DRAFT

MEMORANDUM Date: October 12, 2011 Subject: Su mmary of d iscussion from the September 21, 2011, m eeting between

the American Petroleum Institute and the Environmental Protection Agency From: Heather Brown , EC/R Incorporated

Bill Huang, EC/R Incorporated To: Bruce Moore, EPA/OAQPS/SPPD/ FIG

I. PURPOSE This memorandum summarizes the September 2 1 , 2011 meeting between the Environmental Protection Agency (EPA) and industry representatives from the American Petroleum Institute ( API ) . The purpose of this meeting was to listen to comments and concerns from the API regarding the August 23, 2011, Oil and Natural Gas S ector proposal . II. DATE The meeting took place from 10 :00 am until 3 :00 pm on September 2 1 , 2011 at the Research Triangle Park, NC, campus of the EPA . III. ATTENDEES The following individu als attended the meeting: Industry Representatives B ritish P etroleum : Jeffrey Adams Dana Wood Chesapeake : Grover Campbell Shell George Deeley TGB Rob Ferry Chevron Clay Freeberg ConocoPhillips Clint Gill Devon Joe Leonard ExxonMobile Tom Monahan American Petroleum Institute Matt Todd Marathon Jenny Yang2

U . S . Environmental Protection Agency Office of Air Quality Planning and Standards Bruce Moore Greg Nizich Alex MacPherson Office of Atmospheric Programs Suzanne Waltzer (by telephone) EC/R Incorporated Heather Brown Bill Huang IV. SUMMARY OF DISCUSSION The following is a summary of the discussion during the meeting . The summary has been arranged by topic and is not necessarily presented in the order in which it was discussed . General Bruce Moore went over the ground rules for the meeting with respect to t ime between proposal and promulgation . He is limited to what he can say, and could only answer questions with factual information and provide clarifications . API stated that they a ppreciated EPA for not including for regulation units such as amine treate rs and deliquifying . One of API’s main concerns is applying control technology on a nationwide rule, and r eiterated the need for flexibility in the rule . API stated that they l ike d the structure of the oil and gas sector new source performance standards (NSPS), subpart OOOO , because the new subsections will help with future compliance , but state d that cross ref erence s to the oil and natural gas production national emission standards for hazardous air pollutants (NESHAP), subpart HH, are always difficult t o follow . In addition, the changes to subparts HH and HHH (the natural gas transmission and storage NESHAP) are hard to follow . Extension of Comment Deadline API noted that they have submitted an extension request for the comment period and in turn, the promulgation date . API stated that there a lots of details to evaluate, and w ant ed to make sure both API and EPA have enough time , and to ensure it is done right the first time . In addition, API stated they won’t have time to address solicited comments wi thout an extension . EPA stated that they are addressing the comment extension with OGC, but says it’s up to the decision makers . If they do that they will have to push back the promulgation date as well .3

Additionally, API mentioned that the information co llection request (ICR) comment deadline is tomorrow and affects their time to address comments . New definition s API expressed concern that EPA had preempted section 60 . 15 of the General Provisions, which defines “reconstruction . ” API was concerned tha t the new definition of modification includes VOC and natural gas . API stated that a threshold is needed for what VOC is to distinguish coal bed methane (CBM) and low VOC content . According to A PI , not all recompletions increase emissions, sometimes referred to as reenergizers or workovers . Another concern was EPA’s defining of the commence construction date of a relocated compressor as the date the compressor is installed . API stated that r elocation h as never been defined as a modification for NSPS and NESHAP . API suggested that the manufacturer date should be used as the commence construction date . EPA suggested API provide alternative language in comments . API also discussed the d efinition of piece s of equipment specifically as an affected source (e . g . , pneumatic controller, compressor) . According to API, do cumentation will be a problem for so many individual pieces of equipment . API indicated that S tate minor new source review ( NSR ) programs will kick in if any NSPS or NESHAP apply to a piece of equipment and the emission thresholds go away if NSPS or NESHAP apply . This will force a site to get a new permit every time a new pneumatic controller is installed . API state d that this would be very burd ensome to S tates and industry . API also stated that this is an issue for completion permitting . Compliance A ssurance API was concerned about the detailed monitor ing, testing, notifications, recordkeeping, etc . associated with the compliance demonstrations . API noted that much of their industry is located at remote, unmanned sites with no electricity . API stated that continuous parameter monitoring systems ( CPMS ) for tanks are issue where subpart OOOO cross referenc ed subpart HH . API stated th e CPMS requirements were written for HAP not VOC, and HAP rules were written for major HAP sources therefore, the reason for language is different . API stated that they believe that CPMS were intended for major sources because non major sources are usually without power and communications infrastructure . Notifications API stated that they generally liked the requirements for pneumatic controllers . However, API stated that a dvanced notification for so much equipment is problematic, and needs to be more streamlined . API suggest ed only submitting notification at first required report . API also4

