June 1 6 , 2014

To: U.S. EPA Office of Air Quality Planning and Standards Submitted via electronic mail: oilandgas.whitepapers@epa.gov

Re: AGA Comments on EPA Methane White Paper: Oil and Natural Gas Sector Leaks

___________________________________________________________________________

The American Gas Association (AGA), founded in 1918, represents more than 200 local energy companies that deliver clean natural gas throug hout the United States. There are more than 71 million residential, commercial and industrial natural gas customers in the U.S., of which 94 percent

— over 68 million customers

— receive their gas from AGA members. AGA is an advocate for natural gas utilit y companies and their customers and provides a broad range of programs and services for member natural gas pipelines, marketers, gatherers, international natural gas companies and industry associates. Today, natural gas meets more than one

- fourth of the Un ited States' energy needs.

AGA appreciates the opportunity to comment on the Environmental Protection Agency’s (EPA) technical white paper on “Oil and Natural Gas Sector Leaks” (Leaks Paper). This is one of five technical white papers that EPA released on April 15, 2014 for external peer review relating to “potentially significant sources of methane and volatile organic compounds (VOCs)” from the oil and natural gas sector

– focusing on operations ups tream of natural gas distribution systems. The five white papers evaluate emissions from: (1) production well completions; (2) production well liquids unloading; (3) compressors; (4) pneumatic devices; and (5) equipment leaks “upstream of natural gas dist ribution systems.”
Since AGA represents natural gas utility companies that operate local distribution systems, the white papers have limited direct applicability to our members’ core business. However, we are concerned that some of the broad assumption s made in the white papers, particularly in the Leaks Paper, are not valid with respect to distribution and could indirectly impact distribution operations

. We file these brief comments to clarify the record and avoid later misunderstandings.

Natural Gas Emissions from Distribution Systems Are Low and Declining

At the outset, some context may be helpful. Natural gas emissions from the distribution

sector are already low and declining as a result of our members’ focus on modernizing distribution systems to ensure safety and reliability. Only 0.24 percent of annual produced natural gas was emitted from distribution systems nationwide in 2012, based on estimates in EPA’s most recent Inventory of Greenhouse Gas Emissions and Sinks (1990

- 2012) published April 15, 2014 (2014 Inventory). This compares with an estimated 1.3 percent across the entire value chain, from production to customer.AGA Comments on EPA Methane Leaks White Paper June 1 6 , 2014 Page 2 of 6

We believe the actual percentage is even lower than 0.24 percent , and that the 2014 Inventory is over

- estimating emissions from distribution because the Inventory relies on emission factors developed from field measurements made 20 years ago by the Gas Research Institute (GRI) in a methane study for EPA. This study remains the seminal work on meth ane emissions from the industry. H owever, si nce that time, there have been significant changes in t echnologies, systems and practices due to pipeline safety regu lations , integrity management programs, and voluntary actions our members have taken to reduce emissions through their participation in EPA’s Natural Gas STAR program.

I n 2013, AGA and 13 of our member companies participated in a multi

- city study by Washington State University (WSU) in collaboration with the Environmental Defense Fund (EDF) to
measure methane emissions from natural gas distribution systems across the country. T hese
thirteen LDCs are representative of operations in the different regions of the U.S., operating about 19 percent of the distribution pipeline mileage across the country, 26 percent of the services, and 16 percent of the total natural gas delivered to customers. 1

Th e WSU multi

- city distribution study will provide a larger set of measurements than the
GRI

- EPA study , and the measurements will reflect the lower emissions that result from current equipment and practices as compared to those in place 20 years ago

– prior to the work done through the EPA Natural Gas STAR program and the enhanced integrity management programs called for by recent pipeline safety statutes and regulations. We anticipate the results of the WSU

EDF study will be available in fall 2014

.

Even using the old , inflated GRI emission factor s, EPA’s 2014 Inventory demonstrates that emissions from distribution systems have been steadily declini ng since 1990.

