Regulatory Impact Analysis:

Emission Standards for New and Modified 

Sources in the Oil and Natural Gas Sector

Interagency Review Briefing

July 2, 2015
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Overview

► Preliminaries

► Emissions reductions

► Methane

► Volatile Organic Compounds (VOC)

► Hazardous Air Pollutants (HAP)

► Engineering cost analysis

► Benefits analysis

► Climate

► Health and Welfare

► Economic impacts analyses 

► Energy system impacts

► Labor impacts

2
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Scope of Coverage – 2012 NSPS vs. 2015 Proposal

3

Emission Source 2012 NSPS

(VOC)

2015 NSPS Proposal

(GHG/Methane and VOC)

Compressors through gas processing, 

excluding well site compressors

across the source category, excluding 

well site compressors

Pneumatic Controllers well sites through gas 

processing across the source category

Pneumatic Pumps not covered across the source category

Well Completions hydraulically fractured gas wells hydraulically fractured gas wells and 

hydraulically fractured oil wells

Equipment Leaks natural gas processing plants natural gas processing plants, well sites, 

and compressor stations

Liquids Unloading not covered not covered

Notes:

1

”Across the category” means the production, processing and transmission/storage segments.

2 We are not proposing any additional requirements for emission sources addressed under the 2012 NSPS. 
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► Analytical years

► 2020 

• Assumed to represent the first year the full suite of proposed standards is in effect

• Represents a single year of potential impacts

► 2025:

• Illustrates how new sources accumulate over time under the proposed NSPS

► Baseline

► Impacts incremental to 2012 NSPS

► State rules accounted for where possible

► Limited information on voluntary action in baseline

► AEO 2014 is used to estimate future activities

► 2012 dollar year

► Discount rates:

► Costs: estimates based on 3 and 7 percent

► Benefits: climate benefits presented using multiple discount rates

► Numbers in presentation rounded to two or three significant digits

► Three NSPS Options Analyzed in RIA (details on next page)

Preliminaries

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Regulatory Options Analyzed in RIA

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Sources Controls Option 1 Option 2 

(proposed) Option 3

Well Completions

Hydraulically Fractured Development Oil Wells REC or Combustion Combustion REC/ Combustion

REC/ Combustion

Hydraulically Fractured Wildcat and Delineation Oil 

Wells Combustion X X X

Fugitive Emissions

Well Pads Monitoring and 

Maintenance Annual Semiannual Quarterly

Gathering and Boosting Stations Monitoring and 

Maintenance Annual Semiannual Quarterly

Transmission Compressor Stations Monitoring and 

Maintenance Annual Semiannual Quarterly

Pneumatic Pumps

Well Pads Route to control X X X

Gathering and Boosting Stations Route to control X X X

Transmission and Storage Compressor Stations Route to control X X X

Pneumatic Controllers

Natural Gas Transmission and Storage Stations Emissions limit X X X

Reciprocating Compressors

Natural Gas Transmission and Storage Stations Annual Monitoring and 

Maintenance X X X

Centrifugal Compressors

Natural Gas Transmission and Storage Stations Route to control X X X
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Sources

Incrementally 

Affected Sources

2020 2025*

Hydraulically Fractured and 

Re-fractured Oil Well Completions 15,000 15,000

Fugitive Emissions 22,000 140,000

Pneumatic Pumps 3,000 18,000

Compressors 68 410

Pneumatic Controllers 210 1,300

Total 40,000 180,000

No. of Incrementally Affected Facilities

6

* In addition to newly affected sources in 2025, incrementally affected sources in 2025 include sources that 

become affected in the 2020-24 time period and are assumed to be in continued operation in 2025. These 

estimates are the same regardless of regulatory option analyzed in RIA. Totals may not sum due to 

independent rounding.
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Sources

Emissions Reductions, 2020 Emissions Reductions, 2025

Methane 

(short tons)

VOC 

(short tons)

HAP 

(short tons)

Methane 

(metric tons 

CO2 Eq.)

