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STATE OF NEW MEXICO

BEFORE THE SECRETARY OF ENVIRONMENT

IN THE MATTER OF GCP-OIL AND GAS No. AQB 17-26 (P)

HEARING OFFICER’S REPORT PURSUANT TO 20.1.4.100 (E )(2) NMAC

On February 12, 2018, the appointed Hearing Officer conducted a public hearing pursuant

to 20.1.4.100 (E) (2) NMAC at the Marquez Plaza Building, 525 Camino de Los Marquez, Santa

Fe, New Mexico. Andrew Knight, Office of General Counsel, appeared on behalf of the Air

Quality Bureau of the New Mexico Environment Department (“Department”). Louis Rose,

Montgomery & Andrews, appeared for COG Operating LLC (“COG”), Jennifer Bradfute and

Christina Sheehan, Modrall, Sperling, Roehi, Harris & Sisk, PA, appeared on behalf of New

Mexico Oil & Gas Association (“NMOGA”).

NMED, the applicant, seeks approval for the General Construction Permit for Oil and Gas

Facilities (“AQB 17-26 P”). Applicant presented the technical testimony of Elizabeth Bisbey

Kuehn, then Manager of the Minor Source Section of the Air Quality Control Bureau (Currently

Bureau Chief) and Eric Peters, an Air Dispersion Modeler with the Air Quality Bureau in support

of approval. NMOGA presented technical testimony by Patrick Padilla, Deputy Director of

NMOGA. GOG presented no technical testimony but asked clarifying questions regarding the

construction of the permit.

No other person entered an appearance to provide technical testimony in advance of the

public hearing. Several members of the public attended the hearing. Some members spoke on

behalf of coalitions and groups of concerned citizens. Some members spoke on behalf of non

profit organizations. Members of the public cross examined the technical witnesses. A

considerable number of public comments were also submitted via email. The Hearing Officer

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asked clarifying questions, admitted all exhibits offered by the parties (Department’s Exhibits 1-

10, and a Supplement of Exhibit 9 which included additional public comment and NMOGA’s

Exhibit 1, B I, and B2) into the record proper, and closed the evidentiary record after the public

hearing. Members of the public also filed exhibits at the hearing which were not pre- marked but

included in the record. The record proper also contains the administrative record and all documents

filed with the Hearing Clerk, including emails and letters addressing the public comment.

The public hearing lasted one day and the Hearing Officer conducted it in accordance with

the Department’s Permit Procedures found in 20.1.4 NMAC. The parties submitted proposed

findings of fact and conclusions of law, which the Hearing Officer considered and adopted in

relevant part as set forth herein.

SUMMARY OF PUBLIC HEARING TESTIMONY AND RELEVANT FINDINGS

This is not a verbatim account of the sworn testimony but rather a synopsis

Citations to the transcript are in the following format (TP page #).

Testimony of Leali Loyd

1. Ms. Loyd testified on behalf of herself and her husband Jeremy Sment. She testified that

there is a Delaware-sized methane plume above the Four Corners. She also testified about

the loss of millions of dollars of revenue due to waste caused by flaring as it escapes into

the atmosphere. (TP 15).

Testimony of Charles Schmidt

2. Mr. Schmidt testified in his capacity as an emissions testing manager. His experience

included stack tests, researching testing methodologies, implementing technologies, and

working to support compliance needs of his customers. (TP 16). He submitted a letter

requesting that ASTM Standard D6348 be listed as approved testing methodology. He

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mentioned neighboring states like Colorado which have adopted this method to show

compliance. (TP 17). Upon questioning by the Hearing Officer, he stated he had both a

commercial and professional interest (as an engineer) in supporting the technology as in

his opinion it was superior to other methodologies. He was concerned that if the draft

penTlit did not explicitly mention it, it would not be considered an approved method. (TP

18, 20).

Testimony of John Goldstein

3. Mr. Goldstein, Director of regulatory and legislative affairs for the Environmental Defense

Fund commented on the draft Pennit for Oil and Gas facilities. (TP 21). Environmental

Defense Fund is a national membership organization with over 2 million national members.

(TP 21). Its local membership includes more than 18,000 New Mexicans. (TP 22). One

major concern was that the draft permit did not address emission limitation or perfonnance

standards beyond the Federal standards. (TP 22). Mr. Goldstein discussed the findings for

a NASA satellite study showing the largest concentration of methane anywhere in the U.S.

above the Four Corners. He analogized that the 570,000 tons of methane were the

equivalent of 12 coal fired power plants. (TP 23). He urged New Mexico to keep pace

with its neighbors, that are also major oil and gas producing states, adopting requirements

that are more stringent than federal or apply to sources not regulated by EPA. (TP 23). He

went on to list three other states: Colorado, Wyoming, and Utah that include regulations

that are more protective than Federal Standards. (TP 24). Ohio, Pennsylvania, and

California also have standards more protective than federal standards. (TP 25). Special

emphasis was placed on the timeliness of the permit change in the shifting regulatory

landscape of EPA and Bureau of Land Management. (TP 26). Overall, the attempt to

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streamline the pennit process is missing an opportunity to adopt more rigorous standards

as neighboring states have demonstrated. (TP 27). One concern that was communicated

to NMED were the lack of controls on methane, with nothing beyond federal standards in

regard to Volatile Organic Compounds, and hazardous air pollutant requirements. (TP 28).

Testimony of Natalie Wells

4. Ms. Wells testified that she resided in Santa Fe and was a member of United Church of

Christ and New Mexico Interfaith Power and Light. (TP 30). She seconded the statements

made by Mr. Goldstein and mentioned concern about methane leaks and how it could affect

Native Americans living in Northern New Mexico. (TP 30).

