be addressed by the local government. Noise complaints should be reported to the local law enforcement agency. Traffic complaints should also reported to the local law enforcement agency. Page 19

Federal Air Regulations 40 CFR Part 60 New Source Performance Standards (NSPS) Subpart KKK Equipment leaks of VOC from onshore natural gas processing plants Subpart LLL Standards of performance for Onshore Natural Gas Processing: SO2 emissions Subpart JJJJ Standards of performance for stationary spark ignition internal combustion engines Page 20

Federal Air Regulations (cont.) 40 CFR Part 63 National Emission Standards for hazardous Air Pollutants (NESHAP) Subpart HH Natural gas production facilities Subpart HHH Natural gas transmission and storage facilities Subpart ZZZZ Reciprocating internal combustion engines Page 21

Federal Air Regulations (cont.) Federal regulations NSPS (Part 60) and MACT (Part 63) revisions are to be proposed by July 28 th, with final rules by Feb 2012 Ozone National Ambient Air Quality Standard 85 ppb, 75 ppb, 60 to 70 ppb what will it be??? Page 22

Air Regulations - Authorizations Owners and operators of an O&G site must obtain an authorization for air emissions. REALLY, SINCE WHEN? Since September 1, 1972, when the Texas Clean Air Act became effective. Page 23

TCEQ Air Regulations Type of Authorizations Available Permit by Rule (PBR) if: Less than 250 tpy of CO or NO x, Less than 25 tpy of VOC, SO 2, PM 10, and Less than 25 tpy of any other air contaminant, except carbon dioxide, water, nitrogen, methane, ethane, hydrogen, or oxygen Common PBRs: 106.351 Saltwater Disposal 106.352 Oil & Gas Handling and Production Facilities 106.353 Temporary Oil & Gas Facilities 106.492 - Flares Page 24 106.512 Stationary Engines & Turbines

TCEQ Air Regulations 106.352 O&G Handling and Production Facilities The new PBR, Section 106.352 for Oil & Gas Handling and Production Facilities became effective April 2011. Please see the provided handout for a summary of the new requirements. Page 25

TCEQ Air Regulations Authorizations continued Can t qualify for a PBR, a company may be eligible for a Standard Permit. Can t qualify for a Standard Permit, then the company must get a new-source-review (NSR) permit. Also Major Sources are subject to Title V of the Federal Clean Air Act and must meet operating permit requirements under that program. TCEQ has delegation of this federal program. Page 26

TCEQ Air Regulations A company had an upset at an O&G site that lead to unauthorized air emissions. Are they required to record the information concerning the event? Yes Are they required to report the event to the TCEQ? Depends on what and how much was emitted 30 TAC 101.201 and 101.222 have all of the answers Page 27

TCEQ Air Regulations Someone has complained to the TCEQ about an odor or dust issue at a well pad that is being completed, what TCEQ rules could apply? 30 TAC 101.4 Nuisance and 30 TAC 111.111 Visible emissions Page 28

TCEQ Air Regulations Chapter 101.10. Emissions Inventory Requirements. (a) Applicability. The owner or operator of an account shall submit emissions inventories : (1) an account that meets the definition of a major facility/stationary source, or any account in an ozone nonattainment area emitting a minimum of ten tons per year (tpy) volatile organic compounds (VOC), 25 tpy nitrogen oxides (NOx), or 100 tpy or more of any other contaminant subject to national ambient air quality standards (NAAQS); (4) any minor industrial source, area source, non-road mobile source, or mobile source of emissions subject to special inventories under subsection (b)(3) of this section. Page 29

TCEQ Air Regulations (cont.) Chapter 101 State delegation of 40 CFR Part 60 (NSPS rules) and Part 61 (NESHAPS rules) Chapter 112 Control of sulfur dioxide and hydrogen sulfide Chapter 113 State adopted 40 CFR Part 63 (MACT rules) Chapter 114 Control of air pollution from motor vehicles - Gasoline and diesel Page 30

TCEQ Air Regulations (cont.) Chapter 115 Storage of volatile organic compounds Additional requirements have been proposed. Potential adoption at the November 16 th, TCEQ Commissioner s Agenda A condensate tank or tank battery with more than 1,500 barrels per year liquid throughput requires a vapor recovery unit or control device. A crude oil or condensate tank or tank battery requires vapor recovery unit or control device if potential emissions are over 25 tons per year (tpy). At 25 tpy, vapor recovery devices are expected to be feasible and recovered product should help offset initial costs. The proposed rule would apply these more stringent regulations in the DFW area with 95% control of VOC flash emissions that would reduce VOC emissions by 14.37 tpd in 2012. Page 31

