Options for Unconventional Well Operators under Revised Exemption No. 38

On August 8, 2013, the Pennsylvania Department of Environmental Protection Bureau of Air Quality (“PA BAQ”) released revisions to its list of sources of minor significance, which are exempt from air permitting under Pennsylvania’s Air Pollution Control Act, 35 P.S. § 4001 et seq.¹,² As part of those revisions, PA BAQ has removed the blanket exemption from air permitting previously provided for under category no. 38 for unconventional upstream facilities (“Revised Exemption No. 38”). While maintaining the unconditional exemption for conventional well sites,³ well drilling, completion and work-over activities, and non-road engines as defined in 40 CFR § 89.2, Revised Exemption No. 38 includes a detailed list of five (5) additional criteria an unconventional well site must meet in order to qualify to be exempt from air permitting. Among the new requirements include the use of a leak detection and repair ("LDAR") program and restrictions upon the use of flaring. The previous version of Exemption No. 38, which was adopted in 1996, provided for a blanket exemption for oil and gas well sites in Pennsylvania.

Revised Exemption No. 38 is applicable to sources constructed as new or modified sources as of August 10, 2013. As such, owners and operators of unconventional well sites must act quickly to decide whether to: (i) seek exempt-status under the Revised Exemption No. 38; (ii) submit a Request for Determination (“RFD”) authorizing from the PA BAQ for construction and/or operation of the well site without a permit;⁴ or (iii) obtain plan approvals for well sites to either currently being developed or which will be developed in the near future. The Revised Exemption No. 38 does not apply to sources that were constructed or modified prior to this date and are operating lawfully without a permit.

Under Revised Exemption No. 38, unconventional wells, wellheads and associated equipment are exempt, provided the following exemption criteria are met, including:

1. The application of an LDAR program within 60 days after the completion of the well and annually subsequently thereto.⁵ Any leaks detected must be repaired within 15 days, unless the facility is shutdown or ordering of replacement parts necessary for the repair.⁶
2. Storage vessels and storage tanks equipped with volatile organic compound (“VOC”) emissions controls achieving reductions of 95 percent or greater. Compliance will be demonstrated consistent with 40 CFR Part 60, Subpart OOOO or an alternative test method approved by DEP.
3. Combined VOC emissions from all sources at the facility must be less than 2.7 tons per 12-month rolling average basis. If the VOC emissions include hazardous air pollutants (“HAPs”), HAP emissions at the facility must be less than 1 ton of any single HAP or 1 ton of all HAPs combined in any consecutive 12-month period.⁷
4. Flaring operations must be done in compliance with Subpart OOOO requirements. Flaring may be used by “exploration wells” and for repair, maintenance, emergency or safety purposes. Enclosed flares must be used for all permanent flaring operations and done in accordance with 40 CFR § 60.18.
5. Combined nitrogen oxide (“NOx”) emissions from stationary internal combustion engines at the facility must be less than 100 lbs/hr, 1000 lbs/day, 2.75 tons per ozone season and 6.6 tons per year on a 12-month rolling average basis.⁸

Operators should note that this new criteria is more stringent than recent federal regulations applicable to upstream operations.⁹

In addition to the above requirements, the well site operator is required to comply with all applicable state and federal requirements, including notification, record keeping and reporting requirements, as specified in 40 CRF Part 60, Subpart OOOO. The operator will also be required to demonstrate compliance with the exemption criteria using any generally accepted model or calculation methodology within 180 days after the well completion or installation of a source.

Two prior versions of the Revised Exemption List were made available for public comment. An original version of the proposed Revised Exemption List was published for comment in the Pennsylvania Bulletin (“Bulletin”) on February 26, 2011 at 41 Pa.B. 1065. Based on those comments, DEP revised the proposed revisions and published a new proposed Revised Exemption List for comment in the Bulletin on February 2, 2013 at 43 Pa.B. 742. As finalized, Revised Exemption No. 38 includes significant revisions, including a reorganization which makes clearer that certain provisions are conditions only for unconventional well sites. Revisions, among other things, also include language defining a leak. Notice of the final Revised Exemption List was published in the Bulletin on August 10, 2013.

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¹ Pennsylvania Department of Environmental Protection Document No. 275-2101-003, notice published at 43 Pa.B. 4661 (August 10, 2013). The revisions also included changes to exemption category no. 33, which applies to certain fuel dispensing facilities, including natural gas dispensing facilities.

² The exemption list is adopted pursuant to 25 Pa. Code § 127.14(a)(8),

³ A conventional well is any well that does not meet the definition of unconventional gas well in 58 PA.C.S. § 3203.

⁴ It is unclear under what circumstances an RFD would be granted.

⁵ The Revised Exemption No. 38 states that the DEP BAQ may grant an extension upon receipt of a written request justifying an extension.

⁶ The Revised Exemption No. 38 also includes provisions for what is considered a leak, as well as a requirement that leaks and repairs be recorded and maintained for five (5) years.

⁷ This criteria does not include emissions from sources identified in Revised Exemption No. 38 subparagraphs i, ii, and iv (relating to leaks, storage vessels and flaring, respectively).

⁸ This subsection does not apply to emissions from sources covered by plan approvals or general permits at the facility.

⁹ 40 C.F.R. § 60, Subpart OOOO (2013); on July 28, 2011, the U.S. Environmental Protection Agency announce proposed rules, which for the first time, provided air quality requirements for oil and natural gas upstream sites. 76 FR 52738 (August 23, 2011).