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# / R Incorporated Providing Environmental Technical Support Since 1989

_________________________________________________________________________________________

501 Eastowne Drive, Suite 250  Chapel Hill, North Carolina 27514 Telephone: (919)484

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- 0122 MEMORANDUM

Date: January 5, 2011

Subject: Summary of the Conference Call between the EPA and American

Petroleum Institute on January 5, 2011

From: Denise Grubert , EC/R Incorporated

To: Bruce Moore, EPA/OAQPS/SPPD/CCG

I. PURPOSE

This memorandum summarizes the January 5, 2011 phone call between the Environmental Protection Agency (EPA) and industry representatives from the American Petroleum Institute (API). The intent of the call was to update API on the current timeline and give them an opportunity to raise questions and concerns.

II. DATE

The meeting took place on January 5, 2011 at 1:00pm (ET) on a phone line arranged by the EPA.

The call lasted approximatel y 90 minutes.

III. ATTENDEES

The following individu als called the conference line:

Industry Representatives

A merican P etroleum I

nstitute : Kathy Kalisz

Matt Todd John Wagner

B ritish P etroleum : Jeffrey Adams

Chevron : Janet Bounds

Clay Fleeberg

Shankar Ananthakrishna ConocoPhillips : Clint Gill

Devon: Darren Smith

Encana: Cindy Allen Enterprise: John Columbo

John Fields

ExxonMobil : Tom Monahan

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# / R Incorporated Providing Environmental Technical Support Since 1989

_________________________________________________________________________________________

501 Eastowne Drive, Suite 250  Chapel Hill, North Carolina 27514 Telephone: (919)484

- 0222  Fax: (919) 484

- 0122 Bob Morehouse

Robert Nolan

Marathon Oil : Jenny Yang

Shell : George Deeley

U.S. Environmental Protection Agency (EPA /OAQPS /SPPD/CCG )

Alex McPherson

Bruce Moore

David S a l ma n Jodi Howard

Nick Parsons Rachel Agnew

EC/R Incorporated

Heather Brown

Denise Grubert

Brad Nelson

IV. SUMMARY OF DISCUSSION

Bruce Moore began the call by thanking every th ing for participating in the call and started discussing the current deadlines, current timeline for events

. There is a meeting with Gina McCarthy , the Assistant Administrator, on Friday, January 7, 2011. O ptions selection with the work group will be held on the 1/14.

EPA stated their desire to maintain a s ense of “pragmatism” about what i s realistic to do and

cost

- effective. Without going into any details , EPA representatives maintain they feel the options they have come up with are very cost

- effective.

A question was asked about what value is considered cost

- effective. EPA answered that the

VOC cost

- effectiveness has typically been lo wer than the HAP emissions cost

- effectiveness.

Bruce responded that $3,0 00 to $5,000 per ton has been allowed in the past . Savings have been developed considering the benefit of additional methane added to the sales line when appropriate, but costs will also be presented without this benefit. The social cost of carbon is not factored in the cost analysis of the rule, but we are going to be consistent with the direction the Agency is going in regards to carbon. It will possibly be included in the preamble.

Another question was asked about the projected amount of emissions re ductions projected in the proposal. EPA responded on the order of thousands of VOC and a few million in methane co

benefits.

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# / R Incorporated Providing Environmental Technical Support Since 1989

_________________________________________________________________________________________

501 Eastowne Drive, Suite 250  Chapel Hill, North Carolina 27514 Telephone: (919)484

- 0222  Fax: (919) 484

- 0122 A question was raised whether EPA was aware of the limitations of green completions. EPA

answered that we believe we do understand. Late in the call, this topic was revisited and API recommended reviewing Wyoming’s green completion permit for reference. API also provided the following limitations:

 Proximity to pipelines

 Inert gas concentration

 Proper pressure

.

A question was raised from EPA to API regarding inert gas concentration. This is caused during energized fracs, which are becoming common especially in tight sand formations, when carbon dioxide and nitrogen are pumped into the well. The initial flowback will contain a high concentration of inert gas and will, therefore, not be considered sales line quality.

The subject of leak detection and repair was mentioned since it can be troublesome outside of processing plant s and EPA would like to find some type of alternative. For example, D irected

I nspection & M aintenance , which is less burdensome and more meaningful to remote locations.

EPA would like to minim iz e vehicle miles and man hours if it i s possible and still reach

emissions reductions.

A question was raised about what is being regulated. EPA indicated, that rules are being proposed for the NSPS and the MACT

. He did indicate the possibility of the CTG

, which would

affect more sources in non

- attainment areas

. Since the residual risk is not finalized, EPA would prefer to not discuss any of the preliminary results during this call.

