### MEMORANDUM

TO: Record

FROM: EPA

DATE: March 1 5 , 201 3

SUBJECT: Supporting Information for Existing Source Analysis (DCN CBM00664 )

To estimate economic achievability of possible discharge limitations for the Coalbed Methane (CBM) industry, EPA analyzed the costs of implementing wastewater pollution controls at existing wells. The Technical Development Document for the Coalbed Methane (CBM) Extraction Industry (TDD) ( DCN CBM00669 ) provides a summary of th is existing source analysis. This memorandum provides additional details on the following tasks that were part of the analysis :

**•** Detailed Questionnaire produced water destination and vo lume review ;

**•** P roduced water transfer volumes analysis ; and

**•** P roject

- level 1 cost s calculations

. Project

- level data for the existing source analysis is provided in the following documents:

**•** CBI Existing Source Analysis database ( DCN CBM 00657 ) presents existing source data and calculation results;

**•** CBI attachment to this memorandum ( DCN CBM00664 .A1 ) present s specific project

- level CBI data that is not included in the CBI Existing Source Analysis database (e.g., projects transferring water; proj ect

- level cost data).

EPA also developed a n on

- CBI Existing Source Database Dictionary ( DCN CBM 00658 ) that describes each data field included in the Existing Source Analysis database

.
1.0 D ETAILED Q UESTIONNAIRE P RODUCED W ATER D ESTINATIONS AND V OLUME R EVIEW
EPA used the CBM Detailed Questionnaire as the primary source of information for the existing source analysis. The Detailed Questionnaire collected information on CBM operations in 2008. EPA identified the projects that discharge produced water to surface water and therefore would be affected by new discharge limitations

. Because c osts are a function of th e volume of wastewater managed, EPA also identified the volume of produced water discharged by each project. During EPA’s review of the Detailed Questionn aire responses 2

1 “Project” is defined as a well, group of wells, lease, group of leases, or recognized unit which is operated as an economic unit when making production decisions , EPA also reviewed Discharge Monitoring Reports (DMRs) provided by Wyoming. EPA found that CBM projects in Wyoming held discharge permits that may or may not discharge to surface water. Section 1.1

2 See EPA’s 2013 Quality Assurance Activities During the Review of the Engineering Portion of the Detailed Questionnaire for the Coalbed Methane (CBM) Extraction Sect or and the Development of the Detailed Questionnaire Databases memorandum ( DCN CBM00663 ) for more information.Memorandum January 18, 2013 Page 2

discusses EPA’s review of the surface wat er destinations and volumes for CBM projects in Wyoming using DMRs

. EPA also reviewed data from operators that transfer produced water between projects to determine if the produced water was discharged to surface water. EPA analyzed these data to determi ne which projects should be attributed costs for implementing wastewater pollution controls (Section 1.2).

1.1

Generally, CBM projects that hold a discharge permit are allowed to discharge to surface water and would 1) indicate in the Detailed Questionnaire that they discharge to surface water (C3

- 1) and 2) list the discharge permits held by the project (C3

- 4a)

. EPA used this information to identify projects that di scharged CBM produced water to surface water

. EPA Review of 2008 CBM Discharging P rojects in Wyoming

Wyoming CBM discharges are permitted differently than most other states. In Wyoming, several types of discharge permits may be issued to CBM projects depending on the final destination of the produced water

. CBM projects may discharge to p ermitted outfalls that allow direct discharge to surface water or they may discharge to ponds that are designed to hold the capacity of the produced water without discharging to surface water 3

EPA received 2008 DMR data . EPA considered the permitted di scharge to self

- contained ponds as discharge to infiltration/evaporation ponds, a zero discharge water management method, because there is no discharge to surface water. Because operators using these evaporation/infiltration ponds hold a Wyoming Pollution Discharge Elimination System (WYPDES) permit, the operator ’ s Detailed Questionnaire response may have categorized the project as a discharging project

. EPA conducted an additional review of the CBM projects in Wyoming using the state DMR data to determine if the project discharged to surface water in 2008

.

4

**•** Whether t he CBM project practices discharge to surface water and/or discharge to infiltration/evaporation ponds ; and from Wyoming, which included information on the type of permitted outfalls (e.g., direct discharge, discharge to pond ) and the discharge volumes from each outfall. EPA used this information to confirm the following:

**•** W hether the discharge volume reported in the Detailed Questionnaire accurately reflects w hat is discharged to surface water

. Based on these findings, EPA updated the responses to the Detailed Questionnaire in the Detailed Questionnaire Engineering database ( DCN CBM00654 )

. EPA’s 2013 Quality Assurance Activities During the Review of the Enginee ring Portion of the Detailed Questionnaire for the Coalbed Methane (CBM) Extraction Sector and the Development of the Detailed Questionnaire Databases memorandum ( DCN CBM00663 ) provides details on EPA’s update to the discharge practices and discharge volum es reported in the Detailed Questionnaire

.

