### 1 TO: Heather Brown and David Hendricks, EC/R Incorporated

FROM: Don Robinson, Eric Stricklin, and Tarang Mehta

DATE: March 25, 2013

RE: Liquids Production Distribution for New Oil and Gas Wells in the U.S.

The purpose of this memorandum is to document the development of crude and condensate production distributions across certain production rate categories for new oil and ga s wells completed in 2009. These distributions will be used to estimate the number of new storage tanks imp acted by the new source perf ormance standards (NSPS) for crude oil and natural gas production, transmission and distribution (40 CFR part 60, subpart OOOO).



## Methodology

ICF used drilling permit data collected by HPDI to develop crude oil and condensate production distributions across specific rate categories for new oil and gas wells in 2009. This was done in the following three steps:

1) Query the HPDI Database for New Wells w ith a “First Date of Production” in 2009

2) Sum the Liquids Production for Twelve Consecutive Months since the “First Date of Production” in 2009

3) Plot the Summed Liquids Production in a Histogram



### HPDI Database

The crude oil and condensate production data used in this analysis was gathered from drilling permit data collected by HPDI. HPDI is a data service comp any that provides data products and d ecision-support applications, which was acquired by Drilling Info, Inc. HPDI collects drilling permit data from state and local governments describing the location, operator, and production characteristics of individual well properties. Henceforth referred to as the “HPDI database,” the aggregated drilling permit data is used in this analysis to plot the distribution of crude oil and condensate production for new wells in 2009.



### 1) Query the HPDI Database for New Wells with a “First Date of Production” in 2009

In order to construct a distribution of the crude oil and condensate production from new oil and gas wells in 2009, ICF first queried the HPDI database for oil and gas wells that were marked with a “first date of production” in 2009. ICF defines gas wells in the HPDI database as wells with an average gas to liquids ratio greater than 12,500 standard cubic feet per barrel over the lifetime of the well and define s oil wells in the HPDI database as wells with an average gas to liquids ratio less than 12,500 standard cubic feet per barrel over the lifetime of the well. This analysis assumes that liquids produced from gas wells is condensate and liqui ds produced from oil wells is crude oil. Finally, not all the drilling permits are marked with a “fir st date of production.” Therefore, fo r this analysis, the number of new oil and gas wells is limited to the number of dril ling records with a “first date of production.”



### 2) Sum the Liquids Production for Twelve Consecutive Months sin ce the “First Date of Production”

in 2009

Second, ICF summed the crude oil volumes for new 2009 oil wells and condensate volumes for new 2009 gas wells over 12 months since the “first date of production.” The crude oil and condensate (i.e., liquids) volumes were summed over 12 consecutive months since the “first date of production” in 2009 to make the comparison of liquids production from one well to another equivalent. For example, if an oil well was completed in March 2009, the well would have been producing in 2009 for 10 months, and if an oil well was completed in November 2009, the well would have been producing in 2009 for 2 months. It would be unfair to compare the production from these two example wells based on their production in 2009 alone. Therefore, this an alysis sums the liquids production for each oil and gas well over 12 consecutive months. For the example oil well completed in March 2009, this assumption

### 2 would entail summing the crude oil production from March 2009 to March 2010, and for the example crude oil well completed in November 2009, it would entail summing the crude oil production from November 2009 to November 2010. Finally, depending on the source of the production records containing the gas and oil production (e.g., state governments) not all the new wells in 2009 had 12 consecutive months of production records. Therefore, the number of new oil and gas wells plotted in this analysis is limited to the number of wells with production records for 12 consecutive months since the “first date of production”.



### 3) Plot the Summed Liquids Production in a Histogram

ICF plotted the number of new oil wells completed in 2009 and the number of new gas wells completed in 2009 on two histograms within defined production rate brackets. ICF also developed two tables showing the number of new oil wells completed in 2009 and new gas wells completed in 2009 by state within each production rate bracket. The production rate brackets in the histograms were deve loped to align with the production rate brackets from the Energy Information Administration (EIA) “Distr ibution of Wells by Production Rate Bracket.” 1 

### The production rate brackets are defined by barrels of oil equivalent per day (BOE/day), which is based on the approximate energy released by burning one barrel of crude oil per day.

