SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 1 Final Staff Report with Appendices for Revised Proposed Amendments to Rule 4402 

## APPENDIX B

RACT Cost Effectiveness Analysis

December 15, 2011SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 2 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 This page intentionally blank.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 3 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 

### RACT COST EFFECTIVENESS ANALYSIS

I. SUMMARY

A reasonably available control technology is a cont rol technology that is considered reasonable for an operator to install or implement. By EPA definition, RACT must be technologically and economically feasible. Whether a control technology is considered RACT can vary between air basins and industries as well as over time. A RACT analysis integrates several factors, including tech nological advancements and costs for equipment, raw material, or labor.

The following discussion summarizes the cost effect iveness analyses performed to address the concerns as identified by EPA. The cos t effectiveness of a control option is the added cost of a control technology or technique per ton of VOC emissions reduced per year. Costs typically included in a cost effec tiveness analysis include capital equipment costs, engineering costs, and labor and m aintenance costs.

II. ANALYSIS OF CLEAN PRODUCED WATER COMPLIANCE OPT IONS

A. Injection of Clean Produced Water

Although District staff have determined, and stakeh olders agree, that it is not feasible to install new reinjection wells in order to dispose o f wastewater through injection; stakeholders represented by the Western States Petr oleum Association (WSPA) submitted data to the District for capital costs fo r disposing the wastewater using injection wells that show this to be not a cost eff ective option. WSPA estimates that the cost effectiveness of VOC reductions achieved by in jection of produced water is $0.370/Bbl, or $1,792,452/ton. The WSPA calculatio ns are explained below.

It is important to note that the ratio of water to each barrel (Bbl) of crude oil produced in the Valley is 10:1. The following cost discussion is based on a per barrel amount. In order to inject the produced water, the water would have to be treated to prevent the plugging of the reservoir. Consequently, operators would incur treating and operating costs plus the capital expenditures for the injecti on well.

Based on information provided to WSPA by a member c ompany, the unit capital costs for treating produced water (annualized over 10 yea rs) is approximately $1.113 per barrel (Bbl) and the operating cost is about $0.417 /Bbl of produced water. WSPA determined the total annualized cost per barrel at $1.53.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 4 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 Table B-1. Estimated Capital Cost for Water Treatin g

Initial Unit Capital Cost $/Bbl Annualized Cost ($)

Annualized Unit Capital Cost 1 Operating Expense 2 Total Annualized

Cost ($/Bbl)

6.858 1.113 0.417 1.53

District staff used the data provided by WSPA to th en determine the annualized cost for treating a range of capacities of facilities, as il lustrated in the table below.

Table B-2. Annualized cost for treatment (WSPA)

Capital Cost for Treating of CPW Capital Recover Cost
Distributed Over 10 Years

Facility Capacity Cost ($/bbl) Annualized Cost ($/year)

ID BWPD BWPY

1 500 182,500 1.53 279,225

2 1,000 365,000 1.53 558,450

3 3,000 1,095,000 1.53 1,675,350

4 5,000 1,825,000 1.53 2,792,250

5 10,000 3,650,000 1.53 5,584,500

The following table illustrates the capital expendi tures for construction of water injection wells for disposal of produced water. This informa tion was provided to the District from the Western States Petroleum Association (WSPA). T he table below is based off of reported numbers to WSPA but has been modified to d isplay different ranges of oil production. The table discusses the facility capac ity in barrels of water produced per day (BWPD) and barrels of water produced per year ( BWPY).

1 The annualized cost (10% at 10 years) is calculate d by multiplying the total (initial) annual cost by the District’s capital recovery factor (0.1623).

2 Members reported treating costs ranging from $0.41 7/Bbl to $0.59/Bbl. The cost estimates use the

more conservative estimate.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 5 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 Table B-3. Capital Expenditure Required for Constru ction of Water Injection Wells

Needed for Disposal of Produced Water (WSPA)

Capital Cost for Injection Wells Capital Recover Cost
Distributed Over 10 Years

Facility Capacity Initial Capital Cost ($) Annualized Cost (10 years at 10%) ID BWPD BWPY

1 500 182,500 415,721 67,472

2 1,000 365,000 831,443 134,943

3 3,000 1,095,000 2,494,328 404,829

4 5,000 1,825,000 4,157,214 674,716

5 10,000 3,650,000 8,314,428 1,349,432

WSPA calculated the emissions reduced using the Wat er9 software and determined the emissions reduced are 2.8 lb VOC/day or 1,022 lb VO C/year (0.51 tons/year).

Table B-4. WSPA Input to the Water9 Model for Deter mining VOC Emissions from

Produced Water Ponds

Assumptions Units Value
1 Determine the average daily average flow rate to ponds Gal/day 55,272
2 Percolation rate for clay and sandy soil (0.8 gal /day *Ft2) Gpd/Ft2 0.8
3 Determine minimum surface area for water percolat ion Ft2 69,090
4 Assume ponds have an average depth of 6 ft Ft2 6
5 Calculate the volume of the pond Gallons 3,100,96 6
6 Calculate the fluid retention time (days) Days 5 6
7 Use Water9 default water temperature (77F or 25C) C 25
8 Use Water9 default assumptions for other paramete rs Given ---
9 Model as a quiescent impoundment, well mixed flow Given ---

10 Determine baseline emissions by modeling using 35 m g/l g/s at 35 mg/l 1.47E-02

Staff converted g/s from line 10 in the the table a bove to tons per year using the following equation:

