June 11, Dear EPA:

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1 U.S. Environmental Protection Agency (EPA) EPA Docket Center (EPA/DC) Attention Docket ID No. EPA-HQ-OAR Mailcode 2822T 1200 Pennsylvania Avenue, NW Washington, D.C Dear EPA: The Northeast Gas Association (NGA) appreciates the opportunity to comment on EPA s proposed supplemental rule on the mandatory reporting of greenhouse gas (GHG) emissions from petroleum and natural gas systems, as published in the EPA s April 2010 Federal Register notice. NGA is a non-profit trade association of natural gas companies. Our members are the local gas distribution companies that serve the states of Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont. Our members also include interstate pipeline companies that transport natural gas into the region; liquefied natural gas (LNG) import and storage facilities; and other industry participants. Collectively, our members serve approximately ten million customers in the Northeast. Our web site is. The notice indicates that this proposed supplemental rule 40 CFR part 98, subpart W requires annual reporting of fugitive and vented carbon dioxide (CO2) and methane (CH4) emissions from petroleum and natural gas systems facilities, as well as combustion-related CO2, CH4, and nitrous oxide (N2O) emissions from flares at those facilities, following the methods outlined in the proposal. This proposed rule would also establish appropriate thresholds and frequency for reporting, as well as provisions to ensure the accuracy of emissions through monitoring, reporting and recordkeeping requirements. This proposed rule applies to facilities in specific segments of the petroleum and natural gas industry that emit GHGs greater than or equal to 25,000 metric tons of CO2 equivalent per year. Reporting would be at the facility level.

2 Page 2 NGA has major concerns about this proposed supplemental rule which we summarize below. We also express our support for the comments of the American Gas Association (AGA), submitted separately, which address a wide range of issues relating to the design of the reporting process and the details of the proposed regulatory requirements. In our comments, we will highlight some of these same issues, which are consistent with the more extensive AGA comments. We hope that you will take our comments under advisement, to help establish a final set of regulations that are well-designed, reasonable, practical, cost-effective, and efficient. NGA and its member companies are committed to helping improve the environment. Our areas of concern are outlined below. Definition of Facility The concept of facility as it applies to a local distribution company (LDC) is still undefined within the proposed regulation. As indicated by AGA in its testimony in April, the proposed rule would likely apply to many more gas utilities and require a much greater burden than estimated by EPA. It is not clear whether EPA intends to define the facility as each distribution system or all the distribution systems owned by a single Distribution Company. If the intent is the latter, to combine all the separate distribution systems of a single company as one facility that spans hundreds of communities across a state, then many more utility companies would likely exceed the 25,000 ton per year threshold for reporting. Once included, those utilities would then have to estimate and report emissions for many small meter and regulator stations and city gate stations scattered across the state - as well as combustion emissions from sources that otherwise would not exceed the facility reporting threshold. Many of the LDCs in the Northeast operate in various locations without direct or contiguous links to each other; it is uncertain how this definition applies. Leak Detection and Reporting The proposal for leak detection and reporting would impose significant additional costs - and would result in an overstatement of the actual level of facility emissions. The proposed rule would require utilities to conduct annual leak detection at above grade M&R stations and to

3 Page 3 apply emission factors to the leaking sources. While current practices require regular leak detection, and effective methods such as bubble testing are used, the proposal specifies optical imaging, a method that appears to be less accurate. Optical imaging requires expensive monitoring equipment, significant time for conducting measurements in the field, and extensive recordkeeping. (On the other hand, current methods using soap solutions, although not quantified, are accurate in pinpointing leaks. The simplicity of this method allows all field personnel to find and fix leaks immediately.) A simple and effective method should be the preferred choice. We believe that the value of optical imaging needs to be demonstrated and defined before any mandate is imposed. We also question whether there would be enough equipment or trained operators to conduct such annual surveys at all the M&R stations that would be affected. Also, when utilities conduct leak detection, they promptly repair leaks that can be readily repaired. Reporting the repaired components as if they were leaking for the entire year will overstate actual emissions. We would respectfully ask that EPA first investigate the accuracy of such programs in terms of the methodology for emissions quantification before imposing and implementing this procedure, and also undertake a comparative assessment of other existing programs and methods to determine if there is a more accurate and cost-effective alternative. Accuracy of Emission Factors NGA questions the accuracy and validity of the proposed emission factors and their application. The proposed method of applying these emission factors to determine applicability or emission rates in our view will require clarification. We would also recommend that the proposed emission factors be peer-reviewed to determine applicability, particularly to the LDC system. Like AGA, we are concerned that EPA is planning to use emission factors that were developed over a decade ago for another purpose - and that were based on limited field work conducted nearly 20 years ago. Changes and upgrades on the distribution system are not reflected within these numbers and raise concerns about validity.

