## Meeting Summary

T opic : Meeting with IPAA a bout the unconventional oil and gas effluent

g uideline rulemaking

Meeting D ate : 20 February 201 3

Participants : Lisa Biddle, Jan Matuszko

, Ahmar Siddiqui, Karen Milam ( EPA/EAD )

Brent Ruminski (ERG)

Lee Fuller , Matt Kellogg ( IPAA )

On 20 February 201 3

, the U.S. Environmental Protection Agency (EPA ) held a meeting

with the Independent Petroleum Association of America (IPAA) 1 to discuss EPA’s effluent

g uideline (ELG) rulemaking for the u nconventional oil and g as extraction industry. Lee Fuller, Vice President of Government Relations, and Matt Kellogg, Manager of Government Relations, represented the IPAA. Discussion topics included:

 Small entity activity in the oil and gas extraction industry ;

 Small entity activity in unconventional oil and gas extraction ; and

 Data needs and available sources for ELG development

.

Attachment 1 lists the meeting participants

.

Small Entity Activity in the Oi l and Gas Extraction Industry

IPAA discussed background information on small entities and their operations in the oil and gas extraction industry. The Small Business Association (SBA) defines a small entity under

the North American Industry Classification System ( NAICS ) code 2111 1 1 Oil and Gas

Extraction as one with less than 500 employees

. 2 NAICS code 211 1 11 represents entities that are primarily engaged in operating and/or developing oil and gas wells. Table 1 shows a breakdown

of the number of firms , establishments, and employees by company size for oil and gas operators

with NAICS code 21111

.

Table 1 . 20 10 U.S. Oil and Gas Extraction Entity Census Data

Company Size (Employees) Number of Firms a Number of

Establishments b Number of Employees

0

- 4 4,409 4,420 7,255

5

- 9 921 938 5,968

1 More information on the IPAA is available online at: http://www.ipaa.org/about

- ipaa/management

team/#Government

2 The definition of a small business in the oil and gas exploration industry is available online at for NAICS 211111 (Oil and Gas Extraction) : http://www.sba.gov/sites/default/files/files/Size_Standards_Table(1).pdfMeeting Summary Page 2 of 5

Table 1 . 20 10 U.S. Oil and Gas Extraction Entity Census Data

Company Size (Employees) Number of Firms a Number of

Establishments b Number of Employees

10

- 19 547 560 7,220

20

- 99 363 438 13,157

100

- 499 94 253 12,729

500 or more 81 912 53,173

Total 6,415 7,521 99,502

a

— A firm is an business or entity consisting of a one domestic establishment or more.

b

— An establishment is an business located at a single location. Source: U.S. Depar t ment of Commerce

. 3

Lee explained that small operators in the oil and gas indu stry are most likely to operate

conventional wells or wells categorized as a stripper or marginal well s

. Conventional wells are typically shallower and do not require hydraulic fracturing to produce economically. Small

enti ties are more likely to afford the capital costs for these types of wells. Marginal and stripper wells may be conventional or unconventional wells that are either old and no longer produce at high rates or were unsuccessfully completed and never produced a t high rates. According to
IPPA, marginal and stripper wells are defined as:

 Marginal well

— O ne that produces less than 15 barrels of oil or 90 thousand cubic feet (MCF) of natural gas per day

 Stripper well

— One that produces less than 10 barrels of oil or 60 MCF of natural gas per day

In many cases, these are wells that large entities drilled and completed , and then sold to smaller entities when the well’s production dropped below the marginal level. S mall entities tend to have lower overhead and daily ope rating costs, and therefore can continue to profit while operating a marginal or stripper well.

To provide context of the role small entities play in the oil and gas industry IPAA provided some key facts on the oil and gas industry , which are also available on IPAA’s

website. 4 Table 2 provides a breakdown of the total number of oil and gas wells in the United

States in 2010. In 2010 , t here were o ver 1,000,000 active oil and gas wells in the United States

. Approximately 73 percent of all these wells were classified as marginal wells and accounted for 15 percent of oil and gas production

. IPAA suggested small entities operate the majority of these types of wells.

