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Self-Disclosure Leads to EPA’s First Greenhouse Gas Emissions Enforcement Case

An oil and gas production company has become the first business in the country fined by EPA for violations of the Clean Air Act’s Greenhouse Gas Tailoring Rule. EPA Region 9 fined the company $34,000 in December 2012 as part of a Consent Agreement following the company’s self-disclosure concerning its failure to obtain a permit for greenhouse gas emissions before construction of three steam generators under EPA’s Prevention of Significant Deterioration (PSD) permitting program.

The company, Vintage Production California LLC, produces oil and gas between Bakersfield and Ventura, California. In 2011, the company commenced construction on three steam generators with a capacity of 85 million Btu per hour, to a preexisting network of approximately 650 wells and 11 steam generators. The steam generators produce steam used to increase pressure and reduce viscosity in the oil and gas reservoirs.

Greenhouse gas emissions (GHGs) are regulated from large stationary sources under EPA’s GHG Tailoring Rule, 75 Fed. Reg. 31513 (June 3, 2010). In particular, EPA’s regulations at 40 CFR 52.21(b)(49)(v) require PSD review and/or PSD permits:

  • at new stationary sources that will emit or have the potential to emit 100,000 tons per year (tpy) of carbon dioxide equivalent (CO2 e); or
  • at existing stationary sources that emit or have the potential to emit 100,000 tpy CO2 e, when such stationary source undertakes a physical change or change in the method of operation that will result in an emissions increase of 75,000 tpy CO2 e or more.

EPA’s penalty action represents the first greenhouse gas emissions enforcement matter in the country under the GHG Tailoring Rule. The agency’s action comes, however, despite several mitigating circumstances.

EPA Region 9, for example, only learned of the apparent PSD violations after the company self-disclosed them to the agency. And EPA levied the civil penalty despite the fact that prior to construction the company obtained an authority to construct permit from the San Joaquin Valley Unified Air Pollution Control District (APCD) covering all of the non-GHG emissions for the project. Moreover, the company only temporarily operated one of the three steam generators over a several month time span and never operated the other two generators. To that end, the settlement agreement did not contain any factual allegations indicating that the operation of the one unit actually caused emission exceedances above the threshold. Finally, EPA’s action comes just one month after the agency granted PSD permitting authority to the San Joaquin Valley APCD, raising the question whether the local permitting authority would have pursued enforcement had the self-disclosure been made in November 2012 to the APCD, as opposed to EPA in September 2012.