   EO12866_Oil and Gas Proposed CTG Withdrawal 2060-AT76 EconomicsMemo_20171024
                                                                               
Memorandum
TO:	Docket Number EPA-HQ-OAR-2015-0216 (Control Techniques Guideline for the Oil and Natural Gas Industry)

DATE:	       October 24, 2017

SUBJECT: Estimated Avoided Costs and Forgone Emission Reductions Associated with the Potential Withdrawal of the Control Techniques Guidelines for the Oil and Natural Gas Industry


The Environmental Protection Agency (EPA) is potentially withdrawing the Control Techniques Guidelines for the Oil and Natural Gas Industry (CTG), a notice for which was published in the Federal Register on October 27, 2016.  Recommendations in the CTG rely on the conclusions in the 2016 Final Rule "Oil and Natural Gas Sector: Emission Standards for New, Reconstructed and Modified Sources" (2016 Rule), which the agency has since announced would undergo a broad reconsideration. The final CTG does not require facilities in the oil and natural gas industry to adopt specific control technologies, but recommends reasonably available control technology (RACT) for oil and natural gas emission sources in Moderate and higher ozone nonattainment (NA) areas and the Ozone Transport Regions (OTR). The CTG does obligate states in the OTR and those with areas of moderate or higher NA to consider RACT for non-major sources in the oil and gas industry in their state when creating or revising their state implementation plans (SIPs). A withdrawal of the CTG would relieve states from the obligation of considering RACT for the oil and gas industry, but would not relieve states from their obligations under the National Ambient Air Quality Standards (NAAQS).
Because the CTG relies on the 2016 Rule, which is being reconsidered, the EPA believes it is prudent to withdraw the CTG. The EPA believes that this withdrawal will enhance the efficiency of states in revising their SIPs, in part because it may prevent the possibility of states having to revise their SIPs further due to changes in the 2016 Rule during the reconsideration. 
When the CTG was published, the EPA also made available an assessment of the emission reductions and net expenditures required by the industry in the hypothetical situation where all affected oil and natural gas emission sources that existed in 2012 and 2014, respectively, adopt the recommended RACT. As the SIP submission deadline for sources covered by the CTG is October 27, 2018, and the deadline to implement the emission controls for the oil and gas sector laid out in the SIP is January 1, 2021, the EPA assumes that there have been no costs expended as a result of the CTG. Under the same assumptions as outlined and explained in the Oil and Natural Gas Industry Estimated Reasonably Available Control Technology Emission Reductions and Cost of Control (CTG Costs), the potential withdrawal of the CTG will result in avoided costs and forgone emission reductions seen in Table 1, below.
Table 1. Summary of Avoided Costs and Forgone Emission Reductions
                  Avoided RACT VOC Cost of Control ($million)
                       Forgone Emission Reductions (tpy)
                                 Capital Costs
                    Annualized Total Costs (w/o savings)[1]
                   Annualized Total Costs (with savings)[2]
                                      VOC
                                    Methane
                                      HAP
                                     $410
                                     $140
                                     $110
                                    80,000
                                    200,000
                                     3,000
 Note that the avoided costs presented here are the estimated costs from the CTG Costs document, however these are in 2016 dollars, and they were previously published in 2012 dollars.
 [1] This is the sum of the avoided capital costs annualized over the lifetime of the individual control technologies at a 7 percent interest rate plus the avoided annual costs.
 2 This is the sum of the avoided capital costs annualized over the lifetime of the individual control technologies at a 7 percent interest rate plus the avoided annual costs minus the forgone revenue from product recovery.

