We’ll also hear from a special guest President of Independent Petroleum Association of America, Lee Fuller, who will provide update on methane rule litigation [inaudible 00:00:40] and commenting activity. Without further ado, I’ll turn it over to the experts.
Joe: Thank you, Katie. First, a little bit of background. I appreciate everybody joining today in our very first methane webinar with specific to the rule that has come out, the requirements associated with that. This is the information collection request that will form the basis for existing sources.
The rule that has come out recently was for new and reconstructed or recently constructed sources. So this rule, if we go from ICR ultimately to a rule that’s going to be a degree of magnitude more difficult to meet.
EPA wants a comprehensive methane regulation from all existing sources as part of [inaudible 00:01:38] initiatives. They want to know how the [inaudible 00:01:41] are configured, installed, being used, to monitor the level of staffing that’s needed, the time to that. John will take us through some of the detail data requirements here in a little bit. Your response to the ICR is mandatory, non-confidential, and maybe most importantly the information submitted can be used for enforcement purposes.
We’re on a short fuse for this. All of the comments have to be pulled together and submitted by August the 2nd. The actual process is that that’s the deadline to get it to the EPA, the EPA then has to take that and push it to the Office of Management and Budget for review because the impact is over $100 million. It will then be either commented on by the ONBA, or the EPA will respond to our comments and issue the rule.
So, the timing going forward after August 2nd is going to be a little bit up in the air but we’ll keep you informed.
Just to let you let you know, as Katie mentioned, we’re pleased and privileged to have Lee Fuller from IPAA leading a coalition of a group of industry associations on both the litigation of the rule and the submittal of the information collection request.
As a little more background, estimates in terms of what…and these all come from the EPA, in terms of their feeling of what it’s going to take to get this done. So, you got two phases that they’re looking at.
Phase one goes out to everyone. They’ve accounted for something on the order of 22,500 companies that are going to get the phase one data request. Phase two goes to their so-called statistically accurate sample of about approximately 3,500 companies. The coverage based on their estimates you can see is almost 700,000 wells, 5,000 gathering visiting stations, almost 700 processing facilities, and almost 230,000 hours to complete, with of the cost of completion at over $40 million.
We will be challenging all of that.
In some cases, historically, to EPA, has always presented estimates that benefit themselves and typically turn out to be very wrong. I’m going to turn it to John now to talk about… I’m sorry, let’s talk a little bit more about the ICR. No, I think it’s John’s turn right now.
John: Yes, this is Johnathan Detiera. And, Joe, thanks for the overview. Let me just recap a little bit of this.
What you have is a rule that’s in place, and that rule is in place to modify the civil use of new facilities that are coming online. It’s a very burdensome rule and it currently exists. [inaudible 00:04:45] have an information request. An information request we expect to have a short fuse. That will be even more information than what you would have to do to comply with the rule that’s currently in place. Then we fully expect that once the EPA gets this information they will then try to modify the rule that’s in place to capture every possible existing facility in extremely burdensome, regulatory effort that will provide the federal government more information on the oil field and oil field activities that any state currently possesses. So, the impact and significance of this could not be underestimated.
I’m going to take you deep into the womb of the information request. Now, I wanted to explain it to you using EPA’s own forums of what’s coming down the road that you will likely have to fill out and which we think is going to be very difficult, if not impossible, to try to stop or slow the EPA on this effort.
You can see there’s an instruction form in front of you in green. Please note that it’s got four steps to it, and the first two steps is what everybody’s going to have to fill out.
You’re going to have to have at step one, complete a parent company information. And that information is going to be for the highest level, the majority corporate owner. And then, in step two, you’re going to have to complete operator information. That operator information is going to be for the people that are actually managing, handling, or delegated by the regulations they work under as the operator of the facility.
So, if you’re a subsidiary of the parent company that you’re a subsidiary to, will be involved. If you’re a contract operator, you’re going to have to be working with your clients and your companies in order to make sure that the parent companies, etc., are fully represented.
I think we are going to see some confusion as people try to sort out what they need to do in step one and step two, but again, this is on track, and the common period is rapidly approaching. We will have comments.
I’d like you then go on to step three which begins the phase two process, which is going to be given to a statistically significant number of companies. We do not know how many that’s going to be, and I think that it will cover a high percentage of the number of oil and gas operators and companies that are currently in the business. This facility-level information request is going to be for all your facilities. I’ll be talking and showing you examples of [inaudible 00:07:29] facilities later. And then, you will have a step four. That’s where you have to complete and sign the acknowledgment sheet.
This is an example of the acknowledgment sheet that’s coming up.
Please notice that there’s going to be two boxes that are going to have to be checked, and then, a signature page. This could be considered an [inaudible 00:07:48] by some, which means that it’ll have some legal standing. It means that the people that check these boxes are going to be taking the responsibility that they have the authority to submit this information and that they know that this information is accurate and correct. We highlighted that in a previous conversation. I’d like to emphasize again the importance of making sure that the people that sign this page are well aware of the obligations that we’ll put them under with the federal government.