0.0147g/s ÷ 453.6 g/lb x 86400 sec/day x 365 day/ye ar ÷ 2,000 lb/ton = 0.51 tpy

Staff then determined the cost effectiveness ($/ton reduced) by applying the annuzliaed costs mentioned above with the VOC reduced, as illu strated in the following table:SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 6 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 Table B-5. Cost Effectiveness of VOC Reductions Ach ieved by Injection of Produced

Water

VOC

Reductions (Ton/Year) Annualized Costs Cost Effectiveness
for VOC Reductions ($/ton) Treating and operating Injection Total

0.51 279,225 67,472 346,697 679,978

B. Treatment of Water to Achieve 5 mg/l

District Analysis For purposes of this cost effectiveness analysis fo r clean produced water, District staff used a software program (created by EPA) called Wat er9. During the public workshop stakeholders were asked if they agreed with the Dis trict’s choice to use this software or if they had recommendations for another software pr ogram would provide more
accurate results. Stakeholders confirmed that Wate r9 is the software they currently use when making similar types of calculations and that it is the most accurate software to use to determine VOC emissions from wastewater proc essing operations, such as

sumps.

District staff calculated the difference in emissio ns from 35 to 5 mg of VOC per liter of

water in three different scenarios. The variable f or each scenario is the retention time, meaning the amount of time the water stays in the p ond. District staff determined that the worst case scenario, one month retention time, resulted in 232 pounds of emissions reduced per year per pond.

District staff used the following assumptions for t hese calculations:

• Lagoon – 25 m W x 25 m L x 3 m deep

• Approximately 6700 ft 2 surface area (this is conservative estimate as ave rage known surface area of clean produced water ponds is 5,913 ft 2 )

• Approximately 12,000 bbl capacity

• Surrogate: decane (C 10 H 22 , default value for oil)

• VOC emissions at 35 mg/l of VOC content = 1.69 E -5 g/s

• VOC emissions at 5 mg/l of VOC content = 2.42 E -6 g/sSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 7 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 Table B-6. VOC Emissions from Wastewater Ponds and VOC Emissions Potentially

Reduced

Retention Time Oil Concentration VOC Emissions VOC Emissions

Reduced
(months) (mg/l) (lb/yr) (lb/yr)

1 35 242 232 1 5 10

3 35 81 78 3 5 3

6 35 40 38 6 5 2

Preliminary calculations have determined that there are 74 active ponds in the Valley. Using the table above to create a worst-case-scenar io calculation staff have determined the total emissions reduced would be 0.02 tons per day of VOC.

Stakeholders provided information that a Wemco (oil water separator unit using forced air or gas) is the commonly used technology in the Valley to decrease the oil content of the CPW. However, a Wemco will generally only get the VOC content down to about 20 mg/l. To get the VOC levels below 20 mg/l operator s will need to install additional polishing equipment; one example would be the use o f nut shell filters, used to remove residual insoluble hydrocarbons from the produced w ater. The additional systems would also require additional support equipment inc luded a feed tank, pumps, and backwashing equipment to clean the filters; also, f acilities would have additional

maintenance and labor costs to clean the filter med ia of the accumulated oil on a routine bases. Stakeholders estimate that capital cost of the new equipment would be $28,000,000 with additional annual costs of $2,000, 000 due to the additional filtration systems. The cost effectiveness analysis indicates that this is not a cost effective option. District staff used the following analysis to make this determination:

1. The capital cost of the new equipment is convert ed to annualized costs using the following calculation:

A = P x CRF where, A = Annualized total capital investment cost P = present value of capital CRF = capital recovery factor = i(i+1) n / (i+1) n -1
i = interest rate = 10% n = useful lifetime of equipment in years = 10 CRF = 0.1(0.1 +1) 10 / (1+0.1) 10 - 1 = 0.1627

A = ($28M) x 0.1627
= 4,555,600SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 8 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 2. The Adjusted annualized cost accounts for the co sts discussed above:

$4,555,600 + 2,000,000 = $6,555,600/yr **≈** $6.5M

3. Staff estimated the tons per year using the wor st case scenario of 232 pounds per year as discussed above.

232 lb/year / 2,000 lb/ton = 0.12 tons/year

4. Staff determined cost effectiveness ($/ton redu ced) using the annualized cost

discussed above:

$6.5M/year ÷ 0.12 tons/year = $54,166,666 $/ton

WSPA Analysis WSPA performed an emission reduction analysis indep endent of the District using the
Water9 software. To evaluate the VOC emission redu ctions expected to be achieved by the changes in effluent concentration, two model ing runs were made, one at each

concentration. The difference between the two mode ling runs was used to calculate the VOC reductions achieved by the proposed change.

The general procedure used for conducting the model ing; the input to the Water9 model and the results of the modeling runs are summarized below. Since roughly 99% of sumps are used by small operators, the process info rmation used in the Water9 modeling was derived from operating data for small operators. WSPA reviewed the 2010 well production data reported by oilfield oper ators to the California Division of Oil, Gas and Geothermal Resources (DOGGR), showed that o nly 40 small operators had surplus water, with a daily average volume of 1316 BPD, likely to be routed to sumps. For this analysis, it is assumed that this produced water would be routed to surface percolation ponds for final disposal.

Table B-7. Small Operator Produced Water Likely to be Routed to a Sump Type of Small

Producer Type of

Production Total for All

Producers Bbl/Day Average Per Producer Bbl/Day

Small Producer Light Oil 4,178 696
Heavy Oil 2,489 415

Total 6,667 1,111

Very Small Producer Light Oil 523 12
Heavy Oil 8,295 193

Total 8,818 205

WSPA calculated the total surface area of ponds use d for disposal of the produced water by assuming a percolation rate of 0.8 gallons /ft 2 . The percolation rate was obtained from the Kern County “Standards and Rules and Regulations for Land Development” for soil type (5): Soils containing cl ay with a small amount of sand orSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 9 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 gravel.

