

[Federal Register: June 12, 2006 (Volume 71, Number 112)]
[Rules and Regulations]               
[Page 33628-33640]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12jn06-14]                         

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 122

[EPA-HQ-OW-2002-0068; FRL-8183-3]
RIN 2040-AE81

 
Amendments to the National Pollutant Discharge Elimination System 
(NPDES) Regulations for Storm Water Discharges Associated With Oil and 
Gas Exploration, Production, Processing, or Treatment Operations or 
Transmission Facilities

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: EPA is taking final action to codify in the Agency's 
regulations changes to the Federal Water Pollution Control Act, also 
known as the ``Clean Water Act'' or ``CWA,'' resulting from the Energy 
Policy Act of 2005. This action modifies the National Pollutant 
Discharge Elimination System regulations to provide that certain storm 
water discharges from field activities or operations, including 
construction, associated with oil and gas exploration, production, 
processing, or treatment operations or transmission facilities are 
exempt from National Pollutant Discharge Elimination System permit 
requirements. This action also encourages voluntary application of best 
management practices for oil and gas field activities and operations to 
minimize the discharge of pollutants in storm water runoff and protect 
water quality.

DATES: This final rule is effective on June 12, 2006. For the purposes 
of judicial review, this final rule is promulgated as of June 12, 2006. 
See 40 CFR 23.2.

ADDRESSES: EPA has established a docket for this action under Docket ID 
No. EPA-HQ-OW-2002-0068. All documents in the docket are listed on the 
http://www.regulations.gov Web site. Although listed in the index, some 

information is not publicly available, e.g., CBI or other information 
whose disclosure is restricted by statute. Certain other material, such 
as copyrighted material, is not placed on the Internet and will be 
publicly available only in hard copy form. Publicly available docket 
materials are available either electronically through http://www.regulations.gov
 or in hard copy at the Water Docket, EPA/DC, EPA 

West, Room B102, 1301 Constitution Ave., NW., Washington, DC. The 
Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through 
Friday, excluding legal holidays. The telephone number for the Public 
Reading Room is (202) 566-1744, and the telephone number for the Water 
Docket is (202) 566-2426.

FOR FURTHER INFORMATION CONTACT: Jeff Smith, Water Permits Division, 
Office of Wastewater Management (4203M), Environmental Protection 
Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460; telephone 
number: (202) 564-0652; fax number: (202) 564-6431; e-mail address: 
smith.jeff@epa.gov.


SUPPLEMENTARY INFORMATION:

I. General Information

A. Does This Action Apply to Me?

    Entities potentially affected by this action include operators of 
oil and gas exploration, production, processing, or treatment 
operations or transmission facilities and associated construction 
activities at oil and gas sites that generally are defined in the 
following North American Industrial Classification System (NAICS) codes 
and titles: 211--Oil and Gas Extraction, 213111--Drilling Oil and Gas 
Wells, 213112--Support Activities for Oil and Gas Operations, 48611--
Pipeline Transportation of Crude Oil and 48621--Pipeline Transportation 
of Natural Gas.
    This description with references to industrial classification codes 
is not intended to be exhaustive, but rather to provide a guide for 
readers regarding entities likely to be affected by this action. This 
description identifies the principal types of entities that EPA is 
aware could potentially be affected by this action. Other types of 
entities not identified could also be affected. To determine whether 
your facility or company is affected by this action, you should 
carefully examine 40 CFR 122.26(a)(2), (b)(14)(x), (b)(15), (c)(1)(iii) 
and (e)(8). If you have questions regarding the applicability of this 
action to a particular entity, consult the person listed in the 
preceding FOR FURTHER INFORMATION CONTACT section.

[[Page 33629]]

B. When Does This Final Rule Take Effect?

    This final rule is effective on June 12, 2006. Because this final 
rule provides relief from permitting requirements for certain 
dischargers, this final rule is not subject to the general requirement 
for a thirty-day waiting period after publication before a final rule 
takes effect. By providing such relief, this final rule ``relieves a 
restriction'' on these dischargers. 5 U.S.C. 553(d)(1). Moreover, 
pursuant to 5 U.S.C. 553(d)(3), EPA has good cause to make this final 
rule effective immediately upon publication. Without this final rule, 
dischargers eligible for this permit exemption would, in accordance 
with EPA's regulations, be required to obtain permit authorization by 
June 12, 2006. This action eliminates this permit obligation, which 
would otherwise have applied during the period between the time the 
rule is published and the time it would take effect (ordinarily, 30 
days after publication). Making this rule effective as soon as it is 
published will help reduce any confusion on the part of those affected 
by the rule regarding the necessity for obtaining permit coverage. 
Therefore, a thirty-day waiting period is unnecessary and would be 
contrary to the public interest.

II. Background Information

    The 1987 amendments to the CWA added language at section 402(l)(2) 
that exempts from NPDES permitting requirements certain storm water 
discharges from oil and gas exploration, production, processing, or 
treatment operations or transmission facilities. That provision in the 
Act states that ``[t]he Administrator shall not require a permit under 
this section, nor shall the Administrator directly or indirectly 
require any State to require a permit, for discharges of storm water 
runoff from mining operations or oil and gas exploration, production, 
processing, or treatment operations or transmission facilities, 
composed entirely of flows which are from conveyances or systems of 
conveyances (including but not limited to pipes, conduits, ditches, and 
channels) used for collecting and conveying precipitation runoff and 
which are not contaminated by contact with, or do not come into contact 
with, any overburden, raw material, intermediate products, finished 
product, byproduct, or waste products located on the site of such 
operations.'' The 1990 NPDES Phase I Storm Water rule (55 FR 47990, 
November 16, 1990) established permit requirements for certain storm 
water discharges, including storm water discharges associated with 
construction activities that disturb five acres or greater or that 
disturb less than five acres when part of a larger common plan of 
development or sale that disturbs five acres or more. One provision of 
the Phase I rule codified the CWA section 402(l)(2) exemption at 40 CFR 
122.26(a)(2). The 1990 rule also codified, at 40 CFR 122.26(c)(1)(iii), 
the conditions that would be considered indicative of contamination by 
contact with raw material, intermediate products, finished product, 
byproduct, or waste products located on a site and would thus 
necessitate an NPDES storm water permit application by oil and gas 
exploration, production, processing or treatment operations or 
transmission facilities. Specifically, 40 CFR 122.26(c)(1)(iii) 
established permit requirements for contaminated discharges as follows:

    (iii) The operator of an existing or new discharge composed 
entirely of storm water from an oil or gas exploration, production, 
processing, or treatment operation, or transmission facility is not 
required to submit a permit application in accordance with paragraph 
(c)(1)(i) of this section, unless the facility:
    (A) Has had a discharge of storm water resulting in the 
discharge of a reportable quantity for which notification is or was 
required pursuant to 40 CFR 117.21 or 40 CFR 302.6 at any time since 
November 16, 1987; or
    (B) Has had a discharge of storm water resulting in the 
discharge of a reportable quantity for which notification is or was 
required pursuant to 40 CFR 110.6 at any time since November 16, 
1987; or
    (C) Contributes to a violation of a water quality standard.

    EPA based this regulation on the legislative history of CWA section 
402(l)(2), which directed EPA to consider whether reportable quantities 
(RQs) of oil or hazardous substances under either the CWA or the 
Comprehensive Environmental Response, Compensation, and Liability Act 
(CERCLA) had been exceeded in determining whether storm water from oil 
and gas operations had been contaminated by contact with overburden, 
raw material, intermediate products, finished products, byproduct, or 
waste products. (Pub. L. 95-217, Sec. 33(c), added subsec. (l))
    Shortly after issuance of EPA's first general permit specific to 
storm water discharges associated with construction activity (Final 
NPDES General Permits for Storm Water Discharges From Construction 
Sites, September 9, 1992, 57 FR 41176), EPA Region 8 raised a question 
to EPA Headquarters about the applicability of the permit requirements 
to oil and gas-related construction activities. On December 10, 1992, 
EPA Headquarters sent a memorandum to EPA Region 8 stating that all 
construction activities that disturb five or more acres must apply for 
a permit, including those construction activities associated with oil 
and gas activities.
    A collection of trade associations brought a lawsuit against EPA 
over this memorandum, asserting that it was unlawful and requesting 
that the court set it aside as inconsistent with the CWA. The United 
States Court of Appeals for the Fourth Circuit dismissed this challenge 
on the grounds that the internal EPA memorandum itself did not 
constitute an action reviewable by the courts. Appalachian Energy Group 
v. EPA, 33 F.3d. 319, 322 (4th Cir. 1994). The interpretation of CWA 
section 402(l)(2) contained in that memorandum, i.e., that oil and gas-
related construction activities required permit coverage, formed the 
basis of EPA policy on the issue.
    When EPA promulgated the Phase II storm water rule on December 8, 
1999, EPA included a requirement that storm water discharges from small 
construction activities obtain NPDES permit coverage beginning on March 
10, 2003. The Phase II rule defined small construction activities as 
those disturbing between one and five acres or those disturbing less 
than one acre when part of a larger common plan of development or sale 
that disturbs one to five acres. As part of its rulemaking, EPA 
analysis suggested that few, if any, oil and gas exploration sites 
would actually disturb more than one acre of land. Economic Analysis of 
the Final Phase II Storm Water Rule, October 1999 (see p. 4-2). 
Accordingly, EPA decided that separate analysis of this sector was 
unnecessary. After promulgating the Phase II rule, EPA became aware 
that close to 30,000 oil and gas sites annually may, in fact, be 
affected. EPA now believes that the majority of such sites may exceed 
one acre when the acreage attributed to lease roads, pipeline rights-
of-way and other infrastructure facilities is apportioned to each site.
    In light of this new information, on March 10, 2003, EPA published 
a rule (the ``deferral rule'') that postponed until March 10, 2005, the 
permit authorization deadline for NPDES storm water discharges 
associated with small oil and gas construction activity. This extension 
was intended to provide EPA time to analyze and better evaluate (1) the 
impact of the permit requirements on the oil and gas industry, (2) the 
appropriate best management practices (BMPs) for preventing 
contamination of storm water runoff resulting from construction 
associated with oil and gas