suggested allowing for periodic reporting at the 1

- year anniversary of installation . API expressed some c onfusion about how to combine reports . They submit t itle V reports for major sources . Some reporting required a nnually but not required on anniversary . API suggested o perator s report activity over a period of time and report all equipment over some geographic area . API asked what the value is of the information in reports . API suggested a 60

- day buffer between the end of the reporting period and the due date of the periodic report . Low VOC Threshold API suggested that EPA set a low VOC threshold for applicability to subpart OOOO . According to API, VOC less that 5 percent by weight would not be worth controlling (e . g . , d ry shale gas, coal bed methane ( CBM )) . API s uggested EPA evaluate where the cost impact reaches the cost effectiveness threshold ($/ton) . Compliance Dates API pointed out some confusion relative to the c ompliance dates and the effective date . EPA stated that had already been pointed out internally . API stated that some c larification was necessary with respect to the compliance date . API suggested that compliance be required 60 days from date of publication of the final rule in the Federal Register . API pointed out that equipment is not always available . As an example, API stated that every new and modified tank required to be controlled under the rule m ay need one or more combustor for a tank . API stated that c ombustor certification is not currently available . At this time, n o manufacturer does this and there are not enough available . EPA suggest ed that, to support their argument, API get suppliers to su bmit how long it would take them to ramp up to meet demand . Costs API stated that EPA appeared to have done a good job calculating the rule cost impacts for the pieces included . However, API stated that there are hidden costs that need to be considered in the cost calculations . For example, EPA did not include costs for vapor recovery unit piping, and costs associated with increased pad size for a combustor (these are not minor costs) . For unanticipated, but necessary costs, EPA suggested API include in their comments, things we haven’t included . Completions API asked how EPA intends to address completions offshore . API stated that they had just started to think about this, and did not believe EPA considered offshore implications .5

