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State Innovation Grants

EPA 2005-2006 State Innovation Grants Competition Pre-Proposals

Project Title:
Implementation of an Environment Results Program for Montana’s Oil and Gas Well Industry
Montana Department of Environmental Quality
Charles Homer
PO Box 200901
Helena , MT 59620-0901
406-444-1499 (FAX)

Federal Involvement:
The project will not be executed in cooperation with or funded by another Federal program.
Regulatory Flexibility:
Implementation of an Environment Results Program (ERP) for oil and gas wells will require approval of a change to Montana’s State Implementation Plan.
This proposal has been reviewed and endorsed by Richard Opper, Director of the Montana Department of Environmental Quality.


The Montana Department of Environmental Quality (MT DEQ) is proposing to develop and implement an Environmental Results Program (ERP) for oil and gas well facilities.

Montana ’s proposed ERP for oil and gas wells would consist of an integrated system of compliance assistance, self-certification, and statistically-based performance measurement. The oil and gas well ERP would be based on the design created by the Massachusetts Department of Environmental Protection. The ERP approach will replace facility-specific permits with industry-wide environmental performance standards and annual certifications of compliance. This will supplement MT DEQ’s traditional compliance inspection and compliance assistance efforts. Compliance assistance will be conducted through outreach and distribution of compliance workbooks specifically addressing the operation of oil and gas wells. These compliance workbooks will contain regulatory requirements as well as pollution prevention best practices. The workbooks would be accessible in an interactive online format, as well as available in a hard copy. Montana’s ERP proposal would also include a requirement for annual submittal of a self-certification of compliance. This requirement would be established through adoption of an administrative rule. Montana’s proposed ERP would also include a statistically-based performance measurement methodology to track results, determine priorities, and establish strategic targeting of inspections and future compliance assistance efforts. MT DEQ would also propose adoption of administrative rules adapted to include all of the conditions currently required in facility-specific permits.

Montana ’s oil and gas well ERP project will consists of four initiatives:


Montana is currently experiencing a significant increase in air quality permitting associated with energy development; specifically, several large coal-fired power plants. The resources necessary to process these complex and controversial permit applications has strained MT DEQ’s available air permitting resources. MT DEQ has also recently determined that there are a significant number of oil and gas wells operating without required air quality permits. In addition to this permitting backlog, MT DEQ is also anticipating a significant increase in oil and gas well development. Montana currently has over 8000 oil and gas wells operating in the state and if even a moderate number of these wells need permits, the permitting backlog, in conjunction with the anticipated increased development, could overwhelm Montana’s air permitting program.

MT DEQ believes that ERPs would be an excellent method for maintaining and improving environmental protection in Montana. It would be MT DEQ’s intent to use the oil and gas well ERP project as a model for other industry groups in the state. Since the increase in energy development is a regional issue, not confined to Montana, it is MT DEQ’s belief that an oil and gas well ERP could serve as a model for all states with oil and gas extraction industries.

Montana ’s proposed ERP will be targeted at air quality since it is the only media program with regulatory requirements applicable to oil and gas wells. However, MT DEQ intends to consider other media in the preparation of the pollution prevention portion of the compliance workbook, since oil and gas wells have the potential for waste and water releases.


The vision for Montana’s proposed ERP program will be to efficiently target Montana’s limited existing environmental management and regulatory resources in the most productive way toward maintaining and improving environmental protection. The ERP project goal is to focus regulatory efforts for the oil and gas well industry toward compliance assistance and pollution prevention for the oil and gas well industry. MT DEQ believes that an ERP would be a regulatory scheme particularly well-suited for maintaining and improving environmental protection for this industry group. While there are a significant number of individual sources with a significant potential environmental impact when considered as a group, the implementation of compliance assistance and pollution prevention, instead of facility-specific permitting, will be advantageous due to the homogeneous nature of the individual wells. Individual sections of the workbooks will address the different types of wells (oil vs. gas).

A secondary benefit will be to free up MT DEQ air quality permitting staff to focus on significant complex sources, such as large coal-fired electrical generating facilities that benefit from individual review. Since coal-fired electrical generating facilities are an industry group that EPA has targeted with several recent initiative such as the Clean Air Interstate Rule and the Clean Air Mercury Rule, MT DEQ believes this would further EPA’s strategic goal of healthier outdoor air.

