Statewide Update 2012

1. Statewide Update 2012 Keith Sheedy, P.E. Technical Advisor Office of Air

2. Canada United Kingdom China x3 Poland Lower 48 states shale plays Japan x2 Spain Turkmenistan Brazil Iraq India Jordan

3. Shale plays in Texas

4. Active oil and gas wells Approximately 397,827 Oil and Gas Wells as of July 2012 and Growing

5. What are the environmental regulations that apply to the oil and gas sector?

6. Who Regulates Oil and Gas Activities in Texas?(RRC or TCEQ) • The Railroad Commission of Texas (RRC) has primary regulatory jurisdiction over the oil and gas (O&G) industry. • The Texas Commission on Environmental Quality (TCEQ) is the environmental agency for the state (especially air emissions). • There is a Memorandum of Understanding (MOU) between the RRC and TCEQ detailing jurisdictions of O&G activities. • http:/info.sos.state.tx.us/pls/pub/readtac$ext.viewtac) • Common Environmental Requirements for Regulated O&G Operations - Publication RG – 482

7. Who Regulates Oil and Gas Activities in Texas?Water Issues (RRC or TCEQ) • Process wastewater discharge and storm water run-off from O&G sites – EPA • Drinking water • Private wells – suspected contamination by O&G should be reported to the RRC • Public water supply – concerns should be reported to the TCEQ • Reclaimed water from municipal or industrial sources used for hydraulic fracturing – TCEQ

8. Surface Water Rights Before initiating any diversion, impoundment, taking, or use of surface water, or construction for those activities, a permit must be acquired from the TCEQ. There are areas of the state where it may be difficult to find water available on a permanent, temporary basis due to existing permits and specific conditions in the stream.

9. Who Regulates Spills at Oil and Gas Sites?(RRC or TCEQ) Classification of the spill determines which agency has jurisdiction Spills associated with exploration, development, and production of O&G – RRC (air emissions - TCEQ) Hazardous substances - TCEQ Refined petroleum products – TCEQ Abandoned containers of unknown substances that are not leaking – TCEQ Texas Oil Spill Prevention and Response Program – Texas General Land Office

10. Who Regulates Waste at Oil and Gas Sites?(RRC or TCEQ) In general wastes from O&G related activities are regulated by RRC. The exceptions are: • Waste associated with transportation of crude oil and natural gas by railcar, truck, barge, or oil tanker • Refined petroleum products by pipeline • Wastes generated at oil field service facilities that provide equipment, materials, or services to the O&G industry • Wastes that are processed, treated, or disposed of at a solid waste management facility authorized by the TCEQ

11. What about the dust, noise, and traffic associated with O&G sites? Dust from public roads should be addressed by the local government. Noise complaints should be reported to the local law enforcement agency. Traffic complaints should also reported to the local law enforcement agency.

12. State Air Regulations - Authorizations Since September 1, 1972, owners and operators of an O&G site must obtain an authorization for air emissions. The agency uses a tiered approach to provide more options for permitting oil and gas facilities: de minimis exclusion; historical standard exemptions, permits by rule (PBR); standard permits; and case-by-case permits.

13. TCEQ Air RegulationsQuiz 1 A company had an “upset” at an O&G site that lead to unauthorized air emissions. Are they required to record the information concerning the event? Yes Are they required to report the event to the TCEQ? Depends on what and how much was emitted 30 TAC §101.201 and §101.222 have all of the answers

14. TCEQ Air RegulationsQuiz 2 Someone has complained to the TCEQ about an odor or dust issue at a well pad that is being completed, what TCEQ rules could apply? 30 TAC §101.4 – Nuisance and 30 TAC §111.111 – Visible emissions

15. TCEQ Air RegulationsSummarized Chapter 101 – State delegation of some Federal Regulations Chapter 112 – Control of sulfur dioxide and hydrogen sulfide Chapter 113 – State adopted 40 CFR Part 63 (MACT rules) Chapter 114 – Control of air pollution from motor vehicles - Gasoline and diesel Chapter 115 – Control of air pollution from volatile organic compounds Chapter 117 – Control of air pollution from nitrogen compounds

16. Federal Air Regulations 40 CFR Part 60 New Source Performance Standards (NSPS) • Subpart KKK – Equipment leaks of VOC from onshore natural gas processing plants • Subpart LLL – Standards of performance for Onshore Natural Gas Processing: SO2 emissions • Subpart JJJJ – Standards of performance for stationary spark ignition internal combustion engines 40 CFR Part 63 National Emission Standards for hazardous Air Pollutants (NESHAP) • Subpart HH – Natural gas production facilities • Subpart HHH – Natural gas transmission and storage facilities • Subpart ZZZZ – Reciprocating internal combustion engines

