### UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT WILDEARTH GUARDIANS, Petitioner,

u U.S.ENVIRONMENTAL PROTECTION AGENCY aid LISA JACKSON, Administrator,U.S.EPA, Respondents.

KERB -MCGEE GATHERING,LLC, Intervenor, COLORADO DEPARTMENT OF PUBLIC HEALTH AND ENVIRONMENT, Intervenor. No. 11 -9527

SETTLEMENT AGREEMENT WHEREAS on Apri125, 2011,.WildEarth Guardians("Guardians")filed petition for review No. 11 -9527("petition for review")in the United States Court ofAppeals for the Tenth Circuit; WI~REAS the petition for review challenges EPA's final action in which EPA denied Guardians' administrative petition requesting that EPA object to the issuance ofthe renewed Title V permit for Kerr-McGee's Frederick Compressor

### Station,notice ofwhich was published at 76 Fed.Reg. 10,361 (February 24,

2011);WHEREAS on November 17, 2010,Guardians petitioned the Environmental Appeals Board("EAB")in connection with EPA's renewal ofa Title V permit issued for the Florida River Compression Facility located on the Southern Ute Indian Reservation in La Plata County, Colorado (Appeal No. CAA 10-04); WHEREAS EPA and Guardians intend to execute or have executed an administrative settlement agreement settling the matters before the EAB in Appeal No.CAA 10-04 as described in Exhibit A attached to this Agreement (the "proposed EAB administrative settlement agreement "); WHEREAS the petition for review and EAB Appeal No.CAA 10-04 both involve issues concerning Clean Air Act Title V permitting in the oil and gas industry; and WHEREAS EPA and Guardians wish to implement this Settlement Agreement("Agreement ") to avoid protracted and costly litigation and to preserve judicial resources; NOW,THEREFORE,EPA and Guardians,intending to be bound by this Agreement,hereby stipulate and agree as follows: 2

### Within fifteen days ofthe proposed EAB administrative settlement

agreement becoming final,EPA and Guardians shall file an appropriate pleading in the Tenth Circuit for the dismissal ofGuardians' petition for review with prejudice in accordance with Rule 42(b)ofthe Federal Rules ofAppellate Procedure,with each Party to bear its own costs and attorneys' fees. 2. Ifthe proposed EAB administrative agreement does not become final, WildEarth Guardians' sole remedy in this case is to pursue its petition for review in the Tenth Circuit. 3. EPA and Guardians agree and acknowledge that before this Agreement is final,EPA must provide notice in the Federal Re ister and an opportunity for commentpursuant to Clean Air Act section 113(8),42 U.S.C. § 7413(g). After this Agreement has undergone an opportunity for notice and comment,the Administrator or the Attorney General, as appropriate, shall promptly consider any such written comments in determining whether to withdraw

or withhold his/her consent to the Agreement,in accordance with section 113(g) ofthe Clean Air Act. Ifthe Administrator or Attorney General elects not to withdraw or withhold his/her consent to the Agreement,EPA shall provide written notice to the Parties as expeditiously as possible, and this Agreement shall become final on the date ofsuch written notice. 3

### 4. No provision ofthis Agreement shall be interpreted as or constitute a

commitment or requirement that EPA obligate funds in contravention ofthe Anti- Deficiency Act, 31 U.S.C. § 1341. 5. Each Party shall bear its own costs and attorney fees in this matter. 6. The undersigned representatives ofeach Party certify that they are fully authorized by the Party that they represent to bind that respective Party to the terms ofthis Agreement.
IGNACIA S. MORENO Assistant Attorney General Environment and Natural Resources Division Dated: By: LAUREL A.BEDIG Environmental Defense Section U.S.Department ofJustice P.O.Box 23986 Washington,DC 20026-3986 (202)305-0331 laurel. bedig @us doj . gov SHEILA IGOE Office ofGeneral Counsel U.S.Environmental Protection Agency Ariel Rios Building 1200 Pennsylvania Avenue,NW Washington,DC 20460 

