TEST ALERT: The Clean Air Act’s Application to Oil and Gas Facilities on Indian Lands: An Evolving Regulatory Scheme

An Evolving Regulatory Scheme

November 14, 2012

Background and Summary

Since August 2011, EPA has promulgated several final rules under the Clean Air Act (“CAA”) that affect emissions sources, including oil and natural gas drilling operations, on Indian lands. Besides the several rules specific to Indian lands, additional regulatory issues — including fugitive emissions, the aggregation of emissions sources, and federal action triggers such as Endangered Species Act and General Conformity — have the potential to substantially impact such operations on Indian lands in the future.

Before EPA issued its final NSR rules for Indian lands in August 2011, EPA already had a Federal Implmentation Plan (“FIP”) in place for major sources on Indian lands located in attainment areas. On behalf of the vast majority of tribes that had not been delegated permitting authority under the CAA, EPA had been issuing permits under its FIP. In 2011, EPA added a nonattainment major NSR program and a minor NSR program for Indian lands to its FIP.  Under consent agreements with a number of impacted exploration and production entities, which were conducting activities on the Fort Berthold Indian Reservation, the August 2011 rule’s effects were postponed for a year. In August 2012, EPA published a final rule specific to that reservation, which addressed 600 existing and new production facilities that EPA could not issue permits for prior to the consent agreements’ expiration dates.

 Although the new Indian lands rules fill certain regulatory gaps, some gaps still remain. Depending on how those gaps are filled, industry could be confronted with regulatory burdens on Indian lands that it had not been anticipating. EPA’s authority to require the inclusion of fugitive emissions when calculating major modifications of non-Section 302(j) major sources – including sources in the oil and natural gas production sector – is in limbo as EPA resolves a conflict between contrary rules from 2002 and 2008. In addition,  EPA is currently sorting out a recent appeals court ruling, which emphasized physical proximity as the most important factor in the determination of whether sources are adjacent and thus, should be aggregated. And EPA Region 8, the home of 27 Tribal Nations, is undertaking a program to consider how source determinations can be streamlined. That Region 8 program could possibly lead to a policy of more source aggregation. Of course, large, aggregated sources could also potentially end up surpassing the greenhouse gas permitting thresholds. In addition, permits issued by EPA under this new authority in nonattainment areas are subject to General Conformity requirements of CAA section 176 and the Endangered Species Act.

Indian Lands NSR Rule

On July 1, 2011, EPA published a final FIP, which included the minors and Nonattainment Major NSR Rules.

  • minors NSR Rule

The minors NSR Rule applies to all new or modified sources on Indian lands with potential to emit (“PTE”) at or greater than the minors NSR thresholds but below the major NSR thresholds. Generally, minors sources are those with a PTE of 100 to 250 tons per year (“tpy”). EPA also added a mechanism that allows major sources on Indian lands to become ‘‘synthetic minors sources” by voluntarily accepting emission limits on their PTE.

There are three permit options under the minors NSR Rule: (1) site-specific permits made on a case-by-case review; (2) general permits; or (3) “synthetic minors permits,” which apply to sources that would be major sources but voluntarily accept emission limits on their PTE to keep emissions below major thresholds. Synthetic minors sources undergo site-specific permitting, and general permits are not issued to such sources.  In addition, as of the rule’s effective date, existing synthetic minors sources could potentially need permits depending on how they became synthetic minorss, while new synthetic minors sources would be able to apply for their permits.

    As for “natural” or “true” minors sources, existing sources generally only need to register within the first 18 months of the minors NSR program, and those sources are not subject to the program’s requirements until their operators propose modifications.  Following the earlier of the first 36 months or 6 months after a general permit for a source category is published, new and modified “natural” minors sources require permits where proposed new or modification-related emissions exceeded minors source thresholds. The final minors NSR Rule also provides a process for case-by-case determinations of maximum achievable control technology (“MACT”), and the rule establishes a registration system for existing minors sources to improve Indian tribes’ inventories of emissions sources.  Lastly, minors modifications at major sources necessitate the submission of permit applications beginning on the rule’s effective date.

  • Nonattainment Major NSR Rule

The scope of the Nonattainment Major NSR Rule is limited to Indian lands in areas that do not meet the NAAQS. Major sources are those with PTEs above major NSR thresholds, which vary depending on the type of source, pollutant, and nonattainment classification but are generally no more than 100 tpy in nonattainment areas. The Nonattainment Major NSR Rule’s requirements follow the transitional NSR program commonly known as “Appendix S,” through which EPA imposes requirements for states and Indian tribes that lack nonattainment major NSR programs for any pollutants regulated under the CAA.  Under the Nonattainment Major NSR Rule, operators of major sources need to receive permits before they can construct or modify their sources. The rule requires affected sources to install Lowest Achievable Emission Rate (“LAER”) control technology and to obtain offsets, which create net air quality benefits in the nonattainment areas.1 In the final Indian lands FIP, EPA, citing concerns about implementation, decided not to allow offset waivers for certain major sources.
Fort Berthold Indian Reservation

The Fort Berthold Indian Reservation (“Fort Berthold”) in North Dakota, which overlies the Bakken Shale, is the site of extensive exploration and production activity. Fort Berthold is home to three affiliated tribes that collectively constitute a federally-recognized Indian tribe. The Bureau of Indian Affairs estimates that roughly 1,000 wells will be drilled on Fort Berthold over the next decade.2


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1 “Review of New Sources and Modifications in Indian Country,” 76 Fed. Reg. 38,748 (July 1, 2011).
2 See, e.g., Order Granting Filing of an Electronic Consent Agreement and Final Order, In the Matter Of: XTO Energy, Inc. at 2 (Aug. 26, 2011), available at$File/CAA0820110018%20CAFO.pdf (hereinafter “XTO CAFO”).

This article was originally published by Bingham McCutchen LLP.