Oil and Gas Air IssuesNAAQS in Transition

AIPRO - Arkansas Independent Producers and Royalty Owners

September 29, 2011

Little Rock, AR

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Discussion Topics

Federal Oil and Gas rule & NAAQS changes underway

MACT and NSPS Rulemaking

National Ambient Air Quality Standards (NAAQS)

Permits (Aggregation, PSD for SO2 and NO2 NAAQS, NEPA)

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Old NSPS

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NSPS Proposed August 23, 2011Comments due October 31, 2011

After proposal, new or modified facilities comply by 2/28/2012

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Source Applicability Proposed Control Devices

Comment

Storage tanks >=1 bbl/d throughput of condensate (≥ 40 API wt.)

>=20 bbls/d throughput of crude oil (<40 API wt.)

Construction commenced after 8/23/2011

Close tank and route vents to a VRU, combustor, or flare that achieves at least 95% emissions control.

Applies to both new and replaced storage tanks

Centrifugal Compressor

Installation commenced after 8/23/2011

Must be equipped with a dry seal

Final rule may allow for wet seal if controlled, but currently not in proposed rule. Includes compressors moved from one site to another

Reciprocating Compressor

Installation commenced after 8/23/2011

Replace rod packing every 26,000 hrs

Includes compressors moved from one site to another

Pneumatic controllers All new or replaced controllers using instrument gas.

Construction commenced after 8/23/2011

Gas plants: instrument gas is prohibited (air is ok)

All other sites: Gas driven controller bleed rate must be < 6 scfh

Natural gas is proposed as a surrogate for VOC

Oil and Gas NSPS Overview

Comments due October 31, 2011; extension request needed

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NAAQS in Transition

1997 Ozone and PM2.5 NAAQS – Largely attained nationwide

2006-Oct. PM10 and PM2.5 NAAQS - Largely attained in the eastern U.S.

2008-Mar. 75 ppb 8-Hour Ozone (Primary & Secondary ) – Now confirmed

2008-Oct Lead NAAQS Final (Primary and Secondary)

2010-Jan. NO2 NAAQS Final (Primary only) – Significant permitting issue

2010-June SO2 NAAQS Final (Primary only) – Attainment by modeling an issue.

2011- Aug. CO NAAQS Final – No proposed changes

2011- Sept. 2 Ozone reconsideration – Terminated by President Obama

2012-March NOx / SOx Secondary – Proposed no combined new form

2012- ? PM10 and PM 2.5 NAAQS (Primary and Secondary)- How much lower?

Source: EPA Information

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U.S. 2008-2010 Ozone Design Values StatusArkansas Counties(ppb)-(Crittenden-74, Polk-70, Pulaski-70, Newton-66, Washington-64)

Design values for monitors in Alaska, Hawaii, and Puerto Rico monitoring sites (not shown) were below 61 ppb

Based on 2008-2010 data retrieved from AQ S D ata M art on January 27, 2011Includes counties w ith incom plete and uncertified data

LegendN um bers of counties are in parentheses

0 - 60 ppb (60)

61 - 75 ppb (538)

76 - 84 ppb (96)

> 84 ppb (16)

In 2010, 102 Counties have Air Quality exceeding the 2008 Ozone NAAQS; NONE in Arkansas

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EPA Ozone NAAQS 2011-’12 Actions

2008 Ozone NAAQS – Applies for PSD and NEPA permitting No non-attainment designations yet ( and none expected for AR) Litigation will resume before year end;

Sept. 2, 2011 – Ozone NAAQS reconsideration ended

Uncertain date - Ozone NAAQS Implementation rules needed

Next steps- Dec. 2012 - 120 day EPA notice of intent to designate Summer 2012 – EPA non-attainment designation using YE2010 Ozone Air

Quality Data

Recommendation: AIPRO review and comment on designation process to assure attainment outcome

9Arkansas monitors attainment in Union (26 ppb) and Pulaski (15ppb)

Counties W ith Monitors Currently Violatingthe Revised Primary 1-Hour Sulfur Dioxide (SO2) Standard of 75ppb

59 of 249 m onitored counties (data in AQ S) vio la te the standard -- Based on 2007-2009 data -- D esignations w ill probably be based on 2009-2011 data

N ot show n on m ap:H aw aii C o., H IS t. C ro ix, V irg in Is lands

22 States (59 counties)with 1-9counties per state monitoring non-attainment

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SO2 NAAQS Status June 2011- State designations (AR attainment/unclassifiable statewide) Sept. 2011-EPA implementation guidance (FR with comment for states

and stakeholders) Rulemaking will follow detailing new implementation approach.

EPA’s new approach will require 100+ TPY (and perhaps smaller) sources to model attainment

Arkansas has ~24 SO2 sources above 100 TPY SO2

Feb. 2012 – EPA intent to designate issues with public comment June 2012 - EPA designation (petition for review possible) June 2013 – Attainment / unclassifiable SIP due (attainment modeling) February 2014 – Non-attainment SIPs due (attainment modeling) June 2017 – Attainment deadline

Recommendation: AIPRO review and comment on Implementation rulemaking

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Counties V io lating Existing PM 2.5 15 ug/m 3 Annual S tandardAnd Hypothetica l Low er S tandards of 13, 12, and 11 ug/m 3

D ata Source: h ttp ://w w w .epa.gov/a irtrends/va lues.htm l

6 counties v io la te 15 ug/m 3

53 additional counties v io la te 13 ug/m 3 (to ta l o f 59)

79 additional counties v io la te 12 ug/m 3 (to ta l o f 138) -- Includ ing Fairbanks N orth S tar, A laska (not show n)109 additiona l counties vio la te 11 ug/m 3 (to ta l of 247)

No Arkansas non-attainment areas; monitor upcoming PM2.5 NAAQS revision

EPA Policy AssessmentRanges

• 11-13 µg / m3

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Counties V io lating Existing PM 2.5 35 ug/m 3 24-Hour S tandardAnd H ypothetica l Lower S tandard of 30 ug/m 3

D ata Source: h ttp ://w w w .epa.gov/a irtrends/va lues.htm l

35 counties v io la te 35 ug/m 3 -- Includ ing Fairbanks N orth S tar, A laska (not show n)

79 additional counties v io la te 30 ug/m 3 (to ta l o f 114) -- Includ ing Juneau, A laska (not show n)

EPA Policy AssessmentRanges

• 30-35 µg / m3

No Arkansas non-attainment areas; monitor upcoming PM2.5 NAAQS revision

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2011 Cross State Air Pollution Rule (CSAPR)

Issued in August; limits EGU emissions to help downwind states attain the 1997 Ozone and 2006 PM 2.5 NAAQS Ozone season NOx limits begin May 2012

Ozone annual NOx limits begin January 2012

SO2 annual limits begin January 2012

Many areas of the eastern U.S. are attaining the NAAQS that the CSAPR targets

Indirect potential impacts: electricity curtailment and price increases beginning in 2012 in some states

Monitor AR utility responses closely

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ConclusionSignificant NAAQS & Oil and Gas sector rule changes underway

New EPA rules and permitting interests best addressed by expanding oil and gas sector associations (state and federal)

Changes underway bear review and comment where appropriate

Air Quality has improved significantly recently

Air Quality improvement trends will continue into the near future