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### Associate Regional Counsel EPA Region 8 1595 Wynkoop Street Denver,CO 80202-2466 Attorneys for Respondent EPA

Dated: By: SAMANTHA RUSCAVAGE-BARZ NM Bar No. 23276 WildEarth Guardians 312 Montezuma Ave. Santa Fe,NM 87501 (505)988-9126 x1158 

### Sruscava e~barz,~a,wildearth~uardians.org Attorney for Petitioner WildEarth Guardians

5SETTLEMENT AGREEMENT

This Settlement Agreement("Agreement" or "Settlement Agreement")is made by, between,and among the U.S.Environmental Protection Agency,Region 8("Region 8"); WildEarth Guardians("Guardians"); and BP America Production Company ("BP"). Region 8, Guardians,and BP are sometimes referred to jointly as the "Parties" and individually as a qty. RECITALS A. BP owns and operates the Florida River Compression Facility ("Florida River") located on the Southern Ute Indian Reservation in La Plata County,Colorado. On October 18, 2010,Region 8 issued a Clean Air Act("CAA")renewal Title V Permit to Operate to BP for Florida River. Permit No. V-SU-0022-05.00. B. Guardians challenged the Florida River Permit to Operate in a Petition for Review submitted to the Environmental Appeals Board ("Board")on November 17, 2010. That Petition for Review is docketed as Appeal No. CAA 10-04. C. BP moved to participate in Appeal No.CAA 10-04 on December 10,2010. The Board granted BP's request on December 20, 2010. The Parties have fully briefed the issues. Guardian's Petition for Review remains pending before the Board. D. The Parties participated in the Board's pilot Alternative Dispute Resolution process over two days in Denver, Colorado and conducted subsequent deliberations. The Parties have now agreed to settle the matters in Appeal No. CAA 10-04 and avoid further proceedings. AGREEMENT NOW, THEREFORE,the Parties intending to be bound by this Agreement,hereby incorporate by reference and agree to the accuracy ofthe above recitals and further agree as follows: Settlement Agreement,EAB Case No. CAA 10-04 Page 1 of 10Board Notification. No later than 10 days from the date this Settlement

Agreement is executed (i.e., signed)by the Parties,the Parties will jointly notify the EAB that they have provisionally reached this Settlement Agreement,will submit the Settlement Agreement to the Board,and request that the Board continue to hold Appeal No. CAA 10-04 in abeyance pending completion ofthe process described in paragraph 19 ofthis agreement. 2. Dismissal with prejudice. Guardians agrees that within 15 days after receiving notification from EPA ofa fully executed Settlement Agreement in accordance with paragraph 19, Guardians will file a motion with the Board to dismiss with prejudice its pending Petition for Review in Appeal No. CAA 10-04. 3. No further proceedings. Guardians agrees that it shall not hereafter institute any legal or other proceedings against any other Party to challenge, litigate, or appeal BP's Florida River Title V October 18, 2010 Permit to Operate. 4. Region 8 pilot program. Region 8 agrees that within 60 days offully executing this Settlement Agreement in accordance with paragraph 19,Region 8 will implement an Oil and Gas Part 71 source determination "pilot" program as described in E~ibit A attached to this Settlement Agreement. Exhibit A is not intended to be exclusive ofthe type ofadditional information Region 8 will request,but provides examples ofthe types ofadditional information that will be requested. 5. Limitations on the pilot program. The pilot program is subject to certain limitations and conditions:

• The pilot program and the information obtained by Region 8 pursuant to the pilot program shall not be construed as altering or providing any

Settlement Agreement,EAB Case No. CAA 10-04 Page 2 of 10

### interpretation as to the governing source determination legal standard or other requirement under title V ofthe CAA. The pilot program is limited to applications for new or renewal Title V permits for which Region 8 is the initial Part 71 permitting authority. The program does not impact state permitting actions. The pilot program is limited to the eaxlier of: 1)the first six Title V new or renewal permit applications for which Region 8 is the initial Part 71 permitting authority, or 2)two years from the effective date ofthe Settlement Agreement.