[[Page 33630]]

exploration, production, processing, or treatment operations or 
transmission facilities, and (3) the scope and effect of section 
402(l)(2) and other storm water provisions of the Clean Water Act. 68 
FR 11325.
    Between 2003 and 2005, EPA gathered information on size, location 
and other characteristics of oil and gas sites to better evaluate 
compliance costs associated with the control of storm water runoff from 
oil and gas construction activities. EPA met with various stakeholders 
and visited a number of oil and gas sites with construction-related 
activities, to discuss and review existing BMPs for preventing 
contamination of storm water runoff resulting from construction 
associated with these oil and gas activities. EPA also gathered 
economic data for the industry and initiated an economic impact 
analysis of the effects of the existing Phase II regulations on the oil 
and gas industry. EPA's preliminary analysis indicated that there could 
be administrative delays in the permitting process for oil and gas 
construction sites which could result in substantial economic impacts, 
particularly in the form of lost production revenues, that were not 
considered in the original economic analysis for the 1999 Phase II 
rulemaking. As a result, on March 9, 2005, EPA further postponed the 
date for NPDES regulation for an additional 15 months until June 12, 
2006, to provide additional time for the Agency to complete its 
evaluation of the economic and legal issues it had identified and to 
assess appropriate procedures and methods for controlling storm water 
discharges from these sources to mitigate impacts on water quality.
    A collection of trade associations petitioned the United States 
Court of Appeals for the Fifth Circuit for review of the March 10, 2003 
deferral rule. The petitioners asserted that the deferral rule 
represents the first time EPA had acknowledged in its NPDES regulations 
that those regulations apply to construction activities associated with 
oil and gas activities. Petitioners further asserted that the deferral 
rule was inconsistent with CWA section 402(l)(2). On June 16, 2005, the 
Fifth Circuit dismissed the petition on the grounds that the issue was 
not ripe for review. Specifically, the Court acknowledged EPA's ongoing 
analysis of this issue and indicated that ``any interpretation [of CWA 
section 402(l)(2)] we would provide would necessarily prematurely cut 
off EPA's interpretive process.'' Texas Independent Producers and 
Royalty Owners Ass'n, et al. v. EPA, 413 F.3d 479, 483 (5th Cir. 2005).
    On August 8, 2005, the President signed into law the Energy Policy 
Act of 2005. Section 323 of the Energy Policy Act of 2005 added a new 
paragraph (24) to section 502 of the CWA to define the term ``oil and 
gas exploration, production, processing, or treatment operations or 
transmission facilities'' to mean ``all field activities or operations 
associated with exploration, production, processing, or treatment 
operations or transmission facilities, including activities necessary 
to prepare a site for drilling and for the movement and placement of 
drilling equipment, whether or not such field activities or operations 
may be considered to be construction activities.'' This term is used in 
section 402(l)(2) of the CWA to identify oil and gas activities for 
which EPA shall not require NPDES permit coverage for certain storm 
water discharges. The effect of this statutory change is to make 
construction activities at oil and gas sites eligible for the exemption 
established by CWA section 402(l)(2).
    On January 6, 2006, EPA proposed amendments to the National 
Pollutant Discharge Elimination System (NPDES) Regulations for storm 
water discharges associated with oil and gas exploration, production, 
processing, or treatment operations or transmission facilities (71 FR 
894) to implement the new provision in the Energy Policy Act of 2005. 
This action finalizes that rule.

III. Summary of This Final Rule and Statutory Basis

    This action implements an amendment to the Clean Water Act 
contained in the Energy Policy Act of 2005. This amendment expanded the 
scope of oil and gas-related activities that are exempt from the 
requirement to obtain an NPDES permit for storm water discharges to 
include most storm water discharges from construction activities 
associated with oil and gas field operations. Under this final rule, 
storm water discharges from construction activity associated with oil 
and gas field operations are exempt from NPDES permitting requirements, 
except in situations when the construction-related activity results in 
the discharge of a hazardous substance or oil in ``reportable'' 
quantities or in situations when the discharge of a pollutant other 
than sediment contributes to a violation of an applicable water quality 
standard. See NRDC v. EPA, 966 F.2d 1292, 1307 (9th Cir.) (noting that 
40 CFR 122.26(c)(1)(iii)(C) addresses ``contamination with substances 
other than oil and hazardous substances''). Such storm water discharges 
continue to be subject to NPDES permitting requirements.
    This final rule revises 40 CFR 122.26(a)(2), which EPA promulgated 
in 1990 to codify the statutory exemption in CWA section 402(l)(2). The 
features of this final rule are the same as those EPA proposed on 
January 6, 2006 (71 FR 894). First, EPA is creating separate 
subparagraphs for the purpose of distinguishing between mining 
operations and oil and gas operations. See 40 CFR 122.26(a)(2)(i) 
(mining operations) & (ii) (oil and gas operations). Second, in new 
subparagraph (a)(2)(ii), which applies to oil and gas operations, this 
final rule incorporates the new definition of ``oil and gas 
exploration, production, processing, or treatment operations or 
transmission facilities'' (also referred to herein as ``oil and gas 
field operations'') now found in CWA section 502(24) as a result of the 
Energy Policy Act of 2005. Finally, new subparagraph (a)(2)(ii) 
provides that sediment discharged from construction activities at oil 
and gas sites does not trigger the requirement for NPDES permit 
coverage.
    As described above in section II (Background), until passage of the 
Energy Policy Act of 2005, EPA had taken the position that storm water 
discharges from oil and gas construction activities were not eligible 
for the NPDES permit exemption in CWA section 402(l)(2). In the Energy 
Policy Act of 2005, however, Congress squarely addressed the issue and 
specifically included construction activities among the types of oil 
and gas field operations eligible for the permitting exemption. The 
Energy Policy Act of 2005 achieved this by adding a new paragraph (24) 
to section 502 of the CWA to define the term ``oil and gas exploration, 
production, processing, or treatment operations or transmission 
facilities''--a term which appears only in section 402(l)(2)--to mean 
``all field activities or operations associated with exploration, 
production, processing, or treatment operations or transmission 
facilities, including activities necessary to prepare a site for 
drilling and for the movement and placement of drilling equipment, 
whether or not such field activities or operations may be considered to 
be construction activities.'' (emphasis added).
    This final rule both codifies this new definition and specifically 
exempts from NPDES permitting storm water discharges of sediment from 
oil and gas construction activities. While the Energy Policy Act 
amendment does not specifically address sediment, that pollutant 
naturally falls within the

