1 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

FINAL STAFF REPORT

Revised Proposed Amendments to Rule 4402 (Crude Oil Production Sumps)

December 15, 2011

Prepared by: Anna Myers, Senior Air Quality Special ist

Kristopher Rickards, Air Quality Engineer Chelsea Gonzales, Air Quality Specialist Nichole Corless, Air Quality Specialist

Reviewed by: Tina Frederick, Compliance Inspector Ellyce Baldwin, Compliance Supervisor Jessi Fierro, Rule Development Supervisor

Mike Oldershaw, Compliance Manager Leonard Scandura, Permits Manager Errol Villegas, Strategies and Incentives Manager Samir Sheikh, Director of Strategies and Incentives

I. SUMMARY

The San Joaquin Valley Unified Air Pollution Contro l District’s (District) Governing Board (Board) adopted amendments to Rule 4402 (Crude Oil Production Sumps) on December 17, 1992 as a part of an effort to renumber rules f rom a previous rule-numbering system to the current District rule-numbering system. The District submitted the 1992 rule revisions to the California Air Resources Board (AR B) for forwarding to the Environmental Protection Agency (EPA) as an amendme nt to the State Implementation Plan (SIP) in 2006.

Upon evaluation of the submitted Rule 4402, EPA fin alized a limited approval and limited disapproval of the rule as an amendment to the District portion of the SIP (Revisions to the California State Implementation P lan, San Joaquin Valley Unified Air Pollution Control District 2011, 39777-39782), effe ctive on August 8, 2011. In its limited disapproval, EPA cited concerns regarding the satis faction of Reasonably Available Control Technology (RACT) requirements through Rule 4402. A copy of the Federal Register and the associated Technical Support Docum ent is included as Appendix D of this final staff report.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

2 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 Pursuant to Section (§)179 of the Clean Air Act (CA A), unless a rule has been updated and approved into the SIP within 18 months after di sapproval, EPA shall impose one or more sanctions until they determine that the State has attained compliance. The purpose of this rule-amending project is to evaluate and ad dress, as appropriate, the concerns identified by EPA regarding Rule 4402 and submit ad opted revisions to EPA for inclusion

into the SIP.

This rule addresses VOC emissions from a source cat egory that is relatively small. VOC emissions reductions are generally far less imp ortant to the Valley’s long-term attainment goals than are NOx emissions reductions. As such, the Valley’s attainment strategies generally emphasize NOx reductions. The District will continue to seek as much VOC reductions as expeditiously practical, tec hnologically feasible, and as economically reasonable as determined by the Govern ing Board.

II. RULE DEVELOPMENT PROCESS

This rule development process is principally focuse d on ensuring that Rule 4402 meets requirements for Reasonably Available Control Techn ology (RACT). Based on the District’s evaluation of sources subject to Rule 44 02, the District proposes to make a number of relatively minor and administrative amend ments to the rule.

District staff hosted a public workshop on October 18, 2011 and two technical workgroup meetings with industry representatives in September and October of 2011. District staff solicited comments from the public, affected sources, trade organizations, ARB, and EPA. Upon review and evaluation, District staff incorporated the comments and data into the rule and final staff report as ap propriate.

As part of the District’s new socioeconomic policy adopted by the Board in October 2011, District staff identified three industry trad e associations for this source category: the Western States Petroleum Association (WSPA), th e Independent Oil Producers Associations (IOPA), and the California Independent Petroleum Association (CIPA). District staff solicited these groups for feedback on control costs and feasibility of the revised proposed rule amendments. At the October 1 8, 2011, public workshop, District staff asked for assistance in identifying other tra de organizations that could provide additional cost and source-specific data. No addit ional industry groups have been

identified at this time. District staff also solic ited feedback from affected sources to determine if any new Department of Transportation, Occupational Safety and Health Administration, safety or other requirements that w ould result from the revised proposed amendments. Thus far no additional requirements ha ve been identified.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

3 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 The proposed rule and final draft staff report will be published and made available to affected sources and interested parties prior to a public hearing of the District Governing Board to consider adoption of the proposed rule ame ndments. Proposed amendments to the rule are scheduled to be presented to the Go verning Board during the public hearing on December 15, 2011.

III. BACKGROUND

Crude Oil Production Operations with Sumps A.

Oil production operations pump crude oil from the g round and separate the usable products from the sand, water, and other fluids tha t it is entrained in. In most cases, the separation process occurs in tanks or a combination of tanks and sumps. The following is a simplified overview of the initial separation procedure, which takes place prior to product being sent to a sump or tank for additional separation:

• Oil-water-gas mixtures produced from individual we lls are sent to a fluid gathering system.

• The fluid then enters a free-water knockout (FWKO) vessel where initial separation of gas, oil, and water takes place. A f ree-water knockout is a vessel designed to reduce the velocity of the produced str eam so that free water and solids settle out. The knockout may be a tank or p ressure vessel.

• After leaving the FWKO vessel, the oil fraction, w hich usually contains significant amounts of residual water, is sent to a heater trea ter or tank where additional water is separated from the oil and any remaining g as. A heater treater is a pressure vessel used in an oil field to break oil-w ater emulsions. The process involves the application of heat and may be accompa nied by the addition of chemicals upstream or at the treater.

• If significant gas is released, it may be directed to a vapor collection system; otherwise, gas is removed with the oil fraction. T he separated oil is then directed to a storage tank and eventually sent offsite for s ale/distribution.

The remaining oily water fraction is then directed to a tank or a sump for further separation. As identified in the ARB TSD for sumps used in oil production ( Suggested Control Measure of the Control of Organic Compound Emissions from Sumps Used in Oil Production Operations ), waste water, also called produced water, needs t o be disposed of in one or more of the following ways: r e-injection into the oil reservoir; injection into a favorable subsurface formation; re -direction into a permitted existing surface waterway after appropriate treatment to rem ove contaminants; percolation; or evaporation. In the Valley, processed water is com monly disposed of using a combination of percolation and evaporation; this is especially true for small and very small oil producers. The process of percolation can only be achieved through the use of unlined excavations in the ground, commonly referre d to as sumps or ponds.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

4 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 The Purpose and Use of Sumps B.

In oil and gas production operations, sumps receive oil-water mixtures for the purpose of separating usable oil products from water, sand, and semi-sold hydrocarbons. Sumps operate under continuous use during normal operatio ns of oil production. Sumps also serve as receptors or holding ponds to allow the di sposal of water through evaporation and percolation. Sumps are separated into the following three classe s, based upon where they function within the treatment process:

• First stage (primary) production sump. A sump that receives a stream of crude oil and produced water directly from one or more oil pr oduction wells or field gathering
systems.

• Second stage (secondary) production sump . A sump that receives waste water streams (water/oil) from one or more first stage se parators (including first stage sumps and/or tanks).

• Third stage (tertiary) production sump . A sump that receives waste water streams (water/oil) from one or more second stage separator s (including second stage sumps and/or tanks). In most cases, there are only small amounts of oil present in

the waste streams.

Sumps are further classified by the type of petrole um they receive:

• Light oil service sumps . Sumps that contain crude oil having an American Petroleum Institute (API) gravity of 30 o or greater.

• Heavy oil service sumps . Sumps that contain crude oil having API gravity l ess than

30 o

.

