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Summary of Regulatory Impact Statement - 6 NYCRR Part 570

Liquefied Natural Gas

The New York State Department of Environmental Conservation (DEC) is proposing to adopt 6 NYCRR Part 570 to implement a permitting program for the siting and construction of Liquefied Natural Gas (LNG) facilities. These regulations will promulgate criteria for the siting of these facilities and the form and content of permit applications. As required by Environmental Conservation Law (ECL) Article 23, Title 17 (the LNG statute), environmental safety permits must be obtained from DEC before construction of an LNG facility in New York State (the State). This rulemaking will establish a program that addresses the renewed interest in locating LNG facilities (particularly heavy-duty truck fueling facilities) in the State, and allow the siting, construction, and operation of such facilities. Part 570 will also address the transportation of LNG and the statutory requirement that intrastate transportation only occur along approved routes.

1. Statutory Authority

The statutory authority for DEC to adopt Part 570, and guidance as to such regulations' contents, is found in ECL Sections 1-0101, 3-0301, 23-1703, 23-1705, 23-1707, 23-1709, 23-1711, 23-1713, 23-1715, 23-1717 and 23-1719. The full Regulatory Impact Statement summarizes each of these statutory sections. Key statutory provisions are outlined below.

ECL Section 1-0101 declares a policy of the State to conserve, improve and protect its natural resources and environment and to control water, land and air pollution in order to enhance the health, safety and welfare of the people and their overall economic and social well being. ECL Section 3-0301 empowers DEC to coordinate and develop programs to carry out the environmental policy of the State set forth in Section 1-0101. Among other things, section 3-0301 specifically empowers DEC to adopt such regulations as may be necessary to effectuate that environmental policy. A permitting program for LNG facilities will further the objectives of these sections by providing a means to appropriately site LNG facilities in locations that encourage the best usage of land and minimize the risk of potential environmental and safety impacts. Further, the proposed rules will address the transportation of LNG within the State.

Various sections of the LNG statute specify the requirements for implementation of the LNG program in the State. The LNG statute emphasizes the need to minimize the siting of LNG storage, transportation and conversion facilities in residential areas or in proximity to contiguous populations and to protect such areas from potential hazards associated with transportation of LNG.

The authorities granted to DEC by the cited ECL provisions also empower DEC to address the transportation of LNG. As required by the LNG statute, the proposed rules prohibit intrastate transportation of LNG until routes are approved. Part 570 dovetails with federal standards applicable to LNG storage and transportation, as detailed in the complete version of the RIS. Like the underlying LNG statute, the proposed rules do not impede interstate commerce. Thus, DEC has the statutory authority to adopt the proposed rules.

2. Legislative Objectives

a. Overview

ECL 23-1709 requires DEC to adopt regulations for the safe siting and operation of LNG facilities. Use of LNG in heavy-duty trucks has environmental advantages over the use of diesel fuel because of reduced greenhouse gas and other emissions. Most other states permit LNG storage, conversion and transportation. As a result, LNG refueling stations may be operated in such other states. But New York has not permitted the construction of any LNG facilities since the LNG statute was adopted. There are three "grandfathered" peak shaving facilities in New York City and on Long Island operating under orders on consent with DEC in accordance with ECL 23-1719. Adoption of Part 570 will allow DEC to address the renewed interest in siting LNG facilities, and to consider applications for environmental safety permits for new facilities.

b. Specific Regulatory Provisions

Section 570.1: Introduction
This section contains descriptions of the general purpose, applicability, definitions, exemptions, severability, and enforcement of Part 570. Part 570 incorporates by reference standards contained in the National Fire Protection Association (NFPA) Standards 52 and 59A. These regulations do not regulate compressed natural gas or liquefied petroleum gas, or require permits for vehicles or vessels fueled by LNG.

Section 570.2: Permit Requirements and Application Procedures
This section sets forth permit application procedures addressing: siting; permit duration and renewal; public participation guidelines; permit modification and change of facility ownership; permit suspension or revocation; and program fees. It requires that applicants offer emergency training for local fire department staff, if needed.

Section 570.3: Site Inspections and Training of Local Fire Department Personnel
This section authorizes DEC (or qualified third parties) to inspect permitted facilities to determine compliance, and requires that applicants offer emergency training for local fire department staff, if needed.

Section 570.4: Transportation of LNG
This section prohibits the intrastate transportation of LNG to supply permitted facilities unless the intrastate transportation route has been certified. Consistent with the LNG statute, the proposed regulations do not affect interstate LNG transport.

Section 570.5: Non-Conforming Facilities
This section addresses "grandfathered" LNG facilities. No permits are required for these three facilities, unless capacity is increased.

Section 570.6: Permanent Closure of Out-Of-Service LNG Storage Tanks
This section requires that out-of-service LNG storage tanks be permanently closed pursuant to certain engineering guidelines and procedures.

Section 570.7: Financial Assurance
This section states that financial assurance, the form and amount of which will be established by DEC, may be required to ensure proper closure of LNG facilities.

Section 570.8: Reporting of LNG Spills
This section explains the requirements for reporting LNG spills.

Section 570.9: Moratorium
This section states that Part 570 will not affect any statutory moratoria.

Section 570.10: References
This section provides a listing of reference materials that are cited in 6 NYCRR Part 570, including those that are incorporated by reference, and explains how they can be obtained for inspection and/or purchase.

3. Needs and Benefits

Without Part 570, new LNG facilities cannot be constructed or operated in the State. A 1998 New York State Energy Research and Development Authority (NYSERDA) report found that New York was the only state in the nation with a moratorium on LNG facilities, which have been operated safely elsewhere. The report recommended the moratorium be lifted, which occurred on April 1, 1999, except for New York City. The report also recommended the repeal of the LNG statute.