The holding capacity of the pond was subsequently c alculated from the surface area using an average depth of six feet. The residence time used in the Water9 modeling was then determined by dividing the sump capacity b y the daily throughput rate. The input parameters used in the Water9 modeling and th e VOC emissions predicted for disposal of produced water are summarized in the ta ble below.

Table B-8. WSPA Input to the Water9 Model for Deter mining VOC Emissions from

Produced Water Ponds

Assumptions Units Value
1 Determine the average daily average flow rate to ponds Gal/day 55,272
2 Percolation rate for clay and sandy soil (0.8 gal /day *Ft2) Gpd/Ft2 0.8
3 Determine minimum surface area for water percolat ion Ft2 69,090
4 Assume ponds have an average depth of 6 ft Ft2 6
5 Calculate the volume of the pond Gallons 3,100,96 6
6 Calculate the fluid retention time (days) Days 5 6
7 Use Water9 default water temperature (77F or 25C) C 25
8 Use Water9 default assumptions for other paramete rs Given ---
9 Model as a quiescent impoundment, well mixed flow Given ---

10 Determine baseline emissions by modeling using 35 m g/l g/s at 35 mg/l 1.47E-02

11 Determine controlled emissions by modeling using 5 mg/l g/s at 5 mg/l 6.08E-04

12 Determine change in VOC emissions to (g/s) **∆** g/s 1.41E-02

13 Determine total daily emission reductions (Lb/Day) Lb VOC/Day 2.69

District staff used the table above to calculate th e cost effectiveness of treating clean produced water to reduce the VOC content from 35 mg /l to 5 mg/l.

1. Staff estimated the tons per year using the prov ided 2.69 pound per day

information from the table above.

2.69 lb/day x 365 days/year = 982 lbs/day **≈** 1,000 lbs (or 0.5 tons/year)

2. Staff determined cost effectiveness ($/ton reduc ed) using the average reported

costs discussed above:

$4 million /year ÷ 0.5 tons/year = $8 million/ ton

As illustrated by both the cost effectiveness analy sis presented by District staff and the one performed by WSPA, the treatment of clean produ ced water from 35 mg/l to 5 mg.l is not a cost effective option, and therefore goes beyond RACT. As such, District staff proposes to not amend this section of the rule.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 10 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 Worst Case Scenario Based on conversations with EPA staff, District sta ff performed a third cost effectiveness analysis to evaluate a worst case sce nario cost effectiveness analysis. Emissions from a clean produced water pond will nev er emit as many emissions as a third stage heavy oil sump, but for purposes of per forming this worst case scenario calculation, staff assumed the emissions from a cle an produced water pond are equivalent to that of a third stage heavy crude oil production sump.

The calculations are presented below:

Staff made the following assumptions:

• The emission factor for a clean produced water pon d is equivalent to third stage heavy oil sumps.

• All VOCs would evaporate from the pond and none wo uld remain in the pond, percolate, or undergo biodegradation.

• A pond is 69,000 ft 2

• Annualized costs would be equivalent to the lower costs of the two methodologies presented above (District costs versu s WSPA costs) at $4 million/year

1. Staff calculated the tons of VOC from a po nd using the assumptions above.

0.0051 lb/ft 2 x 69,000 ft 2 sump ÷ 2,000 lb/ton = 0.18 tons VOC (day)

2. Staff calculated the tons per year of VOC.

0.18 tons VOC/day x 365 days/year = 66 tons per yea r

3. Assuming all VOC’s evaporate from the pond into the air. 5 mg from 35 mg would produce the following reductions:

(5 mg/l ÷ 35 mg/l) – 100% = 86% reduction

4. Staff determined the amount of VOCs reduce d by

66 tpy x 0.86 = 56.8 tons VOC reduced

5. Staff applied determined the cost effectiv eness ($/ton reduced) using the assumptions above.

$4 million/year ÷ 56.8 tpy = $70,423

Even conducting a worst case analysis assuming a cl ean produced water pond was emitting as much as a third stage sump, it is not c ost effective to lower the clean produced water threshold from 35 mg/l to 5 mg/l and therefore beyond RACT.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 11 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 III. COMPLIANCE WITH SECTION 5.0 REQUIREMENTS

District Rule 4402 Section 5.0 (Requirements) provi des operators with two options to comply with rule requirements; the operator can eit her install one of three control devices, or replace the sump with a tank. The thre e control devices must also comply with other requirements specified in the rule. The three control devices available to operators as a means of compliance are as follows:

1. A flexible floating cover 2. A rigid floating cover equipped with a closure d evice between the sump wall and the cover edge which maintains the gap between the wall and cover at every point around the perimeter at no more than one inch

3. A fixed-roof cover

Staff performed a cost effectiveness analysis for o perators to install and maintain and to remain compliant with rule requirements for each of these three sump control devices. It is important to note that in determining the cos t effectiveness for operators to comply with Section 5.0 of Rule 4402, costs used for these analyses are for a 1,000 ft 2 surface area sump (the exemption limit for small producers) and are annualized 1986 dollars from the ARB TSD document on sump control measures. Staff contacted stakeholders and requested additional cost information for sump covers but no facility in the Valley has ever installed a cover on a sump. As previousl y discussed, historically when an operator must install a cover on a sump they respon d by replacing the sump with a tank. Therefore, stakeholders do not have any cost inform ation to provide the District for costs of sump covers. Stakeholders informed Distri ct staff that they had asked vendors and were unsuccessful in getting cost data for sump covers from them. District staff did

additional research to obtain this cost information , including requesting it from EPA, and because no facilities use sump covers, District sta ff were equally unsuccessful in obtaining said data; as such, District staff have d etermined that the cost information provided in the ARB TSD is the only cost data avail able, and therefore it is the appropriate cost information for these analyses. S taff additionally determined that flexible floating covers are not reasonably availab le control options because no operator, manufacturer, or distributer uses, create s, or distributes these covers. Flexible floating covers are not available to opera tors for use.

