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SUBJECT: Impacts of NSPS Gas Capture Requirements for New Gas Well Completions
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DATE: April 5, 2012
This document summarizes the approach for estimating the impacts of regulating volatile organic compound (VOC) emissions from new gas well completions following hydraulic fracturing where reduced emissions completions (REC) are required. A description of the data and how it was used is provided. This document is intended to serve as a companion to the docket memos and TSD, so this document provides a summary of the information and methodologies that are detailed separately in those files. A similar procedure as the one shown here was used to estimate the impacts from recompletions following hydraulic fracturing and for the portion of affected facilities where combustion is used for VOC control instead of the combination of combustion and gas capture.
General Methodology
Below is the list of steps taken to estimate each aspect of the impacts.
Estimate Emissions from Representative Individual Source
   1. Develop a methane emission factor for hydraulically fractured well completions (see separate docket memo: Emission Factor for Hydraulically Fractured Gas Well Completions: Data Assessment and Calculation Methodology)
   2. Develop a conversion of mass of methane to mass of VOC (see separate docket memo: Composition of Natural Gas for Use in the Oil and Natural Gas Sector Rulemaking)
Estimate Reductions from Representative Individual Source
   1. Determine the control efficiency of implementing a REC (see separate docket memo: Percent of Emissions Recovered by Reduced Emission Completions, May 19, 2011)
   2. Multiply the control efficiency by the VOC emissions from a representative source
Estimate the Cost of Compliance for Representative Individual Source
   1. Determine average cost per day of a REC (see Section 4.4.2.3 of Proposal Technical Support Document)
   2. Determine average duration of REC in days  (see Section 4.4.2.3 of Proposal Technical Support Document)
Estimate the Cost-Effectiveness of VOC Control
   1. Divide the reductions from a representative source by the cost for a representative source
Estimate Total Emissions from All Hydraulically Fractured Gas Well Completions
   1. Estimate the number of gas well completions in a representative year
   2. Multiply the number of gas well completions by the representative emissions from an individual source
Estimate Total Reductions from All Hydraulically Fractured Gas Well Completions
   1. Estimate the number of gas well completions in a representative year
   2. Multiply the number of gas well completions by the representative emissions reductions from an individual source
Estimate Total Cost of Compliance for All Hydraulically Fractured Gas Well Completions
   1. Estimate the number of gas well completions in a representative year
   2. Multiply the number of gas well completions by the cost of compliance for a representative individual source
Figure 1, below, illustrates the general process by which each aspect of the impacts was determined.
                            Methane Emission Factor
                         Conversion of Methane to VOC
                     VOC Emissions per Gas Well Completion
                            REC Control Efficiency
                    VOC Reductions per Gas Well Completion
                          Average Cost of REC per Day
                           Average Duration of RECs
Cost of REC per Well Completion
                       Cost-Effectiveness of VOC Control
                             Total VOC Reductions
                           Total Cost of Compliance
                              Total VOC Emissions
        Number of Hydraulically Fractured Gas Well Completions per year
Figure 1: Flow Diagram of Impacts Estimations
Figure 1
Data Descriptions
This section describes the data used for the impacts calculations. The data is also discussed in related docket memos and in the TSD. The list of the data is:
   * Methane emission factor for hydraulically fractured gas well completions
   * Conversion of mass of methane to mass of VOC
   * REC control efficiency
   * Average cost of REC per day
   * Revenues from natural gas product recovery
   * Average duration of RECs
   * Number of hydraulically fractured gas well completions per year
Methane Emission Factor
The methane emission factor was calculated based on 4 different data sets which contained over 1,000 wells. The emission factor was a simple average of the average emissions per completion from each data set (i.e. a simple average of 4 emission factors). The data included tight gas formations, shale formations, and coal bed methane (CBM) formations.
From the comments submitted to the proposed NSPS, additional data was received that the EPA considered. By performing a series of calculations based on this new data, it was shown that the previously developed emission factor was representative of emissions from a typical hydraulically fractured gas well completion.
For more information on the development of the original emission factor and the evaluation of data submitted through NSPS comments, please see the docket memo titled "Emission Factor for Hydraulically Fractured Gas Well Completions: Data Assessment and Calculation Methodology".
Conversion of Mass of Methane to Mass of VOC
A conversion of mass of methane to mass of VOC was determined using composition data from 9 different references. Based on this data, it was possible to generate an average composition profile for produced gas, and subsequently, a ratio of mass of methane to mass of VOC.
For more information regarding the development of this ratio as well as the raw data on which it is based, please see the memo from EC/R to Bruce Moore titled "Composition of Natural Gas for use in the Oil and Natural Gas Sector Rulemaking".
REC Control Efficiency
Based on the results reported by 4 different Natural Gas STAR Partners who performed RECs, it was possible to estimate a representative control efficiency of using RECs. The companies provided both recovered and total produced gas, allowing for the calculation of the percentage of the total gas which was recovered. This estimate was based on data for more than 12,000 well completions.
Average Cost and Duration of RECs
The average cost and duration of RECs was obtained from data also shown in the Natural Gas STAR Lessons Learned document titled "Reduced Emissions Completions for Hydraulically Fractured Natural Gas Wells" and is available at: http://epa.gov/gasstar/documents/reduced_emissions_completions.pdf. The impacts calculations use the cost per day for gas capture and the duration of gas capture along with a setup/takedown/transport cost and a flare cost to represent the total cost. The cost is then annualized across the time horizon under study. The average cost and duration information is also covered in the TSD.
Revenue from Recovered Products
The costs were depicted in two different ways: without accounting for the value of the product recovered as a result of controlling VOC, and with the revenue from recovered products. To estimate the revenue from recovered products, the estimated value of the recovered gas was added to the estimated value of the recovered condensate. 90% of the gas emitted (ie 90% of the emission factor per completion event) was depicted as being captured and sold (see separate docket memo: Percent of Emissions Recovered by Reduced Emission Completions, May 19, 2011). This saved gas was multiplied by a characteristic gas price of $4 per Mcf gas. A characteristic amount of gas condensate was determined to be 34 barrels per completion, and this number of barrels was multiplied by its characteristic market value of $70 per barrel.
Number of Hydraulically Fractured Gas Well Completions per Year
The number of hydraulically fractured gas well completions was estimated using the National Energy Modeling System analysis consistent with the Annual Energy Outlook 2011 Reference Case. It is estimated that there would be 11,403 gas well completions in tight, shale, and CBM formations. From this total, three deductions were made:
   1. The first deduction was for wildcat and delineation wells
         a. 446 well completions
         b. According to Annual Energy Outlook 2011 Reference Case
   2. The second deduction was for RECs already required by state regulations
         a. 1,644 well completions
         b. 15 percent of gas well completions (after subtracting wildcat and delineation wells)
         c. Explained in Section 4.3.3 of Proposal Technical Support Document
   3. The third deduction was for low pressure wells
         a. 931 well completions
         b. 10 percent of gas well completions (after subtracting wildcat and delineation gas wells and the gas well completions already controlled by state regulations)
         c. Based on the memo titled "Determination of Minimum Flowback Pressure, Docket EPA-HQ-OAR-2010-0505, Oil and Natural Gas Sector: New Source Performance Standards 40 CFR Parts 60" from ICF International to Bruce Moore on March 26, 2012.

