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In the United States, hazardous wastes are subject to regulations mandated by the Resource Conservation and Recovery Act (RCRA). Every month, we provide clear, in-depth guidance on a different aspect of the RCRA regulations. The information presented here is an excerpt from McCoy’s RCRA Unraveled, 2017 Edition.

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©2017 McCoy and Associates, Inc. All rights reserved.

Oil and Gas Exploration and Production Exclusion

Due to their large volume and relatively low toxicity, EPA excludes drilling fluids, produced waters, and other wastes uniquely associated with the exploration, development, or production of crude oil, natural gas, and geothermal energy from the definition of hazardous waste. [§261.4(b)(5)] As such, even if these wastes exhibit a hazardous characteristic, they are not regulated as RCRA hazardous. Most states have adopted this federal exclusion, which (because of the relatively small size of the geothermal industry) is commonly referred to as the oil and gas exclusion or the E&P exclusion.

We want to emphasize at the outset, that even though certain crude oil, natural gas, and geothermal energy wastes are excluded from regulation as hazardous waste, they may still be regulated under state programs (e.g., oil and gas commission rules and regulations), the RCRA Subtitle D solid waste regulations, or other federal requirements (e.g., hazardous materials transportation regulations, reserve pit programs, National Pollutant Discharge Elimination System permits, and Safe Drinking Water Act provisions). Furthermore, the exclusion does not mean that these wastes do not present a threat to human health and the environment if improperly managed. [Exemption of Oil and Gas Exploration and Production Wastes From Federal Hazardous Waste Regulations, EPA/530/K-01/004, October 2002, available from http://nepis.epa.gov/EPA/html/Pubs/pubtitleOSWER.html by downloading the report numbered 530K01004.]

Determining what wastes are excluded

Figuring out what wastes are excluded from hazardous waste regulation under §261.4(b)(5) isn’t always straightforward. The first step is to review EPA’s guidance on wastes “uniquely associated” with the exploration, development, or production of oil, gas, or geothermal energy.

“Uniquely associated” wastes

Drilling fluids and produced water represent the largest quantity of oil, gas, and geothermal energy wastes excluded from RCRA hazardous waste regulation. These wastes are estimated to constitute over 98% of the total industry waste stream. [Associated Waste Report, January 2000, available from http://archive.epa.gov/epawaste/nonhaz/industrial/special/web/pdf/execsum.pdf] The remaining 2% consists of other wastes associated with the exploration, development, or production of oil, gas, or geothermal energy, which are also excluded from hazardous waste regulation under §261.4(b)(5).

The legislative history of the exemption implies that the term “other wastes associated with” includes wastes intrinsically derived from primary field operations associated with the exploration, development, or production of oil, gas, or geothermal energy. [EPA/530/K-01/004, RO 11610] EPA noted on March 22, 1993 that this concept includes wastes “associated with operations to locate or remove oil or gas from the ground or to remove impurities from such substances and [they] must be intrinsic to and uniquely associated with oil and gas exploration, development, or production operations.” [Emphasis added.] [58 FR 15284] For example, methanol injected into natural gas production wells to keep them from freezing during the winter months produces a water/methanol waste stream when separated from the recovered natural gas; the water/methanol mixture is a “uniquely associated” waste and therefore is excluded under §261.4(b)(5). [RO 12258] Case Study 1 gives other examples of this concept.

Case Study 1

Primary field operations

As mentioned above, uniquely associated wastes must be intrinsically derived from primary field operations associated with exploration, development, or production activities. Primary field operations include only those activities necessary to locate and recover oil, gas, and geothermal energy from the ground and remove impurities. Primary field operations consist of [EPA/530/K-01/004, RO 11610]:

  • Exploration, development, and the primary, secondary, and tertiary production of oil or gas.
  • Crude oil processing, such as water separation, demulsifying, degassing, and storage in tanks associated with a specific well or wells.
  • Crude oil activities occurring at or near the wellhead and before the point where the oil is transferred from an individual field facility or a centrally located facility to a carrier (i.e., pipeline or truck) for transport to a refinery.
  • Natural gas activities occurring at or near the wellhead or at the gas plant and before the point where the gas is transferred from an individual field facility, a centrally located facility, or a gas plant to a carrier (i.e., pipeline or truck) for transport to market. Gas plants are considered to be part of production operations regardless of their location with respect to the wellhead, because natural gas often must be processed to remove water and other impurities prior to sale.

Primary field operations do not include transportation and manufacturing operations. Wastes generated during transportation and manufacturing are not excluded as discussed in more detail below.