3 ERG

, 2012. Coalbed Methane State Phone Calls. Various Dates and Contacts. EPA

- HQ

- OW

- 2010

- 0824. DCN CBM00678

. 4 EPA included the 2008 DMR data f rom Wyoming in the Pollutant Database located in the EPA docket. EPA

- HQ

OW

- 2010

- 0824, DCN CBM00689

.Memorandum January 18, 2013 Page 3

1.2

During EPA ’s review of question C3

- 1 responses to the Detailed Questionnaire

, EPA determined that some CBM operators reported the final destination of their produced water as d ischarge to a POTW o r third party when they were transferring their produced water to another CBM operator or project that , in turn, discharged the produced water to surface water

. EPA also determined that

some op erators reported transferring produced water between their own projects. For all operators that transferred produced water to another CBM operator or project , EPA added a notation in the E xisting S ource Analysis database ( DCN CBM 0065 7 ) that the operator transferred produced water to another operator or project and changed the final produced water destination from POTW to surface water discharge

. Operators Transferring Produced Water

EPA assumed that the costs of managing the produced water should be attributed to the pro ject from which the produced water is discharged, not to the project that generated and transferred the produced water. To calculate produced water management costs, EPA subtracted the volume of produced water transferred from the operator producing the wa ter and add ed th is volume to the operator receiving the water.

The accompanying CBI Excel spreadsheet ( DCN CBM00664 .A1 ) shows the individual project volumes for the five projects transferring produced water and for the five projects accepting produced water

. EPA’s Technical Development Document for the Coalbed Methane (CBM) Extraction Industry ( DCN CBM00669 ) provides additional discussion about where produced water volumes are used in the existing source analysis.

2.0 E XISTING S OURCE A NALYSIS C ALCULATIONS
EPA computed project

- level costs for existing discharging projects to implement two produced water management alternatives : ion exchange and underground injection. The following sub sections discuss detailed information about these project

- level calculati ons.

2.1

EPA used the parameters from the Detailed Questionnaire that are listed in Project

- Level Economic Data

Table 1 in the existing source analysis . EPA transferred the se parameters from the Detailed Questionnaire to the Existing Source Analysis database ( DCN CBM 00657 ) for use in the existing source analysis 5

While developing the existing source database, EPA identified missing operator responses for some of the data fields

. EPA estimated values for missing data using the methods listed in .

Table 1 and included these estimated values in the Existing Source Analysis database ( DCN C BM 00657 ).

5 U.S. EPA. 2013a. Economic Analysis for Existing and New Projects in the Coalbed Methane (CBM) Industry

. EPA

- HQ

- OW

- 2010

- 0824, DCN CBM00680.Memorandum January 18, 2013 Page 4

Table 1 . Detailed Questionnaire Part B Information Using in Existing Source Analysis

Missing Information from the Detailed Questionnaire Response EPA’s Method of Estimati ng Data Missing from the Detailed Questionnaire G as produced (B3

- 59) Use the reported data from the Screener Questionnaire (DCN 00564 ) Gas sold (B3

- 60) Calculate the value as gas produced (B3

- 59) minus gas used (B3

- 61) Gas used (B3

- 61) Assume no gas was used and gas sold (B3

- 60) equaled production Average wellhead price (B3

- 62) Assume the average of the reported wellhead prices for other projects in the same basin Royalties (B3

- 65) , severance (B3

- 66) , and/or ad valorem (B3

- 67) Assume the average of the reported rates for other projects in the same basin

2.2

EPA estimated costs for ion exchange and underground injection using operator responses to the Detailed Questionnaire and existing data

. The methodology EPA used to estimate the project

level cost to implement ion exchange and underground injection is presented in this section. The accompanying CBI Excel spreadsheet ( DCN CBM00664 .A1 ) presents the underlying data used
to calculate project

- level costs for ion exchange and underground injection. Project

- Level Costs to Implement Water Management Alternatives

Ion Exchange Costs. EPA used existing data along with the costs and volumes reported in operator responses to question s C3

- 10 6 and C2

- 3 of the Detailed Questionnaire. EPA only inclu ded Detailed Questionnaire responses that included both produced water volume and ion exchange cost. EPA calculated an average ion exchange cost of $0.50 per barrel that they applied to all basins. The project

