### Petition for Reconsideration of

Subpart W of the Final Rule for Mandatory Reporting of Greenhouse Gases: Petroleum and Natural Gas Systems

75 Fed. Reg. 74,458 (Nov. 30, 2010 ); Docket No. EPA-HQ-OAR-2009-0923

March 2, 2011

________________________ _____________________ ________________________

I. Introduction

The American Gas Association, founded in 1918, represents 199 local energy companies that deliver clean natural gas throughout the United St ates. There are more than 70 million residential, commercial and industrial natural gas customers in the U.S., of which 91 percent — more than 64 million customers — receive their gas from AGA members. AGA is an advocate for natural gas utility companies and their customers and provides a br oad range of programs and servic es for member natural gas pipelines, marketers, gatherers, in ternational natural gas companies and industry associates. Today, natural gas m eets almost one-fourth of the United States' energy needs.

AGA appreciates the effort that the U.S. Environmental Protection Agency (“EPA” or “Agency”) made to understand our issues and to address the concerns we raised in our comments on the Subpart W proposed rule. In particular, we appreciate EPA’s
clarification in the final rule that our members’ more than 64 million residential,
commercial and industrial customer meters will not be subject to annual on-site surveys or other reporting requirements under Subpart W. We also appreciate EPA’s decision to allow an array of effectiv e leak survey options, as we requested, rather than requiring that a ll leak surveys be performed using infrared cameras. These two changes significantly reduce burdens and costs as compared to the proposed rule.Unfortunately, in attempting to address thes e concerns in the final rule, the Agency has adopted new terms and requirement s with no clear meaning that unless changed will make it impossible for our me mbers to determine with assurance how to comply with the rule, yield conflicti ng and unreliable emissi ons data, and thereby undermine the purposes of Subpart W. We believe these new problems can be resolved if we are allowed to provide comments and discuss our proposed solutions with the Agency. AGA is t herefore petitioning for EPA’ s reconsideration of the Subpart W final rule captioned above (Subpart W Rule) pursuant to section 307(d)(7)(B) of the Clean Air Act (CAA or Ac t). In addition, we request that EPA stay the effectiveness of these provis ions in the Subpart W Rule pending
reconsideration.

Section 307(d)(7)(B) of the Act provides that the EPA Administrator is required to convene a proceeding to reconsider a final rule,

“[i]f the person raising an objection can de monstrate to the Admi nistrator that it was impracticable to raise such object ion within [the period for public comment] or if the grounds for such objection arose after the period for public comment (but within the time specified for judicial revi ew) and if such objection is of central
relevance to the outcome of this rule.”

CAA §307(d)(7)(B), 42 U.S.C. §7607(d)(7)(B). AGA’s objections clearly meet this standard. We object to terms and requirements that appeared for the first time in the final rule in November 2010, thus provid ing us no opportunity to comment on them during the period for public comment on t he proposed rule, which closed on June 11,
2010.

We also object to terms that were used in different ways in the proposed rule than in the final rule. Here, too, the grounds for our objection did not arise until after the comment period closed. Further, these terms and requirements are of “central
relevance to the outcome of this rule.” AGA members cannot decipher the meaning of these new terms – which are subjec t to conflicting interpretations.

It is conceivable that the electronic reporting forms or software that EPA has promised might upon review resolve some of these issues. But EPA did not provide
these materials for review and comment duri ng the comment period. On March 1, 2011, the Agency announced that it will release the reporting software sometime later this spring. We will need an opportuni ty to test this so ftware and the forms to be sure they align with what is required in the Subpart W Rule, once we know what
that is.

2As a result of these uncertainties, it will be impossible in present circumstances for Designated Representatives to provide t he required certification of compliance with the related Subpart W reporting requirem ents and emission factor formulas with assurance. In addition, the conflicting in terpretations of key terms and requirements are likely to result in either significant ov er reporting or under reporting or inaccurate reporting of greenhouse gas emissions. Clear ly, these objections are of central
relevance to the outcome of this rule.