With [inaudible 00:08:22] we step into some of the facility-loaned information that they’re going to have in part two.
This is going to go through what the EPA is considering the omission source specific information. We’re going to have a series of slides that are going to have the EPA definitions. The facility itself is going to be focused on the overall facility and with some definitions of what the facility can entail. And at the same time, it’s going to also require detail-specific information of the equipment that’s on the lease.
For example, well sites and pads are going to be required to be included in the information, so the number of well sites, the number of pads that are associated with this are going to have to be tabulated and accounted for. You’re going to have to account for tanks and tankage. You’re going to have account for separators. At the same time, any [inaudible 00:09:22] devices are going to have be separately handled and counted for. You’re going to have acid gas removal units to be highlighted and identified and submitted. Dehydrators, you’re going to have to have all your compressors, including vapor-recovering units that are going to be highlighted. You’re going to have to have any leaks that are detected to be reported in this. If you do a blow-down in your facility, you’re also going to have to have blow-down information. Please note that flares, conductors, and vapor recovery units that are used at the facility are considered patrol devices. Those will also have to be handled and highlighted.
The way that you’re going to be relaying this information is through an Excel spreadsheet to the Environmental Protection Agency.
Sidenote: Savvy Operators note that ALL information required by EPA today or in the future could easily be collected by the GreaseBook app…
You’re going to be having a facility ID number, a facility name and description, you’re going to have to [inaudible 00:10:16] and of course, most are no 24 hours, you have pumpers that go [inaudible 00:10:22]. The electrical status distance to the nearest field office, other distance information, what the type of production is, what the types of liquids is coming, the number of producing wells, the number of capped or abandoned wells that are in place. They are going to want hydro-fractioning information of the wells that have been hydro-fractioned.
You can see that this a long reach and extensive document of request that is going to be very repetitive to fill out, but it’s also going to have to be very specific because [inaudible 00:10:52] has all of these in common. Everyone one of them has some sort of variability associated with it.
In that regard, they have tried to indicate that there is an adjacency. So, definition, that will demonstrate how you can try to combine equipment into one portion [inaudible 00:11:10]. The simplest way of putting it in terms of equipment is within a quarter mile and connected, then you can comp that as a single source of determination. You give a series of factors that are include through there. We think that this is going to require some fairly diligent efforts by your [inaudible 00:11:31] and your mappers to make sure that the facilities, that they are positioning and locating the location of in the field far within this quarter mile [inaudible 00:11:41] that you have proper placement. So, this will require likely a new date gathering.
I’d like to now introduce Bill Stevens, our chief lobbyist for the alliance. Bill is going to go through how some of our political leadership and regulators are reacting to this. Mr. Stevens.
Bill: Thanks, John. Last month, the Railroad Commission issued a letter to the Texas Attorney General requesting his office to consider filing litigation related to the EPA’s methane rules.
As you can see from this press release, the Railroad commissioners have strong opinions regarding these new rules. The commissioner [inaudible 00:12:17] is saying, “These overbearing regulations accomplish nothing other than encumbering business, polluting our economy, and cutting jobs.”
Commissioner [00:12:25] points out that the methane emissions have dramatically fallen during recent energy growth thanks to technology and industry leadership on the issue.
And commissioner [inaudible 00:12:34] adds that the rules will harm Texas energy producers and accomplish very little in terms of protecting the environment.
In response to this letter from the Railroad Commission, the Texas Attorney General is preparing to file paperwork for a notion of reconsideration of the rule. It will be signed on behalf of the state of Texas, the Railroad Commission of Texas, and the Texas Commission of Environmental Quality. The motion will be filed and should be placed [inaudible 00:13:02] the deadline of August 3rd. The alliance scene has worked with each of the commissioner’s offices, and both executive directors of the Railroad Commission and TCQ are urging them to act.
We appreciate the state and the leadership of these agencies and recognize the debilitating and unnecessary overreach by the federal government with regards to methane production.
Joe: That was very helpful, Bill. And I appreciate that analysis. Now, Jim Standley (Policy Advisor at Texas Alliance of Energy Producers), if you would introduce our guest speaker, Mr. Lee Fuller (executive vice president of the Independent Petroleum Association of America).
Jim: Will do. Was Mr. Fuller successful to get even on the phone?
John: Yes, he is.
Lee: Can you hear me?
Jim: Yeah, great.
Lee: I’m on the phone.
Jim: Yeah, I [inaudible 00:13:48]. I wasn’t, so I’m happy you were.
Joe: Jim, [inaudible 00:13:54].
Jim: With that, I would like to introduce Mr. Lee Fuller, President of the Independent Petroleum Association of America. And the gentleman that has the tip of the spear and leading the effort on the methane rule litigations and to stand the ICR combatting activities. And with that, I’d like to turn it to Lee.