[[Page 33631]]

newly created exemption from NPDES permitting.
    Indeed, singling out storm water discharges of sediment in today's 
rule is the best way to implement and conform the Energy Policy Act of 
2005 with the preexisting text of CWA Sec.  402(l)(2). First of all, 
for oil and gas exploration, production, processing, or treatment 
operations, or transmission facilities, only those discharges 
contaminated by contact with raw material, intermediate products, 
finished product, byproduct, or waste products located on the site are 
subject to permitting requirements under 402(l)(2). (Overburden is 
applicable only to mining.) The presence of sediment in a discharge 
from a construction site is not itself indicative of contact with those 
materials. Oil and hazardous substances for which there is an RQ under 
either CERCLA or the CWA, in contrast, is indicative of such contact 
and are not likely to be found in runoff from oil and gas exploration, 
production, processing, or treatment operations or transmission 
facilities except as a result of such contact.
    Second, sediment is the pollutant most commonly associated with 
construction activities, whether at oil and gas sites or elsewhere. 69 
FR 22475 (April 26, 2004); 67 FR 42654 (June 24, 2004). EPA's 2003 
construction general permit, for example, focuses primarily on limiting 
discharges of sediment. In EPA's view, to codify a permitting exemption 
for storm water discharges from oil and gas construction activities but 
simultaneously to exclude from the new exemption sediment, the 
discharge most closely associated with construction, would not be 
consistent with the intent of the CWA amendments enacted by the Energy 
Policy Act of 2005. This view is consistent with contemporaneous 
interpretations of the exemption by members of Congress. Several 
members of Congress opposed this amendment because it would exclude oil 
and gas construction sites from NPDES permitting requirements.\1\ 
Although these members opposed the amendment to CWA section 502 (which 
ultimately passed despite their opposition), today's rule is consistent 
with their descriptions of the impacts this amendment would have on 
NPDES permit requirements for oil and gas construction sites.
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    \1\ See 151 Cong. Rec. S9262, S9339, S9342, S9346, S9347 and 
E1726.
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    CWA Section 402(l)(2) provides that EPA ``shall not require'' an 
NPDES permit ``for discharges of storm water runoff from mining 
operations or oil and gas exploration, production, processing, or 
treatment operations or transmission facilities composed entirely of 
flows which are from conveyances or systems of conveyances (including 
but not limited to pipes, conduits, ditches, and channels) used for 
collecting and conveying precipitation runoff and which are not 
contaminated by contact with, or do not come into contact with, any 
overburden, raw material, intermediate products, finished product, 
byproduct, or waste products located on the site of such operations.'' 
(emphasis added). In 1990, EPA codified regulations at 40 CFR 
122.26(c)(1)(iii) to implement this exemption. Specifically, 40 CFR 
122.26(c)(1)(iii) provides that an NPDES permit is required for those 
storm water discharges from oil and gas field operations resulting in 
the discharge of reportable quantities (RQs) of hazardous substances or 
oil that trigger notification requirements pursuant to 40 CFR 110.6, 
117.21 or 302.6, or that contribute to a violation of water quality 
standards. The first of these two conditions, discharge of RQs, 
reflects specific language in the legislative history of Section 
402(l)(2) directing EPA to consider exceedances of RQs in determining 
whether contamination through contact with raw material, intermediate 
products, finished product, byproduct, or waste products had occurred. 
The second condition reflects EPA's judgment at the time the Phase I 
Storm Water rule was promulgated that violation of a water quality 
standard would also generally be indicative of contamination through 
contact with raw material, intermediate products, finished product, 
byproduct, or waste products. However, it is important to bear in mind 
that EPA has historically interpreted Section 402(l)(2) as not applying 
to construction activities at oil and gas sites, and therefore did not 
previously need to consider how sediment discharges would be treated by 
these regulations. These regulations were upheld in NRDC v. EPA, 966 
F.2d 1292, 1306-08 (9th Cir. 1992). EPA did not propose to change the 
requirements in 40 CFR 122.26(c)(1)(iii), and is not revising that 
provision in this final rule, although EPA is revising the 
applicability of 122.26(c)(1)(iii)(C) by including in new 
122.26(a)(2)(ii) a provision that (c)(1)(iii)(C) does not apply to 
sediment discharges. This change reflects EPA's judgment that 
discharges of sediment, which may become an issue now that Congress has 
determined that 402(l)(2) applies to construction activities at oil and 
gas sites, do not necessarily indicate contamination through contact 
with raw material, intermediate products, finished product, byproduct, 
or waste products. Indeed, the only change that EPA is making to the 
regulations today is to modify 122.26(a)(2) to expand the NPDES permit 
exemption to cover storm water discharges of sediment from construction 
sites associated with oil and gas field operations as mandated by the 
CWA amendment in the Energy Policy Act of 2005, together with CWA 
section 402(l)(2).
    Nothing in the Energy Policy Act amendment altered the structure of 
section 402(l)(2) itself or the conditional nature of that NPDES 
permitting exemption. Thus, storm water discharges contaminated by 
contact with raw material, intermediate products, finished product, 
byproduct, or waste products, as indicated by discharges of reportable 
quantities of hazardous substances or oil, or by violations of water 
quality standards for pollutants other than sediment from a 
construction site associated with oil and gas operations, would 
continue to be subject to NPDES permitting requirements. By 
specifically exempting sediment (which is not considered indicative of 
contact) but no other pollutant, this final rule thus honors both the 
precise focus of the 2005 amendment and the text of CWA section 
402(l)(2) itself.

IV. Response to Comments

    EPA received over 50 comments on its proposal to codify provisions 
of the Energy Policy Act of 2005 into the NPDES regulations. EPA's 
responses to all the comments received on the proposed rule are 
available in the Response to Comment document that is part of the 
docket for this final rule (Docket identification number: EPA-HQ-OW-
2002-0068). EPA's responses to significant issues raised on the 
proposed rule are discussed below.

A. Applicability

    Several commenters asserted that the Energy Policy Act of 2005 
amendment to the CWA effectively excludes almost all oil and gas 
exploration, production and transmission construction activities from 
the NPDES permitting requirements regardless of the amount of acreage 
disturbed. One of these commenters also specifically supported applying 
the exemption to all site sizes. EPA agrees with these commenters that 
Congress intended to exempt discharges from the specified oil and gas 
activities regardless of size; under this final rule, all covered oil 
and gas-related construction activities are eligible for the NPDES 
permitting exemption for their uncontaminated storm water

[[Page 33632]]

discharges without regard to the amount of acreage disturbed.
    Another commenter agreed with EPA that pipelines and compressor 
stations should be included in the exemption. One commenter identified 
a number of what it believed to be exempt construction activities 
necessary to support construction of pipeline and compressor stations 
as well as long term maintenance of the system. EPA generally agrees 
with these commenters' assessments about the applicability of this 
final rule to natural gas transmission pipelines and their associated 
infrastructure. Storm water discharges from field activities, such as 
the clearing, grading, and excavation associated with pipeline and pump 
station construction, are within the scope of activities eligible for 
the NPDES permit exemption under this final rule. One commenter 
interpreted the language in the exemption to include material mining 
sites (e.g., sand and gravel pits and quarried aggregate) that exist 
only to support pipeline and pump station construction and maintenance 
activities. EPA disagrees with this comment. The Agency does not 
believe that Congress intended the term ``oil and gas exploration, 
production, processing, or treatment operations or transmission 
facilities'' to include off-site operations whose only connection to 
such facilities is that they produce products (e.g., sand, gravel, or 
aggregate) that are later used by such facilities. Under this theory, 
producers of any product used at oil and gas sites (e.g., drilling 
equipment) could similarly claim entitlement to the 402(l)(2) 
exemption. Nothing in the definition provided in the Energy Policy Act 
of 2005 or Section 402(l)(2) itself suggests that Congress intended 
such a broad reach for this exemption. However, the Agency does 
consider ``cut and fill'' activities (i.e. where excavated earth and 
rock at the site is used to level the surface of the site) within the 
project area of a well pad, access road, pipeline, etc., to be an 
integral part of the on-site construction activities and, thus, within 
the scope of activities for which storm water discharges are eligible 
for the NPDES permit exemption under this final rule.
    One commenter requested that EPA provide definitions in the rule 
for the terms ``processing operations,'' ``treatment operations'' and 
``transmission facilities.'' EPA believes the terms are generally 
unambiguous as understood by experienced oil and gas operations 
personnel and most state regulators and thus the creation of a new set 
of definitions specific to this rule is unnecessary. These terms are 
discussed in Section V (Terminology).
    One commenter suggested that EPA define the term ``facility'' to 
mean only those areas subject to oil and gas activity under control of 
the owner operator. EPA does not think that such a definition is 
warranted or appropriate because, as used in the proposed rule, the 
term ``facilities'' simply describes the types of field activities that 
cannot be subject to NPDES permitting under certain circumstances and 
is not intended to address ownership or operational issues.
    One commenter noted that ``the mining industry and its exemption 
are distinct from the oil and gas industry and its exemption, both in 
terms of the nature of the activities involved and the definition of 
`contamination' that applies under the statute and EPA's regulations.'' 
Another commenter stated that the term ``overburden'' is applicable to 
mining activities only and commended EPA for providing a separate 
section in the regulatory language [40 CFR 122.26(a)(2)(i)] describing 
the mining activities eligible for exemption from storm water NPDES 
permit requirements. EPA acknowledges the commenter's detailed account 
of the legislative history of the CWA with respect to the definition of 
the term ``overburden'' and agrees that the language in the proposed 
rule appropriately differentiates between mining and oil and gas field 
activities and operations for purposes of implementing Section 
402(l)(2) and the Energy Policy Act of 2005. EPA notes, however, that 
this final rule is not intended to make any change to NPDES permit 
requirements applicable at mining sites.
    Two commenters requested general, rather than individual, permit 
coverage for storm water discharges that do not qualify for the 
permitting exemption. This would mean, for example, that coverage of 
releases in excess of reportable quantities (see 40 CFR 110.6, 117.21 
and 302.6) in storm water from spills or other releases during pipeline 
construction be available under a construction general permit or an 
industrial permit, such as EPA's Multi-Sector General Permit (MSGP) for 
releases during other field activities or operations. EPA believes an 
individual permit application will generally be the most appropriate 
way to address such contaminated discharges and establish appropriate 
controls to minimize impacts from future discharges. EPA notes, 
however, that this final rule is not intended to modify any 
requirements or provisions regarding the availability of general 
permits in lieu of individual permits.
    Several commenters engaged in activities that are not related to 
oil and gas exploration and production suggested that their industrial 
sectors should also be exempt from CWA permitting requirements for 
discharges associated with construction activities because they believe 
that their construction-related activities result in no significant 
discharges or impairment of water quality in adjacent water bodies. One 
trade association, representing the geothermal energy industry, argued 
that its members used oilfield contractors, suppliers and equipment and 
constructs well pads, access roads, and pipeline rights-of-way that are 
virtually identical to those employed by the oil and gas exploration 
and production industry. This industry, however, is not engaged in oil 
and gas field operations or activities and, therefore, does not qualify 
for the exemption that is the subject of this rule.
    Similarly, another commenter representing home builders argued that 
the application of this exemption solely to the oil and gas industry, 
coupled with regulatory burden on the residential construction industry 
imposed by the existing Phase II storm water rules, constituted 
overregulation. This commenter urged EPA ``to defer the regulation of 
the residential construction industry until adequate data has been 
collected to provide either outright support for the current regulation 
or to support its modification so that the impact of the rule is both 
fair and justified.'' This commenter also provided a discussion of the 
regulatory burden on the residential construction industry imposed by 
the final Phase II storm water regulations promulgated in 1999 (64 FR 
68722, December 8, 1999).
    EPA acknowledges comments raised by the geothermal and home 
building sectors but notes that this rulemaking is in response to the 
Energy Policy Act of 2005, and any comments on the applicability of the 
Phase II regulations to activities other than oil and gas field 
activities or operations associated with exploration, production, 
processing, or treatment operations or transmission facilities are 
outside the scope of this rulemaking. The Energy Policy Act of 2005 
merely defines the term ``oil and gas exploration, production, 
processing, or treatment operations or transmission facilities'' and 
does not reference any other industrial sectors. Consistent with the 
Act, EPA's proposal and this final rulemaking are also limited to oil 
and gas field activities or operations that fall within the definition 
of this term and do