The crude oil and water mixes as it flows through p ipelines from upstream sources to the sump. Emulsions consisting of small globules o f crude oil are dispersed throughout the mixture. The stability of the emulsion is an i mportant factor affecting the separation of the oil and water phases. Stable emulsions are those in which the dispersed globules resist rapid coalescence. Because crude o il is usually less dense than water, when the mixture enters the sump, gravity causes th e water to settle into a separate liquid layer below the oil; allowing the operator t o skim the oil from the surface of the sump. The efficiency of the oil-water separation p rocess in a sump is also dependent upon the amount of time the fluid spends in the sum p, or its residence time. As the residence time increases, a more complete separatio n occurs

The separation of oil and water in a sump happens a s a result of density differences between the two primary components—oil being less d ense than water. De-emulsifiers or the application of heat, which can be added to t he oil-water mixture upstream of theSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

5 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 sump, can enhance the separation process. The oil- water mixture, or emulsion, is often held together with other agents such as silts, clay s, or naturally occurring surfactants. A de-emulsifier is a chemical compound that forms ele ctrochemical bonds with electrochemically similar compounds; they attach to certain parts of the mixture, forming denser globules that will separate from less-dense parts of the mixture. If mixing is adequate, the result is eventual removal of non-sol uble globules from the liquid. Likewise, the application of heat to the oil-water mixture enhances separation. Heat raises the kinetic energy of the oil and water mole cules to enhance separation; oil molecules, being less dense than water molecules po ssess a high velocity when heated, thus are more effectively separated from wa ter with the application of heat.

Sump Activity in the Valley C.

ARB 1 made the determination that, in California, most o f the sumps are used by a few producers, usually in areas where the production of heavy crude oil is predominant. The District’s emissions inventory, as presented in the 2007 Area Source Emission Inventory Methodology , supports this determination.

In the past, some companies used primary sumps to a ccept crude oil directly from wells. However, these primary sumps have been eliminated a nd operators now direct crude oil from wells to tanks or vessels. There are however, secondary and tertiary sumps still used in the Valley. The sumps were identified, recorded , and verified through extensive efforts by District staff. The surface area of active sump s, by facility size and oil specific gravity

as determined in the 2007 Area Source Emission Inventory Methodology , are presented in the following table:

Table 1. Total Surface Area of Sumps in the Valley (2007)

Classification First Stage Sumps Second Stage

Sumps Third Stage Sumps

(ft 2 ) (ft 2 ) (ft 2 )

Large Operations

Light Oil 0 0 0

Heavy Oil 0 0 5,440

Small Operations

Light Oil 0 6,297 51,971

Heavy Oil 0 97,298 147,757

TOTAL

Light Oil 0 6,297 51,971

Heavy Oil 0 97,298 153,197

1 ARB TSD for the Suggested Control Measure of the Control of Organic Compound Emissions from Sumps Used in Oil Production OperationsSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

6 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 The table below illustrates the number of active su mps in the Valley as presented in the 2007 Area Source Emission Inventory Methodology. For purposes of this ruleamending project staff will assume that the quantit y of active sumps in the Valley as presented in the table below is equivalent to the a ctive sumps in 2011. Even though affected sources have pointed out that the use of s umps has been and continues to be declining in the Valley.

Table 2. Active Sumps in the Valley (2007)

Classification First Stage Sumps Second Stage

Sumps Third Stage Sumps

(ft 2 ) (ft 2 ) (ft 2 )
Large Operations Light Oil 0 0 0 Heavy Oil 2 0 0 1 Small Operations Light Oil 0 6 10 Heavy Oil 0 34 44

TOTAL Light Oil 0 6 10 Heavy Oil 0 34 45

A. Emissions

Emissions of volatile organic compounds (VOCs) from secondary and tertiary sumps depend on the type of crude oil they contain, which is broadly categorized as “light” or “heavy” based on its API gravity, and the surface a rea of the sumps.

The District reviewed and refined the emission inve ntory for this source category in 2007. The emission factors for crude oil production sumps presented in the following table reflect a correction made to the technical guidance documen t for the “Emission Inventory Criteria and Guidelines Regulation” for AB 2588 (Air Toxics “Hot Spots” Information and Assessment Act of 1987) by the Kern County Air Poll ution Control District. District staff, ARB, and stakeholders vetted these emission factors throughout the emission inventory update process and through District permit streamli ning efforts. These adopted and approved emission factors are summarized in the fol lowing table:

2 There is uncertainty about the one third stage hea vy oil large operation sump. This sump is currentl y being evaluated to determine the use and purpose of this sump.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

7 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 Table 3. Emission Factors for Sumps

Classification Total Organic

Gas (lb/ft 2 -day) Fractional

Reactive Organic

Gas Reactive Organic

Gas (lb/ft 2 -day)

Heavy Oil (API < 30°)

First Stage 0.10459 0.80 0.0837

Second Stage 0.05149 0.80 0.0412

Third Stage 0.00641 0.80 0.0051

Light Oil (API >30°)

First Stage 0.143 0.80 0.1144

Second Stage 0.02 0.80 0.016

Third Stage 0.01 0.80 0.008

Table 4 represents the 2007 emissions inventory for oil sumps, reported for each county in the District. For specific information regarding c alculations and methodology used to determine the emission inventory please refer to th e 2007 Area Source Emission Inventory methodology

, available on the District website.

Table 4. Total Emissions for Crude Oil Production S umps (2007)

County Emissions (tpy)

NOx CO SOx VOC PM10 PM2.5

Fresno N/A N/A N/A 9.75 N/A N/A

Kern N/A N/A N/A 761.35 N/A N/A

Kings N/A N/A N/A 0.00 N/A N/A

Madera N/A N/A N/A 0.00 N/A N/A

Merced N/A N/A N/A 0.00 N/A N/A

San Joaquin N/A N/A N/A 0.00 N/A N/A

Stanislaus N/A N/A N/A 0.00 N/A N/A

Tulare N/A N/A N/A 197.34 N/A N/A

Total N/A N/A N/A 968.44 N/A N/ASAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

8 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 IV. DISCUSSION

Based on their analysis of the current version of D istrict Rule 4402, EPA identified several areas of concern in the rule that preclude its full approval as an amendment

into the SIP. EPA based its determination on the n eed for improved rule clarity, increased enforceability, and stronger requirements to implement RACT.

A reasonably available control technology is a cont rol technology that is considered reasonable for an operator to install or implement. By EPA definition, RACT must be technologically and economically feasible. Whether a control technology is considered RACT can vary between air basins and industries as well as over time. A RACT analysis integrates several factors, including tech nological advancements and costs for equipment, raw material, or labor.

The following discussion summarizes the issues iden tified by EPA as published in the Federal Register and includes the District’s re sponses and revised proposed rule amendments to address the issues identified by EPA. Refer to Appendix B of this final staff report to review the RACT cost effectiv eness analyses used to support the District responses to EPA.

A. Section 1.0 – Purpose

District staff proposes to remove some language fro m this section of the rule to simplify rule language. This change is administrat ive in nature and does not change the applicability or requirements contained in this rule.

B. Section 3.0 – Definitions

EPA Comments: Update the definition of Clean Produced Water (CPW) to replace EPA Test Methods 4.13.2, 418.2, and 8240, these are outdated test methods that used chlorofluorocarbon (CFC) 113 as the extraction solv ent, with updated EPA Test Methods 1664A and 8260, both of which do not use CF Cs. Also, for produced water to be considered clean produced water pursuant to Rule 4402 it must have a VOC content less than 35 mg/l VOC. In contrast, South Coast Air Quality Management District (SCAQMD) Rule 1176(i)(5)(J), Ventura County Air Pol lution Control District (VCAPCD) Rule 71.4 C.1.c and San Luis Obispo County Air Poll ution Control District (SLOCAPCD) Rule 419 C.4 define clean produced water as not exc eeding 5 mg/l at the inlet.

