2 Colo. Code Regs. § 404-1-316

Current through Register Vol. 47, No. 24, December 25, 2024

Section 2 CCR 404-1-316 - REQUIREMENTS FOR OIL AND GAS OPERATIONS IN THE OZONE NONATTAINMENT AREA

a.Consideration of Operator's NOx Intensity Target Status for Oil and Gas Development Plans in the Ozone Nonattainment Area between May 1 and September 30.

(1)Operator's Demonstration of NOx Intensity Target Status for Oil and Gas Development Plans. Each Oil and Gas Development Plan application that seeks approval to conduct pre-production operations in the Ozone Nonattainment Area between May 1 and September 30 will provide the following information on a Form 2B:

A.Operators Subject to the NOx Intensity Target.

i. The Operator will provide the following information, as submitted in its most recent interim report pursuant to AQCC Regulation No. 7, Part B.VI.E.4, as incorporated in Rule 301.h:

aa. Interim NOx intensity, calculated pursuant to AQCC Regulation No. 7, Part B.VI.E.2.a, as incorporated in Rule 301.h; and

bb. Indication of whether the operator has met, has exceeded, or is below its NOx Intensity Target.

cc. If any data pertaining to an Operator's NOx Intensity Target is corrected and submitted to CDPHE, the same corrected data will be submitted to the Commission within 10 days of its submission to CDPHE.

ii. The Operator will provide the following information, as submitted in its annual report pursuant to AQCC Regulation No. 7, Part B.V.B, as incorporated in Rule 301.h:

aa. NOx intensity, calculated pursuant to AQCC Regulation No. 7, Part B.VI.E.2.a, as incorporated in Rule 301.h; and

bb. Indication of whether the operator has met, has exceeded, or is below its NOx Intensity Target.

B.Operators Not Subject to the NOx Intensity Target. For Operators not subject to the NOx Intensity Target pursuant to AQCC Regulation No. 7, as incorporated in Rule 301.h, for the preceding May 1 through September 30 period, the following information:

i. A statement certifying that the operator will comply with Enhanced Systems and Practices for all activities included in the Oil and Gas Development Plan; and

ii. A list of additional operational practices to be utilized by the operator to reduce emissions of NOx.

C. On the Form 2B, the Operator will indicate the year the Operator plans to begin pre-production operations.

(2) Any Oil and Gas Development Plan application that seeks approval to conduct pre-production operations in the Ozone Nonattainment Area between May 1 and September 30 must be submitted, pursuant to the 300 Series Rules, no later than December 31 of the year prior to the proposed pre-production operations. Submission of the Oil and Gas Development Plan by December 31 does not guarantee that the Commission will hear the application before May 1 of the following year.

(3)Director's Consideration of an Operator's NOx Intensity Target Status. As part of the Director's Recommendation pursuant to Rule 306.b, the Director will consider the Operator's NOx Intensity Target status.

(4)Commission Consideration of an Operator's NOx Intensity Target Status. The Commission will review the Director's Recommendation pursuant to Rule 307 and consider the Operator's NOx Intensity Target status.

b.Form 2D, Emissions Intensity Assessment. All Operators who conduct, or seek to conduct, Oil and Gas Operations within the Ozone Nonattainment Area will file a Form 2D, Emissions Intensity Assessment, by February 15, 2025, and no later than February 15 of each year thereafter.

(1)Pre-Production Operations Within the Ozone Nonattainment Area between May 1 and September 30. Any Operator who seeks to conduct pre-production operations under an approved Oil and Gas Development Plan, Form 2A, or Form 2 in the Ozone Nonattainment Area between May 1 and September 30 will submit a Form 2D to the Director. No pre-production operations may occur within the Ozone Nonattainment Area between May 1 and September 30 without an approved Form 2D. The Form 2D will include:

A. For Form 2Ds submitted for proposed pre-production operations between May 1 and September 30, 2025, an Operator will submit:

i. The Operator's most recent interim NOx intensity information pursuant to AQCC Regulation No. 7, Part B.VI.E.4, as incorporated by Rule 301.h, for 2024, or a statement certifying that the Operator is not subject to the NOx Intensity Target;

ii. A narrative description of the Enhanced Systems and Practices pursuant to Rule 316.c that the Operator plans to utilize to reduce emissions and/or ensure that it does not exceed its NOx Intensity Target during the upcoming year;

iii. A narrative description of the Operator's ability to not exceed its NOx Intensity Target for pre-production operations proposed between May 1 and September 30, 2025;

iv. A narrative description of the Operator's level of pre-production operations for the upcoming May 1-September 30 time period as compared with the prior two May 1-September 30 time periods, if applicable;

v. Any other information that demonstrates compliance with the NOx Intensity Target; and

vi. A certification that the information provided in the Form 2D is true and correct to the best of the Operator's knowledge and belief.

B. For Form 2Ds submitted for proposed pre-production operations between May 1 and September 30, 2026, and each May 1 to September 30 time period thereafter, an Operator will submit:

i. The Operator's most recent NOx Intensity information, which will include, as applicable:

aa. The Operator's most recent annual NOx Intensity information pursuant to AQCC Regulation No. 7, Part B.V.B, as incorporated in Rule 301.h, indicating whether the Operator is below, has met, or has exceeded its NOx Intensity Target; and the Operator's most recent interim NOx Intensity information pursuant to AQCC Regulation No. 7, Part B.IV.E.4, as incorporated in Rule 301.h, indicating an Operator's progress with respect to its NOx Intensity Target; or

bb. A statement certifying that the Operator is not subject to the NOx Intensity Target.

iii. A narrative description of the Operator's ability to not exceed its NOx Intensity Target for pre-production operations proposed for the upcoming May 1-September 30 time period;

v. Any other information that demonstrates compliance with the NOx Intensity Target; and

vi. A certification that the information provided in the Form 2D is true and correct to the best of the Operator's knowledge and belief.

(2)Production Operations Within the Ozone Nonattainment Area. All Operators in production in the Ozone Nonattainment Area will submit a Form 2D containing its most recent NOx Intensity information, which will include the information set forth in Rule 316.b.(1).B.i, as applicable. The Form 2D will also include:

A. A statement certifying that the Operator was below its NOx Intensity Target by 20% or greater in its most recent annual report, as informed by its interim report; or

B. A statement certifying that the Operator was not below its NOx Intensity Target by 20% or greater in its most recent annual report, as informed by its interim report, and information to assist the Director in evaluating whether the Director believes the Operator can comply with its NOx Intensity Target, including, but not limited to, whether the Operator will take additional actions to:

i. Implement any Enhanced Systems and Practices found in Rule 316.c;

ii. Shut in one or more Oil and Gas Well(s); or

iii. Plug and Abandon one or more Oil and Gas Wells.

(3)Director's Review of a Form 2D.

A.Pre-Production Operations Within the Ozone Nonattainment Area between May 1 and September 30.

i. If the Operator's Form 2D indicates the Operator was below its NOx Intensity Target by 20% or greater in its most recent annual report, as informed by its interim report, the Director will approve the Form 2D to authorize pre-production operations in the Ozone Nonattainment Area for the immediately upcoming May 1 and September 30 time period.

ii.Additional Review. If the Operator's Form 2D indicates the Operator was not below its NOx Intensity Target by 20% or greater, the Director may approve the Form 2D to authorize pre-production operations in the Ozone Nonattainment Area for the immediately upcoming May 1 and September 30 time period, or require the Operator to engage in the following additional review process.

aa. If the Director requires the Operator to engage in this additional review process, an Operator will submit an anticipated list of all proposed pre-production operations for the upcoming May 1-September 30 time period, in support of its Form 2D. Such list will include, but is not limited to, the following information:

1. Oil and Gas Locations to be constructed;

2. Oil and Gas Well(s) to be drilled, deepened, re-entered, or planned for sidetrack;

3. Oil and Gas Well(s) to be completed or recompleted;

4. Oil and Gas Well(s) to be converted into Class II UIC Well(s); and

5. Well(s) to be converted from Stratigraphic Well(s) into Oil and Gas production Well(s).

bb. If the Director believes the list of proposed pre-production operations submitted pursuant to Rule 316.b.(3).A.ii.aa demonstrates the Operator can comply with its NOx Intensity Target, the Director will approve the Form 2D.

