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Initial 

Economic Impact Analysis 

for 

Proposed State Implementation Plan Revisions to the Air Quality Control Commission’s 

Regulation Number 3 and Regulation Number 7 

Regulation 3, Parts A, B, and C 

Regulation 7, Sections I-XVIII 

Per C.R.S. 25-7-110.5 

September 18, 2008 

I. REQUIREMENTS FOR ECONOMIC IMPACT ANALYSIS (EIA)

Section 25-7-110.5 (4)(a), C.R.S. sets forth the requirements for initial and final Economic 

Impact Analysis, as stated below: 

“Before any permanent rule is proposed pursuant to this section, an initial economic 

impact analysis shall be conducted in compliance with this subsection (4) of the proposed 

rule or alternative proposed rules. Such economic impact analysis shall be in writing, 

developed by the proponent, or the Division in cooperation with the proponent and made 

available to the public at the time any request for hearing on a proposed rule is heard by the 

commission. A final economic impact analysis shall be in writing and delivered to the 

technical secretary and to all parties of record five working days prior to the prehearing 

conference. If no prehearing conference is scheduled, the economic impact analysis shall 

be submitted at least ten working days before the date of the rule-making hearing. The 

proponent of an alternative proposal will provide, in conjunction with the Division, a final 

economic impact analysis five working days prior to the prehearing conference. The 

economic impact analyses shall be based upon reasonably available data. Except where 

data is not reasonably available, or as otherwise provided in this section, the failure to 

provide an economic impact analysis of any noticed proposed rule or any alternative 

proposed rule will preclude such proposed rule or alternative proposed rule from being 

considered by the Commission. Nothing in this section shall be construed to restrict the 

Commission's authority to consider alternative proposals and alternative economic impact 

analyses that have not been submitted prior to the prehearing conference for good cause 

and so long as parties have adequate time to review them.” 

The Air Pollution Control Division (Division) has selected C.R.S. § 25-7-110.5(4)(c)(III), which 

calls for an EIA that: 

(A) Identifies the industrial and business sectors that will be impacted by the proposal; 

and 

(B) Quantifies the direct cost to the primary affected business or industrial sector; and 

(C) Incorporates an estimate of the economic impact of the proposal on the supporting 

business and industrial sectors associated with the primary affected business or 

industry sectors. 

An EIA need only be based upon reasonably available data (§25-7-110.5(4)(a), C.R.S.). 
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II. DISCUSSION 

Analysis Background 

This Economic Impact Analysis (EIA) considers impacts from implementing proposed 

regulations that are aimed at reducing ground level ozone within the nonattainment area (NAA) 

by reducing emissions of ozone precursors, volatile organic compound (VOC) from the 

following sources: 

• Oil and gas industry condensate tanks in the ozone non-attainment area, 

• Oil and gas industry pneumatic controllers in the ozone non-attainment area, 

• Multiple industries through expansion of Regulation 7 Reasonably Available Control 

Technology (RACT) applicability in the ozone non-attainment area, and 

• Multiple industries through revising Regulation 3 Air Pollution Emission Notice (APEN) 

reporting and permitting exemptions state-wide (this strategy alone will not reduce VOC 

emissions; it is intended to provide information and increase equity). 

These proposed revisions are necessary to ensure attainment with the current 8-Hour Ozone 

National Ambient Air Quality Standard (NAAQS) set at 0.08 parts per million (ppm), and to 

otherwise achieve ozone reductions in light of both the new 8-Hour Ozone NAAQS set at 0.075 

ppm and the Governor’s July 27, 2007 directive to proactively and pragmatically reduce ozone 

levels. 

Proposed Rules 

These proposed revisions accomplish five objectives: A) reduce volatile organic compound 

(VOC) emissions from oil and gas operations in the ozone non-attainment area, B) revise the 

control requirements for condensate tanks by transitioning from a system-wide to an emissions 

threshold control strategy in the ozone non-attainment area, C) expand VOC RACT requirements 

such that all ozone non-attainment areas are subject to Regulation 7’s RACT requirements, D) 

clarify how the RACT requirements in Regulations 3 and 7 interact in the ozone non-attainment 

area, E) improve the Division’s inventory of specific source category emissions state-wide; and 

F) make typographical, grammatical and formatting changes for greater clarity and readability. 