- level data are included in the attached CBI Ex cel spreadsheet ( DCN CBM00664 .A1 )

. Underground Injection Costs. EPA used the operating and maintenance costs reported in
qu estions C2

- 7a, C2

- 8c, and C2

- 8d. v 7 to estimate the cost of underground injection in each CBM basin. U nderground injection costs depend primarily on the accessibility of injection wells and

on transportation costs. The a ccessibility of injection wells depends on the regional geology and the presence of existing underground injection infrastructure, which should be fairly constant th roughout a given basin. Transportation methods and costs should also be constant throughout a basin. T herefore

, EPA assumed that a basin average underground injection cost should be an accurate estimate of the cost. EPA averaged all costs for projects that only disposed of produced water via underground injection (i.e., projects that did not use multiple disposal options) according to the Detailed Questionnaire responses to calculate the basin

- level average costs in dollars per barrel

. Section 5 of the TDD discusses the assumptions made for basins that did not have any associated underground injection costs reported in the Detailed Questionnaire.

6 Question C3

- 10 requests capital costs and the year in which the costs were incurred and 2008 operating and maintenance costs of the ion exchange unit.
7 Question C2

- 7a requests 2008 operating and maintenance costs of the produced water management system ( PWMS); Question C2

- 8c requests 2008 operating and maintenance costs of the piped water gathering system; and Question C2

- 8d.v requests 2008 total costs incurred to truck produced water to the PWMS.Memorandum January 18, 2013 Page 5

EPA multiplied the basin

- level average underground injection costs ($/bbl) by the discharge volumes for each pro ject to determine the underground injection costs for each project.

3.0 Q UALITY C ONTROL P ROCEDURES

EPA’s contractor, ERG, adhered to the Quality Assurance Project Plan for the Review and Data Entry of the Engineering Portions of the Coalbed Methane Questionna ire (CBM00691) and the Quality Assurance Project Plan For the Economic Portion of the Coalbed Methane Detailed Questionnaires and Coalbed Methane Economic Analysis Task ( CBM00692 ) during the existing source cost analys i s. ERG conducted the following QA checks during the cost analyses:

**•** ERG created a table in the Engineering database 8 (DCN CBM00654 ) to use as a crosswalk between the various identifiers used in the Detailed Questionnaire Engineering database, the Economic database 9 (DCN CBM00656 ) , and the S creener database ( DCN CBM00681 ). This table includes all of the CBM operators in the industry with additional project

- specific information from the Detailed and Screener Questionnaires. ERG reviewed this information with the economists to verify its correc tness and provide crosschecks of project

- specific information

.

**•** ERG created the CBI Existing Source Analysis database ( DCN CBM 00657 ) by extracting data from the Detailed Questionnaire

. ERG checked that the data were transferred correctly by visually checking the project

- level data in the CBI Existing Source Analysis database against the project

- level data in the Engineering database (DCN CBM00654 )

. ERG also checked approximately 10 percent of the projects in the existing source database against the ha rdcopy Detailed Questionnaires to ensure that the database information was assigned to the correct project and operator.

**•** One team member created queries in the CBI Existing Source Analysis database ( DCN CBM 00657 ) and another team member reviewed the design and logic of the queries. ERG documented these checks in the database.

**•** ERG checked that the total number of discharging projects analyzed throughout the existing source analysis was consistent. ERG also checked that the same discharging projects (i.e., s ame individual project IDs) w ere analyzed throughout
t he existing source cost analysis. This was one check to verify th at the database queries in the CBI Existing Source Analysis database ( DCN CBM 00657 ) were performing correctly.

8 The Detailed Questionnaire Engineering database contains operator responses to Parts A and C of the Detailed Questionnaire. See EPA’s 2013 Quality Assurance Activities During the Review of the Engineering Portion of the Detailed Questionnaire for the Coalbed Methane (CBM) Extraction Sector and the Development o f the Detailed Questionnaire Databases memorandum ( DCN CBM00663 ) for more information.
9 The Detailed Questionnaire Economic database contains operator responses to Part B of the Detailed Questionnaire. See EPA’s 2013 Quality Assurance Activities During th e Review of the Economic Portion of the Detailed Questionnaire for the Coalbed Methane (CBM) Extraction Sector and the Development of the Economic Database memorandum ( DCN CBM00 701) for more information.Memorandum January 18, 2013 Page 6

**•** ERG had a senior staff me mber familiar with effluent guidelines development review the results from the CBI Existing Source Analysis database ( DCN CBM 00657 )

.