District Response (Test Methods): District staff agrees with the EPA assessment that

the test methods used to test for VOC content of th e clean produced water should be updated. District staff proposes to amend the defi nition of Clean Produced Water to include updated test methods 1664A and Method 8260. Method 1664A uses hexane rather than a CFC to extract volatiles, and test Me thod 8260 has replaced Method 8240 in labs. District staff proposes to add these test methods to the rule instead of replacing the existing test methods because while EPA may dis courage the existing test methodsSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

9 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 they have not been prohibited, or discredited as in effective. In fact, a mixture of test methods are currently in use (depending on the oper ator) and inclusion of all methods would be appropriate for this source category. Dis trict staff does not anticipate additional costs to be associated with this propose d amendment because the new test methods are currently in use, and operators still h ave the option to use the older test

methods.

District Response (VOC Content for CPW): District staff analyzed the feasibility and the cost effectiveness of reducing the VOC content limit for CPW from 35 mg/l to 5 mg/l VOC to determine whether this is a RACT option for operators in the Valley. The following analysis documents the District’s finding s.

District staff surveyed the existing CPW ponds and sumps and determined that operators do in fact store CPW greater than 5 mg/l. If the District were to change the CPW limit from 35 mg/l to 5 mg/l then Valley operat ors would be faced with either increasing the processing of the CPW to get the con centration to less than 5 mg/l and allow the continued use of sumps and ponds, or stop the use of sumps or ponds and send the CPW to either municipal wastewater systems or to reinjection wells.

Disposal Alternatives As discussed above, EPA identified the SCAQMD Rule 1176 as an example of a rule that contains requirements to limit the VOC content of CPW to less than 5 mg/l. At the public workshop and technical workgroup meetings, a ffected sources brought it to the attention of staff that in the SCAQMD, the operator s do not have to comply with the 5 mg/l required limit because they are not sending th eir clean produced water to ponds; rather they send it to the Los Angeles and Orange C ounty municipal sewer systems with oil content of up to 60 ppm to 100 ppm. Anoth er disposal alternative for operators is to dispose of the wastewater using reinjection w ells instead of treating it and putting it in ponds. These two options are not technologicall y feasible for Valley operators because they are not available options to crude oil production facilities in the Valley. Crude oil production facilities in the Valley diffe r greatly from those in other air district jurisdictions because they are located in rural are as and not in or near city limits, while in other parts of California the facilities are loc ated within city limits. The location of these operations prevents them from having access t o municipal wastewater systems. Also, operators in the Valley have not been able to get the necessary permits required to install reinjection wells from the Division of O il, Gas & Geothermal Resources (DOGGR) 3 . Because industry has been unable to get the requ ired permits District staff determined this is not a technologically feasible o ption to operators. Additionally, WSPA performed a cost effectiveness analysis independent of the District and determined that the cost effectiveness of injecting the water would be $679,978 per ton of VOC reduced; this is not a cost effective option. The WSPA anal ysis is presented in detail in Appendix B of this final staff report.

3 Cox, J . (2011, September 04). and Cook, R (2011, November 03).SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

10 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 Treatment of Water to Achieve 5 mg/l

District staff calculated the difference in emissio ns from 35 to 5 mg of VOC per liter of water in three different scenarios using EPA Water9 software. District staff determined that the cost effectiveness would for treating wate r to 5 mg/l would be $54 million per ton of VOC reduced. WSPA performed a cost effectiv eness analysis independent of the District analysis for the treatment of clean produc ed water to achieve 5 mg/l and determined it would cost $8 million per ton of VOC reduced. Staff also performed a third cost effectiveness analysis as a worst case s cenario cost effectiveness analysis using emission factors that we believe to be too hi gh for clean produced water. The third analysis resulted in a cost effectiveness of greater than $70,000 per ton of VOC reduced. All three scenarios produced the same res ult; treatment of clean produced water from 35mg/l to 5 mg/l is not cost effective. For the detailed discussion of each of these three analyses please refer to Appendix B (RA CT Cost Effectiveness Analysis) of this final staff report.

Water9 Discussion EPA staff has expressed to District staff a concern that utilizing the EPA Water 9 software may not be the appropriate calculation met hodology for estimating emissions from clean produced water ponds.

District staff contends that EPA Water9 is appropri ate for use in determining emissions from ponds used to dispose of produced water in oil production operations, as discussed below. Affected sources agree with this assessment, as supported by the comment letter submitted to the District incorporat ed into this discussion. EPA has recommended staff perform a mass balance calculatio n to determine the VOC emissions from ponds of clean produced water. Dist rict staff has considered this option and determined that it would not be an appropriate method for determining the emissions from a pond because it would not account for the VOCs that would percolate into the soil nor does it compensate for biodegrada tion that naturally occurs in ponds.

The user’s manual for EPA Water9 provides informati on on the applicability of this model for various process types. The preface at pa ge ii states that Water9 is used for “for estimating air emissions of individual waste c onstituents in wastewater collection, storage, treatment, and disposal facilities ...”. Pr oduced water ponds (use for evaporation and percolation of wastewater) are disp osal devices used in oil production wastewater handling operations.

WSPA pointed out that EPA has used the Water9 model for many years and that these models serve as the basis for virtually all of the rulemaking pertaining to emissions of air contaminants from surface impounds; WSPA listed six other software programs (See Appendix A). According to the EPA Water9 instructi on manual:

Water9 is used to estimate air emissions from site specific water treatment plants (including the prediction of biodegradation and sludge sorption of organics) for common wastewater treatment units inc luding the following:SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

11 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 drains, sumps, weirs, open drains, j traps, manhole covers ... and settling ponds. Water9 provides models for the evaluation o f landfill, land treatment, and impoundment disposal facilities

In defining the constituents for the wastewater str eam, Water9 includes crude oil (as decane) in the list of constituents available for u se. The VOC constituents in produced water are generally heavier hydrocarbons, as the li ghter hydrocarbons entrained in the produced fluids are released earlier in the product ion process. As such, using the default crude oil constituent is acceptable.

Water9 also allows the concentration (ppmw) of a pa rticular constituent to be used. In our calculations, we estimated emissions from ponds using a crude oil concentration of 35 mg/l (based on current rule exemption levels) an d 5 mg/l (based on EPA suggested rule exemption levels).

Water9 includes lagoons as a component in the waste water treatment process. Lagoons typically have a long retention time to all ow for evaporation of the wastewater. Crude oil production ponds likewise have a long ret ention time for produced water. As such, crude oil production ponds serve a similar pu rpose as lagoons. It is important to note however, that Water 9 calculations do not acco unt for percolation of water into the soil. Because a significant portion of the produce d water (and associated VOCs) do percolate, and therefore are not the source of emis sions, Water9 results potentially overstate the emissions from clean produced water p onds. The emissions modeled in Water9 are estimated based on biodegradation and ev aporation of a portion of the VOCs in the wastewater. Therefore, the District st ill believes that the Water9 calculations are appropriate. Nevertheless, as dis cussed earlier, the District included a worst-case analysis that likely overestimates emiss ions by orders of magnitude.

Additional Amendments Staff proposes to add six definitions to Section 3. 0 to improve clarity of rule requirements. These are amendments are administrat ive in nature and do not change the applicability or requirements of the rule. The following six definitions to be added

are:

• APCO: the Air Pollution Control Officer of the San Joaquin Valley Unified Air

Pollution Control District.

• API: American Petroleum Institute.

• ARB: California Air Resources Board.

• EPA: United States Environmental Protection Agency

.