As previously discussed, the cost effectiveness of a control measure is the dollars per

ton of emissions reduced. To create a worst-case s cenario, resulting in conservative calculations, District staff determined the emissio ns from second and third stage sumps with a surface area of 1000 sq. ft. containing heav y crude oil. Calculations do not include light crude oil because the applicability o f the Section 4.1.1 exemption is limited to small producers of heavy oil, these calculations are illustrated below.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 12 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 VOC Emission Calculations from Heavy Oil Sumps were calculated using the following equations:

2 nd stage: 1,000 ft 2 x 0.0412 lb/ft 2 -day = 41.2 lb VOC/day = 7.52 tons VOC/year

3 rd stage: 1,000 ft 2 x 0.0051 lb/ft 2 -day = 5.1 lb VOC/day = 0.93 tons VOC/year

A. Compliance with Section 5.1.1 (flexible floating cover)

A flexible floating cover is a cover that floats di rectly on the liquid surface. The purpose of a flexible floating cover is to eliminate evapor ation by reducing the exposed liquid surface area. Flexible floating covers are general ly made of polymer materials that can resist weathering, high temperatures, and ultraviol et radiation. The ARB TSD cites flexible floating covers as having 98% control effi ciency. For purposes of this analysis, staff will assume the 98% control efficiency is acc urate.

Prior to installation of a flexible floating cover the site must be prepared for that

installation.

• Provide a symmetrical impoundment perimeter with u niform sides slope

• Create a trench around the impoundment perimeter t o anchor the flexible floating

cover

• Modify pipes and other structures protruding above the liquid surface so that they are located below the liquid surface, and install o n them shields made of steel or polymer to protect the flexible floating cover from damage by the protrusions when the sump liquid level is lowered.

Flexible floating covers are installed and anchored and they are equipped with floats which prevent it from sinking if it is ruptured, an d weights to increase stability. A hatch and an access platform located above the oil skimmi ng mechanism can be installed if necessary to permit inspection, maintenance, and ad justment of the skimming

mechanism.

For smaller sumps (<1000 sq. ft. surface area), a s implified installation is available because there is no need to dig a trench to anchor the membrane; instead the membrane can be wrapped around two sand filled tube s and one tube can be anchored directly to the ground for stabilization purposes.

The ARB TSD estimated the total capital costs for f lexible floating covers, rigid floating covers, and fixed dome roofs. All the cost estimat es for covers include the following:

• The sump cover and its installation,

• Site preparation necessary for the installation of the cover,

• Excavation, concrete, and pouring as necessary,

• Miscellaneous costs including pipe modification, h atch assembly, walkway, and seals, andSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 13 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 • Administrative costs and taxes, which account for approximately ten percent of

the total cost.

The ARB TSD lists $7,370/year, 98% control efficien cy, and a 5 year life span. Adjusting from the annualized cost at 1986 dollars to 2011 dollars (multiplying by 2.75% inflation/yr):

ARB makes the statement in the TSD that flexible fl oating covers pose a safety hazard for sumps where methane is produced or where dissol ved gases can enter the sump with the feed stream. The flexible floating cover would not allow the escape of these gases and could create a situation that would resul t in explosions. The ARB TSD further explains that the combustible gases would t hat might otherwise accumulate beneath the cover would need to be removed and disp osed of. The method of disposal of collected gas would be to send it to a flare. T he cost effectiveness analysis must

account for these additional costs.

Additional costs for a vapor compressor skid to mit igate vapors collected under the flexible cover and a flare to dispose of the vapors are as follows:

500 Mscfd Vapor Recovery Unit including suction scr ubber, 2 compressors, discharge cooler, and discharge scrubber has a total capital cost of $277,000.

The capital cost of the vapor skid is converted to annualized costs using the following

calculation:

A = P x CRF where, A = Annualized total capital investment cost P = present value of capital CRF = capital recovery factor = i(i+1) n / (i+1) n -1
i = interest rate = 10% n = useful lifetime of equipment in years = 10 CRF = 0.1(0.1 +1) 10 / (1+0.1) 10 - 1 = 0.1627

A = ($277,000) x 0.1627
= 45,068

The annual cost to install and operate a flare for the incineration of captured gas is $79,195 in 2008 dollars. Adjusting from the annual ized cost at 2008 dollars to 2011 dollars (multiplying by 2.75% inflation/yr):SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 14 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 The Adjusted annualized cost accounts for the costs discussed above:

$12,437+ 45,068 + $85,729 = $143,234/yr

The ARB TSD costs were combined with the above ment ioned costs to perform the cost effectiveness analysis as presented in the table be low.