Testimony of Joan Brown

5. Ms. Brown testified as a Franciscan Sister and Executive Director of New Mexico

Interfaith Power and Light. (TP 31). She mentioned that faith based communities have

been involved in addressing methane pollution to create stronger guidelines on the federal

and state level. (TP 31). She stated that letters that are signed by faith based leaders

statewide are voices that are not nonnally heard. (TP 31). This concern is prompted by a

concern for environmental justice, the health of the communities, and for care of all God’s

creation. (TP 31, 32). She disapproved of allowing each operator to estimate their expected

emissions and allowing the operators to determine which control devices to install. (TP

32). Another element of the draft permit that was troubling was the removal of one-quarter

mile setbacks for polluting facilities, from homes, schools, offices, and state parks. (TP

32). Because of New Mexico’s poverty, the loss of $27 million dollars a year affects the

royalties that would benefit the state and are wasted. tip 33). Her mother and her religious

traditions indicate “Waste Not, Want Not” and those guidelines are not being followed.

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(TP 33). When questioned about enviromnental justice impacts by the Hearing Officer,

Sister Brown indicated that in the Northwest there were groups of indigenous people and

in the Southeast where 50 or 60 percent of the population was Hispanic, that those voices

were marginalized and diminished because they don’t have power. (TP 35). The power is

held by industry and money. (TP 35). She expressed a concern that language access was

a problem in the public hearing process. (TP 35).

Testimony of Donald Meaders

6. Mr. Meaders recommended that the state institute well head metering. He wanted

the state and the states children to obtain the royalties. (TP 36). He thought that anything

that was flared or wasted should be paid for because it is a state resource. He noted that

the state needed as much revenue as it could find. (TP 36).

Testimony of Jill Joseph

7. Ms. Joseph, a nurse, testified about the public health consequences especially as it

contributes to chronic obstructive pulmonary disease, asthma, and other respiratory

problems. (TP 39. ) The financial cost of lost revenue of $27 million due to venting,
flaring, and leaks was also a concern. (TP 39). She feels strongly that New Mexico

has a duty to all its citizens to protect public health. (TP 40).

Testimony of Thomas Singer

8. Mr. Singer represented the Western Environmental Law Center. (TP 42). They are

based in Taos and represent clients in the four Corners Region. (TP 42). He previously

served on an advisory committee. (TP 42). He was also heavily involved in the

methane rule making by the Bureau of Land Management. (TP 42). He pointed out

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that the methane rules, stern from EPA rules, New Source Performance Standards

Sections Quad 0 (0000) and Quad Oa (0000a). (TP 42). He mentioned that those

rules were currently being reviewed by the EPA. (TP 43)

Testimony of Mary Layne

9. Ms. Layne wanted the people who supported fracking to identify themselves at the

hearing. (TP 45). She stated that the drafi permit would not establish maximum

emissions and that in her opinion that was just wrong. (TP 45). The new proposed rule

would delete the requirement for setbacks from schools and homes. (TP 46). She also

read from the Rio Grande Chapter of the Sierra Club which quoted 180 to 240 million

dollars of New Mexico’s natural gas is being wasted due to largely preventable venting,

flaring, and leaks according to scientific estimates and industry’s self-reported data.

(TP 47).

Testimony of Arlene Griffin

10. Ms. Griffin testified as a concerned citizen and concerned parent. (TP 49). She urged

New Mexico to be a trend setter by making things better, as health and wellbeing, are

things that matter, and affect fundamental rights: including life, liberty, and the pursuit

of happiness. (TP 52).

Cross Examination by Teresa Seamster

11. Ms. Seamster, an elected office of the Northern New Mexico Sierra Club, had several

questions for the Department’s witnesses. (TP 112). She wanted to know how the

WPX explosion occurred and the environmental consequences. (TP 117). She was

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particularly concerned about hydrogen sulfide being leaked within a quarter mile of the

Lybrook school which has 125 students. (TP 121).

Cross Examination by Bruce Baizel

12. Mr. Baizel, is the Director of the Oil and Gas Accountability Project, and the energy

program of Earthworks. (TP 129). He wanted to know why the setback rule was

eliminated from the current drafi permit. (TP 131). The NMED witness, Elizabeth

Bisbey-Kuehn, testified that the setback requirement had been eliminated because they

did not have the regulatory authority to include it. (TP 131). Previous Permits did not

have the regulatory authority to include it. (TP 131). Mr. Baizel suggested that

coordinated notice might be helpful to alert surface owners of any changes to the permit

in the event of a modification which would not require additional public notice. (TP

135).

Cross Examination by Stephen Verchinski

13. Mr. Verchinski wondered why there was no listing of best available technology in the

permit process. (TP 145) The NMED witness, Elizabeth Bisbey-Kuehn, stated that

they didn’t have the regulatory authority to insist on best available emission equipment

to install at a single site. (TP 146).

Cross Examination by Mr. Schmidt

14. Mr. Schmidt learned through cross examination that ASDM D 30 had been added to a

list of approved technologies during the course of the hearing. (TP 152).

Cross Examination of Eric Peters

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15. Mr. Goldstein questioned Mr. Peters who did the modeling about impacts at the fence

line. The Witness explained that most likely there would be. (TP 167).

Mr. Peters was questioned about the cumulative effects of all the permits. (TP 169). Mr.

Peters stated that if you add the monitoring and modeling together then that would be a full

accountability of all the pollution. (TP 170).

Cross Examination of Mr. Peters

16. Mr. Baizel asked for Mr. Peters to specify what he included in his modeling. (TP 174).

Mr. Peters, NMED’s modeler, explained he used tanks, turbines, engines, enclosed

combustion devices, and flares. (TP 174).

Opening Statement and Direct Testimony of New Mexico Oil and Gas

17. Ms. Bradfute explained that the New Mexico Oil and Gas Association, (“NMOGA”)

is a nonprofit industry organization with over 900 members. (TP 182). NMOGA’s

members will be most impacted by the permit. (TP 182). NMOGA responded to public

outreach efforts and submitted numerous comments and suggestions for the proposed

permit (TP 182). She summarized a regulatory outline and explained that the Air

Quality Bureau’s discretion was limited by the regulations. (TP 183). She pointed out

that the EIB, was the appropriate entity, with authority to adopt new standards as

needed. (TP 183).

Direct Examination of Patrick Padilla

18. Patrick Padilla, Deputy Director of NMOGA, handles matters related to regulatory

proceedings as well as agency interactions on behalf of the association. (TP 185). Mr.