II. Objections and Request for Administrative Stay

A. Request for Administrative Stay of Subpart W Rule

EPA should stay the applicat ion of the Subpart W Rule pending reconsideration. The Administrative Procedure Act (APA) provides that “[w]hen an Agency finds that justice so requires, it may postpone the effe ctive date of action taken by it, pending judicial review.” 5 U.S.C. §705. APA sect ion 705 clearly shows that the standard for an Agency’s administrative stay (justice so requires) differs significantly from the standard for a judicial stay of the Agency’s action (irrepar able harm). There is no need to show irreparable harm to support an administrative stay. EPA has applied the APA’s “justice so requires” standard fo r administrative stays in Clean Air Act

cases. 1 EPA can and should find that in th is instance, justice requires staying the Subpart W Rule pending recons ideration. Certainly it is unjust to require compliance from natural gas local distri bution companies (LDCs) when they cannot determine what they are required to do under the Rule, and absent a stay, they will be forced to make a “guess” to begin per forming leak surveys and collecting data on emissions this year. The resulting information would be gathered under different interpretations of the rule, as each LDC di d the best it could, and therefore would be of little use to EPA. Accordingly, t here would be no significant damage to EPA’s mission from granting this stay.

AGA accordingly requests a stay of the ef fective date for the Subpart W provisions affecting natural gas distribution, dehydrat ion units at underground storage facilities, and LNG facilities pending reconsideration.

1 See, e.g., Ohio: Approval and Promulgation of Implementation Plans, 46 Fed. Reg. 8,581, 8,582 n.1 (Jan. 27, 1981).

3B. AGA’s Objections

AGA requests reconsideration of Subpart W, as applied to Natural Gas Distribution Companies, Natural Gas Distribution Faci lities, dehydration units and internal combustion units at Underground Storage Fa cilities, and LNG facilities, based on the following objections.

1. Key New Terms Are Vague and Confusing

The Subpart W obligations for LDCs are prim arily focused on reporting emission leaks.
The manner in which those leaks must be quantified and report ed depends on the regulatory classification of the leaking equip ment. Specifically, physical surveys of the number of leaks are required for “ above ground meters and regulators at custody transfer city gate stations.” Emission fact ors for leaking component are then applied to
those numbers to co mpute an end quantity.

On the other hand, the rule requires “devel oped” emission factors to quantify emissions from “above ground mete rs and regulators at non-custody transfer city gate stations.”

The rule does not define any of these terms (e.g., custody transfer city gates, non - custody transfer city gates, meters and regulators). Most im portantly, the basic distinction that required thes e new definitions was not present in the proposed rule. Accordingly, there was neither opportunity nor occasion to comment on these terms and their usage during the rulemaking. AGA members would like to work with EPA to develop clear definitions for the terms custody transfer city gates and non-custody transfer city gates.

a) Non-custody Transfer City Gates Station

Several provisions in the Subpart W Rule and preamble seem to imply that a “noncustody-transfer city gate station” will a lways have a meter. The emission factor equation W-32 for “non-custody-transfer city gat e stations” clearly requires multiplying
the emission factor times the num ber of above ground meter runs.

There is a difference of opinion among AGA members whether a non-custody transfer station must have a meter to be a part of the reporting requirement. The term is not clearly defined in the rule.

The term “city gate” is widely used in the i ndustry, but unfortunatel y it means different things to different companies. It can mean the place where an LDC takes custody of

4natural gas from the upstream supplier (eit her directly from a producer or from an interstate pipeline company). The term “city gate” is also used by some to refer to the place where natural gas is conveyed into a lo wer pressure distribution system for a town or city – either directly from the upstream suppl ier (producer or interstate pipeline) or from the LDC’s own intrastate high pressure transmission pipelines.

Some companies do not use the term “city gate” to refer to the si tuation where natural gas goes from the company’s own transmission pipes to one of its distribution systems. Instead, these companies may use other terms such as “district re gulator” or “metering and regulating station,” or “M&R” equipment, and these terms also can have varying meanings. AGA believes the best solution would be to work with EPA to develop clear, workable definitions for use in the Subpart W ru le. This is essential to ensure that all operators report the same information required by EPA.

It was not possible to comment on this iss ue, because the terms “city gate,” “custody transfer,” " non-custody transfe r," “meter and regulator” and “meter run” were not used in proposed section 98.232(i)(1) until after the fi nal rule went into place Moreover, the whole conceptual framework of the proposed ru le was different, in that the proposed rule did not rely on making distinctions am ong different locations or types of equipment.

b) Custody Transfer Ci ty Gate Stations

In the Subpart W Rule, EPA introduced a new requirement that an LDC must perform annual leak surveys at all its “custody-transfer city gate stations.” This term appeared
for the first time in the fi nal rule and is not defined. Accordingly, AGA had no opportunity to comment on it.

