EPA Greenhouse Gas Mandatory Reporting Rule. Onshore Petroleum & Natural Gas Production

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EPA Greenhouse Gas Mandatory Reporting Rule Onshore Petroleum & Natural Gas Production

Onshore Petroleum & Natural Gas Production

Agenda 1.Applicability 2.Source Categories 3.BAMM Time Line 4.BAMM Request 5.Questions NYSE: DVN www.devonenergy.com page 3

Disclaimer Devon and its contractors make no representations or warranties regarding the accuracy or validity of any of the regulatory interpretations discussed in this presentation, and any reliance on such regulatory interpretations will be at your own risk and discretion. NYSE: DVN www.devonenergy.com page 4

Basin / Facility Map Facility - With respect to onshore petroleum and natural gas production: Facility means All petroleum or natural gas equipment on a well pad or associated with a well pad under common ownership or control, including leased, rented, or contracted activities by an onshore petroleum and natural gas production owner or operator, that are located in a single hydrocarbon basin. Basin - American Association of Petroleum Geologists (AAPG) Provinces Code Map NYSE: DVN www.devonenergy.com page 5

AAPG Basins NYSE: DVN www.devonenergy.com page 6

Asset Classification Sub-basin Categories Comprised of the formation type within county lines. Conventional Unconventional Formation Types >0.1 millidarci permeability 0.1 millidarci permeability Shale Coal seam Other tight reservoir rock On August 19 th, 2011 EPA proposed a sub-basin construct for classification of production assets within a basin. Operators will need to classify all of their assets into 1 of 4 EPA proposed sub-basins. NYSE: DVN www.devonenergy.com page 7

Production Type Production Type Based on production zones. OIL WELL A well completed for the production of crude oil from at least 1 oil zone or reservoir Light crude ( 20 API) Heavy crude (< 20 API) GAS WELL Any well that is not completed in an oil zone or reservoir (undefined in subparts A or W) NYSE: DVN www.devonenergy.com page 8

Applicability Tool EPA Applicability Tool Industry groups and operators have tested the EPA tool and determined that it provides wildly inaccurate results and is not based on subpart W methodologies Example: Onshore production centrifugal compressor venting EPA Applicability Tool: 2,140 MT CO 2e /yr Subpart W Calculation: 4,892 MT CO 2e /yr Error of 56% Operator Applicability Tools Many operators and contractors have developed their own applicability tools to determine applicability for their assets. Devon has assisted the OIPA in the development of an applicability tool for its membership. NYSE: DVN www.devonenergy.com page 9

Applicability Tool General Instructions Color scheme: Green cells are required. User must enter values for applicable source types. Blue cells are optional. Default values are used for these cells if no user data are entered. Operator should enter operator-specific data where available. Red cells display emission estimation results and cannot be altered. The tool is intended to be used for the onshore production industry segment only. Emission estimation methods are provided for the following source types: Onshore production storage tanks Combustion emissions from natural gas-fired internal combustion engines Acid gas removal (AGR) vents Compressor vents Dehydrator vents Equipment leaks Pneumatic device vents Pneumatic pump vents NYSE: DVN www.devonenergy.com page 10

Applicability Tool General Instructions (cont d) Not all potential subpart W source types are included in this tool. Source types that are not covered by this tool include, but are not necessarily limited to, the following: Well event emissions: Well venting for liquids unloading Venting/flaring during completions and workovers w/ & w/o hydraulic fracturing Well testing venting/flaring Associated gas venting/flaring Flare stack emissions Combustion emissions from non-gas fired equipment (e.g., diesel-fired generators) Combustion emissions from large (> 5 MMBtu/hr) external combustion devices Enhanced oil recovery (EOR) operations (EOR injection pump blowdowns & hydrocarbon liquids dissolved CO 2 ) If an operator has any of the omitted source types, actual emissions may be significantly greater than those estimated by this tool. NYSE: DVN www.devonenergy.com page 11