Table B-9. Cost Effectiveness for 1000 sq. ft. Heav y Oil Sump Equipped with a

Flexible Floating Sump Cover Sump VOC

Emissions (tpy) Control

Efficiency VOC

Controlled (tpy) Adjusted

Annualized
Cost Cost per ton

of VOC

controlled

2 nd Stage: 7.52 98% 7.37 $143,234 $19,435

3 rd Stage: 0.93 98% 0.91 $143,234 $157,400

B. Compliance with Section 5.1.2 (rigid floating co ver with a one-inch gap)

Rigid floating covers are made with metal, or polym eric compounds reinforced with carbon, fiberglass, or other materials. The instal lation of a rigid floating cover requires the following site preparation before it can be ins talled:

• Excavation of the sump to create a level bottom an d vertical sides

• Lining of the walls of the sump with reinforced co ncrete 1⁄2 foot thick

• Construction of inlet and outlet pipes through the concrete walls, and

• Installation of five concrete blocks each about th ree feet high at the bottom of the sump to provide support to the rigid floating cover at low fluid levels.

Rigid floating covers work to reduce evaporation by resting on the liquid surface much like flexible floating covers do. This poses the s ame issues with collection of combustible gases under the cover and requires the collection and disposal of such gases for safety reasons. Unlike flexible floating covers, rigid floating covers would not completely cover the sump liquid surface. Exposed areas would exist along the entire perimeter of the cover between the cover and the su mp wall. The ARB TSD cites control efficiency for rigid floating covers at 90% . For purposes of this analysis, District staff will assume the 90% control efficiency is acc urate.

Sumps in the Valley are generally unlined dirt exca vations. In order to comply with the requirement of having cement reinforced concrete wa lls for the sumps, operators would have the additional costs of emptying existing sump s and either storing or disposing of the collected liquid prior to installing the new su mps. As discussed in Section III of this final staff report, sumps are not only used for sep aration of water and oil but also for disposal of liquids through percolation. If the su mps were lined with cement, then the operator would have the additional costs of disposi ng of the water after the oil has been separated from it, as discussed earlier in this fin al staff report.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 15 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 The ARB TSD lists $17,200/year, 90% control efficie ncy, and a 5 year life span. Adjusting from the annualized cost at 1986 dollars to 2011 dollars (multiplying by 2.75% inflation/yr):

Again, this cost data would be combined with the ad ditional capital costs for installing a vapor recovery and destruction device to each sump for safety purposes. Using the same capital cost data discussed previously in comb ination with the added cost of emptying the sump and storing or disposing of the l iquid within it during the construction of the new sump would result in the cost effectiven ess analysis as presented in the

table below.

Additional costs for a vapor compressor skit to mit igate vapors collected under the flexible cover and a flare to dispose of the vapors are as follows:

500 million standard cubic feet per day (Mscfd) Vap or Recovery Unit including suction scrubber, 2 compressors, discharge cooler, and disc harge scrubber has a total capital cost of $277,000.

The capital cost of the vapor skid is converted to annualized costs using the following

calculation:

A = P x CRF where, A = Annualized total capital investment cost P = present value of capital CRF = capital recovery factor = i(i+1) n / (i+1) n -1
i = interest rate = 10% n = useful lifetime of equipment in years = 10 CRF = 0.1(0.1 +1) 10 / (1+0.1) 10 - 1 = 0.1627

A = ($277,000) x 0.1627
= 45,068

The annual cost to install and operate a flare for the incineration of captured gas is $79,195 in 2008 dollars. Adjusting from the annual ized cost at 2008 dollars to 2011 dollars (multiplying by 2.75% inflation/yr):

The Adjusted annualized cost accounts for the costs discussed above:

$29,025 + 45,068 + $85,729 = $159,822/yrSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 16 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 Table B-10. Cost Effectiveness for Heavy Oil Sump Equipped with a Rigid Floating

Sump Cover Sump VOC

Emissions (tpy) Control

Efficiency VOC

Controlled (tpy) Adjusted

Annualized
Cost Cost per ton of

VOC controlled

2 nd Stage: 7.52 90% 6.77 $159,822 $23,067

3 rd Stage: 0.93 90% 0.84 $159,822 $190,264

C. Compliance with Section 5.1.3 (fixed roof cover)

Fixed roof covers are constructed of polymers, alum inum, or steel. They are either flat or dome shaped and completely enclose the contained liquid, but are not in contact with the liquid surface. Fixed covers come in two basic shapes, flat and dome shaped. The Both types of fixed roof covers require a cement fo oting to be constructed along the top of the sump perimeter in order to permit permanent attachment and sealing of the roof to the sump perimeter. Additionally, pressure vacu um (PV) valves would be required on the cover to eliminate possible extremes in pressur e. Flat fixed covers are not feasible for sumps exceeding 20 feet due to required structu ral support; therefore when discussing fixed roof covers throughout this final staff report, District staff are referring specifically to dome covers.

A typical dome cover is made of triangular aluminum sheets that are bolted to a triangular framework of aluminum I-beams, which are attached to a concrete foundation along the impoundment perimeter by expansion anchor s. Neoprene seals are placed

between the I-beams and the aluminum sheets with si licon caulking applied at each node and gusset. ARB determined that the only sour ces of emissions from a fixed roof cover would be fugitive emissions from the PV valve and from other points of potential leakage. The control efficiency for fixed roof cov ers for sumps is 90%.

Staff contacted numerous manufacturers and vendors and were unable any that

manufacture or distribute fixed roof covers for sum ps. Stakeholders groups also stated they asked for this cost information from group mem bers and from vendors and because these are not used in the Valley for sumps there is no cost information

available.

The ARB TSD lists $5,720/year, 90% control efficien cy, and a 20 year life span. Adjusting from the annualized cost at 1986 dollars to 2011 dollars (multiplying by 2.75% inflation/yr):

Again, this cost data would be combined with the ad ditional capital costs for installing a vapor recovery and destruction device to each sump for safety purposes. Using the same capital cost data discussed previously in comb ination with the added cost ofSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 17 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 emptying the sump and storing or disposing of the l iquid within it during the construction of the new sump would result in the cost effectiven ess analysis as presented in the

table below.