Various provisions in the Subpart W Rule and preamble indicate that the LDC should perform leak surveys on a list of specif ied equipment, apply certain default “leaker” emission factors to the componen ts found to be leaking at the time of the survey, total
those leaker emission factors for each stat ion, and then total the emissions from all stations and divide by the number of mete r runs to develop a company-specific emission factor for “city gate stations” that is to be applied to the population count of meter runs at non-custody trans fer city gate stations regardless of whether it has a meter, depending on the definition of non-custody transfer station.

The Subpart W Rule indicates that facilitie s that are part of a transmission system are not subject to Subpart W reporting. But in many cases, the meter runs at custody
transfer stations are owned and operated by the upstream supplier (which is either the producer or an interstate transmission pipe line company). The upstream supplier needs

5to know the volume of natural gas conveyed, so that they know how much money to bill the LDC. The LDC does not own or operate the meter runs in these situations, the
meters are not within the di stribution system, and the LDC has no authority to leak test the equipment owned and operated by another entit y. Since the equipm ent is within the transmission system, that would seem to place it outside the scope of the Subpart W
Rule. This will lead to anomalous results. We believe it makes better sense to apply a standard emission factor to a population count of such stations, and this will yield better,
more consistent data.

2. There are Far Simpler Ways to Accomplish EPA’s Objectives

Equally Well

We urge EPA to allow LDCs to use the new, updated emission factors developed recently by the Gas Technology Institute (GTI) Operations Technology Development (OTD) group for custody transfer stations and below ground regulators, which were described in AGA’s comments and provided to EPA by member National Grid during the comment period. These new emission factors could be applied to a population count of both above and below ground regulat or stations to provide a more comprehensive and accurate estimate of greenhouse gas emissions – using an easier and cheaper approach.

3. New Emission Factor Formulas Are Confusing Or Contain Math Errors that Vastly Inflate Emission Estimates

The new emission factor equations W-30, 31 and 32 in the final rule are confusing. Since these formulas were not included in the proposed rule, AGA did not have an opportunity to comment on them. Notably, Equation W-32 for n on-custody city gate stations contains a math error that results in double counting annual hours of operation, thereby inflating emission estimates for non-cu stody-transfer city gate stations by a factor of 8,760. Specifically, Equation W-32 generates an annual emission factor (EF). Equation W-31 requires that this annual EF be multiplied by the annual hours of operation. Equation W-32 should be modified so that the EF that is calculated is an hourly emission factor

Equation W-30 is also confusing. The form ula and the final rule provisions that it references use terms such as “equipment leak source,” “facility” and “source” inconsistently to reference either components or leaks at a particular site or at the “facility” – which for purposes of the natural gas distribution source category encompasses the LDC’s entire statewide distri bution system. This makes it impossible to understand what the company is supposed to be calculating – emissions per station
or the sum of emissions from all stations? In addition, it is unclear how emissions from various component types are to be treated in the calculations. Equations W-30, W-32,

6and section 98.233(q)(8) and/or (r)(6) appear to be missing provisions or definitions that would explain what EPA intends to require. In addition, W-30 does not mesh properly with W-32, because Equation W- 30 refers to “components,” whereas W-32 (which relies on the data used in W-30) refers to “meters” and “meter runs.” In EPA’s January 2011 informal Q&A responses to AGA’s question s regarding the final rule, the Agency responded that the emission factor equations should be based on counts of “meter runs.” However, the disclaimer on EPA’s response makes it clear that AGA members cannot rely on this interpretation of the c onfusing provisions in the final rule:

“DISCLAIMER: Any communication on t he GHG Reporting Program (GHGRP) is intended to provide general and administrat ive information about Part 98. This communication does not provide legal advice, and responses to questions received do not have legally binding effect or expressly or implicitly create, expand, or limit any legal rights, obligat ions, responsibilities, expectations, or benefits in regard to any person. Fac ility owners or operator s and suppliers are responsible for determining how they woul d be affected by the requirements of
the rule.”

Since it is not possible for LDCs to dete rmine what these equations in the final rule require, the remedy must be to revise the final ru le so that it clearly explains what is or is not required under Equations W-30, W-31 and W-32, and to allow AGA and its members an opportunity to comment on t he proposed changes to the equations before they are adopted in final form.

