Oil & Gas Production Protocol Public Workshop Webinar

1. Oil & Gas Production ProtocolPublic WorkshopWebinar September 22nd and September 8th, 2009

2. Agenda • Overview of agenda and logistics • Introduction to The Registry and its reporting program • Oil & Gas Production (O&GP) Protocol—background and development process • Overview of the O&GP Protocol and key issues for public feedback • Questions and comments • Wrap-up

3. Logistics for the Call • Presentation & agenda available for download: http://www.theclimateregistry.org/resources/protocols/oil-and-gas-production-protocol/ • All participant lines muted until question and comment period • Electronically “raise hand” or use chat feature to ask question • Must enter unique audio pin to “raise hand” and speak on the call • Technical problems: Tel. (866) 523-0764

4. Overview of the registry

5. The Climate Registry MISSION: To standardize and centralize high quality GHG data into a North American GHG registry to support voluntary and mandatory reporting programs BOARD: 12Canadian Provinces/Territories 41 U.S. States and D.C. 6 Mexican states 4 Native Sovereign Nations MEMBERS: 345 Members

6. The Registry: General Overview • The largest climate initiative in North America • Voluntary GHG reporting program of best practices • Policy neutral • Policy decisions are left to the provinces, territories, states and Native Sovereign Nations • No lobbying • Primary goal is accurate, consistent data • Protocols based on internationally-recognized standards • The Registry coordinates with state/provincial, regional and federal policymakers • Support states and provinces in execution of mandatory programs • Primarily infrastructure support

7. Voluntary Reporting Benefits • Prepare for mandatory state/federal reporting • Document early actions • Education for employees on GHG emissions • A cost effective means to track/manage GHG emissions • Access to software and technical support • Get a seat at the table on policy development • Recognition as a global environmental leader

8. Key Registry Components • Participation in The Registry requires all organizations to report at a minimum: • All GHG emissions in North America (Canada, US, Mexico) • Entity-wide emissions at the facility-level • All six GHGs (CO2, CH4, N2O, HFCs, PFCs, SF6) • All direct (Scope 1), indirect emissions (Scope 2) and biogenic emissions from stationary combustion • Annually • Requirement for annual third party verification • General Verification Protocol (GVP) • Climate Registry Information System (CRIS)

9. Organizational Boundaries • Control (Financial or Operational) • Report 100 percent of the emissions from sources that are under your control, including both wholly owned/operated and partially owned/operated sources • Public companies also disclose equity investments • Equity Share • Report all emissions sources in which your entity has an equity share. • If you would like to report according to equity share, you must also report according to a control methodology (as described above)

10. Other Organizational Issues • Corporate Reporting • If parent company is a Registry Member, then all subsidiaries must report through parent • All Members are encouraged to report at the highest level possible • Government Agency Reporting • All departments must report under governing entity, if it is a Registry Member (including municipal utility, if applicable)

11. Leased Assets • Finance or Capital Lease • Must report emissions as if wholly owned and controlled regardless of organizational boundary approach • Operating Lease • Operational Control: must report emissions • Equity Share or Financial Control: reporting emissions is optional

12. Operational Boundaries • Direct Emissions (Scope 1) • Direct emissions from stationary combustion • Direct emissions from mobile combustion • Direct emissions from physical & chemical processes • Direct fugitive emissions • Indirect Emissions (Scope 2) • Indirect emissions from electricity use • Indirect emissions from imported steam, CHP, district heating and cooling • Biogenic Emissions • Stationary combustion

13. Facility-level Reporting • GRP Facility Definition • Any stationary installation or establishment located on a single site or on contiguous or adjacent sites that are owned or operated by an entity • Including all mobile sources that operate within the boundary of a single stationary facility • Commercial building and special categories of facilities (T&D systems) can be aggregated • Mobile sources aggregated by geographic location, vehicle-type, existing fleet or individual vehicle

