Interstate Pipelines **|** Exploration & Production 

# EL PASO / EPA MRR SUBPART W MEETING – MAY 5, 2010 MEETING ATTENDEES  EPA
 Ragan Tate, Office of General Counsel
 Roger Fernandez, Climate Change Division
 Akachi Imegwu, Climate Change Division  ICF Consulting
 Sandy Seastream  Reddal One, LLC
 Touche Howard  El Paso
 Fiji George
 Craig Bock
 Naomi CortezInterstate Pipelines **|** Exploration & Production 

# Proposed EPA MRR Subpart W El Paso Corporation May 5, 2010

# Agenda Introduction Proposed Subpart W Summary of Recommendations and Conclusions

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# Premier Pipeline Franchise

4  19% of total U.S. interstate pipeline mileage  26 Bcf/d capacity (15% of total U.S.)  19 Bcf/d throughput (30% of gas delivered to U.S. consumers)  1 st “GREEN ” pipeline El Paso Natural Gas Mojave Pipeline Colorado Interstate Gas Wyoming Interstate Cheyenne Plains Pipeline Tennessee Gas Pipeline

Southern Natural Gas Elba Island LNG Florida Gas Transmission (50%) Ruby Pipeline

# El Paso Exploration & Production Domestic Central  Primarily shale, coal seam, and tight-gas programs  Low- risk repeatable plays  1,211 Bcfe of proved reserves 1  100% drilling success rate2  325 MMcfe/d of production 3

1 Proved reserves as of year-end 2008; includes proportionate share of FSOG 2 Drilling success rate is YTD Q3 2009 3 Production estimate for full -year 2009; Total company & Central include proportionate share of FSOG Total Company
 Well -situated in key U.S. basins
 Focused on unconventional and low- risk conventional programs
 More than 2.5 Tcfe proved reserves 1

 ~85% natural gas
 ~755 MMcfe/d of production 3 Western  Primarily oil, coal seam and tight-gas programs  Low- risk repeatable plays  717 Bcfe of proved reserves 1  100% drilling success rate2  150 MMcfe/d of production 3 Gulf Coast  Low- to medium - risk exploration  Large acreage position  553 Bcfe of proved reserves 1  80% drilling success rate 2  265 MMcfe/d of production 3 5

# Proposed EPA MRR Subpart W

# El Paso’s Fugitive Emissions Experience Implemented Research Grade Leak Measurement Programs Dating Back to 1999 Used Many Leak Detection Tools Including IR Camera Conducted Leak Measurements With Hi - Flow Sampler, Vent Bags, and Meters
 Includes Both Third Party and In - House Measurements 

### Provides El Paso A Unique Understanding of What Will Be Required Under the MRR

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# Preliminary Assessment of El Paso Facilities Subject to Proposed Subpart W

8 1 Preliminary estimate based on definition in proposed rule which includes liquids handling 2Gulf LNG Terminal under construction 3All estimates based on methodologies used by El Paso in reporting to California Climate Action Registry Count % Scope 1 Emissions 3 Pipeline Business Unit Transmission Facilities 197 126 Underground Storage Facilities 11 9 Processing Facilities 1 8 6 LNG Import Terminals 2 2 2 E&P Business Unit Basins 11 9 Onshore Fields 62 59 Processing Facilities 5 5 Gathering Pipeline Miles 2,400 2,400 95 98 Facility Type Current Facility Profile Facilities Subject to Sub W

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# EPA Subpart W Re-proposal Positive changes from 2009 proposal

 Reduction in source categories for T&S
 Monitoring requirements less burdensome for T&S
 Certain improvements in methodologies
 Format of the rule well laid out 9

# Summary of Key Issues MRR compliance date unreasonable

 Multiple recommendations 

## Onshore production definition is cumbersome  Reporting at a “field level” with a 25,000 MT/yr threshold 

## MRR provisions can be simplified and improved Compliance costs are underestimated

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# MRR Compliance Date

# Compliance Date Concerns Expected finalization of Subpart W by late 3Q 2010 Unlike EPA Gas Star program, this is a “compliance grade” mandatory regulatory program  § 98.4(e)(1) "I certify under penalty of law that I have personally examined, and am familiar with, the statements and information submitted in this document and all its attachments . Based on my inquiry of those individuals with primary responsibility for obtaining the information, I certify that the statements and information are to the best of my knowledge and belief true, accurate, and complete . I am aware that there are significant penalties for submitting false statements and information or omitting required statements and information, including the possibility of fine or imprisonment . ’’  Reports must assure compliance provisions are carried out to provide “reasonable assurance of compliance” 

### El Paso believes that MRR provisions with a start date of 1/1/11 is too aggressive and will undermine quality of data reported
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# Compliance Date Concerns (2) Monitoring is complex  Focus should be on adequate data for reasonable cost Clarification on handling of pre-tested components  Leaks detected are assumed throughout the year (original proposal) vs. repairing leaks prior to quantifying emissions (re- proposal) (75 FR 18623 (04/12/2010)) Available expertise is currently very limited
 Good results require trained personnel These limitations impact both safety and quality of data