Rule of thumb for determining if wastes are “uniquely associated”

EPA has tried to clarify when oil, gas, and geothermal energy wastes are “uniquely associated” using a simple rule of thumb. According to the agency, a waste is considered “uniquely associated” with exploration, development, or production activities and, therefore, most likely excluded from hazardous waste regulation if:

  • The waste came from down hole (i.e., it was brought to the surface during oil, gas, or geothermal energy exploration, development, or production operations); or
  • The waste was otherwise generated by contact with the oil, gas, or geothermal energy production stream during the removal of produced water or other contaminants from the well or the product (e.g., waste demulsifiers, spent iron sponge). [March 22, 1993; 58 FR 15285]

Materials must be used in order to be “uniquely associated”

Only used materials are considered to be uniquely associated wastes when disposed. Discarded unused materials (such as unused chemicals) are not uniquely associated and therefore are not excluded from hazardous waste regulation when disposed, regardless of their intended use. [EPA/530/K-01/004]

During oil field operations, excess unused drilling and workover fluids that exhibit the characteristic of corrosivity are disposed in a reserve pit. Are these unused materials subject to RCRA hazardous waste regulation?

Yes. According to EPA, unused chemical products (such as well-completion and workover fluids) are not excluded from hazardous waste regulation when they are disposed. However, if the unused materials are hazardous only due to their corrosivity, they can be neutralized by elementary neutralization or totally enclosed treatment in the same tanks used to hold the fluids prior to use without subjecting the tanks to hazardous waste regulation. The neutralized waste could then be disposed in the reserve pit, unless a state program prohibits such practice. [RO 11794, 12105]

Examples of wastes that are excluded

Based on the “uniquely associated” guidance discussed above, Table 1 lists examples of exploration, development, or production wastes that EPA has specifically said are excluded from regulation as RCRA hazardous waste.

Table 1

Examples of wastes that are not excluded

EPA has determined that the oil and gas exclusion does not apply to transportation or manufacturing wastes (as discussed in more detail below). To clarify this issue, the agency has provided examples of wastes that do not qualify for the §261.4(b)(5) exclusion (and therefore are hazardous wastes if they exhibit a characteristic or meet a listing description). Examples of these nonexcluded wastes are given in Table 2.

Table 2

Using Tables 1 and 2 to determine if wastes are excluded is exemplified as follows.

Well stimulation, the process of acidizing or fracturing an oil or gas well, is sometimes performed to enhance production. Solutions of acid, chemicals, sand, and water may be pumped into a well to eliminate obstacles to the flow of oil and gas. Acidic solutions used in well stimulation are often partially prepared offsite at a service company by combining acid, chemical solutions, and water in tank trucks. During transfer of the acid to the tank trucks, small quantities of acid typically spill from the hose or overflow the tank truck. The spilled acid is rinsed with water on a concrete containment slab that drains into a wastewater holding tank. The service company believes that the wastewater should be classified as “well stimulation fluids” (an excluded waste under the oil and gas exclusion—see Table 1) because the sole purpose of preparing the solution is to stimulate or otherwise enhance oil and gas production. Furthermore, even though the wastes will not reach the wellhead, the company argues that the wastes are associated with production operations—not wastes related to transportation and manufacturing. Is this rationale correct?

No. The acidic wastewater is not excluded because it is not intrinsically derived from the exploration, development, or production of oil or gas. It was never used in such operations, regardless of the intent in preparing the mixture. This type of waste fits under the category of “oil and gas service company wastes, such as…spilled chemicals, and waste acids” in Table 2, which are not excluded. [RO 13236]

After well stimulation is accomplished, some unused stimulation fluids remain in the tank trucks. The trucks return to the service company’s facility where they are flushed out with water. Would the resulting wastewater qualify as “well stimulation fluids” and thereby be excluded?

No. The wastewater containing unused stimulation fluids from the tank trucks is also not excluded. It is classified in the nonexcluded category of “unused fracturing fluids or acids” in Table 2. The unused fluids that remain in the trucks are not intrinsically derived from oil and gas exploration, development, or production operations, regardless of the intent of their preparation. [RO 13236]

Reserve and other types of pits are required for many E&P operations in order to efficiently extract oil and gas resources. Synthetic pit liners are used to keep E&P wastes from contaminating soil/water near pit locations. When removed, are spent synthetic pit liners excluded under the E&P exclusion of §261.4(b)(5)?