Condensate Tank Proposed Rules in the Ozone Non-attainment Area

Proposed rules further reduce VOC emissions by: 1) requiring control device and monitoring 

equipment installation and operation during the first 90 days of operation beginning February 1, 

2009; 2) redefining modification activities that trigger additional control and monitoring 

equipment installation and operation beginning February 1, 2009; 3) lowering the applicability 

thresholds for new and modified tanks from five down to two tons per year of VOCs beginning 

February 1, 2009 and for existing tanks from 20 down to 10 tons per year of VOCs ; and 4) 

increasing control requirement by initially increasing system-wide control requirements in May 

1, 2009, ultimately transitioning to a emissions threshold control strategy beginning in May 1, 

2010. Affected tanks are required to control emissions by 95% and to monitor associated air 

pollution control equipment to ensure compliance. 
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Tanks serving newly drilled, recompleted or stimulated wells be required to employ air pollution 

control equipment during the first 90 days of production. Air pollution control equipment can 

include combustion devices, vapor recovery units, or Division approved alternative controls or 

pollution prevention activities that meet the control efficiency requirement. If after the first 90 

calendar days, the data shows that annual emissions from the tank will not exceed the control 

requirement threshold, the control may be removed. 

Enhanced monitoring provisions are proposed for condensate tanks as an indicator of compliance 

to ensure actual emissions reductions occur. In many cases, condensate tanks are remotely 

located and un-manned. For combustion control devices (flares), auto-igniters and electronic 

surveillance systems are required to identify when the pilot is not lit and attempt to relight it, 

document the duration of time when the pilot is not lit, and notify an operator that repairs are 

necessary to ensure proper control operation and ensure control operation. 

Proposed recordkeeping and reporting requirements are minimized to offset the added control 

assurance gained through enhanced monitoring. This revision reduces the frequency and 

reporting of emissions estimation calculations, from a weekly to a rolling-12 month basis and 

from annual company-wide reporting to reporting upon request of the Division (normally during 

routine inspections or via APEN updates for significant increases in annual emissions). 

Pneumatic Controller Proposed Rules in the Ozone Non-attainment Area

Proposed rules require new pneumatic controllers be at least low-bleed devices beginning 

February 1, 2009, and existing high-bleed pneumatic devices be retrofit or replaced with lowbleed devices, or devices with equivalent or lower VOC emissions, by May 1, 2009. An 

exception will allow high-bleed devices to be used if the Division determines that a safety or 

process reason makes it technically infeasible to use a low-bleed device. Operators will be 

required to inspect high-bleed devices on a monthly basis and perform maintenance as needed. 

Operators will be required to keep logs of the number of devices, device type, and inspection and 

maintenance that is performed. Operators will be required to tag the devices, which will help 

enable the Division to track compliance. 

Regulation 7 Expansion of RACT Proposed Rules in the Ozone Non-attainment Area

Proposed rules will require that Regulation 7 expand the applicability of Reasonably Available 

Control Technology (RACT) requirements to existing, new, and modified sources outside of the 

historic 1-hour Ozone Non-attainment or Attainment/Maintenance Area, beginning February 1, 

2009. 

This proposed regulation change is based on equity - sources in the 1-hour Ozone Nonattainment or Attainment/Maintenance Area already comply with Regulation 7. The Division 

believes all ozone non-attainment areas (existing and future designations) should comply with 

Regulation 7.

 

Regulation 3 Exemptions Proposed Rules State-wide

Proposed rules will revise APEN reporting exemptions for specific source categories, beginning 

February 1, 2009. This regulation change is based on equity. Most sources of VOC emitting 

one or more ton per year file an APEN and obtain a permit if they emit two or more tons per year 

in the ozone non-attainment area (or two or more ton per year file an APEN and obtain a permit 
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if they emit five or more tons per year in all other areas). This proposal requires source 

categories currently exempt from these thresholds to obtain APENs and permits at those same 

thresholds as other sources in the respective areas. 

Edits to Regulation 7 Proposed Rules

Proposed rules will be revised to correct typographical, grammatical and formatting changes, as 

necessary, beginning February 1, 2009. 

Data Used in EIA 

To perform the EIA, the following information must be obtained to calculate industry’s costs to 

implement the proposed regulation: 1) number of control and monitoring devices required, 2) 

associated costs, and 3) emission reductions that can be achieved. 