• Region 8 shall provide an opportunity for non-governmental organizations, industry, and other interested stakeholders to submit individual feedback on the pilot program,focusing on the types of information requested by Region 8 in the permit application process and the process used to request that information. 6. BP takes no position on the pilot program. BP takes no position regarding the nature,purpose,or relevance ofthe (i)additional information Region 8 will request under the pilot program and (ii) baseline analysis Region 8 wi11 prepaxe as part ofthe pilot program. 7. No precedent. It is specifically understood and agreed that this Settlement Agreement is executed for the sole purpose ofsettling Appeal No.CAA 10-04. No Party shall be deemed to have approved,accepted,or consented to any principle, or statutory or regulatory interpretation which underlies CAA source determinations or any ofthe matters agreed to herein

or raised in connection with the issues settled herein. This Settlement Agreement shall have no

Settlement Agreement,EAB Case No. CAA 10-04 Page 3 of 10

### precedential value and shall not be binding on any Party as to any claims,issues, or appeals,

other than those specifically addressed herein. 8. Successors and assigns. The terms ofthis Settlement Agreement shall bind and inure to the benefit ofthe principals,agents,related or affiliated entities,representatives, successors,predecessors-in-interest,and assigns ofthe Parties. Any change in ownership or corporate or legal status, including but not limited to any transfer ofassets or real or personal property shall in no way alter the status or responsibilities ofthe Parties under this Settlement Agreement. 9. Authority. The Parties represent and warrant that the person executing the Agreement on each Party's behalfhas been duly authorized by all necessary and appropriate action to enter into this Settlement Agreement. 10. Counterparts. This Settlement Agreement may be executed in two or more counterparts. It shall not be necessary that the signatures ofall Parties hereto be contained on any one counterpart; each counterpart shall be deemed to be an original, and all counterparts together shall constitute one and the same agreement. 11. Construction. This Agreement shall be construed without regard to the Party or Parties responsible for its preparation, and it shall be deemed to have been jointly prepared by all Parties. Any ambiguity or uncertainty existing herein shall not be interpreted or construed against any Party by virtue ofdrafting the Agreement. This Agreement shall be liberally construed as effecting a full and final settlement ofmatters and controversies as described herein. This Settlement Agreement shall be governed and construed under the laws ofthe Unites States. 12. Effective date. This Settlement Agreement will be effective when executed by all Parties, subject to final approvals pursuant to paragraph 19.

Settlement Agreement,EAB Case No. CAA 10-04 Page 4 of 1013. Entire agreement. This Settlement Agreement,including Exhibit A,constitutes

the sole and entire understanding ofthe Parties and no statement,promise or inducement made by any Party to this Settlement Agreement,or any agent ofsuch Parties,that is not set forth in this Settlement Agreement shall be valid or binding. All prior conversations,meetings, discussions, drafts and writings ofany kind are specifically superseded by this Settlement Agreement. 14. Amendments. The provisions ofthis Settlement Agreement can be amended or modified only by the written mutual consent ofall Parties. 15. Region 8's discretion. Except as expressly provided herein,nothing in the terms ofthis Settlement Agreement shall be construed to limit or modify the discretion accorded Region 8 by the Clean Air Act,its implementing regulations,or general principles of administrative law. 16. Funding and Authority. The commitments by Region 8 in this Settlement Agreement are subject to the availability ofappropriated funds. No provision ofthis Settlement Agreement shall be interpreted as or constitute a commitment or requirement that Region 8 obligate, expend or pay funds in contravention ofthe Anti

-Deficiency Act, 31 U.S.C. § 1341,or any other applicable appropriations law or regulation, or otherwise take any action in contravention ofthose laws or regulations. In addition,no provision in this Agreement shall be interpreted as or constitute a commitment or requirement that EPA take action in contravention ofthe CAA;the Administrative Procedure Act, 5 U.S.C. §§ 551 -559, 701 -706; or any other law

or regulation. 17. Costs and attorne.~. Each Party shall bear its own costs and attorney fees in this matter.

