Office of WaterUpdate on EPA’s Clean Water Act Review of theCoalbed Methane (CBM) Extraction SectorInternational Petroleum & BiofuelsEnvironmental Conference (Houston, TX)5 November 2009Office of WaterPage 2 of 315 November 2009 IPEC16 (Houston, TX)• Provide background on EPA’s Detailed Study onthe coalbed methane (CBM) extraction sector.– Overview of Clean Water Act (CWA), effluent guidelines,and effluent guidelines planning– Overview of scope and schedule for CBM Detailed Study.• Provide update on current datagathering activities including ongoing survey of CBM operators.PA CBM WellPresentation OverviewOffice of WaterPage 3 of 315 November 2009 IPEC16 (Houston, TX)• The major environmental law governing surface water discharges is theClean Water Act (CWA).• Goals of the Clean Water Act are:- Restore and maintain the chemical, physical and biological integrity of theNation's waters for the protection and propagationof fish, shellfish, and wildlifeand provides for protection of human health and recreation in and on the water(e.g., fishing, swimming, boating); and- Zero discharge of pollutants to navigable (surface) waters.• EPA and States implement the CWAthrough publication of regulations anddischarge permits for point sources ofwastewater pollution.• Any discharge to the surface waters mustcomply with the more stringent oftechnology-based and water-qualitybased effluent limits.CBM Outfall (PRB, WY)EPA Regulation of Discharges to Surface WatersOffice of WaterPage 4 of 315 November 2009 IPEC16 (Houston, TX)Technology-Based Approach• Effluent limitation guidelines (ELG)(national standards)• Best professional judgment (BPJ)(site specific)Water Quality-BasedApproach• EPA and States developswater quality standards:– Designated uses, Criteriato protect those uses,Anti-degradation policyNPDES permits should be renewed every five years.Set StandardsImplementPermit• Issue individual permit for a single facility or ageneral permit for a broadgroup of similar facilities across a geographic area.• Permits must include the most stringent requirements based on waterquality and/or technology-based approach.• Ensure permits limits are met through compliance assistance,inspections, audits, environmental studies, and review of dischargemonitoring reports.EPA Regulation of Discharges to Surface WatersOffice of WaterPage 5 of 315 November 2009 IPEC16 (Houston, TX)• EPA establishes effluent limitations guidelines (ELGs) for categories of U.S. industry.• These ELGs are based on technologies that are available and economically achievablefor the industrial sector.• There are ELGs for 56 industrial categories (450 subcategories) covering more that60,000 direct and indirect dischargers.• The ELGs for the oil and gas extraction industry are located in EPA’s Federalregulations (40 CFR 435) and were issued in stages:1979 (onshore & beneficial use),1993 (offshore), 1996 (coastal), and synthetic-based drilling fluids (SBF) issued in 2001.• The Oil and Gas Extraction ELGs do not currently regulate pollutant discharges fromCBM extraction operations.– As required by EPA regulations, NPDES Permit writers used their ‘best professional judgment’to establish technology-based effluent limits. See40 CFR 122.44(a)(1) and 40 CFR 125.3(d).– EPA considers CBM extraction a potential new subcategory of the Oil and Gas ExtractionCategory.Technology-based Approach: Effluent GuidelinesOffice of WaterPage 6 of 315 November 2009 IPEC16 (Houston, TX)• The CWA requires EPA to annually review existing ELGs and torevise such regulations “if appropriate.”• The 1987 Clean Water Act Amendments added Section304(m),which requires EPA to publish a plan every two years afterallowing for public comment.• In these biennial plans the Agency must announce its schedule for:- Performing its annual reviews of existing ELGs, and- Revising ELGs rulemakings initiated as a result oftheseannual reviews.• More information at: http://www.epa.gov/guide/304mEffluent Guidelines PlanningOffice of WaterPage 7 of 315 November 2009 IPEC16 (Houston, TX)• Rationale for Detailed Study:– Growing industry sector and potential impacts onthe environment.– Impacts to surface waters from discharge ofCBM produced water can depend on thequantity and quality of the CBM produced water.• Objectives and Scope of the Detailed Study:– Evaluate availability and affordability of technologyoptions for CBM produced water discharges in thecurrent and future CBM basins.