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### SUMMARY

DATE: May 21 , 2015

SUBJECT: Summary of Calls with State, Tribal and District Air Agencies to Discuss Air

Rules and CTGs, for the Oil and Natural Gas Production, Transmission and

Distribution Sector

In February 2015 , the U.S. Environmental Protection Agency ( EPA or Agency) sought self

- nominations

from states and tribes in terested in approaches the A gency c ould consider as it develops proposed regulations , guidelines

, and voluntary approaches to address greenhouse gases (GHG) and volatile organic compounds (VOC s ) in the oil and natural gas (ONG) sector . This effort is part of the s trategy announced by the Obama Administrati on in January 2015 to address methane and smog

- forming VOC emissions from the oil and gas industry

. The summary that follows captures the broad themes and general comments from the participants offered during a series of teleconferences.

EPA plans to bui ld on its 2012 New Source Performance Standards (NSPS)

- 40 CFR part 60 subpart

OOOO

- for the ONG industry to achieve both reductions in GHG s (methane) and VOCs

, and will issue a proposal in summer 2015. At the same time, EPA plans to issue draft Control Techniques Guidelines (CTGs) for controlling VOC emission s from covered ONG sources in areas where CTGs are required

under the Clean Air Act (ozone nonattainment areas classified as Moderate and above, and states in the Ozone Transport Region). Bot h the proposed NSPS and the draft CTGs will be made available for public

review and comment. EPA plans to finalize these actions in 2016. EPA also plan s to expand the successful Natural Gas STAR Program by launching a new partnership in collaboration with key stakeholders by the end of 2015, with a program proposal to be issued for feedback earlier in the year. 1

Participants in the outreach process included a ir agencies from 12 states and three tribes , along with two

multi

- state air organizations . Partici pating states were: California, Colorado, Kansas, Louisiana, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, Texas, Utah

, and Wyoming. Tribal air agencies participated from the Fond du Lac Band of Lake Superior Chippewa , the Southern Ute Indian Tribe

, and

the Ute M ountain Ute Tribe. Two multi

- state organizations

, the Central States Air Resources Agencies (CENSARA) and the Western Regional Air Partnership

, also participated in the process.

After a kickoff call, EPA held a series of calls with the states, tribes

, and state organizations to learn more about their experiences and hear their interests and concerns. Using a set of discussion questions as a guide, EPA sought and compiled feedback. This document summarizes the broad themes raised during

t hose d iscussions

.

Question 1 : Are you considering regulating, or have you regulated new or existing sources of upstream oil and gas air emissions?

The majority of states are regulating new sources of upstream ONG air emissions through permitting

, while other states are relying primarily on subpart OOO O to regulate ONG facilities

. One state noted that

1 EPA released the Natural Gas STAR Methane Challenge Program proposal in July 2015. Details are available at http://www.epa.gov/gasstar/methanechallenge/index.htmlPage 2 of 6

it revises its permitting guidance periodically to capture new sources and to require controls on existing permitted sources in nonattainment areas.

All T rib al air agencies have considered regulating new and/or existing upstream ONG air emissions. One

tribe noted it recently developed an air quality monitoring program to monitor criteria pollutants and

ozone precursors.

Question 2

– What pollutants are the focus of your regulations or deliberations (e.g., VOCs, hazardous air pollutants (HAP s ) or methane)?

The majority of states identified VOC s as a focus, though not exclusively, and some states listed HAP s as being of particular interest ( New York, Ohio , Pennsylvania

, and Wyoming )

. A number of states

, including Colorado and Pennsylvania

, specifically regulate methane, while other states control methane through VOC rules

. Texas noted that it addresses criteria pollutants , hydrogen sulfide

, and benzene through emissions limits in its oil and gas standard permit used primarily in the Barnett Shale, for example, and has rules focusing on emissions of particulate matter, nitrogen oxides, VOCs

, and sulfur compounds in nonattainment and certain other areas. O ther states do not regulate methane but may

consider it in the future

. Kansas regulations do not focus on any particular pollutant

.

Tribal air agencies listed VOCs, HAP s
, and methane as concerns, in add ition to suspended particles

. They are interested i n ways to reduce these emissions. One tribe has not considered VOC or methane

emission regulations because there is both a New Source Review ( NSR ) program and an NSPS ( subpart

OOOO ) for ONG sources in place

.

