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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, D.C. 20460 

OFFICE OF 

 AIR AND RADIATION 

Petroleum and Natural Gas Systems (Subpart W) of the Greenhouse Gas Reporting Rule 

Docket: EPA-HQ-OAR-2009-0923 

Title: Detailed Determination Cost Analysis 

Summary: The purpose of this memo is to provide a more detailed analysis of the determination 

costs and compare it with the conservatively higher estimates provided in the Economic Impact 

Assessment to the final Subpart W rule. 
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Estimates of Determination Costs 

Overview and Purpose 

The Final 40 CFR Part 98, Subpart W rule Economics Impact Assessment (EIA) document 

(EPA-HQ-OAR-2009-0923) provides a simple, macro-level estimate of determination costs—

i.e., the burden of estimating emissions to determine whether an entity exceeds the reporting 

threshold. The EIA cost estimates for reporters are assumed to capture the reporting 

determination burden, however, those cost estimates do not account for the reporting 

determinations made by facilities that are estimated to fall below the threshold. The EIA includes 

a separate cost estimate for reporting determinations made by facilities that are estimated to fall 

below the threshold in order to better reflect the rule’s total economic burden. 

The reporting determination estimates for non-reporters in the EIA represent conservative, 

upper-bound estimates of these costs. The purpose of this memo is to provide a more detailed 

analysis of the determination costs for non-reporters. The results of the analysis presented below 

shows that actual determination costs are potentially much lower than the macro-level estimate 

used in the EIA. The EIA estimates determination costs to be $18.4 million for the first year for 

all non-reporters across all segments of the oil and gas industry; the analysis discussed in this 

memo produces an estimate of $5.6 million.1

 

The remainder of this memo provides background about the detailed determination cost analysis, 

the underlying assumptions, and the calculations and detailed estimates. 

Background 

EIA Costs Analysis Assumptions 

The EIA determination costs are based on one of the following two methods: 

1) For onshore petroleum and natural gas production – Each reporter was assigned a 

screening cost and preliminary monitoring cost. EPA plans to develop screening tools to 

assist reporters in threshold determination. The screening cost accounts for the time spent 

in gathering basic facility level data, such as well count and major equipment count, as 

well as the staff time required to input this data and run the voluntary screening tool. The 

screening cost was applied to all non-reporters with estimated emissions of 20,000 metric 

tons CO2e or less; EPA used the results of its threshold analysis to determine the number 

of entities at this emissions level. EPA assumed that any non-reporter above the 20,000 

metric tons CO2e level would conduct some preliminary monitoring to determine whether 

or not to report and accounted for this in the preliminary monitoring cost. EPA estimated 

                                                           

1 All estimates are given in 2006‐dollar years.
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the screening cost per non-reporter to be $573 and preliminary monitoring cost per nonreporter to be $1,034. A breakdown of these costs by activity and labor hours is as 

below; 

Non-reporters in the onshore production segment were assumed to spend the following 

hours conducting the screening tool analysis: 

a. Regulatory Review – the cost to thoroughly review the rule per company 

(estimated 1.8 basins per company) 

i. Senior Management ($101.31/hr) – 1.5 hours 

ii. Middle Management ($88.79/hr) – 1.5 hours 

iii. Junior Engineer ($71.03/hr) – 1.5 hours 

b. Understand What Information is Required 

i. Junior Engineering ($71.03/hr) – 2 hours 

c. Gather Operations Data for Screening Tool 

i. Junior Engineering ($71.03/hr) – 2 hours 

d. Complete Screening Tool and Revise the Results 

i. Junior Engineering ($71.03/h) – 1 hour 

Non-reporters in the onshore production segment above 20,000 metric tons were assumed 

to spend the following hours conducting preliminary monitoring, in addition to the 

screening tool hours above: 

a. Further Regulatory Review per Company (estimated 1.8 basins per company) 

i. Senior Management ($101.31/hr) – 1.5 hours 

ii. Middle Management ($88.79/hr) – 1.5 hour 

iii. Junior Engineer ($71.03/hr) – 1.5 hours 

b. Gather Actual Data from Field 

i. Senior Operator ($60.84/hr) – 8 hours 

c. Collect Data from Senior Operators Compile Results and Revise 

i. Junior Engineering ($71.03/h) – 4 hour 

EPA applied the screening cost estimate to a total of 21,370 non-reporting facilities; of 

these non-reporting facilities, an additional preliminary monitoring cost was applied to 

159 facilities, which resulted in a total determination cost of $12.5 million for the onshore 

production segment in the first year. The number of non-reporting facilities using 

screening and preliminary monitoring is shown in Table 3. 

