Seep Tents Masters Project

1. Donald Bren School of Environmental Science & Management Seep Tents Masters Project Presentation to Stakeholders April 12th, 2002

2. Agenda • Introductions • Background • Research approach • Water quality & marine ecology • Air quality • Regulatory obstacles & requirements • Economic costs & benefits of seep tents • Results & Recommendations

3. Group Project Members • Ali Ger • Water quality, marine ecology, cost-benefit analysis • Misty Gonzales • Air quality, ozone production modeling • Erin Mayberry • Health valuation, cost-benefit analysis • Farah Shamszadeh • Gas price forecasting, cost-benefit analysis, regulatory framework

4. Background • Project proposed by SBCAPCD • Research motivation • Recent CA energy crisis has renewed interest in capturing this seepage as a potential “green” source of natural gas • The SBCAPCD suggested that capturing natural hydrocarbons might reduce local air pollution

5. Research Approach • We take an interdisciplinary approach to evaluating a proposed project by estimating: • Impacts on water quality and marine ecology • Effects on air quality • Regulatory obstacles and requirements • Economic costs and benefits of installing additional seepgas capture tents • Majority of the data for this group project came from the UCSB Hydrocarbon Seeps Project and SBCAPCD

6. Tent design? Source: http://seeps.geol.ucsb.edu/

7. Temporal Seep Flux Temporal decline statistically deduced from ARCO capture data

8. Spatial Seep Flux • Spatial flux is variable • High flux areas are optimal tent locations • Grided Libe Washburn’s flux buoy data over 100’ x 100’ plots • Statistically deduced function for decrease in capture for each additional tent

9. Environmental Impact marine environment • Important to understand how additional seep tents may impact: • Seep gas total flux rates • Fate and transport of hydrocarbon gases • Marine ecology • Interactions with seep ecosystem structure

10. Seep Environmentbiogeochemistry & ecology • Seeps release between 80,000 to 200,000 m3 of gas per day • Mostly methane with trace amounts of toxics • Most toxics and hydrocarbons disperse and/or biodegrade readily • Toxicity reduces away from the seeps • Impacts on water quality not known (negligible) • Hydrocarbons provide organic enrichment • Result in localized rings of increased sediment biomass around the seep vents

11. Environmental Impact marine impacts • Impacts on soft bottom sediments • Biomass is relatively low • Recovery from disturbance is quick • Tent installation • Short-term: One-time impacts to seafloor communities • Long-term: Undetectable impacts • Pipeline • Short/Long-term: Possible ecosystem level impacts if piping is not placed sufficiently far from critical habitats (kelp beds)

12. Environmental Impact air quality - methane • Primary component is methane • Contributes to global warming • Seepage accounts for between 0.001-0.004% of total methane flux to atmosphere (2-5 x 1010 g/yr)

13. Environmental Impact air quality - ozone • Seep gas contains reactive organic gases (ROGs) • Ozone is a serious health concern • Magnitude of seep contribution to ozone formation varies depending on: • Climate • Levels of ROGs and NOx ROG + NOXhv O3

14. Environmental Impact air quality - speciation

15. Environmental Impact ozone production model • Relates seep gas emissions to ozone formation (reactivity) • Estimates the change in ozone associated with seep gas capture • Results input to health benefit model • Monetizes benefits of improved air quality from seep tents installation

16. Ozone Production Model Volume (%)

17. Environmental Impact ozone model output

18. Environmental Impact ozone model output  0.84% O3 reduced first year  0.4% annually over 20 years

19. Regulatory Requirements processing facility Current regulatory obstacles limit development or use of onshore gas processing facility • Measure A96 requires voter approval on onshore infrastructure for offshore projects • Project would be dependent on the county voters’ approval of processing facility • Coastal Act s.30263 implies new facilities will not be developed unless existing facilities used at maximum capacity

20. Regulatory Requirements processing facility • Most likely existing facility: Ellwood Oil and Gas Processing Facility • Existing tent gas processed there • Closest onshore support facility to the seep field • Ellwood facility currently under-utilized, but designated as non-conforming land use • Unlikely that facility will accept additional gas for processing

21. Regulatory Requirements emission reduction credits Unlikely for 3 reasons: • Difficult to prove tents would permanently reduce ROGs • S.B. in attainment for federal ozone standards • Seeps are natural source of ROGs • Exception would have to be made to issue credits to a project that reduced seep gas

22. Cost-Benefit Analysis approach • Purpose: guide regulators in project decisions • 2 views taken: entrepreneur and policymaker • Entrepreneur needs to know project profit • Policymaker also considers value of improved air quality • Monetize health benefits • Other benefits likely small and difficult to quantify (i.e. marine ecology)

