October 21, 2008 Mark Jones Environmental Analyst NMED/Air Quality Bureau

1. Regional Air Quality Analysis: Four Corners October 21, 2008 Mark Jones Environmental Analyst NMED/Air Quality Bureau

2. Four Corners Overview • Arizona, Colorado, New Mexico, Utah, Navajo Nation, Ute Mountain Ute, Southern Ute Indian Tribe • San Juan Oil & Gas Basin produces 4 bft3 natural gas daily (1.5 trillion ft3 annually).[2004 survey] • 6-8% of US Natural Gas production. California’s largest source of natural gas. • 17.6 million TPY coal mined. • Expansive untapped coal, oil and gas reserves. • 7 class I areas within 250 km

3. Class I Areas in the Four Corners Utah Colorado Arizona New Mexico

4. ENERGY GENERATION • 3840 megawatts of existing coal fired power • Proposed 1500 MW Desert Rock Energy Facility (DREF)coal fired power plant • Economic Pressure to develop resource • Active environmental community

5. Four Corners Power Plant San Juan Generating Station NOx, SO2, HAPS, CO2

6. Proposed DREFPower Plant

7. Recent Power Plant News & Events • San Juan Generating Station is in theprocess of a 4-yr $320 million environmental upgrade • 2 units complete, remaining 2 units complete by Spring 2009 • Substantial reductions in NOx, SO2, and Mercury (Hg) • Approx. NOx 35%, Hg 85%+ • Environmental Upgrade resulting from consent decree amongst PNM, NMED, Sierra Club, and Grand Canyon Trust • Preliminary Projections: • 11,000 tons per year SO2 reduction • 9,000 tons per year NOX reduction • Decrease in opacity excursions • 800 lbs Hg per year reduction • DREF air permit issued • However, state and environmental groups suing on multiple grounds including CO2 • Construction is delayed pending law suits

8. Four Corners Agency Actions on Power Generation • Consent decree oversight • EPA Regions 6, 8 & 9 and AZ, CO, NM and UT are evaluating a range of options for NOx controls (including SCR) for BART under the Regional Haze Rule. • NM Tax credits available for IGCC and CCS • GHG inventory moving forward and other rules being developed • NM has spent considerable time commenting & making environmental mitigating suggestions conc. the DESERT ROCK ENERGY PROJECT and at this time is opposing the project legally on certain grounds.

9. Oil & Gas Wells in Four Corners (as of 2003)

10. OIL and GAS PRODUCTION • The Farmington BLM RMP & EIS states that “the NM portion of the San Juan Basin supports approximately 18,000 active oil and gas wells and there are more than 2,400 existing oil and gas leases in the planning area • 10,000 new wells were estimated to be drilled in NM on Federal land portion of San Juan Basin as part of the 20 yr BLM reasonable foreseeable development RMP (2001) and evaluated in the Farmington Resource Management Plan & EIS Record of Decision (2003) • The scope of the BLM RMP is approximately 1,415,300 acres of public land and 3,020,693 acres of federal minerals in San Juan, McKinley, Rio Arriba and Sandoval Counties. The overall planning area encompasses 8,274,100 acres. • There are addition existing gas wells and projected growth in the Northern San Juan Basin in Colorado, and outside the BLM jurisdiction in NM portion of San Juan Basin. • Many small unregulated sources • Multiple Operators • Changing Field Conditions

14. VOC, SO2, CO, PM, NOx

17. Four Corners Air Quality Task Force • Began meeting November 2005 • Approximately 250 members and interested parties • Task Force Report final version released November 2007 • Report includes mitigation options developed by task force members • Over 500 pages • http://www.4cornersair.org

18. Four Corners Agency Action on Oil & Gas Production • Federal Land Managers (BLM, FS, NPS), EPA and Tribes working cooperatively to minimize impacts • BMPs for Tanks • Optimization, Centralization, Co-location • Control of existing/new engines in permits to drill • EPA working on rule/protocol for using Optical imaging for leak detection