2) For other segments of the oil and gas industry – Each non-reporter was assigned a 

screening cost of $ 1,022 and non-reporters above the 20,000 metric ton CO2e level were 

assigned an additional preliminary monitoring cost of $1,124. 
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Non-reporters, for segments other than onshore production, were assumed to spend the 

following hours conducting the screening tool analysis: 

a. Regulatory Review – the cost to thoroughly review the rule 

i. Senior Management ($101.31/hr) – 0.1 hours 

ii. Middle Management ($88.79/hr) – 1 hour 

iii. Junior Engineer ($71.03/hr) – 8 hours 

b. Understand What Information is Required 

i. Junior Engineering ($71.03/hr) – 2 hours 

c. Gather Operations Data for Screening Tool 

i. Junior Engineering ($71.03/hr) – 2 hours 

d. Complete Screening Tool and Revise the Results 

i. Junior Engineering ($71.03/h) – 1 hour 

Non-reporters, for segments other than onshore production, above 20,000 metric tons 

were assumed to spend the following hours conducting preliminary monitoring, in 

addition to the screening tool hours above: 

b. Further Regulatory Review 

i. Senior Management ($101.31/hr) – 0.1 hours 

ii. Middle Management ($88.79/hr) – 1 hour 

iii. Junior Engineer ($71.03/hr) – 8 hours 

b. Reevaluate What Data is Required 

i. Junior Engineer ($71.03/hr) – 2 hours 

c. Gather Actual Data from Field 

i. Senior Operator ($60.84/hr) – 4 hours 

d. Collect Data from Senior Operators Compile Results and Revise 

i. Junior Engineer ($71.03/hr) -1 hour 

Table 3 shows the total number of non-reporting facilities incurring screening tool and 

preliminary monitoring costs. 

EPA determined that such a simplistic approach, however, likely overestimates the determination 

cost estimates for the following reasons: 

1) Each industry segment has a wide range of facility sizes. In some cases, facilities are so 

small that the screening process may be unnecessary (e.g., a facility with only one well) 

or could involve a simple and quick assessment using the screening tool. For example, in 

the onshore production category there are approximately 20,072 facilities that have less 

than 50 wells; each of these facilities has on average an estimated annual emissions of 

2,119 metric tons CO2-equivalent. These facilities, which account for about 94 percent of 

the non-reporters in the onshore production segment, are well below the reporting 
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threshold and may be aware of this, and therefore would most likely not feel the need to 

use the screening tool. The small facilities that voluntarily choose to use the screening 

tools would require much less time than that assumed in the simplified EIA analysis, 

which applied a screening cost to all non-reporters, regardless of size, that was based on 

the time expected for medium-sized non-reporters to use the tool. Applying a constant 

screening cost to all non-reporters, however, overstates the cost because most of the nonreporters are small. That is, 94 percent of the non-reporters are small and therefore likely 

to have screening costs that are much lower than the screening cost estimate used in the 

analysis. 

2) In the case of offshore facilities operating in the Federal Gulf of Mexico, designated 

representatives may review the emissions estimates provided by Bureau of Ocean 

Management, Regulation and Enforcement (BOEMRE) Gulfwide Offshore Activity Data 

System (GOADS) to determine whether their facilities (i.e., the platforms) are above or 

below the 25,000 metric ton reporting threshold. Each designated representative can 

conduct this screening for all of its facilities using BOEMRE reported data; in most 

cases, the designated representative is a company that reports emissions for multiple 

facilities. Since the emissions data for each platform facility is already known, the cost to 

determine whether or not to report per platform facility is going to be lesser than what 

EPA estimated in its macro level analysis. Hence, the macro-level analysis overestimates 

the cost to determine whether offshore GOADS reporters will have to report to Subpart 

W. 

3) For all segments, the screening estimate includes a cost component that represents the 

time taken for a preliminary rule review. The preliminary rule review cost was applied to 

each facility rather than each designated representative, however. This resulted in an 

overestimate of the costs because the designated representative need only review the rule 

once for all its facilities. 

Revised Cost Analysis Assumptions 

EPA conducted a more detailed analysis by allocating non-reporters from the onshore 

production, offshore production, and LDC segments into two categories. The first category 

represents the small non-reporters, or reporters with small operations that will clearly be below 

the reporting threshold hence will be comfortable making a threshold determination without 

using the screening tool or have to conduct minimal screening to determine whether or not they 

have to report. The small non-reporters for each of these three segments are defined as follows: 

a) Onshore production – any facility with less than 50 wells; 

b) Offshore production – any facility in Federal Gulf of Mexico; and 
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c) LDCs – any facility with less than 150 miles of main pipelines. 

The second category represents facilities that need a more detailed screening because of their 

size and large number of equipment. This second category also includes facilities that are above 

20,000 metric tons CO2e and therefore will need some preliminary monitoring to determine 

whether or not they have to report. 

