American Oil and Gas Reporter - July 2018 - 126

state, local and tribal air agencies of the
requirement to address RACT for nonmajor sources in this sector (and the associated need to consider the recommendations in the CTG for the time being),"
the agency points out.
As part of its request for comments,
EPA says, it sought any information related to state rules that would have supplanted the need for additional requirements under the final CTG, as well as
on state actions with respect to sources
that would be affected by the CTG in
the absence of the CTG. It says this includes information on regulations in SIPs
that would affect nonmajor oil and gas
sources in the CTG, regardless of that
document's status.
The planned withdrawal includes model
rule language incorporating the recommended compliance elements that states
may use as a starting point when developing their SIPs, EPA reports. The agency
notes the deadline for incorporating the
CTG-based RACT recommendations into
SIPs has not passed, so states may wish
to wait for the final outcome of any action
relating the CTG and EPA's reconsideration of the NSPS before finalizing additional controls on oil and gas sources
covered by the CTG, unless otherwise
required by other regulations.
Inappropriate Controls
EPA is correct in seeking to withdraw
CTGs for the oil and gas industry, IPAA
and its allies assert, citing the CTG's
links to the 2016 NSPS (Subpart OOOOa)
and the 2011 NSPS (Subpart OOOO).
"While Subpart OOOO has been essentially subsumed into Subpart OOOOa,
these regulations are now being revisited
and may be significantly revised," the industry groups say. "Additionally, the application of the 2011 NSPS substantially
impacts the universe of facilities that
comprise the existing sources that would
be affected by the CTG. Until the validity
of the NSPS is resolved, existing sources
should not be subject to technology controls that may be inappropriate."
On the state level, the Clean Air Act requires SIPs for ozone nonattainment areas
classified as moderate or higher to use
RACTs. The industry comments say because
some states must develop their SIPs for the
2008 Ozone National Ambient Air Quality
Standards even through a 2015 ozone
NAAQS has been promulgated, they would
be required to include the CTG in their
planning for both specific ozone nonattainment areas and on a statewide basis for
states in the ozone transport region. "Given
the flawed nature of the CTG, this result is
inappropriate," the groups state.
The groups maintain the NSPS BSER

determination is inappropriate as RACT
for existing sources, and is particularly
problematic for oil and gas wells that
would be most affected by the CTG for
two reasons:
* Wells decline after their initial production; and
* The 2011 NSPS controls most significant oil and gas production emissions
sources.
"The 2011 NPS has been in effect for
seven years, and before it a substantial
portion of wells were drilling under the
voluntary Gas STAR program that used
comparable technologies," the groups
note. "Consequently, the pool of existing
sources not using these technologies will
be dominated by low-production wells
(15 barrels a day or less for oil; 98 Mcf a
day or less for natural gas). Not only is
the emissions potential for these wells
far lower than new sources, the cost
impact is far more difficult to absorb."
The agency must determine which approach it should take on the NSPS revision,
the groups say, adding that if EPA decides
to develop CTG for existing sources, it
must take a different approach than used
in this iteration. "It must recognize that
its prior NSPS actions will create a far
different profile of existing source emissions. It must develop RACT using the
realities of that profile," the industry
groups urge.
In addition, EPA must use more realistic
economic analysis in developing its RACT
assessments, the comments say. The industry
groups note that the current CTG is based
on a natural gas price of $4.00 an Mcf,
while the actual price is closer to $3.00 an
Mcf, with taxes and royalty payments reducing the gross price to roughly $2.25.
The groups also point out that the agency
must recognize how close most low-production wells that provide the majority of
domestic production are to the tipping point
of being uneconomic if compelled to absorb
the cost of additional requirements.
According to the industry coalition,
"For too long, cost-effectiveness analyses
look at some type of incremental cost/benefit but these benefits are unachievable if
the absolute cost pushes a well into shutting down."
API Comments
In separate submitted comments, the
American Petroleum Institute expressed
support for EPA's planned withdrawal of
CTGs and revised NSPS OOOOa rules.
API Senior Director of Regulatory
and Scientific Affairs Howard Feldman
says the institute hopes the agency's
actions will provide regulatory certainty
to the oil and gas industry, and that the
new rules are science based and cost-ef-

126 THE AMERICAN OIL & GAS REPORTER

fective. He points out the nation's ozone
concentration and methane emissions
have decreased significantly, and air
quality continues to improve, thanks in
part to industry investments in emissions
technology and increased gas use.
Between 2000 and 2014, oil and gas
companies invested $90 billion in new
zero- or low-emissions technologies, API
says, more than twice that of the next
closest industry sector, and nearly as
much as the federal government.
API supports EPA following the science,
and also recognizing the results that state
and federal regulations already have
achieved, Feldman says. He asserts that
Congress has the opportunity to ensure
that states and businesses are protected
from duplicative and burdensome regulations. API hopes to see legislative proposals
that improve implementing ozone standards
while continuing the nation's commitment
to protecting public health and reducing
air emissions, he says.
r

Lilis And Salt Creek Sign
Oil Gathering Agreement
SAN ANTONIO, TX.-Lilis Energy
Inc. has entered into a crude oil gathering
agreement with Salt Creek Midstream
LLC, an ARM Energy Holdings' affiliate.
Salt Creek is building a regional
pipeline system, and will provide gathering
and transportation service for Lilis' oil
production in Texas and New Mexico to
its terminal in Winkler County, Tx., the
companies say. The terminal will allow
Lilis to directly access long-haul downstream pipelines connected to Midland
and the Gulf Coast region. The project is
scheduled to begin service in 2019.
According to the companies, the project
is supported by a dedicated area of mutual
interest, which covers all of Lilis' acreage
in Lea County, N.M., and Winkler and
Loving counties in Texas. Lilis will provide
its acreage dedication with no volume or
capital expenditure commitments, and
Salt Creek will provide all capital for the
oil-gathering system, they describe.
In addition to the oil-gathering agreement, the companies say they also have
entered into an agreement whereby Lilis
has received cash consideration in exchange for granting Salt Creek options
to provide certain natural gas midstream
services for Lilis' gas produced within
an area of mutual interest.
Ronald D. Ormand, Lilis' chairman
and chief executive officer, says, "Lilis
now is very well positioned for the future
with infrastructure systems in place
through long-term gas and crude gathering
agreements."
r
American Oil and Gas Reporter - July 2018

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