Performance goals would include increased compliance rates and reduced emissions. As stated before, MT DEQ believes oil and gas wells currently have a significant rate of non-compliance with air quality permitting requirements. MT DEQ believes implementation of an ERP will provide a regulatory system that can be administered with less staff than would be required under a traditional facility-specific permitting program. This will enable MT DEQ to focus staff on identification of non-compliant wells. MT DEQ also believes implementation of an ERP will reduce the regulatory burden associated with permitting while increasing environmental protection through compliance assistance and pollution prevention. Reduction in regulatory burden should increase compliance rates.


The proposed ERP project start date would be January 1, 2006. The proposed completion date would be June 30, 2007.

Project Milestone

Anticipated Achievement Date

Receive notification of grant award

October 1, 2005

Solicit database development contract proposals

November 1, 2005

Solicit compliance workbook development contract proposals

November 1, 2005

Award database development contracts

January 1, 2006

Award compliance workbook development contracts

January 1, 2006

Begin administrative rule development process

January 1, 2006

Implement ERP & registration system (Project Completion)

June 30, 2007

Implementation Timing Considerations: There are two factors that may potentially influence implementation of the ERP. Establishment of an ERP is predicated on adoption of administrative rules by the Montana Board of Environmental Review (MT BER). The MT BER is an independent quasi-judicial board that has the authority to adopt all administrative rules implementing the Federal and Montana Clean Air Acts. MT DEQ cannot guarantee that the ERP Program will be approved by the MT BER. If an ERP program is adopted by the MT BER, the program cannot be implemented until a change to Montana’s State Implementation Plan is approved by EPA’s Region VIII. The EPA Region VIII staff have recently expressed significant concerns about exempting other source categories from facility specific permit requirements.


Montana ’s proposed project will address two of the topic areas contained in the State Innovation Grant Program Solicitation Notice; development and implementation of an Environmental Results Program, and streamlined or enhanced permitting through application of innovative IT systems. Montana’s ERP proposal will further EPA’s goals in both of these topic areas.

Environmental Results Program Model: Development of an ERP for the oil and gas extraction industry would expand the application of the ERP model to a new business sector. Oil & gas extraction, as part of the energy sector, is a priority environmental sector and the ERP tools developed by Montana in this proposal would be appropriate for use by other states in EPA Region VIII and throughout the western US. This would achieve EPA’s desired result of supporting projects that lend themselves to State-to-State export of technical assistance and sharing of data and results.

Innovative IT Systems: Development of online registration, compliance certification and emission inventory data systems with integrated GIS-based tracking and statistical compliance targeting subsystems will be consistent with EPA’s goal of developing ERP data automation systems. Since Montana’s data systems are developed in ORACLE, the data systems developed under this proposal, would be easily transferable to other states. Improvement in Results from Project Implementation.

