### Summary of Interagency Working Comments on Draft Language under EO12866/13563 Interagency Review. Subject to Further Policy Review.

1 Environmental Protection Agency (EPA): Proposed Rule

Oil and Natural Gas Sector: Emission Standards for New and Modified Sources

Regulatory Impact Analysis

RIN 2060

- A S30

General Comments : 1. Reviewer recommends additional explanation why EPA is not proposing the “less stringent” option provided in Table 1

- 2 as it provides an additional $100 million more net benefit than EPA’s proposed option.

EPA RESPONSE: Please see the discuss ion on this point in response to interagency comments on the preamble.

2. Reviewer recommends revising the options provided within the RIA to allow for differences in well completion controls and fugitive emissions monitoring and maintenance. For example, options should include REC only well completion control and fugitive emission annu al monitoring and maintenance; REC only well completion control and fugitive emission semiannual monitoring and maintenance; REC only well completion control and fugitive emission quarterly monitoring and maintenance; REC and combustion well completion con trol and fugitive emission annual monitoring and maintenance; REC and combustion well completion control and fugitive emission semiannual monitoring and maintenance; and REC and combustion well completion control and fugitive emission quarterly monitoring and maintenance.

EPA RESPONSE: We have determined that it is not technically feasible to require only RECs at hydraulically fractured and refractured well completions. This rules out half of the suggested options. We are analyzing two of the three remaini ng opt ions suggestions. While we are reluctant to add the remaining option to the RIA, the full details of the
im p a cts of the various option s can be found in the TSD supporting the proposal.

3. Reviewer recommends splitting out the gross cost of compliance from the net cost of compliance in the preamble followed by an explanation of the assumptions that were used to calculate the offset from the sale of the captured gas and offset for the final net cost. For example, a discussion should be included to descr ibe the extent to which regulatory structures, infrastructure constraints and/or other unique circumstances may prevent regulated entities from readily monetizing the value of gas that is not emitted as a result of compliance with this proposed rule. The calculation of the offset should be as
well defined as the i nitial cost itself

.

EPA RESPONSE: We revised preamble section XI.C “What are the compliance costs?” to include more information about revenues from product recovery, as well as a simple
sensitivi ty analysis.

### Summary of Interagency Working Comments on Draft Language under EO12866/13563 Interagency Review. Subject to Further Policy Review.

2 4. Reviewer recommends providing an explanation why the “cost

- effectiveness” metric is necessary within this rule. See Section 3.4.6.

EPA RESPONSE: We believe the discussion s in the preamble (VIII.A) and in section
3.4.6 of the multipollutant cost

- effectiveness approach is thorough. Additionally, we are requesting comment on the approaches to estimate cost

- effectiveness for emissions reductions using multipollutant controls assessed in this action.

5. Reviewer recommends q uantifying uncertainty in emissions estimates instead of providing estimates as “single

- point” estimates without margins of error ; for example, by using the uncertainty analysis in the U.S. Greenhouse Gas Inventory upon which many
estimates in this RIA are based. Reviewer also suggests including sensitivity analysis using a range of input parameters and scenarios, including a range of natural gas prices (used for calculating monetary benefits of recovered g as).

EPA RESPONSE: The uncertainty analysis in the U.S. Greenhouse Gas Inventory is largely performed at the national level and accounts for uncertainties in the numerous inputs to the national level emissions inventory. In addition, the Inventory is focused on current and historical emissions levels, rather than projecting to future years. To transfer the statistical results in the Inventory to the projection of new sources in t his action, which uses but does not rely exclusively on the Inventory, would be inappropriate. For sensitivity analysis of assumed natural gas prices, see response to #3 above.

6. Reviewer recommends providing the correct amount of significant digits to ensu re that EPA is not providing the impression of false precision. For example, Table 3

- 4 and 3

- 5 should be modified as it goes down to the dollar.

EPA RESPONSE: Thank you for the suggestion. We are re

- presenting results rounded to 2 or 3 significant digits as appropriate

.

7. Reviewer recommends soliciting comment on whether EPA’s assumptions for the increase in number of sources is appropriate.

EPA RESPONSE: We have added a solicitation for comment on the projection methodology as well as solicited informati on to improve our understanding of the turnover rates of potentially affected sources

.

8. Reviewer recommends providing a graphical presentation of the Sector Emissions
Overview as it is difficult to read in a narrative format.

EPA RESPONSE: The Sector Emi ssions Overview mistakenly duplicated one paragraph, where one paragraph listed statistics from the 2014 GHG I nventory and then listed statistics from the 2015 Inventory, which was confusing. With the paragraph cleaned up,
it reads much clearer.

