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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: Subpart W’s Impact on the Greater Economy

Summary: This memo summarizes EPA's analysis of the potential impact of the petroleum 

and natural gas systems final rule Subpart W - Petroleum and Natural Gas Systems of the 

Greenhouse Gas Reporting Rule on the United States economy in general. 
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Subpart W’s Impact on the Greater Economy 

Overview and Purpose 

This memo summarizes EPA’s analysis of the potential impact of the petroleum and natural gas 

systems final rule Subpart W – Petroleum and Natural Gas Systems of the Greenhouse Gas 

Reporting Rule (hereafter, Subpart W) on the United States economy in general. EPA 

determined that if all of the Subpart W reporting costs were passed on to fuel consumers in the 

form of higher prices, the price of natural gas and petroleum could increase by less than 0.1 

percent. Hence, EPA concluded that the impact of Subpart W on the greater economy is 

insignificant. 

Background 

EPA received several comments on its April 2010 Subpart W proposal raising concerns that the 

rule could affect the prices of fuels or disrupt fuel supply into the greater economy. EPA notes 

that the final Subpart W rule does not have any requirements that will in any way disrupt 

petroleum and natural gas production or supply either partially or completely, i.e. all monitoring 

required under the final rule can be conducted under business-as-usual conditions. However, 

EPA understands that the Subpart W monitoring and reporting costs could be passed on to endusers in other industries such as farmers, manufacturers, and individual consumers in the form 

of higher fuel prices. To evaluate this potential impact on fuel prices, EPA conducted an 

analysis to estimate the increase in fuel prices under the assumption that all of the costs from the 

rule would be passed on to end-users. 

Analysis of Potential Cost Impact on Fuel Prices 

EPA used the Subpart W monitoring and reporting costs from the Economic Impact Analysis 

(EPA-HQ-OAR-2009-0923) and the total throughput from reporting facilities by segment to 

estimate the impact on fuel prices. The impact is the ratio of the Subpart W cost borne by 

reporters to the total throughput of fuel (natural gas or petroleum) through their reporting 

facilities. The national throughput for each of the segments is defined as follows: 

a) Onshore production – petroleum and natural gas produced 

b) Offshore production – petroleum and natural gas produced 

c) Onshore natural gas processing – natural gas processed by the facility less extraction 

loss (extraction loss means the reduction in quantity of natural gas due to the extraction 

of natural gas liquids from the natural gas processed) 

d) Onshore transmission – all natural gas leaving the natural processing plant is assumed to 

go through transmission, i.e. the same volume as onshore natural gas processing in item 

(c) above 

e) Underground Storage – withdrawals of natural gas from underground storage reservoirs 

f) LNG Storage – withdrawals of liquefied natural gas (LNG) from storage 
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g) LNG imports – total volume of natural gas imported as LNG (Note that exports of LNG 

with an increased fuel price do not impact U.S. domestic markets. Also, there is only 

one export LNG facility in the U.S. in Alaska; hence the impact from this one facility on 

the overall economy is insignificant.) 

h) LDCs – assumes 60 percent of all end-use natural gas consumption in the country goes 

through LDCs.1 

EPA views this as a robust and conservative approach for several reasons. First, this approach 

accounts for throughput from reporting facilities only; petroleum and natural gas operators will 

not report from all of their facilities (e.g., some facilities will be below the reporting threshold). 

Therefore, the reporting cost will be apportioned to reporting throughput, which is less than the 

total fuel (oil and natural gas) going into commerce. Second, parent companies may pass on 

some of the costs to the owners instead of end-use consumers . Third, EPA used the first-year 

cost, which is notably higher than subsequent-year costs. In sum, the analysis provides an 

upper bound estimate of the impact. 

The analysis was conducted in three steps, as follows: 

A) Estimate the fuel throughput for reporters for each segment; 

B) Determine the first year cost impact per volume of throughput for each segment; and 

C) Calculate the ratio of reporting throughput to cost and compare to the average market fuel 

price from 2003 to 2008. 

A. Estimate the Fuel Throughput by Reporters for each Segment 

First, EPA estimated the fuel throughput for reporters in each segment using its threshold 

analysis (see Appendix C of the Technical Support Document). For some segments, the fuel 

throughput is not available. In such cases, EPA estimated the fuel throughput for reporters 

using analogous data such as fuel capacity. While it is possible to estimate emissions based on 

the capacity of individual facilities (which EPA had to do in the threshold analysis for all 

segments except onshore production), that approach is not a fair measure of actual throughput 

because often the capacity of facilities far exceeds the throughput. Therefore, for segments 

other than onshore production, EPA estimated the actual throughput of reporting facilities 

(“reporting throughput”) using Equation 1: 

national capacity

reporting capacity national throughput reporting throughput* = Equation 1 

 

1 EIA. (2008) Distribution of Natural Gas: The Final Step in the Transmission Process. U.S. Energy Information 

Administration. 
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The national throughput for each of the segments in the petroleum and natural gas industry was 

determined using the following data sources: 

1) Onshore production – EPA determined the total petroleum and natural gas production 

from reporting onshore production entities using the HPDI, LLC database2 which 

provides real oil and natural gas production rates reported to state governments. 

