AUSTIN CENTURY CITY CHARLOTTE CHICAGO HOUSTON IRVING LOS ANGELES

NEW YORK ORANGE COUNTY SAN FRANCISCO BAY AREA SHANGHAI WASHINGTON, DC

LONDON: KATTEN MUCHIN ROSENMAN UK LLP

A limited liability partnership including profession al corporations San Francisco Bay Area Office
1999 Harrison Street
Suite 700 Oakland, CA 94612

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Washington DC O ffice 2900 K Street NW, North Tower
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S HANNON S. B ROOME

shannon.broome@kattenlaw.com

(415) 293

- 5818 direct ( 415 ) 704

- 3151 fax (202) 625

- 3715 direct (202) 295

- 1125 fax June 16, 2014

Via email to: oilandgas.whitepapers@epa.gov

, frantz.chris@epa.gov

Re: TXOGA Comments on EPA’s Oil and Gas White Papers

Dear Sir or Madame:

On behalf of the Texas Oil & Gas Associa tion (TXOGA) , we are providing this response to EPA’s April 15, 2014 release for external peer review of five “White Papers” on methane and volatile organic compound (VOC) emissions from the oil and gas sector. http://www.epa.gov/airquality/oilandgas/whitepapers.html

. The White Papers address the following five potential sources of emissions:

1. Compressors

2. Hydraulically Fractured Oil Well Completions and Ongoing Production

3. L eaks

4. Liquids Unloading

5. Pneumatic Devices

It is our understanding that EPA will be making decisions regarding whether to pursue regulation of these sources sometime in the Fall of 2014, and for any sources for which EPA decides to propose regulations , the Agency would endeavor to begin that process sometime in 2015.

Founded in 1919, TXOGA is the largest and oldest petroleum organization in Texas, representing more than 5,000 members. The membership of TXOGA produces in excess of 90 percent of Tex as’ crude oil and natural gas, operates 100 percent of the state’s refining capacity, and is responsible for the vast majority of the state’s pipelines. TXOGA member companies produce a quarter of the nation’s oil, a third of its natural gas and account f or one

- fourth of the U.S. refining capacity.

As EPA is aware, TXOGA has been involved with EPA’s regulatory process for this sector under Sections 111 and 112 of the Clean Air Act through the submittal of extensive comments, litigation, and an administ rative petition for reconsideration (which has been granted in part). Since the original rule was finalized in 2012, Oil and Natural Gas Sector: New Source Performance Standards and National Emission Standards for Hazardous Air Pollutants Reviews

, 77 Fed. Reg. 49,490 (Aug. 16, 2012) (Final Rule), partly in response to petitions for reconsideration and petitions for review in the U.S. Court of Appeals for the D.C. Circuit, EPA has already issued one set of revisions to the regulations and is slated to relea se a secondPage 2

proposed rule at the end of June 2014, which may be followed by yet another round of reconsideration rulemaking in 2015. In the meantime, the regulation of sources and the need to comply has begun and is expanding.

As EPA is also aware, th e rules that were issued in 2012 (and that have been and are being amended for clarity) represent a significant expansion of the regulatory requirements for this source category, including expansion in scope to operations that are much smaller than have

be en historically regulated. As a result, companies

– many of which are smaller than those typically regulated by EPA air regulations

– have needed to institute new systems for compliance and training programs for operators.

TXOGA is appreciative of the efforts that EPA has made to clarify the regulations but it is important to recognize that these efforts were necessary, in part, because of the need for EPA technical experts to gain a greater understanding of the actual operating requirements, business

n eeds, and technical capabilities of this complex and diverse industry. With this regulatory history, we want to encourage EPA to consider the need for a period of stability in the regulatory requirements once the regulations already issued are sufficientl y clarified. A period of stability before even greater expansion or other changes will be beneficial for all stakeholders because it will allow companies to institute and refine their compliance systems such that the rules can be interpreted and applied t o operations across a given company and that employees can be trained

in accordance with those determinations.

I. Technical Issues Raised by White Papers

TXOGA has previously noted that industry groups were not invited to participate in the development of the White Papers until very late in the process (1 month prior to publishing). In fact, very few of the references cited in the White Papers were prepared by industry or industry trade groups with the most knowledge of oil and gas operations. As a res ult, these papers contain many technical inaccuracies that greatly affect the characterization of emissions and potential mitigation techniques.

TXOGA members want to highlight the following points as examples that are indicative

of the inaccuracies t hat appear throughout the White Papers:

Oil and Natural Gas Sector Hydraulically Fractured Oil Well Completions and Associated Gas During Ongoing Production

• The White Paper incorrectly states that emissions from flowback of hydraulically

fractured oil we lls are “uncontrolled.” Report for Oil and Gas Sector Oil Well Completions and Associated Gas During Ongoing Production, Table 3

- 1 (April 2014). This is inaccurate. In most situations, standard industry practice is to control flowback emissions through f laring or reduced emissions completions (REC) for safety reasons. This White Paper, however, does not attempt to characterize the current frequency of flowback control, which will lead to an overstatement of potential emission reduction

benefits from addi tional regulation in this area and could cause members of the public to believe emissions currently are much higher than they actually are.Page 3

• The White Paper inaccurately uses the term “associated gas” when describing what is more commonly known as “strande d gas.” Associated gas is all gas produced concurrently with crude oil while stranded gas is only the subset of associated gas that is

flared or vented and cannot be sold to market because of the lack of infrastructure or low

volume. As a result of the u se of the term “associated gas” instead of the more accurate “stranded gas,” a reader may be inappropriately led to believe that all of the “associated gas” reported in the Appendix A data tables is flared or vented, when these tables actually

represent no thing more than total volumes of gas produced at the well. Much of this produced gas was actually gathered and sold, not vented or flared.