Methane 

(short tons)

VOC 

(short tons)

HAP 

(short tons)

Methane 

(metric tons 

CO2 Eq.)

Oil Well 

Completions 140,000 110,000 14 3,100,000 140,000 120,000 14 3,100,000

Fugitive Emissions 33,000 8,700 330 750,000 210,000 57,000 2,200 4,900,000

Pneumatic Pumps 5,400 1,500 57 120,000 32,000 9,000 340 740,000

Compressors 1,600 43 1 36,000 9,400 260 8 210,000

Pneumatic 

Controllers 590 16 0 13,000 3,500 97 3 80,000

Total 180,000 120,000 400 4,000,000 400,000 180,000 2,500 9,000,000

Emissions Reductions, Proposed NSPS

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Note: totals may not sum due to independent rounding.
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Secondary Emissions, Proposed NSPS (short tons)

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2020

Sources CO2 NOx PM CO THC

Oil Well Completions 580,000 300 10 1,600 620

Fugitive Emissions minimal minimal Minimal minimal Minimal

Pneumatic Pumps 24,000 12 0 66 25

Pneumatic Controllers 0 0 0 0 0

Compressors 550 0 0 2 1

Total 2020 610,000 310 10 1,700 640

2025

Sources CO2 NOx PM CO THC

Oil Well Completions 610,000 310 11 1,700 640

Fugitive Emissions Minimal Minimal minimal Minimal Minimal

Pneumatic Pumps 140,000 72 0 400 150

Pneumatic Controllers 0 0 0 0 0

Compressors 3,300 2 0 9 4

Total in 2025 750,000 380 11 2,100 790

Note: totals may not sum due to independent rounding.
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► Many of the control options capture natural gas that would otherwise be flared or vented

► Estimated recovery

► 8 billion cubic feet (bcf) in 2020

► 19 billion cubic feet (bcf) in 2025

► We assume producers are paid $4/Mcf for recovered gas

► EIA’s AEO 2014 forecasted wellhead prices paid to lower 48 state producers to be $4.46/Mcf in 

2020 and $5.06/Mcf in 2025. 

► The $4/Mcf price assumed in this RIA is intended to reflect the AEO estimate but simultaneously 

be conservatively low.

Product Recovery from Proposed NSPS

9

Sources

2020 2025

Gas recovery

(Mcf)

Revenue from 

recovery

Gas recovery 

(Mcf)

Revenue from 

recovery

Oil Well Completions 6,200,000 $25,000,000 6,200,000 $25,000,000

Fugitive Emissions 1,900,000 $7,300,000 12,000,000 $47,000,000

Pneumatic Pumps 0 $0 0 $0

Compressors 76,000 $0 450,000 $0

Pneumatic Controllers 30,000 $0 180,000 $0

Total 8,200,000 $32,000,000 19,000,000 $72,000,000

Note: totals may not sum due to independent rounding.
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Capital and Annualized Engineering Costs, Proposed 

NSPS*

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Sources

2020 2025

Capital Costs

Nationwide 

Annualized 

Costs Capital Costs

Nationwide 

Annualized 

Costs

Oil Well Completions $150,000,000 $120,000,000 $150,000,000 $120,000,000

Fugitive Emissions $8,400,000 $44,000,000 $53,000,000 $280,000,000

Pneumatic Pumps $5,900,000 $840,000 $36,000,000 $5,100,000

Compressors $540,000 $250,000 $3,200,000 $1,500,000

Pneumatic Controllers $48,000 $5,200 $290,000 $31,000

Reporting and Recordkeeping $0 $1,400,000 $0 $4,100,000

Total $160,000,000 $170,000,000 $240,000,000 $410,000,000

* Presented costs estimated using 7 percent discount rate. The choice of discount rate has a small effect on 

nationwide annualized costs. The compliance costs related to oil well completions and fugitive emissions surveys 

occur in each year, so the interest rate has little impact on annualized costs for these sources. The annualized costs 

for pneumatic pumps, compressors, and pneumatic controllers are sensitive to discount rate, but these constitute 

a relatively small part of the total compliance cost estimates for the proposal.