In the past 25 years, natural gas utilities have installed modern polyethylene (PE) plastic distribution mains used for delivering gas at low pressure at a rate of 30,000 miles per year, and cathodically protected steel mains used for high pressure delivery at a rate of 1,500 miles per year, both connecting new customers and upgrading existing pipeline infrastructure. Replacing cast iro n and unprotected steel mains , based on the pipe’s fitness for service, with modern materials has yielded significant emission reductions. Based on EPA’s 2014 Inventory, e missions from natural gas utility distribution systems have dropped 22 percent since 1990, even as the number of customers served has increased by 32 percent. N early 90 percent of the emission declines from distribution systems since 1990 are due to pipeline replacements.

1 Based on DOE EIA data in 2011. 

### 2AGA Comments on EPA Methane Leaks White Paper June 1 6 , 2014 Page 3 of 6

Distribution Utilities Are Accelerating This Declining Trend

We are not resting on our laurels. AGA’s members all have programs for modernizing their systems and implementing integrity management programs , and many have worked with their utility commissions to speed

- up the pace of pipe replacements

.

As regulated utilities, our members must obtain approval from their state utility commissions

to recover the costs of pipe replacement programs. It is important to remember that state utility
commissions are economic regulators. They must balance the need for infrastructure investments with the cost to consumers. It costs roughly $1 million to $ 5 million on average and as much as $ 10
million in highly urban areas to replace a mile of distribution main, depending on its location and other factors. State utility com missions must consider how many miles of pipe can be replaced per year

-

- while ensuring affordable energy bills for customers , reliable service

, and fair returns on equity that will attract capital at reasonable costs. While pipe replacement has a ben eficial impact on emissions, the utility commission must focus on balancing these important economic concerns.

AGA is p leased that 38 states have adopted specific accelerated infrastructure replacement mechanisms to allow natural gas distribution utilities to recover the costs of accelerated replacement on a timely basis. AGA supports the expansion of these programs to include all utilities operatin g in these states, as well as the adoption of similar programs by additional states.

AGA Has Adopted Guidelines for Reducing Natural Gas Emissions

In addition, on May 17, 2014, AGA’s Board of Directors approved AGA’s Voluntary Guidelines for Reducing Natural Gas Emissions

, which describes a list of effective practices that a natural gas distribution company may use in appropriate circumstances to continue the trend of declining natural gas emissions. It provides general guidelines to assist our member companies in developing their own company

- specific procedures. The li sted measures include : (1) modernizing distribution systems by replacing cast iron, unprotected steel or other distribution lines based on the pipeline’s fitness

- for

- service ; (2) replacing high

- bleed pneuma tic valves and pilot regulators; (3) enhancing excavation damage prevention programs ; (4) reducing venting during pipe repair or replacement programs ; and (5) conducting annual directed inspection and maintenance (DI&M) at custody transfer city gate stations and metering and pressure regula ting (M&R) stations.

Many AGA member gas distribution utilities are also long

- time partners of EPA’s Natural Gas STAR program and active participants in that technology transfer program. AGA looks forward to
our continued collaboration with EPA in this 20

- year partnership to identify and share effective practices for methane emission reduction.



### 3AGA Comments on EPA Methane Leaks White Paper June 1 6 , 2014 Page 4 of 6

Distribution Emission Reductions Are Costly, But Integral to Utilities’ Safety Focus

A recent cost study by ICF International for the Environmental Defense Fund found that while
there are cost

- effective and even profitable options for reducing methane emissions in upstream operations based o n the value of recovered methane , this is not true for distribution. See “Economic Analysis of Methane Emission Reduction Opportunities in the U.S. Onshore Oil and Natural Gas Industries” (ICF International, 2014). Considering that replacing distribution pipe costs approximately $1 million to over $ 3 million per mile

, the ICF study concluded that replacing distribution pipe could
not be cost justified purely for the purpose of reducing emissions. 2 However, ICF noted that utilities are nevertheless replacing pipe to modernize their systems and meet pipeline safety goals, and that this is also helping to reduce emissions. The ICF study also evaluated enhanced leak detection and repairs at M&R stations, but the cost of this measure was literally “off the chart” at an estimated $ 19.75 per Mcf

– more than four times the current Henry Hub price for natural gas. 3 ICF did not include this measure when calculating an average cost of one cent per Mcf for all the other measures
evaluated

– which were all applicable to operations upstream of the distribution system.

