Code of Colorado Regulations
1000 - Department of Public Health and Environment
1002 - Water Quality Control Commission (1002 Series)
5 CCR 1002-61 - REGULATION NO. 61 - COLORADO DISCHARGE PERMIT SYSTEM REGULATIONS
Section 5 CCR 1002-61.58 - STATEMENT OF BASIS, SPECIFIC STATUTORY AUTHORITY, AND PURPOSE - STORMWATER - JANUARY 2006 RULEMAKING HEARING; FINAL ACTION FEBRUARY 13, 2006; REVISIONS EFFECTIVE MARCH 30, 2006

A. SUMMARY

In this proceeding, the Commission considered whether, in view of the provisions of the federal Energy Policy Act of 2005 (the Energy Bill), any revisions should be adopted to current Colorado requirements regarding stormwater discharge permits for oil and gas construction activities. The Commission decided to:

* Leave unchanged the current stormwater discharge permit requirements for oil and gas construction activities;

* Modify section 61.3 , which concerns applicability, to clarify that "the term" oil and gas exploration, production, processing or treatment operations or transmission facilities "does not include construction activities associated with such operations or facilities." This will make plain the Commission's intent that the oil and gas exemption under section 61.4 is not meant to apply to construction related to oil and gas operations; and

* Modify section 61.3.(2)(e)(ii)(A) for consistency.

The Commission directs the Division to collaborate with the Colorado Oil and Gas Conservation Commission (COGCC) on improving the regulation of oil and gas construction sites and minimizing their impacts on waters of the state, and to involve other stakeholders to the extent practicable.

The Commission plans to hold an informational hearing in early 2007, to review the status of these efforts and to assess whether any further actions by the Commission are appropriate to protect water quality.

B. AUTHORITY AND NEED TO REGULATE

Some representatives of the oil and gas industry have argued that the Energy Bill preempts Colorado's ability to regulate stormwater discharges from oil and gas construction activities. Based on advice from the Attorney General's Office and the analysis of other parties to this proceeding, the Commission disagrees. Although Congress has eliminated most federal regulation of stormwater discharges from oil and gas construction activities, Congress has not stated that such activities cannot be regulated by state governments.

The Colorado Discharge Permit System Regulations' stormwater discharge permit provisions have applied to oil and gas construction activities disturbing five or more acres since October 1, 1992. These regulations have applied to all oil and gas construction activities disturbing one or more acres since March 2, 2001. As adopted at that time, the regulations required activities disturbing one or more but less than five acres to apply for a discharge permit by July 1, 2002. That application deadline was later changed to March 10, 2005, and subsequently to June 30, 2005.

Section 25-8-202(8)(a) of the Colorado Water Quality Control Act allows the Commission to adopt rules more stringent than corresponding enforceable federal requirements only if it is demonstrated at a public hearing, and the Commission finds, based on sound scientific or technical evidence in the record, that the more stringent state rule is necessary to protect the public health, beneficial use of water or the environment of the state. The 2005 federal Energy Bill conditionally exempts most oil and gas construction activities from the EPA stormwater discharge permit program under the federal Clean Water Act. Accordingly, the federal NPDES stormwater requirements for such activities are limited to those oil and gas construction sites that have had a discharge of a certain level of pollutants (a "reportable quantity"), or have contributed to a violation of a water quality standard. This is less strict than the Division's regulation, in that a narrower category of sites is covered.

The Commission makes the following findings and conclusions regarding the requirements of section 25-8-202(8)(a). In making its determination, the Commission relies upon the entire record before it, but takes specific note of the following evidence.

* If not properly managed, discharges from construction activity can impact the biological, chemical and physical integrity of receiving waters. Evidence for this includes EPA's analysis of water quality impacts from large construction sites (FR Vol. 55, No. 222, Nov. 16, 1990, pp. 48033-48036) and small construction sites (FR Vol. 64, No. 235, Dec. 8, 1999, pp. 68724-68731), as well as EPA's Report to Congress on the Phase II Storm Water Regulations (EPA 833-R-99-001, October, 1999, pp. 1-4).

* The runoff generated while construction activities are occurring has potential for serious water quality impacts and reflects an activity that is industrial in nature. Where construction activities are intensive, the localized impacts of water quality may be severe because of high unit loads of pollutants, primarily sediments. Construction sites can also generate other pollutants such as phosphorus, nitrogen and nutrients from fertilizers, pesticides, petroleum products, construction chemicals, and solid wastes. FR Vol. 55, No. 222, Nov. 16, 1990, pp. 48033.

* Sediment yields from smaller construction sites are as high or higher than the 20 to 150 tons/acre/year measured from larger sites. Siltation is clearly a significant cause of impairment in water quality in rivers and lakes. EPA, Report to Congress on the Phase II Storm Water Regulations, EPA 833-R-99-001, October, 1999, pp. 1-4.

