Economic Analysis of Methane Emission Reduction Opportunities in the U.S. Onshore Oil and Natural Gas Industries March 2014 Prepared for Environmental Defense Fund 257 Park Avenue South New York, NY 10010 Prepared by ICF International 9300 Lee Highway Fairfax, VA 22031 blank page Economic Analysis of Methane Emission Reduction Opportunities in the U.S. Onshore Oil and Natural Gas Industries Contents 1. Executive Summary .................................................................................................................... 1‐1 2. Introduction ............................................................................................................................... 2‐1 2.1. Goals and Approach of the Study .............................................................................................. 2‐1 2.2. Overview of Gas Sector Methane Emissions ............................................................................. 2‐2 2.3. Climate Change‐Forcing Effects of Methane ............................................................................. 2‐5 2.4. Cost‐Effectiveness of Emission Reductions ............................................................................... 2‐6 3. Approach and Methodology ....................................................................................................... 3‐1 3.1. Overview of Methodology ......................................................................................................... 3‐1 3.2. Development of the 2011 Emissions Baseline ........................................................................... 3‐2 3.3. Projection to 2018 ..................................................................................................................... 3‐4 3.4. Identification of Targeted Emission Sources ............................................................................. 3‐6 3.5. Selected Mitigation Technologies ............................................................................................. 3‐9 3.6. Source Categories Not Addressed ........................................................................................... 3‐23 4. Analytical Results ....................................................................................................................... 4‐1 4.1. Development of Emission Control Cost Curves ......................................................................... 4‐1 4.2. Emission Reduction Cost Curves ................................................................................................ 4‐2 4.3. Co‐Benefits .............................................................................................................................. 4‐11 5. Case Studies ............................................................................................................................... 5‐1 5.1. Wet Seal Compressor Degassing for Centrifugal Compressors ................................................. 5‐1 5.2. Dry Seal Replacement/Retrofit .................................................................................................. 5‐2 5.3. Wet Seal Degassing Capture Systems ........................................................................................ 5‐2 5.3.1. Economic Analysis of Installing Wet Seal Degassing Capture Systems ........................ 5‐3 5.4. Liquids Unloading ...................................................................................................................... 5‐6 5.4.1. Background ................................................................................................................... 5‐6 5.4.2. Plunger Lifts .................................................................................................................. 5‐7 5.4.3. Additional Options for Removing or Remediating Liquids Problems ........................... 5‐9 5.4.4. Liquids Issues in Horizontal Wells ............................................................................... 5‐12 6. Conclusions ................................................................................................................................ 6‐1 Appendix A. Additional Sensitivities .................................................................................................. A‐1 Appendix B. Development of the 2011 Emissions Baseline ................................................................ B‐1 Appendix C. Emission Projection to 2018 .......................................................................................... C‐1 Appendix D. Methane Mitigation Technologies ................................................................................. D‐1 Figures Figure 1‐1 ‐ Marginal Abatement Cost Curve for Methane Reductions by Source ................................... 1‐2 Figure 2‐1 ‐ Natural Gas Industry Processes and Example Methane Emission Sources ............................ 2‐3 Figure 3‐1 – Emission Projection to 2018 – (Including Offshore) .............................................................. 3‐5 Figure 3‐2 ‐ Distribution of Emissions in 2018 ........................................................................................... 3‐5 ICF International iii March 2014 Economic Analysis of Methane Emission Reduction Opportunities in the U.S. Onshore Oil and Natural Gas Industries Figure 3‐3 ‐ EIA Oil and Gas Regions .......................................................................................................... 3‐6 Figure 3‐4 ‐ 2018 Projected Onshore Emissions ........................................................................................ 3‐8 Figure 3‐5 ‐ Reciprocating Compressor Rod Packing ............................................................................... 3‐13 Figure 3‐6 ‐ Wet Seal Compressor Schematic .......................................................................................... 3‐15 Figure 3‐7 ‐ Plunger Lift Schematic .......................................................................................................... 3‐17 Figure 4‐1 ‐ Example MAC Curve ............................................................................................................... 4‐2 Figure 4‐2 – National Aggregate MAC Curve for Baseline Technology Assumptions ................................ 4‐3 Figure 4‐3 ‐ Distribution of Emission Reduction Potential ......................................................................... 4‐5 Figure 4‐4 ‐ Emission Reduction by Industry Segment .............................................................................. 4‐6 Figure 4‐5 – Emission Reductions for the Gas Production Segment ......................................................... 4‐7 Figure 4‐6 ‐ Emission Reductions for the Oil Production Segment ............................................................ 4‐8 Figure 4‐7 ‐ Emission Reductions for the Gathering and Boosting Segment ............................................. 4‐9 Figure 4‐8 ‐ Emissions Reductions for the Gas Transmission Segment ..................................................... 4‐9 Figure 4‐9 ‐ National Aggregate MAC Curve with Baseline Technology Assumption and Economy‐Wide Value Recognition ......................................................................................... 4‐10 Figure 4‐10 ‐ National Aggregate MAC Curve by Region ......................................................................... 4‐11 Figure 4‐11 – Co‐Benefit Reductions of VOCs and HAPs ......................................................................... 4‐12 Figure 4‐12 ‐ VOC Reduction Co‐Benefits ................................................................................................ 4‐12 Figure 4‐13 ‐ Hazardous Air Pollutant Co‐Benefits .................................................................................. 4‐13 Figure 5‐1 ‐ Dry Seals on a Centrifugal Compressor .................................................................................. 5‐2 Figure 5‐2 Wet seal degassing recovery system for centrifugal compressors (Source U.S. EPA) .......................................................................................................................................... 5‐3 Figure 5‐3 ‐ Plunger Lift Schematic ............................................................................................................ 5‐7 Figure 5‐4 ‐ Installation of Velocity Tubing Serving to Reduction the Cross Section Area of the Production Tubing ............................................................................................................ 5‐11 Figure 5‐5 ‐ Different Types of Horizontal Wells ...................................................................................... 5‐13 Tables Table 3‐1 ‐ Summary of 2011 Methane Emissions Baseline ...................................................................... 3‐3 Table 3‐2 ‐ Highest Emitting Onshore Methane Source Categories in 2018 ............................................. 3‐7 Table 3‐3 ‐ LDAR Hourly Cost Calculation ................................................................................................ 3‐10 Table 3‐4 – Cost Calculation – Quarterly LDAR ........................................................................................ 3‐12 Table 3‐5 ‐ Assumptions for Rod Packing Replacement .......................................................................... 3‐14 Table 3‐6 ‐ Summary of Mitigation Measures Applied ............................................................................ 3‐21 Table 3‐7 ‐ Summary of Mitigation Measure Characteristics