API expressed their concern about the lack of availability of completion equipment and experienced operators due to the shortage caused by the Wyoming Department of Environmental Quality ( DEQ ) best available control technology ( BACT ) requirements . A PI was conc erned about being rushed to get this equipment and that meeting specifications for this mandatory , nationwide rule could lead to unsafe conditions, which would cause job losses, and safety risks . In addition, API stated that it will take significant time t o deal with API standards and pressure vessel codes . API stressed that ine xperienced operators lack the knowledge and experience to handle issues within the industry . API also stated that the Natural Gas STAR Program is voluntary so operators were properly trained . According to API, Wyoming DEQ provided this sort of time for compliance . API was also concerned about prescribing specific equipment during completions (for example, requiring a sand trap) . API stated that some equipment required may not be necessary or necessary at all times during the completion . EPA suggested API provide suggestions on a better way to do this . API also requested that different techniques , such as the reverse circulation technique, need to be allowed . EPA mentioned Colorado ’s thresholds for completions and asked if API knew where they came from . Knowing how these threshold were derived w ould help to be able to establish threshold . API also mentioned the l ow VOC threshold for CBM . API stated that they would like flexibility t o develop techniques to reduce VOC emissions down the road . API wanted more flexibility to flare a vent, but felt that the regulatory text doesn’t address the issue . API fears the reporting/recordkeeping requirements will be used as enforcement against t hem . API stated that there are o perational and safety issues . According to API, it is hard to gauge well production and they don’t always have the equipment on site available , or gathering lines for permits etc . API stated that third party gathering could take down gathering the lines . API stated that there were B LM issues as well and other costs we didn’t consider . API also had a concern about pipeline pressure issues and when to route to the sales line . API did not like the words “as soon as practicable ” because enforcement might judge it different ly (i . e . , completion c ould be viewed as the same thing as construction activity) . EPA challenged them to add what’s missing from the rule . API responded that they have s ent out industry surveys before and that l ine pressure isn’t something they currently measure and record . EPA asked how they normally decide to vent or recover . API responded it is mostly a question of trial and error and experienced judgment call . API stated that opportunities for venting n eed to be provided when when a dding nitrogen or carbon dioxide (energized completions) and if there is h ydrate formation , which p lug s pipeline wellhead equipment, completion equipment, etc . AP I pointed out that the language for the n otification 30 days b efore the completion in the preamble does not equal the rule language . EPA clarified that it should be 30 days before , in order to give enforcement an idea of what you are doing . API stated that with Subpart A, a 30

-6

day notification, plus a 30

- day notifica tion before commencement is overkill and would overload EPA with 6 notifications on every completion . EPA asked for a streamlined notification suggestion . It is not EPA’s intent to overly burden industry and enforcement . API stated that they needed c larification on the definition of gas well . The term “mouth” of the (gas) well was not clear and is not a term that industry typically uses . API also requested cla rification on the definition of a gas well . API said the difficulty is there is no predictabi lity in this industry and frequently you don’t know what kind of well it will be until completion . As an example, API described a situation with d ual completions (i . e . , t wo strings in one well ) . API suggested using Subpart W for consistency . They stated that h ow wells are permitted locally would be easiest but it is not uniform from S tate to S tate . API also stated that there is a huge overestimation of the number of recompletions . According to API, i t should be 0 . 1%, not 10% . EPA stated that they expec ted this from a lot of commenters . API also stated that the costs are much greater and the amount of gas recovered is incorrect . API stated that they could provide actual amounts/bills and a “case study . ” API asked if a well is fracked once, is it always considered a fracked well . API stated that they believed there would be some problems with definitions down the road for enforcement . API was concerned that once something is fracked that every subsequent action will be considered fracking, even though it may not actually be (i . e . other completions that may be considered a modification of fracking) . EPA stated that they are looking at any action immediately following the fracture, specifically a good word that explicitly states a workover two years down t he road is not subject to the provisions . A PI suggested that the language say “when fracking is involved . ” API also asked about the t iming of the re quirements for completions . API was concerned about what would happen if a well that exists before August 23, 2011 is completed doesn’t have to comply until promulgation . Further, API stated that the recordkeeping text is unclear, and the intent is not explicit . API said the industry is panicking, because they read this as immediate recordkeeping and complianc e . API requested EPA publish a letter or something that can be done to calm everyone down . EPA responded that attorneys are nervous about putting something in text, but EPA says it is going to be changed without some writing . EPA said that they are unaware of a short

- term solution that could be done to make this better . API stated that there are some requirements that as the rule reads now, apply between proposal and promulgation . Storage Tanks API questioned the language in the preamble with respect to storage tanks where EPA stated that “...absent flash emissions the emission approach zero... . ” According to API, “dead oil” tanks have no emissions but are regulated under the proposed rule . API suggested having a throughput7

or emissions threshold for tanks . API pointed out that these thresholds are usually being calculated for state requirements . API stated that they’d inferred from the preamble and rule language that EPA is intending to regulate condensate and crude oil tanks, that are stationary and in the production segment . API then asked whether the sector includes the liquid distribution pipeline and if it does, it shouldn’t . API also pointed out that in their opinion, the change in the t ank definition removed the point of custo dy transfer and now points to the OLD MACT, but OLD MACT points to subpart HH . API also pointed out that the storage tank definition included a 10