* Evidence was provided by Division staff and parties to the hearing regarding potential water quality impacts from specific oil and gas construction sites in Colorado. The Commission regards sediment deposition as a significant problem affecting water quality in the state.

* In 2004, the COGCC permitted 2,917 oil and gas wells. As of December 28, 4,290 well permits have been issued in 2005. Development of such wells usually includes road and pipeline construction as well. At this rate of development, oil and gas construction activities in Colorado pose a substantial risk of water quality impacts if not managed appropriately.

* The evidence does not demonstrate any significant differences in oil and gas construction sites versus other types of construction sites that would reduce the potential sediment yield from such disturbed areas. Although the oil and gas industry has noted the short time frame for actual construction at most oil and gas sites, this does not take into account the time it can take (up to several years) for revegetation of disturbed areas in Colorado's semi-arid environment. In addition, the Commission found that the potential impacts on public health, beneficial use of water or the environment from oil and gas construction activities are not significantly different from other construction sites so as to warrant lesser scrutiny. Other construction sites - small and large - are subject to the stormwater discharge permit provisions of Regulation 61 to prevent adverse water quality impacts.

The Commission concluded that the record for this rulemaking provides sound scientific or technical evidence that continuing to apply stormwater discharge permit requirements for oil and gas construction activities disturbing one acre or more is necessary to protect the public health, beneficial use of water or the environment of the state.

In December 2005, the COGCC amended its Rule 1002.e. requirements to strengthen a section on Surface Disturbance Minimization by specifying that best management practices must be used to minimize erosion and offsite sedimentation by controlling stormwater runoff, and by adding examples of typical best management practices. The amendment adds specific requirements for management practices needed to prevent environmental impacts from stormwater discharges, and is a good step in the review of the COGCC's regulations and the proposal of changes where needed. Industry representatives have argued that there is no need for oil and gas construction activities to be subject to stormwater discharge permit requirements administered by the Division because such activities are already subject to environmental protection requirements under the permitting regulations of the COGCC. However, the COGCC requirements, even with this addition, still do not constitute a full stormwater management program; i.e., there are still no equivalent requirements for preparation and implementation of a Stormwater Management Plan (SWMP) or for inspections of stormwater controls, and COGCC rules do not contain the more detailed requirements in the Division's permit that could be cited in potential compliance assurance actions.

To further clarify its intent regarding regulation of oil and gas construction activities, the Commission revised the stormwater "Applicability" section of the regulation to add a new sentence to subsection 61.3 . This sentence clarifies and reconfirms the Commission's and Division's longstanding practice and interpretation of the regulatory exclusion for "oil and gas exploration, production, processing or treatment operations or transmission facilities". As reflected by the fact that stormwater discharge permit requirements in Colorado have applied to oil and gas construction activities since 1992, this exclusion has consistently been interpreted and applied in Colorado as not covering such construction activities. In view of congressional action in the Energy Bill adopting a definition of this term that now excludes construction activities for purposes of federal stormwater discharge regulation, the Commission decided to add new language to clarify, reinforce and continue the established interpretation and application of this provision in Colorado.

On December 30, 2005, EPA signed a proposed rule for publication in the Federal Register. This proposal seeks to implement the provision of the Energy Policy Act of 2005 that exempts most stormwater discharges from oil and gas construction activities from the requirement to obtain NPDES permit coverage. If the draft EPA regulation were adopted, it would have led to a conflict in Colorado Regulation #61 between subsection 61.3 , and the new language in subsection 61.3(2)(c).

Subsection 61.3 stated that the term "stormwater discharges associated with industrial activity" did not include "discharges from facilities or activities excluded from the NPDES program under 40 C.F.R. Part 122 ..." The Commission has chosen to continue to regulate oil and gas construction sites of one acre or more under the Division's CDPS stormwater discharge program, while such sites are anticipated to be mostly exempt from NPDES permits under the federal regulations. Therefore, Subsection 61.3 has been changed to allow for this difference, by adding the following clause to the beginning of the second sentence of subsection 61.3 : "Except for the provision of 61.3(2)(c) that addresses construction activities associated with oil and gas operations or facilities..."

Some parties argued that EPA's proposal precludes Regulation #61 from addressing these activities. However, the Commission believes that the EPA proposal is consistent with the revisions adopted here, and indeed confirms that Congress did not intend to preempt States from regulating such activities.

C. REGULATED CONSTRUCTION ACTIVITIES

For oil and gas construction activities disturbing five or more acres ("large" construction sites), the Commission left in place the stormwater discharge permit requirements that have been in effect since 1992. Therefore, activities in this category will not be subject to any new or different requirements, but will continue to be subject to the same requirements that have been applicable for the last thirteen years. For oil and gas construction activities disturbing at least one but less than five acres ("small" construction sties), the Commission left in place the stormwater discharge permit requirements that have been in effect since June 30, 2005.