# Compliance Date Concerns (3) Insufficient implementation time  Applicability analysis based on industry factors & all sources  Monitoring plan  Inventory of components  Internal procedures for resourcing → $ and FTEs/contractors

 Current resources tied up with Sub C & NN compliance 

###  Transportation and scheduling issues

 Especially in natural gas pipelines 

###  To achieve reasonable assurance of compliance

 Significant processes, policies, infrastructure and resources must be set up 

###  Safety Concerns 14

# Recommendations for Subpart W Compliance Initial applicability analysis should be based on consistent screening methods/tools  Industry estimation methodologies  Exemption for facilities <10K combustion emissions 

## Option 1: Phased - in Approach  2012 reporting using combination of best available data and proposed MRR methods  Reporting using final EPA methods for all facilities by 2015 

## Option 2: Limiting Approach  2012 reporting for facilities currently subject to MRR under Sub C & NN, followed by reporting of additional Sub W facilities by 2015 15

# Onshore Production “Facility” Definition

# E&P Onshore “facility” Basin level reporting essentially encompasses reporting 100% of emissions

 Table W-2 in Preamble shows 4% of "facilities" account for 81% of the emissions

 Clarification requested 

###  Coverage in terms of emissions and no. of facilities vs. cost  Reasonable assurance of compliance  Practicably enforceable? 

## Recommend defining a reporting area for onshore at production field level

 Comparable coverage with other sectors under Part 98  Consistent with state regulatory structure 17

# Basin vs. Field Reporting Level – Cost vs. Coverage

18 0 10 20 30 40 50 60 70

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Basin > 25K Field >25k Field >10k# ofFields% of Emissions

% of Emissions # of Regulated Fields $6 MM

$3 MM $5 MM

# MRR Monitoring Provisions

# Compressor Unit Vents MRR accounts for compressor mode – El Paso agrees highly accurate However, measurement in all 3 modes for each unit is extremely difficult to accomplish

 Requires additional gas blowdown for each unit  Very time consuming – must wait for modes to be switched  Forcing engine to operate outside of normal conditions
 May result in non - representative data  Results in operational issues and could impact customer demand  Might require multiple visits to each site
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# Compressor Unit Vents (2) Different modes can be characterized without additional blow down events and disruption of operations Measure unit vents in “as found” mode and develop emission factor for each mode; calculate emissions using operating hours

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# Mandatory Use of IR Camera IR camera has many benefits Some drawbacks

 Expensive  Not intrinsically safe  Current expertise is limited 

## Many other effective methods available, both for vents and standard components Does EPA feel the video from camera is critical documentation of leak survey?
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# Standard Component Survey Requires component counts

 Time consuming  Unnecessary for leaker emission factor calculations  Any unnecessary tasks distract from collecting accurate data 

## Allow for second option  Use broad emission factor for standard facility components based on number of units (no leak survey or component count required)

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# Storage Tanks Thousands of tanks for E&P  Insufficient no. of labs to handle volume  Insufficient no. of contractors to complete sampling  Compliance costs not taken into account – up to $1K per pressurized liquid sample 

##  El Paso is currently evaluating variability of liquid samples for recommendation of alternative monitoring methods 

## For Pipelines, direct measurements require substantial time and effort 24

# Compliance Cost Analysis

## Projected Cost Impacts vs. EPA Estimates Compliance costs are underestimated El Paso will provide written comments

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# Recommendations and Conclusions

# Recommendations and Conclusions 1. 

## Subpart W compliance to be based on phased in or limiting reporting approaches for highest quality data 2. 

## Consider proposed changes to Onshore Production “facility” definition and reporting level 3. 

## Provide flexibility in monitoring methods 4. 

## Re-evaluate cost implications

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# Appendix

# Recommendation for Subpart W Compliance Option 1: Phased - in Approach  Combination of best available data and proposed MRR methods 2012 Report:  Base emissions for 75% of facilities on industry recognized methodologies (i.e., API Compendium, INGAA Guidelines, etc.)  Remaining 25% of facilities on proposed M/R/R methods 2013 Report:  50% industry methodologies/50% based on proposed M/R/R 2014 Report:  25% industry methodologies/75% proposed M/R/R 2015 Report:  100% proposed M/R/R

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# Recommendation for Subpart W Compliance (2) Option 2: Limiting Approach  2012 reporting for facilities currently subject to MRR under Sub C & NN  In 2013, emissions will be reported for 33% of additional facilities determined to be subject to MRR due to Subpart W emissions  In 2014, emissions will be reported for 66% of additional facilities  In 2015, emissions reported for 100% of facilities

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# Recommendation for Standard Component Survey Option 2 – Broad Standard Component Emission Factor

 Leakage from Standard Components Small Compared to Vent Leakage (< 20%)  Uncertainty of a Broad Facility Standard Component Factor Has a Small Effect on the Accuracy of Total Reported Emissions  MRR Currently Proposes Leaker Emission Factors Which Have Their Own Uncertainty  Broad Standard Component Emission Factor Previously Developed by EPA Past Study Data2
2 EPA, 7th Annual Natural Gas Star Implementation Workshop 32

# Thank You For Your Time