Additional costs for a vapor compressor skit to mit igate vapors collected under the flexible cover and a flare to dispose of the vapors are as follows:

500 Mscfd Vapor Recovery Unit including suction scr ubber, 2 compressors, discharge cooler, and discharge scrubber has a total capital cost of $277,000.

To convert the vapor skid capital cost and add in a dditional flare costs staff used the following calculation:

A = P x CRF where, A = Annualized total capital investment cost P = present value of capital CRF = capital recovery factor = i(i+1) n / (i+1) n -1
i = interest rate = 10% n = useful lifetime of equipment in years = 10 CRF = 0.1(0.1 +1) 10 / (1+0.1) 10 - 1 = 0.1627

A = ($277,000) x 0.1627
= 45,068

The annual cost to install and operate a flare for the incineration of captured gas is $79,195 in 2008 dollars. Adjusting from the annual ized cost at 2008 dollars to 2011 dollars (multiplying by 2.75% inflation/yr):

The Adjusted annualized cost accounts for the costs discussed above:

$9,653 + 45,068 + $85,729 = $140,450/yr

Table B-11. Cost Effectiveness for Heavy Oil Sump E quipped with a Fixed Roof Sump

Cover Sump
VOC

Emissions (tpy) Control

Efficiency VOC

Controlled (tpy) Adjusted

Annualized
Cost Cost per ton of

VOC controlled

2 nd Stage: 7.52 90% 6.77 $140,450 $20,745

3 rd Stage: 0.93 90% 0.84 $140,450 $167,202SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 18 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 D. Cost effectiveness of installing a tank to repla ce a sump

District staff performed a cost effectiveness analy sis of replacing a sump with a tank to determine whether or not is it a cost effective opt ion. As previously discussed, historical evidence shows that every time an operator has been required to cover a sump they respond by replacing the sump with a tank. Convers ations with stakeholders and venders have confirmed this assessment and industry representatives have stated that operators will continue to respond in this manner i n the future. ARB further supports this assessment in the TSD by stating “We believe t hat a fixed-roof tank operated at a constant liquid level is the logical choice for sum p replacement.”(TSD, 1988, p51)

If an operator installs a tank to replace a sump, t hat operation will no longer be subject to the requirements of District Rule 4402; instead, the operation will be subject to District Rule 4623 (Storage of Organic Liquids). T he exemptions in Section 4.1.1 and 4.1.3 for small and very small producers are limite d to the production of heavy crude oil. Heavy crude oil in the Valley has an average true v apor pressure (TVP) of less than 0.1 psia, but theTVP can range from as low as 0.03 psia to as high as 0.3 psia. As such, tanks used to replace second and third stage sumps would be exempt from District Rule 4623 pursuant to Section 4.4 of that rule. Meaning that no PV valve or APC device would be required for the tank and operators would have the option of having an open roof tank. District staff assumes operators will c hoose to have open roof tanks rather
than install PV valves or APC devices because it is the least expensive option available for tanks. However, for completeness, District sta ff performed the following three cost effectiveness analyses: 1) for replacing a sump wit h an open roof tank, 2) for replacing a sump with a closed roof tank with a PV vent, and 3) for replacing a sump with a closed roof tank with vapor controls.

1. District Analysis of Replacement Tanks District staff determined the following costs using a combination of data from the District permit database and information provided by stakeho lders, manufacturers, and distributers. The costs associated with installing a tank to replace a sump include the following:

i) Cost to install the tank (tank, delivery, cement pad to set it on) (capital cost) ii) Cost of any additional piping to and/or from ta nk (capital cost) iii) Clean up and backfilling of existing sumps (an nual) iv) Ongoing maintenance of the tank (annual) v) Tank site preparation (one time cost) vi) Cleaning of tank bottoms (annual) vii) Disposal of wastewater (annual) viii)Disposal of waste (annual)SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 19 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 The costs specific to installing a fixed roof and v apor controls include the costs mentioned above in addition to following:

i) Fixed roof cover ii) Vapor collection device (including maintenance and labor) iii) Vapor control device(including maintenance and labor)

District staff performed a Tank cost effectiveness at the 1,000 ft 2 sump size is calculated

as follows:

Cost Analysis for Tanks Equipped with a PV Vent Rep lacing a Sump:

Assumptions:

• Assume 2 replacement tanks per sump (as sumps are used for the continuous separation of oil, water, and sediment; to avoid an y interruption in oil production one

tank would remain in service while the second tank is taken offline for maintenance and cleaning)

• Using average sump size of known surface area = 1, 000 ft 2

• Assume the reduction in VOC emissions by a sump wi th a tank ranges from 80% to 90%. (The 1988 TSD the California Air Resources Bo ard assumed that tanks would achieve a 90% reduction in VOC; however, industry b elieves the control efficiency ranges from 75% to 85%.)

