From:
To:
Cc:
Subject:
Date:
Attachments:

Hastie, Roderick
Clayton. EubanksOoaa.ok.aov
Eames, Frederick R,
Draft State Comments for EPA - Confidential
02/21/2014 11:43 AM
49526399 1-c.docx

Confidential
Clayton:
Attached, for your consideration is a draft letter for States to send to E P A commenting
on the Class II Class VI transition guidance. The deadline to file comments is March
1. We have reason to believe that WY would also be interested in filing comments.
Please let me know if you have any questions about this important matter.
Thank you.
Rod

HUNT0N&
WHAMS

Roderick B. Hastie
Senior Director Governmental Relations
rhastie@hunton.com
Hunton & Williams LLP
2200 Pennsylvania Avenue, NW
Washington, DC 20037
Direct: 202.955.1937
Fax: 202.828.3715
www.hunton.com

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 CONFIDENTIAL

DRAFT: 2/20/14

February 27, 2014

By Certified Mail & Email

The Hon. Regina A . McCarthy
Office of the Administrator
United States Environmental Protection Agency
1200 Pennsylvania Avenue, N.W.
Mail Code 1101A
Washington, D C 20460
Email: mccarthy.gina@epa.gov

Re: Draft Underground Injection Control (UIC) Program Guidance on
Transitioning Class II Wells to Class VI Wells
Dear Administrator McCarthy:
We are writing to express our concern over the Environmental Protection Agency's
(EPA) Draft Underground Injection Control (UIC) Program Guidance on Transitioning Class II
Wells to Class VI Wells (Draft Guidance), issued in December 2013. The Draft Guidance
proceeds from an inaccurate understanding of the authority of a Class V I regulator with respect
to Class II wells and therefore unlawfully interferes with the authority granted to States under the
UIC Program. We respectfully request that E P A resolve this fundamental flaw to protect vital
sectors of our economy and preserve the well-being of the citizens and businesses of our States.
The Safe Drinking Water Act's (SDWA) UIC Program is intended to protect subsurface
supplies of drinking water from the drilling and use of underground wells for various industrial
activities. Under this program, oil and gas wells are classified as "Class II" wells, and, pursuant
to the structure of the UIC Program and primacy agreements with EPA, our states - and not E P A
- serve as the primary regulators of Class II wells. Recently, E P A created a new class of wells
under the UIC Program, known as "Class V I " wells, for the underground injection and storage of
carbon dioxide ( C O 2 ) , primarily in connection with prospective carbon capture and storage
(CCS) operations. See 75 Fed. Reg. 77230 etseq. (Dec. 1, 2010). See also 75 Fed. Reg. 75060
(Dec. 1,2010).
Notwithstanding this new class of wells intended to accommodate the underground
injection of C O 2 , many oil and gas producers operating Class II wells have been injecting C O 2
for the past 40 years to manipulate well pressure and enhance the recovery of oil and gas. This
process, commonly referred to as enhanced oil recovery (EOR), has been used in more than
10,000 wells, about 7,000 of which are currently active. EOR represents a critically important
part of our states' and our country's energy infrastructure and plays an essential role in our
nation's economic stability and energy security.

Page 1 of 4

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 CONFIDENTIAL

DRAFT: 2/20/14

The Draft Guidance, arising from EPA's newly-created Class VI wells, is directed at the
interplay between Class II and Class VI wells as it relates to underground C O 2 injection. But
rather than provide clarity and avoid interfering with the production of oil and gas via EOR which, again, we emphasize has been occurring for the past several decades without increased
risk to drinking water and other subsurface assets - the Draft Guidance has introduced confusion
and uncertainty into the oil and gas industry and failed to resolve the business community's
outstanding issues with the UIC Program.
Specifically, the Draft Guidance indicates that a regulator in an E P A regional office
overseeing Class VI wells (i.e., the Class VI Director) has the authority to determine whether a
Class II well at which EOR operations are occurring must "transition" to a Class V I well. This
flies in the face of prevailing industry practice, as well as common sense. It also violates current
law and the proper division of authority between E P A and states under SDWA.
As part of its rulemaking in 2010 creating the Class VI well category, E P A articulated a
series of factors by which a Class II well with EOR operations could be reclassified a Class V I
well, presumably to perform CCS-type operations instead. 40 C.F.R. § 144.19. This included
such criteria as an increase in reservoir pressure within the injection zone, an increase in C O 2
injection rates, suitability of the Class II area of review delineation, the owner's or operator's
plan for recovery of C O 2 at the cessation of injection, the source and properties of injected C O 2 ,
and any additional site specific factors as determined by the regulator. Id. Many Class II permit
holders communicated to E P A that these criteria were too vague and could lead to the
reclassification of wells in which CCS was neither intended nor actually occurring. In response,
E P A prepared and issued the Draft Guidance in December 2013.
The Draft Guidance correctly states that while C O 2 is stored underground during EOR
operations in a Class II well, this alone does not require the transition of the Class II well into a
Class V I well. To the contrary, E P A has plainly stated that EOR operations at a Class II well are
not to be affected by the Class VI rule:
Traditional E R projects are not impacted by this rulemaking and will continue operating under
Class II permitting requirements. E P A recognizes that there may be some C 0 trapped in the
subsurface at these operations; however, i f there is no increased risk to [underground sources of
drinking water (USDW)], then these operations would continue to be permitted under Class II.
2

