COPAS Technology Team RTC MFI -XX

1. COPAS Technology Team RTC MFI-XX • COPAS – Spring 2019 • April 25, 2019

2. Overview • RTC MFI-XX Draft 2 management of issues • Draft 2 significant changes and highlights • Draft 2 Comments Deadline & Drafting Team Next Steps

3. Management of Issues Significant Issues and how they were handled with Draft 2

4. Issues • Facility Common Areas • Categories of RTC Labor • First Level Supervision • Operator vs. Third Party costs • RTC Facility vs. Other Labor

5. Common Areas • COPAS Winter 2019 Discussion Topic 6 - Draft 1 treatment of common areas as “recovered by overhead”. Comment: Needs more discussion – common space used by RTC operators • Draft 2 handling: • Common area in RTC Stand Alone facility: included as overall chargeable cost of RTC facility • Common area in RTC where RTC and non-RTC activities are performed: excluded from overall chargeable cost of RTC facility • Reason: DWAP interpretive language under “Equipment Furnished by Parties, Affiliates” for Operator Operations Offices

6. RTC Labor • Dedicated Facility Labor (chargeable as part of RTC Facility) • Personnel directly operating or monitoring equipment on the Joint Property and includes: • a) operations personnel operating the monitoring and/or controlling equipment on a real time basis, • b) technical personnel, to the extent they are performing functions that directly impact operations by operating RTC equipment that controls physical equipment on the joint property, and • c) personnel who maintain the RTC computer and communication equipment (software and hardware technical specialists).

7. RTC Labor • Non-Dedicated Facility Labor (not chargeable as part of RTC Facility but may be chargeable per the Labor, Services, and Overhead provisions) • Asset team personnel and technical employees, such as engineers and geologists, who are not assigned to the RTC but who use the RTC periodically for a) analytical work traditionally done offsite and b) resolving a specific technical or operational issue in place of a trip to the Joint Property. • Administrative personnel • First level supervisor/supervision • Any other personnel not considered Dedicated Facility Labor

8. First Level Supervision • COPAS Winter 2019 Discussion Topic 7 - Draft 1 treatment of First Level Supervision (FLS) as not chargeable. Comment: Why not? part of the cost of ownership & operation, and 3rd party RTCs would include it. • Draft 2 handling: • Supervision is not a part of the cost of ownership and operation. If you look at the equipment and facilities listed in the MFIs, they include trucks, bulldozers, tractors, etc. and the cost allowed as a charge is the cost of the equipment and the cost of the operator of the equipment – no where is the supervisor of the equipment operator allowed. • Supervisor in the RTC does not qualify as a First Level Supervisor as they are not performing the functions required of a First Level Supervisor as detailed in the various accounting procedures.

9. Operator Recovery vs. Contractor Invoice • Winter 2019 Discussion Topic 5: • Document 1 statement: Only chargeable personnel are those performing the real-time monitoring and/or controlling function in the RTC  • Comment statement: 1st level supervisors should be billable, too. A 3rd party provider would include that in its rates. • RTC Team Position: What a 3rd party charges, which can include items the accounting procedure does not allow as chargeable (overhead, administrative functions), does not make the same items, when provided by the Operator, chargeable.

10. RTC Facility vs. Other Labor • Conditions for when labor can be included in the RTC Facility Rate? • RTC MFI-XX Draft 2 handling: • Dedicated Facility Labor personnel operating equipment that directly impacts actions on the Joint Property belongs in the RTC Facility Rate since chargeability is governed by the “Operator Furnished Facility or Equipment” provision • Non-Dedicated Facility Labor personnel chargeability depends on other provisions of the accounting procedure and does not belong in the RTC Facility Rate since it is governed by the Labor, Services or Overhead provisions

11. Draft 2 Overview Significant Changes and Highlights

12. Draft 2 Response to Comments • Document too long, Redundancies, Document Flow • RTC MFI-XX Draft 2 Solution: • Redundancies reduced • Document order of things changed to flow better: • I. Introduction (why the document is needed) • II. RTC Considerations (What are RTC costs and functions performed) • III. RTC Chargeability through the different COPAS APs • IV. RTC Allocation Considerations • V. RTC Allocation Examples • VI. Appendices A-F • Document size reduced from 72 to ~50 pages!

13. Draft 2 Response to Comments • Need RTC Chargeability Summary • RTC MFI-XX Draft 2 Solution: • Create an AP chargeability summary (Appendix A1) • Since team was concerned that no one read to the end of the Draft 1 document…..moved Draft 1 Appendix G (RTC Cost Description Chargeability Summary) to Appendix A2

14. Draft 2 Response to Comments • Examples are too complex to understand • RTC MFI-XX Draft 2 Solution: • RTC visual configuration examples are gone • Introduction to examples emphasizes that these are not the only possible examples and that the reader will need to utilize the principles included to apply to their own RTC situation • Number of examples reduced from 5 to 2 (!!) • Examples greatly simplified to include only 2 RTC situations: 1) RTC Stand Alone Facility, and 2) Operator Facility Space with RTC and Non-RTC Activities

15. Draft 2 Response to Comments • What about Major Construction and Catastrophe Overhead provisions? • RTC MFI-XX Draft 2 Solution: • Regarding situations when an RTC might be used in a major construction or catastrophe project, there are certain accounting procedures that state the major construction and catastrophe overhead provisions override the Direct Charges provisions. • Those accounting procedures are: • 1976 Offshore Accounting Procedure (for major construction projects), • 1986 Offshore Accounting Procedure (for major construction projects), • 1998 Project Team Accounting Procedure (for major construction and catastrophe projects), and • 2005 Accounting Procedure (for major construction and catastrophe projects).

16. Draft 2 Response to Comments • MFI should address all technologies (Winter 2019-Audit) • RTC MFI-XX Draft 2 Solution: • “Even though this document concentrates on RTC costs, the concepts presented could apply to any type of technology used in joint operations. As an example, certain functions previously performed in the field are now being performed remotely, such as using drones to inspect for pipeline gathering system leaks. In the past a pumper might drive by the pipeline and inspect for leaks and this function was chargeable. Now, an individual could be sitting in an RTC and operating a drone to inspect the same pipeline. The cost of the drone would be chargeable along with the cost of the drone operator since that person’s cost would become part of the cost of operating and owning the RTC and chargeable per the provisions of Equipment and Facilities Furnished by Operator.”

17. Draft 2 Comments Deadline MFI-XX Draft Timeline and RTC Team Next Steps

18. Next Steps • RTC MFI-XX Draft 2 distributed to Audit and JI Committee Chairs March 28, 2019 • Comments summary from Draft 1 placed on COPAS website under Draft Publications >RTC MFI-XX > RTC MFI-XX Draft 1 Comments Received • Send Draft 2 Comments Due BEFORE August 2, 2019 to: dbn.retzloff@gmail.com • Results of Draft 2 comments will determine whether there will be a Voting Draft in Fall 2019

19. Team Members • Larea Arnett, ExxonMobil (Houston) • Chris Copeland, Continental Resources (Oklahoma City) • Tammy Miller-Davison, Encana (Colorado) • Janice Edmiston, AMS-PAR (Houston) • Terry McMurray, Gas Equities (Colorado) • Joy St. Pierre, Shell (New Orleans) • Deb Retzloff, Independent Consultant (Houston) • Jeff Roberson, Chevron (Houston)