A second NYSERDA LNG report (2011) analyzed the "state-of-the-art" of LNG activities in the US, and provided facility, job and cost projections in the event LNG regulations were promulgated. The report confirmed that the recent lower price of LNG compared with other fuels has increased its demand in the transportation sector, and that most states use NFPA Standards 52 and 59A, which are comprehensive standards for the construction and operation of LNG facilities. The report also documented the environmental benefits of LNG.

The 2011 study also estimated the type and number of LNG permits expected to be issued in the State if the regulations were promulgated. These include: (1) LNG import/export terminals (these would require federal approval); (2) peak shaving plants that produce/store/vaporize LNG; (3) regional LNG production facilities (relatively large quantities); (4) LNG production at natural gas wells; (5) LNG production at facilities with access to a natural gas pipeline; and (6) LNG fueling facilities without on-site production of LNG. Using various methods, the report estimates that between 10 and 25 facilities (best estimate 21) will be permitted in the first five years after Part 570 is promulgated.

In recent years, several companies have proposed LNG operations in the State. Commercial vehicle manufacturers have expressed interest in replacing diesel engines with those that run on LNG.

4. Costs

a. Costs to regulated community

In addition to any fees or costs associated with the State Environmental Quality Review Act process, applicants for LNG permits will have to submit application fees for each new permit, renewal, or transfer, based on the facility's LNG storage capacity. If the capacity is less than 1,100 gallons, the fee for a five-year permit is $100; 1,100 gallons to 10,000 gallons: $500; 10,001 to 70,000 gallons: $1,000; greater than 70,000 gallons: $2,500. The application fee is a one-time fee for the life of the permit for the original permit holder.

Applications must evaluate the capabilities of local fire response agencies. If DEC (with the assistance of the Office of Fire Prevention and Control (OFPC) of the State Division of Homeland Security and Emergency Services) concludes that additional training, equipment, or personnel are needed, the applicant must provide same. Costs for training will range from $1,000 to $5,000 per firefighter, depending on their numbers and experience levels. Subsequent annual refreshers will range from $200 to $500.

b. Costs to DEC, State, and Local Government

Promulgation of these regulations is required by the LNG statute. DEC expects the State to recoup its personal service and non-personal service costs through permit application fees. DEC will need to dedicate staff time to issue permits and inspect LNG facilities. ECL 23-1715 provides DEC with the ability to recover costs associated with permit revocation and enforcement proceedings.

Costs to other state agencies are to: 1) OFPC for the Fire Administrator's review of applications to determine capabilities of local fire departments; and 2) New York State Department of Public Service (NYSDPS) for inspection of facilities covered by the Public Service Law. These responsibilities can be fulfilled with those agencies' current staff.

Costs to local governments will be paid for by applicants. Thus, there will be no, or de minimis, costs to local governments.

c. Basis of Cost Estimates

The cost estimates contained herein are from the 2011 NYSERDA LNG report and DEC staff's best professional judgments based on years of experience with many environmental regulatory programs. Both the 1998 and 2011 NYSERDA reports are incorporated herein by reference and available on DEC's website.

5. Local Government Mandates

No recordkeeping, reporting, or other requirements not created by the LNG statute will be imposed on local governments by this rulemaking.

6. Paperwork

No paperwork is proposed other than as is required by the LNG statute. Applicants must submit completed applications to DEC. There are reporting obligations for releases of LNG which result in, or may reasonably be expected to result in, a fire or an explosion. These obligations are consistent with the legislative intent and do not cause any undue costs or burdens.

7. Duplication

Three federal agencies, the Federal Energy Regulatory Commission (FERC), the Department of Transportation (USDOT), and the Coast Guard (USCG), have jurisdiction over LNG safety issues. Under the Natural Gas Act, FERC issues certificates authorizing the siting and construction of onshore and near-shore LNG import or export facilities, and has jurisdiction over LNG peak shaving facilities used in interstate commerce. FERC also issues certificates of public convenience and necessity for LNG facilities engaged in interstate natural gas transportation by pipeline. In addition, the NFPA standards have been adopted by numerous state and federal agencies.

Finally, the USCG has authority over the design, construction, manning, and operation of ships and barges that transport LNG, and marine transfer areas of import/export facilities. Currently, no import and/or export terminal facilities are operating in the State.

At the State level, NYSDOT, NYSDPS, and OFPC have regulatory jurisdiction over certain aspects of the production, storage, transportation, and use of LNG. In drafting Part 570, DEC worked with all affected state agencies to minimize the impact of any duplication, overlap or conflict on the regulated community.

8. Alternatives

No action: If Part 570 is not promulgated, DEC cannot issue permits for LNG facilities. Under a "no action" alternative, the economic, environmental, and energy benefits of these projects would be lost.
Legislative initiative: There have been attempts to amend the LNG statute, which could significantly change DEC's role in regulating LNG facilities. To date, none of these efforts have been successful. Thus, DEC continues to be responsible for developing Part 570.
Rulemaking initiative: Based on the preceding discussion, regulations should be promulgated to address the safe siting, construction and operation of LNG facilities.

9. Federal Standards

Federal standards applicable to this rulemaking are 49 CFR 193, USDOT Pipeline Safety regulation; and 33 CFR 127, USCG's Navigation and Navigable Waters regulation.

10. Compliance Schedule

The regulated community will be required to comply upon enactment of the proposed regulations.

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