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

of Appeals 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 of the renewed Title V permit for Kerr-McGee's Frederick Compressor
Station, notice of which 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 of a

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 of the proposed EAB administrative settlement

agreement becoming final, EPA and Guardians shall file an appropriate pleading

in the Tenth Circuit for the dismissal of Guardians' petition for review with

prejudice in accordance with Rule 42(b) of the Federal Rules of Appellate

Procedure, with each Party to bear its own costs and attorneys' fees.

2. If the 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 comment pursuant 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)

of the Clean Air Act. If the 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 of such written notice.

3
4. No provision of this Agreement shall be interpreted as or constitute a

commitment or requirement that EPA obligate funds in contravention of the

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 of each Party certify that they are

fully authorized by the Party that they represent to bind that respective Party to the

terms of this Agreement.

IGNACIA S. MORENO

Assistant Attorney General

Environment and Natural Resources

Division

Dated: By:

LAUREL A. BEDIG

Environmental Defense Section

U.S. Department of Justice

P.O. Box 23986

Washington, DC 20026-3986

(202) 305-0331

laurel. bedig@us doj . gov

SHEILA IGOE

Office of General Counsel

U.S. Environmental Protection Agency

Ariel Rios Building

1200 Pennsylvania Avenue, NW

Washington, DC 20460

~y_~c~:~w:~Tr:~i

a
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

5

SETTLEMENT 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 of the above recitals and further agree as

follows:

Settlement Agreement, EAB Case No. CAA 10-04 Page 1 of 10
Board 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 of the process described in paragraph 19 of this agreement.

2. Dismissal with prejudice. Guardians agrees that within 15 days after receiving

notification from EPA of a 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 of fully 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 of the type of additional

information Region 8 will request, but provides examples of the types of additional 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 of the 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 of the

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 of the (i) additional information Region 8 will request under the

pilot program and (ii) baseline analysis Region 8 wi11 prepaxe as part of the pilot program.

7. No precedent. It is specifically understood and agreed that this Settlement

Agreement is executed for the sole purpose of settling 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 of the 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 of this Settlement Agreement shall bind and

inure to the benefit of the principals, agents, related or affiliated entities, representatives,

successors, predecessors-in-interest, and assigns of the Parties. Any change in ownership or

corporate or legal status, including but not limited to any transfer of assets or real or personal

property shall in no way alter the status or responsibilities of the Parties under this Settlement

Agreement.

9. Authority. The Parties represent and warrant that the person executing the

Agreement on each Party's behalf has 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 of all 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 of drafting the Agreement. This Agreement shall be liberally

construed as effecting a full and final settlement of matters and controversies as described herein.

This Settlement Agreement shall be governed and construed under the laws of the 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 10
13. Entire agreement. This Settlement Agreement, including Exhibit A, constitutes

the sole and entire understanding of the Parties and no statement, promise or inducement made

by any Party to this Settlement Agreement, or any agent of such Parties, that is not set forth in

this Settlement Agreement shall be valid or binding. All prior conversations, meetings,

discussions, drafts and writings of any kind are specifically superseded by this Settlement

Agreement.

14. Amendments. The provisions of this Settlement Agreement can be amended or

modified only by the written mutual consent of all Parties.

15. Region 8's discretion. Except as expressly provided herein, nothing in the terms

of this 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 of appropriated funds. No provision of this Settlement

Agreement shall be interpreted as or constitute a commitment or requirement that Region 8

obligate, expend or pay funds in contravention of the Anti-Deficiency Act, 31 U.S.C. § 1341, or

any other applicable appropriations law or regulation, or otherwise take any action in

contravention of those 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

of the 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 10
18. Voluntarily entered. This Settlement Agreement is entered into voluntarily by

and between each of the Parties. The Parties agree that this Settlement Agreement has been

negotiated by the Parties in good faith, that the settlement of the 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) of the

CAA. If the 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 of such written notice.

20. EAB ADR Status Conferences. Throughout the duration of the 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 of the 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 of any

Settlement Agreement, EAB Case No. CAA 10-04 Page 6 of 10
such 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 of its 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 of Settlement Agreement. Except as provided herein, this Settlement

Agreement shall not constitute an admission or evidence of any fact. This Settlement Agreement

shall not constitute an admission of wrongdoing, misconduct, or liability on the part of the

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 of General 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 10
DATE:

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 66.3 077

Jeffrey C. Conrad

BP America Inc.

501 Westlake Park Boulevard

Houston, Texas 77079-2607

Telephone: 281.3 66.1859

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 03.893.13 79

As to form

Settlement Agreement, EAB Case No. CAA 10-04 Page 8 of 10
SETTLEMENT 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 of studying, 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 of truth, accuracy, and completeness by

the responsible official. EPA also plans to work with applicant to minimize or eliminate

the submittal of CBI 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 of the 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) If the Region determines that additional analysis is warranted, the Region will request

more detailed information from the applicant, as necessary.

5) If the Region determines that a written source determination analysis is necessary, the

Region will prepare it prior to preparing the draft Part 71 permit.

6) If the Region prepares a written source determination analysis, the Region will include it

in the Part 71 permit docket.

Component A — Examples of Information 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 of activities for each component;

Settlement Agreement, EAB Case No. CAA 10-04 Page 9 of 10
d. Latitude /Longitude for each component;

e. Proximity of component 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 of gas flow among field components

owned/operated by and/or used by the applicant;

b. General description of gathering 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 of factors influencing percentage of gas flow to compression

and processing facilities such as pressure, contractual obligations, gas custody,

etc.;

d. General description of gas flow from wells to all other field components under

control by permittee; and

e. General description of system redundancy, if present, if a component goes offline.

What emission sources, if any, are capable of operating 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, if any, 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.

If necessary, 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