Padilla was tendered as a technical expert in regulatory issues and oil and gas

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operations. (TP 187). Mr. Padilla learned of the proposed General Construction Permit

in late 2015. (TP 188). In response to New Mexico Environment Departments request

for stakeholder input, NMOGA, put together a workgroup of member companies and

technical individuals to formulate comments on behalf of the organization in the fall of

2016, TP 188). In January of 201$ NMED hosted an open house to discuss the draft

GCP. (TP 188).

NMOGA made several suggestions including Permit by Rule, using a throughput

rate in conjunction with a calculation that would basically prove compliance through

the amount of product moving through a facility, including a provision for starting

construction on a facility pending final outcome of a penriit, and continued

authorization of existing facilities that were covered under GCP- 1, and GCP-4, and

offered alternative modeling to the bureau. (TP 192. 193).

Permit by rule was rejected, the facility production rate in conjunction with a

calculation for emissions compliance proof was accepted. (TP 193). Mr. Padilla

explained that oil and gas operators could chose to do business in Texas rather than

New Mexico. (TP 195). Working on the New Mexico Checkerboard comprised of

state land, federal land, tribal land, private land and a whole multitude of land types is

more complex. (TP 196).

Mr. Padilla explained why he believed that Methane was not specifically listed,

because it was not defined as a criteria pollutant. (TP 198). He explained that you

could not control Volatile Organic Compounds without controlling methane at the same

time. tip 198). He explained that controls on VOC’s emissions complied with

requirements contained in the Clean Air Act. (TP 199). The state would have an

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estimate of non-fugitive emissions through at the Energy, Minerals, and Natural

Resources Department that had a study. (TP 201). Venting and flaring would likely

be higher than any fugitive emissions from equipment. He explained that several peer-

reviewed study’s that 1.7 would be a total loss factor. (TP 101.)

He discussed the potential rollback of federal regulations, specifically, New Source

Perfonnance Standards Sections Quad 0 (0000), and Quad Oa (0000a), and the BLM’s

venting and flaring rule. (TP 203). Anything after May of 2012 would have to comply

with Quad 0 (0000) which was aimed at VOC’s. Anything after September 2015, has

to comply with Quad Oa (0000a) which targets methane. (TP 203).

There have been attempts at the Federal level to limit those rules. (TP 203). The Hearing

Officer asked if any research was done statewide on the tracking fugitive versus non-

fugitive emissions. (TP 20$, 209). Mr. Padilla indicated that members of NMOGA had

done that research and were relying on data from the Energy Information Agency and EPA.

(TP 209). He stated that NMOGA did not agree with the $27 million-dollar annual loss of

revenue that had been stated earlier due to the fluctuations in the market. (TP 209). He

emphasized that industry is working hard to minimize loss and he extrapolated that if there

were a $27 million-dollar annual loss than industries gross loss would be between $225

million and $230 million. (TP 210). The Hearing Officer questioned the witness about his

opinion about setbacks. (TP 214). Mr. Padilla explained that there are local zoning rules,

and rules at the county and city level. (TP 214). He mentioned communities in the

Southeast and Northwest who have implemented local zoning ordinances. (TP 214).

Cross of Mr. Padifia

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19. Mr. Goldstein confirmed that he and Mr. Padilla were talking about the same study, a

2017 Environmental Defense fund study, commonly refelTed to as the New Mexico

Methane Waste Report. (TP 221). Mr. Goldstein questioned whether Mr. Padilla was

familiar with a study “Airborne methane remote measurement reflect heavy tail

distribution in Four Corners Region” that appeared in the proceedings of the National

Academy of Science. (TP 225). Mr. Padilla asked clarifying questions, and stated he

was familiar with the NASA study but didn’t agree it was accurate. (TP 225). Mr.

Padilla confinned that the NASA study was a peer reviewed study. (TP 226).

Afternoon Public Comments

Testimony of Mr. Baizel

20. Mr. Baizel testified that he was part of a working group called, STRONGER, which is

a national multi stakeholder board, which reviews Oil and Gas Environmental

Regulations. The group is comprised of industry, state regulators, and public

representatives on the board. (TP 242). He commented that the absence of optical gas

imaging and LDAR in the permit would not address the problem. (TP 244). He

mentioned Colorado’s methane rule, which was revised, resulted in a 60% reduction in

fugitive emissions. (TP 244). Visual/Olfactory inspection don’t capture it and if you

can see it you can fix it. (244). He also stated that it was better to verify emissions

than for industry to self-report. (TP 244). He observed that in other states, processing

facilities, initially obtained their permits based on modeling emissions standards but

when they were sampled using infrared technology, they were 10 times above the limit.

(TP 245). He observed a trend in other states like Pennsylvania and Texas were facility

modifications were used to avoid obtaining a Title V permit. (TP 245). Mr. Baizel

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thought that a second notice, (posted), that would cover major modifications would be

useful so neighbors and landowners would know of changes to the facilities. (TP 247).

Testimony of Mr. Goldstein

21. Mr. Goldstein reported that he received an email notification during the hearing that

the Bureau of Land Management had issued a policy to rescind its venting and flaring

rule. (TP 248).

FINDINGS OF FACT AS PROPOSED BY NMED

I. FINDINGS OF FACT

1. The Bureau provided notice of its intent to propose a new General Construction

Penriit for Oil and Gas activities in the fall’ of 2015 and accepted comments and suggestions from

interested stakeholders and the general public between the fall of 2015 — January of 2018.

Bureau’s Statement of Intent, Exhibit 10.

2. The Secretary issued a Hearing Determination for this matter on December 22,

2017, and the matter was docketed and a hearing officer was assigned on December 27, 2017. See

Notice of Docketing and Hearing Officer Assignment.

3. Public notices providing the time, date, and location of the hearing were published

in English and in Spanish in the Albuquerque Journal, FanTlington Daily Times, and the Hobbs

News Sun on December 31, 2017. Bureau’s Statement of Intent, Exhibit 5.

4. The Bureau submitted its Statement of Intent to Provide Technical Testimony on

January 29, 2018, listing two witnesses, Elizabeth Bisbey-Kuehn and Eric Peters. Bureau’s

Statement of Intent.

