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Revised Summary of Regulatory Impact Statement - 6 NYCRR Part 570

Liquefied Natural Gas

This revised rulemaking is proposed by the New York State Department of Environmental Conservation (DEC) to adopt 6 NYCRR Part 570, to implement requirements for the safe siting and operation of Liquefied Natural Gas (LNG) facilities and transportation of LNG under Environmental Conservation Law (ECL) Article 23, Title 17 (the LNG statute). Adoption of Part 570 would allow DEC to permit the siting, construction, and operation of LNG facilities in response to the renewed interest in locating LNG facilities (particularly heavy-duty truck fueling facilities) in New York State (the State). Part 570 also addresses the transportation of LNG and the statutory requirement that intrastate transportation only occur along approved routes.

Use of LNG in heavy-duty trucks has environmental advantages over the use of diesel fuel because of reduced greenhouse gas and other emissions. Other states allow LNG storage, conversion and transportation. As a result, LNG refueling stations may be operated in such other states. 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 DEC Orders in accordance with ECL section 23-1719. Adoption of Part 570 would allow DEC to consider applications for environmental safety permits for new facilities and address renewed interest in siting LNG facilities.

1. Statutory Authority

The statutory authority for Part 570, and guidance as to its contents, is found in ECL sections 1-0101, 3-0301, and the LNG statute. The full Regulatory Impact Statement (RIS) discusses each of these statutory sections. Key provisions are summarized below.

ECL section 1-0101 declares a policy of the State to conserve, improve and protect its natural resources and environment and to prevent, abate and 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 adopt regulations as may be necessary to effectuate that environmental policy. ECL section 23-1709 requires DEC to adopt regulations for the safe siting and operation of LNG facilities. Various sections of the LNG statute specify the requirements for implementation of an LNG program in the State.

2. Legislative Objectives

ECL section 23-1703 sets forth the legislative findings and purpose of the LNG statute to control and regulate the siting of LNG facilities for the protection of public health, the environment, and economic welfare of the people of the State. ECL section 23-1703 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.

A regulatory program for LNG facilities would further the objectives of the LNG statute and ECL section 23-1709 specifically by establishing a permitting program to appropriately site LNG facilities in locations that encourage the best usage of land and minimize the risk of potential environmental and safety impacts. 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 full RIS. Like the underlying LNG statute, the proposed rules would not impede interstate commerce.

Section 570.1 contains general provisions, including purpose, applicability, definitions, and exemptions. These regulations, consistent with the LNG statute, would not regulate compressed natural gas or liquefied petroleum gas, or require permits for vehicles or vessels fueled by LNG.

Section 570.2 implements objectives of ECL 23-1707, 23-1709 and 23-1711. It sets forth permit application procedures; public participation guidelines; permit modification and change of facility ownership; permit suspension or revocation; permit application fees; and costs. In a substantial change from the proposed regulations, this section has been revised to limit the capacity of permitted LNG facilities to 70,000 gallons. This change addresses concerns embodied in public comments regarding safety of larger facilities.

Section 570.3 implements provisions of ECL 23-1715 that authorize DEC, or qualified third parties, to inspect permitted facilities, and requires that LNG facilities offer, at the applicant's cost, emergency training for local fire department staff. The revised rule also clarifies that permitted facilities must maintain certain records.

Section 570.4 implements objectives of ECL 23-1713. It prohibits the intrastate transportation of LNG unless the intrastate transportation route has been certified. Because no routes are currently approved, intrastate transportation of LNG is prohibited. Consistent with the LNG statute, the proposed regulations do not affect interstate LNG transport.

Section 570.5 implements ECL 23-1719 and addresses "grandfathered" LNG facilities. No permits are required for these facilities, three of which currently operate in New York, unless capacity is increased. In the proposed rule noticed on September 11, 2013, these facilities were called "non-conforming" consistent with language used in ECL 23-1719. In response to public comments, in the revised proposed rule these facilities are referred to as "pre-existing" facilities.

Section 570.6 requires out-of-service LNG tanks to be permanently closed pursuant to certain engineering guidelines and procedures. This section includes procedures similar to those required for out-of-service petroleum bulk storage tanks to ensure protection of public safety and the environment.

Section 570.7 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 requires LNG spills to be reported to ensure protection of public safety and the environment.

Section 570.9 states that Part 570 will not affect any statutory moratoria.

Section 570.10 provides a listing of reference materials that are cited in 6 NYCRR Part 570.

3. Needs and Benefits

Without Part 570, new LNG facilities cannot be constructed or operated in the State. In recent years, several companies have proposed LNG operations in the State. Commercial vehicle manufacturers and operators have expressed interest in replacing diesel engines with those that run on LNG.

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, even though LNG facilities 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 U.S., 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 included: (1) LNG import/export terminals, which 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) would be permitted in the first five years after adoption of regulations. The most common LNG facilities in this first five years are expected to be fueling facilities. This report also indicates that the great majority of, if not all, facilities that would be permitted in the first five years of the program would have storage capacities less than 70,000 gallons. The 70,000 gallon limit on facility capacity for a permitted LNG facility, which is proposed in this revised rulemaking, would greatly curtail, if not eliminate, the possibility of new peak shaving facilities and regional LNG production facilities. As noted above, LNG import or export facilities would be primarily under federal jurisdiction.

4. Costs

a. Costs to Regulated Community

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. In addition, DEC is authorized to recover costs incurred in implementing the program.

Applicants must provide any additional training, equipment, or personnel determined by DEC to be necessary. Costs for training would range from $1,000 to $5,000 per firefighter, depending on their numbers and experience levels. Subsequent annual refreshers would 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 beyond what is required by the LNG statute would be imposed on local governments by this rulemaking.

6. Paperwork

Applicants must submit completed applications to DEC for a permit. In addition, there are record-keeping requirements and reporting obligations for spills of LNG of one gallon or more, or lesser amounts that result in a fire or explosion. These obligations are consistent with the legislative intent and would not cause any undue costs or burdens.

7. Duplication

Three federal agencies, the Federal Energy Regulatory Commission (FERC), Department of Transportation (USDOT), and 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, NFPA standards have been adopted by numerous state and federal agencies.

Finally, 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, NYSERDA and OFPC have regulatory jurisdiction over, and/or input into, 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

If Part 570 is not promulgated, DEC cannot issue permits for LNG facilities. DEC has rejected this alternative because the LNG statute requires that DEC promulgate regulations to permit LNG facilities, and under a "no action" alternative, the economic, environmental, and energy benefits of these projects would be lost.

9. Federal Standards

No federal standards will be exceeded by promulgating the proposed rule.

10. Compliance Schedule

The regulated community would be required to comply upon adoption of the proposed regulations.

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