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Regulatory Impact Statement (Full Text) - 6 NYCRR Part 570

Liquefied Natural Gas

Introduction

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 are necessary to fulfill, in part, DEC's obligations under Environmental Conservation Law (ECL) Article 23, Title 17 (the LNG statute) to promulgate criteria for the siting of these facilities and to prescribe the form and content of applications for environmental safety permits. As required by the LNG statute, an environmental safety permit must be obtained from DEC prior to construction of an LNG facility in New York State (the State). The statute also directs that operation of LNG facilities must be carried out in conformance with permits issued by DEC. Although ECL Article 23 requires a permit from DEC, a regulatory program for LNG facilities is not in place. With renewed interest in locating LNG facilities (particularly heavy-duty truck fueling facilities) in the State, this rulemaking will establish a program that will address 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. A brief summary follows for each of these statutory sections.

ECL Section 1-0101. This section declares that it is a policy of the State to conserve, improve and protect its natural resources and environment and control water, land and air pollution in order to enhance the health, safety and welfare of the people of the State and their overall economic and social well being. This section further expresses, among other things, that it is the policy of the State to foster, promote, create, and maintain conditions under which social, economic, and technological progress for present and future generations can be achieved by guaranteeing that the widest range of beneficial uses of the environment is attained without risk to health or safety, unnecessary degradation, or other undesirable or unintended consequences.

ECL 1-0101 also dictates the State policy to promote patterns of development and technology which minimize adverse impacts on the environment. This section supports DEC's efforts to create a permitting program for the siting and operation of LNG facilities that is protective of public health and safety. Similarly, this section also supports the adoption of regulations addressing the transportation of LNG within the State.

ECL Section 3-0301. This section empowers DEC to coordinate and develop programs to carry out the environmental policy of the State set forth in Section 1-0101. Section 3-0301 specifically empowers DEC to: coordinate and develop policies, planning and programs related to the environment of the State and regions thereof; to encourage industrial, commercial, residential, and community development which provides the best usage of land areas, maximizes environmental benefits and minimizes the effects of less desirable environmental conditions; to provide for the prevention and abatement of all water, land and air pollution; to prevent pollution through the regulation of the storage, handling and transport of solids, liquids and gases which may cause or contribute to pollution; to assess new and changing technology and development patterns to identify long-range implications for the environment and encourage alternatives which minimize adverse impacts; to cooperate with officials and representatives of the federal government, other states and interstate agencies regarding problems affecting the environment of the State; to enter into contracts with any person to do all things necessary or convenient to carry out the functions, powers and duties of DEC; and to adopt such regulations as may be necessary, convenient or desirable to effectuate the environmental policy of the State.

A permitting program for LNG facilities will further the objectives of this section 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 conditions under which a permit may be issued for the construction of an LNG facility and the transportation of LNG within the State.

ECL Section 23-1703. This section declares that it is in the best interests of the State to regulate and control the siting of LNG facilities. The statute emphasizes the need to address the storage, transportation and conversion of LNG to natural gas to minimize the siting of these facilities in residential areas or in proximity to contiguous populations and to protect such areas from the potential hazards associated with transportation of LNG. Finally, this section specifically excludes the storage and transportation of natural gas at normal temperatures from the requirements of the statute. This section, adopted in 1976, provides the backdrop for the LNG statute, and the legislative findings that served as a basis for it. Adoption of Part 570 is consistent with the legislative directive that a regulatory scheme is necessary to address the increasing use of liquefied natural gas and the potential for its storage and transportation to create a risk to public safety.

ECL Section 23-1705. This section defines the terms used in Title 17 unless the context otherwise requires a different definition. The statutory definition of LNG includes both liquefied natural gas and liquefied petroleum gas (LPG); however, Part 570 does not address LPG, because as the term LPG is commonly used, it is excluded under ECL Section 23-1703, which states in part "liquefied petroleum gases in the form of butane, bottled gas, propane, propylene and butylene gas when stored or transported at their respective normal temperatures are not subject to regulation under the provisions of this act".