Currently, there are approximately 192 active certifications of coverage under the Division's general permit for oil and gas construction activities disturbing one or more acres. Because many of these certifications apply to multiple contiguous well sites within a well field, this represents hundreds or possibly several thousand individual well pads.

In calculating the number of acres of land disturbed to determine the applicability of stormwater discharge permit requirements, section 61.3 of the Colorado Discharge Permit System Regulations provides that all "clearing, grading and excavation" associated with the activity is included. For an oil and gas construction activity, this includes not only the drill pad but also any production facility, any roads constructed to provide access to the pad area, and any pipelines constructed for transmission of product for transport, storage or processing. This subsection of the regulation also provides that all disturbed land area "that is part of a larger common plan of development or sale" will be included in the acreage calculation. For the oil and gas industry, a "common plan of development" generally is interpreted to mean development of several well pads and/or related infrastructure (i.e., roads, pipelines, pumping stations, etc.) in a contiguous area either during the same time period or under a consistent plan for long-term development. "Contiguous" is interpreted to mean sites up to ¼ mile apart and/or having the area between the sites disturbed (i.e., connected by a road or pipeline). Multiple well pads developed by the same company within a single well field will often fall under this provision.

Taking these considerations into account, the Commission anticipates that many oil and gas construction activities will exceed the five-acre threshold, and most will exceed the one-acre threshold. The differentiation in the Division's requirements between small and large construction sites is primarily important only when considering the applicability of the Division's erosivity waiver. This waiver is generally for sites that will be completed and stabilized in a few months and during dry times of the year. It is anticipated that the waiver may be used mostly for small construction projects in agricultural areas on the eastern plains, as the criteria for final stabilization are less strict for projects on land that will be returned to agricultural use (e.g., cropland).

The Commission determined that the continuation of existing stormwater discharge permit requirements for oil and gas construction activities is necessary and appropriate considering:

* The potential water quality impacts from such construction activities, as noted above;

* The large number of oil and gas construction activities currently in place in Colorado;

* The large number of additional oil and gas construction activities expected to occur in Colorado in the future; and

* The extremely limited federal regulation of the potential water quality impacts from stormwater runoff at such activities, as a result of the 2005 federal Energy Bill.

D. ECONOMIC REASONABLENESS

Sections 25-8-102(5) and 25-8-202(2), C.R.S., direct the Commission to consider the economic reasonableness of a regulatory action. In addition to its findings related to section 25-8-202(8)(a), the Commission concluded, based on the record of this proceeding, that continuing to apply Colorado stormwater discharge permit requirements to oil and gas construction activities that disturb one or more acres is economically reasonable.

For oil and gas construction activities disturbing five acres or more, the result of this proceeding is to continue the stormwater discharge permit program requirements that have been in place for over 13 years. The Commission found that compliance with these requirements has not created an unreasonable economic burden on the oil and gas industry or significantly harmed the productivity of that industry. This proceeding does not create any new or additional economic burden for this category of activities.

For oil and gas construction activities disturbing one or more but less than five acres, the result of this rulemaking is to reaffirm their coverage under the stormwater discharge permit program. The final effective date for this coverage was June 30, 2005. The evidence submitted does not demonstrate that the economic impact of compliance for one to five acre sites will be different in nature or magnitude than that for five acre and larger sites. This requirement does not create a significant new economic burden.

In addition, the Commission notes that adequate information is now available about appropriate best management practices (BMPs) for managing stormwater runoff from oil and gas construction activities. The evidence submitted indicates that the BMPs applicable to these sites do not differ substantially from BMPs for other construction activities.

E. NEXT STEPS FOLLOWING THIS RULEMAKING

The Commission intends to schedule a public Informational Hearing for early 2007, to review the status of implementation of these provisions for oil and gas construction activities disturbing one or more acres, to assess whether any further actions by the Commission are appropriate to protect water quality.

The Division has stated that it intends to initiate a joint effort with the COGCC, inviting participation from industry, local government and the public, to:

* Examine current stormwater management practices for oil and gas construction activities in Colorado ; and

* Explore options to assure that implementation of the Commission's stormwater permitting requirements and the COGCC regulations will be coordinated in a manner to avoid adverse water quality impacts from these activities while minimizing the administrative burden on these agencies and the regulated community.

The Commission supports and encourages this effort. The Commission also specifically requests that the Division's efforts include exploration of options for waivers or other forms of flexibility for activities that present a low risk of adverse water quality impacts. The information gathered should be extremely beneficial in informing future Commission decisions about appropriate stormwater discharge permit regulations for these activities. As part of this effort, the Commission specifically encourages examination of opportunities for coordination between this regulation and the COGCC regulations regarding erosion control and stormwater runoff.

PARTIES TO THE RULEMAKING HEARING