### Summary of Interagency Working Comments on Draft Language under EO12866/13563 Interagency Review. Subject to Further Policy Review.

3 9. Reviewer recommends a clearer, disaggregated presentation of the cost

- benefit analysis
for each of five broad operational/equipment categories because both the estimated compliance costs and benefits appear to vary considerably across those categories.

EPA RESPONSE: The RIA presents benefit

- cost analysis on the entire regulatory proposal, not the component parts. That said, the RIA and particularly the TSD present ample information on the costs and emissions reductions across regulatory options.

10. Reviewe r recommends that EPA more explicitly delineate how modified sources are

treated vis

- à

- vis new sources in terms of forecasting incremental changes, underlying assumptions, etc. The RIA provides such information on the new source side but not on

the modifi ed source side. The reviewer also cannot gauge the significance of modified

sources relative to the new sources due to a lack of info.

EPA RESPONSE: We added a discussion of this issue after Table 3

- 2 in the RIA. We
have also clarified in the RIA that ou r estimates of newly affected source include both

new and modified sources. As mentioned in response to comment #7 above, we have

added a solicitation for comment for information on turnover and modification rates.

11. Reviewer recommends that EPA clarify whi ch of the estimated impacts were based on the analysis of the 2012 rulemaking and how they were applied for this rulemaking.

B ased on what EPA said during the RIA briefing, EPA based many of the impact

assess ments in this RIA on the 2012 RIA which did inc lude ranges for estimated impacts and sensitivity analyses for items pertaining to both rulemakings. It is not clear however how doing so suffices f or the current rulemaking; for instance, how did EPA update the

relevant estimates for the current rulemaki ng?

EPA RESPONSE: The TSD supporting this proposal indicates technical information drawn (and updated, when appropriate) from analysis and data supporting the 2012 rulemaking. The 2012 R IA contained sensitivity analyse s on the assumed price of natural

gas and the impacts of cost and emission assumptions for reduced emission completions of hydraulically fractured and refractured natural gas well completions. We performed that analysis because assumptions around these factors influenced the net compliance

co sts greatly. While important, these assumption do not have as great leverage on net results as in 2012, so we have opted in this RIA for a simple sensitivity discussion on assumed natural gas prices. See comment #3 above.

12. Reviewer recommends referencing the four studies below in considering the health impacts of exposure to VOC and HAPs air pollution from the oil and gas sector.

a. ATSDR, Health Consultation: Public Health Implications of Ambient Air Exposures to Volatile Organic Compounds as Measured in Rur al, Urban, and Oil & Gas Development Areas Garfield County, Colorado, 2008, http://www.cdphe.state.co.us/dc/ehs/GarfieldCounty.pdf

.

### Summary of Interagency Working Comments on Draft Language under EO12866/13563 Interagency Review. Subject to Further Policy Review.

4 b. Bunch, A.; Perry, C.; Abraham, L.; Wikoff, D.; Tachov sky, J.; Hixon, J.; Urban, J.; Harris, M.; Haws, L. Evaluation of impact of shale gas operations in the Barnett Shale region on volatile organic compounds in air and potential human health risks Sci. Total Environ. 2014, 468, 832

– 842

. http://www.sciencedirect.com/science/article/pii/S0048969713010073 ?

.
c. L. McKenzie, R. Witter, L. Newman, J. Adgate. Human health risk assessment of air emissions from development of unconvention al natural gas resources. Sci Total Environ, 424 (2012), pp. 79

– 87. http://www.sciencedirect.com/science/article/pii/S0048969712001933
d. McKenzie LM, Guo R, Witter RZ, Savitz DA, Newman LS, Adgate JL. 2014. Birth outcomes and maternal residential proximity to natural gas development in rural Colorado. Environ Health Perspect 122:412

– 417. http://dx.doi.org/10.1289/ehp.130672 2

EPA RESPONSE: Without conducting a full literature review, it would not be appropriate to cite a handful of studies in the RIA. In addition, it is not clear to what extent these limited case studies can be generalized to represent potential health imp acts near oil and gas operations across the country.

13. Reviewer notes that the margin of error has a direct bearing on the cost

- benefit analysis. For the most part, the benefits vary directly and linearly with the quantities of methane or
HAP reduction that are actually achieved. Indeed, most of those benefits are derived from factors that are expressed in units of dollars per ton of pollutant. Thus, if the actual emissions reductions are only half of what was estimated, the benefits will corresponding ly only be half. On the other hand, if the actual emissions are greater than estimated, the benefits will also be greater, in direct proportion to the emission
reductions. The compliance costs, on the other hand, are not as closely related to emissions

re ductions. Compliance costs are based on two principal factors. The first is the number
of methane

- emitting components in a particular system (e.g., compressors, pneumatic devices, valves, seals, tanks, etc.) or the number of well completions that are per formed in a given time period. The second is the nature and frequency of methane emissions surveys that are performed in order to monitor the effectiveness of the mitigation measures that have been implemented. A third factor is the extent to which emiss ions are mitigated, in which case the company may or may not be able to monetize the value of any conserved natural gas.