The proposal should identify what permitting programs or activities are involved in the project. Oil and gas wells are currently subject to minor source permitting. The project proposal should clearly identify how the innovation will result in measurable improvements in environmental results with respect to water and energy use, reduction in waste generation or disposal, reduction in releases of contaminants into the air or water, or in protection of habitat quality. Since MT DEQ believes that there is currently a significant non-compliance rate among oil and gas wells, the implementation of an ERP will increase compliance rates as well as potentially reducing emissions of air pollutants through compliance assistance and pollution prevention. Wherever possible the projects should also demonstrate any improvement in administrative efficiency and reduced program costs, or cost savings to the permitted entity. The implementation of Montana’s ERP proposal will increase administrative efficiency through implementation of the online registration and reporting systems and reduction of the labor intensive facility-specific permitting of oil and gas wells. The proposal should specifically address the following questions: How does the proposed tool or approach differ from traditional approaches? Currently, regulation of emissions of air pollutants from oil and gas wells is implemented through traditional preconstruction permitting, if permits are required at all. How does the project build on “lessons learned” from prior experience (not limited to the proposing State’s own experience)? This ERP project will be based on ERPs developed by other states for small businesses and area sources. Are the quantifiable improvements in environmental outcomes expected to result from implementation of this innovation clearly described? Quantifiable outcomes include increases in compliance rates and long term reductions in emissions of Hazardous Air Pollutants (HAPS) and criteria air pollutants. Are any measurable improvements in administrative efficiency and program operational costs that may result from the program clearly described? Improvement in administrative efficiency will be measured by the increase in the number of regulated facilities operating in compliance without a commensurate increase in staff.. Are the likely savings in costs and efficiency for the permit holders/regulated entities resulting from implementation of this innovation clearly described? Increased regulatory efficiency for the regulated community will be achieved through implementation of an on-line registration system instead of the facility-specific permitting process. What are the public involvement processes that will be used to ensure public knowledge of and participation in the project? Montana has numerous processes for public involvement in the air quality program including, the formal Air Pollution Control Advisory Council and the informal Clean Air Act Advisory Committee. Any associated administrative rulemaking that would be undertaken by the MT BER would have to comply with the public notice and hearing procedures of the Montana Administrative Procedures Act. Any contracts awarded would also have to comply with formalized public notification procedures. Public involvement processes associated with implementation of the ERP at specific well sites would be addressed in the administrative rulemaking. If applicable, what are the factors that will be taken into consideration in the design and implementation of the project as it relates to concerns in communities with environmental justice issues? Environmental justice issues would be addressed in the administrative rulemaking. Measuring Improvement and Accountability.

The proposal should establish outcome goals for the innovation and indicators to measure progress toward meeting these goals. Proposals should identify clear objectives, and performance indicators to be used to facilitate later independent evaluation of the success of the project. The proposal should clearly identify what baseline and final outcome measures are to be used, and provide a commitment from the sponsor to track, measure, report, and evaluate the results. The State should identify: What are the indicators of environmental improvement that will be used to show environmental improvement, and is the relationship to the specified outcome goal clear? (Goal and objective measures should be both qualitative and quantitative and should assess the project’s measurable benefits.) The indicators of environmental improvement will be increased compliance rates and reduced emissions of HAPS and criteria air pollutants. How and when will the baseline measurements be developed? Baseline measurements will be developed for calendar year 2005 through the annual emission inventory and a preliminary determination of the number of existing oil and gas wells currently operating without required air quality permits. What is the plan, timeline, and commitment for measuring and evaluating how well the project meets its goals and objectives? MT DEQ will compile an emission inventory and assess compliance rates annually. What are the expected short-term (within one to three years) measurable results to be obtained through this innovation and how will they be measured? The short-term measurable result would be increasing the number of oil and gas wells operating in compliance with current requirements (i.e., wells currently operating without permits will be operating under an ERP). What are the expected long-term measurable results to be obtained through this innovation, how will they be measured, and what is the time span for those results? Long-term reduction in emissions of HAPS and criteria air pollutants. Transferring Innovation.

The proposal should describe how the innovation potentially could be replicated or more broadly applied by the proposing State, other States, or EPA. To address this issue, the proposal should answer the following questions: What methods will be used to document and publicize the outcomes and methods of this innovation and make the information available to other jurisdictions? Any ERP tools created through this project would be made available on MT DEQ’s web site. What is the potential for widespread application or use of the tool/approach as a model for “next generation” environmental protection? Since energy development is a high priority in the western US, MT DEQ believes there is a significant potential for use of the oil and gas ERP model by other states. How will the application of this innovation be used to promote organizational system change, or develop a culture of innovative environmental problem-solving as a “way of doing business” within the State or more broadly? MT DEQ intends to use the oil and gas well ERP, where it may be appropriate, as a model for other source categories within the state. . What commitments can the proposing State make to provide consultation and mentoring to other States wishing to adopt similar innovations? State recipients may also be required to assist EPA or an EPA-designated third party evaluator in conducting a project evaluation during the course of, and/or immediately following completion of the project by providing data, interviews and assistance in contacting project cooperators or stakeholders. MT DEQ will provide all products developed through this project (software, compliance workbooks) to EPA and other states through the MT DEQ web site. MT DEQ will provide consultation as our staff resources and time commitments allow.


State: Montana
Agency: Montana Department of Environmental Quality
Project Title: Implementation of an Environment Results Program for Montana’s Oil and Gas Well Industry

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