[[Page 33633]]

not address any other industrial sectors. Therefore, these comments are 
outside the scope of this rulemaking.
    Several commenters stated their concerns that all oil and gas-
related operations and activities will no longer be held accountable 
for storm water discharges. EPA acknowledges the commenters' concerns 
but believes they are outside the scope of this rulemaking. The final 
rule merely implements clear Congressional intent to exempt certain 
storm water discharges from NPDES permit requirements. The Agency 
notes, however, that this exemption is limited to discharges that are 
not contaminated by contact with raw material, intermediate products, 
finished product, byproduct, or waste products. EPA has further 
included in the final regulatory text a note encouraging operators of 
oil and gas field activities or operations to implement and maintain 
Best Management Practices (BMPs) to minimize discharges of pollutants, 
including sediment, in storm water both during and after construction 
activities to help ensure protection of surface water quality during 
storm events. EPA further notes that the industry has developed and is 
promoting the use of a manual designed to assist operators in 
implementing such practices (see Section IV.B below).

B. BMP Implementation

    EPA received a number of comments supporting the use of voluntary 
Best Management Practices (BMPs) to control erosion and sedimentation 
runoff from oil and gas construction activities. Several commenters 
suggested that EPA's proposed approach encouraging the use of BMPs is 
an appropriate means for controlling runoff. Many of these commenters 
liked the approach outlined by the Independent Petroleum Association of 
America in their ``Guidance Document: Reasonable and Prudent Practices 
for Stabilization (RAPPS) of Oil and Gas Construction Sites'' (Horizon 
Environmental Services, Inc., April 2004). This guidance advocates the 
selection and practical application of BMPs based on specific physical 
characteristics of the site (e.g., proximity to waterbody, slope, 
vegetative cover, and geographic location). The guidance is presented 
in a straight-forward format that is appropriate for field personnel to 
access and understand. Additionally, one commenter indicated that EPA's 
proposed approach will significantly reduce paperwork and the lead time 
required to implement a project while still preventing adverse impacts 
to the environment. Several commenters suggested that not having to 
obtain permit coverage provides operators with more flexibility to 
schedule land disturbance activities in a way that minimizes erosion 
and sedimentation. One commenter suggested that EPA has met 
Congressional intent by encouraging the voluntary use of BMPs through 
the implementation of RAPPS or other similar approaches.
    Several commenters indicated that similar programs already exist to 
control erosion and sedimentation from oil and gas activities. 
Specifically, one commenter described the Federal Energy Regulatory 
Commission (FERC) requirements for pipeline projects. Although not 
specifically identified by the commenter, EPA believes that the 
commenter is likely referring to two documents entitled ``Upland 
Erosion Control, Revegetation, and Maintenance Plan, January 2003'' and 
``Wetland and Water Body Construction and Mitigation Procedures, 
January 2003'' that are designed to assist pipeline license applicants 
by identifying ``* * * baseline mitigation measures for minimizing the 
extent and duration of project-related disturbance of field 
activities.'' Although less detailed than some BMP guidelines developed 
by states and industry, the FERC plans are a valuable addition to the 
information base available to oil and gas operators for minimizing 
environmental damage. Another commenter noted that the state of West 
Virginia requires BMPs, consistent with the state environmental 
agency's erosion and sediment control field manual, through its well 
drilling and well re-working permit program.
    Conversely, several other commenters suggested that the use of 
voluntary approaches is inadequate to ensure protection of water 
quality and also suggested that the RAPPS document is overly broad and 
should focus more on keeping sediment on site than keeping sediment out 
of nearby waterbodies. Some of these commenters suggested that NPDES 
permits, which would require BMP implementation, are the best approach 
for regulating these discharges. Several commenters believe that EPA 
should do more to encourage and support state efforts to control 
sediment from oil and gas activities. One commenter suggested that EPA 
should require operators to utilize BMPs and violations should be 
subject to enforcement.
    In response to comments criticizing the adequacy of the recommended 
BMP provisions, the Agency again notes that this final rule merely 
codifies Congress' clear intent to prohibit EPA from requiring an NPDES 
permit for certain storm water discharges associated with oil and gas 
construction activities.
    EPA believes that a ``one size fits all'' approach or the use of a 
single suite of BMP is generally inappropriate to control erosion and 
sedimentation from all types of oil and gas construction activities. 
The RAPPS document and other relevant guidance are intended to provide 
information to operators to assist them in selecting appropriate BMPs, 
and combinations of BMPs, to protect water quality. EPA believes that 
use of this guidance will result in practical, cost-effective 
approaches that are flexible enough to address the variety of 
situations and water quality concerns that might be encountered in the 
field. EPA also intends to continue to work cooperatively with industry 
representatives and other interested groups to further develop and 
refine RAPPS and other industry-specific BMPs to promote even wider 
acceptance and implementation of these tools for reducing potential 
environmental impacts associated with oil and gas field operations. 
Additionally, EPA encourages state regulatory agencies and others with 
an interest in protecting water quality to assist in this effort to 
further clarify appropriate erosion and sedimentation control measures 
for oil and gas field operations.
    As in the proposed rule, this final rule includes a note at 40 CFR 
122.26(a)(2)(ii) encouraging operators of oil and gas field activities 
or operations to implement and maintain BMPs to minimize discharges of 
pollutants, including sediment, in storm water both during and after 
construction activities. EPA also encourages State and local 
authorities to address storm water discharges of sediment from 
construction activities associated with oil and gas field operations 
through authorities other than the NPDES permit program where 
appropriate but, as discussed in Section IV.D, Section 402(l)(2) 
prohibits EPA or the States from requiring a permit for these 
discharges under the authority of the CWA NPDES program.