• Operator: includes but is not limited to any perso n who owns, leases, supervises, or operates a facility and/or equipment.

• Volatile Organic Compound (VOC): as defined in Rul e 1020 (Definitions).SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

12 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 C. Section 4.0 – Exemptions

The Federal Register cites that Rule 4402 has exemp tions that are broader than exemptions in other air districts in California and that the District should analyze whether these exemptions continue to be appropriate . EPA also calls for the District to

use cost information that is more current than that used in the 2009 RACT Analysis, and to consider alternative disposal methods (e.g., und erground injection, tanks, or additional pretreatment) in addition to sump and po nd covers. The Federal Register specifies exemption Sections 4.1.1, 4.1.3, and 4.1. 7 to be of particular concern.

Section 4.1 District staff proposes to include the phrase “... Se ction 5.0 of ...” to Section 4.1 to clarify that these operators are exempt from the re quirements section of the rule; in order to demonstrate compliance with exemptions in Section 4.1 facilities are required, or will be required, to keep records pursuant to Se ction 6.0. The added phrase will improve rule clarity and is an administrative chang e to rule language. This change does not change the intent or requirements of existing r ule language.

Section 4.1.1

EPA Comment: Section 4.1.1 exempts operations less than 6000 bar rels per day with sumps less than 1000 ft 2 . from substantive requirements. No other neighbor ing districts allow exemptions from small producers, except SBCAP CD Rule 344, which is more

restrictive. The EPA TSD elaborates on the discuss ion in the Federal Register to clarify that SBCAPCD Rule 344 B.3.a.2. exempts small produc ers (less than 150 barrels/day average over one year) with no restriction on surfa ce area of sump or type of crude oil in the sump; additionally, SBCAPCD Rule 344 B.4. ex empts any 2 nd or 3 rd stage sump
with less than 1000 ft 2 of surface area, also with no restriction on type of crude oil in the

sump.

District Response (SBCAPCD): District staff have determined that the two exempti ons in the SBCAPCD Rule 344 are less stringent then Dis trict Rule 4402 exemption 4.1.1. The SBCAPCD exemption for producers of less than 15 0 barrels per day have no restriction on the size of the sump or the type of crude in that sump; also, the second SBCAPCD Rule 344 exemption exempts any 2 nd or 3 rd stage sump with less than 1000 sq. ft with no restriction on the size of producer that can enjoy this exemption and no restriction as to the type of oil in the sump. Dis trict Rule 4402 exemption 4.1.1 restricts the size of the operator, the size of the sump, and the type of oil in the sump. This is more restrictive then the SBCAPCD exemptions, which have been found to meet RACT requirements by EPA 4

.

4 Approval and Promulgation of Implementation Plans; California State Implementation Plan Revision; Kern County Air Pollution Control District; Santa B arbara County Air Pollution Control District, 1996, 5515 – 5517).SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

13 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 District Response (RACT): If the District were to remove the Section 4.1.1 ex emption for small producers, operators would have two optio ns available to them. Either comply with rule requirements pursuant to Section 5.0, or replace the sumps with tanks, which would also require additional processing in additio n to the replacement. It is important to note that historically, when the rule was amende d, and operators became subject to the requirements of Section 5.0, they have chosen t o remove the sump and install a tank; as confirmed at the public workshop on Octobe r 18, 2011, and through conversations with affected sources. Operators als o confirmed at the public workshop that this will continue to be industries response t o any change to the requirements or the exemptions sections of this rule.

Compliance with Section 5.0 District Rule 4402 Section 5.0 (Requirements) provi des operators with three control device options to install for compliance; the three control devices must also comply with other requirements specified in the rule. The thre e control devices available to operators as a means of compliance are as follows:

1. A flexible floating cover 2. A rigid floating cover equipped with a closure d evice between the sump wall and the cover edge which maintains the gap between the wall and cover at every point around the perimeter at no more than one inch

3. A fixed-roof cover

Staff performed a cost effectiveness analysis for o perators to install and maintain and to remain compliant with rule requirements for each of these three sump control devices.

District staff evaluated the cost effectiveness for a small producer to comply with

Section 5.0 and determined that it is not a cost ef fective option.

It is important to note that in determining the cos t effectiveness for operators to comply with Section 5.0 of Rule 4402, costs used for these analyses are for a 1,000 ft 2 surface area sump (the exemption limit for small producers) and are annualized 1986 dollars from the ARB TSD document on sump control measures. Staff contacted operators and requested additional cost information for sump cove rs but no facility in the Valley has ever installed a cover on a sump. As previously di scussed, historically when an operator must install a cover on a sump they respon d by replacing the sump with a tank. Therefore, affected sources do not have any cost in formation to provide the District for costs of sump covers. Operators informed District staff that they had asked vendors and were unsuccessful in getting cost data for sump covers from them. District staff did

additional research to obtain this cost information , including requesting it from EPA, and because no facilities use sump covers, District sta ff were equally unsuccessful in obtaining said data; as such, District staff have d etermined that the cost information provided in the ARB TSD is the only cost data avail able, and therefore it is the appropriate cost information for these analyses. R efer to Appendix B for the complete discussion of these analyses.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

14 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 Replace a sump with a Tank

District staff then evaluated the cost effectivenes s for a small producer to install a tank (with additional required processing) to replace a sump, and again determined that it is not a cost effective option. Refer to Appendix B f or the complete discussion of this analysis. Because there is no cost effective metho d of compliance or an alternative, this exemption demonstrates RACT. District staff p roposes to not amend Section 4.1.1.

Section 4.1.2 This exemption is for clean produced water in sumps . The Federal Register does not cite a deficiency specific to Section 4.1.2; howeve r, the TSD states that clean produced water has a limit of 5mg/l in SCAQMD, VCAPCD, and S LOCAPCD. The VOC content for clean produced water in the Valley is RACT as t here is no additional available control technology or processing method reasonably available or feasible, as outlined in

section 3.0 of the Discussion Section of this final staff report for that analysis and discussion. It is important to note that SBCAPCD R ule 344 B.2. has an exemption for post tertiary sumps and post tertiary pits, which c an be interpreted as an exemption for clean produced water in sumps.

Section 4.1.3

EPA Comment: Section 4.1.3 exempts operations less than 300 barr els per day with sumps less than 5000 sf from substantive requiremen ts. No other neighboring districts allow exemptions for very small producers. The EPA TSD elaborates on the discussion in the Federal Register to clarify that SBCAPCD Rul e 344 exempts small producers (less than 150 barrels/day average over one year) w ith no restriction on surface area of sump or type of crude oil in; additionally, SBCAPCD Rule 244 exempts any 2 nd or 3 rd
stage sump with less than 1000 ft 2 of surface area, also with no restriction on type of

crude oil.

District Response: Removing the exemption in Sections 4.1.3 would resu lt in very small producers either having to comply with rule r equirements pursuant to Section 5.0, or having to replace the sumps with tanks (and addi tional required processing). It is important to note that historically, when faced wit h complying with rule requirements, operators have chosen to remove the sump and instal l a tank, as confirmed at the public workshop on October 18, 2011.

District staff evaluated the cost effectiveness for a small producer to comply with

Section 5.0 and determined that it is not a cost ef fective option. District staff then evaluated the cost effectiveness for a small produc er to install a tank to replace a sump, and again determined that it is not a cost effectiv e option. A summary of these analyses is presented earlier in this final staff report; fo r the detailed analyses for these refer to Appendix B of this final staff report. Because the re is no cost effective method of compliance or an alternative, this exemption demons trates RACT. District staff proposes to not make this rule amendment. Very sma ll producers have smaller facilities and similar, if not more expensive and difficult to implement, cost and feasibility factors as small producers; therefore the determination tha t there is no cost effective option forSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

15 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 small producers is also applicable to very small pr oducers. See section 4.1.1 of the Discussion section of this final staff report for t he analysis.