4 Page 4 Finally, flexibility should be built into the rule to provide for updates when new emission factors become available. Potential Double-Counting of Emissions Reported fugitives from Subpart W should be deducted from Subpart NN reporting requirements. We are very concerned that otherwise there would likely be a double count of emissions on the distribution system, resulting from an overlap of transmission company emissions within the LDC system data. Factoring LNG Systems The Northeast U.S. has among the highest level of liquefied natural gas (LNG) inputs in the nation. There are three import facilities in Massachusetts alone, and LDCs maintain and operate LNG peak-shaving and satellite facilities in seven of the eight Northeast states in the NGA area. Reflecting this LNG preponderance in the Northeast, we have extensive comments on the implications for LNG facilities. The EPA notes that it lacks information on greenhouse gas emissions at LNG facilities. For the LNG storage and LNG import/export segments identified in the proposed rule, fuel combustion is a primary source of greenhouse gas emissions. Combustion equipment is used at the various types of LNG facilities, including vaporizers, to regasify the LNG for sendout (at both storage and import facilities), and compressors (at the storage and liquefaction facilities). (Contrary to EPA s assumption in the proposed rule and background documents, universally across all LNG facilities, pumps are used to pressurize the LNG to be vaporized for sendout, and not compressors, which as the EPA notes may vent limited amounts of greenhouse gases by design.) LNG facilities will be reporting greenhouse gas emissions from fuel combustion as applicable, in accordance with the requirements contained in Subpart C of the 2009 Final Mandatory Reporting Rule.

5 Page 5 Subpart W proposes that LNG facilities quantify certain specified process emissions, grouped as defined into vented and fugitive categories. The facility is to measure emissions from certain vented sources. Additionally, the EPA proposes that each facility identify 100% of its fugitive emissions sources by examining all facility equipment with a prescribed detection instrument, and prescribes leaker factors to estimate emissions from these identified sources. The EPA also prescribes a population leaker factor for vapor recovery compressors; this type of plant system at LNG facilities may take several forms, some of which are closed systems with no possibility of leaks. The EPA has chosen to apply these factors uniformly to generic equipment names across the entire supply chain of petroleum and natural gas systems. However, given the extreme operating conditions in LNG facilities, equipment is designed, selected, installed, operated, and maintained to greatly reduce or eliminate leakage. The factors prescribed, which were introduced in 1993 for the synthetic organic chemical manufacturing industry (SOCMI), have not specifically been evaluated by the EPA for their applicability to current LNG facilities and equipment, nor for their applicability for cryogenic service. Further, the EPA has overlooked the basic principle that underlies the strong safety record of LNG facilities - to design, install, operate, and monitor the facility to keep the product safely within the process equipment. This principle dovetails with EPA s charge to minimize greenhouse gas emissions from that equipment in these facilities. (It is also in LNG facilities commercial interest to minimize emissions, as the LNG, a premium fuel, as liquid or gas, is the facilities only product, and it must be dispatched from the plant to customers in order to generate revenue.) As EPA acknowledges, no direct studies have been done on emissions or the related operating activities and requirements of other federal agencies at LNG facilities. EPA notes that transmission pipeline segments between compressor stations are being exempted from the proposed rule, on the grounds that leaks are quickly identified and repaired following leakage surveys, which are conducted at required intervals (measured in months) in accordance with 49 C.F.R. Part 192. However, LNG facilities are subject to even more stringent requirements in 49 C.F.R. Part 193, including (i) installing, monitoring, and maintaining leak and flammable gas detection systems, designed to provide coverage for all areas of the plant as determined by a professional engineering evaluation, and required to alarm in the field and in