For those proposals specific to Regulation 7 expansion of RACT, Regulation 3 Exemptions and 

edits to Regulation 7, detailed data is not reasonably available. There are innumerable types of 

facilities that would be subject to these Regulation 3 and 7 proposed rules. For example, any 

emission source in an ozone non-attainment area that emits VOC emissions would be subject to 

the expansion of RACT, and since not previously subject to RACT, these sources may have 

never been required to report emissions to the Division. Such facilities include, without 

limitation, oil and gas facilities, food processing and packaging facilities, refineries, dry cleaners, 

printers and other surface coating operations. Within each of these categories, there are many 

different facilities of varying sizes and configurations, which compounds the difficulty in 

estimating costs of VOC emissions control. While potential costs associated with undertaking an 

analysis of control technology may be capable of general estimation and quantification, the 

potential costs associated with installing control technologies do not lend themselves to the same 

analysis. Such information is not reasonably available, in that it is so fact-specific as to preclude

meaningful, generalized analysis. Such costs would be dependent upon numerous site-specific 

factors, including the type of facility, the amounts and types and constituents emitted by the 

facility, the concentrations of odors, the configuration of the facility (for example, whether there 

is space available to install certain types of equipment). Thus, the Division has an inaccurate 

inventory of these sources and associated emissions at this time and limits any cost analysis 

which may be performed. This is also true for sources affected by Regulation 3 reporting and 

permitting exemption changes. Clarifying edits to Regulation 7, edits are minimal and impacts 

are believed to be negligible 

Thus the Division focused efforts on this economic impact analysis on impacts to the oil and gas 

industry in controlling emissions from condensate tanks and pneumatic controllers. 

Condensate Tank EIA Data

The number of units (tanks or tank batteries) that will need to install control devices and conduct 

monitoring under the proposed rule and the controlled and uncontrolled emissions from large 

units were based on the Division’s emissions inventory (data reported to the Division by industry 

via APENs) for the 2007 inventory year. 

The number of small tanks or tank batteries (those having actual uncontrolled emissions of equal 

to or more than 10 tpy uncontrolled VOC emissions) that will need to install control devices 
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under the proposed rule was based on the Division’s emissions inventory for the 2007 inventory 

year. Because the current reporting threshold is higher than five tons per year, and therefore the 

Division’s emissions inventory is limited, the controlled and uncontrolled emissions from small 

units were based on data gathered within the ozone non-attainment area by Independent 

Petroleum Association of Mountain States (IPAMS). 

The cost of controlling emissions was based on data collected from the oil and gas industry. 

Pneumatic Controller EIA Data

The number of high-bleed pneumatic controllers in place and associated emission reductions that 

could be obtained by retrofitting or replacing some of them were estimated based on data 

gathered within the ozone non-attainment area by IPAMS. The percentage of high-bleed 

pneumatic controllers that will be replaced or retrofit is based on data gathered by the Division 

from industry. 

Controller capital, installation, and maintenance cost data was obtained from vendors. Because 

this strategy increases the amount of natural gas that companies can sell, the strategy pays for 

itself. The U.S. natural gas wellhead price used in this analysis, $10.82 per thousand standard 

cubic foot, was current as of June 2008. 

Regulation 7 Expansion of RACT EIA Data

Cost data is not readily available for this proposed regulation change. Industry has not indicated 

that this proposed regulation change will have a significant impact. 

Regulation 3 Exemptions EIA Data

Cost data is not readily available for this proposed regulation change. The cost of filing an 

APEN is $152.90. Annual fees and permit fees vary by source type. 

Edits to Regulation 7 EIA Data

Cost data is not available to this proposed regulation change. Industry has not indicated that this 

proposed regulation change will have a significant impact. 

Impact to Public 

The public will be indirectly affected by the proposed rule. Reductions in VOC emissions will 

reduce the incidence of ozone induced human health impacts caused by pulmonary, 

cardiovascular, respiratory, and nervous system disease. Ozone damages crops, forests, and 

other natural plant life, so these will benefit if VOC emissions are reduced. Reducing emissions 

from pneumatic controllers will also reduce methane, which is a greenhouse gas and contributes 

to climate change. It is not within the scope of this analysis to determine if the public will face 

increased costs associated with the proposed regulation. 

The associated benefit of improved public and environmental health from this proposal is 

difficult to assess. 