14. Protocol development process

15. Protocol Development Process • Developed in partnership with the Western Regional Air Partnership (WRAP) • Effort has three elements: • Task 1: Scoping Paper for the Oil and Gas Industry • Task 2: Report on Significant Source Categories and Technical Review of Estimation Methodologies • Task 3: The Climate Registry’s Voluntary Reporting Protocol for the Oil and Gas Exploration and Production Sector (O&GP Protocol)

16. Protocol Development Process • Inclusive, transparent, multi-stakeholder approach • Outputs subject to comprehensive review • Development process involves four key groups: • O&GP Workgroup • Public Stakeholders • Protocol Committee • Registry Board of Directors

17. Protocol Development Process • O&GP Workgroup • Approximately 25 GHG reporting experts representing government, business and environmental organizations • Supported by WRAP, Registry staff and expert contractors • Responsible for identifying key reporting and quantification issues, proposing protocol options, providing detailed review of all drafts of protocol, and discussing stakeholder feedback • Public Stakeholders • Provide feedback during public comment period

18. Protocol Development Process • Registry Board of Directors • Final decision on adoption of protocol at January 2010 meeting • Protocol Committee • Subcommittee of Board of Directors • Approves release of public comment draft, recommends adoption of final protocol to full Board of Directors • Final decision making authority on policy issues

19. Workgroup Organizations • Alberta Environment Ministry • American Petroleum Institute • BP Petroleum • British Columbia, Ministry of Environment • California Air Resources Board • California Department of Conservation • California Independent Petroleum Association • Canadian Association of Petroleum Producers • Chevron – Texaco • El Paso Exploration & Production • Environmental Defense • U.S. EPA – Natural Gas STAR • Mexico: SEMARNAT Air Quality • Natural Resource Defense Council • New Mexico Air Quality Bureau • New Mexico Oil Conservation Commission • Santa Barbara County APCD • Shell Oil Company • Williams Production • World Resources Institute • Yates Petroleum

20. Major Milestones • Complete protocol outline 4/29 • Complete initial draft of 6/22O&GP Protocol • Workgroup review of initial draft 6/22 - 7/10 • Complete public comment draft 8/21 • Public comment period 8/24 – 9/25

21. Overview of the Oil and Gas Production Protocol For Western Regional Air Partnership Oral Presentation August 13, 2009 Presented by: Science Applications International Corporation

22. Presentation Overview • Overview: • Applicability of the O&GP Protocol • General structure/organization of the Protocol • Major issues addressed in O&GP Protocol: • Facility definitions • Alternative calculation methods for stationary combustion emissions • Additional issues raised in cover memo: • Required reporting of Scope 3 emissions from drilling, completions and workovers • Completeness of the O&GP Protocol • Clarifications provided on application of GRP rules to O&GP sector • Additional estimation methodologies provided for O&GP emission sources

23. Applicability of the Protocol • The O&GP Protocol covers all emissions sources in the exploration and production (E&P) of oil and natural gas • In addition, the O&GP Protocol covers all emission sources for: • Natural Gas Processing Plants • Crude Oil Transportation (including pipelines, trains, trucks, and marine vessels) • The O&GP Protocol does not cover: • Oil refining and the downstream distribution of petroleum products • The transmission, storage and distribution of natural gas downstream of the processing plant • The O&GP Protocol is addressed to all companies involved in any way in E&P, natural gas processing, and/or crude oil transportation, including: • Oil and Gas leaseholders • Support services contractors (e.g., drilling contractors)

24. Drilling & Completion Production Processing Transmission Storage & Distribution Gas Treating Facilities Gas Exporting Facilities Oil & Gas Distribution Gathering Separation & Distribution Oil Refineries Oil Exporting Facilities Pumpjack Water Handling Including Steam Injection (Water, Steam, Gas) Applicability of the Protocol (Cont.) Oil Industry Sector The O&GP Protocol does not address oil industry operations shown in the shaded area.

25. Transmission, Storage & Distribution Exploration Production Processing Compressor Stations Drilling & Completion Engine Separator Gas Plant Distribution C Gas Compressor Stations LNG C Liquids Liquids to Distribution Well Underground Storage Applicability of the Protocol (Cont.) Natural Gas Industry Sector The O&GP Protocol does not address natural gas operations shown in the shaded area.