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5. Attorney Louis W. Rose entered his appearance on behalf of COG Operating LLC

on January 29, 2018. Entry of Appearance of Louis W. Rose.

6. Attorneys Christina Sheehan and Jennifer Bradfute filed a Statement of Intent to

Provide Technical Testimony on behalf of the New Mexico Oil and Gas Association (NMOGA)

on February 29, 2018, listing one witness, Patrick Padilla. NMOGA Statement of Intent.

7. A hearing was held on this matter on Monday, February 12, 2018, at the Marquez

Plaza Building, 525 Carnino de Los Marquez, Santa Fe, New Mexico, beginning at 9:00 a.m., and

continuing until approximately 3:21 p.m. Transcript of Proceedings.

8. The hearing officer began the hearing by taking public comment from ten members

of the public. Three additional public comments were heard at the end of the hearing. Tr. pp. 15-

52 and pp. 234-249.

9. After being duly sworn, the Bureau’s witnesses adopted their pre-filed written

testimony and provided a summary of the same. Tr. pp. 56-70, and pp. 153-178.

10. Following their direct testimony, the Bureau’s witnesses responded to questions

from the hearing officer, the attorneys for the other parties, and members of the public. Tr. pp. 70-

152; pp. 158-164.

11. Following the Bureau’s presentation of witnesses, Patrick Padilla provided

testimony on behalf of NMOGA, and responded to questions from the hearing officer and one

member of the public. Tr. pp. 185-227.

12. General Construction Permits are authorized by Section 20.2.72.220 NMAC, and

are issued by the Department in order to register like kind types of sources which are subject to

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similar state and federal regulations, which have similar types of equipment and emissions and

which are subject to similar types of monitoring, recordkeeping, and reporting requirements. Tr.

p. 89, in. 18-23.

13. The proposed General Construction Permit is more stringent than a source-specific

Part 72 construction permit would be, and the conditions of the General Construction Permit would

be federally enforceable. Tr. p. 91, in. 6-7; p. 96, ln. 23-25.

14. The proposed permit achieves several important environmental and permitting

benefits, including providing additional flexibility in the type of authorized equipment and control

devices, and improving the Department’s ability to determine compliance with the allowable

emission limits. Tr. p. 57, In. 3-10.

15. The proposed permit is intended to supersede the GCP-1 and GCP-4 permits which

were issued 19 and 17 years ago, respectively, and contain outdated equipment lists, outdated

authorized allowable control devices, and outdated monitoring, recordkeeping, and reporting

requirements. Tr. p. 70, In. 7-15.

16. The proposed permit eliminates the existing limitations of the GCP-l and GCP-4

permits, and includes voluntary reductions in the emission of volatile organic compounds from

sources including truck loading. Tr. p. 57, ln. 10-13.

17. Facilities potentially subject to Title V or Prevention of Significant Deterioration

(PSD) permitting requirements could use the proposed permit to establish federally enforceable

emission limits to stay out of further penrlitting requirements. Tr. p. 57, ln. 14-17.

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18. The proposed pennit is cost-effective, with a current permitting fee of $4,080, and

can be obtained within 30 days of the date the Bureau receives a Registration fonm Tr. p. 57, in.

18-21.

19. General permits provide a permitting option that requires less review time for

permit writers, and less time reviewing modeling results, because the air dispersion modeling

analysis has already been performed during the development of the permit. Tr. p. 58, In. 10-14.

20. The Bureau has issued other General Construction Peniiits, including GCP-l, GCP

-2, GCP-3, GCP-4, GCP-5, and GCP-6. Tr. p. 58, ln. 20-25; p. 59, in. 1-5.

21. The proposed penrLit was developed through a collaborative effort among various

sections within the Bureau, including the Minor Source section, Enforcement and Compliance and

modeling section, together with input and technical assistance from interested parties and

stakeholders. Tr. p. 59, In. 12-17.

22. The proposed pennit limits the potential emission rate of the pennitted equipment

to less than 95 tons per year of nitrogen oxides, carbon monoxide, and sulfur dioxide. Tr. p. 62, in.

19-2 1.

23. The proposed permit limits the emission rate of all equipment to less than 25 tons

per year of particulate matter measuring 2.5 microns or less, particulate matter measuring between

2.5 and 10 microns, total suspended particulate matter, and hydrogen sulfide. Tr. p. 63, in. 1-4.

24. The proposed permit limits hazardous air pollutants from a facility to less than ten

tons per year for any single hazardous air pollutant and 25 tons per year for all combined hazardous

air pollutants. Tr. p.63, in. 5-10.

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25. The proposed pennit contains an allowable equipment list that includes storage

vessels, flares, enclosed combustion devices, thermal oxidizers, engines, turbines, generators,

dehydrators, cryogenic units, acid gas removal systems, amine or sweetening units, and other

natural gas processing equipment. Tr. p. 64, In. 8-15.

26. The proposed permit also authorizes auxiliary equipment and activities, including

heaters, separators, truck loading, vapor recovery towers, condensers, pumps, and compressors.

Tr. p.64, ln. 16-21.

27. Registration under the proposed permit insures that a facility will not be classified

as a major source pursuant to 20.2.70 or 20.2.74 NMAC. Tr. p. 65, in. 9-1 1.

28. The proposed permit contains monitoring, record keeping, and reporting

requirements for individual pieces of equipment, as well as gas analysis requirements and setback

distances to surrounding facilities. Tr. p. 66, In. 3-6.

29. The registration information required for the proposed permit includes all of the

same information required for an individual Part 72 permit. Tr. p. 68, ln. 19-22.

30. The state of New Mexico has no specific regulation that establishes methane

emission limits; rather, New Mexico incorporates federal requirements for methane emissions

found in the New Source Performance Standards Sections 0000 (Quad 0) and Quad Oa. Tr. p.

72, ln. 12-20.

31. The Bureau would be unable to establish emission limits for methane absent a

specific state regulation promulgated by the Environmental Improvement Board. Tr. 72, In. 24-5;

p.76, ln. 1.