No. “[S]ynthetic pit liners used in E&P operations are not covered by the RCRA exemption because they are not intrinsically derived from, or uniquely associated with operations associated with the exploration, development, or production of crude oil and natural gas.” [RO 14815; see also RO 14816]

Additional guidance for determining if the exclusion applies

The agency has provided additional guidance in a number of different documents that may help determine the applicability of the §261.4(b)(5) exclusion to a particular waste stream. Below, we summarize EPA’s interpretations regarding applicability of the §261.4(b)(5) exclusion to transportation and manufacturing activities, crude oil reclamation, service companies, and natural gas wastes. Based on this guidance, Figure 1 is a logic diagram for determining the general applicability of the oil, gas, and geothermal energy exclusion.

Figure 1

The regulatory status of mixtures that contain excluded oil and gas wastes and nonexcluded waste is shown in Figure 2.

Figure 2

Transportation wastes

Wastes associated with transportation (e.g., wastes generated from a transportation pipeline) do not qualify for the §261.4(b)(5) exclusion. The question then becomes: when does transportation begin? This question is answered separately for crude oil and natural gas operations.

Crude oil transportation

In the oil field, crude oil and any produced water are directed from the wells to a series of tanks, called a tank battery, where the water and oil separate naturally due to gravity. (This process is sometimes enhanced by the use of heat.) Following water separation, the crude oil is metered prior to a change in custody or ownership and/or its transportation offsite.

As discussed previously, the oil and gas exclusion covers production-related activities that occur only as part of primary field operations at or near the wellhead. Only wastes generated before the end of primary field operations are excluded. Wastes generated as part of the process of transporting products away from primary field operations are not excluded. Examples of nonexcluded wastes resulting from transportation include pigging wastes from transportation pipeline pumping stations, contaminated water and snow resulting from spills from transportation pipelines or other forms of transport of the product, and soils contaminated from such spills. Conversely, storage of crude oil in stock tanks at production facilities is considered part of the production separation process, not transportation. Therefore, wastes from these tanks would be included in the exclusion, as noted in Table 1. [March 22, 1993; 58 FR 15284, 15286, EPA/530/K-01/004, RO 11610]

EPA generally defines the end of primary field operations and the beginning of transportation as 1) a custody transfer of the product from the producer (an individual field facility or a centrally located facility) to a carrier (pipeline or trucking company) for transport to a refinery; or 2) if no custody transfer takes place, the end of initial separation and dewatering of the crude oil (typically the point at which crude oil leaves the last vessel, including the stock tank, in the tank battery associated with the well or wells). Any waste generated after either of these two events is not included within the scope of the oil and gas exclusion. [March 22, 1993; 58 FR 15286, RO 11610]

Natural gas transportation

Some water may be separated from natural gas at the wellhead. However, gas from several wells is typically commingled and sent to a central gas plant where additional water and impurities are removed. Between the wellhead and the gas plant, ownership of the gas may change.

For natural gas, EPA defines primary field operations as production-related activities at or near the wellhead and at the gas plant (regardless of whether or not the gas plant is located near the wellhead), but prior to transport of the natural gas from the gas plant to market. According to EPA, “[b]ecause the movement of the natural gas between the wellhead and the gas plant is considered a necessary part of the production operation, uniquely associated wastes derived from the production stream along the gas plant feeder pipelines (e.g., produced water, gas condensate) are considered excluded wastes, even if a change of custody of the natural gas has occurred between the wellhead and the gas plant.” [March 22, 1993; 58 FR 15286–7]

Thus, transportation begins at the point where the gas is transferred from an individual field facility, a centrally located facility, or a gas plant to a carrier for transport to market. If the gas requires purification and dehydration, the point that transportation begins is after product separation and dehydration at the gas plant. [EPA/530/K-01/004, RO 11610] See Case Study 2.

Case Study 2

Gas-plant and feeder-pipeline wastes that are not excluded include [March 22, 1993; 58 FR 15287]:

  • Pump lube oil,
  • Waste mercury from meters and gauges,
  • Soil contaminated by spills of wastes that are not uniquely associated with production operations (e.g., soil contaminated by mercury from gauges), and
  • Wastes generated by nonproduction-related activities (i.e., manufacturing) that may occur at a gas plant (e.g., wastes produced during 1) operations that go beyond the removal of impurities; 2) the physical separation of the gas into its component fractions, such as cracking and reforming the various gas fractions; and 3) the addition of odorants or other substances).