Note: totals may not sum due to independent rounding.
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Climate, Health, and Welfare Benefits

► Methane 

► Climate benefits from methane reductions (including ozone and stratospheric 

water vapor) (monetized in main BCA)

► Health and welfare benefits from reductions in methane-related ozone 

precursor (long term) (not monetized) 

► VOCs (not monetized)

► PM2.5 precursor – health, visibility

► Ozone precursor – health, vegetation, climate

► HAPs – health (not monetized)

► Benzene

► Toluene

► Formaldehyde

► Carbonyl sulfide

► Ethyl benzene

► Mixed xylenes

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Climate Benefits from Methane Reductions

► Estimated global social benefits of methane emission reductions using direct 

estimates of the social cost of methane (SC-CH4)

► SC-CH4 estimates monetized value of impacts associated with marginal changes in 

methane emissions in a given year

► Used direct SC-CH4 estimates developed by Marten, Kopits, et al. (2014), which are 

consistent with the U.S. government’s SC-CO2 estimates (e.g., same models and 

assumptions) 

► Direct estimates preferable to approach used in past sensitivity analyses 

► Previous rulemakings used GWP-weighted estimates of SC-CO2to approximate SC-CH4 

and presented results in sensitivity analysis 

► GWP approach likely underestimates SC-CH4(e.g., Marten and Newbold (2012), 

Waldhoff et al. (2015)) 

• For example, misses important temporal and non-linear effects

► EPA conducted letter review of applying the SC-CH4in regulatory analyses

► Charge focused on EPA’s interpretation of the limitations of the GWP approach to 

monetization of CH4 emissions changes, appropriateness of SC-CH4 estimates for 

regulatory analysis, consistency of estimates with U.S. Government’s SC-CO2 estimates

► Reviewed by three experts in climate change economics and integrated assessment 

modeling

► Reviews will be made public and included in rulemaking docket

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Climate Benefits from Methane Reductions

► Conclusions from the letter review of applying the SC-CH4 estimates in 

regulatory analyses

► Reviewers found estimates to be consistent with the SC-CO2 estimates and that 

direct estimates are preferable to the GWP-based approach

► Two reviewers concluded that use of the SC-CH4 estimates is appropriate, provided 

that EPA discuss the limitations, similar to the discussion provided for SC-CO2and 

other economic analyses

► All three reviewers encouraged continued improvements in the SC-CO2 estimates 

and suggested that as those improvements are realized they should also be 

reflected in the SC-CH4 estimates

► One reviewer suggested that use of the SC-CH4 estimates should lag this process

► EPA is seeking comment on use of the SC-CH4 estimates in the oil and 

gas benefits analysis

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Social Cost of Methane Estimates

Year

Social Cost of Methane (in 2012$ per metric ton)

5 Percent

Average

3 Percent

Average

2.5 Percent

Average

3 Percent

95th percentile

2012 $430 $1,000 $1,400 $2,800

2015 $490 $1,100 $1,500 $3,000

2020 $580 $1,300 $1,700 $3,500

2025 $700 $1,500 $1,900 $4,000

2030 $820 $1,700 $2,200 $4,500

2035 $970 $1,900 $2,500 $5,300

2040 $1,100 $2,200 $2,800 $5,900

2045 $1,300 $2,500 $3,000 $6,600

2050 $1,400 $2,700 $3,300 $7,200

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Source: Marten, Kopits, et al. 2014

Notes: The values are emissions-year specific and are adjusted for inflation using the GDP implicit price deflator. 

The estimates in this table have been adjusted to reflect the minor technical corrections to the SC-CO2 estimates 

described above. 
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Estimated Global Benefits of Methane Reductions*

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*The SC-CH4values are dollar-year and emissions-year specific. SC-CH4values represent only a partial 

accounting of climate impacts.