Applicability Tool Gas Composition Enter produced gas CH 4 and CO 2 concentrations representative of your operations These compositions are used in several of the source type calculations throughout the tool Default values of 85% for CH 4 and 5% for CO 2 should be modified based on operator-specific data NYSE: DVN www.devonenergy.com page 12

Applicability Tool Onshore Production Tanks Estimations based on results of E&P TANK runs for 8 geographical database cases from the Southwestern U.S. Select the case that is most representative of your operations Enter total, basin-wide hydrocarbon liquids (oil/condensate) production from all wells NYSE: DVN www.devonenergy.com page 13

Applicability Tool Combustion Sources Estimates emissions from natural gas-fired internal combustion engines Calculations based on modified engine type, size, and fuel consumption data for production engines Data source: Burklin, C., Heaney, M. (2006, October 5). Natural Gas Compressor Engine Survey for Gas Production and Processing Facilities. Retrieved from http://www.utexas.edu/research/ceer/ghg/files/confcallsupp/h06 8FinalReport.pdf See applicability tool information tab for detailed information about data sources and assumptions NYSE: DVN www.devonenergy.com page 14

Applicability Tool Combustion Sources (cont d) Enter total basin-wide number of engines by type (rich burn/lean burn) within each size range Estimations use typical size and fuel consumption ratings of representative models within each type/size range combination See applicability tool information for data source and assumption details NYSE: DVN www.devonenergy.com page 15

Applicability Tool Acid Gas Removal Venting Estimations based on subpart W 98.233(d)(3) Calculation Methodology 3 Enter total basin-wide sour gas (inlet stream) volume for all AGR units (required) Enter sour gas (inlet stream) CO 2 concentration (optional) If no sour gas concentration is entered, CO 2 concentration for produced gas from composition tab is used by default Enter sweet gas (outlet stream) CO 2 concentration (optional) If no sweet gas concentration is entered, zero is used by default NYSE: DVN www.devonenergy.com page 16

Applicability Tool Compressor and Dehydrator Venting Dehydrator venting estimations based on subpart W 98.233(e)(2) Calculation Methodology 2 for glycol dehydrators with annual throughput less than 0.4 MMscf/day (146 MMscf/yr) If you operate any production dehys with 0.4 MMscf/day throughputs, consider using a GLYCalc run in lieu of Applicability Tool to estimate CO 2 and CH 4 for emissions from these units Compressor venting calculations based on only available subpart W methodology for onshore production Enter total basin-wide counts of dehydrators, reciprocating compressors, and centrifugal compressors NYSE: DVN www.devonenergy.com page 17

Applicability Tool Equipment Leaks Estimation based on subpart W 98.233(r)(2)(i) Calculation Methodology 3, which uses major equipment counts and composition from Gas Composition tab Light Crude emission factors used for oil production equipment leak estimates Enter total basin-wide counts of gas wells and oil wells Enter total basin-wide counts of major equipment by equipment type Separators and line heaters for gas production sites Separators, heater-treaters, and headers for oil production sites Dehydrator and compressor counts are taken from Compressor and Dehydrator Venting section of the tool Compressor and Dehydrator Venting section must be completed first Dehys and compressors assumed to be in gas production service NYSE: DVN www.devonenergy.com page 18

Applicability Tool Pneumatic Devices & NG-Driven Pneumatic Pumps Estimations based on subpart W 98.233(a) & (b) Subpart W multipliers and emission factors used along with composition from Gas Composition tab Enter total basin-wide counts of pneumatic devices by type High bleed (continuous) Low bleed (continuous) Intermittent bleed Enter total basin-wide count of natural gas-driven pneumatic pumps NYSE: DVN www.devonenergy.com page 19

Applicability Tool Demonstration Please provide your information! NYSE: DVN www.devonenergy.com page 20