ECL Section 23-1707. This section specifies that an environmental safety permit is required before any person commences the preparation of a site for, or begins construction of, an LNG facility. This section also specifies that a permitted facility must be constructed and operated in a manner consistent with such permit. Section 7 of Title 17 also indicates that the statute does not exempt such facilities from compliance with State law and regulations or municipal laws and regulations not inconsistent with an environmental safety permit issued by DEC.

ECL Section 23-1709. This section specifies the siting criteria that must be included in regulations promulgated by DEC. The legislature directed that such siting criteria must be designed to insure the maximum safety of the public from hazards associated with storage, transportation, and conversion of LNG. This section also lists the factors that must be considered by DEC in making decisions about the suitability of a proposed location, and describes the regulations that must be promulgated to specify the content of an application to DEC. Finally, this section indicates that ECL Article 70 will govern the procedures for applications, renewals, modifications, suspensions and revocations under Article 23, Title 17.

ECL Section 23-1711. This section contains public hearing and notice requirements for Title 17 and authorizes DEC to permit, deny, or impose conditions deemed appropriate for a permit issued under Title 17. It also directs DEC to deny permits for any facility that poses a danger to residential areas or contiguous populations, is not necessary, or is otherwise not in the public interest.

ECL Section 23-1713. This section provides that except for transportation by navigable waterways, all intrastate transportation of liquefied natural and petroleum gas must be along routes certified by the New York State Department of Transportation.

ECL Section 23-1715. This section describes civil and criminal penalties for violations of Title 17. It also provides that the costs of the implementation of Title 17 shall be at no net cost to affected municipalities or the State.

ECL Section 23-1717. This section states that DEC shall determine the need for, and if necessary ensure the provision of, training of local fire department personnel to ensure they are capable of responding to emergency situations involving LNG. Costs for such training shall be paid for by those subject to the LNG statute.

ECL Section 23-1719. This section allows facilities operating at the time of the passage of the statute to continue operations only if DEC issues an order so allowing. Otherwise such activities would be subject to a moratorium. DEC held hearings and issued orders pursuant to this section.

The above-referenced sections of the ECL confer broad authority on the Commissioner and DEC to promulgate rules designed to protect the environment and public safety. The State's policy to encourage industrial, commercial, residential and community development which provides the best usage of land areas, maximizes environmental benefits and minimizes the effects of less desirable environmental conditions requires that DEC develop a regulatory program that gives due consideration to the appropriate location for certain types of facilities. In the case of LNG, the LNG statute places particular emphasis on the need to avoid the siting of LNG facilities in residential areas due to the volatile nature of liquefied natural gas. In this regard, the LNG statute provides DEC with specific grants of authority to consider applications for environmental safety permits and to determine the conditions under which LNG facilities may be constructed and operated.

The proposed rules achieve the general and specific legislative goals found in the ECL by establishing a permitting process that will address the need to protect the public from the potential hazards associated with LNG storage, conversion, and transportation and at the same time take advantage of the economic, environmental, and technological advantages that LNG offers. The proposed rules are necessary for DEC to consider applications for environmental safety permits and will provide a process to evaluate proposed locations for LNG refueling stations in New York, which are the primary type of facilities DEC expects will be permitted under the proposed rules.

The general and specific authorities granted to DEC by the ECL provisions discussed above 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. The United States Department of Transportation's Pipeline and Hazardous Materials Safety Administration (USDOT) and the United States Coast Guard (USCG) have authority to promulgate and enforce safety standards for LNG storage and transportation in interstate commerce. Their authority to do so derives from, among other laws, the Natural Gas Pipeline Safety Act of 1968 and the Hazardous Materials Transportation Act. For the transport of LNG in port areas, the Magnuson Act and the Ports and Waterways Act of 1972 provide additional authority for the USCG to enforce safety standards in navigable waterways.