19. NM Action on Oil & Gas Production • Existing Engines: NM is evaluating the need for new regulations. Has worked with BLM to incorporate a limit in the Permit to Drill COA • New Engines: EPA New Source Performance Standard (NSPS) Subpart JJJJ Summary • Effective March 18, 2008 • Applies to new, modified and reconstructed stationary spark ignition (SI) internal combustion engines (ICE), regardless of size and combusting any fuel • Emissions controlled to levels achievable by Best Demonstrated Technology (BDT) • regulated pollutants: NOx, CO and VOC, plus sulfur limit on gasoline • Phased in from manufacture dates from 2007 to 2011 and beyond) • NMED has prepared a white paper summary on the new rule and is currently in process of conducting industry outreach on the new rule in San Juan County • NM also has San Juan VISTAS program with 3 partners who have pledged to voluntarily reduce some emissions leading to ozone, haze, & climate change • Continued inventory and modeling work with goal of maintaining and/or improving air quality

20. San Juan VISTAS 2006 Participation & Emissions Reductions VISTAS Partners • KEY STRATEGIES: • Compressor Engine Optimization, Purchase and Installation of Screw Compressors and New Cummins IC Engines, Insulation of Separators and Production Tanks, Plunger Lift Optimization

21. 2007 Participation & Emissions Reductions VISTAS Partners • KEY STRATEGIES: • Compressor Engine Optimization, Purchase and Installation of Screw Compressors and New Cummins IC Engines, Insulation of Separators and Production Tanks, Plunger Lift Optimization, Capstone Turbines and SWD Well Decommissioning, Reduced Trucking of Produced Fluids • Small Lean Burn Engines

22. 2008 Participation & Emissions Reductions VISTAS Partners • KEY STRATEGIES: • ConocoPhillips,TBD, similar to 2007 • Red River Compression: 77 small lean burn compressor engines w/5440 total hp • New Partner: • Auburn Environmental joined Feb 2008

24. Other Sources

25. Four Corners Agency Action on Other Sources • adopt tougher emissions standards for new vehicles in New Mexico. The standards will apply to new vehicles sold in New Mexico _ not used cars or new cars before the 2011 model year. (Being challenged in court) • NM is in the development process of a fugitive dust regulation • Statewide Open burning rule in effect (enforcement of trash burning) • NM will soon commence a school bus retrofit project in San Juan County with federal funding

26. Four Corners Agency Action on Renewable Energy, Energy Efficiency, & Conservation • CO & NM have implemented a range of Energy Efficiency measures and incentives for renewable energy and conservation. • Measures have been included in Supplemental Environmental Projects • There is an RFP out from utilities El Paso Electric, Xcel Energy, PNM, and Tri-State Generation and Transmission Association seeking detailed proposals from solar developers for the construction of a solar parabolic trough generation facility to provide solar electricity to each of the utilities by 2012. Scale in the range of 100 MW • The Federal gov’t just now in Oct 2008 extended federal solar tax credit for 8 more years which now includes commercial entities & utilities • An 8-year extension of the residential and business Investment Tax Credit (ITC) for solar, small-wind and geothermal systems • An elimination of the US $2,000 cap on the residential ITC • Elimination of the prohibition on utilities from obtaining the ITC • Authorization of US $800 million for clean energy bonds for renewable energy generating facilities • A 1-year extension of the PTC for wind projects • A 2-year extension of the PTC for geothermal facilities • Creates a 2 year ITC for marine energy technologies (tidal, wave, current, ocean thermal)

28. 4K 2005 and 2018 Power Plant Emissions

29. 4K 2005 and 2018 Oil & Gas Emissions – NOx

30. 4K 2005 and 2018 Oil & Gas Emissions – VOC

31. 4K 2005 and 2018 Emissions – All Sources NOx

32. 4K 2005 and 2018 Emissions – All Sources VOC

33. 4K 2005 and 2018 Emissions – All Sources SO2

34. Four Corners Modeling Project Objectives • Model air quality, visibility, deposition impacts of air emissions in the Four Corners region for 2005 & 2018 • Evaluate impacts of alternative mitigation strategies • Primary focus on impacts in Mesa Verde and Weminuche Class I areas and surrounding Class II areas.