- tpy cutoff . EPA responded that this was an error . API noted that the throughput and cutoffs apply to crude oil and condensate, but asked if there is a diesel rule and is EPA intending to regulate other fluids . According to API, a tpy emission limit for storage tanks would take care of other types of fluids . EPA responded that they did not envision covering die sel tanks . API then asked whether EPA intended to cover temporary tanks or just stationary tanks . EPA responded that the tank would probably have to be there for a year to be stationary . EPA sug gested that API ask this question in its comments and propose a solution . API noted that the throughput threshold is a problem . According to API, capacity and vapor pressure cutoffs were more appropriate . F lash tanks would not fall under capacity and vapor pressure cutoffs . According to API, if the storage tank does not have flash emissions then why not have vapor pressure and capacity cutoffs . As a result, cost effectiveness for very low emitting storage tanks would approach infinity . Another possibility would be to have an Reid vapor pressure (RVP) test . This would make complying with the rule simpler . API stated that issues with throughput cutoffs result from having a high or iginal production rate and then a production rate decline . Another issue is that with an annual throughput cutoff, industry would need a year to gather the data . Therefore, API recommended using sales volume as a measure of throughput . Additionally, API pointed out that a c ouple of S tates already have cutoffs . API asked why EPA chose to use the emission factors to determine the thr oughput from emissions . API TCEQ ranked methods for calcula ting emissions from flash tanks and the East Texas study used by EPA was not high on the list . According to API, an emission cutoff of 10 tpy is appropriate . API discussed the Wyoming DEQ BACT policy, which allows potential emissions to be calculated by using a 30

- day throughput times a decline factor . Wyoming also allows 60 days to8

install controls and allows controls to be removed after decline the emission r ate is less than 6 to 8 tpy and below specific throughput . The u sag e of tank could be intermittent . API also s uggested separate cutoff for larger capacity tank s with throughput less than a specified gallons/year . An example would be storage tanks designed to accommodate unloading liquid from well . The t hroughput only cutoff would be a disincentive to replace tanks that may be old and in need of replacement . API asked how well populations were calculated . API also asked about the 500 ppm leak definition for tank roof fittings . API stated that they could manufacturer data showing that Enardo valves couldn’t meet the 500 ppm leak definition . According to API, Enardos valves are designed to have an inherent leak rate that would be greater than 500 ppm . API recommended EPA use the work practices they provided a few months ago . API stated they would like an option for floating roofs for non

- flashing tanks . T hey stated that when being extended to black oil tanks, floating roofs should be allowed . In the cost analysis API stated there are line items in such a project that need to be accounted for to get the full cost . API stated that n ew tanks were more expensive to install for valves and fittings and that EPA need s to account for tanks that have to install valves and fittings to comply at a later date . API stated that they n eed time to install controls once they become subject . As an example, API stated a potential solution, would be to give the industry time to determine what production is, and tim e to determine the decline factor . EPA asked API how they would like to see storage tanks rule designed . API recommended using the Wyoming DEQ program as a model for throughput and emissions threshold . The operator would determine the decline factor in the field . Since the decline factor varies across the country; EPA could use national average or allow to be calculated in field . EPA stated that they would take a look at the Wyoming program again . API stated that they would also review the program . API reiterated their c oncerns with changes in subpart HH that now would be required and is cross referenced from subpart OOOO, such as MRR issues and General Provisions . API also mentioned that the NSPS doesn’t refer to the certified equipment allowance in s ubpart HH . API also r eiterated the remoteness of sites as issues to compliance . API suggested using a deminimus HAP level or a cutoff similar to the “in o rganic HAP service . ” API mentioned the NESHAP revisions regarding the MACT floor . API was concern ed about the tanks that were used for the floor determination and requested EPA submit the l egacy docket memo regarding the MACT floor .9