Pursuant to the Natural Gas Act, the Federal Energy Regulatory Commission (FERC) also has jurisdiction over certain LNG facilities. Specifically, FERC issues certificates of public convenience and necessity for facilities transporting natural gas, including LNG, in interstate commerce. For entirely in-state transportation of natural gas the New York State Public Service Commission has authority to impose safety standards for pipelines and gathering lines. However, LNG is not able to be transported over significant distances in pipelines. Although the USDOT's safety standards apply to both interstate and intrastate facilities, states are permitted to implement more restrictive safety standards for intrastate facilities than those imposed by USDOT. USDOT may also delegate their authority to State agencies, enabling State agencies to conduct inspections for compliance with USDOT and State regulations. The USDOT definition of an LNG facility is limited specifically to storage operations involving or impacting interstate commerce.

As authorized by the LNG statute, proposed Part 570 addresses intrastate transportation of LNG by prohibiting such transportation until there are approved routes. As detailed above, federal agencies already prescribe minimum standards for interstate transportation and the proposed rules allow interstate transport of LNG. Part 570, as proposed, prohibits the transport of LNG only when both the point of loading the truck and the consumer or end user are in the State and the route of delivery does not cross state lines, unless and until routes for such intrastate transportation are approved. In this regard, the proposed rules do not impede the movement of LNG by truck between and among states. Nor does Part 570 create a preference or advantage for in-state markets. Part 570, by design, does not directly or indirectly impact interstate commerce. As such, DEC has the statutory authority to adopt the proposed rules governing the siting of LNG facilities, which does not allow the intrastate transportation of LNG unless routes for such intrastate transportation are approved.

2. Legislative Objectives

a. Overview

The LNG statute, at 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 for heavy-duty trucks may be operated in such other states. New York, on the other hand, has not permitted the construction of any LNG facilities since the LNG statute was adopted. There are three "grandfathered" peak shaving facilities in downstate New York operating under orders on consent with DEC in accordance with ECL 23-1719, but with renewed interest in siting LNG facilities, adoption of Part 570 will allow DEC to consider applications for environmental safety permits to construct new facilities.

b. Specific Regulatory Provisions

Section 570.1: Introduction
Section 570.1 contains a description of the general purpose, applicability, definitions, exemptions, severability, and enforcement throughout Part 570. Part 570 incorporates by reference standards contained in the National Fire Protection Association ("NFPA") Standards 52 and 59A. Consistent with the LNG statute, 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
Section 570.2 sets forth permit application procedures and requirements. It specifies application contents, and criteria for: siting; permit duration and renewal; public participation guidelines; modification of permit and change of facility ownership; permit suspension or revocation; and program fees. It requires that applicants offer emergency training for local fire department staffs, if needed. Issuance of these permits is expected to attract corporations/industries interested in constructing and operating LNG facilities, which will result in economic growth and environmental benefits from using LNG as a fuel, rather than petroleum.

Section 570.3: Site Inspections and Training of Local Fire Department Personnel
Section 570.3 authorizes DEC (or qualified third parties approved by DEC) to inspect permitted facilities to determine compliance. It also describes facility inspections and provides that applicants shall offer, at their cost, emergency training for local fire department staff, if needed.

Section 570.4: Transportation of LNG
Section 570.4 prohibits the intrastate transportation of LNG to supply a permitted facility unless the intrastate transportation route has been certified as set forth in subdivision 570.4(a). NYSDOT has determined that because certified routes are not established for other hazardous materials, it would be impracticable to establish certified intrastate routes for LNG. Consistent with the LNG statute, the proposed regulation does not require certification of interstate routes of LNG transport.

Section 570.5: Non-Conforming Facilities
Section 570.5 addresses "grandfathered" LNG facilities. There are three such facilities: National Grid's Holtsville and Greenpoint facilities, and Con-Edison's Astoria plant. These facilities operate pursuant to 1979 DEC Orders. No permits are required for these facilities, unless capacity is increased.

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

Section 570.7: Financial Assurance
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: Reporting of LNG Spills
Section 570.8 explains the requirements for reporting LNG spills.

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

Section 570.10: References
Section 570.10 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. In 1997, the Legislature directed the New York State Energy Research and Development Authority (NYSERDA) to conduct a study of the safety of LNG facilities and their potential economic and environmental benefits. The ensuing 1998 report found that New York was the only state in the nation with a moratorium on LNG facilities, and that they had 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. This regulation will comply with the statutory requirement to promulgate a regulation to permit new LNG facilities and will enable the State to realize the economic and environmental benefits of LNG.

