United States Environmental Protection Agency Office of Air Quality Planning and Standards Research Triangle Park, NC 27711 FINAL REPORT EPA-452/R-99-003 May 1999 Air EPA ECONOMIC IMPACT ANALYSIS OF THE OIL AND NATURAL GAS PRODUCTION NESHAP AND THE NATURAL GAS TRANSMISSION AND STORAGE NESHAP Final Report ------- Economic Impact Analysis of the Oil and Natural Gas Production NESHAP and the Natural Gas Transmission and Storage NESHAP U.S. Environmental Protection Agency Office of Air and Radiation Office of Air Quality Planning and Standards Air Quality Strategies and Standards Division MD-15; Research Triangle Park, N.C. 27711 Final Report May 1999 U.S. Environmental Protection Agency Region 5, Library (PL-12J) 77 West Jackson Bputevard, 12th Floor Chicago, IL 60604-3590 ------- Disclaimer This report is issued by the Air Quality Standards & Strategies Division of the Office of Air Quality Planning and Standards of the U.S. Environmental Protection Agency (EPA). It presents technical data on the National Emission Standard for Hazardous Air Pollutants (NESHAP), which is of interest to a limited number of readers. It should be read in conjunction with the Background Information Document (BID) for NESHAPs on the Oil and Natural Gas Production and Natural Gas Transmission and Storage source categories (April 1997). Both the Economic Impact Analysis and the BID are in the public docket for the NESHAP final rulemaking. Copies of these reports and other material supporting the rule are in Docket A-94-04 at EPA's Air and Radiation Docket and Information Center, Waterside Mall, Room M1500, Central Mall, 501 M Street, SW, Washington, DC 20460. The EPA may charge a reasonable fee for copying. Copies are also available through the National Technical Information Services, 5285 Port Royal Road, Springfield, VA 22161. Federal employees, current contractors and grantees, and nonprofit organizations may obtain copies from the Library Services Office (MD-35), U.S. Environmental Protection Agency, Research Triangle Park, NC 27711; phone (919) 541-2777. 11 ------- TABLE OF CONTENTS Section Page List of Figures vii List of Tables ix List of Acronyms xi List of Definitions xiii Executive Summary xvii ES.l Industry Profile xvii ES.2 Regulatory Control Options and Costs . . . xix ES.3 Economic Impact Analysis xx ES.4 Regulatory Flexibility Analysis .... xxiii 1 Introduction 1-1 1.1 Scope and Purpose 1-1 ±.2 Organization of the Report 1-2 2 Industry Profile 2-1 2.1 Production Processes 2-2 2.1.1 Production Wells and Extracted Products 2-2 2.1.2 Dehydration Units 2-5 2.1.3 Tank Batteries 2-6 2.1.4 Natural Gas Processing Plants 2-8 2.1.5 Natural Gas Transmission and Storage Facilities 2-9 2.2 Products and Markets 2-9 2.2.1 Crude Oil 2-10 2.2.1.1 Reserves 2-10 2.2.1.2 Domestic Production . . 2-10 2.2.1.3 Domestic Consumption . . 2-13 2.2.1.4 Foreign Trade 2-13 2.2.1.5 Future Trends 2-16 2.2.2 Natural Gas 2-16 2.2.2.1 Reserves 2-16 2.2.2.2 Domestic Production . . 2-18 2.2.2.3 Domestic Consumption . 2-21 2.2.2.4 Foreign Trade 2-21 2.2.2.5 Future Trends 2-23 2.3 Production Facilities 2-26 2.3.1 Production Wells 2-26 2.3.1.1 Gruy Engineering Corporation Database . . 2-29 2.3.2 Dehydration Units 2-29 iii ------- TABLE OF CONTENTS (continued) Section Page 2.3.3 Tank Batteries 2-30 2.3.4 Natural Gas Processing Plants 2-30 2.3.5 Natural Gas Transmission and Storage Facilities 2-31 2.4 Firm Characteristics 2-31 2.4.1 Ownership 2-32 2.4.2 Size Distribution 2-33 2.4.3 Horizontal and Vertical Integration 2-34 2.4.4 Performance and Financial Status 2-36 Regulatory Control Options and Costs of Compliance 3-1 3.1 Model Plants 3-1 3.1.1 TEG Dehydration Units 3-2 3.1.2 Condensate Tank Batteries .... 3-3 3.1.3 Natural Gas Processing Plants 3-4 3.1.4 Offshore Production Platforms . . 3-5 3.2 Control Options 3-6 3.3 Costs of Controls 3-8 Economic Impact Analysis 4-1 4.1 Modeling Market Adjustments 4-3 4.1.1 Facility-Level Effects 4-3 4.1.2 Market-Level Effects 4-6 4.1.3 Facility-Level Response to Control Costs and New Market Prices . . . 4-7 4.2 Operational Market Model 4-8 4.2.1 Network of Natural Gas Production Wells and Facilities 4-9 4.2.1.1 Allocation of Production Fields to Natural Gas Processing Plants . . . 4-10 4.2.1.2 Assignment of Model Units 4-13 4.2.2 Supply of Natural Gas 4-15 4.2.2.1 Domestic Supply .... 4-15 4.2.2.2 Foreign 4-20 4.2.2.3 Market Supply 4-21 4.2.3 Demand for Natural Gas 4-22 4.2.4 Incorporating Regulatory Control Costs 4-24 4.2.4.1 Affected Entities . . . 4-24 4.2.4.2 Natural Gas Supply Decisions 4-25 IV ------- Section TABLE OF CONTENTS (continued) Pace 4.2.5 Model Baseline Values and Data Sources 4-26 4.2.6 Computing Market Equilibria . . . 4-26 4.3 Regulatory Impact Estimates 4-29 4.3.1 Market-Level Results 4-29 4.3.2 Industry-Level Results 4-29 4.3.2.1 Post-Regulatory Compliance Cost .... 4-31 4.3.2.2 Revenue, Production Cost, and Profit Impacts . . . 4-32 4.3.2.3 Screening Analysis for Natural Gas Transmission and Storage 4-32 4.4 Economic Welfare Impacts 4-38 5 Firm-Level Analysis 5-1 5.1 Analyze Owners' Response Options .... 5-3 5.2 Financial Impacts of the Regulation . . 5-5 5.2.1 Baseline Financial Statements 5-7 5.2.2 With-Regulation Financial Statements 5-8 5.2.3 Profitability Analysis 5-16 References R-l Appendix A Gruy Engineering Corporation's Oil Wellgroups by State A-l B Gruy Engineering Corporation's Gas Wellgroups by State B-l C Derivation and Interpretation of Supply Function Parameter 3 C-l D Natural Gas Market Model Summary D-l E Approach to Estimating Economic Welfare Impacts E-l F Data Summary of Companies Included in Firm-Level Analysis: 1993 F-l v ------- VI ------- LIST OF FIGURES Number Pace 2-1 Crude oil and natural gas production flow diagram 2-3 2-2 Summary of processes at a tank battery .... 2-7 2-3 Summary of processes at natural gas processing plant 2-8 4-1 Facility unit cost functions 4-5 4-2 Effect of compliance costs on facility cost functions 4-6 4-3 Natural gas market equilibria with and without compliance costs 4-7 4-4 Theoretical supply function of natural gas producing well 4-19 5-1 Characterization of owner responses to regulatory action 5-6 5-2 Distribution of total annual compliance cost to sales ratio for sample companies . . . 5-12 VI1 ------- Vlll ------- LIST OF TABLES Number Page ES-1 ES-2 2-1 2-2 2-3 2-4 2-5 2-6 2-7 2-8 2-9 2-10 2-11 2-12 2-13 2-14 2-15 2-16 2-17 2-18 2-19 2-20 2-21 2-22 3-1 3-2 Summary of Annual Control Costs by Model Plant Summary of Selected Economic Impact Results . . Total U.S. Proved Reserves of Crude Oil, 1976 Through 1993 U.S. Crude Oil Reserves by State and Area, 1993 U.S. Crude Oil Production, 1982-1992 Total U.S. Crude Oil Consumption and Price Levels, 1980-1992 Summary of U.S. Foreign Trade of Crude Oil, 1983-1992 Supply, Demand, and Price Projections for Crude Oil, 1990-2010 U.S. Proved Reserves of Dry Natural Gas, 1976 Through 1993 U.S. Natural Gas Reserves by State and Area, 1993 U.S. Natural Gas Production and Wellhead -- ;ce levels, 1980-1992 U.S. Natural Gas Consumption by End-Use Sector, 1980-1992 U.S. Natural Gas Price by End-Use Sector, 1980-1992 Historical Summary of U.S. Natural Gas Foreign Trade, 1973-1993 Supply, Demand, and Price Projections for Natural Gas, 1993-2010 Number of Crude Oil and Natural Gas Wells, 1983-1992 U.S. Onshore Oil and Gas Well Capacity by Size Range, 1989 Distribution of U.S. Gas Wells by State, 1993 U.S. Natural Gas Processing Facilities, 1987-1993 U.S. Natural Gas Processing Plants, Capacity, and Throughput as of January 1, 1994, by State Firm Size for SIC 1311 by Range of Employees, 1992 Top 20 Oil and Natural Gas Companies, 1993 . . Performance Measures for OGJ Group, 1993 . . . Performance of Top 10 Gas Pipeline Companies, 1994 Model TEG Dehydration Units Model Condensate Tank Batteries . XX xxii 2-11 2-12 2-13 2-14 2-15 2-16 2-17 2-19 2-20 2-22 2-23 2-24 2-25 2-26 2-27 2-28 2-31 2-32 2-34 2-37 2-39 2-39 3-3 3-4 IX ------- LIST OF TABLES (Continued) Number Page 3-3 Model Natural Gas Processing Plants 3-5 3-4 Model Offshore Production Platforms 3-6 3-5 Summary of Control Options by Model Plant and HAP Emission Point 3-7 3-6 Total and Affected Population of TEG Units by Model Type 3-8 3-7 Total and Affected Population of Condensate Tank Batteries by Model Type 3-9 3-8 Total and Affected Population of Natural Gas Processing Plant by Model Type 3-9 3-9 Regulatory Control Costs per Unit for the Oil and Natural Gas Production Industry by Control Option and Model Plant 3-10 3-10 Summary of Annual Costs by Model Plant . . . . 3-13 4-1 List of States by Exchange Status of Natural Gas, 1993 4-12 4-2 Summary of Allocation of Production Wells, rr<_cessing Plants, and Model Units for 1993 by State 4-16 4-3 Short-Run Supply Elasticity Estimates for Natural Gas by EPA Region 4-20 4-4 Short-Run Demand Elasticity Estimates for Natural Gas by End-User Sector 4-23 4-5 Baseline Equilibrium Values for Economic Model: 1993 4-27 4-6 Summary of Natural Gas Market Adjustments . . . 4-30 4-7 Industry-Level Impacts 4-32 4-8 Impacts for Selected Natural Gas Transmission and Storage Firms 4-36 4-9 Economic Welfare Impacts 4-39 5-1 SBA Size Standards by SIC Code for the Oil and Natural Gas Production Industry 5-3 5-2 Dun and Bradstreet's Benchmark Financial Ratios by SIC Code for the Oil and Natural Gas Production Industry 5-9 5-3 Distribution of Model TEG Units by Firm's Level of Natural Gas Production 5-11 5-4 Calculations Required to Set up With-Regulation Financial Statements 5-14 5-5 Key Measures of Profitability 5-17 5-6 Summary Statistics for Key Measures of Profitability in Baseline and With Regulation by Firm Size Category 5-18 x ------- LIST OF ACRONYMS API American Petroleum Institute ATAC Average total (avoidable) cost Bcf Billion cubic feet BID Background information document BOE Barrels of oil equivalent BOPD Barrels of oil per day bpd Barrels per day BTB Black oil tank battery Btu British thermal unit cf(d) Cubic feet (per day) CIS Commonwealth of Independent States CTB Condensate tank battery D&B Dun and Bradstreet DEC Diethylene glycol DOE Department of Energy EG Ethylene glycol EIA Energy Information Administration FERC Federal Energy Regulatory Commission GRI Gas Research Institute HAPs Hazardous air pollutants IPAA Independent Petroleum Association of America ISEG The Innovative Strategies and Economics Group LDAR Leak detection and repair xi ------- LPG Liquid petroleum gas MACT Maximum achievable control technology Mbpd Thousand barrels per day MC Marginal cost Mcf(d) Thousand cubic feet (per day) Mmbpd Million barrels per day MMBtu Million British thermal units MMcf(d) Million cubic feet (per day) MMS Minerals Management Service NAFTA North American Free Trade Agreement NESHAP National Emission Standard for Hazardous Air Pollutants NGL Natural gas liquids NGPA Natural Gas Policy Act NGPP Natural gas processing plant OGJ Oil and Gas Journal OPEC Organization of Petroleum Exporting Countries RCRA Resource Conservation and Recovery Act SBA Small Business Administration SIC Standard Industrial Classification TB Tank battery Tcf(d) Trillion cubic feet (per day) TEG Triethylene glycol TREG Tetraethylene glycol XII ------- LIST OF DEFINITIONS API Gravity--the gravity adopted by American Petroleum Institute for measuring the density of a liquid, expressed in degrees. It is converted from specific gravity by the following equation: Degrees API gravity = 141.5/specific gravity - 131.5 Black Oil Tank Battery--the collection of process equipment used to separate, treat, store, and transfer streams from production wells primarily consisting of crude oil with little, if any, natural gas. City Gate--the final destination of gas products prior to direct distribution to end users, such as homes, businesses, and industries. Condensate Tank Battery--The collection of process equipment used to separate, treat, store, and transfer streams from production wells consisting of condensate and natural gas. Condensates--hydrocarbons that are in a gaseous state under reservoir conditions (prior to production), but that become liquid during the production process. Dry Gas--natural gas whose water content has been reduced through dehydration, or natural gas that contains little or no commercially recoverable liquid hydrocarbons. End-user Price--the delivered price paid by residential, commercial, industrial, and electric utility consumers for natural gas. Extracted Stream--the untreated mixture of gas, oil, condensate, water, and other liquids recovered at the wellhead. Glycol Dehydration--absorption process in which a liquid absorbent, a glycol, directly contacts the natural gas stream and absorbs water vapor in a contact tower or absorption column. The glycol becomes saturated with water and is * Introduction to Oil and Gas Production. American Petroleum Institute. 