Settlement Agreement,EAB Case No. CAA 10-04 Page 5 of 1018. Voluntarily entered. This Settlement Agreement is entered into voluntarily by

and between each ofthe Parties. The Parties agree that this Settlement Agreement has been negotiated by the Parties in good faith, that the settlement ofthe claims against the EPA in this

case will avoid prolonged litigation among the Parties and preserve EAB resources,that this Settlement Agreement is fair, reasonable, and in the public interest in accordance with the Clean Air Act. 19. Public Notice. The Parties agree and acknowledge that before this Agreement is final, the EPA must provide notice in the Federal Re ig'ster and an opportunity for comment for persons not named as parties or intervenors in this matter pursuant to CAA section 113(g),42 U.S.C. § 7413(g). After this Agreement has undergone an opportunity for notice and comment, the Administrator shall promptly consider any such written comments in determining whether to withdraw or withhold his/her consent to the Agreement,in accordance with section 113(g)ofthe CAA. Ifthe Administrator elects not to withdraw or withhold his/her consent to the Agreement, the EPA shall provide written notice to the Parties as expeditiously as possible, and this Agreement shall become final on the date ofsuch written notice. 20. EAB ADR Status Conferences. Throughout the duration ofthe Pilot Program,the Parties agree to participate in status conference calls with the EAB ADR Settlement Judge and Counsel every six months to discuss the status ofthe Pilot Program. 21. EPA Right to Withdraw. Nothing in this Settlement Agreement shall be construed to limit or modify EPA's discretion to alter, amend or revise any regulations, guidance,or interpretation EPA may issue in accordance with or on matters related to this Settlement Agreement or to promulgate superseding regulations, guidance,or interpretations, or to limit any right that Petitioners may have to seek judicial review in a subsequent case ofany

Settlement Agreement,EAB Case No. CAA 10-04 Page 6 of 10such action by EPA. If such event renders the Pilot Program moot,EPA shall have the right to

withdraw from this Settlement Agreement and shall notify the Parties ofits reason for doing so. 22. Notices. Any notices required or provided for by this Settlement Agreement shall be in writing,effective upon receipt, and sent to the below signatories or such other person as the Parties may subsequently identify in writing to the other Parties. 23. Use ofSettlement Agreement. Except as provided herein,this Settlement Agreement shall not constitute an admission or evidence ofany fact. This Settlement Agreement shall not constitute an admission ofwrongdoing,misconduct,or liability on the part ofthe United States, its officers or any person affiliated with it. IN WITNESS WHEREOF,the Parties' duly authorized representatives have executed this Settlement Agreement on the dates indicated below.

DATE:

DATE: Sara Laumann Steve Odendahl Associate Regional Counsel EPA Region 8 1595 Wynkoop Street Denver, Colorado 80202 -2466 Telephone: 3

03.312.6443 303.312.6219

Kristi Smith Air and Radiation Law Office Office ofGeneral Counsel U.S. Environmental Protection Agency 1200 Pennsylvania Avenue,N.W.(MC-2344A) Washington,D.C. 20460 Telephone: 202.564.2068

Settlement Agreement,EAB Case No. CAA 10-04 Page 7 of 10DATE:

DATE:

DATE:

DATE: Samantha Ruscavage-Barz WildEarth Guardians 312 Montezuma Ave. Santa Fe,NM 87501 Telephone: 505.988.9126 x.l 158 Facsimile: 505.989.8623

Timothy W.Harrington BP America Production Company Regional President,NAG 501 Westlake Park Boulevard Houston,Texas 77079-2607 Telephone: 2

81.3 66.3077

Jeffrey C. Conrad BP America Inc. 501 Westlake Park Boulevard Houston,Texas 77079-2607 Telephone: 281.3

66.1 859
As to form

Charles L.Kaiser John R.Jacus Charles A.freer Davis Graham &Stubbs LLP 1550 Seventeenth Street, Suite 500 Denver,Colorado 80202 Telephone: 303<892.9400 Facsimile: 3