75 Fed. Reg., at 77245. The Draft Guidance properly reiterates this point, stating "[tjraditional
EOR projects are not affected by the Class V I rulemaking and will continue to be permitted
under Class II requirements." Draft Guidance, at 1.
But then the Draft Guidance goes on to describe scenarios in which a Class II well with
EOR operations would need to be reclassified as a Class VI well, based on the unchecked
increase in subsurface pressures caused by the injection of C O 2 . This is blatantly inconsistent
with prevailing practices in the oil and gas industry and contrary to law.
Under the UIC Program, our states are vested with authority to permit Class II wells with
EOR for purposes of enabling the production of oil. As part of this, the state-level Class II
Director reviews maximum and average injection pressures and other information to ensure that
C O 2 injection will "not result in the movement of fluids into a U S D W so as to create a
Page 2 of 4

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 CONFIDENTIAL

DRAFT: 2/20/14

significant health risk." Draft Guidace, at A-4-A-5. Class II regulations specify limits on
injection pressures to prevent the movement of injection or formation fluids into a U S D W or the
fracturing of the confining zone. Id. at A-8. See also 40 C.F.R. § 146.23(a). The Class II
framework is thus wholly competent to prevent unchecked increases in subsurface pressures
during EOR operations and other traditional oil and gas production methods. The scenario
described by E P A as a trigger for reclassification simply is not reflective of real world operating
conditions.
The actual circumstance under which reclassification would occur, also described in the
Draft Guidance, is where a Class II operator changes the primary purpose of the well from the
production of oil to the maximal underground storage of C O 2 and, in so doing, changes its
operations in such a way as to transcend the confines of the Class II regulatory structure and
create an "increased risk to USDWs compared to traditional Class II operations using carbon
dioxide." Draft Guidance, at ii. Importantly, this is not so easily done. A Class II permit holder
cannot change from EOR to maximal C O 2 storage without accounting for numerous other
interests and legal and business considerations. For example, its contractual obligations with
land owners and/or subsurface rights holders would most likely need to be altered, if not
renegotiated, to accommodate such a transition. Similarly, state laws intended to enable oil and
gas production can, in certain circumstances, interfere or even prohibit the use of oil and gas
wells for maximal C O 2 storage if future production would be inhibited.
But regardless, the Draft Guidance further complicates and confuses the situation by
erroneously implying that the Class VI Director can, on his or her own volition, preempt the
Class II Director and require the Class II permit holder to file for reclassification under Class IV.
This is not lawful. Allowing the Class V I Director to "second guess" the Class II Director and
intervene seemingly on a whim violates EPA's own rules regarding state primacy and flagrantly
impinges upon state authority. E P A cannot revoke a state's primacy unless it can show a failure
to comply with applicable requirements. 40 C.F.R. § 145.34(b). These requirements prescribe a
series of detailed steps E P A must follow in order to do so, including providing adequate notice to
the state and allowing the state sufficient time to take corrective action.
Thus the Draft Guidance, in overtly implying that the Class V I Director is empowered to
act unilaterally within an industry in which he or she lacks requisite experience - thereby
exposing a Class II permit holder to the seemingly unbounded risk of being ordered, absent any
specific criteria, to apply for reclassification - is utterly and entirely beyond the bounds of E P A
authority and carries the very real possibility of doing harm to our nation's energy infrastructure.
Moving beyond the confines of a traditional Class II well with EOR operations to maximal C O 2
storage is not easily nor quickly done and implicates significant economic and other business
considerations. Allowing the Class V I Regulator to intervene seemingly without basis adds an
unconscionable level of uncertainty and risk to a mature area of industrial activity already well
and thoroughly regulated.

For the foregoing reasons, we respectfully request you take immediate action to rectify
this situation as the Draft Guidance is finalized and, additionally, through any other rulemakings

Page 3 of 4

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 DRAFT: 2/20/14

CONFIDENTIAL

as may be necessary under the UIC Program to eliminate this uncertainty and ensure strict
adherence to applicable law.