Section 4.1.4 The Federal Register does not cite a deficiency for Section 4.1.4. However, the TSD

does cite that no other districts were found to hav e a similar exemption. This exemption is for sumps with estimated emissions of 0.007 lb/s q ft per day or less established by

the ARB flux-box test method.

District staff researched this exemption and determ ined that this exemption originated

from the ARB Suggested Control Measure (SCM) for the Control of Organic Compound Emissions from Sumps Used in Oil Production Operati ons . ARB has not since published a revised SCM recommending that air distr icts no longer offer this exemption for crude oil production operations. Therefore, Di strict staff has determined that this exemption is still relevant and it continues to be appropriate. District staff proposes to keep this exemption in rule language.

Section 4.1.5 The Federal Register does not cite a deficiency for Section 4.1.5. However, the TSD

does cite that no other districts were found to hav e a similar exemption. This exemption, as currently enforced, is for any first, second or third stage sump used not more than seven days in any one calendar month and not more than 21 days per calendar year.

District staff has evaluated the relevance of this exemption and have determined that it is still relevant and does continue to be an approp riate exemption; therefore, District staff propose to keep this exemption in rule langua ge. District staff does however; propose to amend this section to remove references to first stage sumps. First stage sumps would be prohibited in the Valley on and afte r January 1, 2013, therefore it would be irrelevant to include them in this exemption. R efer to Section 5.0 of the Discussion section of this final staff report for further disc ussion on this proposed prohibition of first
stage sumps.

Section 4.1.6 The Federal Register does not cite a deficiency for Section 4.1.6. The TSD does cite

that Rule 4402 is intended to control emissions fro m crude oil production sumps and is not meant to address sumps at petroleum refineries.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

16 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 Section 4.1.7

EPA Comment: Section 4.1.7 exempts ponds of “clean produced wate r” with less than 35 mg/l VOC from Rule 4402 requirements. In contra st, SCAQMD Rule 1176(i)(5)(J),

VCAPCD Rule 71.4 C.1.c and SLOCAPCD Rule 419 C.4 ex empt wastewater sumps only where the VOC content does not exceed 5 mg/l a t the inlet.

District Response: District staff has determined that 35 mg/l VOC for clean produced

water is RACT. See Section 3.0 of the Discussion s ection of this final staff report for the discussion of that determination. Staff proposes t o make no amendments to this

section of the rule.

Section 4.1.8

EPA Comment: Rule 4402 does not limit the time that oil or oily water can be kept in an emergency pit. In contrast, SLOCAPCD Rule 419 C.2 requires clean-up to begin within 24 hours and to finish within 15 days. The TSD fur ther states that the SBCAPCD exempts pits for emergencies that are used less tha n 30 days per year and VCAPCD also exempts emergency pits. The TSD elaborates, “ We understand that many ponds in the San Joaquin Valley have been closed under Re gional Water Quality Control Board (RWQCB) order, but other ponds continue to op erate in the district.” Emissions from these ponds are not included in the Districts current VOC emission inventory for crude oil production sumps because they are exempt. It is not known if the VOC emissions from the ponds are significant or not. T he ponds that initially receive wastewater from oil production would have the highe st VOC concentrations and are of particular concern.

District Response: District staff has reviewed this comment and has de termined that it would be appropriate to require a time limit for us e of emergency pits. District staff has determined that the use of an emergency pit, as cur rently enforced, is not an unlimited time. If it is determined that a sump is in contin uous use it is inspected and regulated as a sump; however, staff agree that this amendment co uld improve enforceability of rule requirements. Staff proposes to amend Section 4.1. 7 to remove “Pits” from the section and to add it to a new section by itself. As such, Section 4.1.8 would be created to provide the exemption for pits, and effective on an d after January 1, 2013 the use of emergency pits would be required to begin within 24 hours after the end of each emergency occurrence and for clean-up to be complet ed within 15 days after the beginning of clean-up efforts. It should be noted that the verbage of this exemption as presented in the proposed rule published on Novembe r 15, 2011 has been revised for the sake of clarity; the intent and applicability o f this exemption has not changed as a result of this revision. This requirement would al so contain associated recordkeeping requirements pursuant to Section 6.0 of the rule; p lease see Section 6.0 of Rule 4402 for recordkeeping requirement language.

It should be noted that District staff disagree wit h EPA concerns that VOC emissions from ponds may be significant. Ponds are defined t o only contain clean produced water, which has a VOC content of 35 mg/l of water. This is significantly less than whatSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

17 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 would be found in a sump with oily water in it. Cl ean produced water has already been through a process to remove the majority of the oil

.

Section 5.0 – Requirements D.

EPA Comment: Rule 4402 allows 1 st stage sumps. In contrast, SBCAPCD Rule 344 and VCAPCD Rule 71.4 do not allow the operation of 1 st stage sumps.

District Response: Research of the District permit database, the Distr ict emission inventory, and field research by District staff ind icate that no first stage sumps are in use in the Valley. Tanks were installed to replace the first stage sumps over twenty years ago, in response to regulatory requirements for air and water quality. District staff proposes to add a new section that prohibits first stage sumps as of January 1, 2013;

this new section would be Section 5.1. All section s under Section 5.0 would be renumbered to reflect the addition of the new requi rement in Section 5.1.

Section 5.1.2

EPA Comment: Section 5.1.2 allows a 1-inch gap and does not requ ire seals for rigid floating covers. In contrast, SCAQMD Rule 1176(e)( 2)(B)(vi) and SLOCAPCD Rule 419 D.2.e. require rigid floating covers to have seals, the gap cannot exceed 1/8” for a cumulative length of 95% of the perimeter, and no s ingle gap may exceed 1⁄2 inch.

District Response: Based on staff research and conversations with affe cted sources

and staff from other air districts staff have deter mined that there are no sumps in the SLOCAPCD and there are no sumps in SCAQMD. This is further supported by the

1988 ARB TSD which determined that 95% of the total surface area of sumps in California were located in the Valley, and the majo rity of these sumps were used by small producers of heavy crude oil. Only 0.44 perce nt of the total surface area of sumps were located in SLOCAPCD and only two percent of th e total surface area of sumps were located in the SCAQMD during the years of 1984 – 1986. District staff believes that there are no sumps in California complying wit h the proposed requirements in the EPA comment. The requested requirements in the EPA comment are beyond RACT.

It is important to note that sumps in the Valley ar e excavations in the ground with unfinished, and unlined, sides. Covers with a 1/8- inch gap are not a feasible option for existing sumps in the Valley because the sides of t he sumps erode. No facilities in the Valley use covers on their sumps, rigid or otherwis e. If the rule requirements are amended or exemptions removed resulting in previous ly exempt sumps becoming subject to rule requirements then, based on histori cal activities and observations, and statements from operators, operators will opt to pu t in a tank to replace the sumps rather than invest significant funds to meet new su mp requirements.