2) Offshore production – EPA determined the total petroleum and natural gas production 

from reporting offshore production entities using the total offshore production from the 

Energy Information Administration (EIA).3 

3) Onshore processing – EPA determined the total volume of natural gas processed from 

reporting natural gas processing entities using the natural gas processed reported to the 

EIA.4 

4) Onshore transmission – EPA estimated the total transmission throughput for reporting 

natural gas transmission entities using the natural gas processed reported to the EIA. 

EPA assumed the national throughput for the transmission sector was equivalent to the 

natural gas throughput less extraction losses. 

5) Underground storage – EPA determined the total underground storage throughput for 

reporting underground storage entities using data from the Energy Information 

Administration (EIA)5. 

6) LNG Storage – EPA estimated the total liquefied natural gas withdrawn for LNG 

storage reporters using data from the EIA.6 

7) LNG Import – EPA estimated the total liquefied natural gas imported for LNG terminal 

reporters using data from the EIA.7 

8) LDCs – EPA determined the total natural gas deliveries for natural gas distribution 

reporters using EIA data8. 

Table 1 below shows the national capacity and reporting capacity from the Subpart W threshold 

analysis, and the national throughput and reporting throughput as determined from this analysis 

for each segment. 

 

2 HPDI Database 

3 EIA. (2010). Crude Oil Production. U.S. Energy Information Administration. Independent Statistics and 

Analysis. <www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbbl_m.htm> 

4 EIA. (2010). Natural Gas Plant Processing. U.S. Energy Information Administration. Independent Statistics and 

Analysis. <www.eia.gov/dnav/ng/ng_prod_pp_dcu_nus_a.htm> 

5 EIA. (2010) U.S. Underground Natural Gas Storage by Storage Type. U.S. Energy Information Administration. 

Independent Statistics and Analysis. <www.eia.gov/dnav/ng/ng_stor_type_s1_a.htm> 

6 EIA. (2010) Liquefied Natural Gas Additions to and Withdrawals from Storage. U.S. Energy Information 

Administration. Independent Statistics and Analysis. <www.eia.gov/dnav/ng/ng_stor_lng_dcu_nus_a.htm>. 

7 EIA. (2010) U.S. Natural Gas Imports by Country. U.S. Energy Information Administration. Independent 

Statistics and Analysis. <www.eia.gov/dnav/ng/ng_move_impc_s1_a.htm>. 

8 EIA. (2010) Natural Gas Consumption by End Use.. U.S. Energy Information Administration. Independent 

Statistics and Analysis. <www.eia.gov/dnav/ng/ng_cons_sum_dcu_nus_a.htm>. 
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Table 1. Estimated Volume of Fuel Throughput for Reporters for each Segment in Petroleum and Natural 

Gas Systems (Subpart W), in billion cubic feet per year (Bcf/year) 

Industry Segment 

National 

Capacity 

(Bcf/year) 

Reporting 

 Capacity 

(Bcf/year) 

National 

Throughput 

(Bcf/year) 

Reporting 

Throughput 

(Bcf/year) 

Onshore Production (Natural Gas) 17,540 16,125 17,540 16,125 

Onshore Production (Petroleum) 2,864,0061 2,277,8451

 2,864,0061 2,277,8451

Offshore Production (Natural Gas) 11,2612 5,1192 3,584 1,629

Offshore Production (Petroleum) 11,2612 5,1192 1,701,4661

 773,4891

Processing 16,675 16,249 13,776 13,424

Transmission 516,338 492,315 13,776 13,135

Underground Storage 8,330 5,795 2,493 1,734

LNG Storage 79 73 34 31

LNG Terminals 3,918 1,947 584 290

Distribution 1,2003 1,0263 11,975 10,238

1 Units for petroleum production in U.S. Barrels per day. 

2 These are national emissions in Mcf/year. Offshore Production reporting throughput was determined using the national emissions and the 

reported emissions, in Mcf/year, because natural gas capacity data was not available. 3 These are thousand miles of main pipelines in natural gas distribution. Distribution reporting throughput was determined using miles of 

main pipeline, in thousands of miles, because distribution natural gas capacity data was not available. 