Next, to each group noted above, EPA assigned hours for the key determination tasks required, 

such as gathering data and using the screening tools. This approach better captures the estimated 

labor and costs for screening than the macro-level analysis in the EIA, which used a flat cost that 

did not vary by each facility’s size. In addition, EPA applied preliminary rule review costs to the 

designated representatives rather than to individual facilities. The hours assumed for each task 

and the corresponding labor rates are provided in Tables 1 and 2, respectively. Table 3 provides 

a count of non-reporters that will either conduct screening only or will conduct both screening 

and preliminary monitoring. Table 4 provides a count of facilities per designated representative; 

the rule review cost was applied to each designated representative. Finally, Table 5 provides a 

summary of the first- and subsequent- year determination costs by industry segment, estimated 

using Equation 1 and Equation 2 below. 

⎟

⎠

⎞ ⎜

⎝

⎛ = ∑ + p p p

i

DCY1 d n hiLi h L n Equation 1 

( ) DCY 2 = d hpLpnp Equation 2 

where, 

DCY1 = the first year determination cost (Table 5) 

DCY2 = the subsequent year determination cost (Table 5) 

d = the facilities per designated representative (Table 4) 

n = the number of facilities that do not perform preliminary monitoring (Table 3) 

hi = the labor hours for each labor category (e.g. regulation review), i (Table 1) 

LI = the labor rate for each labor category, i (Table 2) 

hp = the labor hours preliminary monitoring (Table 1) 

Lp = the labor rate for preliminary monitoring (Table 2) 

np = the number of facilities that perform preliminary monitoring (Table 3)
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Table 1. Determination Cost Labor Hours 

Labor Hours 

Onshore Production (less than 50 wells) 

Onshore Production (Greater than 50 wells) 

Offshore Production (Federal GoM) 

Offshore Production (State, California, and Alaska) 

Natural Gas Processing 

Natural Gas Transmission 

Underground Storage 

LNG Storage 

LNG ImporExporTermi

Regulatory review 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 Understand required operational info 0 2 0 0 2 1 1 1 Gather operations data 0 2 0 0 2 1 1 1 Use screening tool 1 1 4 1 1 1 1 1 Preliminary monitoring 0 14 0 0 14 8 8 8 

Table 2. Determination Cost Labor Rates 

Labor 

Rates 

($2006) 

Onshore Production (less than 50 wells) 

Onshore Production (Greater than 50 wells) 

Offshore Production (Federal GoM) 

Offshore Production (State, California, and Alaska) 

Natural Gas Processing 

Natural Gas Transmission 

Underground Storage 

LNG Storage 

LNG ImpoExpoTerm

Regulatory review $87.04 $71.03 $73.94 $73.94 $73.94 $73.32 $73.32 $73.32 $Understand required operational info $71.03 

$71.03 

$71.03 $71.03 $71.03 $71.03 $71.03 $71.03 $

Gather operations $63.89 $71.03 $63.89 $63.89 $63.89 $63.89 $63.89 $63.89 $
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data Use screening tool $71.03 

$71.03 

$71.03 $71.03 $71.03 $71.03 $71.03 $71.03 $

Preliminary monitoring $71.03 $71.03 $71.03 $71.03 $71.03 $71.03 $71.03 $71.03 $

Table 3. Non-Reporting Facilities that Perform and do not Perform Preliminary Monitoring. 

Number of 

NonReporters 

Onshore Production (less than 50 wells) 

Onshore Production (Greater than 50 wells) 

Offshore Production (Federal GoM) 

Offshore Production (State, California, and Alaska) 

Natural Gas Processing 

Natural Gas Transmission 

Underground Storage 

LNG Storage 

LNG ImpExpTerms 

Facilities without Preliminary Monitoring 20,072 1,298 2,460 698 253 722 244 23 Facilities with Preliminary Monitoring 0 159 15 4 24 77 20 1 

Table 4. Facilities per Designated Representative for each Segment 

Onshore Production 

Offshore Production 

Natural Gas Processing 

Natural Gas Transmission 

Underground Storage 

LNG Storage 

LNG Import/ExporTerminals 

Facilities Per Designated Representative 0.56 0.36 0.37 0.13 0.46 1.00 1.00 
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Table 5. Revised Determination Costs for the First and Subsequent Years 

New 

Determination 

Cost 

Onshore Production 

Offshore Production 

Natural Gas Processing 

Natural Gas Transmission 

Underground Storage 

LNG Storage 

LNG Import/ExpoTerminals 

First Year $4,217,525 $482,526 $137,458 $226,621 $88,037 $9,910 $524 Subsequent Year $255,503 $5,810 $33,709 $61,379 $17,174 $958 $0