Because sumps in the Valley are unlined excavations in the ground and no facility has a sump cover, if an operator were to become subject t o new rule requirements they would be required to install new sumps and new sump cover s. As discussed earlier in thisSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

18 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 final staff report, compliance with requirements pu rsuant to Section 5.0 is not cost effective for small and very small producers. Amen ding Section 5.0 would be beyond RACT for small and very small producers. If a large producer were to become subject to rule requirements costs would include the installation of new sumps and new sump covers and a dditional gas capture systems and control or destruction technology, in addition to additional labor and maintenance costs. According to the 2007 Area Source Emission Inventory Methodology , there are seventeen third stage sumps used by large operation s producing heavy crude oil. There are no second stage sumps used by large opera tions and no third stage sumps used at light oil production facilities. These sev enteen active sumps have an average surface area of 3,200 ft 2 . The smallest sized sump that the ARB TSD account ed for

was a 500 ft 2 sump with annualized capital costs of $5,580 for a flexible floating cover and $9,480 for a rigid floating cover.

For purposes of this cost effectiveness analysis, D istrict staff used the cost information provided by ARB in the TSD, converted those costs t o 2011 costs then added the additional costs associated with the necessary capt ure and control devices. See below for the full analysis. District staff used the cos t information from the ARB TSD because it is the only information available because, as pr eviously discussed, no operators have ever installed a sump cover and distributers do not know of any facility in California that has a sump cover, therefore they also do not have c ost information. Staff used the following equation to adjust from the annualized co st at 1986 dollars to 2011 dollars (multiplying by 2.75% inflation/yr):

$/1 + 0.0275  2011 − 1986   = $		

Table 5. ARB TSD Data for Floating Sump Covers for 500 ft 2 Sumps (Adjusted to

2011 dollars)

Type of Floating

Cover 1986

Annualized Capital Costs 2011 Annualized

Capital costs Control

Efficiency Life Span of

Cover

Flexible $5,580 $9,416 98% 5 years
Rigid $9,480 $15,998 90% 5 years

ARB makes the statement in the TSD that floating co vers pose a safety hazard because sumps where methane is produced or dissolved gases can enter the sump with the feed stream. The floating cover would not allow the esc ape of these gases and could create a situation that would result in explosions. The A RB TSD further explains that the combustible gases that might otherwise accumulate b eneath the cover would need to be removed and disposed of. The method of disposal of collected gas would be to

install a combustion device such as a flare. This cost effectiveness analysis accounts

for these additional costs. Additional costs for t he capture and control devices used for this analysis, as discussed in detail in Appendix B of the final staff report, include the following:SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

19 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 • Cost for capture device ($45,068)

• Cost for control/destruction device ($85,729) The adjusted annual cost accounts for the cost of t he sump cover, the capture device,

and the control/destruction device as discussed abo ve are presented in the table below:

Table 6. Total Adjusted Annualized Costs

Type of

Cover Cost for Sump

Cover Cost for

Capture Device Cost for

Control Device Total Costs
Flexible $9,415 $45,068 $85,729 $140,213 Rigid $15,998 $45,068 $85,729 $146,795

The ARB TSD costs were combined with the above ment ioned costs to perform the cost effectiveness analysis as presented in the table be low.

Table 7. Cost Effectiveness for 3 rd Stage 500 ft 2 Heavy Oil Sump Equipped with a

Floating Sump Cover Sump VOC

Emissions (tpy) Control

Efficiency VOC

Controlled (tpy) Adjusted

Annualized

Cost Cost per ton

of VOC

controlled Flexible 0.47 98% 0.46 $140,213 $304,810 Rigid 0.47 90% 0.42 $146,795 $ 349,511

Section 5.2.5

EPA Comment: Section 5.2.5 requires fixed covers to be equipped with a pressure/vacuum (PV) valve set to within ten percen t of maximum safe working pressure. In contrast, SCAQMD Rule 1176(2)(A)(ii) and (6)(A) and SBCAPCD Rule 344 D.2.b.2 require that fixed covers be equipped with a 95% efficient air pollution control (APC) device.

District Response: As discussed earlier in this final staff report, co mpliance with requirements pursuant to Section 5.0 is not cost ef fective for small and very small producers. Amending Section 5.0 would continue to be not cost effective, and therefore go beyond RACT for small and very small producers.

If a large producer were to become subject to rule requirements costs would include the installation of new sumps and new sump covers and a dditional gas capture systems and control or destruction technology, in addition to additional labor and maintenance costs. According to the 2007 Area Source Emission Inventory Methodology , the sumps used by large operations producing heavy crude oil have an average surface area of

320 ft 2 . The smallest sized sump that the ARB TSD account ed for was a 500 ft 2 sump with annualized capital costs of $3,920 for a fixed roof cover. For purposes of this cost effectiveness analysis, District staff used the cos t information provided by ARB in the TSD because it is the only information available be cause, as previously discussed, noSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

20 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 operators have ever installed a sump cover and dist ributers do not know of any facility in California that has a sump cover, therefore they also do not have cost information.

1. The ARB TSD lists $3,920 per year, 90% control e fficiency, and a 5 year life. Adjusting from the annualized cost at 1986 dollars to 2011 dollars (multiplying by 2.75% inflation/yr):

$3,920

 1 + 0.0275  2011 − 1986   = $6,615		

2. Again, this cost data would be combined with the additional capital costs for installing a vapor recovery and destruction device to each sump for safety purposes. The adjusted annual cost accounts for the costs dis cussed are summarized above and discussed in detail in Appendix B of the final staf f report. Those costs include the following:

• Cost for capture device ($45,068)

• Cost for control/destruction device ($85,729)

3. Staff combined the annual capital cost with the cost for the capture device and

the cost for the control device as follows:

$6,615 + $45,068 + $85,729 = $137,412

4. Using the same capital cost data discussed previ ously in combination with the added cost of emptying the sump and storing or disp osing of the liquid within it during the construction of the new sump would result in th e cost effectiveness analysis as presented in the table below.

Table 8. Cost Effectiveness for a Large Producer H eavy Oil 500 ft 2 Sump Equipped

with a Fixed Roof Sump Cover
Sump VOC

Emissions (tpy) Control

Efficiency VOC

Controlled (tpy) Adjusted

Annualized

Cost Cost per ton of

VOC controlled

3 rd Stage: 0.93 90% 0.84 $137,412 $ 115,426

It is important to note that if the rule requiremen ts and exemptions are amended resulting in the requirement of facilities to insta ll a 95% control on a sump, then operators will install a tank to replace the sumps. Replacing a sump with a tank is not a cost effective option, as discussed in the earlier in this final staff report.

Section 5.3

EPA Comment: Section 5.3 states: “If replacement tank exclusivel y serves identical function of sump replaced, permitting of such tank shall not be considered an emission change for the purposes of Rule 2201 (New and Modif ied Source Review Rule)”. AnySAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

21 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 exemptions to NSR requirements should be incorporat ed within the NSR program. This language should be removed.

District Response: If the NSR exemption were removed from Rule 4402, o perators who replace sumps with tanks that serve an identica l function would be subject to BACT when they apply for permits to install those tanks. Although existing Rule 2201 Sections 4.2.3 and 4.6.8 allow exemptions from BACT and Offs et requirements, the exemptions apply only to the installation or modification of a n emission control technique performed solely for the purpose of compliance with the requi rements of District, State or Federal air pollution control laws, regulations or orders. Such exemptions do not apply to replacement units needed to comply with the prohibi tory rules. Therefore, District propose to retain the existing language in Rule 440 2 with the replacement of the word “shall” with the word “may” as agreed upon as appro priate for District Rule 4702 by EPA

and ARB.

Section 6.0 – Administrative Requirements E.

EPA Comment: Rule 4402 does not require periodic inspection of c overs and APC equipment to ensure proper operation. In contrast, SCAQMD Rule 1176(f)(1)(C) requires periodic leak inspection and APC testing.

