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In re Shell Offshore, Inc.

Case Number:OCS Appeal Nos. 07-01 & 07-02
ELR Citation:37 ELR 41313


On June 12, 2007, U.S. Environmental Protection Agency, Region 10 (Region), issued two Outer Continental Shelf (OCS) air regulation minor source permits (the Permits) to Shell Offshore, Inc. (SOI). The Permits authorize SOI to “mobilize, operate and demobilize” two drilling vessels for placement and anchoring in the Beaufort Sea OCS sea floor, off the North Slope of Alaska, for the purpose of oil exploration. On July 16, 2007, Resisting Environmental Destruction on Indigenous Lands, a Project of the Indigenous Environmental Network; Northern Alaska Environmental Center; Alaska Wilderness League; Center for Biological Diversity; and Natural Resources Defense Council (collectively REDOIL), and the North Slope Borough (NSB) (collectively the Petitioners), filed timely petitions with the Environmental Appeals Board (the “Board”) opposing the Permits on various grounds.

The petitions present issues of first impression concerning the regulation of air pollution from OCS activities under section 328 of the Clean Air Act (CAA or the Act) and its implementing regulations at 40 C.F.R. part 55, and require consideration of how these OCS provisions interface with the Act’s preconstruction review Prevention of Significant Deterioration (PSD) regulations. At issue is whether, under section 328, the Region may define each separate location at which an SOI drilling vessel attaches to the seabed as a separate OCS source, and how, if at all, such determination affects the scope of what constitutes a single stationary source for purposes of the PSD regulations. This question affects whether SOI may obtain minor source permits, as the Region has issued here, or must obtain major source PSD permits, which would subject the company to a more rigorous set of application criteria and permit requirements.

NSB and REDOIL both dispute the Region’s interpretation of what constitutes an OCS source and allege that the Region erred by authorizing each drill site to be treated as a separate minor source for PSD purposes. NSB also challenges: (1) the Region’s calculation of the drill ships’ potential to emit (PTE) nitrogen oxides (NOX) and the practical enforceability of the Permits’ NOX limitations of 245 tons per year (tpy); (2) the validity and reliability of SOI’s modeling analysis to predict the impact of the drill ship emissions on the ambient air quality; (3) the adequacy of the opportunity for public participation the Region afforded the affected communities; and (4) the sufficiency of the Region’s environmental justice analysis.

Held: The Board remands the Permits on the sole issue of the “stationary source” the Region identified for purposes of determining whether PSD permits would be required for SOI’s proposed activities on the OCS. On all other issues, review is denied. The Board holds as follows:

• The Board rejects the Petitioners’ argument that the Region clearly erred by concluding in this case that the “OCS source” within the meaning of CAA section 328 and 40 C.F.R. part 55 is the drill ship when attached to the seabed and not the drill ship wherever it travels on the OCS.

• The Board rejects NSB’s contention that the boundaries of Shell’s mineral leaseholds necessarily define what constitutes “contiguous or adjacent properties” under the PSD regulations, which in turn determines which emissions sources constitute a single stationary source. However, the Board finds that the Region did not provide an adequate analysis and record support for its conclusion that each OCS source separated by more than 500 meters is a separate stationary source. The Region concluded that such sources are not “contiguous or adjacent properties” within the meaning of the applicable PSD regulations. The Board remands the Permits so the Region may provide an adequate explanation of its rationale, supported by record evidence, for determining the 500-meter perimeter to be the boundary of a single stationary source, or to modify its determination of what constitutes a single stationary source.

• The Board rejects NSB’s arguments related to the Region’s PTE calculations. NSB contends that the Region failed to require SOI to calculate PTE at the sources’ maximum design capacities and that SOI failed to meet the requirements for obtaining an Owner Requested Limit (ORL) under the applicable Alaska regulations. The Board finds that SOI’s PTE calculation properly considered the ORL, which limits the sources’ NOX emissions below the major source threshold. Under the Alaska regulations, which require a calculation of actual emissions when requesting an ORL, the “actual emissions” of a source that has not yet begun operations is equivalent to PTE. Accordingly, the Region did not err in approving SOI’s ORL, which was based on the PTE calculation without a separate actual emissions calculation.

• The Board also denies review of NSB’s contentions that the ORL for NOX is not federally enforceable. The issue, which was reasonably ascertainable but not raised during the comment period on the draft permits, was not preserved for review before the Board.

• The Board rejects NSB’s contention that SOI’s ambient air quality modeling analysis, which the Region accepted, is invalid. NSB argued that the analysis did not follow the preferred or recommended air quality model, did not include data for all emissions units for each stationary source, and did not provide adequate background air quality data. Because the Board finds that these issues related to the modeling analysis are fundamentally technical in nature and that the Region’s response to comments does not reflect clear error, the Board declines to substitute its own judgment for the Region’s technical judgment.

• The Board finds that NSB has not demonstrated that the Region clearly erred in its conduct of public participation in the permitting process. The Board is unpersuaded that by holding the public hearing and comment period on the draft permits during the spring subsistence harvest period, the Region denied the communities affected by the Permits an opportunity for meaningful participation in the permitting process. The Board finds that the record indicates that the Region complied with its regulatory obligations regarding public notice and comment. Additionally, the Board finds that the record reflects compliance with Executive Order 13,175 regarding tribal consultation.

• The Board rejects NSB’s assertion that the Region failed to perform an adequate environmental justice analysis under Executive Order 12,898. Because the executive order concerns the adverse human health or environmental effects of a federal agency’s programs, policies, and activities on minority populations and low-income populations, and the Region has determined that no such adverse effects cognizable under the PSD permit program will result from the issuance of the Permits to SOI, the Board declines to review this issue.