03.893.1379

As to form

Settlement Agreement,EAB Case No. CAA 10-04 Page 8 of 10SETTLEMENT AGREEMENT — EXHIBIT A

Title: EPA Region 8 Oil and Gas (O&G) Part 71 Source Determination Pilot Program Purpose: To conduct a pilot program for the purpose ofstudying,improving,and streamlining O&G source determinations in new or renewal Title V permits for which Region 8 is the initial Part 71 permitting authority. Timeframe: The pilot program is to be conducted for 2 years or through six initial or renewal Part 71 permit actions, whichever comes first. General Process: 1) Consistent with Part 71 application information submittals,the Region will request that all information be submitted under certification oftruth, accuracy,and completeness by the responsible official. EPA also plans to work with applicant to minimize or eliminate the submittal ofCBI claimed information,as appropriate. 2) The Region plans to send a request for general information on a source determination screening form (or similar mechanism)to O&G applicants seeking a new or renewal Title V permits for which Region 8 is the initial Part 71 permitting authority . (See outline below for proposed content ofthe source determination screening form.) 3) The Region will apply its professional judgment and determine,based on the general information received, whether additional source determination analysis is necessary. 4) Ifthe Region determines that additional analysis is warranted,the Region will request more detailed information from the applicant, as necessary. 5) Ifthe Region determines that a written source determination analysis is necessary,the Region will prepare it prior to preparing the draft Part 71 permit. 6) Ifthe Region prepares a written source determination analysis,the Region will include it in the Part 71 permit docket. Component A — Examples ofInformation the Region Plans to Request Usin~Screening Form Emission source information for gas field components within the field owned operated by applicant. Components include,but are not limited to, well sites, tank batteries, compressor stations, gas plants, etc.
a. Applicant System Map: i. Identify gathering pipelines ownedloperated and/or used by the applicant; and ii. Identify components owned/operated by the applicant. b. SIC code for each component; c. Description ofactivities for each component; Settlement Agreement,EAB Case No. CAA 10-04 Page 9 of 10

### d. Latitude /Longitude for each component;

e. Proximity ofcomponent to facility location in permit application; and f. Location factors for components (such as 

### surface owner agreements, spacing orders, lease /NEPA requirements,terrain, andlor proximity to existing structures). 2. Gas flow in field
a. Simple process flow diagram ofgas flow among field components owned/operated by and/or used by the applicant; b. General description ofgathering pipeline systems in gas field. Are they owned/operated exclusively by the applicant to service components owned/operated exclusively by the applicant or are they a shared resource with third party companies? Do other third party components (i.e. well sites,tank batteries, etc.)send gas to applicant owned/operated gathering pipelines and/or does gas from applicant owned/operated gathering pipelines feed to other third party compressor stations and processing facilities? c. General description offactors influencing percentage ofgas flow to compression and processing facilities such as pressure, contractual obligations, gas custody, etc.; d. General description ofgas flow from wells to all other field components under control by permittee; and e. General description ofsystem redundancy, ifpresent, ifa component goes offline. What emission sources,ifany,are capable ofoperating independently from other components? Component B: Procedures for Building on Prior Determinations and Information Submitted. 1. Send a request to the applicant for an update to the information the Region may already have regarding operations in the field.
a. Allow the applicant to submit information using previously acknowledged facts already provided on an existing screening form or through an existing source determination analysis in the same field. b. Require applicant to specify whether they want the Region to rely on previously acknowledged facts and what those facts are. c. Require the applicant to confirm what,ifany,previously acknowledged data continues to accurately represent operations in the field. 2. Review the information provided (either previously acknowledged or new)and determine whether an additional source determination analysis is necessary for the source. Ifnecessary, conduct the additional source determination analysis using the previously acknowledged data and any new information regarding that source's operations in the field.

Settlement Agreement,EAB Case No. CAA 10-04 Page 10 of 10