C. Interpretation of Energy Policy Act Regarding Sediment

    EPA received a number of comments both agreeing with and disputing 
the Agency's interpretation of the Energy Policy Act of 2005, 
particularly as it applies to discharges of sediment from construction 
activities. Several commenters stated that the Energy Policy Act simply 
clarified Congress' original intent with respect to the 1987 amendments 
to the Clean Water Act exempting certain oil and gas activities from 
the requirement to obtain NPDES permits when the activity does not 
involve the discharge of any raw

[[Page 33634]]

material into waters of the United States. Others stated simply that 
they believed EPA's interpretation of the Energy Policy Act to be 
correct and reasonable.
    A number of commenters expressed opposition to EPA's interpretation 
of the Energy Policy Act. Many of these commenters simply expressed 
opposition to exempting the oil and gas industry from permitting 
requirements but did not suggest how their opposition could be 
reconciled with the statutory revisions of the Energy Policy Act of 
2005 which clearly exempts certain oil and gas related construction 
activities from NPDES permitting requirements. Others expressed their 
belief that EPA had failed to represent Congressional intent and 
suggested that storm water discharges of sediment that contribute to a 
violation of water quality standards should not be exempt from the 
requirement to obtain NPDES permit coverage.
    EPA notes that its interpretation of the CWA amendment found in the 
Energy Policy Act of 2005 is consistent with contemporaneous 
Congressional floor statements interpreting the amendment. Even without 
consideration of these floor statements, however, the Agency views 
today's rule as adopting the best interpretation of the legislation 
itself. The amendment to the language in CWA section 502, together with 
the exemption found in CWA section 402(l)(2), clearly conveys 
Congressional intent to provide oil and gas construction projects with 
relief from the potential burdens associated with NPDES permits. 
Accordingly, EPA views sediment from oil and gas construction 
activities to be the very pollutant being exempted from permitting by 
the Energy Policy Act of 2005.
    Under CWA section 402(l)(2), storm water discharges associated with 
oil & gas exploration, production, processing, or treatment operations 
or transmission facilities are exempt from NPDES permitting 
requirements under two scenarios. Under the first scenario, storm water 
discharges associated with oil & gas activities are exempt if they do 
not come in contact with, i.e., if they are diverted around, any ``raw 
materials, intermediate products, finished product, byproduct, or waste 
products located on the site of such operations.'' (The term 
``overburden'' in CWA section 402(l)(2) is not commonly associated with 
oil and gas operations; therefore, it is not relevant to this 
discussion or today's regulation.) Under the second scenario, the storm 
water discharges are exempt even if they do come in contact with those 
materials, provided that the storm water is not contaminated by such 
contact. Under EPA's regulations, storm water is considered 
contaminated by contact with these materials if the discharge contains 
a reportable quantity of certain substances or if the discharge 
contributes to a violation of a water quality standard. See 40 CFR 
122.26(c)(iii).
    The Energy Policy Act of 2005 did not alter this general regime. 
Rather, by defining ``oil and gas exploration, production, processing, 
or treatment operations or transmission facilities'' to include 
construction activities, the 2005 amendment simply provided that storm 
water discharges associated with construction at those oil and gas 
sites are eligible for the statutory exemption.
    Some commenters have questioned, however, whether Congress intended 
to exempt construction-related storm water discharges from NPDES 
permitting when those discharges contain only sediment. EPA believes 
the answer is yes. Nothing in the 2005 amendment altered the statutory 
concept that storm water (of whatever type) is exempt so long as it is 
not contaminated by contact with ``raw materials, intermediate 
products, finished product, byproduct, or waste products.'' Further, 
nothing in the 2005 amendment defined ``raw materials, intermediate 
products, finished product, byproduct, or waste products''--to include 
naturally occurring sediment exposed or displaced as a result of 
construction activity, and those terms are not generally understood in 
the oil and gas industry to refer to such sediment.
    As discussed in more detail in the proposed rule (71 FR 897-898), 
EPA determined, consistent with the legislative history of CWA section 
402(l)(2) at the time that it originally promulgated 40 CFR 
122.26(c)(1) that exceedence of an RQ for pollutants such as oil and 
hazardous substances would generally be indicative of contamination 
through contact with raw material, intermediate products, finished 
product, byproduct or waste products, and that violation of a water 
quality standard would also generally be indicative of such contact. 
However, now that Congress has broadened the 402(l)(2) exemption to 
include construction activities at oil and gas field operations, EPA 
believes that discharges of sediment are not necessarily indicative of 
such contact. Sediment is the pollutant most commonly associated with 
construction activity. Hence, exempting storm water discharges of 
sediment from oil and gas construction sites from NPDES permitting 
requirements reflects a reasonable (and EPA believes, the best) 
interpretation of Congressional intent in limiting the 402(l)(2) 
exemption to discharges not contaminated by contact with raw material, 
intermediate products, finished product, byproduct or waste products, 
in the context of the new definition for oil and gas exploration, 
production, processing or treatment operations or transmissions 
facilities included in the Energy Policy Act of 2005. Therefore, 
pursuant to today's rule, discharges of storm water from oil and gas 
construction sites that do not come in contact with those materials are 
exempt under CWA section 402(l)(2) even if the storm water contains 
construction-related sediment, and even if those sediment discharges 
cause water quality impacts. Sediment could, however, serve as a 
vehicle for discharges of other pollutants, such as oil or grease or 
hazardous substances (e.g., heavy metals) and if an RQ is exceeded or a 
water quality standard violated for such other pollutants, such 
contamination would trigger permitting requirements.
    Several commenters suggested the goal of protecting water quality 
would be better served if discharges associated with small oil and gas 
construction activity required NPDES permit coverage. EPA believes that 
it is appropriate for operators of exempted oil and gas facilities to 
adopt BMPs that will, among other things, minimize the transport of 
sediments to surface waters, and has included in the final rule 
language encouraging voluntary adoption of such BMPs. However, the 
Agency's purpose in promulgating today's final rule is to implement the 
narrow statutory change relating to Section 402(l)(2) that is contained 
in the Energy Policy Act of 2005. The Agency believes that the best 
interpretation of this statutory change is that it excludes storm water 
discharges associated with oil and gas construction activities from 
regulation under the NPDES program, except where contamination by 
contact with raw materials, intermediate products, finished product, 
byproduct, or waste products (as understood within the context of 
Section 402(l)(2)) has occurred.
    One commenter thought that EPA should interpret the statutory 
language more narrowly--in a way that ``gives the benefit of the doubt 
to the environment.'' The commenter further suggested that the 
exemption is applicable only if storm water is diverted around 
operations to prevent contamination. EPA agrees with this commenter up 
to a point. One way that an operator can ensure that there is no 
contamination of storm water through contact with raw materials, 
intermediate

[[Page 33635]]

products, finished product, byproduct, or waste products is to ensure 
either that all such material is covered, or that storm water is 
diverted around it, and EPA strongly urges operators to do this. 
Operators that fail to do this will not be eligible for the Section 
402(l)(2) exemption if an exceedance of an RQ or a violation of a water 
quality standard occurs as a result of contact with such materials. 
However, this does not change EPA's determination that the best 
interpretation of Congressional intent in enacting the revised 
definition in the Energy Policy Act of 2005 is that contact with 
naturally occurring sediment which is not itself contaminated with 
toxic or hazardous substances does not constitute ``contact'' for 
purposes of Section 402(l)(2). The Agency has clearly communicated this 
through its proposed rule and through today's regulation which does not 
require an NPDES permit for uncontaminated storm water discharges but 
encourages the voluntary use of BMPs through a note in the regulation.

D. Non-NPDES Program Authority

    One commenter requested clarification on a state's authority to 
regulate storm water discharges associated with oil and gas 
construction activities. This rulemaking clarifies that uncontaminated 
storm water discharges associated with oil and gas field activities 
cannot be regulated directly or indirectly by either EPA or a state 
under the authority of the NPDES permit program. Another commenter 
noted that states are not pre-empted by the CWA amendment or by the 
Energy Policy Act of 2005 from acting to regulate discharges pursuant 
to more stringent state programs. EPA agrees with this statement and 
affirms the fact that States and Indian Tribes have the right to 
regulate or otherwise reduce pollutants (including sediment) from storm 
water discharges associated with oil and gas field operations under 
State or Tribal law, but not under NPDES program authority. While EPA 
agrees that States and Tribes have broad discretion to use a variety of 
approaches in instances where water quality standards have been 
violated, the ability to require an NPDES permit from sites described 
in CWA section 402(l)(2) that discharge storm water from oil and gas 
activities is limited to those discharges that contain reportable 
quantities of oil or a toxic and/or hazardous substance or that 
contribute to a violation of water quality standards for a pollutant 
other than sediment.
    Discharges exempt from NPDES permit requirements in this final 
rulemaking are exempt from these requirements regardless of whether 
EPA, a State, or an authorized Tribe is the permitting authority. This 
final rule is not intended to interfere with the ability of States, 
Tribes, or local governments to regulate any discharges through a non-
NPDES permit program. In fact, EPA expects that operators whose storm 
water discharges are exempt from NPDES permit requirements will comply 
with any other applicable Federal, State, tribal, and local controls on 
oil and gas field operations. This final rule does not in any way 
curtail the ability of an appropriate environmental management agency 
(e.g., State, Tribal or local government) to impose specific discharge 
conditions on an oil and gas operator that is exempted from NPDES 
requirements under this final rule so long as these requirements are 
imposed pursuant to authority other than an NPDES permit program. For 
example, a State or Tribe could choose, under its own authorities, to 
require that an operator meet certain discharge conditions in sensitive 
watersheds. However, if a State, Tribe, or local government were to 
require a permit for discharges exempt from the Clean Water Act NPDES 
program requirements, those permit requirements would not be considered 
part of an NPDES program. See 40 CFR 123.1(i)(2).