Lee: Well, thank you very much, I appreciate it. I clarify that I’m the Executive Vice President. My president of…Barry Russell is probably with…they want me to do that. But I do appreciate the chance to talk to you, to give you an update on where we are on a variety of these issues. I’m going to start with the methane rule litigation.
As the fires start to strive, there’s a very tight clock on actions to get a litigation initiated on that. We have to file by Tuesday of next week, August the 2nd. We have a group that’s been put together, [inaudible 00:14:54]. It’s probably generally [inaudible 00:14:59] the leader of the Texas Alliance as one of the many state associations that’s participating with us as well, along with some other national [inaudible 00:15:08] like the American Exploration & Production Council.
It’s basically a group of associations that are all representing independent producers. We wanted to begin the litigation and the reconsideration process where we would have an ability to be a clear and direct voice for independent producer issues since many of the challenges with these rules, they fall much more heavily on smaller operations than on larger ones. But nevertheless, everybody in the business is being affected by it.
The attorney that has worked with the independent producer group on fire regulations, notability, the subpart [inaudible 00:15:56] regulations that were released in 2012 and also worked with us on comments from [inaudible 00:16:03] array, and control technique guideline, [inaudible 00:16:09] of EPA as far as last year. Then they finalized the [inaudible 00:16:15] regulations in June of this year, where we’re now facing a litigation.
We’re looking at tracking two paths, with respect to [inaudible 00:16:25]. Why is the petition for review of the regulation itself, and the second is petitions for reconsideration of specific parts of it.
There’s a tactical question that we’re dealing with there and deciding what issues are abroad and speaking [inaudible 00:16:42] for litigation and what areas do we think we want to focus on trying to get EPA to address a reconsideration process.
Part of the tactical decision there is that if we pursue both at the same time on a particular issue, its opportunity to be litigated gets diminished because of a petition for reconsideration. And secondly, we expect to see a consolidation with other petitioners for review that can limit the size of the brief that can be filed. So, you don’t want to lose your ability to raise your issues as strongly as possible in the litigation by having too many issues limited by the number of words. It’s a legal dynamic in these court cases that we always have to grapple with.
So, the action we have to take by next week is really just to make the courts aware that we intend to seek petition for review and they will give us a schedule for a subsequent further information, and we’ll have to file.
Simultaneously, and on the same day, we have to consummate comments on the ICR proposal that EPA has published. The fire slides went through a lot of specifics with that. I apologize, but they already covered this other part I would mention now. But this is all coming under the paperwork production act where EPA has to get authority not to stand out this information collection request.
What we’re completing next week is a 60-day comment period on the draft ICR proposal. After that, EPA will make possibly modifications to the proposal and then send it to review at the office of Management and Budget. It has a 30-day comment period there. We’ll be filing additional comments depending on how EPA responds to the comments that are filed next week in the ICR. And then, Office of Management and Budget will make the decision on whether to allow EPA to send out the ICR.
EPA’s target is to try to get this ICR transmitted by October 30th, or no later than October 30th of this year in order to try to get responses back…
Jimmy: Okay. Well, thank you very much. I suspect we have a technical difficulty there with Mr. Fuller, but we do thank you for what he shared with us. I hope you all heard that last date, October 30th is the goal for the EPA to have this information request out and circulating, and possibly even back. That is not our [inaudible 00:19:53] and it is something that I think we just drew our conclusions that we have. One is that what we’re presenting to do with the information request is just the beginning of what we think will happen because there is a rule in place, it’s going to require new and modified facilities to do these surveys, and once those information requests, which is going to be coming in the fall, is in place, we expect the rule to be reworked.
At the same time, the actual rule itself is going to require the use of [inaudible 00:20:25] cameras, or sniffers, and all the equipment that you are listing in this information request is going to be checked by the EPA to determine whether you are actually stiffing the right equipment. So, what you say in the first part is going to be important down the road, and you’re going to want to get it right.
Finally, the EPA have verbally informed us that they will consider penalizing operators who do not comply cooperatively with the information collection request. They are going to use their environmental [inaudible 00:20:55] schedule for doing that. Our understanding is that it could be up to $25,000 per day.
With that, that concludes our presentation. We’d like to highlight to you the helpful links that we have up here. They should take you to some of the information or slides that you saw today.
I’d like to thank Mr. Fuller, I’d like to thank Mr. Stanley, I’d like to thank Mr. Stevens and Katie Carmichael. If you have any questions, please feel free to send them to us and we’ll be happy to try to respond. Katie, any final words?
Katie: No. If you all have any questions, feel free to email me at [inaudible 00:21:30] @gmail.com, but please take a minute to respond to the evaq that I’ll email tomorrow. That’s all. Thank you.
Jamie: Thank you.