            
The table below summarizes the breakdown of the estimated number of gas well completions.
Table 1: Number of Hydraulically Fractured Gas Well Completions
                                    Source
                           Required to perform RECs
                  Required to Combust Completion Emissions[*]
                    Completions Already Regulated by States
              Total Hydraulically Fractured Gas Well Completions
Hydraulically Fractured Gas Well Completion
                                     8,382
                                     1,377
                                     1,644
                                    11,403
* Note that the gas well completions required to combust the completion emissions are not prohibited from performing RECs. However, for the impacts assessment, these well completions are assumed to control emissions through a combustion device only.
Final Impacts
The tables below provide the final rule impacts for well completions when REC are performed estimated using the methodologies, data, and parameters described in this memo, in the docket memos, and in the TSD.
Table 2: Estimated Impacts per Individual Hydraulically Fractured Gas Well Completion When REC is Performed
                                    Source
                                 Uncontrolled 
                                 VOC Emissions
                                    (tons)
                           VOC Emissions Reductions
                                    (tons)
                     Cost of Compliance (without savings)
                       Cost of Compliance (with savings)
Individual Hydraulically Fractured Gas Well Completion
                                    22.691
                                    21.500
                                    $33,237
                                    -$1,543

Table 3: Estimated Impacts for All Hydraulically Fractured Gas Well Completion When REC is Required 
                                    Source
                                 Uncontrolled
                                 VOC Emissions
                                    (tons)
                           VOC Emissions Reductions
                                    (tons)
                     Cost of Compliance (without savings)
                       Cost of Compliance (with savings)
All Hydraulically Fractured Gas Well Completion
                                    190,200
                                    180,214
                                 $278,594,675
                                 -$12,931,285
Note:  An additional 55,535 tons of 58,612 tons of VOC emissions are estimated to be reduced via completion combustion for hydraulically fractured gas well completions that are not required to implement a REC but are required to combust emissions.

Table 4: VOC Control Cost Effectiveness when a REC is Performed
                                    Source
           VOC Control Cost Effectiveness ($/ton) -- without savings
             VOC Control Cost Effectiveness ($/ton) -- with savings
All Hydraulically Fractured Gas Well Completion
                              $1,546 per ton VOC
                               -$72 per ton VOC