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32. While not specifically controlled or identified in the proposed permit, methane is

part of the constituent stream that is controlled by the various control devices that are authorized

under the proposed permit. Tr. 73, in.19-25.

33. Air dispersion modeling performed for the proposed permit was performed using

observed meteorological conditions that would result in the highest concentrations of pollutants at

potential receptors. Tr. p. 159, in. 17-25.

34. In response to comments from the U.S. EPA and from the oil and gas industry,

many air dispersion models were revised and rerun to develop the proposed penhlit. Tr. p. 156, In.

22-24.

35. In total, hundreds of modeling scenarios were run for the proposed permit. Tr. p.

156, in. 24-25.

36. The air dispersion modeling perfornied for the proposed pennit demonstrated that

facilities that operate in accordance with the permit will not cause or contribute to exceedances of

any applicable air quality standard or PSD increment. Tr. p. 157, In. 13-16.

II. MODIFICATIONS TO PROPOSED PERMIT

37. In response to comments and questions from other parties during the hearing, the

Bureau agreed to make certain corrections and clarifications to the language of the proposed

penhlit. Tr. p. 102, In. 25; p. 103, in. 1-5; p. 10$, In. 13-24.

38. In addition, the Bureau has identified typographical and clerical errors in the draft

permit that require correction.

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39. Condition Al00.E has been deleted. This condition states that no construction of

modifications may commence prior to receiving written approval from the Department. As this

condition is duplicated elsewhere in the permit (Condition A102.B; Condition B101.B, and

Condition C 10 1.3.2), Condition Al00.E does not provide additional clarification or instruction,

and may be deleted without reducing the enforceability of the permit.

40. Condition A102.A had an extra and unnecessary period at the end of the regulatory

citation. The period has been deleted.

41. Condition A102.B has been moved to Section A100 and renamed A100.E. This

condition is more appropriate under Section A100: Introduction and Applicability, than under

Section A102: Facility Description.

42. The footnote to Table 106 has been modified to add the tenTi “typically.” In most

cases, fugitives do not count toward Title V and PSD applicability. Adding the term “typically”

provides for the unusual circumstances where fugitive emissions must be included in Title V and

PSD applicability.

43. Condition A106.C has been modified. Under the recordkeeping requirement, the

final sentence has been modified to delete the word “Condition.” The inclusion of this extra word

was in error and its deletion resolves the error.

44. Condition A201.A has been modified. The term “Combustor” has been modified

to “Combustion.” This is consistent with how the equipment is referred in the proposed permit.

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45. Condition A202.B header has been modified. The header has been modified to

state, “of NOx and CO,” instead of “for NOx and CO.” Replacing “for” with “of’ clarifies the

condition header and makes more logical sense.

46. Condition A206.B has been modified. The term “with” has been added to the final

sentence of the Requirement Condition. This addition makes the sentence logical and complete.

47. Condition A206.C has been modified. The semicolons separating specific

requirements in the Requirement Condition have been replaced with commas. This is consistent

with other parts of the permit, and provides consistency in the Permit.

48. Condition A207.B has been modified. The letter “a” has been added to the first

sentence of the Monitoring Requirement. This addition makes the sentence logical and complete.

49. Condition A207.C has been modified. The words “or less” have been added after

H2S in the final sentence of the Condition. This request was made by one of the parties at the

hearing and is appropriate to include in the permit.

50. Condition A208.A has been modified. The words “(two) and (one)” have had the

parentheses deleted and placed around the numbers 2 and 1, respectively. This is consistent with

other parts of permit, and provides consistency to how numbers are represented in the Permit.

51. Condition A208.B has been modified. The Requirement Condition has been

modified to clarify that each ECD and TO in the Registration Fonn is subject to the terms and

conditions of the permit. The term “or” implied that the permittee may comply with the

requirements for either of the units. The new language clarifies that each unit is subject to the

tenns of the permit condition.

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52. Condition A210.A has been modified. The term “and” has been added between

requirements in the Monitoring Requirements. This is consistent with other parts of permit, and

provides consistency in the Pennit.

53. Condition A210.B has been modified. The words “from those listed” has been

deleted from the first sentence of the Requirement Condition. This is consistent with other parts

of pemlit, and provides consistency in the Penriit.

54. Condition A2 11 .B has been modified. The condition has been updated to include

references to Subpart A, in addition to NSPS 0000 and 0000a. This is consistent with other

parts of penrlit, does not change the meaning of the condition, and provides consistency in the

Permit.

55. Condition A212 has been modified. The setback for Terrain has been updated to

remove the parentheses around “five” and place them around “5.” This is consistent with other

parts of the penilit, and provides consistency in the Pennit. The setback for Nearby facilities has

been modified by adding a period at the end of the sentence.

56. Condition BlOl.D has been modified. The term “regular” has been inserted in

front of “Part 72” each time this term appears in this condition. This clarifies and distinguishes

the difference between regular, or custom, Part 72 penTlits and General Construction pemlits. The

term “application” has been inserted in the first sentence of the third paragraph to clarify that the

applicant is submitting an application.

57. Condition B1O1.E has been created. The issue of the Department revising the

Registration Form was raised at the hearing. This Condition addresses that concern and states the

following:

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A. On an as needed basis, the Department may revise the

Registration form and Air Emission Calculation Tool in

order to make necessary revisions, improvements, and

updates to the Forms.

58. Condition B110.f(1) has been modified. The term “limits” has been removed. The

correction clarifies that emissions in excess of 1.0 pph or 1.0 tpy must be reported for units with

no emission limits established in the Registration Fonm

59. Condition C100.B(2)(a) has been modified. The parentheses around “ten” have

been removed and inserted around the number “10.” This is consistent with other parts of the

permit.

60. Condition DiOl has been modified to delete multiple definitions of the same tenri,

and clarify the Pennit. The inclusion of multiple definitions of the same term was creating

additional confusion for internal and external users. The deleted definitions may be found in

various state and federal regulations if needed. These definitions are already incorporated into the

penTlit by reference and, thus, the deletion of definitions does not reduce the enforceability of this

Permit, or change any meaning or condition in this Permit.