4. New Electronic Reporting For m is Not Yet Available for

Comment or Testing

Stakeholders should be given the opportunity to comment and to have access to the reporting software to perform tria l runs. Even if EPA fixes problems with the definitions and formulas, this will have no effect if the re porting software does not accurately reflect those changes. Stakeholders did not have an opportunity to review and comment on the forms and software during the comment period that ended on June 11, 2010. In fact, the forms and software are still not avail able for review. This is creating problems for reporting under other provisions of the Mandatory Reporting Rule (MRR) in addition to Subpart W. We need an opportunity to debug the system and perform quality assurance and quality control (QA/QC) testing to ensure that the software results in an accurate emissions report. Otherwise it will be impossible for Designated Representatives to certify with assurance that their company has filed an accurate report in compliance with the Subpart W Rule.

75. EPA Should Exclude Small In ternal Combustion Sources, Not
Just External Combustion

Under the final rule, LDCs are required to report emissions under Subpart W if they operate a “distribution facilit y” (i.e. distribution system) that is estimated to emit methane from certain listed types of equipm ent equal to or exceeding 25,000 metric tons per year of CO2 equiva lent (CO2e) emissions. If an LDC’s estimated system-wide methane leaks exceed this threshold, then it is required to report both estimated methane leaks from distribution equipment a nd combustion emissions -- carbon dioxide (CO2), methane (CH4), and nitrous oxi de (N2O) from stationary combustion equipment. 2 Similarly, if an LDC or other company operates an underground storage facility whose methane and CO2 emissions from listed components exceed the 25,000 ton per year threshold, then the underground storage operator is required to report both
its estimated methane emissions and its com bustion emissions from stationary fuel combustion equipment. 3

In the final rule, EPA substantiall y expanded paragraph 98.233(z) beyond what appeared in the proposed rule. The effect of this change, plus changes at 98.232(i), (j) and (k) pertaining to gas distribution, appear to pull in a much broader spectrum of
combustion units than would have been the ca se under the proposed rule. Under the proposed rule, only if the aggregate maximum rated heat input capacity of stationary fuel combustion units at a discrete facility totaled 30 mmBtu/hr or greater would there be a reporting obligation. The changes made to the final rule, again without opportunity for our members to review and comment, woul d appear to expand the reporting obligation to a much larger population of smaller units spread across the distribution system.

EPA added a new exclusion from the reporting rule for small external combustion sources used in natural gas production or di stribution that have a rated heat capacity less than or equal to 5 mmBtu/hr. AGA suppor ts and appreciates this new exclusion for small external combustion sources. However, we do not understand why EPA excluded only external combustion sources such as small boilers, and did not also exclude small
internal combustion sources such as small stationary engines and turbines with a rated heat capacity less than or equal to 5 mmBtu/hr, which equates to about 625 hp. Having

2 See 75 Fed. Reg. at 74,498-90, 74,504; 40 C.F. R. §§98.231, (reporting threshold) 98.232(i)(6)(LDC requirement to report combustion emissions), 98.233 (z) (method for calculating natural gas distribution combustion emissions).

3 See 75 Fed. Reg. at 74,489-90; 40 C.F.R. §§98.2 (r eporting threshold), 98.232(f) (underground storage list of equipment and components), 232(k) (requirement for Subpart W facilities – other than production and distribution - to report combustion emissions under subpart C).

8to account for such small sources would impose a significant bur den on LDC reporters
that is not commensurate with the value of the data that w ould be provided. We note also that given the unusually broad definition of “distributi on facility” – to encompass all distribution pipe and equipment operated by a gas utility acro ss an entire state – this will sweep in thousands of small combustion units that would not be included in reporting requirements and burdens for other sectors – or for combustion facilities under Subpart
C - where the definition of facility is limited to the tr aditional CAA concept of a contiguous property or plant si te. AGA requests reconsiderat ion of this new exclusion
for small combustion sources and revision to include both small internal and external combustion sources, as well as to clarify t hat reporting of combusti on emissions is only required where the aggregate maximum rated heat input capacity of stationary fuel combustion units totals 30 mmBtu/hr or great er at a discrete station site after the
excluded units are deducted from em issions at that station.