Onshore Production Source Categories 1. (a) Natural Gas Pneumatic Device Venting 2. (c) Natural Gas-Driven Pneumatic Pump Venting 3. (d) Acid Gas Removal Vents 4. (e) Dehydrator Vents 5. (f) Well Venting for Liquids Unloading 6. (g) Gas Well Venting During Completions & Workovers With Hydraulic Fracturing 7. (h) Venting During Completions & Workovers Without Hydraulic Fracturing 8. (j) Onshore Production Storage Tanks 9. (l) Well Testing, Venting & Flaring 10.(m) Associated Gas Venting & Flaring 11.(n) Flare Stack Emissions 12.(o) Centrifugal Compressor Venting 13.(p) Reciprocating Compressor Venting 14.(r) Population Count & Emission Factors 15.(x) EOR Hydrocarbon Liquids Dissolved CO 2 16.(z) Onshore Petroleum & Natural Gas Production & Natural Gas Distribution Combustion Emissions 17.(w) EOR Injection Pump Blowdown NYSE: DVN www.devonenergy.com page 21

Regulation Disclaimer As operators, engineers and industry experts we understand that the rule is often unclear and contains errors and inconsistencies. Many industry groups (including OIPA) and operators are working with the EPA to address issues within the rule. However, the fact of the matter is that the rule is final and a reporting deadline has been set. NYSE: DVN www.devonenergy.com page 22

98.233(a): Natural Gas Pneumatic Device Venting Source Category Points of Interest: *Device Definitions in Subpart A High Low Intermittent Device Classification > 6scf/hr 6scf/hr Snap-acting / Throttling T = Operating hours of each device type (Cumulative) GHG i = Sub-basin representative gas analysis Operators must complete an actual count by the third calendar year of reporting (2013). NYSE: DVN www.devonenergy.com page 23

98.233(c): Natural Gas-Driven Pneumatic Pump Venting Source Category Points of Interest: Count Operators must have an actual count for the first year of reporting. T Operating hours of each pump (Cumulative) GHG i - Sub-basin representative gas analysis NYSE: DVN www.devonenergy.com page 24

98.233(d): Acid Gas Removal Vents Source Category Points of Interest: Methodology 1: CEMS Methodology 2: Vent Meter Methodology 3: Volumetric CO 2 Emission Calculation Vol I Inlet CO 2 content (Requires Quarterly Analysis [FAQ Avg ]) Vol O - Outlet CO 2 content (Requires Quarterly Analysis [FAQ Avg ]) OR (Sales Line Spec) Methodology 4: Standard Simulation Software (AspenTech HYSYS, API 4679 AMINECalc) NYSE: DVN www.devonenergy.com page 25

98.233(e): Dehydrator Vents Source Category Points of Interest: Glycol Dehydrator Classification: Throughput threshold 0.4 mmscf/day 0.4 mmscf/day Methodology 1 0.4 mmscf/day < Methodology 2 Methodology 1: Standard Simulation Software (AspenTech HYSYS, API 4679 AMINECalc) Methodology 2: Volumetric GHG Emission Calculation Requires contractors to conduct an asset inventory (Count) Desiccant Dehydrators Refilling Process Emissions NYSE: DVN www.devonenergy.com page 26

98.233(f): Well Venting for Liquids Unloading Source Category Points of Interest: Well Classification: Two (2) categories: Wells without plunger lift Wells with plunger lift Methodology 1: Representative Measurement Data (FR in cf/hr) Requires operators to install a flow meter to measure the flow rate. Operators will have to further classify their wells into: Tubing diameter groups & Pressure groupings per sub-basin EPA has proposed 5 pressure groupings Methodology 2 & 3: Individual Well Venting Events We anticipate most industry operators to use methodologies 2 & 3. Methodology 2 applies to wells without plunger lift assist Methodology 3 applies to wells with plunger lift assist Operators will need to track the time duration of each venting event regardless of the methodology they elect to use. The majority of data points needed for methodologies 2 & 3 are well characteristics (static data points that will not change) NYSE: DVN www.devonenergy.com page 27