Sincerely,

Page 4 of 4

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E. SOOTT PRUITT
ATTORNEY GENERAL OF OKLAHOMA

February 28, 2014

VIA CERTIFIED MAIL E-MAIL

The Hon. Regina A. McCarthy

Of?ce of the Administrator

United States Environmental Protection Agency
1200 Avenue, NW.

Mail Code 1101A

Washington, DC 20460

Email: mccaithygina?bepagov

US. Environmental Protection Agency
Rule Guidance Comments

1200 Avenue NW.
Washington, DC. 20460

Email: GSRuleGuidanceComments@epa.gov

 

Re: Draft Underground Injection Control (UIC) Program Guidance on
Transitioning Class II Wells to Class VI Wells

Comments from the Attorneys General of the States of Oklahoma, Alabama,
Michigan, Nebraska, South Carolina, Texas and Wyoming

Dear Administrator McCarthy:

We are writing to express Our concern over the Environmental Protection Agency?s
(EPA) Draft Underground Injection Control (UIC) Program Guidance on Transitioning Class 11
Wells to Class VI'Wells (Draft Guidance), issued in December 2013. The Draft Guidance
proceeds from an inaccurate understanding of the authority of a Class VI regulator with respect
to Class 11 wells and therefore unlawfully interferes with the authority granted to States under the
UIC Program. We respectfully request that EPA resolve this fundamental flaw to protect vital
Sectors of our economy and preserve the well-being of the citizens and businesses of our States.

The Safe Drinking Water Act?s (SDWA) UIC Program is intended to protect subsurface
supplies of drinking water from the drilling and use of underground wells for various industrial
actiVities. Under this program, oil and gas wells are classi?ed as ?Class 11? wells, and, pursuant
to the structure of the UIC Program and primacy agreements with EPA, our states and not EPA

Page 1 of 4
315 N.E. 215T OKLAHOMA CITY, OK 73105 (405) 521-3921 - FAX: (405) 521-6246

0!
recycled paper

 

 serve as the primary regulators of Class II wells. Recently, EPA created a new class of wells
under the UIC Program, known, as ?Class wells, for the underground injection and storage of
carbon dioxide (CO2), primarily in connection with prospective carbon capture and storage
(CCS) operations. See 75 Fed. Reg. 77230 et seq. (Dec. 1, 2010). See also 75 Fed. Reg. 75060
(Dec. 1, 2010).

Notwithstanding this new class of wells intended to accommodate the underground
injection of C02, many oil and gas producers operating Class 11 wells have been injecting CO2
for the past 40 years to manipulate well pressure and enhance the recovery of oil and gas. This
process, commonly referred to as enhanced oil recovery (EOR), has been used in more than
10,000 wells, about 7,000 of which are currently active. EOR represents a critically important
part of our states? and our country?s energy infrastructure and plays an essential role in our
nation?s economic stability and energy security.

The Draft Guidance, arising from newly-created Class VI wells, is directed at the
interplay between Class 11 and Class VI wells as it relates to underground C02 injection. But
rather than provide clarity and avoid interfering with the production of oil and gas via EOR 
which, again, we emphasize has been occurring for the past several decades without increased
risk to drinking water and other subsurface assets the Draft Guidance has introduced confusion
and uncertainty into the oil and gas industry and failed to resolve the business community?s
outstanding issues with the UIC Program.

Speci?cally, the Draft Guidance indicates that a regulator in an EPA regional of?ce
overseeing Class VI wells (129., the Class VI Director) has the authority to determine whether a
Class II well at which EOR operations are occurring must ?transition? to a Class VI well. This
?ies in the face of prevailing industry practice, as well as common sense. It also violates current
law and the proper division of authority between EPA and states under SDWA.

As part of its rulemaking in 2010 creating the Class VI well category, EPA articulated a
series of factors by which a Class 11 well with EOR operations could be reclassi?ed a Class VI
well, presumably to perform CCS?type operations instead. 40 C.F.R. 144.19. This included
such criteria as an increase in reservoir pressure within the injection zone, an increase in C02
injection rates, suitability of the Class II area of review delineation, the owner?s or operator?s
plan for recovery of C02 at the cessation of injection, the source and properties of injected C02,
and any additional site specific factors as determined by the regulator. Id. Many Class II permit
holders communicated to EPA that these criteria were too vague and could lead to the
reclassification of wells in which CCS was neither intended nor actually occurring. In response,
EPA prepared and issued the Draft Guidance in December 2013.