1983. Xlll ------- circulated through a boiler where the water vapor is boiled off. Gruy "Wellgroups11—Gruy Engineering Corp. developed "wellgroups," or model production wells, for both oil and gas wells in 37 areas across the U.S. For each geographic area, wellgroups are defined by well depth ranges and by production rate in each depth range. Natural Gas Processing Plant--a facility designed to (1) achieve the recovery of natural gas liquids from the stream of natural gas, which may or may not have been processed through lease separators and field facilities, and (2) control the quality of the natural gas to be marketed.* Natural Gas--a mixture of hydrocarbons and varying quantities of nonhydrocarbons that exist either in gaseous phase or in solution with crude oil from underground reservoirs. Offshore Production Platforms--facilities used to produce, treat, and separate crude oil, natural gas, and produced water in offshore areas. Producing Field--an area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same geological structure feature and/or stratigraphic condition.* Production Well--a hole drilled into the earth, usually cased with pipe for the recovery of crude oil, condensate, and natural gas. Proved Crude Oil Reserves--the estimated amount of crude oil that can be found and developed in future years from known reservoirs under current prices and technology. Proved Natural Gas Reserves--the estimated amount of gas that can be found and developed in future years from known reservoirs under current prices and technology. Pump Stations—facilities designed to transport crude oil from tank batteries to refineries. Stripper Wells—those production wells that produce less than 10 bpd or 60 Mcf per day. Wellhead Price—represents the wellhead sales price, including charges for natural gas plant liquids subsequently removed from the gas, gathering and compression charges, and State production, severance, and/or similar charges. Introduction to Oil and Gas Production. American Petroleum Institute. 1983. xiv ------- Wet Gas--unprocessed or partially processed natural gas produced from a reservoir that contains condensable hydrocarbons. xv ------- XVI ------- EXECUTIVE SUMMARY The petroleum industry is divided into five distinct sectors: (1) exploration, (2) production, (3) transportation, (4) refining, and (5) marketing. The National Emission Standard for Hazardous Air Pollutants (NESHAP) establishes controls for the products and processes of the production and transportation sectors of the petroleum industry. Specifically, the oil and natural gas production and natural gas transmission and storage source categories include the separation, upgrading, storage, and transfer of extracted streams that are recovered from production wells. Thus, it includes the production and custody transfer up to the refinery stage for crude oil and up to the city gate for natural gas. This report evaluates the economic impacts of additional pollution control requirements for the oil and natural gas production and natural gas transmission and storage source categories that are designed to control releases of hazardous air pollutants (HAPs) to the atmosphere. ES.l INDUSTRY PROFILE Production occurs within the contiguous 48 United States, Alaska, and at offshore facilities in Federal and State waters. In the production process, extracted streams from production wells are transported from the wellhead (through offshore production platforms in the case of offshore wells) to tank batteries for separation of crude oil, natural gas, condensates, and water from the product. Crude oil products are then transported to refineries, while natural gas products are directed to gas processing plants and then to final transmission lines at city gates. The equipment required in xvi i ------- the production of crude oil and natural gas includes production wells (including offshore production platforms), dehydration units, tank batteries, natural gas processing plants, and transmission pipelines and underground storage facilities. Because oil is an international commodity, the U.S. production of crude oil is affected by the world crude oil price, the price of alternative fuels, and existing regulations. Domestic oil production is currently in a state of decline that began in 1970. U.S. production in 1992 totaled only 7.2 million barrels per day (MMbpd)--the lowest level in 30 years. Natural gas production trends are distinct from those of crude oil. Production has been increasing since 1986 mainly due to open access to pipeline transportation that has resulted in more marketing opportunities for producers and greater competition, leading to higher production. Also contributing to the increase in production are significant improvements in drilling productivity as well as more intensive utilization of existing fields since 1989. Natural gas consumers include residential and commercial customers, as well as industrial firms and electric utilities. Since 1986, natural gas consumption has shown relatively steady growth, which is projected to continue through the year 2010. The oil and natural gas production industry is characterized by large (major) oil companies on one level and smaller independent producers on another level. Because of the existence of major oil companies, the industry possesses a wide dispersion of vertical and horizontal integration. Several oil companies achieve full vertical integration in that they own and operate facilities that are involved in each of the five sectors within the petroleum industry. Independent companies, by definition, are involved in only a XVlll ------- subset of these five sectors. Horizontal integration also exists in that major and independent firms may own and operate several crude oil and natural gas production and processing facilities. ES.2 REGULATORY CONTROL OPTIONS AND COSTS The Background Information Document (BID) details the technology basis for the national emission standards on affected sources. Model plants were developed to evaluate the effects of various control options on the oil and natural gas production industry and the transmission and storage industry. Selection of control options was based on the application of presently available control equipment and technologies and varying levels of capture consistent with different levels of overall control. The BID presents a summary of the control options for each of the following model plants: • triethylene glycol (TEG) dehydration units, • condensate tank batteries (CTB) • natural gas processing plants (NGPP), and • offshore production platforms (OPP). Table ES-1 summarizes the annual compliance costs associated with the regulatory requirements for each model plant by source category. Major sources of HAP emissions are controlled based on the MACT floor, as defined in the BID. The Agency has determined that a glycol dehydration unit must be collocated at a facility for that facility to be designated as a major source. Therefore, the MACT floor may apply to stand-alone TEG units, condensate tank batteries, and natural gas processing plants. Black oil tank batteries and offshore production platforms are not considered since TEG units are not typical of the operations at black oil tank batteries and are completely controlled at offshore production platforms. Based on public comments on the proposed rule, EPA re- evaluated the costs and affected units in the Natural Gas Transmission and Storage sector. A full evaluation is xix ------- presented in the BID, but a suinmary of costs are also presented in Table ES-1. The final rule for this industry will control major sources only, whereas the proposal for this rule evaluated control xx ------- TABLE ES-1. SUMMARY OF ANNUAL CONTROL COSTS BY MODEL PLANT Model Plant Cost per model unit TEG dehydration units TEG-A - TEG-B $12,989 TEG-C $12,937 TEG-D $12,790 TEG-E $12,790 Condensate tank batteries CTB-E - CTB-F $19,660 CTB-G $24,973 CTB-H $25,071 Natural gas processing plants NGPP-A $46,747 NGPP-B $61,823 NGPP-C $81,083 Natural gas transmission and storage units TEG-A TEG-B TEG-C TEG-D $49,787 TEG-E $49,787 requirements for major and area sources. Therefore, this EIA for the final rule only presents impacts on major sources. ES.3 ECONOMIC IMPACT ANALYSIS This economic impact analysis assesses the market-, facility-, and industry-level impact of the final rule on the oil and natural gas production industry. According to the BID, black oil tank batteries will not incur control costs so that only condensates processed at condensate tank batteries will be directly affected by the regulation. Condensates represent less than 5 percent of total U.S. crude oil XX I'. ------- production.* Thus, this analysis does not include a model to assess the regulatory effects on the world crude oil market because the anticipated changes in the U.S. supply are not likely to influence world prices. Consequently, the economic analysis focuses on the regulatory effects on the U.S. natural gas market that is modeled as a national, perfectly competitive market for a homogeneous commodity. In addition to the analysis presented at proposal, this EIA also incorporates an evaluation of the impact on the transmission and storage sector of the natural gas industry. To estimate the economic impacts of the regulation on the natural gas market, a multi-dimensional Lotus spreadsheet model was developed incorporating various data sources to provide an empirical characterization of the U.S. natural gas industry for a base year of 1993--the latest year for which supporting technical and economic data were available at proposal. The analysis for the final rule maintains this base year to provide consistent comparisons between the final rule and proposed rule. The exogenous shock to the economic model is the imposition of the regulations and the corresponding control costs. A competitive market structure was incorporated to compute the equilibrium prices (wellhead and end user) at which the supply and demand balance for natural gas output. Domestic supply is represented by a detailed characterization of the production flow of natural gas through a network of production wells and processing facilities. Demand for natural gas by end-use sector is expressed in equation form, incorporating estimates of demand elasticities from the economic literature. Although the model includes a foreign component of U.S. natural gas supply (i.e., imports), it does 'Oil and Natural Gas Production: An Industry Profile. U.S. Environmental Protection Agency, OAQPS, Research Triangle Park, NC. October 1994. p. 4. xxii ------- not incorporate U.S. exports of natural gas that are observed at insignificant levels. The model analyzes