1

DOE Office of Natural Gas and Petroleum Technology

Overview of Environmental Program Retroactive Metrics

Analysis

July 2000

2

Background

• Forward Environmental Metrics Analyses Capture the Projected Future Benefit of Current ONGPT Environmental Program Activities

• 3 Previous Environmental Metrics Analyses– 1996

– 1998

– 2000

3

Background

• How can ONGPT Capture the Current and Past Benefit of Environmental Program Activities?

• Was the ONGPT Environmental Program as Effective as Predicted in the 1996 - 2000 Forward Environmental Metrics Analyses?

4

Retroactive Environmental Metrics -Objectives

• Estimate the Actual Impact of ONGPT Environmental Program Activities for 1996 - 2000

• Extend the Estimated Impact of ONGPT Environmental Program Activities to the Near Term, 2000 - 2005:– to capture Environmental Program Benefits up to the

point at which the 2000 Forward Metrics begins.

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Retroactive Environmental Metrics - Objectives, (cont.)

• Compare Retroactive Metrics Analyses with Projections from the 1996, 1998, & 2000 Environmental Metrics Analyses

• Did the ONGPT Environmental Program Actually have the Impact on – Production,

– Environmental Compliance Costs

– Revenues and Royalties,

– Employment, etc.

Predicted by Previous Forward Environmental Metrics?

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Review of Technical Approach for Forward Environmental

Metrics Analyses

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Forward Environmental Metrics Review

• 6 Categories of Environmental Issues that Affect Oil and Gas E&P

– Drilling

– Produced Water Management

– Production Waste (Associated) Management

– Remediation

– Air Emissions

– Other: Spills, Underground Injection, Regulatory Streamlining

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Forward Environmental Metrics Review

• Identify Individual Environmental Issues

• Develop alternative future regulatory or compliance technology scenarios for each environmental issue.

• Estimate relative impact/influence of ONGPT Environmental Program activities for each environmental issue

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Forward Environmental Metrics Review

• Estimate unit incremental compliance cost ($/well) for future environmental requirements– Probabilistic, “expected value” methodology– Reservoir level costs applied through Oil and Gas

Environmental Model

• Three Cases Distinguished by Magnitude of Incremental Environmental Costs:– With DOE (DOE + Industry)– Without DOE (Industry Only)– Stringent

10

Forward Environmental Metrics Review

• Incremental Environmental Costs to Oil System Analysis & Gas System Analysis Models (OSAM) (GSAM)

• Estimated Future ONGPT Environmental Program Benefit is Difference between With DOE Case & Without DOE Case– (With DOE Case) - (Without DOE Case) = Estimated ONGPT

Environmental Program Benefit

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Forward Environmental Metrics - Regulatory Issues

$Incremental EnvironmentalCompliance Cost

1996 2000 2020$0

Stringent Case

Industry Only Case

(Without DOE)

With DOE Case

ONGPT Environmental Program Benefit

12

Forward Environmental Metrics - Technology Issues

$Incremental EnvironmentalCompliance Cost

1998 2000 2020

$0

Stringent Case

Industry Only Case

With DOE Case

ONGPT Environmental Program Benefit

+$

-$

13

Retroactive Environmental Metrics

• Based on Technical Approach Developed for Forward Environmental Metrics

• Evaluates Actual ONGPT Environmental Program Involvement For Each Environmental Issue Considered in the 1996, 1998 & 2000 Analyses

• Reservoir Level Incremental Environmental Compliance Costs Developed for 3 Cases:– With DOE Case (Baseline Case)

– Industry Only Case (Without DOE Case)

– Stringent Regulation or Limited Technology R&D Case

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Retroactive Environmental Metrics

$Incremental EnvironmentalCompliance Cost

1996 2000$0

Stringent Case

Industry Only Case

With DOE Case = Baseline

ONGPT Environmental Program Benefit

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Retroactive Environmental Metrics- Environmental Issues

Regulatory Issues• 31 Issues

– 23 Onshore, 8 Offshore & Coastal General

• Selected Issues:

– Onshore Drilling Waste Management

– Offshore Synthetic Drilling fluid

– Offshore Drilling Waste Management

– Drilling in Wetlands Onshore Produced Water Disposal

– Offshore Produced Water Disposal

– Offshore Air emissions Control

– Hydraulic Fracturing

Technology Issues• 10 -12 Issues

– 10 Onshore, 2 Offshore

• Selected Issues:

– Regulatory Streamlining

– Onshore Drilling - Waste Volume Reduction

– Onshore Wetland Mitigation

– Onshore Produce Water Technology - Water Treatment

– NPDES Stormwater Permitting

– Salt Cavern Disposal E&P Waste

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Retroactive Environmental Metrics -Incremental Cost Cases

• With DOE Case (DOE + Industry)

– Represents the Current Scenario:Actual Compliance Costs with Existing Technology

– Baseline Environmental Compliance Cost

– $ 0 Incremental Environmental Compliance Cost

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Retroactive Environmental Metrics -Incremental Cost Cases

• Stringent Regulation/ Limited Technology R&D Case

– Regulatory Issues: Represents the Most Stringent Feasible Outcome of Pending Regulatory Requirements ( “the worst that could have occurred”)

– Technology Issues: Represents What Incremental Environmental Compliance Costs “Might have Been”

– Technology: Estimates Increased Costs Due to Limited Technology R&D and Less Technology Penetration.