Production of elemental sulfur from hydrogen sulfide gas at a gas plant is considered treatment of an excluded waste because hydrogen sulfide gas is a uniquely associated waste (see Table 1). Thus, any residual waste derived from the hydrogen sulfide remains excluded. [March 22, 1993; 58 FR 15287]

Status of excluded wastes shipped offsite

Note that excluded wastes do not lose their excluded status if they undergo custody transfer and are transported offsite for treatment, reclamation, or disposal. [March 22, 1993; 58 FR 15285, EPA/530/K-01/004]

Manufacturing wastes

In addition to transportation wastes, wastes associated with manufacturing operations are not uniquely associated with primary field operations and therefore are not excluded under §261.4(b)(5). [EPA/530/K-01/004, RO 11610] Manufacturing (for the oil, gas, and geothermal energy industry) is defined as “any activity occurring within a refinery or other manufacturing facility the purpose of which is to render the product commercially saleable.” Consequently, any wastes associated with oil refining, petrochemical-related manufacturing, and electricity generation are not excluded. [RO 11610, 13293] Case Study 3 illustrates the status of a manufacturing waste under this exclusion.

Case Study 3

Crude oil reclamation

The crude oil reclamation industry recovers marketable crude oil and other hydrocarbons from produced water, crude oil tank bottoms, and other oily wastes that are generated by the production of crude oil and natural gas. Thermal and/or physical processes, such as heat and gravity separation, are used to recover saleable crude oil. If it is difficult to separate crude oil from produced waters, demulsifiers are added. Wastes resulting from crude oil reclamation include produced water and tank bottom solids.

In its July 1988 regulatory determination, EPA included “liquid and solid wastes generated by crude oil and tank bottom reclaimers” on the list of nonexcluded wastes (see Table 2). However, in its March 22, 1993 clarification, EPA explained that this entry refers only to nonexploration, nondevelopment, or nonproduction wastes generated by reclaimers (i.e., wastes derived from processing nonexcluded oil field wastes or wastes that contain materials that are not uniquely associated with exploration, development, or production operations). Examples of nonexcluded wastes are waste solvents generated from solvent cleaning of tank trucks that are used to transport oil field tank bottoms. [58 FR 15285, RO 11595]

Generally, crude oil reclaimer wastes that are derived from processing excluded oil field wastes (e.g., produced water and basic sediment) are not subject to hazardous waste regulation because of the §261.4(b)(5) exclusion. Wastes derived from treating an excluded waste (including recovery of product from an excluded waste) usually remain excluded from RCRA requirements. For instance, waste residues from the onsite or offsite recovery of crude oil from tank bottoms obtained from crude oil storage facilities at primary field operations (i.e., operations at or near the wellhead) are excluded from hazardous waste regulations because the crude oil storage tank bottoms at primary field operations are excluded. As noted above, offsite transport of excluded wastes from a primary field site for treatment, reclamation, or disposal does not negate the exclusion. [58 FR 15285, RO 11595]

Service companies

Oil and gas service companies are hired by the principal operating company to supply materials for use at a drilling or production site or provide other onsite or offsite assistance. Offsite services performed by these companies may include product formulation, materials transportation, laboratory analysis, and waste handling/disposal.

In its 1988 regulatory determination, EPA stated that “oil and gas service company wastes, such as empty drums, drum rinsate, vacuum truck rinsate, sandblast media, painting wastes, spent solvents, spilled chemicals, and waste acids” are not covered by the oil and gas exclusion. However, as clarified in the March 22, 1993 notice, the agency intended for that item to include only wastes generated by service companies that are not uniquely associated with primary field operations. EPA did not intend to imply that service companies would never generate an excluded waste. Any waste generated by activities uniquely associated with the exploration, development, or production of oil, gas, or geothermal energy during primary field operations is excluded from hazardous waste regulation, regardless of whether it is generated by a service company or the principal operator.

For example, waste acid generated during a well workover would be excluded, if the waste came from down hole. Applicability of the exclusion wouldn’t hinge on whether that waste was generated by a service company or the principal operator. When a service company’s trucks leave the production site and return to its company’s facility, any unused frac or stimulation fluids would not be excluded when they are washed out (as was discussed previously). However, rinsates from the company’s trucks or drums are excluded if the wastes contained within them are excluded, provided that the rinsing fluid is not subject to RCRA (e.g., solvents). [58 FR 15286]


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Disclaimer

Considerable care has been exercised in preparing this document; however, McCoy and Associates, Inc. makes no representation, warranty, or guarantee in connection with the publication of this information. McCoy and Associates, Inc. expressly disclaims any liability or responsibility for loss or damage resulting from its use or for the violation of any federal, state, or municipal law or regulation with which this information may conflict. McCoy and Associates, Inc. does not undertake any duty to ensure the continued accuracy of this information.

This document addresses issues of a general nature related to the federal RCRA regulations. Persons evaluating specific circumstances dealing with the RCRA regulations should review state and local laws and regulations, which may be more stringent than federal requirements. In addition, the assistance of a qualified professional should be enlisted to address any site-specific circumstances.