This paper was originally published by the Rocky Mountain Mineral Law Foundation in the Proceedings of the 58th Annual Rocky Mountain Mineral Law Institute (2012) Chapter 6 THERE’S SOMETHING IN THE AIR: NEW AND EVOLVING AIR QUALITY REGULATIONS IMPACTING OIL AND GAS DEVELOPMENT Colin G. Harris Bryan Cave HRO Boulder, Colorado Ivan L. London Bryan Cave HRO Denver, Colorado Synopsis § 6.01 Introduction § 6.02 Framework of the Clean Air Act [1] National Ambient Air Quality Standards [2] State Implementation Plans [3] Permits [a] Types of Permits [i] Preconstruction New Source Review Permits for Major Sources [ii] Minor Sources [iii] General Permits and Permits by Rule [iv] Operating Permits [4] Requirements for New and Modified Sources [5] Standards for Hazardous Air Pollutants for New and Existing Sources [6] State Primacy [7] Other Sources of Air Quality Control: Federal Agencies, Oil and Gas Commissions, and Local Governments 6-1 6-2 Mineral Law Institute § 6.03 Emission Sources and Control Technologies Affecting Oil and Gas Operations [1] Drilling and Completions [2] Flaring [3] Tanks [4] Processing and Dehydration [5] Compression [6] Equipment Leaks § 6.04 New and Revised Standards for Oil and Gas Operations [1] NSPS OOOO [a] Hydraulic Fracturing for Gas Wells [b] Oil Wells [c] Compressors [d] Pneumatic Controllers [e] Storage Vessels [2] NSPS KKK [3] NSPS LLL [4] NESHAP HH [5] RICE Subject to NSPS and NESHAP [a] NSPS IIII [b] NSPS JJJJ [c] NESHAP ZZZZ § 6.05 Air Quality Standards: Ozone Nonattainment [1] Background [2] The Practical Impacts of Nonattainment [3] Ozone Nonattainment Areas in the Intermountain West Associated with Oil and Gas Development [a] Denver Northern Front Range [b] Jonah/Pinedale, Wyoming [c] Uintah Basin, Utah [4] Ozone Advance Program § 6.06 Aggregation of Oil and Gas Operations Air Quality Regulations 6-3 [1] Frederick Compressor Station—Contiguous or Adjacent [2] Florida River Compression Facility—Contiguous or Adjacent [3] Sims Mesa CDP—Common Control [4] Other Aggregation Cases [a] Midwest—Contiguous or Adjacent [b] Marcellus Shale [5] Aggregation Lessons § 6.07 EPA’s Indian Country Rules [1] The “Gap” in Indian Country Permitting [a] Indian Country Minor Source Program [b] Indian Country Nonattainment NSR Program [2] Key Time Frames [3] Implementation: Permitting, Public Comment, and Review [4] Fort Berthold Indian Reservation § 6.08 Greenhouse Gas Regulation [1] Tailoring Rule [2] Greenhouse Gas BACT for Oil and Gas [3] Mandatory Reporting Rule § 6.09 Land Management Decisions and the National Environmental Policy Act [1] Air Quality Mitigation in NEPA Documents [2] Formalizing Air Quality Review and Data [3] NEPA Case Study: Hell’s Gulch, White River National Forest, Colorado § 6.10 Modeling [1] Permitting [2] One-Hour NO2 and SO2 NAAQS [3] Controversies § 6.11 Startup, Shutdown, and Malfunction Exemption [1] Elimination of the Exemption 6-4 Mineral Law Institute § 6.01 [2] SSM in Permitting § 6.12 Enforcement § 6.13 Local Regulation [1] Shifting Focus [2] Scientific Controversies [3] Local Control [4] Preemption Litigation § 6.14 Conclusion: Overcoming Regulatory Strategies That Threaten Development § 6.01 Introduction* “Call out the instigators Because there’s something in the air We’ve got to get together sooner or later Because the revolution’s here . .” — Thunderclap Newman, “Something in the Air,” on Hollywood Dream (Track Records 1970). “Something in the Air” was a number-one single by the band Thunder- clap Newman in 1969.1 The song was a generic and dreamy call for revolu- tion as the Sixties drew to a close. Today, the lyrics could symbolize one the most significant challenges facing oil and gas development: regulators and activist groups increasingly perceive oil and gas extraction and midstream activities as significant contributors to the presence of “something in the air,” and “revolution” may aptly characterize the fast-paced and compre- hensive air quality regulatory changes, both new and evolving, that regula- tors are directing at the oil and gas industry to address these concerns. The Clean Air Act (CAA)2 may be the most complex, burdensome, and costly environmental statute ever promulgated. By any measure, the pain has resulted in considerable gain: the CAA has a proven track record of * Cite as Colin G. Harris & Ivan L. London, “There’s Something in the Air: New and Evolving Air Quality Regulations Impacting Oil and Gas Development,” 58 Rocky Mt. Min. L. Inst. 6-1 (2012). 1 Pete Townshend of The Who created Thunderclap Newman for The Who’s roadie John “Speedy” Keen, who wrote and sang “Something in the Air.” Townshend played bass on the song using the pseudonym Bijou Drains. Townshend used this pseudonym again on the song “Misunderstood” from his excellent 1977 album Rough Mix recorded with Ronnie Lane of Faces. 