Wednesday, October 4, 2017

Shale Law in the Spotlight: Overview of Utah’s Laws and Regulations Related to Oil and Gas Air Emissions

Written by Chloe Marie – Research Fellow

Utah is a significant oil and gas producer with 3 of the 100 largest natural gas fields in the United States according to the U.S. EIA. On September 6, 2017, the Utah Air Quality Board issued new air quality regulations addressing the oil and gas industry. To provide background and context for these new regulations, this article will review Utah regulations relating to air pollution generally as well as specific air emission regulations for the oil and gas industry.

The Utah legal framework for air quality and pollution prevention is provided by the Utah Air Conservation Act codified in Utah Code Ann. §§ 19-2-101 to 127. The Utah Air Conservation Act establishes a coordinated statewide program of air pollution prevention, abatement, and control, and examines the roles and responsibilities of the state and local units of government. It also applies to all potentially emitting industrial activities, including oil and gas exploration and development activities, and provides the Utah Air Quality Board with the authority to regulate and control emissions from pollution sources. The Act’s provisions are implemented through the Utah Administrative Code, Title R.307.

The Utah Division of Air Quality (DAQ) is responsible for issuing air quality permits, including approval orders and operating permits. An operator who plans to construct or operate any new facility or engage in the modification of any existing facility contributing to air pollution is required to obtain an Approval Order pursuant to the New Source Review (NSR) permitting process. In order to obtain an Approval Order, the applicant must submit a Notice of Intent to the Division of Air Quality; however, there is an exemption provided for small sources. The Division of Air Quality requires an applicant to obtain an Operating Permit for any operation considered as a major source – meaning that has the potential to emit 10 tons per year of any hazardous air pollutant, 25 tons per year of any combination of hazardous air pollutants, or 100 tons per year of any other air pollutants.

On August 20, 2013, the Utah Department of Environmental Quality (DEQ) submitted to the U.S. EPA proposed changes to the State Implementation Plan (SIP) to include revisions to the nonattainment permitting regulations codified in the Utah Administrative Code (Title R307) in order to comply with Federal regulations 40 CFR 51.165. The proposed revisions deal with the updating of Rule R307-420. Permits: Ozone Offset Requirements in David and Salt Lake Counties as well as sections of Rule R307-403. Permits: New and Modified Sources in Nonattainment Areas and Maintenance Areas. The U.S. EPA identified certain deficiencies in Utah’s nonattainment permitting rules in the SIP and thus suggested further review of Rule R307-403 in addition to already proposed revisions of the rule.

In a letter dated September 30, 2016, the Utah DEQ asserted its commitment to reviewing such rule and submitting a SIP revision to EPA by December 8, 2017. More precisely, the Utah DEQ undertook to modify the definition of “regulated NSR pollutant” in R307-403-1 in order to reflect EPA’s new provision at 40 CFR 51.165(a)(13) pursuant to the ruling in NRDC v. EPA, 706F.3d 428 (D.C. Cir. 2013); edit the NNSR requirements set out in R307-403-3 into state-specific language in accordance with CAA section 173(a) and (c), and 40 CFR 51.165(a); clarify the general offset requirements set out in R307-403-4 as provided in CAA Section 173(c) and 40 CFR 51.165 as well as adding a new section addressing pollutant specific offset requirements as per 40 CFR 51.165(a)(11); and clarify offset credit reductions in R307-403-7 as set out in CAA Section 173(c)(1) and 40 CFR 51.165.

Except for the revised rule R307-420, the U.S. EPA conditionally approved all of the State Implementation Plan revisions on February 3, 2017. EPA stated that such final action was taken “because, while the submitted revisions to Utah’s nonattainment permitting rules do not fully address the deficiencies in the state’s program, Utah has committed to address additional remaining deficiencies in the state’s nonattainment permitting program no later than a year from the EPA finalizing this conditional approval.”

In a memorandum dated August 23, 2017, the Utah Division of Air Quality (DAQ) declared that “oil and gas production sources, while individually small, make up a significant portion of the total emissions inventory in Utah” before adding that “over the past few years, oil and gas permits have made up over half of the minor source permit requests to the DAQ, yet the conditions in these permits are virtually identical due to the similar characteristics of the oil and gas well sites themselves.” As a result, the DAQ proposed to replace the existing source-by-source permitting process with one requiring a permit-by-rule (PBR) and thus took a series of measures to amend legislation and adopt new laws governing oil and gas sources.

More precisely, the DAQ proposed for public comment the amended rules R307-150. Emission Inventories; R307-401. Permit: New and Modified Sources; R307-504. Oil and Gas Industry: Tank Truck Loading as well as the new rules R307-505. Oil and Gas Industry: Registration Requirements; R307-506. Oil and Gas Industry: Storage Vessels; R307-507. Oil and Gas Industry: Dehydrators; R307-508. Oil and Gas Industry: VOC Control Devices; R307-509. Oil and Gas Industry: Leak Detection and Repair Requirements; and R307-510. Oil and Gas Industry: Natural Gas Engine Requirements. According to the DAQ, “these rules will improve the permitting, compliance, and emission inventory processes for oil and gas sources … [and] are intended to increase efficiency while ensuring that air requirements are being met statewide.”

On September 6, 2017, the Utah Air Quality Board released the revised rule R307-403 for New and Modified Sources in Nonattainment Areas and Maintenance Areas for public comment and, in a memorandum, recommended that the Board propose the R307-403 amendments for a 30-day public comment period. The revised rule implements the federal nonattainment area-permitting program for major sources and also contains new source review provisions for PM2.5 and PM10 in nonattainment areas. In addition, the revised rule supplements the permitting requirements of R307-401. Permit: New and Modified Sources. Furthermore, the revised rule clarified lowest achievable emission rate (LAER) requirements and applicable offset requirements.

Stay tuned for any further legal developments!

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