E. Other Comments

    Several commenters suggested that the EPA discussion in the 1990 
Phase I Storm Water Application Regulation addressing issues regarding 
``stale'' (i.e., dated) data on releases of reportable quantities of 
oil and/or toxic substances is appropriate to this rulemaking as well. 
However, these commenters were concerned that there was no specific 
timetable for them to file an application for a storm water permit 
necessitated by a discharge of a reportable quantity that took place 
many months or even years prior to this rulemaking going into effect. 
Therefore, these commenters suggested that the requirement to seek 
coverage under an NPDES permit as the result of such a discharge should 
be limited to discharge events occurring no more than three years prior 
to the date of the publication of this final rulemaking. EPA finds this 
comment to be outside the scope of this final rulemaking. EPA notes 
that under CFR 122.26(c)(1)(iii), an oil or gas exploration or 
production facility of any size that had a discharge of an RQ at any 
time after November 16, 1987 was already required to have obtained an 
NPDES storm water permit for a discharge associated with industrial 
activity. EPA did not propose to change 40 CFR 122.26(c)(1)(iii), and 
the Agency is not revisiting that provision in this final rule.
    Two commenters suggested that EPA's recognition of States' 
authority to implement their own regulatory program outside of the 
``umbrella'' of the NPDES program should obligate EPA to provide 
technical expertise and resources to help States act on this authority. 
To the extent practicable, given its own limited resources, EPA will 
develop guidance to assist States, Tribes, and local governments in 
exercising their authority reserved for them by the CWA. EPA has always 
assisted States and Tribes with responses to technical inquiries 
relating to interpretation of NPDES program and CWA statutory 
requirements, and the Agency intends to continue providing such 
assistance.
    One Tribe notes in its comments that EPA did not consult with 
tribal governments during the rulemaking process, as called for in 
Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments.'' As discussed below, EPA did not need to consult 
with the Tribes under Executive Order 13175 because the proposed rule 
would not--and this final rule does not--have any substantial direct 
effects on tribal governments, on the relationship between Federal 
Government and Indian tribes, or on the distribution of power and 
responsibilities between the Federal Government and Indian tribes. This 
final rule does not add to the existing requirements under EPA's 
regulations. Rather, this final action codifies a recently-enacted 
amendment to the CWA which exempts certain oil and gas field activities 
from NPDES permitting requirements.

V. Terminology

    As noted earlier in this document, questions have arisen regarding 
some of the terms used in this final rule. This section collects EPA's 
interpretation of these terms.

Field Activities or Operations

    This final rule adopts in 40 CFR 122.26(a)(2)(ii) language from the 
Energy Policy Act of 2005. EPA interprets the specific phrase ``all 
field activities or operations'' in this language to include the 
construction of drilling sites, drilling waste management pits, access 
roads, in-field treatment plants and the transportation infrastructure 
(e.g., crude oil and natural gas pipelines, natural gas treatment 
plants and both natural gas pipeline compressor and crude oil pump 
stations) necessary for the operation of most producing oil and

[[Page 33636]]

gas fields. Such construction activities may thus be eligible for the 
CWA section 402(l)(2) exemption from NPDES permitting requirements.

Processing

    The terms ``processing,'' ``treatment,'' and ``transmission'' are 
generally well understood among industry professionals and oilfield 
personnel engaged in oil and gas exploration, production, processing, 
or treatment operations or transmission. These terms are described in 
turn below.
    ``Processing'' may be used in connection with either oil or gas 
field activities, but it is more commonly used to describe certain 
natural gas field activities. Industry professionals generally regard 
``processing'' as applying strictly to removal of either contaminants 
(such as hydrogen sulfide or carbon dioxide), natural gas liquids or 
rare gasses (such as helium) from produced natural gas.
    Most produced natural gas contains over 90 percent methane by 
volume. ``Pipeline quality'' natural gas sold by intrastate and 
interstate transmission pipeline companies usually has been upgraded to 
be as much as 99 percent methane by volume. For the purposes of this 
final rule, EPA considers the term ``processing'' to refer to those 
field operations related to either upgrading of natural gas by removal 
of contaminants (e.g., carbon dioxide, hydrogen sulfide and water) or 
the extraction of valuable, higher molecular weight ``natural gas 
liquids'' (e.g., ethane, propane, butane, and condensate) or rare gas 
constituents (e.g., helium and xenon) prior to sale of the gas to an 
intrastate or interstate gas transmission pipeline. Regardless of the 
physical size or throughput capacity of a processing facility or its 
geographic location (either within a single producing field or at a 
centralized location serving several producing fields), a gas 
processing plant merely serves as an intermediate step in the supply-
transmission-distribution chain that transports natural gas from the 
producing well to the ultimate end-user. Gas processing does not 
physically or chemically change the basic constituent (methane) in 
natural gas. Gas processing is not analogous to the term ``chemical 
processing'' as is commonly used by chemical engineers to describe 
manufacturing operations that create finished products in the petroleum 
and petrochemical refining industrial sectors. The North American 
Industrial Classification System (NAICS) codes for oil and gas 
extraction activities (including ``natural gas processing'') are found 
under the designation 211 (equivalent to the older Standard Industrial 
Classification [SIC] code designation 1311). EPA regards the processing 
described above as an inherent component of natural gas extraction 
field activities.

Treatment

    Similarly, the term ``treatment'' may be used in the context of 
either the oil or gas industries, but is more commonly used when 
referring to the removal of contaminants, such as salt water, sediment, 
pipe scale, rust and organic material (i.e., bacterial growths) from 
crude oil in the producing field. These contaminants are generally 
removed (i.e., the crude oil is ``treated'') prior to sale and 
transportation of the oil via tanker truck or dedicated pipeline to a 
petroleum or petrochemical refinery.
    All crude oil contains physical and chemical contaminants that 
should be removed prior to sale to a refinery. The term ``treatment'' 
as used by most oil and gas field operations personnel is applied to a 
variety of field techniques for removing these naturally occurring 
contaminants from crude oil. Mature oil wells in the United States 
often produce large volumes of salt water along with smaller volumes of 
crude oil. Some oil reservoirs also yield crude oil that contains 
significant amounts of dissolved natural gas (predominantly methane). 
This mixture of crude oil, water and (sometimes) gas is treated in 
order to separate out the oil and gas from the contaminants. In the 
course of being pumped out of the well and into holding tanks, the 
crude oil may also pick up additional contaminants such as dirt and 
sediment from the producing formation, corrosive scale and rust from 
the steel tubing and flow lines, and bacterial growths present in the 
formation or the flow lines. The entrained gas, water and various 
contaminants are removed prior to sale of the crude oil to a refiner or 
intermediate buyer. The most common technique for removing these 
contaminants involves using a cylindrical steel tank called a separator 
which separates the three components of the flow--gas, oil and water. 
The separator can be either a vertical or a horizontal tank and 
configured to separate only gas from the liquid (two-phase separation) 
or to separate gas, oil and water (three-phase separation). This 
process relies primarily upon simple gravimetric separation of the gas, 
oil and water. Any small amounts of gas are either vented or drawn off 
at the top of the tank. The oil and water separates in the tank (the 
oil will float on top of the water column) and the heavier sediment 
precipitates out of the mixture and eventually settles to the bottom of 
the tank as sludge. In some cases chemicals may be added to cause the 
suspended sediment particles to aggregate and settle out more easily 
from the crude oil and water. In cold weather or cases where there is 
bacterial contamination, chemicals may be added to the oil-water 
mixture to assist in killing the organisms and removing or neutralizing 
the contaminants. ``Clean'' crude oil is periodically or continually 
withdrawn from the top of these separators and stored in ``stock'' 
tanks to await pickup by tanker truck or metered sales to a crude oil 
pipeline. In some cases, where rain enters a storage tank or the 
temperature drops precipitously, some additional water may become 
entrained in the crude oil and form an oil-water emulsion. If the water 
content is greater then the specifications set by the crude oil 
purchaser, the stock tank oil may be further treated using chemicals 
and/or heat to reduce the amount of entrained water prior to sale.
    All of the above activities are typically identified as 
``treatment'' by oil and gas field operations personnel, and EPA will 
consider these, and similar field activities necessary to remove 
contaminants from crude oil, to fall within the scope of ``treatment 
operations'' as that term is used in CWA section 402(l)(2).