market adjustments associated with the imposition of the regulation by employing a process of tatonnement whereby prices approach equilibrium through successive correction modeled as a Walrasian auctioneer. As presented in Table ES-2, the major outputs of this model are market-level impacts, including price and quantity adjustments for natural gas and the impacts on foreign trade, and industry-level impacts, including the change in revenues and costs, adjustments in production, closures, and changes in employment. The market adjustments associated with the XXlll ------- TABLE ES-2. SUMMARY OF SELECTED ECONOMIC IMPACT RESULTS Natural Gas Production Market-level impacts Prices(%) 0.0008% Wellhead 0.0004% End-user Domestic production (%) -0.0003% Industry-level impacts Change in revenues ($106) $3.0 Change in costs (106) $7.4 Change in profits ($106) -$4.4 Closures Production wells 0 Natural gas processing plants 0 Employment losses 0 Economic welfare impacts ($106) Change in consumer surplus -$0.3 Change in producer surplus -$4.6 Domestic -$4.7 Foreign $0.1 Change in economic welfare -$4.9 regulation are negligible in percentage terms (less than 0.01 percent) as well as in comparison to the observed trends in the U.S. natural gas market. For example, between 1992 and 1993, the average annual wellhead price increased by 14 percent, while domestic production of natural gas rose by 3 percent. For transmission and storage, a screening analysis of impacts at the firm level was conducted. If this indicated substantial impacts a full market model as utilized for natural gas production could have been developed. The screening analysis showed: 1) that only 7 firms are estimated to be impacted, 2) that total compliance costs on this industry ($300,000) represent only 2/100ths of one percent (0.02%) of industry revenues, and xxiv ------- 3) that compliance'costs for individuals firms are likely to represent less than one percent of firm revenues for the affected firms. Furthermore, the market adjustments in price and quantity allow calculation of the economic welfare impacts (i.e., changes in the aggregate economic welfare as measured by consumer and producer surplus changes). These estimates represent the social cost of the regulation. For natural gas production, transmission, and storage, the annual social cost of the regulation is $4.9 million. This measure of social cost is preferred to the national cost estimates from the engineering analysis because it accounts for the market adjustments and the associated deadweight loss to society of the reallocation of resources. ES.4 REGULATORY FLEXIBILITY ANALYSIS Environmental regulations such as this final rule for the oil and natural gas production and the natural gas transmission and storage industry affect all businesses, large and small, but small businesses may have special problems in complying with such regulations. The Regulatory Flexibility Act (RFA) of 1980 requires that special consideration be given to small entities affected by Federal regulation. Under the 1992 revised EPA guidelines for implementing the Regulatory Flexibility Act, an initial regulatory flexibility analysis (IRFA) and a final regulatory flexibility analysis (FRFA) will be performed for every rule subject to the Act that will have any economic impact, however small, on any small entities that are subject to the rule, however few, even though EPA may not be legally required to do so. The Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996 further amended the RFA by expanding judicial and small business review of EPA rulemaking. Although small business impacts are expected to be minimal due to the size cutoff for TEG dehydration units, this firm-level analysis addresses the RFA requirements by measuring the impacts on small entities. xxv ------- Potentially affected firms include entities that own production wells and/or processing plants and equipment involved in oil and natural gas production, transmission or storage. For the production sector, we use financial information from the Oil and Gas Journal(OGJ)and financial ratios from Dun and Bradstreet to characterize the financial status of a sample of 80 firms potentially affected by the regulation. Firms in this sample include major and independent producers of oil and natural gas in addition to interstate pipeline and local distribution companies primarily involved in natural gas. According to Small Business Administration general size standard definitions for SIC codes, a total of 39 firms included in this analysis, or 48.8 percent, are defined as small. For the natural gas transmission and storage sector, we use information from the OGJs special issue of "Pipeline Economics" to determine impacts on small businesses. With regulation, the change in measures of profitability for production firms are minimal with no overall disparity across small and large firms, while the likelihood of financial failure is unaffected for both small and large firms. Likewise, for the transmission and storage sector, impacts are minimal because the majority of firms included in our analysis have compliance cost-to- revenues ratios below one percent. Therefore, there is no evidence of any disproportionate impacts on small entities due to the final rule on the oil and natural gas production industry. XXVI ------- SECTION 1 INTRODUCTION The U.S. Environmental Protection Agency (EPA or the Agency) is developing an air pollution regulation for reducing emissions generated by the oil and natural gas production and natural gas transmission and storage source categories. EPA has developed a National Emission Standard for Hazardous Air Pollutants (NESHAP) for each category of major sources under the authority of Section 112(d) of the Clean Air Act as amended in 1990. The Innovative Strategies and Economics Group (ISEG) of EPA contributes to this effort by providing analyses and supporting documents that describe the likely economic impacts of the standards on directly and indirectly affected entities. 1.1 SCOPE AND PURPOSE This report evaluates the economic impacts of pollution control requirements for the oil and natural gas production and natural gas transmission and storage source categories that are designed to control releases of hazardous air pollutants (HAPs) to the atmosphere. The Clean Air Act's purpose is "to protect and enhance the quality of the Nation's air resources" (Section 101[b]). Section 112 of the Clean Air Act as amended in 1990 establishes the authority to set national emission standards for the 189 HAPs listed in this section of the Act. A major source is defined as a stationary source or group of stationary sources located within a contiguous area and under common control that emits, or has the potential to emit considering control, 10 tons or more of any one HAP or 25 tons 1-1 ------- or more of any combination of HAPs. Special provisions in Section 112(n)(4) for oil and gas wells and pipeline facilities affect major source determinations for these facilities. For HAPs, the Agency establishes Maximum Achievable Control Technology (MACT) standards. The term "MACT floor" refers to the minimum control technology on which MACT can be based. For existing major sources, the MACT floor is the average emissions limitation achieved by the best performing 12 percent of sources (if the category or subcategory includes 30 or more sources), or the best performing five sources (if the category or subcategory includes fewer than 30 sources). MACT can be mere stringent than the floor, considering costs, nonair quality health and environmental impacts, and energy requirements. 1.2 ORGANIZATION OF THE REPORT The remainder of this report is divided into four sections that support and provide details on the methodology and results of this analysis. The sections include the following: • Section 2 introduces the reader to the oil and natural gas production and natural gas transmission and storage source categories. It begins with an overview of the oil and natural gas industry and presents data on products and markets, production units, and the companies that own and operate the production and storage units. • Section 3 reviews the model plants, regulatory control options, and associated costs of compliance as detailed in the draft Background Information Document (BID) prepared in support of the regulations. • Section 4 describes the methodology for assessing the economic impacts of the regulation and the analysis results. 1-2 ------- Section 5 explains the methodology for assessing the company-level impacts of the regulation including an initial regulatory flexibility analysis to evaluate the small business effects of the regulation. 1-3 ------- SECTION 2 INDUSTRY PROFILE The petroleum industry is divided into five distinct sectors: (1) exploration, (2) production, (3) transportation, (4) refining, and (5) marketing. The NESHAP considers controls for the products and processes of the production and transportation sectors of the petroleum industry. Specifically, the oil and natural gas production and natural gas transmission and storage source categories include the separation, upgrading, storage, and transfer of extracted streams that are recovered from production wells. Thus, it includes the production and custody transfer up to the refining stage for crude oil and up to the city gate for natural gas. Most crude oil and natural gas production facilities are classified under SIC code 1311--Crude Oil and Natural Gas Exploration and Production, while most natural gas transmission and storage facilities are classified under SIC 4923--Natural Gas Transmission and Distribution. The outputs of the oil and natural gas production industry--crude oil and natural gas--are the inputs for larger production processes of gas, energy, and petroleum products. In 1992, an estimated 594,189 crude oil wells and 280,899 natural gas production wells operated in the United States. U.S. natural gas production was 18.3 trillion cubic feet (Tcf) in 1993, continuing the upward trend since 1986, while U.S. crude oil production in 1992 was 7.2 million barrels per day (MMbpd), which is the lowest level in 30 years. The leading domestic oil and gas producing states are Alaska, Texas, Louisiana, California, Oklahoma, New Mexico, and Kansas. 2-1 ------- The remainder of this section provides a brief introduction to the oil and natural gas production industry. The purpose is to give the reader a general understanding of the technical and economic aspects of the industry that must be addressed in the economic impact analysis. Section 2.1 provides an overview of the oil and natural gas production processes employed in the U.S. with an emphasis on those affected directly by the regulation. Section 2.2 presents historical data on crude oil and natural gas including reserves, production, consumption, and foreign trade. Section 2.3 summarizes the number of production facilities by type, location, and other parameters, while Section 2.4 provides general information on the potentially affected companies that own oil and natural gas production facilities. 2 .1 PRODUCTION PROCESSES Production occurs within the contiguous 48 United States, Alaska, and at offshore facilities in Federal and State waters. Figure 2-1 shows that, in the production process, extracted streams from production wells are transported from the wellhead (through offshore production platforms in the case of offshore wells) to tank batteries to separate crude oil, natural gas, condensates, and water from the product. Crude oil products are then transported through pump stations to a refinery, while natural gas products are directed to gas processing plants and then to final transmission lines at city gates. The equipment required in the production of crude oil and natural gas includes production wells (including offshore production platforms), separators, dehydration units, tank batteries, and natural gas processing plants. 