Table 2 . 20 10 U.S. Marginal and Stripper Well s

Oil Wells Gas Wells Marginal Other All Marginal Other All

Number of active w ells 370,315 149,254 519,569 376,086 117,448 493,534

3 Available online at: http://www.census.gov/econ/susb/

. 4 More information from IPPA on the oil and gas industry is available online at: http://www.ipaa.org/economics

analysis

- international/industry

- statistics/Meeting Summary Page 3 of 5

Table 2 . 20 10 U.S. Marginal and Stripper Well s

Oil Wells Gas Wells Marginal Other All Marginal Other All

Percent of total active w ells (%) 7 1 29 100 76 24 100

Total p roduction (oil

— MBO ) (gas

— BCF) 36 3 1,87 1 2,233 3,085 18,24 7 21,332

Percent of total p roduction (%) 16 84 100 14 86 100

Average p roduction per day per

well a
(oil

— BPD per well ) (gas

— MC FD per well ) 3 34 12 22 426 118

a

— Calculated based on reported data above.

Source: IPPA’s website. 4

MBO

— Million barrels of oil.

BCF

— Billion cubic feet.

BPD

— Barrels per day.

MCF

— T housand cubic feet per day.

Small Entity Activity in the Unconventional Oil and Gas Extraction Industry

As previously mentioned, IPAA suggested that most small entities in the oil and gas extraction industry are likely to only operate conventional wells o r wells that are classified as a marginal or stripper wells

. B oth EPA and IPA A are aware that some small entities operate wells

in unconventional formations such as coalbed methane (CBM), tight sands, and shale but it is unclear how many . IPAA went on to f urther explain these small entities are most likely to operate CBM wells because these wells cost less to drill and complete than tight gas and shale gas wells

. T hrough previous communication with the industry, EPA is aware that small er entities

do drill and complete shale gas wells.

IPAA suggested that entities operating CBM wells, including small entities, have a larger variety of wastewater management practices including: underground injection, surface water discharge, land application, and evaporation depending on location but practices did not differentiate between small and large entities . This is because of the relatively low levels of dissolved solids in CBM wastewater compared to shale gas wastewater. IPAA went on to explain

that entiti es operating shale gas wells are mostly likely to manage their wastewater only through reuse in fracturing or underground injection due to high levels of dissolved solids

. However,

s mall entities operating shale gas wells are less likely to reuse wastewate r in fracturing because the time between completions increases storage costs

.

Data Needs for Effluent Guideline Development

The data needs for the unconventional oil and gas ELG rulemaking were discussed at the conclusion of the meeting. EPA is seeking da ta on the following topics on a basin and formation

basis:Meeting Summary Page 4 of 5

 Industry profile ( shale gas entity size distribution);

 Well drilling and completion cost s ;

 Hydraulic fracturin g fluid and wastewater volumes ;

 Wastewater quality; and

 Wastewater (i.e., flowback and produced water) man agement practices and costs.Attachment 1

Table A

- 1. List of Meeting Participants

Name Affiliation Phone Email

Lee Fuller IPAA 202

- 857

- 4722 lfuller@ipaa.org

Matt Kellogg IPAA 202

- 857

- 4722 MKellogg@ipaa.org

Lisa Biddle US EPA 202

- 566

- 0350 Biddle.Lisa@epamail.epa.gov January Mat uszko US EPA 202

- 566

- 1035 Matuszko

. January @epa.gov

Karen Milam US EPA 202

- 564

- 9752 Milam. Karen @epa.gov Ahmar Siddiqui US EPA 202

- 566

- 1044 Siddiqui.Ahmar@epa.gov

Brent Ruminski ERG 703

- 633

- 1701 Brent.R uminski@erg.com