The Nickel Report

In August 2018, the US Environmental Protection Agency announced it was rebranding its National Enforcement Initiatives as National Compliance Initiatives, and specifically stated it was no longer targeting oil and gas sources as deserving of extra scrutiny. In addition, since taking office in January 2017, the Trump administration has aggressively rolled back many environmental regulations promulgated under the Obama administration. Despite what some may perceive as a kinder, gentler EPA and the Trump administration’s “deregulatory” agenda, however, the EPA has continued to pursue enforcement cases against many of the same businesses believed to benefit the most from the administration’s policies. Notably, this includes midstream oil and gas sources, as recently evidenced by EPA’s September 2019 Enforcement Alert (EA) titled, “EPA Observed Air Emissions from Natural Gas Gathering Operations in Violation of the Clean Air Act.”

In the EA, EPA takes aim at “non-compliance concerns” associated with air emissions from pipeline maintenance operations on natural gas gathering systems. Specifically, the EA focuses on volatile organic compound (VOC) emissions that can occur during pipeline “pigging” operations. A form of flow assurance for oil and gas pipelines, pipeline pigging facilitates correct pipeline operation. Pipeline pigs are introduced into the line through a “trap,” which includes a launcher and receiver. Without interrupting flow, the pig is then forced through the pipeline, and sweeps the pipeline by scraping the sides of the pipeline and pushing any collected liquids or debris ahead. Pipeline pigs also serve a significant safety purpose. For example, so-called “smart” pigs are used for integrity assessments to identify potential pipeline anomalies.

According to the EA,

EPA and state inspectors have observed numerous instances where depressurizing pig launchers and receivers in natural gas gathering operations emit unauthorized or excess VOC emissions, due to the company’s failure to obtain an air permit for the pigging equipment, to address deficiencies in the design of the pigging equipment, or to operate the pigging equipment in accordance with an air permit, air permit application or air permit registration.

As noted, even if the emissions from these operations are included in a permit or limit or are an otherwise permit-exempt or de minimis source of emissions, EPA may view the emissions as out of compliance the same as if the emissions were inconsistent or exceeding representations in a facility’s permit application or in the emissions calculations to support a specific permit limit. According to EPA’s EA, in such circumstances, and depending on the state and local air permitting rules and regulations, a “company’s misrepresentation to the permit authority may mean that the emissions from the pigging operations are considered unauthorized or excess.”

EPA identifies numerous “engineering solutions” that, according to EPA, can control and reduce emissions from pigging operations. These engineering solutions include the installation of pig ball valves, multi-pig launcher systems, redesigns of receiver barrels (i.e. installation of drains to collect and prevent emissions from condensate liquids and pig ramps) and/or site modifications to capture and control emissions (e.g. installation of barrel pump downs, rerouting of VOC emissions to vapor recovery units (VRUs) and/or combustors). EPA offers that the “applicability and effectiveness of these engineering solutions are site-specific; [but] solutions can generally be combined to effectively reduce emissions.”

The EA follows on the heels of a number of enforcement cases and/or related Consent Decrees entered into between the agency and oil and gas sources over the past several years. EPA references one such recent enforcement in its EA by way of example for the alleged non-compliance it seeks to address. As is common in an enforcement context, however, EPA makes no assertions as to the weight of the benefits versus the costs or technical complexities for retro-fitted installations on gas gathering systems, which span widespread and remote areas of the country. Either way, EPA has made clear its intent to continue to pursue oil and gas emission sources as part of its broader enforcement efforts under the Clean Air Act.

Midstream oil and gas operators should take notice of the EA and the related enforcements pursued by EPA and the states. Operators should consider measures and efforts to review and amend permit representations and limits to reflect accurate emission estimates and to otherwise employ technologies to minimize emissions from its gathering and transmission systems. The ramifications of a failure to do so can result in high-profile, costly and complex enforcement proceedings.