35. Four Corners Modeling Schedule

36. Modeling Information Distribution • All modeling work is now anticipated to be complete by Spring 2009 • Modeling results will be presented at a Four Corners Air Quality Group (4CAQG) update meeting tentatively scheduled forSpring 2009 in Durango, CO at Ft. Lewis College • Modeling results will also be made available online,http://www.nmenv.state.nm.us/aqb/4C/Modeling.html

37. NAVAJO LAKE MONITORING SITE NOx Ozone PM 2.5 NH3 Met

38. Northwestern New Mexico Air Quality Monitoring NH3(airport) NOx Ozone PM 2.5 NH3 Met Waterflow SO2 NOx Ozone Met PM10 PM2.5 SO2 NOx Ozone Met NMED Air Monitoring website real time data: http://air.nmenv.state.nm.us/*Also in process of installing mercury total deposition air monitor at Navajo Lake site 2008 *Four Corners Ammonia study recently published in Journal of Environmental Monitoring

40. How 3 Monitors in San Juan County Compare to the EPA 8-hour Ozone Standard NAAQS 8-hour ozone std decreased to 0.075 ppm in March 2008 *We have observed relatively high levels of ozone at Navajo Lake site this October 2008. & based on a few high days middle of October our 4th highest 8-hour average there this year increased to 75 ppb (preliminary). Which led to 3-yr average of 77 ppb exceeding new standard of 75 ppb

41. Four Corners Monitoring Information • Monitoring data for our 3 ozone monitors in San Juan County is available online (real time & archived) as well as in summary format showing the annual design values that are compared to the federal standard for attainment status. • The 3-year average design values for the 3 San Juan County ozone monitors in 2008 are currently 0.065, 0.071, and 0.077 ppm. • Recent preliminary monitoring data shows that due to the strengthened ozone standard and some high ozone days at Navajo Lake monitor in October, we have reached the threshold for attainment status and exceeded it at Navajo Lake site. A three yr avg of annual 4th highest 8-hour avg ozone at Navajo site is now 0.077 ppm compared to the new standard of 0.075 ppm. A timeline showing dates for recommending non-attainment and designation follows this slide. • Both other monitors in San Juan County (Bloomfield and Substation) have never exceeded the ozone standard. • We have exceptional monitoring staff in San Juan County • There are other monitors just North of NM border that we use to assess regional air quality and we have done passive ozone studies and other research throughout the area

42. New NAAQS 8-hour Ozone Standard (0.075 PPM March 2008)

43. If area goes non-attainment • Nonattainment Areas Areas formally declared in violation of the NAAQS and areas contributing to a violation are designated “nonattainment areas.” Nonattainment areas must meet certain Clean Air Act requirements, such as: • Transportation Conformity - Requires a demonstration that regional long-range transportation plans will not negatively impact air quality, or federal transportation funds can be withheld • New Source Review - Requires a review of new or modified industrial operations to minimize air pollution. • Rate of Progress Requirements - A certain percentage of pollutants must be reduced each year. • Specific attainment date - Consequences of failure to reach attainment by the specified date include stricter control measures and the potential for stiff penalties. • 10-year maintenance plan - Includes additional or continuing mandatory programs for 10 years following redesignation to attainment. • Another requirement obligates the state to develop and implement a prescriptive, enforceable clean air plan that mandates how the area will come into compliance with the NAAQS that is exceeded. The enforceable clean air plan and revisions to it are known as the State Implementation Plan (SIP).

44. Other Industry Actions • Some other companies have environmental stewardship programs @ our last Task Force meeting we had 5 companies present including • 2 Vistas Partners: Conoco & Red River • BP – VOC reductions w/well completion process • Red Willow – lean burn compressors / adding catalysts to meet 2011 NSPS requirements • & San Juan Generating Station • San Juan Generating Station is currently in process of environmental upgrade w/significant emissions reductions • Now projecting approximately • 11,000 tons per year SO2 reduction • 9,000 tons per year NOX reduction • Decrease in opacity excursions • 800 lbs Hg per year reduction • Some other Four Corners O&G companies participate in GAS STAR program which can have indirect reductions of ozone precursors

45. “It really is up to all of us to work together to protect our air quality in New Mexico. The key is that everyone needs to participate and no one should hesitate to take action, no matter how small or inconsequential that action may seem.” —Mary Uhl New Mexico Environment Department, Air Quality Bureau Chief

46. QUESTIONS ? • New Mexico Environment Department’s Air Quality Bureau Farmington Office (new Address) Santa Fe 3400 Messina Drive 1301 Siler Rd., Bldg B, Farmington, NM 87402 Santa Fe, NM 87507 (505) 566-9746 (800) 224-7009 Project Websites: Four Corners Air Quality Group: http://www.nmenv.state.nm.us/aqb/4C/index.html Four Corners Modeling Project: http://www.nmenv.state.nm.us/aqb/4C/Modeling.html San Juan VISTAS: http://www.nmenv.state.nm.us/aqb/projects/SJV/index.html Homepage: http://www.nmenv.state.nm.us/aqb/