TCEQ Air Regulations (cont.) Chapter 117 Control of air pollution from nitrogen compounds In other words, the control of NOx from combustion sources. Page 32

Barnett Shale Lessons Learned Enhanced monitoring and use of emerging technology Emission related research Rulemaking Routine maintenance Responsiveness COMMUNICATION!!! Page 33

Oil and Gas EI Improvement Activities 2005 Upstream Oil and Gas Tank Project Measured emissions from oil and condensate tanks Developed factor for area source emissions inventory EPA approved Tank testing procedure needed http://projects.tercairquality.org/aqr/h051c Dallas-Fort Worth (DFW) Compressor Engine Project Ambient measurements downwind of gas compressor engines Develop typical compressor engine ambient signatures 2007 Engine Fleet DFW Nonattainment Area Survey 2007 Southeast Texas Compressor and Dehydrator Survey

Oil and Gas EI Improvement Activities Drilling Rig Emissions Project Activity data Emissions characterization data Used to develop the drilling rig emissions inventory for 2008 www.tceq.state.tx.us/implementation/air/airmod/pr oject/pj_report_ei.html Oil and Gas Platform Inventory Improvement Project Oil and gas platforms in Texas water Parallels federal platform inventories in Gulf of Mexico www.tceq.state.tx.us/implementation/air/airmod/pr oject/pj_report_ei.html

Oil and Gas EI Improvement Activities Flash Emissions Model Evaluation Evaluated different methods for calculating oil and condensate tanks Improved agency guidance www.tceq.state.tx.us/implementation/air/airmod/proj ect/pj_report_ei.html Oil and Gas Model Evaluation Evaluate methods, models, and related data Texas-specific calculator for area inventory development Posted on the agency s emissions inventory web page

Oil and Gas EI Improvement Activities Produced Water Storage Tank Project This area may need additional research Limited available data EI Guidance Improvement Comprehensive guidance documents www.tceq.state.tx.us/goto/ieas Barnett Shale Phase I and Phase II special inventory Additional pneumatic valve control survey Type of valves being used: high, low, or no bleed

79 80 78 65 75 73 81 76 88 77 83 76 69 78 70 75 74 East Predominate 65 wind direction on high ozone days 65 Current 2011 Ozone Current Design monitors Values in 68 DFW area

0.35 0.3 0.25 Auto GC Benzene Annual Averages part per billion - by volume (ppbv) Dallas Hinton FW Meacham DISH Eagle Mountain Flower Mound Decatur 0.2 ppbv 0.15 0.1 0.05 NOTES: DISH and Eagle Mountain Auto GC monitors installed in April 2010. Flower Mound and Decatur Auto GC monitors installed in November 2010. 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Year Page 39

What We Are Finding Nearly all of the issues documented arose from human or mechanical failures. These items were quickly remedied and could have been avoided through increased diligence on the part of the operator. Corrective actions amounted to little more than replacing worn gaskets, closing open hatches, and repairing stuck valves.

Moving Forward The TCEQ must continue to: Ensure transparency of our efforts through abundant and timely communication with all interested parties; Evaluate the existing ambient air quality monitoring network and expand, as needed, through the use of established agency protocol for determining the placement of long-term, stationary monitors;

Moving Forward Apply the use of state-of-the-art handheld air monitoring equipment to assess short-term, near-source air quality; Maintain a frequent, routine investigative presence while also providing timely complaint response; Base our rules and permits on sound science and common sense; and Apply our enforcement tools in a fair and consistent manner.

Additional Barnett Shale Information Barnett Shale website: www.tceq.state.tx.us/implementation/barnetts hale/bshale-main

Questions? Keith Sheedy, P.E. 512.239.1556 Keith.Sheedy@tceq.texas.gov Tony Walker DFW Regional Manager 817.588.5902 Tony.Walker@tceq.texas.gov Alyssa Taylor, R.E.M. DFW Air Section Manager 817.588.5828 Alyssa.Taylor@tceq.texas.gov 44