6 Page 6 the attended control room (and designed in some facilities to initiate emergency shutdowns, which provide automatic closure of emission release points); (ii) ensuring that maintenance scheduling on this detection equipment minimizes the amount of equipment that is out of service at one time; (iii) ensuring that when a safety device is taken out of service, the equipment it protects is also taken out of service unless it is protected by another device; (iv) field-checking equipment immediately following cooldown operations; (v) testing and inspecting safety relief valves every year, observing and documenting that they relieve as designed and that they reseat, ensuring valve closure; (vi) maintaining records of operations and maintenance for annual review by federal pipeline inspectors to show the required tests and inspections that have been performed (with steep fines for violations of the regulations); and (vii) performing field checks of all equipment on the site as determined in required facility operating procedures at many facilities at least six times each day. It is of note that the LNG facilities are enclosed sites, staffed by maintenance and operations personnel who are trained to be aware of signs of leakage including unusual ice formations on pipes or vessels, or condensed water vapor in the vicinity of equipment, if a leak should manifest before it activates the detection equipment. Considering all of these operational precautions, LNG facilities are at least as stringently observed and maintained as transmission pipeline segments, and should be exempted from Subpart W. EPA has not shown that LNG facilities emit significant levels of greenhouse gases from fugitive sources. If a leak were to develop in an LNG facility in a cooldown process, the equipment would be adjusted (e.g., tightening the flange) or the process would be stopped. If a safety relief valve were to fail its annual test by failing to lift properly or failing to reseat, it would be immediately replaced or repaired. If a water heater for a heat exchanger were to register the presence of flammable gas in the water, indicating a small internal leak in a heat exchanger, the heat exchanger would be identified and removed from service for testing and repair or replacement. Leaks in LNG facilities are attended to promptly; leaker factors that presume that leaks continue for 365 days give no recognition to the diligent operating and maintenance practices required in, and common to, LNG facilities. Even if a facility were to count all possible valves, pumps, connections, and other emission sources, and assume that all were detected leaking, even applying the 365-day factors still would not yield a mass of emissions that approached a reportable level. Indeed, facilities that have surveyed their plants as proposed

7 Page 7 have identified emissions sources numbering in the single digits, an effort yielding a near-infinite cost for the debatable benefit of identifying those tiny masses of emissions. It is likely EPA s unfamiliarity with LNG facilities that has led to its proposed requirement of plant-wide fugitive detection surveys every year. As suggested above, LNG facility equipment, too, minimizes or eliminates emissions. Valves typically have extended bonnets and packing with high sealing qualities. As noted, safety relief valves are inspected and tested annually for lift pressure and positive reseating. Reciprocating compressors differ from those used in compressor stations, minimizing emissions from the compressor rod packing cases by using piston ring and rod packing materials of varying PTFE (Teflon) blends that are very resilient and have high sealing qualities. In the centrifugal compressors used as liquefaction process refrigerant compressors in LNG storage facilities, the outer case seal areas and the seal oil drains are directed back to the compressor suction, so there are no gases purposely vented to the atmosphere, as the proposed rule assumes. These two types of compressors at LNG facilities further challenge the general assumptions made by the EPA regarding the impact of compressors on emissions. Finally, a majority of LNG pumps in these facilities are either submerged in the LNG tanks or fully enclosed (both pump and motor) in the pump can which contains LNG. These pump types do not require pump shaft seals and are not open to the atmosphere, so they generate no fugitive emissions. LNG pumps with external motors not enclosed within the pump can are closely monitored by facility personnel, and if leakage were to occur, the pump would be shut down and repairs to the seal performed. Due to the level of redundancy of systems and equipment, these LNG facilities are generally equipped with a number of spare pumps, allowing shutdown of any pump experiencing seal failure, while maintaining facility operations. All of this specialized equipment is very different from the valves and pumps and compressors more familiar to EPA and referenced in the quantification methods in the proposed rule. Because LNG facilities with this equipment are so effective at minimizing or eliminating emissions, they should be exempted from detecting and reporting emissions from these fugitive and vented sources. Flares are installed at some LNG facilities, serving as emergency backup equipment to receive boiloff gas in the unlikely event of a total power loss or an equipment failure that disables the boiloff compressor system. LNG facilities are typically designed and installed with multiple levels of redundancy to ensure availability, including redundant power supplies and boiloff