2 42 U.S.C. §§ 7401–7671q. § 6.01 Air Quality Regulations 6-5 reducing air pollutants. When Thunderclap Newman released “Something in the Air” in 1969, urban smog episodes were a major public health crisis, lead from vehicles presented chronic health risks, and pollution control technology was in its infancy. Since then, emissions of the most common air pollutants have declined by 41%, while gross domestic product has increased by more than 64%.3 The CAA started a march of emission con- trol technology that continues to this day. CAA regulators are not resting on their laurels. Congress has amended the law several times, and the implementing regulations at the federal and state level continue to grow and multiply like the many-headed Hydra. Regardless of whether one believes that this is regulatory overreaching or simply a natural response to new air quality challenges, the CAA remains a very powerful tool to affect how industry conducts business. In fact, a strong argument could be made that, unlike the Clean Water Act (CWA)4 and hazardous waste laws, which have reached a high degree of maturity and certainty, the CAA remains in considerable flux and will grow more stringent and complex, at a very deliberate pace and in the public eye, to address concerns that air quality priorities have lagged behind other envi- ronmental laws and regulations. This scenario poses special issues for the upstream and midstream oil and gas industry, which includes exploration, drilling, completions, sepa- ration, gathering, processing, and compression. Over the past several years, oil and gas production and related midstream activities in the Intermoun- tain West have increased due to spectacular discoveries in unconventional resource plays, such as shale gas, and new technologies, such as horizon- tal drilling and hydraulic fracturing.5 Although natural gas prices have declined due to oversupply and other factors, resulting in lower natural gas rig counts,6 the industry has offset the decline by increasing the number of rigs targeting crude oil in response to high crude oil prices.7 Addition- ally, the industry has held natural gas production steady in areas where 3 EPA, “40th Anniversary of the Clean Air Act,” http://www.epa.gov/oar/caa/40th.html. 4 33 U.S.C. §§ 1251–1387. 5 See generally Energy Info. Admin., “Review of Emerging Resources: U.S. Shale Gas and Shale Oil Plays” (July 2011); EPA, “An Assessment of the Environmental Implications of Oil and Gas Production: A Regional Case Study” (Working Draft Sept. 2008) (Assessment of Environmental Implications). 6 Energy Info. Admin., “Short-Term Energy Outlook,” at 7 (May 2012) (Short-Term Energy Outlook) (citing Baker Hughes statistics). 7 See id. at 5–6; see also Energy Info. Admin., “U.S. Oil Rig Count Overtakes Natural Gas Rig Count” (May 9, 2011), http://www.eia.gov/todayinenergy/ (search “Archive” for May 2011). 6-6 Mineral Law Institute § 6.01 operators can supplement natural gas revenues with the sale of natural gas liquids (NGL), which they process from liquids-rich natural gas and sell at prices that approximate crude oil prices.8 Oil and gas development will likely continue to grow and intensify. The pace of this activity is facing gale-force headwinds caused by air quality regulation and disputes. The U.S. Environmental Protection Agency (EPA) and state and local agencies already have an intimidating array of rules applicable to drilling, natural gas processing, storage, compression, dehydration, and pipeline transportation.9 The scope and stringency of regulations is growing.10 Also, federal land management agencies increas- ingly impose extra-regulatory air quality mitigation measures through the National Environmental Policy Act of 1969 (NEPA).11 Even when air qual- ity is addressed, project opponents routinely challenge NEPA decisions based on allegedly deficient review of air issues. Further, citizen groups routinely challenge air permits based on complex and increasingly novel technical and legal arguments, resulting in delay. Amid this regulatory and legal activity, enforcement is escalating. Accordingly, oil and gas operators face increased costs, regulatory burdens, public scrutiny, and delay. High profile issues may even result in complete barriers to development. We will see whether we are experiencing a manageable evolution of the regulatory framework, or if “the revolution’s here,” bringing with it a fun- damental restructuring of the way industry will need to approach every oil and gas development project. One thing is certain: air quality has become the primary lightning rod for environmental regulatory action and stake- holder disputes regarding oil and gas development in the Intermountain West. Section 6.02 of this chapter presents the legal framework of the CAA so that operators can analyze the impacts of regulatory developments on oil and gas development in legal context. Section 6.03 explains the air quality-related emissions sources and control technologies involved in oil and gas activities. Then, sections 6.04 through 6.13 address specific recent 8 See Short-Term Energy Outlook, supra note 6, at 7. 9 .See, 40, e.gC.F.R.