A tribe stated that a ll p ollutants listed in the question are a concern, methane in particular, due to climate change issues. Under the Part 70 program, the Southern Ute Indian Tribe have regulations f or current
NSPS and National Emission Standards for Hazardous Air Pollutants ( NESHAP ) standards

. Another tribe is focused on monitoring suspended particulates to monitor for radionuclides

.

Question 3

– What are the types of sources you are regulating/considering regulating? Have you considered regulating sources identified in the EPA’s White Papers ?

The types of sources regulated

, or being considered for regulation

, vary among states. Texas, for example, stated that any oil and gas source of emissions other than methane, ethane

, and carbon dioxide, requires authorization, in addition to having to meet requirements of any applicable NSPS or National Emissions

Standard for Hazardous Air Pollutants. In addition, most states, such as Louisiana, New York 2 , Ohio, Pennsylvania, Utah

, an d Wyoming, and California’s air districts, regulate storage tanks in addition to

wellheads

. Colorado regulates hydraulically fractured gas and oil wells and venting from storage tanks

,

e quipment leaks at the well site and compressor stations ; p neumatic con trollers, compressor engines, dehydrators, liquids unloading and well maintenance activities, and separators at well production sites are regulated, but not pneumatic pumps

. Several states noted that they regulate compressors (New York, North Dakota, Ohio

, and Pennsylvania)

. North Dakota regulate s compressors for NOx and CO, emissions from completions and ongoing production of hydraulically fractured oil wells

, leaks , and liquids unloading , while p neumatic devices remain under EPA authority.

Some states are considering regulating sources identified in the EPA’s White Papers, with states specifically mentioning onsite tanks at oil fields, equipment leaks, pneumatic pumps and controllers, and

compressors , but implementing new regulations is limited by available resources

. Other states do not

2 New York regulates some storage tanks, but not all of them.Page 3 of 6

regulate facilities beyond federal requirements

, but may consider new sources such as compressor engine

controls if there are new nonattainment designations

.

Among the Tribal air agencies, the Southern Ute regu late s compressor stations and processing plants

. The Fond du Lac Band has a compressor on the Reservation that is receives its Title V permit from EPA, but the Band does not have independent regulatory authority at this time.

Question 4

– Have you regula ted or considered regulating both new and existing sources? If so, which factors did you consider in determining whether to regulate both? Did any factors present particular challenges?

California , Pennsylvania

, and Louisiana regulat e both new and existing sources

, while Wyoming regulat es new and existing sources in nonattainment areas. Ohio regulat es new sources exclusively

, while

other states regulat e new and “ modified ” existing sources (Oklahoma, Texas

, and Utah) . Kansas has not

consider ed regulating new or existing sources unless already subject to a federal rule.

Regarding challenges, California said f ederal methane rules would need to harmonize with existing local air districts’ VOC rules and a planned statewide methane regulation for the ONG sector may overlap with local rules for tanks, which will pose implementation challenges. California also noted that the

t ransmission

, storage

, and distribution segments are currently unregulated for air quality purposes in that

state , so imposing methane regulations on these segments may place a significant burden on smaller Air

Pollution Control Districts ( APCD s ). Colorado’s challenges include cost

- effectiveness of controls, size of operations, effects on nonattainment areas, technical feasibility, existing controls in industry , and proximity to buildings and human activities. Some states cited issues surrounding accurately identify ing pneumatic devi ces i n the field

. Wyoming said c ost

- effectiveness is problematic for new sources because

h igher cost s may be economical in nonattainment areas but not in other areas of the state . Further,

p neumatic pumps are a signif icant source of emissions, but with no source classification code ( SCC ) for these devices, it is difficult to track emissions. Other states challenge s include the quantity of permit applications

, the quantity of new wells coming online

, and the lack of gas collection infrastructure.

Tribal ai r agencies have considered regulating new and existing sources, but are still in the developmental

stage.

Question 5

– Do the requirements vary by region or are they uniform across the state? If they vary, were there specific activities or reasons that the requirements vary?

Kansas, New York, North Dakota, Oklahoma

, and Pennsylvania reported uniform regulations statewide. Other states reported general statewide uniformity with some variations, including different requirements for nonattainment areas (e .g., Colorado, Louisiana, Texas, Wyoming), different compliance dates (e.g., Utah), concentrated development areas (e.g., Texas and Wyoming), and major source NSR trigger (e.g., Ohio)

. California’s air districts have similar, but not uniform, rules.