• In Appendix A of this White Paper, a gas

- to

- oil ratio (GOR) of 12,500 is used as the threshold to separate oil well s from gas wells. The White Paper states that the use of this threshold is justified because: “This methodology is consistent with the gas

- oil ratio methodology used in the 2012 Oil and Natural Gas Sector NSPS development.” Id. at A

3. Actually, this GO R threshold does not appear in Subpart OOOO, and TXOGA is

unaware of an y use of this threshold in the supporting documentation available in the docket for the rulemaking.

Oil and Natural Gas Sector Leaks

• The White Paper improperly defines leaks as emis sions not only from equipment components that are covered in traditional LDAR programs under NSPS and NESHAP regulations, but also from unintended incidents. For example, incidents such as storage thief hatches that are left open or separator dump valves that are stuck open are included within the scope of “leaks.” Report for Oil and Natural Gas Sector Leak, 4 (April 2014). Because the detection and response methods are different, these types of unintended incidents should be characterized and quantified separately from traditional fugitive “leaks.” While LDAR programs are effective for detecting and repairing fugitive “leaks,” preventive maintenance and AVO inspections are more appropriate for

unintended incidents.

Oil and Natural Gas Sector Liquids Unloading

• The White Paper states that artificial lifts (rod pumps) are typically used during periods in which the well pressure declines such that there is inadequate pressure to use a plunger

lift. Oil and Natural Gas Sector Liquids Unloading Processes, 17 (April 2014). This statement is inaccurate. Rod pumps are infrequently used in gas well production, and it would rarely be practical or cost

- effective for an operator to switch from a plunger lift to a rod pump. The White Paper fails to describe the primary use for a rod pump which is to promote an increased flow rate of hydrocarbon liquids, usually crude oil.

• The White Paper lists plunger lifts as a primary technique to mitigate emissions associated with liquid unloading. Id. at 3, 20

- 21. Plun ger lifts are not inherently an emissions control technology, but rather a liquids unloading technology to promote deliquification of thePage 4

wellbore. While plunger lifts may reduce emissions, they do not do so across the full range of operating scenarios. In addition, the White Paper fails to adequately address common impediments to installing plunger lifts including wellbore configuration and the condition of

p roduction casing and tubing.

• The White Paper discusses several liquids unloading mitigation techn iques, but it does not adequately address the operating conditions where well venting is the necessary or preferred technology to deliquify a well.

While TXOGA raises the above issues, we note that we are not undertaking a detailed response to most of the questions at this time but rather will be responding appropriately to any decision that EPA might make regarding a proposal. Failure to raise the accuracy of any characterization at this time should not be interpreted as TXOGA’s concurrence with any a spect of any particular white paper.

II. Process Issues Related to White Paper Commenting and Subsequent Action

As TXOGA understands EPA’s process for the White Papers, the Agency is providing the opportunity for public input but is also seeking input f rom a very limited number of “peer reviewers” that will be compensated for answering the specific questions listed in the particular white paper(s) to which they are assigned.

While TXOGA agrees that a peer review process can be helpful, we note that th e peer reviewers appear to be dominated by certain organizations and do not have the degree of breadth in representation from industry that would be expected given the nature of the information being sought. In general, of the five peer reviewers listed f or each of the five papers, there are 1 or 2 industry peer reviewers listed on each, although the information sought is highly technical in nature related to the equipment used in the industry and its emissions. Given the nature of the questions, it seems that greater representation of companies with the experience of operating the equipment and that have likely evaluated emissions through state permitting requirements and for other purposes would be appropriate.

It is true that EPA is accepting commen ts from the public as well

– which, given that the peer review panels need additional expertise, is critical

– but we are concerned that the Agency will give preferential treatment to information obtained from the peer reviewers. It is essential

that EPA give equal weight to information submitted from other parties that have technical expertise to ensure that any decision made on the basis of this information is appropriately supported.

Finally, EPA should implement this process in a transparent and op en manner. EPA should include on the website the names and qualifications of the peer reviewers. Moreover, EPA should make publicly available on its website or in a public/electronically

- accessible docket all comments filed in response to the White Paper s so that stakeholders may review the information on which the Agency may base decisions to proceed or not with additional regulation.Page 5

TXOGA strongly supports President Obama’s January 21, 2009 commitment to transparency, in which he stated his view th at “ [t] ransparency promotes accountability and provides information for citizens about what their Government is doing” and that “[i]nformation maintained by the Federal Government is a national asset.” Transparency and Open
Government, 74 Fed. Reg. 4685 ( Jan. 26, 2009). Given that the President committed his administration “to disclose information rapidly in forms that the public can readily find and use,”
id., making the comments publicly available will help to fulfill the Administration’s transparency

c ommitment as it applies to the process of potentially expanding the regulation of the oil and gas sector under Sections 111 and 112. We are particularly supportive of the President’s

commitment to disclose information rapidly. In this context, where EPA seeks to make decisions regarding whether to proceed with a proposal in the relatively near term, prompt disclosure of claims made by the public and paid

- for comments of peer reviewers is critical to ensure that any errors or other points of view that migh t not be anticipated in light of the papers themselves be exposed early

— as doing so could prevent EPA from spending resources on an approach that could be technically flawed.

* * * *

TXOGA appreciates the opportunity to provide input to EPA on these issu es and looks forward to a continuing dialogue.

Sincerely

,

Shannon S. Broome

Counsel to TXOGA