cc. If the Director does not believe the list of proposed pre-production operations submitted pursuant to Rule 316.b.(3).A.ii.aa demonstrates the Operator can comply with its NOx Intensity Target, the Director will request a consultation with CDPHE. The Director may also require the Operator to revise the list of proposed pre-production operations submitted pursuant to 316.b.(3).A.ii.aa and resubmit such list to the Director; or take any other actions that the Director, in consultation with CDPHE, deem necessary to assure compliance with the Operator's NOx Intensity Target.

dd. The Director may only approve the Form 2D following additional review if the Operator certifies it is able and willing to comply with the Director's requirements under Rule 316.b.(3).A.ii.cc. If the Operator does not certify that it will comply with the Director's requirements under Rule 316.b.(3).A.ii.cc, the Director may deny the Form 2D.

ee. If the Director requires an Operator to take action pursuant to Rule 316.b.(3).A.ii.cc, the Operator may appeal the Director's decision to the Commission pursuant to Rule 503.g.(10). The matter will not be assigned to an Administrative Law Judge or Hearing Officer pursuant to Rule 503.h. The Commission will hear the appeal at its next regularly scheduled meeting. The Commission may uphold the Director's decision if the Commission determines that the Director had reasonable cause to determine that the required actions are necessary to assure compliance with the Operator's NOx Intensity Target.

B.Production Operations Within the Ozone Nonattainment Area. If the Director determines that the information provided on an Operator's Form 2D pursuant to Rule 316.b.(2) indicates that that the Operator has exceeded for the previous year or is unable to comply with its NOx Intensity Target, then the process set forth in Rule 316.d will apply.

(4)Change in Approved Operations in the Ozone Nonattainment Area between May 1 and September 30. An Operator may request changes to pre-production operations previously approved pursuant to Rule 316.b in the Ozone Nonattainment Area for the period between May 1 through September 30 by submitting an amended Form 2D. Any Form 2D submitted after March 15 requesting changes to pre-production operations previously approved for the immediately upcoming May 1-September 30 time period will be approved only if the requested change includes an improvement to or equivalent Enhanced Systems and Practices pursuant to Rule 316.c, a reduction in operations, or a substitution of authorized Oil and Gas Locations or Wells that are identical in design and operation to the originally approved Locations and Wells. If changes to pre-production operations are a result of changes requested on an approved Oil and Gas Development Plan, a Form 4 Sundry Notice must also be submitted pursuant to Rule 301.c.

(5) The Director will report to the Commission no later than April 15 annually a summary of approved operations in the Ozone Nonattainment Area for the upcoming May 1 through September 30 time period.

c.Enhanced Systems and Practices for Operations Within the Ozone Nonattainment Area.

(1)Applicability.

A. The requirements set forth in Rules 316.c.(2)-(3) will apply to all new Oil and Gas Locations within the Ozone Nonattainment Area for which a Form 2A is submitted pursuant to Rule 304.a.(1) on or after January 1, 2025.

B. The requirements set forth in Rule 316.c.(4) will apply to all new construction of an Oil and Gas Location within the Ozone Nonattainment Area that occurs after January 1, 2026 for any Form 2A approved after the effective date of these Rules.

(2) Operators will use drilling rig and completions technology as set forth in AQCC Regulation No. 7 Part B.VI.E.1.

(3)Required Enhanced Systems and Practices. At all new Oil and Gas Locations subject to this Rule 316.c, Operators will implement the following Enhanced Systems and Practices to avoid, minimize, and mitigate emissions of ozone precursors during the stated time period in the Ozone Nonattainment Area.