Amon g Tribal air agencies, the Ute M ountain Ute Tribe stated the resource protection goals of the tribal council will drive any variation in regulations. The Fond du Lac Band does not have regulations.

Question 6

– Have you identified innovative compliance op tions that reduce the implementation

burden for the state?

The participants discussed several compliance options, such as leak detection and repair ( LDAR )

, optical gas imaging ( OGI ) monitoring

, and the use of general permitting to reduce burden on states and facilities.

O ne state mentioned looking at options for LDAR including using an infrared ( IR ) camera to identifyPage 4 of 6

leaks with more frequent surveys . TCEQ, for example, noted that Texas uses IR cameras as a screening tool, both on the ground and from the air. Other states are also considering developing performance standards rather than specifying control technologies. One state described the ir forward

- looking infrared ( FLIR ) program. Colorado, O hio

, and Pennsylvania also noted the efficacy of streamlined permitting requirements and processes.

Among the Tribal air agencies, the Southern Ute are developing streamlined reporting mechanisms that include an interactive online database of regulated so urces in which sources can report compliance

information.

Question 7

– What has been your experience implementing Control Technique Guidelines (CTGs)?

While a number of states reported some experience implementing CTGs (e.g.

, California’s air districts, Ohio, Pennsylvania, Texas

, and Utah ) to varying degrees, other states (e.g., California, Colorado

, and Louisiana) said their experience has been very limited. Most of Colorado ’s CTGs came out in the 1990s.

Kansas and Oklahoma ha d no experience with CTGs applicable to the ONG industry

.

Pennsylvania noted that t hey are just completing the regulatory process for CTGs issued in 2008 ; a

process that could be faster if they had model rule language in the CTG. Utah has used CTGs in the development of their PM 2.5 State Implementation Plan ( SIP ) to inform the inventory process and to help

define area source controls . Utah noted that e ven though the CTG documents are often out of date, it is a helpful s tarting point. They have used CTGs as the basis of information documents made available online, such as voluntary control measures for pollutants.

None of the Tribal air agencies noted any experience implementing CTGs.

Question 8

– As the EPA develops a CTG for sources of oil and gas emissions, what information and/or features would you like us to consider including (such as detailed cost information)? Is model rule language something that you would find helpful?

The vast majority of states noted that model rule language would be helpful

, 

### al though some states said use of the model language should be optional. Other states wanted to review the CTG before providing comment. New York, Ohio

, and Utah also considered cost information to be helpful. New York and Ohio

added that clear def

initions would be helpful, with New York noting it would be useful to specify applicability by SCC code. Colorado said the CTG should include a mechanism that recognizes current state requirements to minimize conflicts between federal and state rules on th e same sources . The CTG

should also clearly define the first day of operation or commencement of operation as it pertains to drilling or otherwise stimulating a well. Pennsylvania requested the CTG include alternative compliance methods, particularly ones that reduce the burden on small businesses. Texas agreed that a model rul e would be helpful, but requested that the CTG include sufficient time (more than one year) to plan and adopt rules into a SIP . Texas requested that the CTG help clarify applicabilit y by including a statement outlining how each source type would be affected. Texas also requested the EPA use current cost

information for recommended controls , including estimates of the cost of equipment and controls, and not “scale up” based on older es timates of nationwide compliance costs

. Wyoming would like the CTG to address VOC and methane separately, not grouped together as hydrocarbons

, as well as include a technical feasibility analysis taking into account different types of developments and avoi ds a “one size fits all” approach.

Of the Tribal air agencies, Fond du Lac stated if there is a co

- benefit of controlling a second pollutant as a result of a regulation directly controlling a first pollutant, then it would be helpful to see that addresse d in the cost analysis. The Southern Ute believed it would also be helpful to account for the cost of climatePage 5 of 6

change in the cost analysis. The Ute Mountain Ute stated the cost savings resulting from capturing

otherwise vent ed gas should be presented.

Question 9

– Do you think any sources of emissions are particularly amenable to voluntary rather than regulatory action? Do you have any state

- specific voluntary programs that we should be

aware of?

Nine of the states (California, Colorado, Kansas, Louisi ana, New York, North Dakota, Oklahoma, Texas

, and Wyoming) said they have no state

- specific voluntary programs in place and most did not believe such programs would be useful or accepted by industry. One state , however, suggested that pneumatic devices

and their associated maintenance requirements would be a good place for voluntary measures , as well as a voluntary program to institute best management practices ( BMP ) for liquids unloading and well

maintenance. Another state also recommended that pneumatic c ontrollers and pneumatic pumps might be appropriate, as they are aware of voluntary measures in other places, though they themselves had no voluntary programs

.