In addition, we do not understand why EPA prov ided no similar de minimis exemption
for either internal or external small combustion sour ces operated at an underground storage facility. The final rule provides that the operator of an underground storage facility must report combustion emissions purs uant to 40 C.F.R. Pa rt 98, Subpart C. Was it EPA’s intention to require an undergr ound storage facility to report combustion
emissions only if the combustion emissions fr om combustion sources at the underground storage facility independently exceed the 25,000 ton per year CO2e reporting threshold for Combustion Facilities under Subpart C? If so, section 98.232(k) should be revised to say this explicitly. If not, EPA should revise the final rule to provide a de minimis exemption for small internal and external combustion sources at underground storage facilities.

6. The Rule Contains Conflicting Provisions Regarding Whether

Emissions from Dehydration Un its at Underground Storage Facilities Should or Should Not be Reported

AGA requests reconsideration of sections 98.230 and 98.232 based on grounds that arose after the comment period on the proposed ru le closed – and in fact arose after the publication of the final rule . AGA members believed they understood these provisions, as proposed and as finalized, but a recent pronouncement from EPA casts this in doubt.

Based on this new pronouncement, we question w hether it is possible to determine from
the final rule whether or not emissions from dehydration uni ts at natural gas underground storage facilities are requir ed to be reported as underground storage facility emissions. Sections 98.230 and 98.232 contain potentially c onfusing statements in this regard. AGA members belie ve the rule was probably intended to exclude emissions from such dehydrat ion facilities, based on EPA’s explanation in the preamble

9that section 98.232 was intended to define s pecific emission sources that would be subject to reporting for a particular industr y segment. Section 98.230(a) confusingly mentions dehydration units as included wi thin the underground storage segment. But
we have understood that se ction 98.232 is intended to limit the equipment sources actually subject to the reporting require ment for each segment. We have also
understood that EPA included these listed s ources in the section 98.232 reporting requirement because they were deemed to be significant contributors toward overall emissions in the segment.

However, EPA’s recent response to AGA’s question 11(d) [EPA “Question Tracker 479112”] in January 2011 has caused conf usion, because it implies a different interpretation than the preamble and ot her EPA documents in the rulemaking record. We asked whether or not to include dehydrat ion emissions in reporting emissions for underground storage facilities, ant icipating that the Agency w ould confirm that reporting is not required. Instead, EPA responded as fo llows, referencing 98.230 but ignoring the
limitation in 98.232(f):

“Response : Per 98.230(a)(5), natural gas underground storage processes and operations, including dehydr ation, are part of the def inition of the underground storage segment. Therefore, if you have t hese processes at your facility, as defined in 40 CFR 98.6, you would be requi red to report on emissions from these dehydration units.”

This informal Agency response contradicts th e final rule preamble and Response to Comments document. AGA members had been re lying on those documents to interpret
sections 98.230 and 98.232. We understood that sinc e dehydration units are not listed as being subject to the reporting require ment for underground storage facilities in section 98.232(f), the rule t herefore does not require r eporting dehydration emissions for this segment. If this is not the inten t, then it is unclear what section 98.232 is supposed to achieve.

The preamble and Response to Comments (R TC) support our interpretation that dehydration emissions are excl uded from the repor ting requirement. For example, the preamble to the final rule explains:

“Reporters of an industry segment as def ined by 40 CFR 98.230 would report emissions under subpart W only from t he corresponding source types listed for that particular industry segment as defi ned in 40 CFR 98.232. For example, an onshore natural gas transmission compression reporter as defined by 40 CFR

1098.230(a)(4) would report emissions under subpart W only for sources defined in 40 CFR 98.232(e).” 4

Similarly, the RTC explains:

“EPA has clarified in today’s final rule t hat a segment shall report emissions from sources listed under that segment in Section 98.232 of the rule.” 5

“Today’s final rule covers all of the si gnificant sources of emissions under each category source type, taking into consi deration the reporting burden, and other relevant issues. Reporters only report emissions under subpart W from sources listed in Section 98.232 “GHGs to Report” for the specif ic industrial category for which the reporter’s facility qualifies. Ho wever, for threshold determination the reporter must combine emissions and follow the requirements of Section 98.2, for facilities that contain any source cat egory for which calculation methods are provided.” 6

Given EPA’s conflicting response to AGA, which references only 98.230 and ignores the limitation in 98.232(f), it seem s that even EPA finds these pr ovisions confusing. AGA requests reconsideration and revi sion of the rule to make it clear that operators of underground storage facilities (as well as tr ansmission compression facilities) are not required to report emissions from dehydration units.