Tom Monahan from Exxon asked if EPA was considering having criteria to incentivize innovation in reducing e missions. EPA said it will not be in the provisi ons in the rule, but EPA plans to seek comment on this issue

. EPA wants to encourage innovation. There should be some trial period of that technology where you would be considered to be in compliance with the

rule. David S alman from EPA discussed the general provisions

, which does allow a new technology with lower cost to be implemented if it can meet the minimum emission reductions as

the rule. API members raised caution because many times, the regions n eed to approve this and it is not always easy to obtain permission. It would be more helpful if an approval could be made through a State A gency or another streamlined approval process. Within the context of the innovative technology waiver, if this is g ranted than that technology is no longer considered

innovative for future use

. Policy has been issued for PSD that more than one might be allowed

under certain circumstances.

There are frequently multiple ways of controlling some of these sources. EPA is mostly looking at performance standards but that some are equipment standards. API wanted to ensure EPA realizes there are many factors that cause technologies to be inapplicable . EPA said if something is wrong in our understanding, you will have t ime to provide comment and correct us. Ideally,

EPA would like to catch any issues early, as is the purpose for these calls.

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# / R Incorporated Providing Environmental Technical Support Since 1989

_________________________________________________________________________________________

501 Eastowne Drive, Suite 250  Chapel Hill, North Carolina 27514 Telephone: (919)484

- 0222  Fax: (919) 484

- 0122 Brick issues in the MACT will be corrected. API asked if more tanks would be included and EPA responded yes. Another question f ocused on dehydrators

. With respect to the 1

- tpy of benzene threshold, exemption was not supported by the MACT floor so it may be convert ed to a
limit and EPA is also looking into throughput as well.

At this time, EPA is looking at degassing from centr ifugal compressor seals although in some

cases there are relatively low VOC emissions. This is the same for rod packing too.

API was concerned whether promulgation would be extended if the proposal date changed. EPA

said they could not comment as noth ing is confirmed yet. A PI is concerned with the length of the comment period if extension is granted. EPA said 60 days is typically given for public

comment and those are the current intentions. EPA also indicated that more than likely they will

hold several public hearings and the comment period must remain open for a certain time after the last hearing is held

.

API raised additional concern with the 1 tpy of benzene exclusion on dehydrators

. This causes

conflict with a State’s New Source Review p ermitting programs. This makes it difficult to include existing dehydration units as part of the NESHAP. As a result, thousands of dehy drator s would have to be permitted. Therefore

, the emissions threshold is an important aspect of the exemption. In ad dition, many dehydrators are area sources and API is concerned about having to have an emission limit for every source, particularly for these small area sources. API restated this exemption is fairly important because if there is a requirement under the NESHAP it causes

NSR permitting problems . EPA asked if there is an existing source that has a permit, does becoming subject to the rule require them to re

- apply for a permit. The response was that it depends on the permitting authority.

A nother question was posed about w ell venting for liquids unloading. API is concerned since

the Natural gas STAR focuses on plunger lifts . This is just one option that can be used over the

lifetime of a well. EPA is currently focusing on plunger lifts. API stated this do es not necessarily solve the venting problem. During the beginning of production liquids lift on their own, then perhaps velocity strings are used. EPA stated it is planning to build in criteria to allow other liquid lift measures and perhaps, as long as emissions are controlled. Bruce requested

more information on this issue.

API also raised a question on the effective date of the NSPS. Typically, sources built after the proposal date will be subject to the rule. Since well construction takes place over a relatively short time period , this definition may not apply. EPA has discussed this topic and formalizing a way to address this issue.

API asked about 112(n)(4)(b), which states that well head s are exempt and provides steps required to regulate them. At this time, well head and Christmas tree will not be included in the

rule. You would have to “ kill ” the well in order to repair the leak.

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# / R Incorporated Providing Environmental Technical Support Since 1989

_________________________________________________________________________________________

501 Eastowne Drive, Suite 250  Chapel Hill, North Carolina 27514 Telephone: (919)484

- 0222  Fax: (919) 484

- 0122 API wo ndered if there is no extension is there another option. EPA responded that the Agency is progressing as if there is no extension.

In regards to produce d water ponds, EPA plans to ask for comment since there is not enough

available emissions da ta to propose measures at this time.

Tanks and thief hatches were then discussed. EPA understand s that all tanks cannot have controls on them so this will not be required as we do not want to ruin the integrity of the tank. API responded that the integrity of the tank does not matter

. API does not feel there is a

difference in emissions if the thief hatch is open or closed because all tanks have a vent system

anyway

. If the hatch is sealed, the tank vent will have a larger plume versus the hatch

. EPA

asked whether there was documentation to show this, e specially when flashing occurs

. API

believes t he physics of the tank should prove this is true since there is alway s a positive pressure

condition in the tank. Devon Energy has been able to conv ince regulators that having the hatch open does not increase the quantity of emissions.

The call ended by Bruce thanking everyone for the information they provided. API requested

information regarding the de cision of the extensions once a decision has be en made final. The call ended at approximately 2:30pm.