Ohio, Pennsylvania

, and Utah each have voluntary programs. Ohio has a voluntary program for HAP emissions in which companies can receive public recognition for voluntary reductions. Pennsylvania relies on the Natural Gas STAR program for information about voluntary programs and they use this

i nformation to help determine the best available control technology ( BACT ) . Utah said emission controls in the Uinta Basin began with the Ozone Advance program that included voluntary proactive measures.

Utah said a benefit of voluntary measures is that they are quick to implement. The state can monitor the

effe ctiveness of the voluntary measure and get feedback from industry before moving it into a rule.

None of the Tribal air agencies have voluntary programs

.

Follow

- Up Call with California Air Districts

On April 23, 2015, EPA held a follow

- up call with seve ral California air districts (San Joaquin Valley

APCD , South Coast Air Quality Management District, Ventura County APCD and Santa Barbara Count y APCD ) to discuss their experiences with CTGs. The following is a summary of that discussion.

Have you impleme nted the oil and gas CTG from the 1980s?

All the districts (San Joaquin, South Coast, Ventura County and Santa Barbara) stated they have implemented the CTG through their own mature air programs; most of which have been in existence for decades. San Joaq uin and Santa Barbara specifically noted that their own rules and regulations go beyond what the existing CTG requires.

Are there lessons learned that would be helpful for us as we draft the new CTG?

San Joaquin said they cooperate closely with industry associations, citizen advisory committees, agricultural groups

, and others, and recommended that EPA do the same. South Coast and Ventura County noted the importance of urbanization and sensitivity receptors; the age of a facility and its proximity to hom es needs to be kept in consideration. Santa Barbara added that some new measurement
devices

– such as optical gas imaging cameras

– can be too expensive for a d istrict and recommended that the CTG should not mandate monitoring equipment that d istricts do n ot currently use and cannot afford.

Do you have experience in implementing CTGs that included model rules? How does this affect implementation?Page 6 of 6

Among the air agencies, Santa Barbara stated they have implemented model rules which were helpful,

such a s the model rule in EPA’s CTG s for degreasers. All d istricts agreed that model rules could be helpful. South Coast and Ventura County added t hat it would be helpful if model language included the flexibility to allow a district to make it workable with their ne eds, such as an equivalency demonstration. Additionally, Ventura County noted that implement ing the CTG will be smoother if the CTG is consistent with the new CARB rule. Santa Barbara added they would be interested in implementing a new CTG

, only if it add s to what the district requires in its existing program, such as more stringent control requirements, improved monitoring, etc.

Outside of the CTG, have you applied RACT

- like measures to oil and gas sources in your district? If so, what types of measures did you apply? What worked well? What did not?

San Joaquin has applied RACT ( or beyond RACT measures ) from crude oil wells to processing and handling. The South Coast stated it is helpful to have a robust compliance plan and try to steer away from

flare s and concentrate on reinjection and other non

- NOx forming control technologies. Ventura County requires a vapor recovery system; NOx rules apply at low levels in oil fields. The Santa Barbara D istrict noted a focus that includes tanks, loading racks, stea m generators

, and small boilers. They have minor leak rules and require vapor recovery for tanks with no venting of gas during testing.

Do you foresee any challenges in implementing a new oil and gas CTG in your district?

None of the California air dist ricts anticipated major challenges in implementing a new oil and gas CTG. All concurred that an equivalency demonstration would be helpful. South Coast reiterated its concern that multilevel controls and regulations not interfere with one another. Ventura County added that regulating something not currently regulated must be done carefully with feedback from the districts. The district stressed the importance of clear requirements, especially with regard to sources such as temporary production tanks.

Other information districts would like to see the CTG include?

San Joaquin would like to see any information that justifies the assumptions be ing made or the reasoning

behind any requirements. San Joaquin and South Coast believed cost information would be help ful, as an aid in understanding why a specific requirement is being put in place. The San Joaquin D istrict said that if the EPA is looking for detailed cost information, the D istrict has a BACT NSR regulation that can provide such details to the EPA throug h their BACT analyses and permitting processes. South Coast also stated that new technology information would be very useful. Santa Barbara said it would be beneficial

for the CTG to include an inventory of what is out there, such as equipment counts and c ontrol technologies.