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Retroactive Environmental Metrics -Incremental Cost Cases

• Industry Only Case (Without DOE)

– Represents the Incremental Environmental Cost Outcome that Might have Occurred without DOE Environmental Program Participation

– Estimates the Past Level of DOE Environmental Program Activity (DOE Program “Weighting Factor”)

– DOE Program “Weighting Factor” Establishes the Industry Only Case Incremental Environmental Costs

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Retroactive Environmental Metrics -Incremental Cost Cases

Industry Only Case, Incremental Environmental Compliance Cost Example:

Industry Only Incremental Cost = ( Stringent Case Cost - With DOE Incremental Cost) x (Estimated DOE Program Weighting Factor)

Industry Only Incremental Cost = ($1000/well - $0/well) x (0.40)

= $ 400/well

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Retroactive Environmental Metrics

$Incremental EnvironmentalCompliance Cost

1996 2000$0

Stringent Case

Industry Only Case

With DOE Case = Baseline

ONGPT Environmental Program Benefit

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Retroactive Environmental Metrics -Incremental Cost Cases

• DOE Program Weighting Factor Represents the Estimated Level of ONGPT Environmental Program Involvement or Participation in each Environmental Issue Considered in the Retroactive Metrics Analysis

• This Estimate is Critical to Defining the Industry Only Case and thus the Total Environmental Program Benefit

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DOE Environmental Program Weighting Factors - Regulatory Issues

Regulatory Weight

1.- Passive comments on rulemaking Written comments 0.05 - 0.15

2.- Active comments on rulemaking Fund analysis that provides basis for comments 0.15 - 0.25

3.- Facilitate dialogue between Industry and Government 0.10 - 0.25

4.- Collect data on industry practices Baseline practices for rulemaking process 0.20 - 0.30

5.-Active data collection for rulemaking process that involves new research 0.30 - 0.40

6.- Enforcement action avoidance: Operator compliance, workshops, guidance documents, general permits, Risk Based Data Management. 0.40 - 0.50

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DOE Environmental Program Weighting Factors - Technology Issues

Technology Weight

1.- Provide some project funding with resulting “report on shelf” 0.05 - 0.15

2.- Cooperative research agreements such us Petroleum Environmental Research Forum 0.15 – 0.25

3.- Fund research in initial development stage, pilot projects, seed money, etc 0.10 - 0.25

4.- Collect data on industry practices Baseline practices for rulemaking process 0.20 - 0.30

5.- Active data collection for rulemaking process that involves new research 0.30 - 0.40

6. -Enforcement action avoidance: Operator compliance, workshops, guidance documents, general permits, Risk Based Data Management 0.40 - 0.50

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Retroactive Environmental Metrics -Modeling Considerations

• Oil and Gas Environmental Cost Model– Model generates reservoir-level incremental

environmental costs (as opposed to state-level environmental costs) on issue by issue basis.

– Model allows random assignment of full incremental compliance cost to an appropriate percentage of potentially affected reservoirs

• For example: Scenario ‘A’ assigns $1000/well to 20% of reservoirs in State ‘B’. Twenty percent of reservoirs are selected & receive full $1000/well. Previously, all wells in State ‘B’ would have received $200/well.

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Retroactive Environmental Metrics -Modeling Considerations

• Oil and Gas Environmental Cost Model, cont.

To avoid double counting of DOE Environmental Program Benefits claimed in 2000 Metrics:

Benefits Claimed for Retroactive Environmental Metrics start during 1996 - 2000 and end during 2000 - 2005, depending upon when each issue starts in the 2000 Forward Environmental Metrics Exercise.

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Retroactive Environmental Metrics - Modeling Considerations, cont.

$Incremental EnvironmentalCompliance Cost

1996 2000

$0

Stringent Case

Industry Only Case

With DOE Case = Baseline

Retroactive Environmental Program Benefit

20052003

Forward metrics issue starts in 2003. Projected to 2020.

Stringent

Without DOE

With DOE

FutureDOE Program Benefit

EXAMPLE

Retroactive Metrics Issue: Program Benefit Claimed for 1996 - 2003

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Retroactive Environmental Metrics -Modeling Considerations

• OSAM & GSAM

– Baseline environmental costs have been reviewed & updated to incorporate new data/analyses.

– OSAM & GSAM to be calibrated to match actual production & price tracks for 1996-2000.

– Models will be run for 1995 - 2005.

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Retroactive Environmental Metrics -Baseline Environmental Costs

• Data Sources:

– Assessing the Cost of Environmental Compliance. IOGCC, December 1999.

– Basic Petroleum Data Book. API, July 1999.

– 1997 Baseline costs Updated for 1998 Metrics. ICF, 1998

– Petroleum Industry Environmental Performance. API, May 1998

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Retroactive Environmental Metrics - Average Baseline Compliance Costs

(for 1996 - 2000; all regions, depths, resource types)

Type of Cost($/well)

OnshoreNew

OnshoreExisting

OffshoreNew

OffshoreExisting

OilCapital

$13,000 $4,000 $60,000 $60,000

OilAnnual

$1,000 -$1,500

$2,000$4,000 -$10,000

$8,000 -$20,000

GasCapital

$11,500 $4,000 $60,000 $60,000

GasAnnual

$1,000 -$1,500

$2,000$4,000 -$10,000

$8,000 -$20,000