26. General Structure/Organization of Protocol • Parallels the organization of The Registry’s Electric Power Sector (EPS) Protocol (and the upcoming version of the GRP): • Each Part/Chapter/Section in the upcoming GRP is represented in the O&GP Protocol • Reader is referred back to GRP when GRP’s generic guidance suffices • New guidance is provided where needed for unique O&GP reporting requirements and situations

27. Major Issues Addressed in Protocol • Definition of a facility/Aggregation of emissions: • The Issue: O&GP sector is characterized by numerous dispersed sources that do not readily fit the standard definition of a “facility”: • Oil and gas wells (currently can be aggregated to state/province level according to GRP) • Compressor stations • Pipelines • Currently the GRP provides Members with the option of aggregating emissions from oil and gas wells, and pipelines, to the state/province level, recognizing that: • Separate reporting of these geographically dispersed sources would represent an unparalleled reporting burden (there may be hundreds of them in a single producing field) • The transparency gained by separate reporting of each source would be counterbalanced by a level of detail potentially overwhelming to the data user • But it was judged desirable to define one or more aggregation options in between an individual well and an entire state/province, to obtain a more useful level of detail

28. Major Issues Addressed in Protocol • Definition of a facility/Aggregation of emissions (continued): • Proposed Solution: O&GP Protocol calls for dispersed emission sources to be aggregated, at a minimum, to “production field” level: • Production field is a well understood, broadly accepted concept within the industry • Production fields are precisely defined by state, province, or country • Members are given the option of aggregating multiple fields together (particularly useful, e.g., for infrastructure common to more than one field) • Emissions from sources corresponding to standard definition of a facility (e.g., natural gas processing plants) must be reported by facility

29. Major Issues Addressed in Protocol • Definition of a facility/Aggregation of emissions (continued): • Public feedback requested on two issues: • Are there other options, besides state/province/territory, for placing an upper bound on the aggregation of multiple production fields (e.g., oil and gas basins)? Or should the aggregation option be made unbounded? • Should The Registry require Members to list the emission source types covered in each reported production field(s)? If so, is it feasible for The Registry to define the source types to be listed (if yes, please provide suggested list of source types)?

30. Major Issues Addressed in Protocol • Direct emissions from Stationary Combustion: • The Issue: All of the GRP methods for calculating emissions from stationary combustion devices require, at a minimum, fuel consumption data • But the O&GP sector is characterized by numerous small combustion devices that lack fuel consumption meters, e.g.: • Internal combustion engines • Small natural gas turbines • Drill rig and workover rig engines • Heaters and boilers

31. Major Issues Addressed in Protocol • Direct emissions from Stationary Combustion (continued): • Proposed Solution: The O&GP Protocol provides alternative methodologies for calculating stationary combustion emissions based on load factors and time of use: • The alternatives are to be used only when fuel consumption data are lacking and • Time of use is metered or the unit runs continuously

32. Major Issues Addressed in Protocol • Direct emissions from Stationary Combustion (continued): • Public feedback requested on two issues: • Do the alternative methodologies provide sufficient guidance to allow for the reporting of all stationary combustion emissions for the O&GP sector? • If the data required to use the alternative methods (e.g., time of use, load factors, and capacity data) are not available, where could The Registry find published information that could serve as default factors?

33. Additional Issues Raised in Cover Memo • Required reporting of Scope 3 emissions from drilling, completions, and workovers: • The Issue: Drilling, completions and workovers are activities that have been seen as integral and central to the oil and gas production process, but • These activities are generally outsourced by oil and gas leaseholders, and the contractors have shown little interest in joining The Registry and reporting their emissions • Hence the following questions are being raised: • Should The Registry require that Scope 3 emissions from drilling, completions and workovers be reported by O&GP leaseholders? • When Members cannot obtain activity data from their contractors, what default methodologies should they use to estimate these Scope 3 emissions (include a description of the data available to O&GP companies to support the proposed methodologies)?