III. Additional Requests for Relief Upon Reconsideration

A. EPA Provides No Rational Ex planation for Using Outdated,
Inaccurate Emission Factors Rather than Modern, Updated Emission
Factors

In our comments on the Subpart W proposed ru le, AGA urged EPA to use updated,
modern emission factors as t hey become available. We noted that some updated emission factors are already availabl e and should be adopted as approved default
emission factors in the final rule. EPA dec lined to do so without adequate explanation.

4 75 Fed. Reg. 74,462

.

5 RTC, part 1, at 136 (pdf file page153 of 935).

6 RTC, part 1, at 67 (pdf file page 84 of 935).

11Instead, the Subpart W Rule requires LDCs to use outdated emission factors to
estimate their methane emissions. These ol d emission factors were developed over a decade ago by the Gas Research Institute (GRI) using data from testing a limited sample of equipment in work performed near ly 20 years ago. GRI developed the emission factors to facilitate a general estimate of nationwide methane emissions from gas distribution -- not for the purpose of estimating methane emissions from pipe and equipment used in an individual natu ral gas distribution system.

Since that time, AGA member companies have been steadily reducing methane leaks and tightening their distribution systems through voluntary participation in EPA’s Natural Gas STAR program and mandatory complia nce with continuously more stringent PHMSA regulations, resulting in fewer emi ssions. AGA and its me mbers are supporting an ongoing joint research and field testing program with EPA and the Gas Technology Institute (GTI) (the successor to GRI) to develop updated, more accurate methane
emission factors to facilitate more accu rate GHG emission estimates for plastic distribution pipe, metering and regulator (M&R) stations and other natural gas distribution equipment. GTI’s Operations Technology Deve lopment (OTD) group issued a report in November 2009 providing a new updated emission factor for metering and regulating (M&R) stations that could be us ed to simplify and improve the accuracy of emissions reporting for above and below ground regulator stations. This could be used instead of the confusing and cont radictory provisions in the final rule for “non-custodytransfer city gate stations.” AGA referenced this new emission factor in our June 11, 2010 comments, and AGA member company Na tional Grid provided a link to the OTD web site, where they told EPA the M&R em ission factor report is available for free downloading. 7

In November 2010, in response to a request from the Agency, AGA submitted a list of our members’ priority questions regarding the final Subpart W Rule. In our question number 6 (EPA Question Tracker 479106), we s ubmitted an electronic copy of the OTD emission factor report and asked whether EPA would consider changing the rule to incorporate the new OTD emissi on factor for regulator stat ions. EPA responded that it
would take the submission into consideratio n in any future rule revisions, which we appreciate. However, the Agency also responded that it did not receive this data until November 2010. This is incorrect. AGA described the new emission factor in our comments, and our member National Grid provided a web link to the report in comments filed June 11, 2010, within the comment period.

AGA requests that EPA allow t he use of this new, more a ccurate emission factor for regulator stations upon recons ideration of the Subpart W Rule . In addition, we request

7 For your convenience, here is the direct link: http://media.godashboard.com//gti/77b_OTD-10- 0002_GHG_Emission_Factors_FinalReport_v2.pdf

12that EPA revise the rule to facilitate expedi tious adoption of other new emission factors as they are developed, including a new em ission factor for buried plastic pipe that should be complete within the next two years.

B. The Definition of Distribution “Facility” is Overbroad and Confusing

The Subpart W Rule defines “Facility with respect to natural gas distribution for purposes of [Subpart W] and Subpart A” to mean:

“the collection of all distribution pipel ines, metering stations, and regulating stations that are operated by a Local Distribution Company (LDC) that is regulated as a separate operating company by a public utility commission or that are operated as an independent munici pally-owned distribution system.”