In order to develop the histograms and tables, ICF determined the BOE/day for each oil and gas well by converting the natural gas production in thousand cubic feet (Mcf) per oil or gas well to BOE and the condensate production (in barrels) per gas well to BOE. These values were converted to BOE/day using conversions from the 2013 EIA Annual Energy Outlook. For natural gas the 2013 EIA Annual Energy Outlook assumes 5.66 thousand cubic feet per BOE for natural gas and 1.35 barrels per BOE for condensate. 2



## Results

Exhibit 1 and Exhibit 2 show the production distributions for new oil and gas wells completed in 2009 respectively for the entire U.S. Exhibit 3 and Exhibit 4 show the produc tion distributions for new oil and gas wells completed in 2009 respectively by state. Exhibit 1 through Exhibit 4 include 4,672 new oil wells and 13,977 new gas wells respectively, which are new wells marked with a “first da te of production” and with 12 consecutive months of production records. According to HPDI, the total number of new oil wells and gas wells in 2009 was 4,922 and 14,930 respectively. Therefore, the hist ograms represent 94.9% and 93.6% of the national count of new oil wells and new gas wells respectively for 2009 according to HPDI. The EIA estimates the total number of development oil wells and development gas wells drilled in 2009 was 10,585 and 16,882, respectively. 3 

### Therefore, the well counts from this analysis represent 44.1% and 82.8% of the national count of new oil wells and gas wells respectively for 2009 according to the EIA. This calculated representation is due to several factors which may include:

• The wells drilled count reported by the EIA may incl ude wells that are not productive. This analysis estimates the total number of new wells including only wells with 12 months of consecutive production marked with a “first date of production”.

• Production data from the HPDI database is collected by property and not per well. Some states submit well counts for their properties. However, for those states without well counts for individual properties, ICF has assumed one well per property where there is reported oil or gas production.

• The representativeness of the HPDI database is lim ited to the state and local governments which have collected and provided data that meet the requirements of this analysis.

Although a fraction of the total number of oil and gas wells in the U.S. is represented in this analysis, the distribution of wells in each production rate bracket is as sumed to be representative for the U.S. oil and gas well population. The NSPS 40 CFR part 60, subpart OOOO ruling only uses the distribution of wells resulting from this analysis to estimate the number of new tanks impacted by the rule.

1 

### EIA (2010). United States Total 2009: Distribution of Wells by Production Rate Bracket. <www.eia.gov/pub/oil_gas/petrosystem/us_table.html>

2 

### EIA (2012) Annual Energy Outlook. < www.eia.gov/forecasts/ aeo/er/pdf/0383er(2013).pdf>

3 

### EIA (2012). Crude Oil and Natural Gas Exploratory and Development Wells. <www.eia.gov/dnav/ng/ng_enr_wellend_s1_a.htm>

### 3 Exhibit 1. Production Range Distribution for New Oil Wells in 2009

0 30 45 109 110 140 135 137 215 373 374 358 546 340 733 558 325 112 21 6 4 1 0

0 100 200 300 400 500 600 700 800 0 >0-1

1-2 2-4 4-6 6-8 8-10 10-12 12-15 15-20 20-25 25-30 30-40 40-50 50-100 100-200 200-400 400-800 800-1,600 1,600-3,200 3,200-6,400 6,400-12,800 12,800-25,600

Number of New Oil WellsBOE/day

### 4 Exhibit 2. Production Range Distribution for New Gas Wells in 2009

89 464 255 474 560 468 384 298 412 554

493 388 678 546 1969 2780 1979 852 254 50 27 3 0

0 500 1000 1500 2000 2500 3000 0 >0-1

1-2 2-4 4-6 6-8 8-10 10-12 12-15 15-20 20-25 25-30 30-40 40-50 50-100 100-200 200-400 400-800 800-1,600 1,600-3,200 3,200-6,400 6,400-12,800 12,800-25,600