EPA RESPONSE: The monetized climate benefits are estimated using the social cost of methane, a metric that estimates the monetary value of impacts associated with marginal changes in me thane emissions in a given year . However, if they had been monetized, the health benefits resulting from reduced VOC and HAP emissions would be dependent upon the location of emissions and populations and local and regional air quality condition. As result, these health benefits would not likely vary linearly with emissions reductions. As the variation in compliance costs may follow a different distribution than

### Summary of Interagency Working Comments on Draft Language under EO12866/13563 Interagency Review. Subject to Further Policy Review.

5 climate and health benefits, estimation o f the variance of net benefits or the benefit cost ratio is very challenging.

Specific Comments: 1) Page 1

- 2. Reviewer recommends revising the sentence to state:

a. This analysis estimates regulatory impacts for the analysis years of 2020 and
2025 , with the ana lysis period of 10 years

.

EPA RESPONSE: We think the paragraph on 1

- 2 presenting the analysis years and reasoning supporting the choices is complete.

2) Page 1

- 3. Bullets provided within “Summary of Results” is difficult to read and seems duplicative of Ta ble 1

- 1, 2, and 3. Reviewer recommends providing the intuition behind the results in these bullets rather than repeating the numbers.

EPA RESPONSE: The summary of results presented in bullets is somewhat duplicative of
the tables of results in the execut ive summary. That said, it would be difficult to provide
more details on the results with it continuing to be an executive summary.

3) Page 1

- 4, paragraph 2: “...when using a 7 percent discount rate.” To be consistent with the discount rate used for engineerin g costs, it would be useful to show the social benefits at a 7 percent discount rate.

EPA RESPONSE: The social cost of methane values were estimated using the same methodology used in the social cost of CO 2 , which uses discount rates of 2.5, 3, and 5 percent. See the OMB/Interagency Working Group’s Response to Comments on social
cost of CO 2 for detailed discussion ab out why a 7 percent rate is not used, p a g e 21 at https://www.whitehouse.gov/sites/default/fi les/omb/inforeg/scc

- response

- to

- comments

final

- july

- 2015.pdf

.

4) Page 1

- 5. Reviewer recommends providing the revenue offset in the benefits and present
the costs estim ates without the revenue offset

EPA RESPONSE: We are following our traditional practice in economic analysis stationary source air rules by treating estimates of revenues from product recovery as a reduction in compliance costs.

5) Page 1

- 5, paragraph 3: “We 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.” It would be useful if a net job estimate were available. The real employment benefit of a proposal is on net, whether jobs are created or lost.

EPA RESPONSE: Regulatory employment impacts are difficult to disentangle from other economic changes affecting employment decisions over time and across regions and industries. Net employment impact s are composed of a mix of potential declines and gains

### Summary of Interagency Working Comments on Draft Language under EO12866/13563 Interagency Review. Subject to Further Policy Review.

6 in different areas of the economy (e.g., the directly regulated sector, the environmental protection sector, related and upstream and downstream sectors, etc.) over time, and economic theory indicates an ambiguous effect on employment even in the regulated sector. Data limitations and a lack of robust peer

- reviewed methods for estimating net employment effects in the regulated sector present challenges to accurately estimating net employment impacts.

Therefore, this analysis describes potential employment impacts within the oil and gas sector, including both in

- house employees and contractors, and estimates partial employment impacts for affected entities in the oil and gas industry using engineering cost information. These bottom

- up, engineering

- based estimates represent one portion of potential employment impacts within the regulated industry, and are not net employment impact estimates.

6) Page 4

- 38, Paragraph 1: “While EPA is not accounting for the CO2 disbenefits at this time...” At the end of the previous page, estimates of disbenefits per ton are estimated,

thus it seems worthwhile to include in the RIA

.

EPA RESPONSE: EPA has not present ed disbenefit estimates in tabular form due to the
uncertainties. Please see the RIA pages 4

- 37 to 38 , which provides EPA’s rationale for not monetizing the CO 2 disbenefits and presents one potential approach (including details of
the alternative calculati on) for estimating those disbenefits . This section also lists the estimated adjusted amount in the text . EPA is taking comment on this approach and will
consider the comments received . B ased on that input, EPA will determine whether it is appropriate to include the estimates in tabular form and in the rulemaking’s primary
benefit

- cost comparison.