Transmission

    EPA interprets the term ``transmission facilities'' to include all 
necessary infrastructure to deliver natural gas or crude oil from the 
producing fields to the final distribution center (in the case of 
natural gas) or the refinery (for crude oil).
    This interpretation is consistent with the description of 
``transmission facilities'' EPA provided in the preamble to the March 
10, 2003 ``deferral rule'' described earlier in this notice. See 68 FR 
11327. That discussion noted that transmission lines are typically 
major pipelines (e.g., interstate and intrastate pipelines) that 
transport crude oil and natural gas over long distances through large-
diameter pipes operating at relatively high pressures. ``Transmission 
facilities'' generally include all pipelines, compressor stations (for 
natural gas) and pump stations (for crude oil). The line of demarcation 
between natural gas ``transmission facilities'' and ``distribution 
facilities'' is generally the point where a local gas utility takes 
delivery of the gas (often referred to as the ``city gate'') and then 
distributes it via lower pressure service lines to small industrial, 
commercial or residential customers. While crude oil pipelines that 
convey raw material to the

[[Page 33637]]

refineries are generally considered ``transmission facilities,'' 
pipelines that transport refined petroleum products from refineries and 
large petrochemical manufacturing plants to storage tank ``farms'' are 
not considered ``transmission facilities'' for the purposes of CWA 
section 402(l)(2) and this final rule.
    The Pipeline and Hazardous Materials Safety Administration within 
the U.S. Department of Transportation (DOT) defines a transmission line 
as ``* * * a pipeline, other than a gathering line, that transports gas 
from a gathering line or storage facility to a distribution center, 
storage facility or large volume customer that is not down-stream from 
a distribution center.'' (49 CFR 192.3). Although EPA has not elected 
to codify the DOT or any other definition of ``transmission line,'' EPA 
believes that its interpretation of the term ``transmission 
facilities'' as used in CWA section 402(l)(2) is generally consistent 
with DOT's terminology and with widely accepted understanding and usage 
among industry professionals.

VI. Best Management Practices

    In accordance with CWA section 402(l)(2), this final rule does not 
require that operators select, install, and maintain Best Management 
Practices (BMPs) to minimize discharges of pollutants (including 
sediment) in storm water; however, the Agency is encouraging operators 
of oil and gas field activities or operations to institute these 
practices both during and after construction activities whenever 
practicable.
    Installation of effective BMPs will not only help protect surface 
water during storm events but will also assist the operator in ensuring 
that there is no discharge of a reportable quantity or violation of a 
water quality standard that would trigger permitting requirements. 
Appropriate controls would be those suitable to the site conditions, 
both during and after the period of construction, and consistent with 
generally accepted engineering design criteria and manufacturer 
specifications. Selection of effective BMPs should include 
consideration of seasonal and climatic conditions.
    Most storm water controls for construction activities can be 
grouped into three classes: (a) Erosion and sediment controls; (b) 
storm water management measures; and (c) good housekeeping practices. 
Erosion and sediment controls address pollutants (e.g., sediment) in 
storm water generated from the site during active construction-related 
work. Storm water management measures result in reductions of 
pollutants in storm water discharged from the site after the 
construction has been completed. Good housekeeping measures are those 
practices employed to manage materials on the site and control litter. 
While not explicitly required by regulation, some good housekeeping 
practices may be necessary to ensure that runoff satisfies the 
conditions in 40 CFR 122.26(a)(2)(ii) and (c)(1)(iii) for eligibility 
for the 402(l)(2) permitting exemption.
    Effective soil erosion and sedimentation control typically is 
accomplished through the use of a suite of BMPs. Operators should 
design control measures that collectively address the multiple needs of 
holding soil in place, diverting storm water around active areas with 
bare soil, slowing water down as it crosses the site, and providing 
settling areas for soil that has become mobilized.
    The value of construction site BMPs has already been recognized by 
many oil and gas site operators. Under the sponsorship of the 
Independent Petroleum Association of America, the oil and gas industry 
developed guidance entitled ``Guidance Document: Reasonable and Prudent 
Practices for Stabilization (RAPPS) of Oil and Gas Construction 
Sites,'' Horizon Environmental Services, Inc., April 2004, that 
describes the application of appropriate BMPs based on general 
geographical location and the distance, slope, and amount of vegetative 
cover between the construction activity and the nearest water body. 
This document is a common sense approach to mitigating environmental 
consequences arising from a variety of oil and gas construction 
activities. The document has been widely publicized, and a large number 
of independent oil and gas operating companies have informed EPA that 
they have adopted the practices outlined in the document in their day-
to-day field construction activities.

VII. Post-Proposal Litigation

    There is already one published court decision addressing CWA 
section 402(l)(2) in light of the new language in CWA section 502(24). 
EPA's current NPDES General Permit for Storm Water Discharges From 
Construction Activities (the ``General Permit'') was issued by EPA on 
July 1, 2003. 68 FR 39087. The General Permit was challenged by a 
variety of organizations. Three weeks after proposal of this rule, the 
last remaining challenges to the General Permit were dismissed. Texas 
Independent Producers and Royalty Owners Ass'n, et al. v. EPA, 435 F.3d 
758, 767 (7th Cir. 2006). The Court of Appeals took note of the 
proposal EPA is finalizing today, but did not address the merits of 
that proposal. Id. at 766. The court went on to note the ``limited 
circumstances'' under which this challenge was brought: ``The Oil and 
Gas Petitioners represent members seeking to challenge permit 
requirements for uncontaminated discharges. But Congress made clear in 
the Energy Policy Act of 2005 that the EPA may not require permits for 
such discharges. Therefore, the Oil and Gas Petitioners cannot 
establish standing. Accordingly, we Dismiss this petition for lack of 
standing.'' Id. at 767. (emphasis added). This Court had no occasion to 
review facts surrounding the conditions at any particular site, and did 
not address the issue of what constitutes contaminated storm water 
discharges.

VIII. Statutory and Executive Reviews

A. Executive Order 12866: Regulatory Planning and Review

    Under Executive Order 12866, (58 FR 51735 (October 4, 1993)) the 
Agency must determine whether the regulatory action is ``significant'' 
and therefore subject to OMB review and the requirements of the 
Executive Order. The Order defines ``significant regulatory action'' as 
one that is likely to result in a rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Alter materially the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    Pursuant to the terms of Executive Order 12866, EPA has determined 
that this is a ``significant regulatory action'' within the meaning of 
the Executive Order. As such, EPA submitted this action to OMB for 
review. Changes made in response to OMB suggestions or recommendations 
are documented in the public record.

B. Paperwork Reduction Act

    This action does not impose an information collection burden under 
the provisions of the Paperwork Reduction

[[Page 33638]]

Act, 44 U.S.C. 3501 et seq., as this rulemaking is deregulatory and 
imposes no new requirements.
    Burden means the total time, effort, or financial resources 
expended by persons to generate, maintain, retain, or disclose or 
provide information to or for a Federal agency. This includes the time 
needed to review instructions; develop, acquire, install, and utilize 
technology and systems for the purposes of collecting, validating, and 
verifying information, processing and maintaining information, and 
disclosing and providing information; adjust the existing ways to 
comply with any previously applicable instructions and requirements; 
train personnel to be able to respond to a collection of information; 
search data sources; complete and review the collection of information; 
and transmit or otherwise disclose the information.
    An agency may not conduct or sponsor, and a person is not required 
to respond to a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for EPA's 
regulations in 40 CFR are listed in 40 CFR part 9.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to prepare a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements under the Administrative 
Procedure Act or any other statute unless the agency certifies that the 
rule will not have a significant economic impact on a substantial 
number of small entities. Small entities include small businesses, 
small organizations, and small governmental jurisdictions. For purposes 
of assessing the impacts of this final rule on small entities, small 
entity is defined as: (1) a small business as defined by the Small 
Business Administration's (SBA) regulations at 13 CFR 121.201; (2) a 
small governmental jurisdiction that is a government of a city, county, 
town, school district or special district with a population of less 
than 50,000; and (3) a small organization that is any not-for-profit 
enterprise which is independently owned and operated and is not 
dominant in its field.
    After considering the economic impacts of this final rule on small 
entities, I certify that this action would not have a significant 
economic impact on a substantial number of small entities. In 
determining whether a rule would have a significant economic impact on 
a substantial number of small entities, the impact of concern is any 
significant adverse economic impact on small entities, since the 
primary purpose of the regulatory flexibility analyses is to identify 
and address regulatory alternatives ``which minimize any significant 
economic impact of the rule on small entities.'' 5 U.S.C. 603 and 604. 
Thus, an agency may certify that a rule will not have a significant 
economic impact on a substantial number of small entities if the rule 
relieves regulatory burden, or otherwise has a positive economic effect 
on all of the small entities subject to the rule. This final rule, by 
expanding the scope of oil and gas operations eligible for the NPDES 
permit exemption under CWA section 402(l)(2), would relieve the 
regulatory burden for certain discharges associated with construction 
activity at exploration, production, processing, or treatment 
operations or transmission facilities to obtain an NPDES storm water 
permit. I have therefore concluded that this final rule would relieve a 
regulatory burden for all affected small entities.

