1

PROPOSED GHG REPORTING RU

SUBPART W

DCP Midstream

Meeting with CEQ

August 6, 2010
2

WHO IS DCP MIDSTREAM?

 50‐50 joint venture between Spectra Energy and ConocoPhillips

 Operates in “midstream” sector between

• “Raw” Natural Gas (NG) extraction and

• Transmission/storage of pipeline quality NG and Natural Gas Liquids 

 One of largest NG gatherers and processors and the largest NGLs 

• Gathering: Extracted NG conveyed from dozens of well heads to pr

through system of interconnected small‐diameter, low pressure pip

compressor (or “booster”) stations

• Processing: Multi‐step operation to extract and isolate NGLs from “

include “treating” of “raw” NG and/or “fractionation” of NGLs

 DCP currently operates:

• ~ 60,000 miles of gathering and transmission pipeline

• ~ 700 gathering system compressor stations

• 48 NG processing plants and treaters

 Member of Gas Processors Association

 Longstanding Natural Gas STAR participant
3

“SUPER” SOURCE AGGREGATION Proposed “Onshore Natural Gas Processing Plants” d

would require “midstream” sector to aggregate

• gathering system sources ‐‐ no matter how minor or geogr

dispersed ‐‐

• with processing plants

 Such “super” source aggregation would:

• Raise serious legal and policy issues

• Impose extreme burdens

» Would increase DCP’s sources subject to GHG reporting by m

fold, at a capital cost of $203 million – nearly 4 times EPA’s e

capital costs for the entire sector of $53 million

» Would result in sector‐wide first year costs of approximately 

as compared to EPA’s first year compliance estimate of $74.7 
4

LEGAL AND POLICY ISSUES RAISE

“SUPER” SOURCE AGGREGATION

 Would contravene contravene Tailoring Tailoring Rule’s two legal necessity necessity finding

finding

effective effective GHG regulation regulation

• (1) Preserve “major” vs. “minor” source distinction

• (2) Avoid undue burdens on GHG sources < 25,000 tpy CO2e

 Would violate violate Clean Air Act’s “stationary stationary source” framework framework

• Legal presumption against aggregation

• Non‐aggregation of natural gas industry codified by Congress in T

1990 Amendments

 Would exceed Section Section 114 authorities authorities

• Contradicts 40‐year regulatory history

• No rational nexus to substantive GHG regulation

 Would qualify qualify otherwise otherwise as “arbitrary arbitrary and capricious capricious”

• No evaluation of basic issues necessary to override presumption 

aggregation

• High cost and extreme burden not justified
5

EXTREME BURDENS OF “SUPER”

SOURCE AGGREGATION: DCP

NON‐AGGREGATION AGGREGATION

 GHG reporting for sources above

25,000 tpy CO2e threshold:

• all 48 of DCP’s processing plants

• about 24 of its compressor

stations

 Costs estimated at $63 million

(capital) and $2 million/yr

(operating)

“SUPER” SOURCE AG

AG

 All of DCP’s compresso

an additional 630 stati

• become subject to re

• irrespective of GHG e

25,000 tpy CO2e thre

 Costs estimated at $20

(capital) and $6.5 millio

(operating)

DCP’s estimated costs significantly exceed EPA s estimated costs significantly exceed EPA’s estimated cos

s estimated cos

million (capital) and $21.4 million/yr (operating) million (capital) and $21.4 million/yr (operating) -- for entire 

for entire 
6

ESTIMATED DCP METERING COSTS w

w/o “SUPER” SOURCE AGGREGATION

Total $62.8million Total $203.3 million

§98§98

480 $48 million 1,180 $118 million

# of compressor

gas volume

meters req’d

§§

113 $11.3 million 813 $81.3 million

# of compressor

rod vent and

wet seal

degassing

meters req’d

35 $3.5 million 40 $4.0 million §

# of additional

acid gas flow

meters req’d

Pro

Sec

to R

Estimated Cost

“Super”

Source

Aggregation

Estimated

Cost

Non‐

aggregation

Source

Equipment/

Information

Needs
7

“MIDSTREAM” SECTOR INVOLVES

COMPLEX AND GEOGRAPHICALLY

DISPERSED OPERATIONS

• 

• • • 

• 

PORTION OF DCP’s SOUTHEASTERN NEW MEXICO GATHERING SYSTEM
8

EXTREME BURDENS OF “SUPER” SOU

AGGREGATION: “MIDSTREAM” SECT

 Average per facility costs for 1st compliance year

• Gas Processing Plants: $2.4 million, vs. EPA estimate of $59,000

• Booster Stations: $298,000, vs. EPA estimate of $12,000 (for a sm

 Total “midstream” sector costs for 1st compliance ye

• Gas Processing Plants: $698.2 million

• Booster Stations: $3.846 billion

1 to 2 orders of magnitude magnitude higher than EPA’s estimated estimated cos

million million (capital) (capital) and $21.4 million/yr million/yr (operating) (operating)

Fundamentally Fundamentally unfair that the “midstream midstream” sector, sector,

with roughly roughly one‐half the GHG emissions, emissions, is not trea

trea

the same as the interstate interstate natural natural gas sector
9

PROPOSED ALTERNATIVE Rely on non‐aggregation source approach

• Avoids legal and policy issues

• Preserves equity among different NG industry sectors

• Yet, allows EPA to capture largest “midstream” sector sour

processing plants and large compressor stations

 Evaluate smaller (compressor) sources on a separat

• Emission factors study could occur by “midstream” sector 

cooperation with EPA

» Centrifugal compressor wet seals

» Reciprocating compressor rod packing vents

• Results would allow EPA to determine appropriate regulato

forward
10

BACK‐UP SLIDES
11

GPA MIDSTREAM SECTOR COST ESTIM
12

GPA MIDSTREAM SECTOR COST ESTIM
13

GPA MIDSTREAM SECTOR COST ESTIM
14

GPA MIDSTREAM SECTOR COST ESTIM
15

GPA MIDSTREAM SECTOR COST ESTIM
16

GPA MIDSTREAM SECTOR COST ESTIM
17

GPA MIDSTREAM SECTOR COST ESTIM