23. Cost-Benefit Analysis integrated analytical model • Integrates ozone reduction and health benefit valuation models, emission reduction credits, gas price forecast and project cost estimates over a 20-year planning horizon for 1-20 tents • Determines viability from entrepreneurial and social perspectives • Profit = Gas Sales Revenue + Credits - Costs • Social Value = Gas Sales Revenue + Health Benefits - Costs

24. Cost-Benefit Analysis health benefit valuation • Monetary value of improved health from ozone reduction • Determined using range of studies from economic literature – all cited in EPA CBA of Clean Air Act standards • Benefits-transfer approach—uses data from S.B. and other regions to estimate benefit values for S.B. • 20+ studies condensed to 3 scenarios • Most likely scenario: health benefits = $2.1 million for 1st tent averaged over 20 years

26. Cost-Benefit Analysis natural gas price forecast • Natural gas prices forecasted for 20-year life of project • Multiplied by gas captured in each year to achieve revenues • Four gas price forecasts calculated: • Conservative and High ARIMA time series model, Conservative constant pricing (Structural), and Hotelling (scarcity-driven) • Most likely is conservative annual average generated by ARIMA • $2.45 per 1000 cubic feet (MCF)

27. Cost-Benefit Analysis emission reduction credits • Credits worth $5,000/ton ROGs reduced • 80% transfer ratio: 1.2 tons ROGs captured for each 1 ton of credits • Multiplied by amount of ROGs reduced by project scenario, then by transfer percentage • Not included in most likely scenario

28. Cost-Benefit Analysis project costs • Installment • 1-10 tents $3-$1.5 M marginal cost scale • 11-20 tents constant $1.5 M marginal cost • Piping: $1 M/mi to Ellwood • Plus 100 ft for each add’l tent • Maintenance: $100,000/ tent/year for 20 yrs

29. C-B Analysis Model most likely scenario • Most likely project scenario based on best available data

30. C-B Analysis Model

31. C-B Analysis Model alternate scenarios Bold text – optimized for social value Plain text – optimized for profit

32. C-B Analysis Model results • Under likely project conditions, installing new seep tents NOT practical from social or entrepreneurial viewpoint • Business’ point of view: project is not attractive, unless unlikely conditions: • Emission reduction credits are issued • High market gas pricing conditions are sustained • Society’s point of view: costs to private firm outweigh society’s benefit

33. C-B Analysis Model results: credits • If health value is greater or project costs are lower, ERCs could be issued to compensate an entrepreneur for their losses on the project • Example: Scenario 6 • project loses $1.7 million without credits • For a credit of 5% of this project’s ROG reduction the owners of the tents compensated $2 million (industry standard 10% rate of return) • policymaker could create incentive to produce $2.1 million air quality improvement for $2 million in ERCs

34. C-B Analysis Model cost-effectiveness analysis • Prudent to compare cost-effectiveness seep tents to other abatement technology • Seep tents are cost effective technology for ROG abatement • $1,800/ton with seep tents vs. $5,000/ton using other abatement technologies • Seep tents are not a cost effective technology for methane emission abatement • $550/ton with seep tents vs. ~$3.80 /ton in Canada’s pilot program (GERT)

35. Recommendations further research • More precise and complete research into • Chemistry of the Santa Barbara airshed • Marine ecology of the seep field (no ecosystem-level studies) • Use of Santa Barbara County hospital data to derive the exact relationship between illness and ozone in place of using a benefits transfer method

36. Recommendations seep tents projects If a seep tents project is proposed in the future, we recommend that an entrepreneur consider: • Permitting associated with onshore gas processing • Acquisition of ERCs

37. Recommendations policy • Verify precise amount of ozone reduced by seep tents to accurately determine value of health benefits and amount of emission reduction credit • Revise permit and credit conditions to account for the seeps’ spatial and temporal variability • Institute a socially responsible value for credits that reflects the health and other possible external benefits • Compare cost effectiveness of seep tents to other methods of abating tropospheric ozone

38. Acknowledgements • Our advisors: Chris Costello and Natalie Mahowald • Spring quarter advisor Mel Willis • Peter Cantle (SBCAPCD) • Bruce Luyendyk, Jordan Clark, Libe Washburn, James Boles (UCSB Hydrocarbon Seeps Research Group) • Tom Murphy, Doug Allard Patricia Holden, Mike Edwards, Steve Sterner, Michelle Pasini, and Jim Fredrickson, Sally Holbrook

39. Questions?