– Evaluate potential environmental issues associatedwith the discharge of CBM produced water.CBM Produced WaterGathering Pipes (WY)304(m) Detailed Study: Coalbed Methane ExtractionOffice of WaterPage 8 of 315 November 2009 IPEC16 (Houston, TX)Note:Alaska also has CBM reservesCBM Detailed Study: National in ScopeOffice of WaterPage 9 of 315 November 2009 IPEC16 (Houston, TX)• EPA’s CBM Detailed Study is national in scope. However, EPA will examine eachbasin separately to identify potential pollutant discharges and technology options.• Produced water volumes can vary greatly over time,between and within CBMbasins, and may be very large.– Production volumes range from 1,000 to 17,000 gal/day/well in the San Juan and PowderRiver Basins, respectively.• Pollutants in CBM produced water also vary betweenbasins. For example, totaldissolved solids (TDS) vary widely depending on basin geology.–Eastern U.S.:TDS concentrations typically range from 500 to 27,000 mg/L with somewells over 50,000 mg/L.–Western U.S.:TDS concentrations range from 400 to 2,000 mg/L (Powder River Basin),9,000 to 11,000 mg/L (Wind River), to approximately50,000 mg/L (San Juan Basin).• CBM produced water may also contain small amountsof metals and some volatileand semi-volatile organic compounds. EPA is also reviewing USGS research onsodium bicarbonate aquatic toxicity.CBM Detailed Study: Basin SpecificOffice of WaterPage 10 of 315 November 2009 IPEC16 (Houston, TX)Source:USGS Open-File Report 00-372pubs.usgs.gov/of/2000/ofr-00-372/OF00-372.pdfExample of CBM ProducedWater Chemistry Changingwith Geographic Location:Powder River Basin(MT/WY)Office of WaterPage 11 of 315 November 2009 IPEC16 (Houston, TX)Source:Handbook on Coal Bed Methane Produced Water: Management and BeneficialUse Alternatives, ALL Consulting, http://www.all-llc.com/CBM/BU/index.htm, July 2003.This graph shows the increased production of waterin the early life of aCBM well.Well Shut-inExample of CBM Produced Water Discharge VolumesChanging with TimeOffice of WaterPage 12 of 315 November 2009 IPEC16 (Houston, TX)• Major Tasks for Data Collection and Analysis:– Industry survey to collect technical, economic, and environmental data from a widerange of CBM operations across the Nation.– Site Visits & misc. secondary data sources (e.g.,DOE/EIA data)– Stakeholder meetings in the major CBM basins.– EPA has contacted over 700 people in eight statesin over 70 outreach and datacollection activities since 2007.• Stakeholders:– So far: API, regional trade associations, individual companies, treatment technologyvendors, DOE, BuRec, BLM, States, Landowners, Indian Nations• Schedule:– Approval from OMB to distribute the mandatory survey on 18 February 2009.– First Phase (Screener Questionnaire) distributed to approximately 290 operators(that have three or more CBM wells) on February 27th.– Second Phase (Detailed Questionnaire) distributedto approximately 250 CBMprojects on October 30th. Operators have 60 days to respond to survey.– EPA will analyze the survey results and identify whether to initiate a rulemaking inthe final 2010 Effluent Guidelines Program Plan (October 2010).CWA 304(m) Detailed Study: Coalbed Methane ExtractionOffice of WaterPage 13 of 315 November 2009 IPEC16 (Houston, TX)• Survey data will support EPA analyses that:– Quantify levels of pollutants currently dischargedby the industry– Assess potential environmental impacts.– Determine availability of technologies to controlpollutant discharges.– Identify water disposal practices and prevalence of each.– Evaluate economic achievability of the industry toincorporate new controltechnologies and/or disposal and beneficial use practices.• Unit of interest is “project”– Using State data (via HPDI.com) EPA estimated thatthere wereapproximately 45,000 CBM wells, but no way to linkthe wells into projects.Projects consist of 1 to many wells.– EPA used the screener questionnaire to identify business size of operator,number of projects for each operator, wells in eachproject, and project gasproduction and selected water management.– The detailed questionnaire was sent to statisticalsample of projects.CWA 304(m) Detailed Study: Industry SurveyOffice of WaterPage 14 of 315 November 2009 IPEC16 (Houston, TX)EPA CBM Detailed Study: Screener Data Summary• EPA compiled data from screener questionnaires andState data to identify 216operators managing three or more wells and 58 operators managing one to twowells (= 274 operators total).• EPA identified that there were 56,049 CBM wells in2008 that operators managedin 692 different CBM projects.• This CBM production, 2.0 trillion cubic feet, represents approximately 7.7 percentof the total U.S. natural gas production in 2008.