SHALE Oil & Gas Business Magazine
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San Antonio, TX 78209
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The San Antonio region can breathe a little easier, for now. In a December 2017 letter, the U.S. Environmental Protection Agency (EPA) determined it needed more current air quality data before reaching its final ground-level ozone designation for the area. But what would such a designation mean? How would it impact the region? What does this mean for oil and gas operations in South Texas? To begin addressing these questions, we must first understand how air pollution standards are established and implemented nationwide. The Clean Air Act (CAA) requires the EPA to establish air new quality standards or revise existing standards every five years to protect public health. The EPA currently has National Ambient Air Quality Standards (NAAQS) in place for six pollutants, including ground-level ozone. Every time the EPA establishes a new NAAQS or revises the NAAQS, it must designate areas for meeting (“attainment”) or exceeding (“nonattainment”) the standard. Each area that is designated as nonattainment is then classified as Marginal, Moderate, Serious, Severe or Extreme. Nonattainment areas with a “lower” classification have ozone levels that are closer to the standard than areas with a “higher” classification.
In 2015, the EPA revised the existing 2008 NAAQS for ground-level ozone, from 75 parts per billion (ppb) down to 70 ppb. In December 2017, the EPA classified the San Antonio region (the counties of Atascosa, Bandera, Bexar, Comal, Guadalupe, Kendall, Medina and Wilson) as “Unclassifiable/Attainment,” pending the consideration of more current air quality monitoring data to be submitted to the EPA by Feb. 28, 2018. In its letter, the EPA stated its intention to classify both the Dallas/Fort Worth and Houston-Galveston-Brazoria areas as nonattainment for the new NAAQS. Both of these regions are also currently classified as “Moderate” nonattainment for the 2008 standard.
Though the long-term trend has demonstrated an overall decrease in ground-level ozone readings across the San Antonio area, recent monitoring data for the region show that at 74 ppb, ambient ground-level ozone levels are still slightly higher than the new NAAQS. This could mean the region is facing its first ozone nonattainment designation when the EPA releases its final decision in the spring of 2018.
If the eight-county San Antonio area were to be designated as a nonattainment region, it would trigger a series of reporting and regulatory requirements. Shortly after a nonattainment designation, the CAA requires the Texas Commission on Environmental Quality (TCEQ) to submit a plan, called a State Implementation Plan (SIP), for the region that outlines a strategy to attain the ozone NAAQS. The SIP should include a list of control strategies that target various emission sectors, including on-road mobile area sources (e.g., dry cleaners, gas stations), and point sources (e.g., chemical manufacturing, electric utility power generation).
Depending on a region’s classification, control strategies can include enhanced air quality monitoring, vehicle inspection and maintenance requirements, reformulated gasoline, permitting requirements for new or modified industries and industrial pollution controls. In addition, regions may also implement local emission reduction strategies, including idling requirements, telecommute programs, enhanced bikeway programs, incentives for cleaner vehicles, computerized traffic signal systems, peak-period heavy-duty truck bans on roadways and commuter parking space pricing.
The CAA also requires that nonattainment regions conduct emissions analyses for all long-range metropolitan transportation plans, short-range transportation improvement plans and highway or transit projects that receive federal funds in order to ensure they comply with the region’s air quality goal set forth in the SIP. The Federal Highway Administration (FHWY) and the Federal Transit Administration (FTA) are the entities responsible for determining a region’s transportation conformity. If these federal agencies are unable to make a conformity determination, there is a “conformity lapse”; therefore, federal transportation funds are restricted for the region.
A nonattainment designation would also have implications for oil and gas operations in the San Antonio area, as the Atascosa and Wilson counties both lie within the Eagle Ford Shale play.
Designating these counties as nonattainment requires the TCEQ to submit a SIP addressing the implementation of Reasonably Available Control Technology (RACT) to reduce emissions from existing oil and natural gas equipment and processes. The EPA defines RACT as “the lowest emission limitation that a particular source is capable of meeting by the application of control technology that is reasonably available considering technological and economic feasibility.”
To assist state agencies in determining what constitutes RACT for their emission reduction plans, the EPA released its Control Technique Guidelines (CTGs) for the oil and natural gas industry in 2016. According to the EPA, “CTGs are not regulations and do not impose legal requirements directly on pollution sources; rather, they provide recommendations for state and local air agencies to consider as they determine what emissions limits to apply to covered sources by their jurisdictions in order to meet RACT requirements.”
The CTGs for the oil and gas industry address opportunities for emissions reductions throughout oil and natural gas operations, from initial production through product distribution. This encompasses potential requirements for a range of equipment and processes, such as storage vessels, pneumatic controllers, pneumatic pumps and compressors (centrifugal and reciprocating). The EPA also recommends leak detection and repair in addition to monitoring programs to detect fugitive emissions.
Beyond generating these reporting and regulatory requirements, a nonattainment designation would also result in economic repercussions. As noted, the inability to demonstrate roadway projects’ conformity to the SIP would result in a loss of federal highway funds and could drastically impact the region’s mobility. There would also be a substantial impact to economic development, as companies are less likely to build in the region due to increased permitting requirements and the associated costs.
A February 2017 study conducted for the Alamo Area Council of Governments estimated the economic impact, ranging from approximately $27.5 billion (if the region is classified as “Marginal” nonattainment) to $36.2 billion (under a “Moderate” classification). The study tabulated these impact figures based on a number of factors, including lost opportunities for company expansion or relocation to the region, permitting costs, costs associated with project delays, lost gross regional product (GRP) due to construction delays and reduced GRP associated with inspection fee requirements. The study further analyzes the cost of permitting for a variety of industries, including manufacturing, utilities, and oil and gas. Across the entire metropolitan area, the estimated cost of permitting ranges from $24.2 million to $67.2 million.
Oil and gas fields have traditionally been located in less populated areas. However, nonattainment boundaries continue to grow as the EPA lowers nationwide air quality standards, while drillers expand operations toward urbanized regions. This could mean that more oil and gas operators will be faced with the challenge of maintaining operations in the face of increased emission requirements. Others believe these impacts are manageable.
In 2016, Ed Ireland, Executive Director of the Barnett Shale Energy Education Council, pointed out that oil and gas operations in the Barnett region have coexisted with ozone nonattainment controls in the Dallas/Fort Worth area for a considerable time, even with operations in the region undergoing a drilling boom from 2004 to 2012.
It is very important to note that a nonattainment status is not a permanent label. Regions can, and often do, demonstrate attainment for the NAAQS. However, the process to attainment is a lengthy one. Once a region has achieved the air quality standard for three full years and is formally designated with an “attainment” status, it must then submit a 10-year maintenance plan that includes a demonstration of how the area will remain in compliance for the following 10 years and a contingency plan to ensure that any NAAQS violations are quickly corrected.
As the region waits for the EPA’s final designation, local agencies have already begun to proactively address ground-level ozone. In August 2016, the City of San Antonio’s “SA Tomorrow Sustainability Plan” has taken steps toward identifying and implementing air quality strategies and incentives.
About the author: Beth Everage is Policy Director at HBW Resources where she consults with clients from the energy and transportation sectors on regulatory affairs, stakeholder relations and communications. Her previous experience includes energy and environmental policy advocacy on behalf of regional businesses, environmental impact studies and air quality analyses for Houston-Galveston-Brazoria SIP development and conformity demonstrations.
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