61. All the corrections and changes to the proposed permit are shown in redline

strikethrough format in Attachment 1 to this document, and the final proposed permit is included

as Attachment 2.

III. CONCLUSIONS OF LAW

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62. The hearing was conducted in accordance with the Department’s pennitting

procedures found at 20.1.4 NMAC, and all persons present were given an adequate opportunity to

present views, comments, and evidence.

63. All public notice requirements of 20.2.72 and 20.1.4 NMAC were met for this

hearing.

64. The Department has the authority to issue general construction penhlits such as the

proposed permit pursuant to 20.2.72.220 NMAC.

65. Issuance of the proposed pennit falls within the authority granted to the Department

by the Air Quality Control Act, NMSA 1978, § 74-2-7.

66. The Bureau adequately considered and responded to written comments submitted

during the comment period for this permit.

67. The Bureau has met its burden to show that the permit meets the requirements of

the Air Quality Control Act and the Air Quality Control Regulations.

68. No technical evidence was offered during the hearing to support denial of the

permit.

Areas of Concern

F or ease of use the Hearing Officer has included all the proposed findings of facts submitted by

NMED. The Hearing concurs with the adoption of NMED’s proposed findings except for 8

paragraphs. The Hearing Officer has not adopted paragraph numbers 1, 2, 16, 17, and conclusions

of law 62, 63, 66, or 67 for the following reasons. There are two main concerns that can be broadly

addressed as Notice and Environmental Justice.

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Aspects of environmental justice can be broken into separate components; including meaningful

inclusion in the permitting process, public participation, disparate impacts, coordinated

communication, and health and safety as it relates to the removal of setbacks.

Notice

A review of the record proper indicates that the decision to hold a public hearing was not

flagged as an area where public participation would be warranted. Had the bureau requested that

the hearing be noticed and scheduled based on the expectation of public comment, it is likely that

a different date, location, and means of notifying the public, would have been used. The room

allocated for the hearing, barely contained members of the public who wished to attend.

The Affidavits of publication of Legal Notice are attached as NMED’s exhibits 2, 3, and

4. The notice itself indicates under the Availability of Information Section, that interested

persons must submit their written comments to the New Mexico Environment Air Quality

Bureau, 525 Camino de Los Marquez, Suite 1, Santa Fe, NM 87505. This section does not

indicate that failure to submit requests in writing will result in them not being responded to by

the Bureau. Although technical, the Notice requirements require strict compliance.

20.2.72.206 PUBLIC NOTICE AND PARTICIPATION:

A. The department shall:
(1) Make available for public inspection a List of all pending applications for permits or permit
revisions;
(2) Make available for public inspection the permit application and the department’s preliminary
determination. This material shall be available both at the departments central office and the district or field office
nearest to the proposed source. Copies of any permit application, except those portions of which may be determined
as confidential in accordance with 20.2.1 NMAC (General Provisions), will be supplied upon written request and
payment of reasonable costs;
(3) Subsequent to an affirmative administrative completeness determination, publish a public notice
in a newspaper of general circulation in the area closest to the location of the source. The notice shall include: the
applicant’s name and address, the location and brief description of the source, a summary of estimated emissions and
ambient impact, and the department’s preliminary intent to issue the permit if the construction or modification
requested in the application will comply with air quality requirements, including ambient standards. The notice
shall identify the location of the permit application and department’s analysis (when available) for public review and
describe the manner in which comments or evidence may be submitted to the department, including that persons

23
must inform the department in writing of their interest in the permit application in order to have a 30 day period to
review and comment on the analysis under Subsection B of 20.2.72.206 NMAC below. The notice shall clearly
state that any person who does not express such interest in writing prior to the end of the initial 30 day comment
period will not receive notification of the availability of the analysis and thus forewarn such person of the need to
express interest in writing if they desire to review and comment on the analysis

Timing of Notice of Hearing

The purpose of public notice other than, pro-forma, is to give actual notice to members of

the public who may wish to participate in the process or may be impacted by the proposed penTlit

change. NMAC requires that hearings be noticed to the public, and each newspaper has its own

deadlines to submit legal notices. Some papers may require that submissions be on certain days to

meet a publication deadline.

To my knowledge NMED does not have a specific policy related to the timing of notice,

but ostensibly, New Year’s Eve December 31, 2017 is traditionally a time when people are

preparing for a holiday. If the desire is to get actual notice to the public, then timing notices around

Federal Holidays is likely to result in decreased public participation in permit or rule making

hearings.

Had the Secretary been informed about the likelihood of public participation, the Hearing

Officer would have had the option of scheduling the hearing in places that would be affected by

the permit. The Air Quality Bureau picked the time and location of the hearing on Monday

morning in Santa Fe.

In this instance, this permit will impact all areas of the state. Northwestern New Mexico

i.e. the San Juan Basin, and Southern New Mexico i.e. the Permian basin where significant

amounts of oil and gas are located are likely to be impacted. New Mexico’s unique geography and

Checkerboard also means consultation and notice with Tribes. The notice itself was published in

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English and Spanish but no attempts weie made to translate the notice into Navajo. Although not

a requirement, as in Solid Waste Permits, broadening the methods of notice delivery would have

provided broader tribal consultation and greater participation. The Public Participation Matrix,

listed as NMED’s Exhibit 10, indicates that Tribes were emailed a copy of the notice on December

31, 2017. The public in general received notice on December 31, 2017 via a legal notice. There

was an open house held for in Santa Fe from I to 4 PM.

Environmental Justice

No public commenters submitted pre-filed notices of intent to file technical testimony.

Comments submitted by the public were past the deadline of Notice of Intent to File technical

testimony deadline. This also relates to the timing of the Notice.

Many members of the public, some of which belonged to various nonprofits, environmental

groups, and faith based groups had questions about the proposed draft permit. They included;

issues related to health and safety, compliance, and best available technology, environmental

justice issues, and language access issues.

Many of the participants in the Public Hearing knew, or should have known, by their

previous experience in permit hearings that there were deadlines for the submission of technical

testimony. Many of the public commentators were involved in all aspects of rulemaking and were

attorneys. so their level of sophistication, regarding the permitting process and regulatory affairs

far exceeded the average lay person. The NMED cannot insist that interested parties participate

in the pen-nitting process early, rather than wait until the last blow of the horn, to voice concerns.