98.233(g): Gas Well Venting During Completions & Workovers With Hydraulic Fracturing Source Category Points of Interest: With/Without Fracture refers to the fracturing process, not the status of a well as fractured or unfractured. Operators must specify which processes they are performing on a well (Completion or Workover) Operators must specify the well type (horizontal or vertical) to further classify wells. Two (2) Methodologies for operators to choose from: Both methodologies calculate representative flow rates (FR) to apply to all horizontal/vertical, completion/workover combinations in a gas producing sub-basin. Operators will need to track the number of events (completion or workover) and the time duration of each event. Operators also need to track whether the emissions are routed to atmosphere (venting) or flare. Methodology 1 uses a flow meter. Methodology 2 is a flow rate calculation. NYSE: DVN www.devonenergy.com page 28

98.233(h): Venting During Completions & Workovers Without Hydraulic Fracturing Source Category Points of Interest: With/Without Fracture refers to the fracturing process, not the status of a well as fractured or unfractured. Operators must determine which processes they are performing on a well (Completion or Workover) Operators and Industry groups are working with the EPA to define what processes are considered workovers and completions. Operators will need to track the number of events (completions or workovers) and the time duration for each event. Operators also need to track whether the emissions are routed to atmosphere (venting) or flare. NYSE: DVN www.devonenergy.com page 29

98.233(j): Onshore Production Storage Tanks Source Category Points of Interest: Regulation allows for the use of engineering estimates (Default Values) Oil All hydrocarbon liquids (not including produced water) Methodologies 1 4 apply to wells with production 10 bbl/day ***The process flow of the production and orientation of the equipment is required to choose the proper methodology. Methodologies 1-3 apply to wells with colocated separators or tanks. Methodology 4 applies to wells that are not colocated with separators or tanks. Methodology 5 applies to wells with production < 10 bbl/day ***Operators will still have to conduct an inventory to track all oil/condensate production tanks. NYSE: DVN www.devonenergy.com page 30

98.233(l) Well Testing, Venting & Flaring Source Category Points of Interest: Many operators don t plan to report well testing emissions under source category (l). They plan to report emissions from well testing, venting & flaring under source categories (g) or (h). It is interpreted that these emissions are part of a completion or workover process. According to operators, any other well testing will be done through test separators and will not create an emission event. NYSE: DVN www.devonenergy.com page 31

98.233(m): Associated Gas Venting & Flaring Source Category Points of Interest: Industry members have identified this source category to apply to stranded wells only. Stranded well = a well not connected to pipeline infrastructure Industry has interpreted this to not include venting or flaring for emergency, maintenance or service interruptions. EPA has not indicated that this source category does not include service interruption or emergency events.????? NYSE: DVN www.devonenergy.com page 32

98.233(n): Flare Stack Emissions Source Category Points of Interest: Industry has interpreted the EPA s intent for source category (n) to capture all other flaring emissions not accounted for in other source categories. EPA has requested feedback from industry on this source category. Regulation allows for the use of engineering estimates based on best available data or company records to determine unmeasured flow volumes. If CEMs and continuous flow measurement devices are available on the flare, they must be used. Instrumentation will need to calibrated per the requirements in 98.234 (b) If flow measurement and CEMS not available we operators are allowed to use engineering estimates based on best available data Use manfacturer s data for flare efficiency. If not available, default is 98% NYSE: DVN www.devonenergy.com page 33

98.233(o): Centrifugal Compressor Venting Source Category Points of Interest: Requires operators to have a total count of centrifugal compressors in operation each reporting year. Industry has interpreted this to be the number of compressors operating on Dec. 31 of the reporting year. Operators will need to conduct an inventory annually or track changes throughout the year. NYSE: DVN www.devonenergy.com page 34

98.233(p): Reciprocating Compressor Venting Source Category Points of Interest: Requires operators to have a total count of reciprocating compressors in operation each reporting year. Industry has interpreted this to be the number of compressors operating on Dec. 31 of the reporting year. Operators will need to conduct an inventory annually or track changes throughout the year. NYSE: DVN www.devonenergy.com page 35

98.233(r): Population Count and Emission Factors Source Category Points of Interest: Asset Classification: Oklahoma is classified in the Western U.S. Assets classified into service (Light/Heavy Crude or Gas) Major equipment or actual component counts Operators have two (2) methodologies to choose from. Methodology 1 Count major equipment and use EPA component counts and emission factors. EPA has designated that each well pad will have 1 meters/piping Methodology 2 Count each component individually and use EPA emission factors. Tubing systems ½ inch diameter are exempt from (r) NYSE: DVN www.devonenergy.com page 36

