Oil & Gas Law Alert: U.S. EPA Continues Refinery Enforcement of Clean Air Act, Focuses on Flares

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The U.S. Environmental Protection Agency (EPA) and the U.S. Department of Justice (DOJ) recently announced the latest proposed settlement in EPA's Clean Air Act (CAA) enforcement initiative against petroleum refiners. Hess Corporation will pay an $850,000 civil penalty and spend more than $45 million on new pollution controls at its Port Reading, New Jersey refinery to resolve alleged CAA violations. Half of the penalty will be paid to the state of New Jersey. Authorities alleged that Hess made modifications to its refinery that increased emissions without first obtaining pre-construction permits and installing required pollution control equipment. Specifically, the complaint against Hess alleges violations of New Source Review/Prevention of Significant Deterioration requirements related to the facility's fluid catalytic cracking unit (FCCU), refinery heaters, and boilers, and New Source Performance Standards (NSPS) for flares, sulfur recovery units, fuel gas combustion devices (including heaters and boilers), and FCCU catalyst regenerators. The complaint also alleged violations of National Emission Standards for Hazardous Air Pollutants for benzene wastes, as well as Leak Detection and Repair requirements, targeting emissions from flaring at the refinery.

The settlement requires Hess to install new and upgraded pollution controls at the Port Reading refinery to reduce nitrogen oxide and volatile organic compounds, implement more stringent emissions limits, and undertake aggressive monitoring, leak detection, and repair practices to reduce emissions from refinery equipment and processing units.

The settlement includes several measures related to NSPS and flaring. EPA has declared flaring an enforcement priority, and this settlement reflects the agency's focus. The one flare at the refinery must comply with the fuel gas combustion requirements in the NSPS regulations. The flare must be operated as a fuel gas combustion device and comply with NSPS monitoring requirements using continuous emission monitors. In addition, Hess must implement a program to investigate the cause of future acid gas flaring incidents, take reasonable steps to correct the conditions that caused or contributed to the incidents, and minimize the flaring of acid gas and sour water stripper gases. It must also investigate the root cause of acid gas flaring incidents, report on the investigation, and provide an analysis of the measures available to reduce the likelihood of a recurrence from the same root cause, in addition to taking corrective actions to minimize the likelihood of a recurrence of the root cause. It will do the same for hydrocarbon flaring incidents.

EPA's enforcement priority on flaring resulted in another settlement this year. In early April, EPA and the DOJ reached a settlement with Marathon Petroleum Company for several CAA violations. The Marathon agreement focused on injunctive relief related to flares at Marathon's six refineries. Marathon will pay a $460,000 penalty and reduce emissions from all 22 flares at its refineries with state-of-the-art controls on the flares and a cap on the volume of waste gas it sends to the flares. It will also implement a waste gas minimization plan to reduce waste gas to flares, update the plan annually, do a root cause analysis and implement corrective action for any reportable flaring incidents (greater than 500 pounds per day sulfur dioxide (SO2) or 500,000 standard cubic feet per day waste gas flow), and abide by limits on flaring or flaring caps, measured as a 30-day rolling average limit for individual flares or groups of flares and a 365-day rolling average limit for each refinery. Related to flare efficiency, the settlement also requires Marathon to comply with current regulatory standards and install monitoring equipment on its flares, including vent gas flow meters, steam flow meters, steam control equipment, gas chromatographs, and a meteorological station at each refinery. The company must also automate the control of steam addition and supplemental gas to achieve high combustion efficiency and comply with stringent limits. As part of the effort to reach this settlement agreement, Marathon has spent more than $2.4 million to develop and conduct combustion efficiency testing of flares and to advance understanding of the relationship between flare operating parameters and flare combustion efficiency. Since 2009, Marathon also has spent approximately $45 million on equipment, including flow monitors and gas chromatographs, to improve the combustion efficiency of its flares. It plans to spend an additional $6.5 million to implement the terms of the settlement and will spend a yet-to-be-determined sum to comply with new flaring caps.

EPA contends that the equipment already installed by Marathon has saved the company approximately $5 million per year through reduced steam usage and product recovery, with additional savings projected with new equipment to be installed in the future. As part of the settlement, Marathon will also implement a project at its Detroit, Michigan refinery to reduce volatile organic compounds and benzene emissions, and will install controls on numerous sludge handling tanks and equipment, at an estimated cost of $2.2 million.

The government's settlement with Hess is the 31st such agreement with petroleum refineries in the U.S. since 2000. As a result of these settlements, refiners have invested more than $6 billion in new pollution controls to reduce SO2, nitrogen dioxide, and other emissions.

If you have any questions about the content of this alert, please contact a key contributor.

Key Contributors

Matthew Cohen
Krista K. McIntyre
Michael N. Mills
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