• The 692 CBM projects are located in 16 different CBM basins across the Nationbut are mainly concentrated in Wyoming, New Mexico,Alabama, andAppalachia.• CBM projects ranged from over 2,000 CBM wells to 1CBM well. Nationwidemedium and large businesses have 28% of the projects (by number) but provide79% of the gas production.• EPA used these data to draw a representative sample of CBM projects. Thedetailed questionnaire will collect financial and technical data on approximately250 CBM methane projects across the country.Office of WaterPage 15 of 315 November 2009 IPEC16 (Houston, TX)Distribution of CBM Projects (Operator Size, Discharge Status)Small Operator(Discharge)15%Not-Small Operator(Discharge)13%Not-Small Operator(No Discharge)15%Small Operator(No Discharge)57%Office of WaterPage 16 of 315 November 2009 IPEC16 (Houston, TX)Distribution of CBM Gas Production (Operator Size,Discharge Status)Not-Small Operator(Discharge)33%Not-Small Operator(No Discharge)46%Small Operator(No Discharge)14%Small Operator(Discharge)7%Office of WaterPage 17 of 315 November 2009 IPEC16 (Houston, TX)CWA 304(m) Detailed Study: Industry Survey• EPA’s mailing list for the screener questionnairewas built on Statedata (via HPDI.com).• EPA opted to include operators on the screener questionnaire mailinglist if it was unclear about the type of gas production (conventional vs.coalbed methane).• EPA spent considerable effort in tracking down contact information forsmaller operators.• EPA used the updated contact information for its detailed questionnairemailing list.Office of WaterPage 18 of 315 November 2009 IPEC16 (Houston, TX)EPA CBM Detailed Study: Screener Data SummaryOverall operators identified more CBM wells in their responses to thescreener questionnaire (2008 data) than what EPA identified from Statedata (via HPDI.com) (2007 data).Screener database numbers rounded to two significant figuresOffice of WaterPage 19 of 315 November 2009 IPEC16 (Houston, TX)EPA CBM Detailed Study: Screener Data SummaryOverall operators identified more gas production (MMcf) in their responsesto the screener questionnaire (2008 data) than whatEPA identified fromState data (via HPDI.com) (2007 data).Screener database numbers rounded to two significant figuresOffice of WaterPage 20 of 315 November 2009 IPEC16 (Houston, TX)EPA CBM Detailed Study: Screener Data SummaryProduced Water Management Method for Selected Basins(Percentage of Reported CBM Projects)Office of WaterPage 21 of 315 November 2009 IPEC16 (Houston, TX)EPA CBM Detailed Study: Screener Data SummaryProduced Water Management Method for Selected Basins(Percentage of Reported CBM Production)Office of WaterPage 22 of 315 November 2009 IPEC16 (Houston, TX)• Stratification variables for selecting detailed questionnaire respondentsinclude:– Basin: Geological and regional differences+ Collapsed small basins within state+ Split Powder River Basin into Montana, Wyoming– Business size: Small business impacts– Discharge practices within two basins:+ Powder River Basin in Wyoming+ Appalachian+ Most other basin tend to have one main method forproduced watermanagement (discharge or zero discharge).• In the final design of the survey draw EPA focusedon basins withdischargers.• EPA also excluded basins from the draw that couldnot be used tomodel potential future CBM basins and were entirelycomposed of zerodischargers.CWA 304(m) Detailed Study: Industry SurveyOffice of WaterPage 23 of 315 November 2009 IPEC16 (Houston, TX)CWA 304(m) Detailed Study: Industry Survey• EPA used pie charts in evaluating the potential burden of the detailedquestionnaire on operators (in terms of number of projects and gasproduction).• For example, the following charts show the distribution of smallbusinesses that discharge produced water in the Powder River Basin,Wyoming:- One operator had 48 of the 85 projects.- Two operators contributed 50% of the gas.% projects/operator:%gas/operator:Office of WaterPage 24 of 315 November 2009 IPEC16 (Houston, TX)CWA 304(m) Detailed Study: Industry SurveyThe detailed questionnaire will capture different configurations of producedwater management for the selected CBM projects.EPA is also using the detailed questionnaire to identify CAPEXand OPEX, management of treatment residuals, and producedwater characteristics (volume and pollutant concentrations).Office of WaterPage 25 of 315 November 2009 IPEC16 (Houston, TX)CWA 304(m) Detailed Study: Industry SurveyEPA will use the different configurations of produced water managementto identify the current industry practices and evaluate alternativemanagement options.Example DiagramOffice of WaterPage 26 of 315 November 2009 IPEC16 (Houston, TX)CWA 304(m) Detailed Study: Industry SurveyEPA will use the survey weights to estimate incremental compliance costsfor alternative management options.Example DiagramOffice of WaterPage 27 of 315 November 2009 IPEC16 (Houston, TX)• CBM produced water of a suitablequality can be used for beneficialuse. Key controls are TDS andSodium Adsorption Ratio (SAR).