1PROPOSEDGHGREPORTINGRULESUBPARTWDCPMidstreamMeetingwithCEQAugust6,20102WHOISDCPMIDSTREAM?50‐50jointventurebetweenSpectraEnergyandConocoPhillipsOperatesin“midstream” sectorbetween• “Raw” NaturalGas(NG)extractionand• Transmission/storageofpipelinequalityNGandNaturalGasLiquids(NGLs)Oneof largestNGgatherersandprocessorsandthelargestNGLsproducer•Gathering:ExtractedNGconveyedfromdozensofwellheadstoprocessing plantsthroughsystemofinterconnectedsmall‐diameter,lowpressurepipesandcompressor(or“booster”)stations•Processing:Multi‐stepoperationtoextractandisolateNGLsfrom“raw” NG;mayinclude“treating” of“raw” NGand/or“fractionation” ofNGLsDCPcurrentlyoperates:• ~60,000milesofgatheringandtransmissionpipeline• ~700gatheringsystemcompressorstations• 48NGprocessingplantsandtreatersMemberofGasProcessorsAssociationLongstandingNaturalGasSTARparticipant3“SUPER” SOURCEAGGREGATIONProposed“OnshoreNaturalGasProcessingPlants” definitionwouldrequire“midstream” sectortoaggregate• gatheringsystemsources‐‐nomatterhowminororgeographicallydispersed‐‐• withprocessingplantsSuch“super” sourceaggregationwould:• Raiseseriouslegalandpolicyissues• Imposeextremeburdens» WouldincreaseDCP’ssourcessubjecttoGHGreportingbymorethan10‐fold,atacapitalcostof$203million– nearly4timesEPA’sestimateofcapitalcostsfortheentiresectorof$53million» Wouldresultinsector‐widefirstyearcostsofapproximately$4.5billion,ascomparedtoEPA’sfirstyearcomplianceestimateof$74.7million4LEGALANDPOLICYISSUESRAISEDBY“SUPER” SOURCEAGGREGATIONcontraveneTailoringWouldcontraveneTailoringRule’necessityfindingsstwolegalnecessityfindingsforeffectiveregulationeffectiveGHGregulation• (1)Preserve“major” vs.“minor” sourcedistinction• (2)AvoidundueburdensonGHGsources<25,000tpy CO2eviolateWouldviolateCleanAirAct’s“stationarystationarysource”frameworkframework• Legalpresumptionagainstaggregation• Non‐aggregationofnaturalgasindustrycodifiedbyCongressinTitleIIIof1990AmendmentsSectionauthoritiesWouldexceedSection114authorities• Contradicts40‐yearregulatoryhistory• NorationalnexustosubstantiveGHGregulationqualifyotherwiseWouldqualifyotherwiseas“arbitrarycapriciousarbitraryandcapricious”• Noevaluationofbasicissuesnecessarytooverridepresumptionagainstaggregation• Highcostandextremeburdennotjustified5EXTREMEBURDENSOF“SUPER”SOURCEAGGREGATION:DCPNON‐AGGREGATIONAGGREGATIONGHGreportingforsourcesabove25,000tpyCO2ethreshold:• all48ofDCP’sprocessingplants• about24ofitscompressorstationsCostsestimatedat$63million(capital)and$2million/yr(operating)“SUPER”AGGREGATIONSOURCEAGGREGATIONAllofDCP’scompressorstations–anadditional630stations–• becomesubjecttoreporting• irrespectiveofGHGemissionsbelow25,000tpyCO2ethresholdCostsestimatedat$203million(capital)and$6.5million/yr(operating)DCP’s estimated costs significantly exceed EPAs estimated costs significantly exceed EPA’s estimated costss estimated costs–i.e., $53i.e., $53million (capital) and $21.4 million/yr (operating)million (capital) and $21.4 million/yr (operating)--for entire Sectorfor entire Sector6ESTIMATEDDCPMETERINGCOSTSw/andw/o“SUPER” SOURCEAGGREGATION$203.3millionTotal$62.8millionTotal§98.236(a)(17)§98.236(a)(18)$118million1,180$48million480#ofcompressorgasvolumemetersreq’d§98.233(o)§98.233(p)$81.3million813$11.3million113#ofcompressorrodventandwetsealdegassingmetersreq’d§98.233(d)$4.0million40$3.5million35#ofadditionalacidgasflowmetersreq’dProposedRuleSectionLeadingtoRequirementEstimatedCost“Super”SourceAggregationEstimatedCostNon‐aggregationSourceEquipment/InformationNeeds7“MIDSTREAM” SECTORINVOLVESCOMPLEXANDGEOGRAPHICALLYDISPERSEDOPERATIONS• 6,322milesofgatheringpipesconnecting2,944wells• 45Compressor/BoosterStations• 3ProcessingPlants• 5,258sq.miles• Avg.of24milesb/tCompressorStationsandProcessingPlantsPORTIONOFDCP’sSOUTHEASTERNNEWMEXICOGATHERINGSYSTEM8EXTREMEBURDENSOF“SUPER” SOURCEAGGREGATION:“MIDSTREAM” SECTORAverageperfacilitycostsfor1stcomplianceyear• GasProcessingPlants:$2.4million,vs.EPAestimateof$59,000• BoosterStations:$298,000,vs.EPAestimateof$12,000(forasmallgasplant)Total“midstream” sectorcostsfor1stcomplianceyear• GasProcessingPlants:$698.2million• BoosterStations:$3.846billionmagnitude1to2ordersofmagnitudehigherthanEPA’estimatedsestimatedcostsof$53million(capital)million/yr(operating)million(capital)and$21.4million/yr(operating)FundamentallyFundamentallyunfairthatthe“midstreammidstream”sector,sector,roughlywithroughlyone‐emissions,treatedhalftheGHGemissions,isnottreatedinterstatenaturalthesameastheinterstatenaturalgassector9PROPOSEDALTERNATIVERelyonnon‐aggregationsourceapproach• Avoidslegalandpolicyissues• PreservesequityamongdifferentNGindustrysectors• Yet,allowsEPAtocapturelargest“midstream” sectorsources–i.e.,processingplantsandlargecompressorstationsEvaluatesmaller(compressor)sourcesonaseparatebasis• Emissionfactorsstudycouldoccurby“midstream” sectorincooperationwithEPA» Centrifugalcompressorwetseals» Reciprocatingcompressorrodpackingvents• ResultswouldallowEPAtodetermineappropriateregulatorypathforward10BACK‐UPSLIDES11GPAMIDSTREAMSECTORCOSTESTIMATE12GPAMIDSTREAMSECTORCOSTESTIMATE13GPAMIDSTREAMSECTORCOSTESTIMATE14GPAMIDSTREAMSECTORCOSTESTIMATE15GPAMIDSTREAMSECTORCOSTESTIMATE16GPAMIDSTREAMSECTORCOSTESTIMATE17GPAMIDSTREAMSECTORCOSTESTIMATE