Discount rate and statistic

Proposed NSPS 

2020 2025

Metric tons of methane reduced 0.16 million 0.36 million

Metric tons of CO2 Eq. 4.0 million 9.0 million

5% (average) $93 million $250 million

3% (average) $210 million $550 million

2.5% (average) $280 million $700 million

3% (95th percentile) $550 million $1,400 million
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Emissions Changes across RIA Options

Option 1

Option 2 

(proposed) Option 3

Pollutant 2020 2025 2020 2025 2020 2025

Change in Direct 

Emissions

Methane 170,000 330,000 180,000 400,000 190,000 470,000

VOC 120,000 160,000 120,000 180,000 130,000 200,000

HAP 290 1,800 400 2,500 510 3,200

Change in Secondary 

Emissions

CO2 1,000,000 1,200,000 580,000 720,000 580,000 720,000

NOX 530 600 290 370 290 370

PM 19 20 11 11 11 11

CO 2,900 3,300 1,600 2,000 1,600 2,000

THC 1,200 1,300 660 810 660 810

Change in CO2 Eq. 

Emissions 

CO2 Eq. 

(million short 

tons)

4.4 9.9 4.4 9.9 4.7 11.7

CO2 Eq. 

(million 

metric tons)

3.7 7.4 4.0 9.0 4.2 10.6

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Note: short tons per year, unless otherwise noted.
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Net Benefits Across Options ($ millions)

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Option 1

Option 2 

(proposed) Option 3

2020 2025 2020 2025 2020 2025

Total Monetized 

Benefits $190 $450 $210 $550 $220 $640

Total Costs $80 $220 $170 $410 $210 $660

Net Benefits $110 $230 $40 $140 $10 -$20

Note: The benefits estimates are calculated using four different estimates of the social cost of methane (SC-CH4) (average at 2.5 

percent discount rate, 3 percent, and 5 percent; 95th percentile at 3 percent). For purposes of this table, we show the benefits 

associated with the average at a 3 percent discount rate. However we emphasize the importance and value of considering the 

benefits calculated using all four SC-CH4 estimates; the additional benefit estimates range from $93 million to $550 million in 2020 

and $250 million to $1,400 million in 2025 for the proposed option. The CO2-equivalent (CO2 Eq.) methane emission reductions are 

4.0 million metric tons in 2020 and 9.0 million metric tons in 2025 for the proposed option. Also, the specific control technologies 

for the proposed NSPS are anticipated to have minor secondary disbenefits. 

The engineering compliance costs are annualized using a 7 percent discount rate and include estimated revenue from additional 

natural gas recovery as a result of the NSPS. When rounded, the cost estimates are the same for the 3 percent discount rate as they 

are for the 7 percent discount rate cost estimates, so rounded net benefits do not change when using a 3 percent discount rate.
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Energy System Impacts

► We used the U.S. Energy Information Administration’s National Energy 

Modeling System (NEMS) used to develop Annual Energy Outlook 2014

► Baseline projections consistent with Annual Energy Outlook 2014 

► We project baseline and regulatory impact scenarios for 2020 and 2025, 

and 2020-2025 total

► Present estimates of change in crude and natural gas:

► Drilling

► Production

► Prices

► Trade

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Oil and Natural Gas Wells Drilled, Proposed NSPS

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Projection, 2020 Projection, 2025 Projection, 2020-25

2012 Baseline NSPS Baseline NSPS Baseline NSPS

Successful Wells Drilled (Onshore Lower 48 States)

Natural Gas 10,965 20,298 20,299 24,727 24,800 142,764 142,638

Crude Oil 26,517 24,660 24,660 27,648 27,638 155,201 155,202

Total 37,482 44,959 44,959 52,375 52,438 297,965 297,840

Percent Change from Baseline

Natural Gas 0.00% 0.30% -0.09%

Crude Oil 0.00% -0.04% 0.00%

Total 0.00% 0.12% -0.04%
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Domestic Natural Gas and Crude Oil Production, Proposed 

NSPS

Projection, 2020 Projection, 2025 Projection, 2020-25

2012 Baseline NSPS Baseline NSPS Baseline NSPS

Domestic Production (Onshore Lower 48 States)