District Response: It is not technologically feasible for sumps in the Valley to have covers; therefore no sumps in the Valley have cover s or associated APC equipment. Additionally, if this amendment were made, and exem ptions were removed to make currently exempt sumps subject to rule requirements facilities would respond by replacing the sumps with tanks which is not a cost effective option. However, if facilities were to install a tank to replace a sum then the ta nk would become subject to Rule 4623. As it would be duplicative to put tank requi rements in this rule staff propose to

not amend this section of the rule.

Section 6.1

EPA Comment: Add requirement to keep all records for at least tw o, and preferably five

years.

District Response: District staff proposes adding requirements to keep records for a minimum of five years to Section 6.1. Staff has de termined through review of permit conditions that crude oil production facilities are already keeping records for a five-year period. For any facilities not keeping records for five years, this would be an administrative change and would not be associated w ith significant operational changes or increased costs. Staff revised the proposed lan guage to remove the term “on site” from the language. Many oil sites are at remote lo cations with no buildings around them, and many operators have several remote locati ons and a an office at a different location, removing the “on site” language will allo w operators to have flexibility in where they store these records.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

22 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 District staff proposes to require operators to kee p records pursuant to Section 6.1 and make them available to the District, ARB, and EPA u pon request instead of requiring

annual submission of this data. This is not a rela xation because the records will still be maintained and made available, but it will streamli ne the process for both the affected source operators and the District.

EPA Comment: Add requirements to verify the sump surface area an d the annual production rates for both the small producers and v ery small producers in section 6.1.1.

District Response: District staff proposes to amend Section 6.1.1 to c larify and simplify rule language and to require that on and after Janu ary 1, 2013, operators shall be required to keep records that will verify sump surf ace area and annual production rates. District staff assume these facilities are already keeping these records, therefore this is an administrative change and will result in no emis sions reduce and no additional costs to the facility.

District staff also proposes to create a new Sectio n 6.1.2 and require that after January 1, 2013, any operator claiming exemption pursuant t o Section 4.1.3 keep records that document the sump surface area and annual productio n rates. District staff assumes these facilities are already keeping these records; therefore this is an administrative change and will result in no emission reductions an d no additional costs to the facility.

EPA Comment: Require documentation justifying any exemptions cla imed under section 4, including 4.1.7, which exempts pits and ponds.

District Response: District staff proposes to add Section 6.1.5 to rul e language to require an operator claiming an exemption pursuant to Section 4.1.6 to keep records to justify the exemption.

EPA Comment: Add requirement to document use of emergency pits, including when use started, clean-up started and clean-up finished

.

District Response: District staff proposes to add Section 6.1.6 to rul e language to require recordkeeping to document the use of emerge ncy pits including when the use of the emergency pit began, when clean-up of the pit b egan, and when clean-up of the pit is finished. This is an administrative change and is not expected to result in emissions reduced or additional costs to the facility.

Staff revised the proposed language to clarify that this new recordkeeping requirement pertains only to pits used for emergencies. Staff also want to further clarify that the emergency pits that are unmanned and at remote loca tions staff does not expect them to know when the emergency began, to fulfill that r equirement staff will request that operators document when the emergency was discovere d. For example, if a facility has an emergency on Saturday morning, but the operator doesn’t check on that facility until Tuesday, then the documented time of the start of t he emergency would be Tuesday.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

23 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 With regards to the clean-up beginning within 24 ho urs after the end of the emergency, this would still apply. If the emergency is discov ered Tuesday morning, and has already ended, then efforts should begin within 24 hours af ter the discovery.

Section 6.2

EPA Comment: Revise Section 6.2 Test Methods to remove and/or re place inappropriate or outdated test methods such as ARB Method 432, which is designed for paints and coatings and not oily wastewater. EPA a lso recommends adding EPA Test Method 21 in Section 6.2 for determining leaks.

District Response: District staff reviewed test methods presented in S ection 6.2 and

determined that the test method ARB Method 432 is n ot applicable to sumps, therefore propose to remove it from the rule. Staff proposes to delete the test method from

Section 6.2.1 and move test method 422 from Section 6.2.2 to Section 6.2.1. Additionally, staff proposes to add a sentence to t he beginning of Section 6.2 verifying that the test methods pertain to rule requirements in Section 5.0 of the rule. This added sentence will improve clarity of rule requirements and does not change the intent or requirements of the rule. District staff does not p ropose the addition of EPA Method 21

for detection of leaks because there are no leak st andards, no seals, and no proposed standards or seals in rule language to justify the requirement of a leak test method.

Section 7.0 Compliance Schedule F.

EPA Recommendation: EPA recommends deleting Section 7.0 from the rule s ince it is no longer applicable. It is important to note that this is a recommendation and not a deficiency.

District Response: District staff has reviewed this recommendation and rule language, and proposes to delete Section 7.0 from rule requir ements; this amendment will improve rule clarity and simplify rule language, but does n ot change the intent or requirements of

the rule.

Additional EPA Comments and Recommendations G.

EPA Comment: Provisions should be added in Rule 4402 or Rule 462 3 (Storage of Organic Liquids) that ensure that tanks used to rep lace the 1 st stage crude oil sumps have adequate VOC controls.

District Response: If a sump is replaced with a tank it becomes subjec t to Rule 4623; which includes the appropriate requirements for tan k controls, and has already been approved by EPA as at least satisfying RACT. The p urpose of this rule-amending project is to address EPA cited deficiencies in Rul e 4402 only. Adding tank requirements to the sump rule would be duplicative. As such, District staff proposes to not make any amendments to Rule 4402 to include req uirements for tanks.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

24 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 EPA Recommendations: EPA recommends the following improvements for the D istrict to consider during rule-amending process:

1. Increase the requirements for testing wastewater at each inlet to the clean produced water ponds from annually to at least quar terly to ensure ongoing compliance with wastewater VOC limits.

2. Rule 4402 does not include controls for crude oil w ell cellars, evaluate whether to include requirements for controlling emissions from crude oil well cellars in Rule 4402 or as a separate rule.

District Response: District staff does not feel that increasing the te sting from annual to quarterly is warranted. Additionally, crude oil we ll cellars are a very small source of emissions in the Valley, with estimated emissions o f just 0.05 tons of VOC per day. The District will consider these recommendations during future reviews of this rule.

V. GLOBAL CLIMATE CHANGE AND GREENHOUSE GASES

The California Global Warming Solutions Act of 2006 (AB 32) created a comprehensive, multi-year program to reduce greenhouse gas (GHG) e missions in California, with the overall goal of restoring emissions to 1990 levels by the year 2020. In the coming years, the Air Resources Board (ARB) and the Legisl ature will be developing policies and programs to implement AB 32. The District beli eves that the evidence and the rationale that climate change is occurring is compe lling and convincing. In addition to the long-term consequences of climate change, the D istrict is concerned with the potential ramifications of more moderate but immine nt changes in weather patterns. The Valley depends heavily on agriculture for its e conomy and has developed agricultural practices based on the last several de cades of weather patterns. Unanticipated and large fluctuations in these patte rns could have a devastating effect on the Valley’s economy.

