THE OZONE CHALLENGE: WHERE ARE WE? HOW DID WE GET THERE? WHERE ARE WE GOING?

• Jurisdiction: United States

Air Quality Challenges Facing the Natural Resources Industry in the Western United States
(Nov 2007)
CHAPTER 7B
THE OZONE CHALLENGE: WHERE ARE WE? HOW DID WE GET THERE? WHERE ARE WE GOING?
Kenneth A. Wonstolen ^*
Senior Counsel
Fulbright & Jaworski L.L.P.
Denver, Colorado

Introduction

Ozone formation in the western oil and gas producing states is a growing issue for the industry. The issue is becoming a concern in oil fields ranging from southwest Wyoming to northwest New Mexico. In Colorado, ozone levels in the Denver region during the summer of 2007 portend "non-attainment" designation by the Environmental Protection Agency ("EPA"). This paper will primarily address the history and outlook of the ozone issue from the perspective of Colorado's northern Front Range, including the prolific Wattenberg Field of the Denver-Julesburg Basin.

The oil and gas industry is the largest single source of volatile organic compounds ("VOCs") in Denver's regional airshed, as well as a minor source of nitrogen oxides ("NOx").¹ VOCs and NOx react to form ozone under conditions of intense sunlight, high temperatures and low humidity.² The oil and gas industry emits NOx through the operation of drilling rigs and compressor engines. It emits VOCs from condensate tanks,³ glycol dehydrators, pipeline "pigging" operations, and crude hauling operations ("splashfill"). It is worth noting that these VOC emission are not strongly photoreactive and do not readily convert to ozone.

The nine-county Denver region has for years flirted with the upper limits of the federal air quality standard for ozone, but in the summer of 2007, monitoring equipment located at Rocky Flats logged a violation of the federal "8-hour" standard.⁴ If this summer's data is validated, EPA will designate the Denver region as having "non-attainment" status for ozone under the Clean Air Act ("CAA").⁵

The Early Action Compact

In the early years of the new century, Denver was on the verge of ozone nonattainment. Instead, EPA offered Denver, as well as over two dozen other metropolitan areas, the option to enter into an Ozone Early Action Compact ("EAC"). Metro Denver counties and the state entered into the EAC in December, 2002. The Air Quality Control Commission adopted the Ozone Action Plan in March, 2004, and EPA approved it in May, 2005. The plan relied heavily on oil and gas industry emission reductions. Under the EAC, the oil and gas industry was required to reduce condensate tank "flash emissions" in the Wattenberg Field, to install emission

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controls on certain compressor engines and glycol dehydrators, and to produce and sell less evaporative gasoline (reduced Reid Vapor Pressure).⁶

The condensate tank emissions were to be reduced in phases, using a system-wide calculation: 37.5% during the 2005 "ozone season" (May through September), and 47.5% thereafter. Based, however, on concern about increased industry activity in the Wattenberg Field, the Air Pollution Control Division of the Colorado Department of Public Health and Environment ("CDPHE") proposed to increase the required reduction to 75% for the summer of 2007. In December, 2006, in an unprecedented weekend hearing, the Air Quality Control Commission, with industry support, approved this change. Industry is controlling condensate tank emissions mostly by installing "enclosed, smokeless flares" to combust the VOCs. These controls have cost producers approximately $30,000,000 over the past three years. Starting in May, 2008, these controls will be required on a statewide basis, on all tank batteries emitting 20 tons or more per year of VOCs.

In return for adopting the Ozone Action Plan pursuant to the EAC, EPA agreed to defer nonattainment designation, as long as the Denver region met certain milestones, and achieved the ozone standard over the three-year period of 2005-2007.⁷ The area encompassed in the EAC is extensive, including most of the area from Douglas and Elbert Counties on the south, extending north along the South Platte River corridor into northern Weld County.

There was a significant caveat associated with the EAC: "Should any milestones be missed in designing or implementing the EAC, the region will forfeit its participation in the EAC and will revert to traditional nonattainment/attainment requirements based on the latest quality assured monitoring data."⁸

The violation recorded in July, 2007, was especially disappointing in light of CDPHE's annual ozone monitoring plan conclusion for 2004-2006:

Although several monitoring sites exceeded the level of the standard one or more times per year, the values recorded during the last three years show that none of the currently operating ozone monitors have recorded a fourth maximum 8-hour average greater than the level of the current standard. Therefore, Denver and the Front Range should remain in attainment for ozone.⁹

The hot summer of 2007 produced a "fourth highest" exceedence at the Rocky Flats monitor that will push the Denver region into non-attainment. By virtue of one reading, at one monitor, of one part per billion, the region now needs to prepare for the implications of non-attainment.

Non-Attainment

In the near future, EPA will officially designate the Denver region as non-attainment for ozone...