2.1.1 Production Wells and Extracted Products The type of production well used in the extraction process depends on the region of the country in which the well 2-2 ------- "Dry" natural gas Onshore Oil/Gas Well Offshore Oil/Gas Well Extracted streams and recovered products Offshore Production Platform Condensate Tank Battery "Wet" natural gas Black Oil Tank Battery Condensates Natural Gas Processing Plant Marketable natural gas "Dry" natural gas City Gate Crude Oil Refinery Figure 2-1. Crude oil and natural gas production flow diagram. 2-3 ------- is drilled and the composition of the well stream. The recovered natural resources are naturally or artificially brought to the surface where the products (crude oil, condensate, and natural gas) are separated from produced water and other impurities. Offshore production platforms are used to extract, treat, and separate recovered products in offshore areas. Processes and operations at offshore production platforms are similar to those located at onshore facilities except that offshore platforms generally have little or no storage capacity because of the limited available space.1 Each producing well has its own unique properties in that the composition of the well stream (i.e., crude oil and the attendant gas) is different from that of any other well. As a result, most wells produce a combination of oil and gas; however, some wells can produce primarily crude oil and condensat '^h little natural gas, while others may produce only natural gas. The primary extracted streams and recovered products associated with the oil and natural gas industry include crude oil, natural gas, condensate, and produced water. These are briefly described below. Crude oil can be broadly classified as paraffinic, naphthenic, or intermediate. Paraffinic (or heavy) crude is used as an input to the manufacture of lube oils and kerosene. Naphthenic (or light) crude is used as an input to the manufacture of gasolines and asphalt. Intermediate crudes are those that do not fit into either category. The classification of crude oil is determined by a gravity measure developed by the American Petroleum Institute (API). API gravity is a weight per unit volume measure of a hydrocarbon liquid as determined by a method recommended by the API. A heavy or paraffinic crude is one with an API gravity of 20° or less, and a light or naphthenic crude, which flows freely at atmospheric temperatures, usually has an API gravity in the range of the high 30s to the low 40s.2 2-4 ------- Natural gas is a mixture of hydrocarbons and varying quantities of nonhydrocarbons that exist either in gaseous phase or in solution with crude oil from underground reservoirs. Natural gas may be classified as wet or dry gas. Wet gas is unprocessed or partially processed natural gas produced from a reservoir that contains condensable hydrocarbons. Dry gas is natural gas whose water content has been reduced through dehydration, or natural gas that contains little or no commercially recoverable liquid hydrocarbons. Condensates are hydrocarbons that are in a gaseous state under reservoir conditions (prior to production), but which become liquid during the production process. Condensates have an API gravity in the 50° to 120° range.3 According to historical data, Condensates account for approximately 4.5 to 5 percent of total crude oil production. Produced water is recovered from a production well or is separated from the extracted hydrocarbon streams. More than 90 percent of produced water is reinjected into the well for disposal and to enhance production by providing increased pressure during extraction. An additional 7 percent of produced water is released into surface water under provisions of the Clean Water Act. The remaining 3 percent of produced water extracted from production wells is disposed of as waste. In addition to the products discussed above, other various hydrocarbons may be recovered through the processing of the extracted streams. These hydrocarbons include mixed natural gas liquids, natural gasoline, propane, butane, and liquefied petroleum gas. 2.1.2 Dehydration Units Once the natural gas has been separated from the crude oil or condensate and water, residual water is removed from 2-5 ------- the natural gas by dehydration to meet sales contract specifications or to improve heating values for fuel consumption. Liquid desiccant dehydration is the most widespread technology used for natural gas with the most common process being a basic glycol system. Glycol dehydration is an absorption process in which a liquid absorbent, a glycol, directly contacts the natural gas stream and absorbs the water vapor that is later boiled off. Glycol units in operation today may use ethylene glycol (EG), diethylene glycol (DEC), triethylene glycol (TEG), and tetraethylene glycol (TREG).4 Dehydration units are used at several processing points in the process to remove water vapor from the gas once it has been separated from the crude oil or condensate and water. Locations where dehydration may occur include the production well site, the condensate tank battery, the natural gas processing plant, aboveground and underground storage facilities upon removal, and the city gate. 2.1.3 Tank Batteries A tank battery refers to the collection of process equipment used to separate, treat, store, and transfer crude oil, condensate, natural gas, and produced water. As shown in Figure 2-2, the extracted products enter the tank battery through the production header, which may collect the product from many production wells. Process equipment at a tank battery may include separators that separate the product from basic sediment and water; dehydration units; heater treaters, free water knockouts, and gunbarrel separation tanks that basically remove water and gas from crude oil; and storage tanks that temporarily store produced water and crude oil.5 > Tank batteries are classified as black oil tank batteries if the extracted stream from the production wells primarily 2-6 ------- Gas Pipeline Production Wells Extracted Streams __ Separation Produced Water _ Storage Tanks Disposal or Beneficial Use Oil or Condensate Pipeline Figure 2-2. Summary of processes at a tank battery. 2-7 ------- consists of crude oil that has little, if any, associated gas. In general, any associated gas recovered at a black oil tank battery is flared. Condensate tank batteries are those that process extracted streams from production wells consisting of condensate and natural gas. Dehydration units are part of the process equipment at condensate tank batteries but not at black oil tank batteries. 2.1.4 Natural Gas Processing Plants Natural gas that is separated from other products of the extracted stream at the tank battery is then transferred via pipeline to a natural gas processing plant. As shown in Figure 2-3 the main functions of a natural gas processing plant include conditioning the gas by separation of natural gas liquids (NGL) from the gas and fractionation of NGLs into separate components, or desired products that include ethane, propane, butane, liquid petroleum gas, and natural gasoline. Generally, gas is dehydrated prior to other processes at a plant. Another function of these facilities is to control the quality of the processed natural gas stream. If the natural gas contains hydrogen sulfide and carbon dioxide, then Nat G i Swee Oper, i Lira! as r ening nnhuHntinn ations Dehydration r Sulfur Recovery Gas Natural Gas Liquids Pressurized Tanks * 1 Pipeline Fractionation — \ < Storage Tanks Pipeline — >• Pipeline Transfer Operations Figure 2-3. Summary of processes at natural gas processing plant. 2-8 ------- sweetening operations are employed to remove these contaminants from the natural gas stream immediately after separation and dehydration. 2.1.5 Natural Gas Transmission and Storage Facilities After processing, natural gas enters a network of pipelines and storage systems. The natural gas transmission and storage source category consists of gathering lines, compressor stations, high-pressure transmission pipeline, and underground storage sites. Compressor stations are any facility which supplies energy to move natural gas at increased pressure in transmission pipelines or into underground storage. Typically, compressor stations are located at intervals along a transmission pipeline to maintain desired pressure for natural gas transport. These stations will use either large internal combustion engines or gas turbines as prime movers to provide the necessary horsepower to maintain system pressure. Underground storage facilities are subsurface facilities utilized for storing natural gas which has been transferred from its original location for the primary purpose of load balancing, which is the process of equalizing the receipt and delivery of natural gas. Processes and operations that may be located at underground storage facilities include compression and dehydra t i on. 2.2 PRODUCTS AND MARKETS Crude oil and natural gas have historically served two separate and distinct markets. Oil is an international commodity, transported and consumed throughout the world. Natural gas, on the other hand, is typically consumed close to where it is produced. Final products of crude oil are used 2-9 ------- primarily as engine fuel for automobiles, airplanes, and other types of vehicles. Natural gas, on the other hand, is used primarily as boiler fuel for industrial, commercial, and residential applications. 2.2.1 Crude Oil The following subsections provide historical data on the U.S. reserves, production, consumption, and foreign trade of crude oil. 2.2.1.1 Reserves. The Department of Energy defines oil reserves as "oil reserves that data demonstrate are capable of being recovered in the future given existing economic and operating conditions."6 Table 2-1 provides total U.S. crude oil reserves for 1976 through 1993.7 Crude oil reserves continued L-L^lr decline for the sixth consecutive year in 1993, dropping by 788 million barrels (3.3 percent) to 2.3 billion barrels. Low oil prices and decreased drilling activity are the major factors for these recent declines. Table 2-2 presents the U.S. proved reserves of crude oil as of December 31, 1993, by State or producing area.8 As this table indicates, five areas currently account for 80 percent of the U.S. total proved reserves of crude oil with Texas leading all other areas, followed closely by Alaska, California, the Gulf of Mexico, and New Mexico. Texas, Alaska, and California accounted for roughly 82 percent of the overall decline in crude oil reserves from 1992 to 1993. Meanwhile, the Gulf of Mexico Federal Offshore had an oil reserve increase of 237 million barrels. 2.2.1.2 Domestic Production. Because oil is an international commodity, the U.S. production of crude oil is affected by the world crude oil price, the price of 2-10 ------- TABLE 2-1. TOTAL U.S. PROVED RESERVES OF CRUDE OIL, 1976 THROUGH 1993 (million barrels of 42 U.S. gallons) Year 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 Total discoveries 794 827 636 862 1,161 1,031 924 1,144 995 534 691 553 716 689 554 484 785 Production 2,862 3,008 2,955 2,975 2,949 2,950 3,020 3,037 3,052 2,973 2,873 2,811 2,586 2,505 2,512 2,446 2,339 Proved reserves 33,502* 31,780 31,355 29,810 29,805 29,426 27,858 27,735 28,446 28,416 26,889 27,256 26,825 26,501 26,254 24,682 23,745 22,957 aBased on following year data only. Source: U.S. Department of Energy. Energy Information Administration. U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves: 1993 Annual Report. October 1994. alternative fuels, and existing regulations. Domestic oil production is currently in a state of decline that began in 1970. Table 2-3 shows U.S. production in 1992 at 7.2 MMbpd, which is the lowest level in 30 years.9 Domestic production of crude oil has dropped by almost 2 MMbpd since 1985. This decline has been attributed to a transfer of U.S. investment from domestic sources to foreign production.