This led to a dilemma for the Hearing Officer, as to what weight, should be allocated to the

testimony in public comment, versus the pre-filed written technical testimony submitted by NMED

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and NMOGA, including scientific modeling of air quality which was submitted by both entities.

A cursory review of the record, indicating that no members of the public or industry filed NOT’s

to present technical testimony, or opposed the permit hearing, could lead the fact finder to conclude

that there was no opposition to the proposed draft permit.

NMED’s findings of fact indicate that there were 13 public commenters. This tends to

diminish both the volume, and flavor, of public participation and the fact that many public

commenters were part of much larger membership organizations. These groups, despite learning

of the permit hearing, at the tail end of the permitting review period, had serious reservations about

the draft permit, and voiced their opposition to the permit, while identifying several issues of public

concern, namely methane in the four corners, VOC’s, and the health and safety concerns of people

who live near oil and gas facilities. The concern voiced by the public was that the NMED’s draft

penuit was at best a floor, rather than a ceiling, and missed opportunities to create meaningful

change by adopting best techno]ogy and keeping pace with neighboring states that were more

innovative in their permitting procedures and incorporated more stringent standards than the

federal standards. Many members of the public expressed concern about the BLM’s rule revisions

and the potential for EPA rule revision which could adversely impact New Mexico.

As an example, the Western Environmental Law Center, submitted public comment that included

signatures from twenty-two different non-profits including tribal, faith based, and conservation

voters. TP Email Dated January 5, 2018. One area, that both the public and members of the oil and

gas industry, seemed to find commonality was the length and timing of the permit review period.

“NMED designated a permit review and comment period of astonishingly minuscule four business

days over the New Year Holiday and end day of January 5, 2018”. via email. See letter from

Western Environmental Law Center delivered via email dated January 5, 2018.

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The Independent Petroleum Association requested additional time to submit formal

comments, “My members feel strongly that the short comment period combined with the

Christmas & New Year’s Holiday made it impossible to both digest the document and then make

technical comments” TP p 1 Independent Petroleum Association of New Mexico via email.

The public relayed frustration about the squandering of natural resources due to inadequate

regulation. Individuals cited the waste of $27 million dollars per year of natural gas and how lost

royalties equated to a failure to buttress state revenues, while potentially harming future

generations. A diverse set of eyes reviewing the draft permit certainly had questions that may not

have occurred to the drafters and were not addressed in the draft permitting process.

Fortunately, the New Mexico Supreme Court has provided much needed guidance about

the admission of non-technical public comment in the public hearing process and whether that

should be considered by the Hearing Officer. Colonias Dev. Council v. Rhino Environmental

SVCS., mc, provides guidance on the issue of whether a Hearing Officers review of testimony is

limited to technical issues. 2005-NMSC-024 13$ N.M. 133, 117 P.3d 939 The New Mexico

Supreme Court indicated that the Hearing Officer was not confined to purely technical testimony

but also could address factors that related to the cumulative impacts on communities and their

quality of life.

Environmental justice should be considered when considering the cumulative effects of

permits and how they impact a community. Concerns about methane in the four corners, fugitive

emissions, and health and safety for communities that contain oil and gas facilities are an issue of

public concern.

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20. 1.4.6.NMAC (1997) states the objective of the hearing procedures is to ensure the

ability of all persons and entities to participate. There are not separate rules for the regulated

community and the public. The intent of the Legislature was to involve the public in the permitting

process. Here, the revision of the Oil and Gas permit has been unchanged for 18 years and there is

considerable expansion of the oil and gas permitting, particularly in Southern New Mexico. The

Secretary should consider issues relating to public health and welfare and review the non-technical

comments made by a broad cross section of the state. Community concerns and particularly

concerns about health and welfare should be taken into consideration when drafting permits.

The public commenters raised factual issues related to the timing of the public comment

period, the permitting process, environmental accidents, air quality rear schools, and the

disproportionate impact of environmental health effects in areas close to industry and for tribal

communities. Members of the public were concerned about the WPX explosion and setbacks for

occupied structures. BLM is likely the appropriate regulatory entity to address the WPX

catastrophic failure but NMED, should also be mindful, that the public looks to past environmental

failures as a portent of what’s to come in their communities.

The communities of Nageezi, Toneon, and Counselor, as well as the Navajo Nation, have

expressed concerns about the quality of life and the adverse impact and cumulative impacts of

increased oil and gas permitting as it affects quality of life. See Administrative Record email

correspondence from Arlene Griffin dated Wednesday February 14. 2018 including

correspondence dated February 6, 2017 from the President of the Navajo Nation, Russell Begaye,

“I am concerned that increased surface activity from drilling is interrupting the daily lives of

Navajo people who live in Navajo Nation Chapters such as Counselor, Nageezie, Toneon and Ojo

Encino”. An email delivery of legal notice does not seem to meet definition of meaningful

28
consultation to tribal communities. The Lybrook school was also mentioned by a public

commenter, as emissions from nearby oil and gas facilities were thought to be creating public

health concerns for the 150 students.

The overlapping jurisdiction in the Checkboard area, with the BLM, State, and the Federal

Government, have made it difficult for the public to identify the proper regulatory entity to report

compliance issues to. The public wishes to alert regulators to potential dangers to health and

property in their local area. The Air Quality Bureau was tasked with addressing the construction

permit process for oil and gas permits and did not address issues that were deemed outside their

regulatory purview. The Bureau believes that they lack statutory authority to make revisions that

would impact other regulatory entities. The Hearing Officer concurs with NMED, that the desire

for a statewide methane rule, should be addressed in rulemaking or at the legislative level. The

proper forum for proposed rule change would be before the Environmental Improvement Board

through rule making.

The Air Quality Bureau, largely confined their analysis of the permitting process to the

technical aspects of the permit. Through no fault of the bureau, a technocratic approach does little

to allay concerns from the public, that an oil and gas facility located by a school or home may

result in an accident, like the WPX catastrophic failure, that could be injurious to human life.