A. The following Enhanced Systems and Practices are required year-round at new Oil and Gas Locations:

i. If the Operator has pipeline takeaway for produced water, the Operator will also utilize this pipeline takeaway for production flowback water;

ii. The Operator will have adequate and committed pipeline takeaway capacity for all produced gas;

iii. The Operator will shut in the facility, if the gas pipeline is unavailable, and obtain an approved Gas Capture Plan prior to utilizing gas on site;

iv. The Operator will use sand management technology and/or procedures including, but not limited to, closed-loop sandbox technology to reduce the generation and release of silica dust at the Oil and Gas Location;

v. The Operator will cover trucks transporting drill cuttings;

vi. The Operator will coordinate with nearby fire district(s) to promote any further transition away from PFAS Chemical-containing foam and evaluate if PFAS Chemical-free foams are available for any specific hazards; and

vii. If PFAS Chemical-containing foam is used at a location, the Operator will:

aa. Properly characterize the site to determine the level, nature, and extent of contamination;

bb. Perform appropriate soil and water sampling to determine whether additional characterization is necessary and inform the need for and extent of interim or permanent remedial actions; and

cc. Properly capture and dispose of PFAS Chemical-contaminated soil and fire and flush water.

B. The following Enhanced Systems and Practices will be required between May 1 and September 30 for all new Oil and Gas Locations in the Ozone Nonattainment Area, except for Oil and Gas Locations in Disproportionately Impacted Communities, in which case the following Enhanced Systems and Practices are required year-round:

i. The Operator will incorporate options in its Gas Capture Plan for recycling produced natural gas onsite (e.g., for gas lift systems or facility fuel systems);

ii. The Operator will use a lease automatic custody transfer ("LACT") system or technology that is demonstrably equivalent or superior;

iii. The Operator will use International Oil and Gas Producers Group III drilling fluid or a drilling fluid that has less than 0.5% total aromatic contact and a polycyclic aromatic hydrocarbon content less than 0.001%;

iv. The Operator will use a squeegee or other device to remove drilling fluids from pipes as they exit the wellbore; and

v. For ozone mitigation on CDPHE-forecasted high ozone days, the Operator will, as practicable:

aa. Eliminate use of VOC paints and solvents;

bb. Minimize vehicle and engine idling;

cc. Minimize truck traffic and worker traffic;

dd. Postpone the refueling of fleet or personal transit vehicles on Location;

ee. Suspend or delay the use of non-essential fossil fuel powered ancillary equipment (excluding safety-critical or site/Well integrity-critical operations); and

ff. Reschedule non-essential operational activities such as preventative maintenance and tank cleaning.

(4)Additional Enhanced Systems and Practices.

A.Locations Within a Disproportionately Impacted Community. At all new Oil and Gas Locations subject to this Rule 316.c that are also within a Disproportionately Impacted Community, Operators will implement the following Enhanced Systems and Practices to avoid, minimize, and mitigate emissions of ozone precursors between May 1 and September 30 in the Ozone Nonattainment Area.

i. The Operator will not store hydrocarbon liquids in permanent storage tanks on site (other than a maintenance tank possibly used for Well unloading or other maintenance activities);

ii. The Operator will have adequate and committed pipeline takeaway capacity for all produced oil;

iii. The Operator will use pipelines (e.g., lay-flat hose) to transport water used for hydraulic fracturing to the Location; and

iv. If centrifugal compressors are used on the Location, they will be equipped with dry seals.

B.Locations Not Within a Disproportionately Impacted Community. At all new Oil and Gas Locations subject to this Rule 316.c that are not within a Disproportionately Impacted Community, Operators will implement the additional Enhanced Systems and Practices set forth in Rule 316.c.(4).A to avoid, minimize, and mitigate emissions of ozone precursors between May 1 and September 30 in the Ozone Nonattainment Area where practicable.

C. At all new Oil and Gas Locations subject to this Rule 316.c, regardless of whether the Location is within a Disproportionately Impacted Community, Operators will implement the following additional Enhanced Systems and Practices to avoid, minimize, and mitigate emissions of ozone precursors between May 1 and September 30 in the Ozone Nonattainment Area where practicable:

i. The Operator will use grid power or onsite solar power for all permanent powered production equipment onsite, excluding external combustion sources;

ii. All drill rig engines and/or turbines with a manufacturer's design rate greater than or equal to 50 horsepower will be powered by grid power or non-fossil fuel generated power; and

iii. The Operator will not store produced water in permanent storage tanks on site (excluding normally empty maintenance tanks and tanks utilized in produced water recycling/reuse).

