On Sept. 12, 2012, the U.S. Environmental Protection Agency (“EPA”) issued a final rule under the New Source Performance Standards (“NSPS”) of the Clean Air Act governing newly constructed, reconstructed or modified flares and process heaters at petroleum refineries. EPA asserts that these new regulations reduce emissions of sulfur dioxide (“SO2”), nitrogen oxides (“NOx”) and volatile organic compounds (“VOCs”); provide industry with greater compliance flexibility; and allow companies to make routine operational changes without triggering new requirements. EPA has also indicated it believes the new rule will result in fewer cases of respiratory illness, heart attacks and premature deaths, providing a purported $320 million to $610 million in annual health benefits. EPA further claims the final rule will require $460 million in capital costs for flares but will result in $79 million per year in costs savings.
On June 24, 2008, EPA promulgated amendments to the petroleum refinery NSPS (Subpart J – 40 C.F.R. § 60.100 et seq.) and a new NSPS for petroleum refinery process units constructed, reconstructed or modified after May 14, 2007 (Subpart Ja – 40 C.F.R. § 60.100a et seq.). EPA subsequently received three petitions for reconsideration of those final rules from industry and environmental groups. The petitions for review filed by industry groups raised issues, including the definitions of a flare and modifications for flares, sulfur emission limits for fuel gas combustion as they relate to flares, flare flow limits, total reduced sulfur and flow monitoring requirements for flares, and the NOx limit for process heaters. Environmental groups requested that EPA also promulgate standards for carbon dioxide and methane.
On Sept. 26, 2008, EPA granted reconsideration and stayed the effectiveness of the rules applicable to petroleum refinery process heaters and flares. On Dec. 22, 2008, EPA addressed the issues raised in the petitions for reconsideration by proposing amendments and technical corrections to certain provisions for these refinery units. With this recent action, EPA finalized those amendments and technical corrections and lifted the September 2008 stay.
The Sept. 12, 2012, NSPS amendments apply to process heaters constructed, reconstructed or modified after May 14, 2007, and flares constructed, reconstructed or modified after June 24, 2008.
The NSPS amendments include the following provisions:
The new rule does not establish emission limits for methane and carbon dioxide as requested by environmental groups.
Although EPA amended this rule to create new avenues to compliance for petroleum refineries, those amendments also entail added complexity and, for some facilities, added cost. Comments from industry groups indicated that regulated facilities remain concerned about the costs of complying with the rule. The American Petroleum Institute (“API”), for example, asserted that compliance costs remain too high in relation to the air quality benefits EPA claims to have achieved (see Amendments to Refinery Flare & Process Heater Rules, Business & Legal Resources (June 5, 2012), available at http://enviro.blr.com/environmental-news/air/NSPS-new-source-performance-standards/Amendments-to-Refinery-Flare-Process-Heater-Rules/). API’s director of regulatory and scientific affairs, Howard Feldman, stated that “EPA’s rules will be tremendously costly without providing any significant environmental benefit,” characterizing the new rule as part of a “tsunami of new EPA air regulations for refineries,” but adding that “[n]otwithstanding the higher costs, we understand the EPA has made positive changes to the rule in line with comments [API] submitted during the rulemaking process.” (See API Says New Flaring, Process Heat Rules Costly to Industry, The Oilspot News (June 4, 2012), available at http://oilspot2.dtnenergy.com/e_article002445687.cfm?x=b11,0,w).
Given the complexity of this rule, companies subject to it should carefully evaluate its applicability to any flares or process heaters constructed, reconstructed, or modified after the effective dates indicated above. This final rule will become effective on Nov. 13, 2012. Under the Clean Air Act, any party that wants to seek judicial review of the rule must commence litigation in the U.S. Court of Appeals for the District of Columbia Circuit before that date.
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This article was originally published by Bingham McCutchen LLP.