34. Additional Issues Raised in Cover Memo • Required Reporting of Scope 3 emissions from drilling, completions, and workovers: • Pros: • Emissions from drilling, completions and workovers can be significant (up to 10% of emissions from O&GP operations) • Understanding these emissions will help O&GP leaseholders understand their full GHG risk exposure (as these emissions may be required under mandatory reporting programs) • While O&GP leaseholders do not directly control their contractors’ emissions, they have the ability to select more efficient contractors and/or require that their contractors use lower-emitting technologies/fuels

35. Additional Issues Raised in Cover Memo • Required Reporting of Scope 3 emissions from drilling, completions, and workovers: • Cons: • It may be difficult to obtain the data needed to report Scope 3 emissions from the contractors • The Registry will therefore need to provide default methods for use when activity data is unavailable • Such methods may lead to very rough conservative emissions estimates

36. Additional Issues Raised in Cover Memo • Completeness of the Protocol: • The Issue: The O&GP sector has many unique emissions sources • The O&GP must provide calculation methods for all of these sources to enable O&GP Members across Canada, the U.s. and Mexico to report comprehensively • Hence the public is asked to comment if: • Any emission sources for this sector have been omitted • There are additional calculation methods not covered in the O&GP Protocol • There are additional emission factors that should be included in the protocol

37. Clarifications Provided on Application of GRP Rules to O&GP • Reporting of offshore sources by nation or state/province • Numerous examples on application of organizational boundaries to O&GP provided • Description/examples of Scope 1, Scope 2, and Scope 3 sources covered by the protocol provided • Rules for aggregating mobile sources clarified

38. Additional Estimation Methodologies • Direct fugitive emissions • Methodologies are from API Compendium 2009 (Draft), API Compendium (2004), Task 2 report, U.S. EPA Mandatory Reporting Rule, and Oil Sands / Heavy Oil Upgrader Industry Report (May 2004) • Specific methodologies provided for: • Flashing losses from tanks • Working/Breathing losses from tanks • Pneumatic devices • Natural gas driven chemical injection pumps • Wellhead and facilities fugitive losses • Surface collection ponds • Hydrogen units • Flue gas desulphurization • Oil sands mine and ponds emissions • Transportation sector - Oil pump stations

39. Additional Estimation Methodologies (Continued) • Direct Process Emissions • Methodologies are from API Compendium 2009 (Draft), API Compendium (2004), Task 2 report, and EPA Climate Leaders-Natural Gas STAR Program • Specific methodologies provided for: • Amine plants • Dehydrators • Well completions • Underbalanced drilling • Drilling mud degassing • Well blowdowns • Vessel and facility upsets/blowdowns • Compressor engine start-ups and shutdowns • Transportation sector - Truck, tanker, rail loading • Transportation sector - Ballasting and transit loss emissions • Transportation sector - Pipeline blowdowns and pigging

40. Comments & Questions

41. Comments and Questions • If you have entered your unique audio pin: • Raise hand electronically • The moderator will un-mute your line and ask you to raise your question or comment • If you did not enter your audio pin: • Submit your question via chat box function • The moderator will read your question to the group so that it can be addressed on the call.

42. Wrap-up

43. Protocol Finalization Schedule • Public comment period • Public webinar #1 • Public webinar #2 • Review and consolidate comments • Workgroup meeting • Prepare draft final protocol • Protocol and Executive Committee Review • Board adoption 8/24– 9/25 9/2 9/8 9/28 – 10/8 Early November 11/6 – 12/11 Late December Late January

44. Public Comment Process • Use of comments • Comments to be assessed by workgroup, reflected in final draft • Protocol Committee to make final determinations • Comment mechanics • Review in conjunction with Cover Memo • Comments should be submitted using provided template • All materials can be downloaded from our website: http://www.theclimateregistry.org/resources/protocols/oil-and-gas-production-protocol/ • Submit comments by September 25th, 2009, 5:00 PM Pacific to sandra.miranda@saic.com.

45. For More Information on the O&GP Protocol: Peggy Foran Peggy@theclimateregistry.org (213) 542-0291 www.TheClimateRegistry.org For information on the WRAP Project: Tom Moore MooreT@cira.colostate.edu