D.Practicability Assessment.

i. The Operator will explain on its Form 2A whether it is, or is not, implementing the specific Enhanced Systems and Practices listed in Rules 316.c.(4).B and C at the Oil and Gas Location and such explanation will include, but is not limited to:

aa. The availability of equipment or infrastructure required to implement the Enhanced Systems and Practices and the reason that such equipment or infrastructure is unavailable;

bb. An explanation of how implementing the Enhanced Systems and Practices could present adverse impacts to public health, safety, welfare, the environment, or wildlife resources;

cc. The potential reduction of emissions of ozone precursors attributable to the Enhanced Systems and Practices compared to the operational difficulties of implementing the Enhanced Systems and Practices;

dd. The non-applicability of any Enhanced Systems and Practices in Rules 316.c.(4).B and C to the respective Oil and Gas Location; and

ee. Other methods the Operator intends to employ to avoid, minimize, and mitigate adverse impacts to air quality in the Ozone Nonattainment Area during the May 1 to September 30 time period.

ii. The Director's Recommendation on the Oil and Gas Location pursuant to Rule 306.b will include a discussion of the Operator's chosen Enhanced Systems and Practices.

d.Actions to Reduce NOx Emissions. The Director may require Operators to take such actions between May 1 and September 30 in the Ozone Nonattainment Area to reduce NOx emissions generated from permitted pre-production and production operations as the Director deems necessary to assure compliance with an Operator's NOx Intensity Targets.

(1)Actions to Address an Operator's Failure to Comply with NOx Intensity Targets. If the Director determines that the information supplied on an Operator's Form 2D indicates that the Operator has exceeded or is unable to comply with its NOx Intensity Target, the Director will require the Operator to take such actions as the Director deems necessary to assure compliance with the Operator's NOx Intensity Target.

A. For pre-production operations, such actions may include, but are not limited to:

i. A prohibition on pre-production operations between May 1 and September 30 in the Ozone Nonattainment Area;

ii. Implementation of any Enhanced Systems and Practices listed in Rule 316.c; or

iii. Other such actions that the Director deems necessary to assure compliance with the Operator's NOx Intensity Target.

B. For production operations, such actions may include, but are not limited to:

i. Implementation of any Enhanced Systems and Practices listed in Rule 316.c;

ii. Shutting in one or more Wells;

iii. Plugging and abandoning one or more wells; or

iv. Other such actions that the Director deems necessary to assure compliance with the Operator's NOx Intensity Target.

(2)Consultation with CDPHE. Prior to requiring an Operator to take action pursuant to Rule 316.d.(2), the Director will seek consultation with CDPHE.

A. The Director will seek consultation with CDPHE at least 60 days prior to requiring an Operator to take action pursuant to this subsection. The Operator will be invited to participate in the CDPHE consultation. If the Operator elects not to participate, the Director will provide the Operator with a written summary of the consultation within 10 days. The Director may extend the consultation period by 60 days upon the request of CDPHE if additional time is necessary to avoid, minimize, or mitigate adverse environmental impacts.

B. This consultation will focus on measures that an Operator can implement to reduce NOx emissions and come into compliance with its NOx Intensity Targets.

(3)Appeal to Commission of Director Decision. If the Director requires an Operator to take action pursuant to this Rule 316.d, the Operator may appeal the Director's decision to the Commission pursuant to Rule 503.g.(10). The matter will not be assigned to an Administrative Law Judge or Hearing Officer. The Commission will hear the appeal at its next regularly scheduled meeting. The Commission may uphold the Director's decision if the Commission determines that the Director had reasonable cause to determine that the required actions are necessary to assure compliance with the NOx Intensity Target.

2 CCR 404-1-316

47 CR 22, November 25, 2024, effective 12/15/2024