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. 
L. 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, EPA 
generally must prepare a written statement, including a cost benefit 
analysis, for proposed and final rules with ``Federal mandates'' that 
may result in expenditures to State, local, and tribal governments, in 
the aggregate, or to the private sector, of $100 million or more in any 
one year. Before promulgating an EPA rule for which a written statement 
is needed, section 205 of the UMRA generally requires EPA to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, most cost-effective or least burdensome alternative 
that achieves the objectives of the rule. The provisions of section 205 
do not apply when they are inconsistent with applicable law. Moreover, 
section 205 allows EPA to adopt an alternative other than the least 
costly, most cost-effective or least burdensome alternative if the 
Administrator publishes with the final rule an explanation why that 
alternative was not adopted. Before EPA establishes any regulatory 
requirements that may significantly or uniquely affect small 
governments, including tribal governments, it must have developed under 
section 203 of the UMRA a small government agency plan. The plan must 
provide for notifying potentially affected small governments, enabling 
officials of affected small governments to have meaningful and timely 
input in the development of EPA regulatory proposals with significant 
Federal intergovernmental mandates, and informing, educating, and 
advising small governments on compliance with the regulatory 
requirements.
    This final rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) for State, local, or tribal 
governments or the private sector. The final rule imposes no 
enforceable duty on any State, local or tribal governments or the 
private sector. Rather, today's final rule codifies an amendment to the 
CWA by expanding the scope of oil and gas operations eligible for the 
NPDES permit exemption under CWA section 402(l)(2), and relieves the 
regulatory burden for certain discharges associated with construction 
activity at exploration, production, processing, or treatment 
operations or transmission facilities of obtaining an NPDES storm water 
permit. Thus, this final rule is not subject to the requirements of 
sections 202 and 205 of the UMRA. For the same reason, EPA has 
determined that this rule contains no regulatory requirements that 
might significantly or uniquely affect small governments. Thus, today's 
final rule is not subject to the requirements of section 203 of UMRA.

E. Executive Order 13132: Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
The phrase ``Policies that have federalism implications'' is defined in 
the Executive Order to include regulations that have ``substantial 
direct effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''
    This final rule does not have federalism implications. It does not 
have substantial, direct effects on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government, 
as specified in Executive Order 13132. Thus, Executive Order 13132 does 
not apply to this rule.

F. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    Executive Order 13175, entitled, ``Consultation and Coordination 
with Indian Tribal Governments'' (65 FR

[[Page 33639]]

67249, November 9, 2000), requires EPA to develop an accountable 
process to ensure ``meaningful and timely input by tribal officials in 
the development of regulatory policies that have tribal implications.'' 
This final rule does not have any Tribal implications as specified in 
Executive Order 13175. It does not have substantial direct effects on 
Tribal governments, on the relationship between the Federal Government 
and Indian tribes, or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes, as specified in 
Executive Order 13175. This final rule does not add to the existing 
requirements under EPA's regulations. Thus, Executive Order 13175 does 
not apply to this rule.

G. Executive Order 13045: Protection of Children From Environmental 
Health and Safety Risks

    Executive Order 13045, ``Protection of Children from Environmental 
Health Risks and Safety Risks'' (62 FR 19885, April 23, 1997), applies 
to any rule that: (1) Is determined to be ``economically significant'' 
as defined under Executive Order 12866, and (2) concerns an 
environmental health or safety risk that EPA has reason to believe may 
have a disproportionate effect on children. If the regulatory action 
meets both criteria, the Agency must evaluate the environmental health 
or safety effects of the planned rule on children, and explain why the 
planned regulation is preferable to other potentially effective and 
reasonably feasible alternatives considered by the Agency. This final 
rule is not subject to the Executive Order because it is not 
economically significant as defined under Executive Order 12866, and 
because the Agency does not have reason to believe the environmental 
health or safety risks addressed by this action present a 
disproportionate risk to children.

H. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use

    This final rule is not a ``significant energy action'' as defined 
in Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use (66 FR 28355 
(May 22, 2001)), because it is not likely to have a significant adverse 
effect on the supply, distribution, or use of energy.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law 104-113, 12(d) (15 U.S.C. 272 note) 
directs EPA to use voluntary consensus standards in its regulatory 
activities unless to do so would be inconsistent with applicable law or 
otherwise impractical. Voluntary consensus standards are technical 
standards (e.g., materials specifications, test methods, sampling 
procedures, and business practices) that are developed or adopted by 
voluntary consensus standards bodies. The NTTAA directs EPA to provide 
Congress, through OMB, explanations when the Agency decides not to use 
available and applicable voluntary consensus standards. This action 
does not involve technical standards. Therefore, EPA did not consider 
the use of any voluntary consensus standards.

J. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the 
Small Business Regulatory Enforcement Fairness Act of 1996, generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of the Congress and to the Comptroller General of the 
United States. EPA will submit a report containing this rule and other 
required information to the U.S. Senate, the U.S. House of 
Representatives, and the Comptroller General of the United States prior 
to publication of the rule in the Federal Register. A Major rule cannot 
take effect until 60 days after it is published in the Federal 
Register. This action is not a ''major rule'' as defined by 5 U.S.C. 
804(2). This rule will be effective on June 12, 2006.

List of Subjects in 40 CFR Part 122

    Administrative practice and procedure, Confidential business 
information, Environmental protection, Hazardous substances, Reporting 
and recordkeeping requirements, Water pollution control.

    Dated: June 7, 2006.
Stephen L. Johnson,
Administrator.

0
For the reasons set forth in the preamble, chapter I of Title 40 of the 
Code of Federal Regulations is amended as follows:

PART 122--EPA ADMINISTERED PERMIT PROGRAMS: THE NATIONAL POLLUTANT 
DISCHARGE ELIMINATION SYSTEM

0
1. The authority citation for part 122 continues to read as follows:

    Authority: The Clean Water Act, 33 U.S.C., 1251 et seq.

Subpart B--[Amended]

0
2. Section 122.26 is amended by revising paragraphs (a)(2) and (e)(8) 
to read as follows:


Sec.  122.26  Storm water discharges (applicable to State NPDES 
programs, see Sec.  122.35).

    (a) * * *
    (2) The Director may not require a permit for discharges of storm 
water runoff from the following:
    (i) Mining operations composed entirely of flows which are from 
conveyances or systems of conveyances (including but not limited to 
pipes, conduits, ditches, and channels) used for collecting and 
conveying precipitation runoff and which are not contaminated by 
contact with or that have not come into contact with, any overburden, 
raw material, intermediate products, finished product, byproduct, or 
waste products located on the site of such operations, except in 
accordance with paragraph (c)(1)(iv) of this section.
    (ii) All field activities or operations associated with oil and gas 
exploration, production, processing, or treatment operations or 
transmission facilities, including activities necessary to prepare a 
site for drilling and for the movement and placement of drilling 
equipment, whether or not such field activities or operations may be 
considered to be construction activities, except in accordance with 
paragraph (c)(1)(iii) of this section. Discharges of sediment from 
construction activities associated with oil and gas exploration, 
production, processing, or treatment operations or transmission 
facilities are not subject to the provisions of paragraph 
(c)(1)(iii)(C) of this section.

    Note to paragraph (a)(2)(ii): EPA encourages operators of oil 
and gas field activities or operations to implement and maintain 
Best Management Practices (BMPs) to minimize discharges of 
pollutants, including sediment, in storm water both during and after 
construction activities to help ensure protection of surface water 
quality during storm events. Appropriate controls would be those 
suitable to the site conditions and consistent with generally 
accepted engineering design criteria and manufacturer 
specifications. Selection of BMPs could also be affected by seasonal 
or climate conditions.

* * * * *
    (e) * * *
    (8) For any storm water discharge associated with small 
construction activities identified in paragraph (b)(15)(i) of this 
section, see Sec.  122.21(c)(1). Discharges from these sources require 
permit authorization by

[[Page 33640]]

March 10, 2003, unless designated for coverage before then.
* * * * *
 [FR Doc. E6-9079 Filed 6-9-06; 8:45 am]

BILLING CODE 6560-50-P