* "The investment in foreign ventures is spurred by low labor costs and less stringent regulatory environments abroad, as well as the increased likelihood of discovering larger fields in overseas activity. 2-11 ------- TABLE 2-2. U.S. CRUDE OIL RESERVES BY STATE AND AREA, 1993 (million barrels) State/area Alaska Alabama Arkansas California Colorado Florida Illinois Indiana Kansas Kentucky Louisiana Michigan Mississippi Montana Nebraska New Mexico North Dakota Ohio Oklahoma Pennsylvania Texas Utah West Virginia Wyoming Federal offshore Pacific (California) Gulf of Mexico (Louisiana) Gulf of Mexico (Texas) Miscellaneous Total, lower 48 States Total, U.S. Proved reserves 12/31/92 6,022 41 58 3,893 304 36 138 17 310 34 668 102 165 193 26 757 237 58 698 16 6,441 217 27 689 2,569 734 1,643 192 29 17,723 23,745 Total discoveries and adjustments 332 10 17 161 10 10 -7 0 9 -5 77 0 -12 -6 -1 14 19 4 68 -1 309 31 -1 13 492 -11 489 14 8 1,219 1,551 Production 579 10 10 290 30 6 15 2 48 3 106 12 20 16 5 64 30 8 86 1 579 20 2 78 316 50 252 14 3 1,760 2,339 Proved reserves 12/31/93 5,775 41 65 3,764 284 40 116 15 271 26 639 90 133 171 20 707 226 54 680 14 6,171 228 24 624 2,745 673 1,880 192 34 17,182 22,957 Source: U.S. Department of Energy. Energy Information Administration. U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves: 1993 Annual Report. October 1994. 2-12 ------- TABLE 2-3. U.S. CRUDE OIL PRODUCTION, 1982-1992 Year 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 Crude oil production (MMbpd) 8.65 8.69 8.88 9.00 8.68 8.35 8.14 7.61 7.36 7.42 7.17 Source: U.S. Department of Energy. Petroleum Supply Annual 1992. DOE/EIA-0340(92)-1 Vol. 1. May 1993. 2.2.1.3 Domestic Consumption. Crude oil is the primary input to the production of several petroleum products. Consequently, the demand for crude oil is derived from the demand of these final products. Final petroleum products include motor gasoline, diesel fuel, jet fuel, and fuels for the industrial, residential, and commercial sectors as well as for electric utilities. Historical crude oil consumption trends for 1980 through 1992 are shown in Table 2-4.10'11 As shown in this table, a slight upturn in demand occurred in 1988, and consumption then remained fairly constant through 1992. 2.2.1.4 Foreign Trade. The world oil market is unique in that it is dominated by the Organization of Petroleum Exporting Countries (OPEC), which applies the following 2-13 ------- TABLE 2-4. TOTAL U.S. CRUDE OIL CONSUMPTION AND PRICE LEVELS, 1980-1992 Crude oil domestic wellhead price ($ /barrel) Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 Domestic consumption (MMbpd) 17.06 16.06 15.30 15.23 15.73 15.73 16.28 16.67 17.28 17.33 16.99 16.70 17.00 Current dollars 21.6 31.8 28.5 26.2 25.9 24.1 12.5 15.4 12.6 15.9 20.0 16.5 16.0 Constant 1990 dollars 34.2 45.7 38.6 34.4 32.6 29.3 14.9 17.7 13.9 16.8 20.0 15.8 14.7 Sources: U.S. Department of Energy. Petroleum Supply Annual 1992. DOE/EIA-0340(92)-1. Vol. 1. May 1993. U.S. Department of Energy. Natural Gas Annual 1991. DOE/EIA-013K91) . Washington, DC. October 1992. economic principle: if supply is restricted, prices will rise. OPEC accounts for 38 percent of the world oil supply, while the U.S. accounts for 12 percent. Supplies from the OPEC exert a significant influence on domestic crude oil foreign trade levels. In February 1992, OPEC reimposed quotas on individual country output. The new quota signified a reduction in production intended to alter world oil prices. Any future additions to OPEC supply could reduce world crude oil prices. Additionally, if supplies to the world oil supply from the Commonwealth of Independent States (CIS) continue to decline, excess OPEC supplies can be absorbed without a significant crude oil price reduction. 2-14 ------- As Table 2-5 demonstrates, U.S. imports of crude oil have increased steadily since 1983 at an average annual growth rate of 9.6 percent, while U.S. exports have steadily declined at an average of 4 percent annually.12 This has resulted in a net import level in 1992 of 6 MMbpd. Oil imports are projected to exceed 8.2 MMbpd in 1993. This annual growth rate of 4.7 percent is measurably higher than the 2.9 percent rate registered in 1992.13 Total oil imports are predicted to reach 10.1 MMbpd by the year 2000. This predicted rise in imports of crude oil corresponds to an average annual increase of 3.4 percent. The import dependency ratio is forecast to rise to 55 percent in 2000, compared to 48 percent in 1993.14 As a result of the historical decline in domestic production and increases in demand levels, net imports of crude oil are expected to continue to increase. TABLE 2-b. SUMMARY OF U.S. FOREIGN TRADE OF CRUDE OIL, 1983-1992 Imports Year 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 (MMbpd) 3 . 3. 3, 4. 4, 5. 5 5. 5. 6. .10 .23 .08 .13 .60 .06 .79 .87 .78 .07 Domestic crude oil consump- tion (MMbpd) 15 15 15 16 16 17 17 16 16 17 .23 .73 .73 .28 .67 .28 .33 .99 .70 .00 Import percent- age of domestic consump- tion 20 20 19 25 27 29 33 34 34 35 .3 .5 .6 .4 .6 .3 .4 .5 .6 .7 Exports (MMbpd) 0 0 0 0 0 0 0 0 0 0 .16 .18 .20 .15 .15 .15 .14 .11 .12 .09 Domestic crude oil output (MMbpd) 8 8 9 8 8 8 7 7 7 7 .6 .9 .0 .7 .3 .1 .6 .4 .4 .2 Export percent- age of domestic output 2 2 2 1 1 1 1 1 1 1 .0 .0 .2 .7 .8 .9 .8 .5 .6 .3 Source: U.S. Department of Energy. Annual Energy Review 1991. DOE/EIA- 0384(91). June 1992. 2-15 ------- 2.2.1.5 Future Trends. Table 2-6 presents the U.S. Department of Energy's annual projections of crude oil production, consumption, and world oil price from 1993 through 2010 based on two rates of economic growth and two possible oil price scenarios.15 U.S. crude oil supply is predicted to continue to decline between 1993 and 2010, due to low levels of drilling activities in recent years. The range of projections for 2010 is from 6.2 to 3.6 MMbpd. According to the Independent Petroleum Association of America (IPAA), U.S. crude oil production is predicted to continue its decline from 7.0 MMbpd in 1993 to 6 MMbpd by 2000.16 This will be the lowest oil output level since 1950. TABLE 2-6. SUPPLY, DEMAND, AND PRICE PROJECTIONS FOR CRUDE OIL, 1993-2010 Alternative projections to Item Production (MMbpd) Consumption8 (MMbpd) World oil price (1993 $/barrel) Actual 1993 6.85 15.30 16.12 High economic growth 5.57 15.9 24.99 Low economic growth 5.23 15.9 23.29 High oil price 6.20 15.8 28.99 2010 Low oil price 3.58 16.00 14.65 aConsumption is measured by U.S. refinery capacity. Source: U.S. Department of Energy. Annual Energy Outlook 1995 DOE/EIA-0383(95). January 1995. 2.2.2 Natural Gas The following subsections provide historical data on the U.S. reserves, production, consumption, and foreign trade of natural gas. 2.2.2.1 Reserves. Proved reserves of natural gas are the estimated amount of gas that can be found and developed in 2-16 ------- future years from known reservoirs under current prices and technologies.17 Table 2-7 provides total U.S. natural gas reserves for 1976 through 1993.18 Although natural gas discoveries were up considerably in 1993, increased production along with lower revisions and adjustments (resulting from new information about known gas reservoirs) led to a decline in overall natural gas reserves of 2.6 Tcf to total 162.4 Tcf. This decline reflects a 1.6 percent change in reserves from the 1992 level. TABLE 2-7. U.S. PROVED RESERVES OF DRY NATURAL GAS, 1976 THROUGH 1993 (billion cubic feet [Bcf] at 14.73 psia and 60° F)' Year 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 Total discoveries 14,603 18,021 14,704 14,473 17,220 14,455 11,448 13,521 11,128 8,935 7,175 10,350 10,032 12,368 7,542 7,048 8,868 Production 18,843 18,805 19,257 18,699 18,737 17,506 15,788 17,193 15,985 15,610 16,114 16,670 16,983 17,233 17,202 17,423 17,789 Proved reserves 213,278a 207,413 208,033 200,997 199,021 201,730 201,512 200,247 197,463 193,369 191,586 187,211 168,024 167,116 169,346 167,062 165,015 162,415 "Based on following year data only. Source: U.S. Department of Energy. Energy Information Administration. U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves: 1993 Annual Report. October 1994. 2-17 ------- Table 2-8 presents the U.S. proved reserves of natural gas as of December 31, 1993, by State or producing area.19'20 As indicated by this table, the five leading gas producing areas of Texas, the Gulf of Mexico, Oklahoma, Louisiana, and New Mexico all had declines in proved reserves from 1992 to 1993 totaling 2.6 Tcf. These declines were partially offset by substantial increases in Virginia and Colorado, where gas reserves increased by 942 Bcf over 1992. 2.2.2.2 Domestic Production. Natural gas production trends are distinct from those of crude oil. As shown in Table 2-9, production has been increasing since 1986.21'22 This trend can be partially attributed to open access to pipeline transportation, which has resulted in more marketing opportunities for producers and greater competition, leading to higher production. Traditionally, most natural gas sold at the wellhead was sold under long-term, price-regulated contracts and purchased by pipeline companies. These pipeline companies in turn resold it to local distribution companies (from the "wellhead" to the "city gate"). Therefore, the pipelines transported natural gas as part of a larger package of "bundled" services that include acquisition and transportation. Local distribution companies then distribute gas to residential, commercial, and industrial customers and electric utilities (from the "city gate" to the "burner tip"). The end-user price thus reflected the cost of acquisition plus the cost of transport and other services along with the regulator-specified fair rate of return on investment. The Natural Gas Policy Act (NGPA) of 1978 and subsequent Federal Energy Regulatory Commission (FERC) orders throughout the 1980s promoting open access transportation have dramatically altered the industry organization of the U.S. 2-18 ------- TABLE 2-8. U.S. NATURAL GAS RESERVES BY STATE AND AREA, 1993 (Bcf) State/area Alaska Alabama Arkansas California Colorado Florida Kansas Kentucky Louisiana Michigan Mississippi Montana New Mexico New York North Dakota Ohio Oklahoma Pennsylvania Texas Utah Virginia West Virginia Wyoming Federal offshore Pacific (California) Gulf of Mexico (Louisiana) Gulf of Mexico (Texas) Other states Total, lower 48 States Total, U.S. Proved Total reserves discoveries and 12/30/92 adjustments 9,725 5,870 1,752 2,892 6,463 55 10,302 1,126 10,227 1,290 873 875 20,339 329 567 1,161 14,732 1,533 38,141 2,018 904 2,491 11,305 28,186 1,136 20,006 7,044 93 163,584 173,309 657 -371 -9 169 922 12 264 -22 830 75 38 -141 1,019 -43 75 66 1,246 328 4,736 358 454 286 824 4,096 32 3,128 936 13 15,165 15,822 Production 396 287 188 262 406 8 694 68 1,516 147 111 50 1,419 22 57 121 1,879 139 5,030 178 36 179 742 4,696 45 3,383 1,268 10 18,245 18,641 Proved reserves 12/30/93 9,986 5,212 1,555 2,799 6,979 59 9,872 1,036 9,541 1,218 800 684 19,939 264 585 1,106 14,099 1,722 37,847 2,198 1,322 2,598 11,387 27,586 1,123 19,751 6,712 96 160,504 170,490 Sources: U.S. Department of Energy, Petroleum Supply Annual 1992. DOE/EIA-0340(92)-1. Vol. 1. May 1993. U.S. Department of Energy. Natural Gas Annual 1991. DOE/EIA-013K91) . Washington, DC. October 1992. 