Risk Assessment API reviewed sites with risks greater than 10 0 in a million . API pointed out a few sources that may be erroneous and would drive the risks below 100 in a million . One of the sources was an area source . The other source was the Hawkins Gas Plant . The national emissions inventory ( NEI ) says there are 5 glycol dehydration units at Hawkins , but in fact ther e have only been 3 dehydration units for more than 10 years , and one has a 2 MM scf/day throughput and the other two are permitted below 1 tpy benzene . Therefore the Hawkins plant is not represented correctly in the NEI . There is also a spreadsheet error ma king the risks greater than 100 in a million . API also asked why does the equation for the calculation of the MACT floor for dehydration units go to zero, why not stop at the floor . API also asked if the c ompliance level of 1 tpy goes away if the risk i s less than 100 in a million . Pneumatic Controllers API stated they had no issue with the requirement s for low and no bleed pneumatic controllers . However, API stated that they were concerned with pneumatics being defined as an affected facility, which causes permitting issues with state NSR . API suggested a couple of fixes : (1) If it is an air driven pneumatic controller , it is not defined as a facility because there are no V OC emissions . Instead, defi ne it as a gas driven pneumatic and (2) r ecognizing in the preamble that there is a permitting problem, and discuss the permitting issue is not the intent . API again expressed their concerns with the use of natural gas versus VOC and that n atural gas shouldn’t be a surrogate . For example, CBM has no VOC . API stated that the gas definition in KKK doesn’t work anymore because CBM can’t point there for pneumatics . API stated that there is no value added from annual reporting, because they would just resubmit the same report with a different date every yea r . EPA clarified that wasn’t the intent . EPA intended for industry to submit an annual report for new units in the past year . API stated that they misunderstood, it may not be in the regulatory text, but it is stated in the preamble . API also suggested usi ng a concept for subpart OOOO that is similar to subpart JJJJ which does not require reporting for certified engine s . API stated that there needs to be a better definition of gas processing plant . R emote plants do not have electricity . API stated that there are questions as to whether d ew point depression skid s (i . e . , JT skid) is a gas plant . Some States think they are NGPP but most don’t . EPA asked API to suggest a new definition in their comments . API stated that the subpart KKK definition would work only if you specify liquefied petroleum gas ( LPG ) or natural gas liquids ( NGL ) .10

LDAR API was concerned with the new leak definition for existing gas plants subject to subpart HH, because former non

- leakers would suddenly need t o repair . This is an issue for the liquids area of plant . API stated that the compliance time under subpart HH for existing facilities needs to be extended in order to get them to comply . API was also concerned that subpart OOOO requires modifications to pull in more components that were existing, since it doesn’t take that much of a cost to trigger the definition of reconstruction, due to the age of the plants . API would prefer to keep the leak definition of 10,000 ppm for existing facilities, but if tha t isn’t possible , then API stated industry would require a later compliance date . API stated that the terms defined in subpart OOOO are confusing . As an example, API stated that the term “equipment” and the term “affected source” don’t work together . API then asked about how the s tay on subpart VVa affects this proposed rule . EPA responded that subpart OOOO points to the procedures in VVa, but the affected facilities are not subject to subpart VVa . API pointed out that c ertain provisions , such as capi tal expend iture and connectors , are stayed . According to API, the LDAR program for connectors is problematic, because it will bring in a lot of other components . Adding connectors changes the number of components by four times . Compressors API was concerned about the relocation of compressors, since they tend to relocate quite often . The y explained that rental companies come in to swap out compressors frequently . API asked whether the rental companies should be responsible for the recordkeeping