Impact to Administration 
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Implementing the proposed rule has the potential to significantly increase the number of 

regulated sources, and has reporting, permitting, and/or compliance assurance impacts to the 

Division. It is beyond the scope of this analysis to determine costs to the Division associated 

with rule implementation. 

III. ECONOMIC IMPACT ANALYSIS 

Various industrial and business sectors will be impacted by this proposal: 

• Oil and gas (controls for condensate tanks, reducing use of high-bleed pneumatic 

controllers), and 

• Other stationary sources of VOC. 

Supporting business and industrial sectors associated with the primary affected business and 

industry sectors will benefit by selling equipment to the primary affected business and industrial 

sectors. For example, as a result of the proposed regulation, more flares will be sold and, in the 

short term, more low-bleed pneumatic controllers will be sold to replace the high-bleed 

controllers currently in the field. Calculating supporting economic impacts is beyond the scope 

of this document. 

As directed by CRS 25-7-110.5, this EIA does not include an analysis of any nonmarket costs or 

external costs asserted to occur notwithstanding compliance by a source with applicable 

environmental regulations. 

Direct costs to the primary affected business and industrial sectors are shown in the remainder of 

this section. 

Condensate Tank EIA for 8-hour Ozone Non-Attainment Area (NAA)

Table 1: 8-hour Ozone NAA Retrofit of Condensate Tanks with Flare Control Device and 

Surveillance System 

Tanks Cost Analysis: 

Flares @ 95% CE 

>10 and <20 tpy 

uncontrolled 

Controlled VOC Emissions 

 (tpd) 

 (tpy) 

27.2 

9,936 

Annualized Cost Per Unit $8,419 

Number of Units Controlled 773 

Cost Per Ton $655 
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Table 2: Condensate Tank Annualized Costs for Flare Control Device and Surveillance System

Condensate Tank: Flare Control Device w/Surveillance System 

Item 

Capital 

Costs 

(one time) 

Non Recurring 

(one time) 

O&M 

(recurring) 

Annualized Total 

Cost 

(15 yrs) 

Flare $16,540 - - 

Freight & Design - $1,500 - 

Flare Installation - $6,354 - 

Auto Igniter $1,500 - - 

Surveillance System $3,600 - - 

Pilot Fuel - - $1,897 

Maintenance - - $2,000 

Data Management - - $1,000 

Subtotal Costs $21,640 $7,854 $4,897 

Annualized Costs $2,999 $524 $4,897 $8,419

Table 3: 8-hour Ozone NAA Retrofit of Condensate Tanks with Vapor Recovery Unit (VRU) 

Control Device 

Tanks Cost Analysis: 

VRU @ 95% Control 

>10 and <20 tpy 

uncontrolled 

Controlled VOC Emissions 

 (tpd) 

 (tpy) 

27.2 

9,936 

Annualized Cost Per Unit $19,078 

Number of Units Controlled 773 

Cost Per Ton $1,484 

Table 4: Condensate Tank Annualized Costs for Vapor Recovery Unit Control Device

Condensate Tank: Vapor Recovery Unit (VRU) Cost Analysis 

Item 

Capital 

Costs 

(one time) 

Non 

Recurring 

(one time) 

O&M 

(recurring) 

Fuel Sales 

(recurring)

Annualized 

Total Cost 

 (15 yrs) 

VRU $78,000 - - - 

Freight & Design - $1,500 - - 

VRU Installation - $10,154 - - 

Maintenance - - $8,553 - 

Recovered Natural 

Gas - - - ($1,063) 

Subtotal Costs $78,000 $11,654 $8,553 ($1,063) 

Annualized Costs $10,810 $777 $8,553 ($1,063) $19,078
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Pneumatic Controller EIA for 8-hour Ozone NAA

Pneumatic Controller: Converting to Low-Bleed Controllers and Performing 

Enhanced Maintenance on Remaining High-Bleed Cost Analysis 

Number of High-Bleed Controllers 5,524 

Number of Converted Controllers1 5,248 

Number of Remaining High-Bleed Controllers 276 

Controlled Emissions (tons per day/year) 23.3 / 8,496 

Annualized Cost per Controller ($1,505) 

Cost per Ton ($747) 

1 Number of high-bleed controllers that can be retrofit or replaced with low-bleed controllers is calculated by 

assuming a 95% conversion rate