40 C.F.R. §78.238, 75 Fed. Reg. at 74,511. There are se veral problems with this definition. First, it is conf using. In discussing the repor ting requirements for LDCs, both the Agency and our members find it difficu lt to avoid confusion when discussing requirements for individual locations – what one normally calls a facility – and the reporting system-wide “facility” as defined in the rule. Second, it is not clear whether a gas utility that operates distri bution systems in multiple st ates - but subject to the regulation of a different public utility commission in each stat e - should count that multistate operation as a single “facility” or should count operations in stat e A as one “facility” and operations in state B as a second “facility. ” Third, most LDCs are served by
affiliate or interstate transmi ssion pipelines, and the definition of a distribution facility as an LDC, which is regulated as a separate co mpany by a Public Utilities Commission (PUC) is designed to fit that business model . However, California utilities and some other AGA members operate both transmission and distributi on systems. T he definition of a distribution facility needs to be clarified to determine the specific operations that are included in it. Fourth, by using such a broad definition of natur al gas distribution “facility” – to include virtually ever ything operated by an LDC – the Agency has effectively set a far more stringent applicabi lity threshold for LDCs than it has for all other sectors (other than for production, where EPA adopted a multi-state, geologic
basin-wide definition of “facilit y.”) EPA has not provided satisfactory response to our
detailed comments on this i ssue, and we believe there are more workable approaches that could be used. AGA requests reconsideration of the natural gas distribution “facility” definition.

13C. It Was Arbitrary and Caprici ous for EPA to Create a Subpart W Reporting Regulation for a Null Set – LNG Storage Facilities Will Not Exceed the 25,000 ton per year Threshold

EPA’s Subpart W Rule creates an elaborate r egulatory program for a null set. Liquefied natural gas (LNG) satellite and peak shavin g facilities – defined as “LNG Storage Facilities” in the Subpart W Rule – are much smaller than LNG import and export terminals. They have far fewer combus tion sources and components. As AGA demonstrated in its June 11, 2010 comments on the proposed rule, even if every combustion source operated at maximum th roughput for vaporization and liquefaction systems and every component leaked methane (thus requiring the use of leaker
emission factors for all com ponents) the collective carbon di oxide equivalent emissions from even the largest LNG satellite or peak shaving facility could not exceed the 25,000 metric ton per year threshold. And in fact , these facilities emit far less than one half of this worst case emissions scenario, becaus e the combustion sources actually operate about one third of the year or less, and almost no components actually leak.

We appreciate EPA’s creation of an applicability tool to help operators of these facilities determine that their facilities could not po ssibly exceed the applicability threshold. However, we did not have an opportunity to comment on this applicability tool, because
it was created after the comment period ended. We are concer ned that it could be used to infer that these facilities actually emit greenhouse gases at ‘worst case’ levels, which could be used to mislead policy makers as they evaluate future climate emission reduction programs. Further, it makes no sense to require facility operators to go through the effort to prove repeatedly what is already known: that LNG satellite or peak shaving (storage) facilities would not exceed the applicability threshold even if operated in a manner that would never be tolerated by other regulatory agencies or company shareholders. Creating a regulator y program for a null set is a classic example of wasteful, unnecessary and arbitrar y and capricious rulemaking. EPA should revise the Subpart W rule to exclude LNG storage facilities – i.e. LNG satellite and peak shaving facilities.

D. It Was Arbitrary and Caprici ous for EPA to Create a Subpart W Reporting Regulation for LNG Impor t and Export Facilities – Which Have Only Minimal Methane Leaks

Nearly all of the greenhouse gas emissions from LNG import and export facilities come from combustion emissions, not methane leaks. As AGA explained in our June 11, 2010 comments, for operational reas ons, these facilities must be very tight. Almost no

14components leak. If combustion emissions exceed the 25,000 metr ic ton per year threshold, these facilities are already requi red to report CO2 emissions vented from reciprocating compressor (engines) or centri fugal compressors (turbines) under Subpart C. Why then create an additional regulat ory burden on these facilities under Subpart W
to conduct extensive on-site leak surve ys to chase negligible methane leaks from valves, pump seals and other equipment? This will impose significant costs and
resource demands to conduct on- site methane leak surveys to report truly negligible
methane emissions. EPA has offered no rati onal explanation for requiring such a
waste of resources to chase minimal emissions data.

IV. CONCLUSION

For the reasons discussed above, AGA urges EPA to reconsider the provisions in Subpart W applicable to natural gas distri bution and underground storage facilities. AGA also urges EPA to stay the effectiveness of those provisions in Subpart W pending reconsideration, pursuant to the APA standard for an Agency’s administrative stay of a
final rule.

Dated March 2, 2011

Respectfully submitted,

American Gas Association

By: ____________________________

Pamela A. Lacey Senior Managing Coun sel, Environment American Gas Association 400 North Capitol Street N.W. Washington, D.C. 20001 placey@aga.org (202) 824-7340

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