While there are many win-win strategies that can re duce both GHG and criteria/toxic pollutant emissions, when faced with situations tha t involve tradeoffs between the two, District staff believes that the more immediate pub lic health concerns that may arise from an increase in criteria or toxic pollutant emi ssions should take precedence. The San Joaquin Valley Air Pollution Control District’s Governing Board adopted the Climate Change Action Plan (CCAP) in August 2008. For Cali fornia Environmental Quality Act (CEQA) requirements, one of the goals of the CCAP i s to establish District processes for assessing the significance of greenhouse gas im pacts. The District has developed a policy and guidance for addressing greenhouse gases under CEQA.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

25 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 VI. HEALTH BENEFITS

This rule contributes to the Valley’s progress towa rds federal health-based air quality standards (National Ambient Air Quality Standards, or NAAQS). Progressing the Valley towards attainment of the NAAQS helps reduce the Va lley’s air pollution-related health impacts and health-related costs. The District per iodically compiles attainment plans to quantify the amount of emission reductions needed a nd identify the individual control

measures that will achieve these reductions. The c ontrol strategy as a whole has important public health benefits and health costs s avings.

However, for a number of reasons, it can be difficu lt or even misleading to attempt to subdivide this total plan benefit on a rule-by-rule basis. For example, photochemical reactions in the Valley’s atmosphere combine precur sor emissions to generate ozone and particulate matter in the atmosphere, so it is not always appropriate to attribute the health and cost benefits to just one precursor. Al so, considering the extensive emission reductions that have already been achieved in the V alley over the past several years, some emissions sources may appear relatively small and inconsequential from a health perspective. In reality, all attainment plan rule commitments are important to the District’s overall strategy for reducing ambient ai r pollutant concentrations and the associated health impacts and costs.

VII. ANALYSES

A. Emission Reduction

The revised proposed rule amendments are intended t o address the limited approval from EPA concerning RACT. District staff reviewed all subjected facility’s permit data and determined units are already in compliance with the revised proposed amendments. Therefore, no emission reductions are expected from this rule making project.

B. Cost Effectiveness

Pursuant to California Health & Safety Code Section 40920.6(a), the District is required to analyze the cost effectiveness of new rules or rule amendments that implement Best Available Retrofit Control Technology (BARCT) or pl anning requirements to incorporate all feasible measures. The revised proposed amendments to this rule would only add federal RACT requirements but not BARCT or all feasible mea sures, and are therefore not subject to the cost effectiveness analysis mandate. Given that operators are generally complying with the new limits currently and there are no sign ificant emission reductions or compliance costs expected from these rule changes, a cost effectiveness analysis has not been performed.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

26 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 C. Socioeconomic

Pursuant to CH&SC 40728.5, “whenever a district int ends to propose the adoption, amendment, or repeal of a rule or regulation that w ill significantly affect air quality or emissions limitations, that agency shall, to the ex tent data is available, perform an assessment of the socioeconomic impacts of the adop tion, amendment, or repeal of the rule or regulation.”

The source category covers crude oil production sum ps pits and ponds in the Valley. This rule-amending project is not expected to have significant costs associated with it. Therefore, staff concludes that, if a detailed soci oeconomic analysis were conducted, there would be no significant socioeconomic impact from t his rule.

D. Environmental Impact

Pursuant to §15061 of the Guidelines for Implementa tion of the California Environmental Quality Act (CEQA), District staff investigated the possible environmental impacts of the revised proposed amendments to Rule 4402. Based on the lack of evidence to the contrary, District staff has concluded that the rev ised proposed amendments to this rule will not have any significant adverse effects on th e environment. Staff recommends filing a Notice of Exemption under the provisions o f Public Resource Code 15061(b)(3).

E. Rule Consistency

Pursuant to CH&SC §40727.2, District staff prepared a rule consistency analysis that compared the elements of amendments with the corres ponding elements of other District rules and federal regulations. District s taff found that none of the revised proposed amendments would conflict with other Distr ict rules, or federal rules, regulations, or policies covering similar stationar y sources. That analysis is presented in Appendix C of this final staff report.

F. Reasonably Available Control Technology

CAA §182(b)(2) states that ozone attainment plans s hall assure that RACT for VOC is applied at certain sources. A RACT analysis requir es an examination of a rule against Federal rules, regulations, and technology guidelin es as well as comparing it against

rules from other air districts in California. On T hursday, July 7, 2011, EPA published in the Federal Register a RACT analysis of District Ru le 4402. As documented in the Federal Register, EPA determined that Rule 4402 sat isfies RACT and the rule is largely consistent with the relevant CAA requirements, with a few exceptions. The purpose of this rule-amending project is to address the RACT d eficiencies as identified by EPA and as discussed in this final staff report. As such, t his rule satisfies RACT requirements.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

27 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 VIII. REFERENCES

Bay Area Air Quality Management District [BAAQMD]. (Amended September 15, 2004). Regulation 8 Organic Compounds Rule 8 Wastewater Co llections and Separation Systems . Retrieved from http://www.baaqmd.gov/~/media/Files/Planning%20and% 20Research/Rules%20 and%20Regs/reg%2008/rg0808.ashx?la=en

California Air Resources Board [ARB]. (Updated Dec ember 1993). Emissions Factors for Oil and Gas Production Sumps and Pits

California Air Resources Board [ARB]. (August 1988 ). Technical Support Document. ARB’s Suggested Control Measure for the Control of Organic Compound Emissions from Sumps Used in Oil Production Operati ons

Cook, R (2011, November 03). Governor removes DOGGR supervisor from her post.

Bakersfield.com Retrieved from http://www.bakersfield.com/news/business/economy/x1 454911264/Governorremoves-DOGGR-supervisor

Cox, J. (2011, September 04). Local oil industry wa ry of EPA’s push for tighter rules protecting underwater aquifers. Bakersfield.com

. Retrieved from http://www.bakersfield.com/news/business/economy/x1 30698618/Local-oilindustry-wary-of-EPAs-push-for-tighter-rules-protec ting-undergroundaquifers?utm_campaign=flyout&utm_medium=flyout&utm_ source=news_busines

s_economy

Environmental Protection Agency [EPA]. (October 201 0). Technical Support Document. EPA’s Analysis of San Joaquin Valley Air Pollution Control District’s Rule 4402, Crude Oil Production Sumps

Federal Register. Approval and Promulgation of Implementation Plans; California State Implementation Plan Revision; Kern County Air Pollu tion Control District; Santa Barbara County Air Pollution Control District , 1996, 5515 – 5517).

Revisions to the California State Implementation Pl an, San Joaquin Valley Unified Air Pollution Control District [CFR], 76, Fed. Reg. 130 , pp 39777-39782. (2011, July 7). (to be codified at 44 CFR Part 64)

San Joaquin Valley Unified Air Pollution Control Di strict [District]. (2009, January 23). 2007 Area Source Emissions Inventory Methodology 31 0 – Oil Production Fugitive Losses

San Luis Obispo County Air Pollution Control Distri ct [SLOCAPCD]. (Adopted July 12,SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Final Staff Report: Rule 4402 December 15, 2011

28 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 1994). Rule 419 Petroleum Pits, Ponds, Sumps, Well Cellars , and Wastewater Separators. Retrieved from http://www.arb.ca.gov/DRDB/SLO/CURHTML/R419.htm

Santa Barbara County Air Pollution Control District [SBCAPCD]. (Adopted November 10, 1994). Rule 344 Petroleum Sumps, Pits, and Well Cellars. Retrieved from http://www.arb.ca.gov/DRDB/SB/CURHTM L/r344.pdf

South Coast Air Quality Management District [SCAQMD ]. (Amended September 13, 1996). Rule 1176 VOC Emissions from Wastewater Systems . Retrieved from http://www.aqmd.gov/rules/reg/reg11/r1176.pdf

Ventura County Air Pollution Control District [VCAP CD]. (Amended June 8, 1993). Rule 71.4 Petroleum Sumps, Pits, Ponds and Well Cel lars. Retrieved from http://www.arb.ca.gov/DRDB/VEN/CURHTML/R71-4.PDF