2-19 ------- TABLE 2-9. U.S. NATURAL GAS PRODUCTION AND WELLHEAD PRICE LEVELS, 1980-1992 Average annual wellhead ($/Mcf) Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 Domestic production (Tcf) 20 19 17 16 17 16 16 16 17 17 17 17 18 .18 .96 .82 .09 .47 .45 .06 .62 .10 .31 .81 .87 .47 Current dollars 1 2 2 2 2 2 1 1 1 1 1 1 1 .6 .0 .5 .6 .7 .5 .9 .7 .7 .7 .7 .6 .8 price Constant 1990 dollars 2 2 3 3 3 3 2 2 1 1 1 1 1 .5 .9 .4 .4 .3 .0 .3 .0 .9 .8 .7 .5 .7 Sources: U.S. Department of Energy. Petroleum Supply Annual 1992. DOE/EIA-0340(92)-1. Vol. 1. May 1993. U.S. Department of Energy. Natural Gas Annual 1991. DOE/EIA-0131(91). Washington, DC. October 1992. market for natural gas by separating the marketing and transport functions of interstate pipeline companies.* With the separation of transportation from production in the industry, much of the natural gas is purchased directly from producers, and the pipeline companies principally provide transportation services for their customers. Independent These Federal Energy Regulatory Commission orders include FERC Order No. 380, which effectively eliminated the requirement that customers of interstate pipelines purchase any minimum quantity of natural gas, and FERC Order No. 636, which mandates that pipelines must separate gas sales from transportation, thereby allowing open access to pipeline transportation for gas producers and customers. 2-20 ------- brokers and other marketers service these transactions and bypass the traditional marketing structure.*'23 Also contributing to the increase in production shown in Table 2-9 are significant improvements in drilling productivity as well as more intensive utilization of existing fields since 1989. Because of lower prices in 1990 and 1991, however, producers have curtailed drilling programs and have sought ways to cut production costs, for example, by more intensive development of profitable onshore fields. 2.2.2.3 Domestic Consumption. Table 2-10 displays natural gas consumption by end user from 1980 to 1992, while Table 2-11 presents end-user prices for natural gas for the same time period.24'25 Natural gas users include residential and commercial customers, as well as industrial firms and electric utilities. Since 1986, natural gas consumption has shown relatively steady growth, which is projected to continue through the year 2010. Because some consumers can substitute certain petroleum products for natural gas, prices of oil and gas often move in the same direction. Low crude oil prices after the 1986 price collapse, for example, effectively pushed competing gas prices lower. 2.2.2.4 Foreign Trade. On the international market, the U.S. and Canada are the world's leading producers of natural gas, accounting for more than 59 percent of the worldwide gas processing capacity (the U.S. accounts for nearly 42 percent alone) and more than 57 percent of world natural gas production. Table 2-12 displays the level of imports and exports of natural gas as well as the import share Based on USDOE/EIA information for 1991, 84 percent of natural gas was transported to the market for marketers, local distribution companies (LDCs), and end users (45 percent for independent brokers and other marketers, 32 percent for local distribution companies, and 7 percent directly to end users) as compared with only 3 percent in 1982. The remaining 16 percent in 1991 was purchased at the wellhead by interstate pipeline companies for distribution. 2-21 ------- TABLE 2-10. U.S. NATURAL GAS CONSUMPTION BY END-USE SECTOR, 1980-1992 End-user consumption (Tcf) Year Residential 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 4 4 4 4 4 4 4 4 4 4 4 /! 4 .75 .55 .63 .38 .56 .43 .31 .31 .63 .78 .39 c c. .70 Commercial 2 2 2 2 2 2 2 2 2 2 2 2 2 .61 .52 .60 .43 .52 .43 .32 .43 .67 .71 .62 .7? .77 Industrial 7 7 5 5 6 5 5 5 6 6 7 7 7 .17 .13 .83 .64 .15 .90 .58 .95 .38 .82 .02 .23 .64 Electric utilities 3 3 3 2 3 3 2 2 2 2 2 2 2 .68 .64 .23 .91 .11 .04 .60 .84 .64 .79 .79 .79 .77 Other3 1 1 1 1 1 1 1 1 1 1 1 1 1 .66 .57 .71 .47 .61 .47 .41 .67 .71 .70 .90 .75 .85 Total 19 19 18 16 17 17 16 17 18 18 18 19 19 .88 .40 .00 .84 .95 .28 .22 .21 .03 .80 .72 .05 .75 alncludes natural gas consumed as lease, plant, and pipeline fuel. Source: Energy Statistics Sourcebook, 8th ed. PennWell Publishing Co. September 1993. of U.S. domestic consumption and the export share of U.S. marketed production for the years 1973 through 1993 . North American gas trade is a major factor in the competitive U.S. natural gas market. Natural gas imports no longer serve as a marginal source of supply but are actively competing for market share. As shown in Table 2-12, imports increased by 6 percent to 2.3 Tcf from 1992 to 1993 providing 11 percent of U.S. domestic consumption.26 Canadian suppliers account for most of the natural gas imports to the United States. Although no significant changes in gas trade with Mexico are expected in the near future, the North American Free Trade Agreement (NAFTA) will assist in developing and integrating the Mexican gas industry.27 2-22 ------- TABLE 2-11. U.S. NATURAL GAS PRICE BY END-USE SECTOR, 1980-1992 End-use sector ($/Mcf) Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 Residential $3 $4 $5 $6 $6 $6 $5 $5 $5 $5 $5 $5 $5 .68 .29 .17 .06 .12 .12 .83 .54 .47 .64 .80 .82 .86 Commercial $3 $4 $4 $5 $5 $5 $5 $4 $4 $4 $4 $4 $4 .39 .00 .82 .59 .55 .50 .00 .77 .63 .74 .83 .81 .87 Industrial $2 $3 $3 $4 $4 $3 $3 $2 $2 $2 $2 $2 $2 .56 .14 .87 .18 .22 .95 .23 .94 .95 .96 .93 .69 .81 Electric utilities $2 $2 $3 $3 $3 $3 $2 $2 $2 $2 $2 $2 $2 .27 .89 .48 .58 .70 .55 .43 .32 .33 .43 .39 .18 .37 Average $2 $3 $4 $4 $4 $4 $4 $4 $4 $4 $4 .91 .51 .32 .82 .85 .72 .13 .05 .09 .22 .20 NA NA Source: Energy Statistics Sourcebook, September 1993. 8th ed. Perm Well Publishing Co. Historically, imports of natural gas have increased at an average annual growth rate of 10.5 percent. Increases in natural gas imports have been driven by increased U.S. demand and additions to interstate pipeline capacity in 1991 and 1992. Exports have doubled since 1983 although yearly fluctuations have occurred. Net import levels have steadily increased over this time period to 1.79 Tcf in 1992. According to the IPAA, total gas imports, mainly from Canada, are expected to rise to 3.1 Tcf by 2000, up from 2.2 Tcf in 1992. This is an average increase of nearly 6 percent each year. 2.2.2.5 Future Trends. Currently, the domestic natural gas production industry is in transition from a period 2-23 ------- TABLE 2-12. HISTORICAL SUMMARY OF U.S. NATURAL GAS FOREIGN TRADE, 1973-1993 (Bcf) Year 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 Total Total imports exports 1,032 959 953 963 1,011 965 1,253 984 903 933 918 843 949 750 992 1,293 1,381 1,532 1,773 2,137 2,350 .9 .2 .0 .8 .0 .5 .4 .8 .9 .3 .4 .0 .7 .5 .5 .8 .5 .3 .3 .5 .1 77.2 76.8 72.7 64.7 55.6 52.5 55.7 48.7 59.4 51.7 54.6 54.8 55.3 61.3 54.0 73. 6 106.9 85.6 129.2 216.3 140.2 Net imports as a percentage Net Total of total imports consumption consumption 955 882 880 899 955 913 1,197 936 844 881 863 788 894 689 938 1,220 1,274 1,446 1,644 1,921 2,209 .7 .5 .3 .1 .4 .0 .7 .0 .6 .6 .8 .3 .4 .2 .5 .2 .6 .7 .1 .2 .9 22, 21, 19, 19, 19, 19, 20, 19, 19, 18, 16, 17, 17, 16, 17, 18, 18, 18, 19, 19, 20, 049. 223. 537. 946. 520. 627. 240. 877. 403. 001. 834. 950. 280. 221. 210. 029. 800. 716. 129. 726. 219. 4 1 6 5 6 5 8 3 9 1 9 5 9 3 8 6 8 3 4 2 Oa 4. 4. 4. 4. 4. 4. 5. 4. 4. 4. 5. 4. 5. 4. 5. 6. 6. 7. 8. 9. 10 3 2 5 5 9 7 9 7 4 9 1 4 2 2 5 8 8 7 6 7 .9 Exports as a percentage Marketed of marketed production production 22, 21, 20, 19, 20, 19, 20, 20, 20, 18, 16, 18, 17, 16, 17, 17, 18, 18, 18, 18, 19, 647 600 108 952 025 974 471 379 177 519 822 229 197 858 432 918 095 593 585 616 251 .6 .5 .7 .4 .5 .0 .3 .7 .0 .7 .1 .6 .9 .7 .9 .5 .1 .8 .8 .9 .0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 .3 .4 .4 .3 .3 .3 .3 .2 .3 .3 .3 .3 .3 .4 .3 .4 .6 .5 .7 .2 .7 aPreliminary data. Notes: Totals may not equal sum of components due to independent rounding. Geographic coverage is the continental United States including Alaska. Source: U.S. Department of Energy. Energy Information Administration. Natural Gas Monthly U.S. Natural Gas Imports and Exports--1993. August 1994. of overcapacity to one near full capacity utilization. Since 1985, demand has grown in response to low prices while drilling activity remained depressed, lowering the gap that 2-24 ------- existed between demand and supply levels. While the U.S. has a relatively large potential gas reserve base available for development, current low market prices must increase to stimulate new drilling activity and meet projected demand growth. Natural gas supplies are expected to continue to increase through the 1990s, slowing near 2000 as deliverability through existing pipelines constrains the development of some gas markets.28 Table 2-13 presents the U.S. Department of Energy's annual projections of natural gas production, consumption, and wellhead prices from 1993 to 2010 based on three rates of economic growth. U.S. natural gas production and consumption are projected to increase steadily over the projection period.29 The range of projections for 2010 is from 19.89 to 21.91 Tcf. According to the IPAA, natural gas production is expected to increase through the year 2000 at an average annual rate of 1.1 percent, reaching nearly 20 Tcf by the year 2000, up from an expected level of 18.3 Tcf in 1993.30 TABLE 2-13. SUPPLY, DEMAND, AND PRICE PROJECTIONS FOR NATURAL GAS, 1993-2010 Production (Tcf) Consumption (Tcf) Wellhead price (1993 $/Mcf) Actual 1993 18.35 20.21 2.02 Alternative projections to 2010 Base case High Low economic economic economic growth 20.88 24.59 3.39 growth 21.91 25.85 3.74 growth 14.89 23.18 3.01 Source: U.S. Department of Energy. Annual Energy Outlook 1995. DOE/EIA-0383(95). January 1995. 2-25 ------- 2.3 PRODUCTION FACILITIES The following subsections provide details on the operating facilities of the oil and natural gas production industry including production wells, dehydration units, tank batteries, and natural gas processing plants. 2.3.1 Production Wells Table 2-14 displays the number of crude oil and natural gas wells in operation from 1983 to 1992.31 In 1992, an estimated 594,200 crude oil wells operated in the United States, and 280,900 natural gas production wells. For offshore production, an estimated 3,841 oil and gas production platforms operated in 1991 and were associated with a total of 33,000 wells. Natural gas production wells have increased in number steadily since 1983, while crude oil wells show more volatility. TABLE 2-14. NUMBER OF CRUDE OIL AND NATURAL GAS WELLS, 1983-1992 Year 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 Source : Natural gas producing wells 170,300 193,900 214,100 219,100 214,600 217,800 232,100 241,100 265,100 280,900 U.S. Department of Energy. Crude oil producing wells 603,300 620,800 646,600 628,700 621,200 623,600 606,900 602,400 610,200 594,200 Natural Gas 1992: Issues and Trends. DOE/EIA-0560(92) Washington, DC. March 1993. 2-26 ------- Table 2-15 details the distribution of oil and gas well capacity by production of barrels per month.32 Small production wells dominate the industry. Stripper wells are defined as those production wells that produce less than 10 bpd or 60 Mcf per day. In 1989, over 80 percent of the oil wells produced less than 10 bpd or 0 to 300 barrels per month, and over 78 percent of the gas wells produced within the same range. The remaining production wells produce over a wide range, from levels of 301 barrels per month to over 5,000 barrels per month. TABLE 2-15. U.S. ONSHORE OIL AND GAS WELL CAPACITY BY SIZE RANGE, 1989 Size range (barrels/ month) 0- 61- 60 100 101-200 201- 301- 401- 501- 601- 1001- 2001- 5001- Total 300 400 500 600 1000 2000 5000 Over Number of oil wells 3^6 67 76 47 20 21 13 29 22 9 3 617 ,C32 ,150 ,926 ,263 ,631 ,433 ,044 ,992 ,134 ,735 ,555 ,895 Percentage of total 49 10 12 7 3 3 2 4 3 1 _o. 100 .5 .9 .4 .6 .3 .5 .1 .9 .6 .6 .0 Number of gas wells 135, 24, 28, 17, 10, 6, 5, 12, 10, 6, 3. 