Many citizens who reside in urban hubs, like Santa Fe or Albuquerque, are potentially protected

from industrial accidents by existing zoning ordinances and local ordinances that prohibit the

placement of facilities near occupied structures. These same buffer zones may not exist for people

in rural areas who are in closer proximity to oil and gas facilities.

29
NMED did attempt to include the public in its pemlitting process and did outreach, see

NMED’s public participation matrix. Ultimately, the responsibility lies with the Department to

translate difficult scientific concepts for the public and to direct them to the appropriate regulatory

agency. The Air Quality Bureau, is but one part of a larger whole, and cannot be tasked with

righting every perceived environmental wrong.

Ideally, the permitting process would allow for significant public participation. The

administrative record is replete with hundreds of texts and emails from the regulated community

including detailed revisions, scientific analysis, and comments on the proposed draft permit,

including a detailed independent study of air modeling proposed by NMOGA.

Industry was actively involved in the permitting process since 2015. Despite the early

involvement of industry, The Independent Petroleum Association requested additional time to

submit formal comments, “My members feel strongly that the short comment period combined

with the Christmas & New Year’s Holiday made it impossible to both digest the document and

then make technical comments” TP p 1 Independent Petroleum Association of New Mexico via

email. The regulated community had difficulty digesting the proposed permit due to its complexity

and had been meeting and discussing various revisions since 2015. The general public’s ability to

comprehend and propose technical suggestions to the draft pennit was likely impacted by

unfortunate timing of the public notice during the holidays.

It is natural that the regulated community would have an interest in reviewing the proposed

permit revision, as it would impact its constituents, but there is little involvement from the public

until the notice portion of the public hearing, published on New Year’s Eve in the legal notices of

3 newspapers. That may simply be a factor of disinterest on the part of the public, or it may reflect

30
a failure to engage other groups outside the regulatory sphere. Part of meaningful involvement in

the permitting process is making materials related to the process user friendly demonstrating

repeated attempts to engage the public. Federal and State authority overlap and federal regulators

are relying on state regulators, to implement their regulations and report compliance violations.

Who better than state regulators to address issues of local concern? As the Secretary of the

Environment, the Rhino decision makes plain that the Secretary, can consider factors that affect

the community as part of health and safety concerns, and is not strictly limited to a technical

review.

CONCLUSION AND RECOMr%’IENDED DECISION

The narrow issue here is whether the proposed draft General Construction Permit (GCP

Oil and Gas) should be granted. The burden of proof lies with the department. The legal standard

is the preponderance of evidence. Procedural defects to the notice of public hearing, timing, and

opportunity for public participation may have tainted the outcome of the hearing.

Upon review of the entire record proper in this matter, the Hearing Officer recommends

that the Secretary deny the request for the GCP-Oil and Gas permit, at this time, until the hearing

can be re-noticed, with advertisements in Spanish and Navajo, preferably in a medium intended to

reach tribal communities and rural communities. The Hearing Officer does not believe the Bureau

met its burden of proof or engaged in meaningful consultation with tribes, particularly the Navajo

Nation and New Mexicans living in the Checkerboard area.

A review of the record indicates that the Bureau did not consider that the proposed revision

of the draft permit a matter of public concern. Undoubtedly, this was an unintended consequence,

as tremendous amount of time and effort was spent on revising the draft permit. There are currently

about 400 GCP -1 and GCP-4 permits. (TP $1). There are approximately 1,500 to 2,000 regular

31
part 72 minor source permits. (TP $1). There are approximately 150 Title V facilities. (TP 81).

There are approximately 20 employees of NMED who are working on compliance. (TP $1) Title

V permits are inspected every 2 years. Synthetic minor AP sources are inspected every 5 years.

(1? 81). Once a construction pennit is granted it is granted in perpetuity. Both the modeling and

preparation for the hearing demonstrate a great deal of thought and demanding work to create a

better permit that would reflect current technology and best practices. The Hearing Officer would

recommend that the hearing be re-opened and two additional hearings be held. One in Northern

New Mexico, preferably in a Checkerboard area, with a high volume of oil and gas permits and

one in Southern New Mexico, in an area with a high number of oil and gas penriits. Members of

the public who wished to submit technical testimony would have an opportunity to do so under a

revised scheduling order and subsequent to re-noticing and re-opening of the record.

Additional hearings, notice provisions, and accessibility would enable the Secretary to

make a more informed decision and create a more complete record. This could be done in as little

as 3 to 6 months and would ensure both adequate and meaningful public participation as well as

due process. A revision of an existing permit that has been in place for eighteen years should

include time and meaningful opportunity for the public to raise issues of public concern. The

appropriate method for the public to address some of the concerns raised in the hearing may be to

request a rule change via the Environmental Improvement Board, but that does not preclude the

Secretary from addressing some of the issues raised by community members in the current public

hearing.

If the Secretary is inclined to grant the proposed GCP oil and gas permit, now, as submitted

by NMED, perhaps more robust efforts could be made in the future to engage the public in the

pennitting process.

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Erin Anderson, Administrative Law Judge
New Mexico Environment Department
Hearing Officer for AQB 17-26 (P)

33
CERTIFICATE OF SERVICE

I hereby certify that a copy of the Hearing Officer’s Report to 20.1.4.100 (E)(2) NMAC
was sent via email on March 27, 2018 and via mail on March 28, 2018 to the following parties:

Via hand deliveiy:

Andrew P. Knight
Office of General Counsel
New Mexico Environment Department
1190 South Saint Francis Drive
Santa Fe, New Mexico 87505
email: Andrew. Knight@state.nm.us
Cottnsel for the New Mexico Environment Department

Via First Class US. Mail:

Louis W. Rose
Montgomery & Andrews
325 Paseo De Peralta
Santa Fe, New Mexico $7501
email: lrose@montand.com

Christina C. Sheehan
Jennifer L. Bradfute
Post Office Box 2168
500 Fourth Street NW, Suite 1000
Albuquerque, New Mexico 87103-2 168
email: Christina.shehan@modrall.com

Pam Castañeda, Hearing Clerk