7) First annual report is listed as being due January 15, 2014

– date has passed but no language indicates it will be changed. Most other places there is language inserted to identify the date will be changed or inserted as it becomes necessary.

EPA RESPONSE: This comment relates specifically to the preamble, not the RIA. We have moved the comment and response to the document containing the response to interagency comments on the Preamble.

8) Page 1

- 4, paragraph 1: “... in an estimate of about $660 million” should instead read “...in an estimate of about $210 million” in order to be consistent with Table 1

- 1 and
Table 6

- 1.

EPA RESPONSE: Thank you. We corrected.

9) Page 3

- 5. Reviewer recommends providing additional explanation that may be located in the TSD that explains the engineering cost analysis steps.

EPA RESPONSE: The RIA provides an overview of the engineering cost analysis. There are aspects of the engineering cost analysis which have slight variations for each source,

### Summary of Interagency Working Comments on Draft Language under EO12866/13563 Interagency Review. Subject to Further Policy Review.

7 and it would be duplicative to add all this information to the RIA, when it is explained in
full detail in the TSD. In addition, the RIA also has numerous pointers to the TSD.

10) Page 3

- 11, Table 3

- 4 and Page 3

- 15, Table 3

- 6: Are the dollar figures in real or nominal
dollars?

EPA RESPONSE: All dollar figured are in 2012 dollars. We have added (2012$) in the tables notes, as well as some other tables where the dollar year was not included.

11) Page 4

- 4 . Reviewer recommends clarifying the paragraph that starts “In implementing this rule, emission controls may” and “By contrast, the emission reductions . . .” as it is unclear how this rule is different than other air quality rules in relation to helping states comply with applicable NAAQS. If this rule does not help states comply with PM and Ozone NAAQS more than other rules, than the reviewer recommends deleting these paragraphs.

EPA RESPONSE: This is standard language for all non

- NAAQS RIAs that helps explain the difference between illustrative NAAQS RIAs and rules like this one. VOC emission reductions anticipated by this proposed rule can help states attain the Ozone and PM NAAQS.

12) Page 4

- 7, Paragraph 2, lines 6

- 7: “These reductions in 2020 and 2025 represent about 2 percent and 5 percent, respectively, of the GHG emissions for this sector

. . . . ” It would be useful to know what percent of overall U.S. GHG emissions these reductions represent, in order to see what magnitude difference this rule will have on the U.S. environment.

EPA RESPONSE: We believe the comparison of the reductions anticipated from the proposed rule is best compared to the sector’s emissions. The comparison to overall emissions does not speak to the magnitude difference the proposal rule might have on the
U.S. environment.

13) Page 4

- 26. Reviewer recommends focusing on HAPs that are specifically affected by this proposed regulation instead of a general overall discussion. If there are specific HAPs that
EPA is concerned about in regard to these sources, they should be discussed in more
detail.

EPA RESPONSE: Section 4.6 only includes a qualitative discussi on of six HAP that are known to be part of oil and emissions: benzene, toluene, ethylbenzene, carbonyl sulfide, mixed xylene s, and n

- hexane. By reducing 2,5 00 tons of HAP in 2025 , we anticipate reduced exposure to each of these pollutants as a result of this rulemaking, but we do not have data to quantify the associated monetized benefits. The NATA discussion provides
context f or evaluating these qualitative HAP benefits.

14) Page 4

- 38, Table 4

- 8. It is unclear why the CO2 Eq. for Option 1 and Option 2 are different in metric tons when they are the same for short tons (i.e., 4.4 and 9.9).

### Summary of Interagency Working Comments on Draft Language under EO12866/13563 Interagency Review. Subject to Further Policy Review.

8 EPA RESPONSE: Thank you. There was an error on Table 4

- 8 for the CO 2 Eq. reductions in short tons for Option 1. It is 4.1 and 8.2 million tons for 2020 and 2025, respectively.
We made this correction in the RIA.

Typographical Comments: 1) Page 4

- 1, Paragraph 1, line 7: “and 2,500 tons of HAP

. . ” Delete one of the periods.

EPA RESPONSE: Done, thank you.

2) Page 4

- 1, Paragraph 2, lines 7

- 8: “for these rule” Change “these” to “this”

EPA RESPONSE: Done, thank you.

3) Page 4

- 18, Paragraph 2, line 2: “...we were did not. . .” Delete typo.

EPA RESPONSE: Done, thank you.