261, 231 049 144 765 859 957 442 400 042 365 806 060 Percentage of total 51 9 10 6 4 2 2 4 4 2 _i 100 .8 .2 .8 .8 .2 .7 .0 .7 .0 .4 ^4. .0 Source: Gruy Engineering Economic Impacts for the American Corporation. Estimates of RCRA Reauthorization on the Petroleum Extraction Industry. Prepared Petroleum Institute. July 20, 1991. Table 2-16 presents the distribution of U.S. natural gas producing wells by state at the end of 1993.33 According to World Oil, for 1993, a total of 286,168 natural gas producing wells operated at onshore and offshore locations in the 2-27 ------- TABLE 2-16. DISTRIBUTION OF U.S. GAS WELLS BY STATE, 1993 State Alabama Alaska Arkansas California Colorado Federal OCS Illinois Indiana Kansas Kentucky Louisiana Michigan Mississippi Montana Nebraska New Mexico New York North Dakota Ohio Oklahoma Pennsylvania South Dakota Tennessee Texas Utah Virginia West Virginia Wyoming Others Total U.S. 1993 gas wells 3,395 157 2,914 1,072 6,372 3,532 384 1,327 14,200 12,836 13,214 3,174 552 2,900 60 27,832 5,951 104 34,581 28,902 31,100 38 620 47,245 1,164 1,340 38,280 2,880 42 286,168 Percentage of total (%) 1.19 0.05 1.02 0.37 2.23 1.23 0.13 0.46 4.96 4.49 4.62 1.11 0.19 1.01 0.02 9.73 2.08 0.04 12.08 10.10 10.87 0.01 0.22 16.51 0.41 0.47 13.38 1.01 0.01 100.00 Source: Producing Gas Well Numbers are up Once Again. World Oil. February 1993. Vol. 214, No.2. 2-28 ------- continental U.S. and Alaska. As shown, Texas accounts for approximately 16.5 percent of U.S. natural gas wells with 47,245. A continued increase in U.S. natural gas wells is expected for 1994 based on increases in gas prices. 2.3.1.1 Gruy Engineering Corporation Database. Based on lease data, the Gruy Engineering Corporation developed "wellgroups" for both oil and gas wells in each of 37 different geographic areas across the United States.34 For each geographic area, wellgroups are defined by well depth and then by production rate in each depth range. Four depth ranges were employed for oil wells: 0 to 2,000 feet; 2,001 to 6,000 feet; 6,001 to 10,000 feet; and deeper than 10,000 feet. Three depth ranges were developed for gas wells: 0 to 4,000 feet; 4,001 to 10,000 feet; and deeper than 10,000 feet. Furthermore, 11 production ranges were used for both oil and gas wells, expressed in barrels of oil equivalent (BOB), where one barrel of oil equals one BOE that equals 10 Mcf. The production rate ranges in BOE per month are 0 to 60; 61 to 100; 101 to 200; 201 to 300; 301 to 400; 401 to 500; 501 to 600; 601 to 1,000; 1,001 to 2,000; 2,001 to 5,000; and greater than 5,000. Therefore, each of the 37 geographic areas was divided into a possible 44 oil wellgroups and 33 gas wellgroups. The result of Gruy's analysis provides 1,004 oil wellgroups and 643 gas wellgroups (some regions had no wells of certain types). Appendix A provides data on the oil wellgroups developed by Gruy Engineering for each geographic area, and Appendix B provides data on the natural gas wellgroups. 2.3.2 Dehydration Units The Gas Research Institute (GRI) estimates that the U.S. may have 40,000 or more glycol dehydration units. TEG and EG dehydration units account for approximately 95 percent of this total, with solid desiccant dehydration units accounting for 2-29 ------- the remaining 5 percent.35 The primary application of.solid desiccant dehydration units is to dehydrate natural gas streams at cryogenic natural gas processing plants. For TEG dehydration units, stand-alone units dehydrate natural gas from an individual well or several wells, and units are collocated at condensate tank batteries and natural gas processing plants. Available information indicates that, on average, there is one TEG dehydration unit per condensate tank battery and two or four dehydration units (TEG, EG, or solid desiccant) per natural gas processing plant, depending on throughput capacity.36'37 2.3.3 Tank Batteries According to the BID, approximately 94,000 tank batteries operated in the U.S. as of 1989.38 Furthermore, over 85 percent of tank batteries, or an estimated 81,000•facilities, are classified as black oil tank batteries. The remaining 13,000 tank batteries are classified as condensate tank batteries. 2.3.4 Natural Gas Processing Plants Table 2-17 shows the number of natural gas processing facilities in operation from 1987 to 1993 in the United States.39 Over this time period the number of natural gas processing plants has declined by over 10 percent, or a total of 82 plants over 7 years. Table 2-18 provides the number of natural gas processing facilities as of January 1, 1994, the total processing capacity, and 1993 throughput level by State.40 The States with the largest number of natural gas processing plants are Texas, Oklahoma, Louisiana, Colorado, and Wyoming, while the top states in terms of natural gas processing capacity are Texas, Louisiana, Alaska, Kansas, and Oklahoma. 2-30 ------- TABLE 2-17. U.S. NATURAL GAS PROCESSING FACILITIES, 1987-1993 Year 1987 1988 1989 1990 1991 1992 1993 Number of facilities 810 760 745 751 748 735 728 Source: Gas Processing Report. Oil and Gas Journal. 21(24). June 1994. 2.3.5 Natural Gas Transmission and Storage Facilities There are an estimated 300,000 miles of high-pressure transmission pipelines and approximately 1990 compressor stations in the U.S. In addition, the natural gas industry operates over 300 underground storage sites. 2.4 FIRM CHARACTERISTICS A regulatory action to reduce pollutant discharges from facilities producing crude oil and natural gas will potentially affect the business entities that own the regulated facilities. In the oil and natural gas production industry, facilities comprise those sites where plant and equipment extract and process extracted streams and recovered products to produce the raw materials crude oil and natural gas. Companies that own these facilities are legal business entities that have the capacity to conduct business transactions and make business decisions that affect the facility. 2-31 ------- TABLE 2-18. U.S. NATURAL GAS PROCESSING PLANTS, CAPACITY, AND THROUGHPUT AS OF JANUARY 1, 1994, BY STATE Natural gas (MMcfd) State Alabama Alaska Arkansas California Colorado Florida Kansas Kentucky Louisiana Michigan Mississippi Montana New Mexico North Dakota Ohio Oklahoma Pennsylvania Texas Utah West Virginia Wyoming Total U.S. Number of plants 9 3 3 29 50 2 22 3 72 28 6 6 34 6 1 94 2 293 14 7 41 725 Capacity 785 7,775 878 1,044 1,596 890 5,122 141 18,334 4,731 884 19 2,889 122 20 4,656 14 17,259 624 398 3.783 71, 971 .0 .0 .0 .0 .5 .0 .0 .0 .4 .9 .2 .5 .0 .9 .0 .8 .0 .5 .9 .9 .7 .2 1993 throughput 700 6,502 520 658 1,128 622 3,778 117 11,869 858 209 6 2,122 83 8 2,857 8 12,002 416 337 2.973 47,783 .7 .0 .5 .5 .6 .0 .4 .9 .4 .6 .5 .8 .2 .2 .8 .5 .3 .5 .2 .9 ,6 .1 Source: "Worldwide Gas Processing Report. 11(24):49110. June 13, 1994. " Oil & Gas Journal. 2.4.1 Ownership The oil and natural gas industry may be divided into different segments that include producers, transporters, and distributors. The producer segment may be further divided between major and independent producers. Major producers include large oil and gas companies that are involved in each 2-32 ------- of the five industry activities: (1) exploration, (2) production, (3) transportation, (4) refining, and (5) marketing. Independent producers include smaller firms that are involved in some but not all of the five activities. Transporters are comprised of the pipeline companies, while distributors are comprised of the local distribution companies. During 1992, almost 7,700 companies owned the 9,391 establishments operating within SIC code 1311 (Crude Oil and Natural Gas).41 For SIC 1311, the top 8 firms in 1992 accounted for 43.2 percent of the value of shipments, while the top 16 firms accounted for almost 60 percent. Furthermore, the top 8 firms accounted for 64 percent of industry crude oil production and 37 percent of industry natural gas production, while the top 16 firms accounted for 77.7 percent of industry crude oil production and 58.3 percent of industry natural gas production.42 Through the mid-1980s, natural gas was a secondary fuel for many producers. However, now it is of primary importance to many producers. The Independent Petroleum Association of America reports that 70 percent of its members' income comes from natural gas production.43 In 1993, gas production revenues exceeded oil production revenues for the first time, accounting for 56 percent ($38 billion) of total oil and gas industry production revenues. Higher wellhead prices for natural gas, increased efficiency, and lower production costs have all contributed to increased natural gas production and improvements in producer revenues.44 2.4.2 Size Distribution The Small Business Administration (SBA) defines criteria for defining small businesses (firms) in each SIC. Table 2-19 lists the primary SICs to be affected by the proposed 2-33 ------- TABLE 2-19. NUMBER AND PROPORTION OF FIRMS IN SMALL BUSINESS CATEGORY (BY SIC CODE) SIC Code SIC Description SBA size standard in number of employees or annual sales Number of firms Number of firms meeting SBA standard Percentage of firms meeting SBA standard 1311 Crude petroleum and natural gas 1381 1382 2911 4922 4923 Drilling oil and gas wells Oil and gas exploration services Petroleum refining Natural gas transmission Gas 4924 transmission and distribution Natural gas distribution 500 500 $5 million 1,500 $5 million $5 million 500 429 132 176 141 79 74 121 372 100 77 98 11 6 71 87% 76% 44% 70% 14% 8% 59% Source: Ward's Business Directory. Volume 2. Washington, DC. 1993. regulations and their corresponding small business criteria. SICs 1311 and 1381 have the highest percentage of small businesses--87 percent and 76 percent respectively—and SICs 4922 and 4123 have the lowest percentage--8 percent and 14 percent respectively.45 2.4.3 Horizontal and Vertical Integration Because of the existence of major oil companies, the industry possesses a wide dispersion of vertical and horizontal integration. The vertical aspects of a firm's size reflect the extent to which goods and services that can be bought from outside are produced in house, while the 2-34 ------- horizontal aspect of a firm's size refers to the scale of production in a single-product firm or its scope in a multiproduct one. Vertical integration is a potentially important dimension in analyzing firm-level impacts because the regulation could affect a vertically integrated firm on more than one level. The regulation may affect companies for whom oil and natural gas production is only one of several processes in which the firm is involved. For example, a company owning oil and natural gas production facilities may ultimately produce final petroleum products, such as motor gasoline, jet fuel, or kerosine. This firm would be considered vertically integrated because it is involved in more than one level of requiring crude oil and natural gas and finished petroleum products. A regulation that increases the cost of oil and natural gas production will ultimately affect the cost of producing final petroleum products. Horizontal integration is also a potentially important dimension in firm-level analyses for any of the following reasons: • A horizontally integrated firm may own many facilities of which only some are directly affected by the regulation. • A horizontally integrated firm may own facilities in unaffected industries. This type of diversification would