A second LNG study (attached) was sponsored by NYSERDA in 2011 to (1) define the "state-of-the-art" of LNG activities in the US; and (2) provide facility, job and cost projections in the event that an LNG regulation were promulgated. The results confirmed that, in recent years, the 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, including its lower emissions, finding that: "Natural Gas in any form (compressed as CNG or liquefied as LNG) is one of the cleanest burning hydrocarbon fuels, producing lower levels of carbon dioxide (CO2), oxides of nitrogen (NOx), and particulate matter than heavier hydrocarbon fuels such as diesel."

The 2011 study also estimated the type and number of LNG permits that might be issued in New York 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. The study notes that LNG is increasingly used in heavy-duty truck engines, and that LNG could supply natural gas to communities and industries not served by pipelines. 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 developers and commercial vehicle manufacturers have expressed an interest in replacing standard diesel engines with those that run on LNG. For example, in a speech on March 6, 2013, Dan Akerson (General Motors Chairman and CEO) stated that LNG represents an opportunity for commercial vehicle operators to save money and contribute to cleaner air, and that efforts should be made to develop new LNG facilities. In addition, one New York company plans to institute testing of small scale liquefaction of natural gas in the southern tier of New York, and an out of state company has inquired about possibilities of installing LNG truck fueling facilities in New York, as has NYSDOT. At least one other company may also be interested in small scale LNG operations, while still another plans to construct LNG fuel tanks in New York.

4. Costs

Costs to state and local government, and to private regulated parties are discussed below:

a. Costs to regulated community

In addition to any costs and fees associated with the State Environmental Quality Review Act (SEQRA) 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 permit application fee is a one-time fee for the life of the permit for the original permit holder.

As part of the application process, applicants 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 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 numbers and experience levels of the firefighters. Subsequent annual refreshers will range from $200 to $500. These costs include trainer, room, supplies, etc. The training courses use simulations to illustrate the behaviors of LNG and explain how to respond to releases.

b. Costs to DEC, State, and Local Government

Promulgation of this regulation is required by statute. DEC expects the State to recoup its personal services and non-personal services costs through permit application fees. Costs to local governments will be determined and submitted to DEC in the permit application process. Applicants will provide all training, personnel, and equipment needed by local governments. Thus, there will be no, or de minimis, costs to local governments.

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 any revocation and enforcement proceedings.

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

c. Basis of Cost Estimates

The cost estimates contained herein are from the 2011 NYSERDA 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.

5. Local Government Mandates

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

6. Paperwork

No paperwork is proposed other than as is required by 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, NFPA has developed LNG standards which have been adopted by numerous state and federal agencies.

Per pipeline safety laws, USDOT has authority to prescribe minimum safety standards concerning the location, design, construction, initial inspection, and testing of new LNG facilities. Applicable regulations are at 49 CFR 193.

Finally, the USCG has authority over the design, construction, manning, and operation of ships and barges that would 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. NYSDOT has jurisdiction over intrastate LNG transportation routing. NYSDPS is certified by USDOT to carry out a pipeline safety program for intrastate facilities and to act as USDOT's agent for conducting safety inspections at and maintaining oversight of interstate facilities. NYSDPS has promulgated regulations (16 NYCRR Part 259) that prescribe safety standards for all LNG facilities within the State except for those facilities subject to FERC jurisdiction or which are otherwise exempted under 49 CFR Part 193. The primary requirement of Part 259 is adherence to Part 193.

In drafting Part 570, DEC worked with NYSDOT, NYSDPS, NYSDOS, OFPC, and NYSERDA 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. Several corporations have expressed interest in developing LNG facilities, including fueling facilities for heavy-duty trucks. NYSDOT has interest in installing LNG fueling capability statewide. These projects would require DEC permits. 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. Changes considered ranged from a complete repeal of the LNG statute, to minor clarifications. 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, a regulation 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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