8 Page 8 compression units. It is assumed that these flares will be regarded by EPA as emergency equipment similar to emergency generators, and will be exempted from emission reporting. Offshore LNG facilities consist of the LNG carrier with its integral LNG tanks, pumps, and vaporizers, and the mooring and sendout buoy and underwater pipeline. As is true for onshore facilities, specialized installed equipment is designed, operated, and maintained to contain the fluid; installed detection monitors each area and alarms if an emission is detected; personnel inspect and control the processes and will immediately stop an operation in the event of a leak, to protect the carrier s structures from the cryogenic fluid; and emergency shutdown valves provide ultimate control to stop the process. Each ship moors for only long enough to vaporize and offload its cargo. The facility operates only when an LNG carrier is at the deepwater port. Accordingly, the requirement for annual leak detection would be inapplicable. Further, the U.S. Coast Guard thoroughly inspects the safety systems of each vessel upon each arrival, and would prevent mooring, or stop an offloading, in the event of a deficiency or leak. Finally, the technical support document for this proposed rule makes numerous other inapplicable assumptions about LNG facilities, equipment, and practices. First, the document assumes that there are twice as many satellite storage facilities as accounted in the industry. The EPA also assumes that all boiloff from the LNG in storage tanks is re-liquefied by compressors at all facilities, which is not the case. The increase in the universe of LNG facilities, the presumption that all facilities operate numerous compressors (instead of the LNG pumps used in most of those instances), and the assumption that the compressors used are all of the higher-emission type common to other industry segments, along with the misunderstandings noted above regarding specialized equipment and the vigilant operations and maintenance practices in place at these facilities, all render inapplicable the subjects and methods proposed for quantifying emissions of greenhouse gases from LNG facilities. The preamble to the proposed regulation, under the heading LNG Import and Export and LNG Storage, states, EPA is proposing inclusion of these facilities because the National Inventory has very little data on methane emissions in these segments. Because the EPA has not inquired into the equipment and practices of LNG facilities before proposing the requirements for Subpart W, it has presented a plan which a cost-benefit analysis could not justify. NGA supports the withdrawal of LNG facilities from the requirements of Subpart W.

9 Page 9 Ensuring an Accurate and Cost-Effective Response We are concerned that the level of detail required in this proposed regulation for LDCs is too extensive and not warranted. The natural gas industry is committed to reducing its emissions. Our member companies have been actively involved for years in programs required by state public service and public utility commissions to identify and address leakages, as well as in voluntary emissions reduction programs such as EPA s Natural Gas STAR. Enhancing system integrity and safety are paramount, and reducing emissions is our mutual goal. This proposed rule will however add major costs against uncertain gains, given the uncertainty of the methodology applied. Estimated compliance costs for natural gas utilities within these regulatory parameters are high and raise serious concerns. The ability of a utility company to recover these costs in a rate case is uncertain, particularly in a time of difficult economic circumstances for most homeowners, businesses and average ratepayers. We would urge EPA to consider the issue of compliance costs very carefully. We hope that our comments will help EPA in developing the proposed regulation. We look forward to working with EPA to develop a rule that is effective and practical. Sincerely, Thomas M. Kiley President and CEO