{In Archive} ExxonMobil MCU j ennifer.wilder to: Shaheerah Fateen 07/27/2004 01:59 PM

Cc: neil. j .ryan, christopher.w.armstrong

From: j ennife r .wilder@exxonmobil.com

To: Shaheerah Fateen/R9/USEPA/US@EPA,

Cc: neil. j .ryan@exxonmobil.com, christopher.w.armstrong@exxonmobil.com

Archive: This message is being viewed in an archive.

Shaheerah, Attached is a summary of ExxonMobil's view on the topic of Major Source
determination. Please review the document and let us know your thoughts. If there is still a disagreement, I propose a phone meeting within the

week.

(See attached file: U.S.P.O --MCU Title V Major
Source Issues.doc)

Jennifer Wilder Baird Compliance Engineer ExxonMobil Production Company Office: (281) 654-1135 Fax: (281) 654-1147 jennifer.wilder@exxonmobil.com

U.S.P.O --MCU Title V Major Source Issues.docSummary of Title V Major Sou rce Analysis for McElmo Creek

In 2000, a Title V permit application was submitted for the former gas processing plant at the McElmo Creek Unit ("MCU"). Recently, EPA has requested additional

information in order to facilitate the issuan ce of a draft Title V permit for the former gas processing plant.

As part of its review, EPA requested info rmation concerning field operations. It is our understanding that EPA is considering the inclusion of emission units from the field operations as part of the draft Title V pe rmit. EPA contends th at the field operations (or portions of it) are part of the same "m ajor source" as the former gas processing facility, and as such, there is a single major s ource that must be reflected in the draft Title V permit. EPA believes that the definition a nd interpretation of the term "major source" in 40 C.F.R. Part 63, Subpart HH (40 C.F.R. § 63.760 et seq.) supports its position. We disagree with this approach, and our rationale is set forth briefly below.

 Clean Air Act Section 112(n)(4) -- This statutory provision makes clear that emissions from E & P sources (and associated equipment) cannot be aggregated to establish that a source is a "major source" as defined in Title III of the Clean Air Act (and used to define Title V "major source" status). Therefore, EPA cannot aggregate emi ssions from individual wells, tank

batteries and satellite locations to show that the E & P field operations at

MCU should be combined with the form er gas processing plant to create a single major source for Title III or Title V purposes.

 40 C.F.R. § 63.760 (Applicabil ity) -- In order to be subject to regulation

under the NESHAP for Oil and Natura l Gas Production Fa cilities (Subpart HH), the oil and natural gas facilities must meet specific criteria in 40 C.F.R. § 63.760(a)(1) and either of the criteria in 40 C.F.R. § 63.760(a)(2) or (3). 40 C.F.R. § 63.760(a)(1) requires that an o il and natural gas production facility be a major source of hazardous air pollutants.

 The definition of "major source" under 40 C.F.R. § 63.761 also states that "[e]missions from processes, operations or equipment that are not part of the same facility, as defined in this secti on, shall not be aggregated..." The term "facility" is defined in this re gulation in relevant part as

oil and natural gas production a nd processing equipment that is

located within the boundaries of an individual surface site as defined in this section. Equipment that is part of a facility will typically be located within close proximity to other equipment

located at the same facility . Pieces of production equipment or groupings of equipment located on different oil and gas leases,mineral fee tracts, surface f ee tracts, surface lease tracts, or separate surface sites, whether or not connected by a road, waterway, power line or pipeline, shall not be considered part of the same facility

. Examples of facilities in the oil and natura l gas production source category include, but are not limited to, well sites, satellite tank batteries, central tank ba tteries, a compressor station that transports natural gas to a natural gas processing plant, and natural gas processing plants.

The term "surface site" is defined in this same regulation as "any combination of one or more graded pad sites, gravel pad si tes, foundations, platforms, or the immediate physical location upon which equipm ent is physically affixed."

It is our view that the production equi pment located at MCU is not in close proximity to other equipment and the former ga s processing plant. The closest battery is approximately 3/5 mile from the former gas processing plant separated by rugged terrain

and the next closest tank ba ttery (Battery 2) is over one and a half miles away. As such, pursuant to the definition of "facility" and "s urface site" set out above, these individual groupings of production equipment are separate , individual faciliti es whose emissions cannot be aggregated for purposes of determ ining whether a source is a major source. Clearly, the definition of "facility" requires "close proximity" before production field equipment can be grouped together as a sing le facility. That does not exist here.

Moreover, the definition of "facility" contemplates that individual surface sites can exist within a single lease (similar to th e situation at MCU) a nd provided that these individual surface sites are not in close pr oximity to one another, they cannot be aggregated to determine whether a major sour ce exists. This is further supported by the list of examples of facilities provided in the de finition of "facility". The use of the plural "facilities" strongly indicates th at each listed example is ty pically its own, independent "facility" whose emissions must be compared individually against the HAP major source threshold to determine if the particular facil ity is a major source. To determine otherwise

would be inconsistent with the definition of "facility" and would effectively nullify the Clean Air Act § 112(n)(4) prohibition agains t the aggregation of E & P sources and associated equipment.

 The definition of a "major source" in 40 C.F.R § 63.761 for Subpart HH states

that HAP emissions from Facilities that are "production field facilities" can only be aggregated for major source determination purposes from glycol dehydration units and storage tanks with flas h potential. As stated in the final rule preamble, the definition of "produc tion field facilities" was utilized to

define what was intended to be covered by the term "associated equipment" in Clean Air Act § 112(n)(4). Specificall y, the June 17, 1999 final rule preamble (64 Fed. Reg. 32610, 32619 -32620) states that

Under the proposed approach, associated equipment was defined as all equipment up to the point of custody transfer, excluding glycoldehydration units and storage vess els with the potential for flash emissions. This approach also included a definition of facility in the rule that effectively limited the distance over which all emission points (including glycol dehydration units a nd storage vessels with the potential for flash emissions) may be aggreg ated. Based on discussions with industry prior to proposal, as well as comments received supporting the proposed definition of associated equipment, the Agency believes that the proposed approach best m eets both industry a nd EPA goals for implementation of the langua ge of section 112(n)(4).

This statement is consistent with the discussion of the term "facility" discussed above, and it clearly demonstrates that only the emissions from glycol dehydration units and storage vessels w ith flash potential that meet the definitional requirements of the term individual "facility" are to be aggregated. In other words, only those HAP emissions fr om glycol dehydration units and storage tanks with flash potential that are part of an individual surface site may be aggregated for major source determinati on purposes. As we have indicated previously, we don't believe our field equi pment is located in close proximity to each other (or to the former gas processing plant), and therefore, we believe they constitute their own independent surf ace sites which must be independently evaluated to determined if they constitu te a major source. As such, the field equipment must not be included in the Title V permit for the former gas processing plant.

 Conclusion -- Clean Air Act § 112(n)(4) a nd the definition of "major source" in 40 C.F.R. § 63.761 clearly exempt E & P and associated equipment from emissions aggregation for major s ource determination purposes. The regulatory definition preserves the st atutory exemption for "associated equipment" by utilizing the term "facility." In relevant part, this term states that emissions from equipment on se parate surface sites are individual facilities that cannot be aggregated when undertaking a major source

determination. Consistent with thes e provisions, we believe the field equipment at MCU are located on separate surface sites, and as such, their emissions cannot be aggregated for major source determination purposes.