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December 04, 2018 Articles

Aux Sable: EPA’s Continued Focus on Leak Detection and Repair in Energy Industry

The Aux Sable action may indicate an enforcement trend throughout the industry.

By Charles Wehland and Will Taylor

On October 29, 2018, the U.S. Environmental Protection Agency (EPA) and the U.S. Department of Justice (DOJ) filed a complaint against Aux Sable Liquid Products LP in the U.S. District Court for the Northern District of Illinois alleging violations of various state and federal air pollution statutes and regulations in connection with Aux Sable’s natural gas processing plant located outside of Chicago. United States v. Aux Sable Liquid Prods. L.P.,No. 1:18-cv-7198 (N.D. Ill. Oct. 29, 2018). On the same day, the government also filed a proposed consent decree negotiated by the parties and announced a settlement that includes agreed injunctive relief to control emissions and pay $2.7 million in civil penalties.

While the EPA described Aux Sable’s processing facility as one of the largest in the country and emphasized that there was a “huge underestimate of VOC emissions” at the time of the plant’s construction that led to substantial annual violations, this action is likely not an aberration. The EPA for some time has been focused on leak detection, and the Aux Sable action may indicate an enforcement trend throughout the industry.

The Aux Sable Facility

In 1999, Aux Sable constructed its natural gas processing plant in Grundy County, Illinois, which is located about 50 miles southwest of Chicago.

According to the EPA, the facility is one of the largest natural gas liquids (NGL) extraction and fractionation facilities in North America, capable of processing 2.1 billion cubic feet per day of natural gas and approximately 107,000 barrels of NGL products per day. Aux Sable operates two processing trains in parallel, each consisting of a five-bed dehydration system. The facility also has high- and low-pressure flares as emissions-control devices. The facility is located in an area designated as “nonattainment” under the National Ambient Air Quality Standards for ground-level ozone.

In 1999, 2002, and 2016, the EPA issued various construction and other permits to Aux Sable for the facility that limited VOC emissions, set various flare requirements, and established various standards and monitoring provisions.

EPA/DOJ Complaint

In 2013, the EPA conducted a Method 21 leak detection monitoring inspection at the facility, which apparently revealed various violations of certain subparts of the Clean Air Act (CAA) and the permits issued to the facility. The EPA issued violation notices in 2014 and, after further investigation, issued additional violation notices in 2015 and 2016.

In the EPA/DOJ complaint, the government alleges violations of numerous federal and state statutory and regulatory requirements applicable to the facility, including (1) the nonattainment New Source Review provisions of the CAA, (2) the New Source Performance Standards for VOCs from various subparts of 40 C.F.R. part 60, (3) various leak detection and repair (LDAR) requirements, (4) requirements of the Illinois Emissions Reduction Market System, (5) requirements of the Illinois Annual Emissions Reports program, and (6) various conditions regarding VOCs in Aux Sable’s construction permit.

The EPA emphasized the adverse health effects of the emissions at issue, including that VOCs contribute to ground-level ozone and to sensory irritation symptoms, allergies and asthma, and neurological and liver toxicity.

Consent Decree

According to the proposed consent decree that was filed simultaneously with the EPA/DOJ complaint, Aux Sable agreed to multiple elements of injunctive relief to control emissions, including (1) complying with more stringent standards at process units, (2) maintaining 99 percent VOC emissions-control efficiency at off-gas incinerators, (3) implementing an LDAR program that complies with certain regulations, (4) complying with regulations applicable to synthetic organic chemical manufacturing distillation units and reactor processes, (5) retaining a third party to conduct comprehensive audits, (6) installing ultra-low nitrogen oxide burners at process heaters and complying with related emissions limits, and (7) submitting applications for permit amendments to incorporate consent decree requirements. Aux Sable, No. 1:18-cv-7198 (N.D. Ill. Oct. 29, 2018). The EPA estimates that the new controls would result in emissions reductions of approximately 18.8 tons per year of VOCs and between 42.3 and 52.3 tons per year of nitrogen oxides.

It is estimated that Aux Sable will spend between $1.5 million and $2 million in capital costs and between $250,000 and $500,000 annually in operational and maintenance costs to complete the required injunctive relief. The proposed consent decree also proposes that Aux Sable pay a $2.7 million civil penalty. Further, Aux Sable agreed to implement certain mitigation projects to reduce VOC and nitrogen oxide emissions at locomotive switchyards, which will cost approximately $3 million.

The proposed settlement is subject to a 30-day public comment period. The government stated that it may withhold its consent to the proposed consent decree if the comments disclose information or considerations indicating that the consent decree is improper, inappropriate, inadequate, or not in the public interest.

Conclusion

For some time, the EPA has emphasized its LDAR programs. In Leak Detection and Repair: A Best Practices Guide, the EPA stated that, “[i]n general, EPA has found significant widespread noncompliance with Leak Detection and Repair (LDAR) regulations.” The EPA further stated that the

EPA has determined that leaking equipment, such as valves, pumps, and connectors, are the largest source of emissions of [VOCs] . . . from petroleum refineries and chemical manufacturing facilities. The Agency has estimated that approximately 70,367 tons per year of VOCs and 9,357 tons per year of [volatile hazardous air pollutants] have been emitted from equipment leaks.

The enforcement action against Aux Sable and resulting consent decree are likely indicative of the EPA’s continued focus on LDAR regulations. Whether or not the case is part of a larger effort to roll out additional enforcement actions throughout the industry remains to be seen. However, refineries, petrochemical facilities, chemical manufacturing facilities, gas processing facilities, and others in the industry should consider reviewing their LDAR programs in light of the EPA’s continued focus on this issue.

Charles Wehland is a partner in Jones Day’s Chicago office, and Will Taylor is an associate in Jones Day’s Houston office.


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