Litigation by environmental groups forces the U.S. Environmental Protection Agency (EPA) to issue new regulations for the oil and gas industry.

On April 17, 2012, EPA issued the first federal air standards for natural gas wells that are hydraulically fractured, along with requirements for several other sources of pollution in the oil and gas industry that currently are not regulated at the federal level.

EPA issued New Source Performance Standards (NSPS) for volatile organic compounds (VOCs) and National Emission Standards for Hazardous Air Pollutants (NESHAP) for oil and natural gas production. EPA has now set NSPS for hydraulically fractured natural gas wells and for related associated equipment, including pneumatic controllers, compressors and storage vessels. EPA also set new NESHAP standards for glycol dehydrators and for leak detection at natural gas processing plants.

To read more on what the EPA’s final rules are expected to yield, read on after the jump. 

Data provided to EPA shows that some of the largest air emissions in the natural gas industry occur as natural gas wells, which have been hydraulically fractured, are being prepared for production. During a stage of well completion known as “flowback,” fracturing fluids, water, and reservoir gas come to the surface at a high velocity and volume. This mixture includes a high volume of VOCs and methane, along with air toxics such as benzene, ethylbenzene and n-hexane. The typical flowback process lasts from three to 10 days. Pollution also is emitted from other processes and equipment in the industry that prepare gas for sale and that assist in moving it through pipelines.

According to EPA, a key component of the final rules is expected to yield a nearly 95 percent reduction in VOCs emitted from more than 11,000 new hydraulically fractured gas wells each year. This significant reduction would be accomplished primarily through the use of a process – known as a “reduced emissions completion” (“REC”) or “green completion” — to capture natural gas that currently escapes to the air. The new provisions apply to new wells drilled after August 23, 2011, and to the refracturing of existing wells drilled before August 23, 2011.  New wells drilled prior to January 1, 2015, must reduce VOC emissions either by using “completion combustion devices,” or by capturing gas flow back using a REC with a completion combustion device to control gas not suitable for entry into the flow line.

The VOC emission reductions from wells, combined with reductions from storage tanks and other equipment, are expected to help reduce ground-level ozone in areas where oil and gas production occurs. EPA considers methane a significant contributor to climate change.

Some states, such as Wyoming and Colorado, require green completions, as do some cities, including Fort Worth and Southlake, Texas. In addition, data provided to EPA show that a number of companies are using green completions voluntarily. EPA says that the rule builds on the emission reductions these leaders have taken, leveling the playing field across the industry and ensuring this smart environmental and business practice is used in all states where gas wells are fractured. Even so, these regulations could substantially overlap with state regulations.

The American Petroleum Institute complained that immediate implementation of the rule would significantly limit production of natural gas due to a lack of RECs and trained personnel. EPA took this concern into account and extended the compliance period for two years, to 2015.

The final rules are the result of the review, required by the Clean Air Act, of four air regulations for the oil and natural gas industry. The Clean Air Act requires EPA to set new source performance standards (NSPS) for industrial categories that cause, or significantly contribute to, air pollution that may endanger public health or welfare. EPA is required to review these standards every eight years. The existing NSPS – for VOCs and SO2 – were issued in 1985.

EPA also must set standards (NESHAPs) for emissions of air toxics, also called hazardous air pollutants. Air toxics are pollutants known or suspected of causing cancer and other serious health effects. EPA must conduct a residual risk review of these standards every eight years after the standard is issued. The agency must conduct technology reviews of these standards every eight years. EPA’s existing NESHAPs for oil and natural gas production and for natural gas transmission and storage were issued in 1999.

Litigation against EPA was also a factor. In January, 2009, WildEarth Guardians and the San Juan Citizens Alliance sued EPA, alleging that EPA had failed to review the new source performance standards and the major source air toxic standards for the oil and natural gas industry.

In February 2010, the U.S. District Court for the District of Columbia issued a consent decree that requires EPA to take actions related to the review of these standards. EPA issued the proposed rule July 28, 2011. The consent decree required that EPA take final action by April 17, 2012.