Number of New Gas WellsBOE/day5Exhibit3.ProductionRangeDistributionforNewOilWellsin2009byStateProductionRange Brackets(BOE/day)New Oil Wells in 2009AK AL AR CA CO FL KS LA MI MO MS MT ND NE NM OH OK PA SD TX UT VA WY0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0>0-1 0 0 0 3 4 0 0 0 0 0 0 0 0 0 10 6 2 0 0 4 0 0 11-2 0 0 0 11 2 0 0 1 0 0 0 0 1 0 14 3 1 0 0 10 1 0 12-4 0 1 0 21 13 0 0 0 0 0 0 0 1 0 28 1 8 0 0 34 0 0 24-6 0 0 1 33 17 0 0 3 0 0 0 1 0 0 16 0 5 0 0 27 4 0 36-8 0 0 0 42 22 0 0 6 0 0 1 0 1 0 24 2 6 0 0 32 3 0 18-10 0 0 0 29 21 0 0 2 0 0 0 0 0 0 30 0 9 0 0 32 10 0 210-12 0 0 2 41 20 0 0 4 0 0 0 2 0 0 19 1 11 0 0 27 10 0 012-15 0 1 0 54 40 0 0 6 0 0 1 0 2 0 27 0 18 0 0 56 8 0 215-20 0 0 0 92 116 0 0 5 0 0 0 0 2 0 44 1 21 0 0 59 30 0 320-25 0 0 0 85 143 0 0 8 0 0 1 0 0 0 46 0 16 2 0 50 20 0 325-30 0 1 1 72 146 0 0 5 0 0 0 1 2 0 45 0 11 1 0 47 23 0 330-40 0 0 1 98 213 0 0 6 0 0 0 4 4 0 58 0 25 0 1 101 31 0 440-50 0 0 0 58 94 0 0 11 0 0 1 0 6 0 56 0 21 0 0 76 15 0 250-100 1 2 0 99 58 0 0 19 5 0 4 11 50 0 165 0 40 0 1 226 43 0 9100-200 2 2 0 33 5 0 0 23 11 0 4 6 193 0 73 0 31 0 0 162 10 0 3200-400 7 2 0 2 3 0 0 8 1 0 2 2 167 0 29 0 14 0 0 84 3 0 1400-800 16 0 0 0 0 0 0 2 0 0 0 0 54 0 4 0 4 0 0 31 1 0 0800-1600 10 0 0 0 0 0 0 0 0 0 0 0 2 0 0 0 7 0 0 2 0 0 01600-3200 3 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 2 0 0 03200-6400 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 06400-12800 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 012800-25600 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 06Exhibit4.ProductionRangeDistributionforNewGasWellsin2009byStateProductionRange Brackets(BOE/day)New Gas Wells in 2009AK AL AR CA CO FL KS LA MI MO MS MT ND NE NM OH OK PA SD TX UT VA WY00 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 89>0-10 3 2 2 25 0 25 1 0 0 0 4 1 0 26 20 11 8 0 49 5 9 2731-20 5 5 0 8 0 57 5 0 0 0 5 0 2 13 7 8 7 0 51 2 19 612-40 23 5 2 42 0 86 5 4 1 0 25 0 7 35 3 26 24 0 79 5 49 534-60 18 11 3 113 0 82 5 1 0 0 28 0 3 31 1 22 20 0 74 4 96 486-80 16 9 3 82 0 50 1 3 0 1 36 0 12 34 2 30 25 0 67 3 59 358-100 17 12 5 55 0 34 4 1 0 0 30 0 1 28 0 18 20 0 70 4 61 2410-120 14 10 2 41 0 27 0 1 0 0 14 1 0 25 1 19 16 0 50 7 37 3312-150 12 15 3 66 0 28 8 1 0 1 32 0 1 41 0 20 13 0 70 8 66 2715-200 14 23 5 66 0 25 7 1 0 2 35 1 0 89 2 33 18 1 123 5 59 4520-250 8 11 6 83 0 15 7 2 0 1 14 0 0 65 1 35 23 1 141 7 29 4425-300 4 19 9 76 0 11 4 0 0 0 2 0 0 77 0 26 8 0 93 15 10 3430-400 3 23 12 108 0 17 16 2 0 4 2 0 0 133 0 36 31 0 191 17 13 7040-500 4 21 15 78 0 7 4 1 0 1 5 0 0 93 0 38 14 0 168 25 6 6650-1002 3 122 34 310 0 16 56 9 0 7 3 0 0 166 0 112 44 0 782 118 6 179100-2005 4 250 15 554 0 6 103 0 0 10 1 0 0 39 0 147 64 0 1252 149 6 175200-4002 1 413 3 57 0 4 65 0 0 4 0 0 0 30 0 132 31 0 912 56 1 268400-8005 0 99 3 3 0 2 150 0 0 3 0 0 0 10 0 65 6 0 348 2 0 156800-16003 0 2 0 0 0 0 164 0 0 0 0 0 0 0 0 9 1 0 68 0 0 71600-320011 0 0 0 0 0 0 19 0 0 0 0 0 0 0 0 4 0 0 16 0 0 03200-640020 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6 0 0 16400-128002 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 012800-256000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0