98.233(w): EOR Injection Pump Blowdown Source Category Points of Interest: EPA has indicated that pump implies a liquid. CO2 is a gas up to 1,300 psi. EPA has indicated source category (w) does not apply to compressors moving CO2 gas. Industry has identified this as an isolated process, and most operators are addressing these events with the operators that manage these operations. Data point collection: Calculate volume of pump (engineering or manufacturer information) Track the number of blowdowns in the reporting year. Remaining data points reference gas quality NYSE: DVN www.devonenergy.com page 37

98.233(x): EOR Hydrocarbon Liquids Dissolved CO2 Source Category Points of Interest: Industry has identified this as an isolated process, and most operators are addressing these events with the operators that manage these operations. Data point collection: Run analysis on hydrocarbon liquids to determine CO2 concentration. Annual samples must be pulled at STP downstream of the atmospheric tanks (post flashing) Total annual hydrocarbon liquid produced from EOR operations NYSE: DVN www.devonenergy.com page 38

98.233(z): Onshore Petroleum & Natural Gas Distribution Combustion Emissions Source Category Points of Interest: Applicability External Combustion Sources - < 5 mmbtu are exempt (report a count) Internal Combustion Engines Two (2) categories Stationary Internal Combustion Engines Portable Internal Combustion Engines Classification Equipment Type Fuel Type Volume of Fuel Consumed NYSE: DVN www.devonenergy.com page 39

Best Available Monitoring Methods (BAMM) BAMM - 2011 Determine Applicability BAMM - Jan. 1 Dec. 31, 2011 (proposed) Data plan for 2011 Event data Asset Inventory Asset Characteristic data 40 CFR Part 98, Subpart W 98.234 (f)(5)(iv) (proposed) Operators can use BAMM for sources not listed in paragraph (f)(2), (f)(3), and (f)(4). NYSE: DVN www.devonenergy.com page 40

BAMM Timeline (Proposed) 40 CFR Part 98, Subpart W 98.234 (f)(8) Electronic Notice of Intent (e-noi) e-nois submitted to the MRRpetition @ epa.gov e-nois must be submitted by Dec. 31, 2011 e-nois must be submitted in order to submit a extension request BAMM Extension Request Extension requests can be submitted electronically or by mail Extension requests must be submitted by March 30, 2012 Extension Requests must contain the information required in 98.234 (f)(8)(ii) Facilities that submit both an e-noi and an Extension Request will automatically use BAMM through June 30,2012 NYSE: DVN www.devonenergy.com page 41

BAMM e-noi Content of e-noi Identify all facilities for which BAMM is needed. Types of emission sources (source categories) BAMM provision the source falls under. 98.234 (f)(2), (f)(3), (f)(4) or (f)(5) EPA has indicated that a single e-noi for a company is acceptable as long as it identifies all individual facilities by name. NYSE: DVN www.devonenergy.com page 42

BAMM Extension Request Content of Extension Request A list of source categories containing data parameters that BAMM is needed for. A description of the unique or unusual circumstances specific to each source. A detailed explanation and supporting documentation of when the operator will comply with reporting requirements. Industry Position NYSE: DVN www.devonenergy.com page 43

Date/Deadline Summary 2011 Reporting deadline Sept. 27, 2012 (proposed) GHG Program (Auto BAMM expiration date) Jan. 1, 2012 Operators that determine applicability for Subpart W, will need to have systems and programs in place to track operations and events. BAMM deadlines Auto BAMM for Jan 1 Dec. 31, 2011 e-noi due Dec. 31 BAMM Extension Request due March 30, 2012 Auto BAMM granted for Jan. 1 June 30,2012 Operators will need to collect data for any data point not included in their BAMM Extension Request on January 1, 2012. NYSE: DVN www.devonenergy.com page 44

Questions Any Questions? NYSE: DVN www.devonenergy.com page 45

Thank You.