17. Federal Air Regulations (cont.) • Federal NSPS and MACT changes • EPA has just finalized a major revisions to oil and gas rules, includes a new Part 60 Subpart OOOO – Standards of Performance for Crude Oil and Natural Gas Production, Transmission, and Distribution

18. Federal Clean Air Act • EPA set health-based standards for clean air called National Ambient Air Quality Standards (NAAQS) for criteria air pollutants: • Ground-Level Ozone (O3) • Particulate Matter (PM2.5 and PM10) • Nitrogen Dioxide (NO2) • Sulfur Dioxide (SO2) • Carbon Monoxide (CO) • Lead (Pb) • Requires states with counties failing to meet air quality standards to produce a State Implementation Plan (SIP).

19. Nonattainment Areas

20. EPA’s NAAQS Review Schedule 2008 2009 2010 2011 2012 2013 Final Rule: May 27, 2008 Proposed Rule: October 2013 Proposed Rule – July 15, 2009 Final Rule – February 9, 2010 Proposed Rule – December 8, 2009 Final Rule – June 2, 2010 Proposed Rule – May 20, 2008 Final Rule - November 12, 2008 Proposed Rule – August 1, 2011 Final Rule – March 20, 2012 Proposed Rule – February 11, 2011 Final Rule – August 31, 2011 Proposed Rule – June 2012 Final Rule – June 2013 Ozone Nitrogen Dioxide (NO2) SO2 Lead NOX/Sulfur Oxides (SOX) Secondary Level CO PM 2008 2009 2010 2011 2012 2013

21. Eight-Hour Ozone Design Values and Population in Texas

22. Ozone Values and Future Monitors Noncertified 2012 Ozone Design Values as of September 1, 2012 87 79 72 71 75 74 80 88 70 76 =Based on federal requirements, areas where new ozone monitors could be required 69 72 61 64

23. Ozone Design Values and Population in the DFW Area

24. Main questions: How many sources are there and what is in the air? We quickly figured out that while we knew how many wells there were in the Barnett Shale formation, we didn’t know how many sources (storage tanks, compressors, etc…) were associated with each of those wells and what their actual emissions were.

25. 2009 Oil and Gas Equipment and Emission Inventory • Phase I – the first phase of the inventory request asked for basic information from producers and pipeline companies in the 24-county area. • Phase II required that the companies provide detailed information for each piece of equipment reported in Phase I, including: • Equipment and production information • Air emissions authorizations • Location of the sources located within one-quarter mile of the nearest receptor, and • Annual 2009 emissions for nitrogen oxides, volatile organic compounds, and hazardous air pollutants.

26. Barnett Shale 2009 Special Inventory

27. Oil and Gas Emissions Inventory Improvement Activities • Flash emissions model evaluation • Drilling rig emissions project • DFW compressor engine project • Emissions inventory guidance improvements • Engine fleet DFW nonattainment area survey, • Oil and Gas model evaluation • Texas-specific calculator for state-wide area inventory development Copies of these studies and more are available on the Agency’s emissions inventory website: http://www.tceq.texas.gov/airquality/airmod/project/pj_report_ei.html • The reduction is primarily associated with the use of low bleed, ultra low bleed, or no bleed pneumatic valves.

28. 2012 Estimated Emissions in DFW Area The latest DFW Attainment Demonstration SIP Revision for ozone estimated 2012 emissions of VOC and NOX in the nine-county area as:

29. Barnett Shale Pneumatic Valve Survey The TCEQ conducted a Barnett Shale specific pneumatic valve survey in late 2011. The survey requested addition data from the top 17 producers in the Barnett Shale, which accounted for 90 percent of the active gas wells. Results indicated a reduction of 49.6 tpd in estimated emissions associated with those devices. Based on results of the survey, the estimated 2012 VOC emissions would decrease to 63 tpd, which is half of the mobile source VOC emissions.

30. What Does This Mean in Terms of Ozone Formation in the DFW Area? Several variables in addition to the tons of ozone precursors emitted determine the potential impact of the emissions on ozone formation. Most of the O/G emissions are located north, west, and southwest of the DFW urban core, which is generally not upwind during conditions when the highest ozone concentrations are measured. The DFW area is NOX limited, so controlling NOx emissions is more efficient control strategy to minimize DFW area ozone. O/G NOX emissions are estimated to have been reduced from 68 tpd to19 tpd, because of TCEQ rules requiring the use of lower NOX emitting engines. Mobile source NOX emissions are approximately 15 times higher than O/G NOX emissions.