– Beneficial use technologies includesub-drip irrigation, irrigation,livestock watering all either with orwithout treatment.Irrigation with CBM Produced Water(Powder River Basin, WY)• Treatment options include iron oxidation(aeration), coagulation/precipitation, reverseosmosis (RO), countercurrent ion exchange(CCIX), fixed bed ion exchange,precipitation, surface impoundments,downhole separation, and re-injection.– Reduces TDS, SAR, and metals content.– Iron oxidation is typically performed atdischarge locations as part of BMPs to reducediscoloration of discharge point.CCIX resin contract chamber(Powder River Basin, WY)Coalbed Methane Technology Options (Examples)Office of WaterPage 28 of 315 November 2009 IPEC16 (Houston, TX)• EPA and WYDEQ staff visited tendifferent newer treatment technologysites in Wyoming (June 2009).• This recent trip supplements the fivetrips to eight States that EPA took inOctober 2007. In total EPA has visitedover 30 CBM projects with varyingforms of produced water management(e.g., re-injection, treatment anddischarge, beneficial use).Trucked Produced Water, WyomingCoalbed Methane Technology Options (Examples)• Treatment systems recently visited by EPA include:– Fixed Bed Ion Exchange (PRB, WY)– Fluidized Bed Ion Exchange (Pilot Scale) (PRB, WY)– Aeration and Upflow Mixed Media Filtration (PRB, WY)– Ozone and Activated Carbon Pretreatment with Reverse Osmosis (PRB, WY)– Barium and SAR Removal via Chemical Precipitation(PRB, WY)– Commercial Facility Providing Organic and Inorganic Treatment (Pinedale, WY)– Thermal Distillation (Pinedale, WY)– Evaporation and Disposal Commercial Facility (Sublette County, WY)Office of WaterPage 29 of 315 November 2009 IPEC16 (Houston, TX)• EPA examines the costs of different technology options and the potentialeconomic impacts.• These pollution control options could be costly, with multiple impacts onCBM projects and operators.• EPA would like to address the following issues with respect to the potentialeconomic impacts of CBM produced water treatment costs:– Production losses– Firm failures– Employment impacts resulting from production losses and firm failures– Impacts on small businesses• The magnitude of such impacts can be directly or indirectly estimated usingproduction-levelandfirm-leveleconomic and financial modeling.• These models require detailed economic and financial data as inputs toaccurately reflect potential impacts.EPA CBM Economic AnalysisOffice of WaterPage 30 of 315 November 2009 IPEC16 (Houston, TX)Project-specificproduction volumes:current & projectedProject-specifc costs(operating &maintenance, other):current & projectedProject-specific costs(investments) (newprojects only)Project-specific cash flowmodelProject-specific and aggregate annualized costsDiscount rateEPA estimates ofoption costsINPUTSOUTPUTSProject-specific and aggregate production lossesProject-specific and aggregate profitability lossesStatistical weightsProject-specific and aggregate royalty lossesProject-specific and aggregate severance taxlossesProject-specific and aggregate federal tax lossesProject-specific and aggregate losses of projectproduction yearsBaselineconditionsPost-optionconditionsProject-Level AnalysisProject specific and aggregate 1st year shut insFirm-Level AnalysisIncome statementinformationBalance sheetinformationBaselineconditionsPost-optionconditionsFirm-level modelFirm-specific and aggregate firm failuresLesser firm-specific and aggregate impacts onfinancial healthEmployment lossesImpacts on small business (revenue test, firmfailures)Firm size informationEPA CBM Economic AnalysisOffice of WaterPage 31 of 315 November 2009 IPEC16 (Houston, TX)For more information on EPA’s study on CBM...More information is available on EPA’s website at:– http://www.epa.gov/guide/cbm/.EPA project lead is Mr. Carey Johnston, 202-566-1014,johnston.carey@epa.gov.FYI – there are other related studies underway on the topic of CBMproduced water management:– National Research Council (BLM funding)[http://www8.nationalacademies.org/cp/projectview.aspx?key=48996]– Bureau of Reclamation (potential for re-use of CBMproduced water)– Colorado School of Mines (DOE funding)