• Assume 2 sump replacement tank cleanings per year

• Labor required for daily gauging and inspection of the tanks (1 hr/day)

• Labor required to clean tanks annually (72 man hou rs per year x 2 tanks)

• Labor rate of $65/hr

Capital cost for an API 650 5,000 bbl welded tank = $344,000

Operating and labor cost for cleaning the tanks are calculated as:

(1 hr/day x 365 days/year) + (72 hrs/tank x 2 tanks /year) = 509 hrs/year

509 hrs/year x $65/hr = $33,085/year

From EPA’s Alternative Control Techniques Document: Volatile O rganic Liquid Storage in Floating and Fixed Roof Tanks , January 1994: for a 4,762 bbl tank (smaller than that proposed) degassing and cleaning generates 3,000 ga llons of hazardous waste (1,000 gallons of rinseate and 2,000 gallons of sludge), a nd hazardous waste costs $5/gallon to dispose of. For this size tank it would cost (3 ,000 x $5) = $15,000/year in 1994 dollars per cleaning, with two tank cleanings per y ear.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 20 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 Adjusting from the annualized cost at 1994 dollars to 2011 dollars (multiplying by 2.75% inflation/yr):

The following formula was used to determine annuali zed costs: A = P x CRF where, A = Annualized total capital investment cost P = present value of capital CRF = capital recovery factor = i(i+1) n / (i+1) n -1
i = interest rate = 10% n = useful lifetime of equipment in years = 10

CRF = 0.1(0.1 +1) 10 / (1+0.1) 10 - 1 = 0.1627; so,

A = ($344,000 + $344,000) x 0.1627 + $33,085 + $44, 025 = $189,048/yr

VOC Emissions from Heavy Oil Sumps were determined as follows:

2 nd stage: 1,000 ft 2 x 0.0412 lb/ft 2 -day = 41.2 lb VOC/day = 7.52 tons VOC/year

3 rd stage: 1,000 ft 2 x 0.0051 lb/ ft 2 -day = 5.1 lb VOC/day = 0.93 tons VOC/year

Table B-12. Cost Effectiveness for Heavy Oil Sump R eplacement with Tank Equipped

with PV Vent (District)

tons-VOC/yr from sump Control

Efficiency tons-VOC

Controlled Adjusted

Annualized Cost Cost per ton of

VOC controlled

2 nd Stage: 7.52 80% 6.02 $189,048 $31,403

7.52 90% 6.77 $189,048 $27,924

3 rd Stage: 0.93 80% 0.74 $189,048 $255,470

0.93 90% 0.84 $189,048 $255,057

Based on the analysis above, the cost effectiveness of replacing a 2 nd stage sump with a tank ranges from $28,000/year to $31,000/year, wh ile the cost for a 3 rd stage sump replacement is over $255,000/year. Therefore, the costs are beyond reasonable and
not RACT.

Cost Analysis for Tanks Equipped with Vapor Control Replacing a Sump:

Assumptions: (Same as above and including the follo wing)

• Assume tanks equipped with vapor control exhibit 9 5% control (5% accounts for miscellaneous fugitive losses and destruction effic iency of any device)

• Labor required for inspection and maintenance of t he vapor control skid (1 hr/day)

• Labor rate of $65/hrSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 21 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 Total capital cost of a 500 Mscfd Vapor Recovery Un it including suction scrubber, 2 compressors, discharge cooler, and discharge scrubb er = $277,000.

Annual labor and maintenance cost for the vapor rec overy skid:

(1 hr/day * 365 days/year) * ($65/hr) = $23,725/yea r

The annual cost to install and operate a flare for the incineration of captured gas is $79,195 in 2008 dollars.

Adjusting from the annualized cost at 2008 dollars to 2011 dollars (multiplying by 2.75% inflation/yr):

A = ($344,000 + $344,000 + $277,000) x 0.1627 + $33 ,085 + $44,025 + $23,725 + $85,729 = $343,570/yr

Table B-13. Cost Effectiveness for Heavy Oil Sump Replacement Tank Equipped with

Vapor Control (District)

tons-VOC/yr from sump Control

Efficiency tons-VOC

Controlled Adjusted

Annualized Cost Cost per ton of

VOC controlled

2 nd Stage: 7.52 95% 7.14 $343,570 $48,119

3 rd Stage: 0.93 95% 0.88 $343,570 $390,420

Based on the analysis above, the cost effectiveness of replacing a 2 nd stage sump with a tank vented to a vapor recovery and control syste m is $48,119/year, while the cost for

a 3 rd stage sump replacement is over $390,000/year. The refore, the costs are beyond
reasonable and not RACT.

2. WSPA Analysis of Replacement Tanks
WSPA also performed a cost effectiveness analysis i ndependent of the District as discussed below. WSPA used a different approach to determining costs and in determining what types of costs would impact the re placement of the sump with a tank

with various controls. District staff included thi s analysis to illustrate that after analyses were conducted by WSPA the replacement of sumps wit h tanks is not a cost effective option for operators in the Valley.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 22 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 To obtain cost estimates in terms of 2011 dollars, the 1986 costs provided by ARB in the TSD were multiplied by the ratio of the 2010 Pr oducer Price Index (PPI) relative to the 1986 PPI. Since tanks consist primarily of ste el, the PPI for “Fabricated Plate work” was used for escalating the 1986 costs. The PPI fo r fabricated Plate Work” was obtained from the Bureau of Labor Statistics (BLS).

Because sumps are used for the continuous separatio n of oil, water, and sediment at least two tanks will be required to replace a singl e sump. One tank would remain in

service while the second tank is taken out of servi ce for maintenance and cleaning to

remove accumulated sediment. To account for the se cond “standby” tank, the cost estimated by the ARB equation was doubled. The equ ation used for estimating the capital costs of replacing heavy oil production sum ps with tanks are summarized below.