31. Statewide Pneumatic Devices Survey As part of ongoing efforts to improve the area source oil and gas emissions inventory, the TCEQ requested data associated with pneumatic devices operating at active gas well sites outside of the Barnett Shale area for calendar year 2011. Total component count of pneumatic devices categorized according to type and bleed rate. This data will be used to evaluate volatile organic compounds emissions estimates from pneumatic devices on the county-level.

32. Air Monitoring in Texas • Mobile monitoring (short-term monitoring) • Ambient air monitoring networks (long-term monitoring)

33. Short-term monitoring We conducted several (9) multiple day mobile monitoring trips in the Barnett Shale area Evaluating the ambient air along the ‘fence-line’ of the facilities (short-term 30 minute sampling)

34. Short-term monitoring Provides short-term data – a snapshot of air quality for a specific time and place Short-term data allows the TCEQ to make assumptions about the potential for health effects after a short-term exposure to the monitored concentrations Short-term data also helps the TCEQ determine where to focus resources

35. What is in the Ambient Air? Short-term Monitoring Since August 1, 2009, the TCEQ has surveyed 2,428 sites in the DFW area using the GasFind IR camera and at 2,384 of these sites, a hand-held volatile organic compound sampler was also used. 1,198 canister samples have been collected in the DFW area. Since 2005, the TCEQ has purchased 11 GasFind IR cameras (4 are located in DFW region) and numerous other handheld, state-of-the-art, air monitoring instruments Barnett Shale Air Sampling Map Viewer

36. Investigative Presence and Complaint Response Implemented a 12-hour response time for all complaints received concerning oil and gas facilities in the 24-county Barnett Shale area Added additional investigators to the DFW Region Office and created a Barnett Shale team Conduct periodic reconnaissance investigations in selected areas, along with scheduled compliance investigations at natural gas sites Conduct monitoring at the request of the public and other interested parties.

37. Ambient Air Monitoring Network One of the largest monitoring networks in the nation Monitor for: CO/NOx/O3 SO2/H2S/ VOCs and Semi-volatiles Chromium VI Particulate Matter Lead

38. TCEQ Monitoring Sites in DFW Area

39. North Texas 2012 VOC Air Monitors 2012 General locations of the next five Auto GCs

40. Auto GC Benzene Annual Averages

41. Benzene Health Effect Levels Auto GC monitors avg. reading: <0.2 ppb

42. Eagle Ford Shale Zero to 150,000 bbl/day in five years

43. San Antonio 8-Hour Ozone Design Value (ppb)

44. Meteorological Features in San Antonio’s Conceptual Model • High ozone days exhibit light winds and either • northeast and easterly flow at C23 • northwesterly to easterly flow reversal at C58 • Low ozone days exhibit mostly southerly to south-southeasterly flow

45. Eagle Ford Counties High and Low Ozone Days High Ozone days Low ozone days

46. What might a newer episode show? Other episodes, for example 2009, will show more high ozone days from southerly flow. Lowering the ozone standard will increase the importance of selecting spring episodes which are generally more southerly flow regimes. Furthermore, the TCEQ has started to review the need for addition monitors in the area.

47. Eagle Ford Counties with 2010 Population Data

48. TCEQ’s Oil and Gas Web Site: “Oil and Gas Facilities: Compliance Resources”Compliance tools for oil and gas facilities in Texas“texasoilandgashelp.org” Compliance information on air, water, waste, and spill issues. Guidance documents for local governments having to deal with oil and gas facilities and associated ancillary businesses. RV Parks: Am I Regulated

49. Summary: What We Are Finding Nearly all of the issues documented arose from human or mechanical failures. These items were quickly remedied and could have been avoided through increased diligence on the part of the operator. Corrective actions amounted to little more than replacing worn gaskets, closing open hatches, and repairing stuck valves.

50. Moving Forward The TCEQ must continue to: • Ensure transparency of our efforts through abundant and timely communication with all interested parties; • Evaluate the existing ambient air quality monitoring network and expand, as needed, through the use of established agency protocol for determining the placement of long-term, stationary monitors; • Apply the use of state-of-the-art handheld air monitoring equipment to assess short-term, near-source air quality; • Maintain a frequent, routine investigative presence while also providing timely complaint response; • Base our rules and permits on sound science and common sense; and • Apply our enforcement tools in a fair and consistent manner.