Leaks Paper Assumes Incorrectly that Leak Repair Is “Almost Always Economical”

In the summary for the Leaks Paper (section 4.0), EPA asserts that “[a]vailable information suggests that once a leak is found it is almost always economical to repair the leak. According to
the studies reviewed, the cost of detecting the leak is generally far larger tha n the cost of fixing the
leak.” 4

This statement is not accurate with respect to leak detection and repair in distribution systems. Standard leak detection is performed regularly as required by federal and state pipeline safety regulations and state utility commission requirements. The equipment used need not be costly and can detect very small leaks

– including those that are not considered hazard ous. Leaks are graded based on safety. Grade 1 leaks are considered hazardous and must be repaired immediately , which is defined as within a few hours . Grade 2 leaks are not hazardous but have t h e potential, over time, to become hazardous . These lea ks can be scheduled for later repair but would typically be repaired within a few weeks. Grade 3 leaks are not considered hazardous and are
monitored

. T hese non

- hazardous leaks are either barely perceptible or located far from occupied buildings, or both. In addition, utility personnel typically repair nearly all above ground grade 2 and even grade 3 leaks on the spot

, even small leaks that are barely detectable

, if it is possible to do so

2 See ICF Cost Study at pa ge 3

- 23

. 3 See ICF Cost Study , Executive Summary, Page 1

- 2.

4 Leaks Paper, at page 55

.


### 4AGA Comments on EPA Methane Leaks White Paper June 1 6 , 2014 Page 5 of 6

with simple hand tools

, e.g. by tightening a fitting with a wrench

. To get a sense of the size of a typical grade 3 leak , consider that in order to pinpoint their location on above ground equipment, a standard procedure is to apply soap solution and wait up to 30 minutes for the methane to slowly produce tiny soap bubble s

.

G iven that distribution utilities already repair grade 1 and 2 leaks as required by pipeline safety regulations, and typically grade 3 leaks if they are on above ground equipment and the repair can be performed with hand tools

, that leaves only grade 3 non

- hazardous leaks on buri ed distribution pipe

.

Below ground repairs can require obtaining permits to disrupt traffic, cutting off gas service

to customers , excavating to gain access to the pipe, removing gas from the line for safety

, which in fact may emit more methane than the original leak, making the repair, and restoring pavement
afterward . Based on a 2011 survey of AGA members, this process can cost $20 to $14,500 per pipe
leak repair . The median cost, based on the 2011 survey, was about $1,140 per leak. The cost for a particular leak repair depend s on the location, labor costs for the time required, the size of the
excavation , and the type of material or pavement that must be excavated and replaced. In light of
these costs and the fact that methane may have to be vented in order to perform the repair, t he question becomes whether it is sensible to devote resources to make multiple small repairs for non

hazardous grade 3 leaks , or to direct those resources to current or accelerated program s to replace pipe based on its fitness for service, at a pace approved by the state utility commission. In any event, given the cost of making repairs to address very low grade, non

- hazardous leaks on buried pip e, it certainly cannot be said that it is “almost always economical to repair” these leaks based on the value of recovered product

.



### 5AGA Comments on EPA Methane Leaks White Paper June 1 6 , 2014 Page 6 of 6

AGA urges EPA to revise the Leaks Paper to make it clear that it is often not economical to repair small, non

- hazardous leaks on distribution systems based on the value of recovered methane
alone , and that by law

, hazardous leaks are already repaired promptly pursuant to pipeline safety regulations . We also urge EPA to note at the outset of the Leaks Paper that emissions from distribution systems are already quite low and declining , and that utilities are taking proactive steps

to modernize their distribution systems and continue the declin ing trend in emissions.

T hank you for the opportunity to comment.

Respectfully Submitted,

Pamela Lacey Senior Managing Counsel, Environment American Gas Association 400 N. Capitol St., NW Washington, DC 20001 202.824.7340 placey@aga.org



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