Table B-14. Capital Cost Estimate for Tanks Replaci ng Heavy Oil Sump 3 (WSPA)
Capital cost Equation Average Area (S) Ft 2 Cost

Escalation

Factor Cost for Two Tanks

Cost ($) = 45.7(S)+0.12*(s) 1.5 +52,350 Total Cost 2010 ($) Annualized

Costs ($)
Secondary 2,010.94 1.8924 586,916 95,256
Tertiary 2,413.97 1.8924 669,534 108,665

Operating Costs for Tanks

The Operating costs associated with the tank replac ements are summarized below. The annual operating cost estimate includes:

• Operation and Maintenance (estimated to be 1.5% of the total capital cost);

• Cost for demulisfier/corrosion 4 inhibitors required for treating produced water;

• Cost of labor required for daily gauging and inspe ction of the tanks (1Hr/day);

• Cost of labor required to clean tanks annually (72 man hours per year x 2 tanks).

Table B-15. Annual Operating Cost for Tanks Replaci ng a Heavy Oil Sump 5 (WSPA)

Sump Type O&M

($/Year) Treating Cost Labor Costs Total
Cost ($/Year) $/Bbl Bbl/Year $/Year Hr/Year $/Hr $/Year

Secondary 5,423 **≈** 0.05 85,745 4,287 437 65 28,405 32,692
Tertiary 6,756 **≈** 0.05 136,145 6,807 437 65 28,408 35,212

3 Annualized costs are calculated using a capital re covery factor of 0.1623 (10 years at 10%).

4 Additional treating cost will be incurred due to t he shorter residence time of the produced water in tanks (compared to sumps) and cost for corrosion inhibito rs. WSPA conservatively used $0.05 per barrel for the incremental treating costs. Some members repor ted higher chemical treating costs.

5 Produced water volumes are distributed to sumps ba sed on the surface area of the sump type.
Produced water column were obtained from the Califo rnia DOGGR 2010 well production database.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 23 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 Small operators do not have significant amounts of gas production. Consequently, field gas gathering systems for transport of gas to inci neration devices are unavailable. If vapor recovery systems were installed on tanks, the n many operators would also have to construct new pipeline segments to transport vap ors to the nearest produced gas collection system (which could be miles away).

The other alternative would be the installation of an onsite VOC destruction device (i.e. flare). However, the vapors recovered from the tan ks would have a low heating value, to sustain combustion supplemental fuel would need to be provided. As discussed above, in most cases delivery of fuel gas for tank blanketing or use as supplemental fuel in a VOC destruction device would require the insta llation of new pipelines.

Given the issues discussed above, and based on disc ussions with engineers knowledgeable in design of vapor recovery systems, depending on the distance to nearby pipelines, WSPA believes that it could cost $350,000 to $500,000 (or more) to install the piping and equipment required for a tan k VRS and a VOC destruction device.

For the purpose of conducting the cost effectivenes s analysis for replacing sumps with tanks equipped with a VRS, WSPA assumed an initial capital cost fo $350,000 (or an annualized cost of $56,805).

Table B-16. Capital Costs Incurred for Replacing a Heavy Oil Sump with Tanks and

Vapor Recovery (WSPA)

Sump Type Initial

Capital Costs ($) Annualized Costs

(10 years at 10%) Total Annualized Cost ($/Year) Total

Annualized
Cost ($/Year) Tanks VRS Tanks VRS
Secondary 586,914 350,000 95,256 56,805 152,061
Tertiary 669,534 350,000 108,665 56,805 165,470

The operating cost associated with a tank replaceme nt and the installation of a vapor recovery system includes the operating costs for ta nks (discussed previously) plus the additional operating cost for the VRS. The increme ntal, annual operating cost for the VRS includes the following:

• Operation and maintenance (estimated to be 1.5% of the VRS capital cost);

• Cost of labor required for daily inspection and op eration of VRS (1 HR/Day);

• Annual cost of electricity and fuel required for e quipment (not included).

The incremental operating costs for the VRS are ass umed to be independent of the type of crude oil production and the type of production sump (secondary, tertiary). The incremental, annual operating costs for the operati on of the VRS are summarized

below.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix B: RACT Cost Effectiveness Analysis December 15, 2011

B - 24 Final Staff Report with Appendices for Revised Proposed Amendments t o Rule 4402 Table B-17. Incremental, Annual Operating Cost for a Tank with VRS Replacing a

Sump (WSPA)

O&M ($/Year) Fuel and Electricity 6 Labor Costs Total
Cost ($/Year) Fuel and Electricity Electricity Hr/Year $/Hr $/Year

5,250 --- --- 365 65 23,725 28,975

District staff combined the cost information provid ed above by WSPA and calculated the cost effectiveness using emissions information prov ided above from the District emission inventory. Please refer to Appendix A for the discussion regarding the WSPA emission inventory calculations and estimations.

Table B-18. Cost Effectiveness of Replacing a Heav y Oil Sump with a Tank

Sump Type Emissions

Reduced (80%)
VOC (Ton/Year) Annualized

Captial Cost ($/Year) Annual

Operating Cost ($/Year) Total

Annual
Cost $/Year Control Cost

Effectiveness ($/Ton)

Secondary 6.02 95,256 32,692 127,948 21,254
Tertiary 0.75 108,665 35,212 143,877 191,836

Table B-19. Cost Effectiveness of Replacing a Heavy Oil Sump with a Tank with a

Vapor Recovery System

Sump Type Emissions

Reduced (99%) VOC (Ton/Year) Annualized Cost

($/Year) Annual

Opeating Cost ($/Year) Total

Annual
Cost $/Year Control Cost

Effectiveness ($/Ton) Tanks VRS Tanks VRS

Secondary 7.45 95,256 56,805 32,692 23,725 208,478 27,984
Tertiary 0.92 108,665 56,805 35,212 23,725 224,407 243,921

6 Incremental cost of fuel and electricity are not i ncluded because they are not available at the level of detail for this cost analysis.