Natural Gas (tcf) 22.075 26.577 26.576 28.931 28.927 167.585 167.576

Crude Oil (million bbls/day) 4.599 7.234 7.234 7.064 7.062 7.174 7.173

Percent Change from Baseline

Natural Gas 0.00% -0.01% -0.01%

Crude Oil 0.00% -0.03% -0.01%

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Crude Oil and Natural Gas Wellhead Prices, Proposed NSPS

Projection, 2020 Projection, 2025 Projection, 2020-25

2012 Baseline NSPS Baseline NSPS Baseline NSPS

Lower 48 Average Wellhead Price (Onshore Lower 48 States)

Natural Gas (2012$ per Mcf) 2.562 4.458 4.458 5.064 5.071 4.670 4.673

Crude Oil (2012$ per barrel) 94.938 92.913 92.913 104.889 104.887 98.932 98.931

Percent Change from Baseline

Natural Gas 0.00% 0.14% 0.06%

Crude Oil 0.00% 0.00% 0.00%

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Net Imports, Crude Oil and Natural Gas, Proposed NSPS

22

Projection, 2020 Projection, 2025 Projection, 2020-25

2012 Baseline NSPS Baseline NSPS Baseline NSPS

Net Imports

Natural Gas (tcf) 1.515 -1.901 -1.900 -3.211 -3.208 -15.371 -15.367

Crude Oil (million bbls/day) 8.432 5.781 5.781 6.004 6.005 5.914 5.916

Percent Change from Baseline

Natural Gas -0.05% -0.09% -0.03%

Crude Oil 0.00% 0.02% 0.02%
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Labor Associated with Pollution Controls

► In addition to qualitative discussion of the potential employment impacts 

of environmental regulation, the RIA presents estimates of labor required 

to install, maintain, and operate control equipment associated with the 

proposed NSPS 

► Labor component of engineering cost analysis provided basis for the 

estimates

► Divided estimates into one-time labor and annual labor

► Estimate jobs in full-time equivalents (FTE) by dividing labor hours by 

2080 (40 hours x 52 weeks)

► Note that this type of FTE estimate cannot be used to identify the specific 

number of people involved or whether new jobs are created for new 

employees, versus displacing jobs from other sectors of the economy 

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Labor Associated with Pollution Controls

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Sources One-time FTE Annual FTE

2020

Oil Well Completions 0 350

Fugitive Emissions 73 170

Pneumatic Controllers 0 0

Pneumatic Pumps N/A N/A

Reciprocating Compressors 0 0

Centrifugal Compressors 0 0

Reporting and Recordkeeping Requirements 0 19

Total 73 530

2025

Oil Well Completions 0 350

Fugitive Emissions 73 1,040

Pneumatic Controllers 0 0

Pneumatic Pumps N/A N/A

Reciprocating Compressors 0 0

Centrifugal Compressors 0 0

Reporting and Recordkeeping Requirements 0 60

Total 73 1,400

Note: totals may not sum due to independent rounding.
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Appendix

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Source: Adapted from American Gas Association and EPA Natural Gas STAR Program

Crude Oil to Refineries 

(not included in this source 

category)

Production & Processing

1. Drilling and Well Completion

2. Producing Wells

3. Gathering Lines

4. Gathering and Boosting Stations

5. Gas Processing Plant

3

1

2

4

5

6

7

8

10a

10b

10c

10d

9

Natural Gas 

Transmission & Storage

6. Transmission Compressor Stations

7. Transmission Pipeline

8. Underground Storage

Distribution

9. Distribution Mains

10. Regulators and Meters for:

a. City Gate

b. Large Volume Customers

c. Residential Customers

d. Commercial Customer

Natural gas systems encompass wells, gas gathering and 

processing facilities, storage, and transmission and distribution 

pipelines. 

Oil and Gas Sector Description

Natural gas distribution is currently out of the scope of the white 

papers and 2015 NSPS Proposed Rule