B. Determine the first year cost impact per volume of throughput for each segment 

EPA divided the first year costs estimated in the Economic Impact Analysis (EPA-HQ-OAR2009-0923) for each segment by the reporting throughput for each segment. This analysis is 

different for onshore and offshore production because both natural gas and petroleum are 

produced and will share the reporting cost. 

Cost Impact Analysis for Onshore and Offshore Production 

Since onshore and offshore production reporters produce both petroleum and natural gas, EPA 

converted the reporter production of petroleum and natural gas volumes to energy content in 

British thermal units (Btu). EPA then divided the total first year cost for production by the total 

energy content produced. The resulting average cost burden per Btu was then multiplied by the 

higher heating value9 of produced natural gas and crude oil to give the cost per thousand cubic 

feet of natural gas and barrels of oil respectively. Equation 2 below shows how this was done 

for natural gas and, Equation 3 , below, shows how this was done for petroleum. 

Ng Ng Pt Pt

Total

Ng Ng G HHV G HHV

B B HHV

× + × = × Equation 2 

 

9 2009 API Compendium Table 3-7, pg. 3-20 
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Ng Ng Pt Pt

Total

Pt Pt G HHV G HHV

B B HHV

× + × = × Equation 3 

where, 

BNg = Burden to report natural gas from the onshore/ offshore production segment per 

thousand cubic feet of natural gas ($2006/Mcf) 

BPt = Burden to report petroleum from the onshore/ offshore production segment per 

barrel of petroleum ($2006/bbl) 

GNg = Total estimated natural gas reporting throughput in the onshore/ offshore 

production segment in thousand cubic feet of natural gas per year (Mcf) 

HHVNg = Higher heating value of natural gas (Btu/Mcf) 

GPt = Total estimated petroleum reporting throughput in the onshore/ offshore 

production segment in U.S. barrels (bbl) 

HHVPt = Higher heating value of petroleum (Btu/bbl) 

BTotal = Total burden for the onshore/ offshore production segment ($2006) per burden 

analysis to the rule 

Table 2, below, shows the total first year cost (process and combustion emissions) per volume 

of reporting throughput and per MMBtu. 

Table 2. Total First Year Process and Combustion Cost per Fuel Energy Content and per Fuel Volume. 

Sector First Year Cost per MMBtu 

($/MMBtu) 

First Cost per 

Volume 

Onshore Production (Natural Gas) $ 0.00057 0.0007 $/Mcf

Onshore Production (Petroleum) $ 0.00057 0.0033 $/bbl

Offshore Production (Natural Gas) $ 0.00016 0.0002 $/Mcf

Offshore Production (Petroleum) $ 0.00016 0.0009 $/bbl

Processing $ 0.00050 0.0006 $/Mcf

Transmission $ 0.00129 0.0013 $/Mcf

Underground Storage $ 0.00142 0.0015 $/Mcf

LNG Storage $ 0.02122 0.0218 $/Mcf

LNG Terminals $ 0.00024 0.0002 $/Mcf

Local Distribution $ 0.00019 0.0002 $/Mcf

Weighted Natural Gas Impact† $ 0.00070 0.0008 $/Mcf

Weighted Oil Impact $ 0.00224 0.0130 $/bbl

† The total first year process and combustion cost per volume does not include the cost from Onshore Production (Petroleum) or 

Offshore Production (Petroleum). 

C. Compare the resulting metric with the average market fuel price from 2003 to 2008 

The total weighted first year burden for Subpart W per Mcf of natural gas and per barrel of oil 
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throughput for reporters, $0.0008 per Mcf for natural gas and $0.0130/bbl for petroleum, is less 

than 0.1 percent of the average cost of wellhead produced natural gas over the past five years. 

The Energy Information Administration reports the average cost of wellhead produced natural 

gas from 2004 to 2008 as $6.62 per Mcf10 and the average cost of domestic crude oil as $59.08 

per U.S. barrel11. Given that Subpart W’s burden per volume of natural gas and petroleum 

throughput for reporters is an insignificant fraction of national fuel prices, EPA concludes that 

Subpart W’s impact to petroleum and natural gas prices will be negligible. Furthermore, 

summing the individual burdens per volume of natural gas sold for each segment to determine 

the national burden per volume of natural gas sold overestimates the real impact on downstream 

U.S. natural gas prices. In conclusion, Subpart W will have little impact on other industries 

(e.g., farming and manufacturing) and commercial and residential consumers. 

 

10 EIA (2008) Monthly Energy Review. Table 6-7, pg. 199. Retrieved online 27 Aug. 2010 at < 

http://www.eia.doe.gov/aer/pdf/pages/sec6_17.pdf> 

11 EIA (2008) Annual Energy Review. Table 5.18, pg. 169. Retrieved online 08 Oct. 2010 at < 

http://www.eia.gov/emeu/aer/pdf/pages/sec5_45.pdf>