The Draft Guidance correctly states that while C02 is stored underground during EOR
operations in a Class II well, this alone does not require the transition of the Class 11 well into a
Class VI well. To the contrary, EPA has plainly stated that EOR operations at a Class 11 well are
not to be affected by the Class VI rule:

Traditional ER projects are not impacted by this rulernaking and will continue operating under
Class permitting requirements. EPA recognizes that there may be some C02 trapped in the
subsurface at these operations; however, if there is no increased risk to [underground sources of
drinking water then these operations would continue to be permitted under Class II.

Page 2 of 4

 

75 Fed. Reg, at 77245. The Draft Guidance properly reiterates this point, stating ?[t]raditional
EOR projects are not affected by the Class VI rulemaking and will continue to be permitted
under Class II requirements.? Draft Guidance, at 1.

But then the Draft Guidance goes on to describe scenarios in which a Class 11 well with
EOR operations would need to be reclassified as a Class VI well, based on the unchecked
increase in subsurface pressures caused by the injection of C02. This is blatantly inconsistent
with prevailing practices in the oil and gas industry and contrary to law.

Under the UIC Program, our states are vested with authority to permit Class 11 wells with
EOR for purposes of enabling the production of oil. As part of this, the state-level Class 11
Director reviews maximum and average injection pressures and other information to ensure that
CO2 injection will ?not result in the movement of ?uids into a USDW so as to create a
signi?cant health risk.? Draft Guidace, at Class regulations specify limits on
injection pressures to prevent the movement of injection or formation ?uids into a USDW or the
fracturing of the confining zone. Id. at See also 40 C.F.R. The Class II
framework is thus wholly competent to prevent unchecked increases in subsurface pressures
during EOR operations and other traditional oil and gas production methods. The scenario
described by EPA as a trigger for reclassi?cation simply is not re?ective of real world operating
conditions.

The actual circumstance under which reclassi?cation would occur, also described in the
Draft Guidance, is where a Class II operator changes the primary purpose of the well from the
production of oil to the maximal underground storage of C02 and, in so doing, changes its
operations in such a way as to transcend the confines of the Class II regulatory structure and
create an ?increased risk to USDWs compared to traditional Class operations using carbon
dioxide.? Draft Guidance, at ii. Importantly, this is not so easily done. A Class II permit holder
cannot change from EOR to maximal C02 storage without accounting for numerous other
interests and legal and business considerations. For example, its contractual obligations with
land owners and/or subsurface rights holders would most likely need to be altered, if not
renegotiated, to accommodate such a transition. Similarly, state laws intended to enable oil and
gas production can, in certain circumstances, interfere or even prohibit the use of oil and gas
wells for maximal C02 storage if future production would be inhibited.

But regardless, the Draft Guidance further complicates and confuses the situation by
erroneously implying that the Class VI Director can, on his or her own volition, preempt the
Class 11 Director and require the Class permit holder to ?le for reclassi?cation under ClassVI.
This is not lawful. Allowing the Class VI Director to ?second guess? the Class 11 Director and
intervene seemingly on a whim violates own rules regarding state primacy and ?agrantly
impinges upon state authority. EPA cannot revoke a state?s primacy unless it can show a failure
to comply with applicable requirements. 40 CPR. 145 These requirements prescribe a
series of detailed steps EPA must follow in order to do so, including providing adequate notice to
the state and allowing the state suf?cient time to take corrective action.

Thus the Draft Guidance, in overtly implying that the Class VI Director is empowered to
act unilaterally within. an industry in which he or she lacks requisite experience thereby
exposing a Class II permit holder to the seemingly unbounded risk of being ordered, absent any

Page 3 of 4

 

speci?c criteria, to apply for reclassi?cation is utterly and entirely beyond the bounds of EPA
authority and carries the very real possibility of doing harm to our nation?s energy infrastructure.
Moving beyond the con?nes of a traditional Class 11 well with EOR operations to maximal C02
storage is not easily nor quickly done and implicates signi?cant economic and other business
considerations. Allowing the Class VI Regulator to intervene seemingly without basis adds an
unconscionable level of uncertainty and risk to a mature area of industrial activity already well
and thoroughly regulated.

For the foregoing reasons, we respectfully request you take immediate action to rectify
this situation as the Draft Guidance is ?nalized and, additionally, through any other rulemakings
as may be necessary under the UIC Program to eliminate this uncertainty and ensure strict
adherence to applicable law.

Sincerely,

   

era? 
E. Scott Pruitt
Oklahoma Attorney General

an? am Km 47 am?

Luther Strange Greg Abbott
Alabama Attorney General Texas Attorney General

 
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Bill Schuette Peter Michael
Michigan Attorney General Wyoming; Attorney General

Que /f 

Jon Bruning
Nebraska Attorney General

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Alan Wilson
South Carolina Attorney General

Page 4 of 4