help mitigate the financial impacts of the regulation. • A horizontally integrated firm could be indirectly as well as directly affected by the regulation. For example, if a firm is diversified in manufacturing pollution control equipment (an unlikely scenario), the regulation could indirectly and favorably affect it. In addition to the vertical and horizontal integration that exists among the large firms in the industry, many major producers often diversify within the energy industry and 2-35 ------- produce a wide array of products unrelated to oil and gas production. As a result, some of the effects of control of oil and gas production can be mitigated if demand for other energy sources moves inversely compared to petroleum product demand. In the natural gas sector of the industry, vertical integration is limited. Production, transmission, and local distribution of natural gas usually occur at individual firms. It is more likely that natural gas producers will sell their output either to a firm that will subject it to additional purification processes or directly to a pipeline for transport to an end user. Several natural gas firms operate multiple facilities. However, natural gas wells are not exclusive to natural gas firms only. Typically wells produce both oil and gas and can be owned by a natural gas firm or an oil company. Of the independents' total revenues, 72 percent is derived from natural gas output, and the remaining 28 percent is from crude oil production. Unlike the large integrated firms that have several profit centers such as refining, marketing, and transportation, most independents have to rely only on profits generated at the wellhead from the sale of oil and natural gas. Overall, the independent producers sell their output to refineries or natural gas pipeline companies. They are typically not vertically integrated but may own one or two facilities, indicating limited horizontal integration. 2.4.4 Performance and Financial Status In a special addition of the Oil and Gas Journal (OGJ), financial and operating results for the top 300 oil and natural gas companies are reported.46 Table 2-20 lists selected statistics for the top 20 companies in 1993.47 The results presented in the table reflect lower crude oil and petroleum prices in 1993, which suppressed revenues. However, 2-36 ------- TABLE 2-20. TOP 20 OIL AND NATURAL GAS COMPANIES, 1993 Rank Company 1 2 3 4 5 6 7 8 E 9 <] 10 11 12 13 14 15 16 17 18 19 20 Exxon Corp. Mobil Corp. Chevron Corp . Amoco Corp. Shell Oil Co. Texaco Inc . ARCO (Atlantic Richfield Corp . ) Occidental Petroleum Corp. BP (USA) Conoco Inc . Enron Corp. Phillips Petroleum Co. USX-Marathon Group Coastal Corp. Unocal Corp. Amerada Hess Corp. Columbia Gas System Ashland Oil Inc. Consolidated Natural Gas Co. Pennzoil Co. Total assets ($103) 84,145,000 40,585,000 34,736,000 28,486,000 26,851,000 26,626,000 23,894,000 17,123,000 14,864,000 11,938,000 11,504,315 10,868,000 10,806,000 10,277,100 9,254,000 8,641,546 6,957,900 5,551,817 5,409,586 4,886, 203 Total revenue ($103) 111,211,000 63,975,000 37,082,000 28,617,000 21,092,000 34,071,000 19,183,000 8,544,000 15,714,000 15,771,000 8,003,939 12,545,000 11,962,000 10,136,100 8,344,000 5,872,741 3,398,500 10,283,325 3,194,616 2,782,397 Worldwide Net liquids income production ($103) (Mil bbl) 5,280, 2,084, 1,26^. 1,820, 781, 1,068, 269, 283, 1,461, 812, 332, 243, -29, 115, 213, -268, 152, 142, 205, 141, 000 000 000 000 000 000 000 000 000 000 522 000 000 800 000 203 200 234 916 856 568 285 295 236 170 228 250 79 -- 135 3 89 57 4 84 79 3 8 3 24 .0 .0 .0 .0 .0 .0 .0 .0 .0 .5 .0 .0 .9 .0 .0 .6 .3 .9 .0 Worldwide natural gas production (Bcf) 1,583 1,665 902 1,487 553 748 449 238 -- 481 262 509 317 122 623 323 71 36 124 223 .0 .0 .0 .0 .0 .0 .0 .0 .0 .2 .0 .0 .0 .0 .0 .5 .2 .0 .0 U.S. liquids production (Mil bbl) 202.0 111.0 144.0 100.0 147.0 155.0 221.0 21.0 228.9 40.0 2.5 47.0 41.0 4.9 48.0 26.0 3.6 0.4 3.9 24.0 U.S. natural gas production (Mil bbl) 697.0 558.0 751.0 867.0 539.0 652.0 332.0 219.0 33.6 305.0 240.0 345.0 193.0 122.0 365.0 183.0 71.5 36.2 124.0 220.0 Note: All values are in 1993 U.S. dollars. Source: "Total Earnings Rose, Revenues Fell in September 5, 1994. 1993 for OGJ300 Companies." Oil and Gas Journal. 22(36):49-75. ------- higher natural gas prices, consumption, and production, as well as increased consumption of petroleum production, offset these trends. Total assets for the top 300 companies fell in 1993 for the third consecutive year, a reflection of continued industry restructuring and consolidation with mergers, acquisitions, and liquidations. As a result, the number of publicly held companies was slashed. The top 300 companies, however, represent a large portion of the U.S. oil and gas industry and indicate changes and trends in industry activity and operating performance. Net income for OGJ's top 300 companies jumped 75.5 percent in 1993 to $18.3 billion, while total revenues fell 3.9 percent to $475.1 billion. Other measures of financial performance for the group showed improvement in 1993. Capital and exploration spending totaled $50.3 billion, up 1.8 percent from 1992. In addition, the number of U.S. net wells drilled rose 24.4 percent to 8,656. Table 2-21 provides 1993 performance highlights for the OGJ's group of 22 large U.S. oil companies.48 Earnings for the group jumped sharply in 1993, increasing by 78.6 percent from 1992. Performance in 1993 restored group profits to the 1991 level even though total revenues for the group fell 3.8 percent to $436.3 billion in 1993. Lower crude oil and petroleum product prices were the main factors in the observed decline in revenues. A more recent issue of OGJ reported on the economic status of all 110 major and nonmajor* natural gas pipeline companies in 1994.49 Table 2-22 reports the sales volume, operating revenues, and net income for the top 10 U.S. natural gas pipeline companies in 1994. Operating revenues of the top 'Major pipeline companies are those whose combined gas sold for resale and gas transported for a fee exceeded 50 bcf at 14.37 psi (60 degrees F) in each of the three previous calendar years. Nonmajors are natural gas pipeline companies not classified as majors and whose total gas sales of volume transactions exceeded 200 MMcf at 14.73 psi (60 degrees F) in each of the three previous calendar years. 2-38 ------- TABLE 2-21. PERFORMANCE MEASURES FOR OGJ GROUP, 1993 Perf ormance measure 1993 highlights Total assets Net profits Return on equity Return on total assets Capital/exploration spending Net liquids production Net natural gas production Crude runs to stills Liquid reserves Natural eras reserves $385.4 billion, down 1 percent $16.2 billion, up 78.6 percent 10.1 percent, up 4.8 points 3.9 percent, up 1.9 points $38.8 billion, down 5.8 percent 8.4 million bpd, down 2 percent 30 bcfd, up 0.7 percent 15.6 million bpd, up 1.2 percent 32 billion bbl, up 1.7 percent 140.2 tcf, up 0.6 percent Source: "Profits for OGJ Group Show and Gas Journal. 92(24):25- Big Gain in 1993; Revenues Dip." Oil -30. June 13, 1994. TABLE PERFORMANCE OF TOP 10a GAS PIPELINE COMPANIES, 1994 Company Tennessee Gas Pipeline Co. Natural Gas Pipeline of America ANR Pipeline Co. Texas Eastern Transmission Corp. Panhandle Eastern Pipe Line Co. Transcontinental Gas Pipe Line Corp. Northern Natural Gas Co. El Paso Natural Gas Co. t CNG Transmission Corp. Florida Gas Transmission Co. Total 1994 Total All Companies 1994 Total All Companies 1993 Net Income ($000) 489,984 158,165 152,057 148,887 112,910 110,726 97,570 92,978 88,055 78,166 1,529,498 2,373,245 1,113,303 Operating Revenues ($000) 1,065,285 1,046,660 152,057 832,405 384,771 1,590,962 702,567 669,439 488,754 175,731 7,108,631 16,547,531 21,746,475 "Based on net income. Source: "U.S. Interstate Pipelines Ran More Efficiently in 1994". Oil and Gas Journal, p. 39-58. November 27, 1995. 2-39 ------- 10 companies equaled $7,108,631 and represented 43 percent of the total operating revenues for major and nonmajor companies, which had declined by 24 percent from the previous year. Net income for the top 10 was over $1.5 billion and represented almost 65 percent of the total net income for all major and nonmajor companies. Despite the overall decline in operating revenues, the total net income for the 100 companies rose by 37 percent from 1993 to 1994. 2-40 ------- References: 1. U.S. Environmental Protection Agency. Natural Emission Standards for Hazardous Air Pollutants for Source Categories: Oil and Natural Gas Production and Natural Gas Transmission and Storage^-Background Information for Proposed Standards. Office of Air Quality Planning and Standards. Research Triangle Park, NC. July 1996. 2. Ref. 1, p. 2-6. 3. Ref. 1, p. 2-6. 4. Wright Killen & Co. Natural Gas Dehydration: Status and Trends. January 1994. Prepared for Gas Research Institute, Chicago, IL. 5. Ref. 1, p. 2-13 through 2-15. 6. U.S. Department of Energy. Energy Information Administration. U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves: 1993 Annual Report. October 1994. 7. Ref . 6 . 8. Ref. 6. 9. U.S. Department of Energy. Petroleum Supply Annual 1992. DOE/EIA-0340(92)-1. Vol. 1. May 1993. 10. Ref. 9. 11. U.S. Department of Energy. Natural Gas Annual 1991. DOE/EIA-0131(91). Washington, DC. October 1992. 12. U.S. Department of Energy. Annual Energy Review 1991. DOE/EIA-0384(91). June 1992. 13. Independent Petroleum Association of America. Fact Sheet. "IPAA Supply and Demand Committee Short Run Forecast for 1993." 14. Independent Petroleum Association of America. Fact Sheet. "IPAA Supply and Demand Committee Long Run Forecast for 1993-2000." May 6, 1993. 15. Ref. 6. 16. Ref. 14. 2-50 ------- 17. Ref. 6. 18. Ref. 6. 19. Ref. 9. 20. Ref. 11. 21. Ref. 9. 22. Ref. 11. 23. Doane, Michael J., and Spulber, Daniel F. "Open Access and the Evolution of the U.S. Spot Market for Natural Gas." Journal of Law and Economics. 12:477-517. October 1994. 24. Energy Statistics Sourcebook, 8th ed. PennWell Publishing Co. September 1993. 25. Ref. 24. 26. U.S. Department of Energy. Energy Information Administration. Natural Gas Monthly U.S. Natural Gas Imports and Exports--1993. August 1994. 27. U.S. Department of Energy. Natural Gas 1994: Issues and Trends. DOE/EIA-0560(94). Energy Information Administration. Washington, DC. July 1994. 28. Haun, Rick R. U.S. Gas Processing Prospects to Improve After Mid-90s. Oil and Gas Journal. 11(23). 29. Ref. 6. 30. Ref. 14. 31. U.S. Department of Energy. Natural Gas 1992: Issues and Trends. DOE/EIA-0560(92). Washington, DC. March 1993. 32. Gruy Engineering Corporation. Estimates of RCRA Reauthorization Economic Impacts on the Petroleum Extraction Industry. Prepared for the American Petroleum Institute. July 20, 1991. 33. "Producing Gas Well Numbers Still Climbing," World Oil. 215_(2) :77, February 1994. 34. Ref. 32. 35. Ref. 4, Table B-l. 2-51 ------- 36. Memorandum from Akin, Tom, EC/R Incorporated to Smith, Martha E.; EPA/CPB. July 30, 1993. Revised preliminary estimate of the number and size ranges of tank batteries on a national basis. 37. Memorandum from Viconovic, George, EC/R Incorporated, to Smith, Martha E., EPA/CPB. April 8, 1993. Summary of meeting with the Gas Research Institute. 38. Ref. 1, p. 2-3. 39. "Worldwide Gas Processing Report." Oil and Gas Journal. £2(24) :49-110. June 13, 1994. 40. Ref. 39. 41. U.S. Department of Commerce. Census of Mineral Industries- Industry Series. Bureau of the Census, Washington, DC. 1995. Table 1. 42. Ref. 41, Table 10. 43. Ref. 27. 44. Ref. 27. 45. Ward's Business Directory. Volume 2. Washington, DC. 1993. 46. "Total Earnings Rose, Revenues Fell in 1993 for OGJ300 Companies." Oil and Gas Journal. 92 (36) :49-75. September 5, 1994. 47. Ref. 27. 48. "Profits for OGJ Group Show Big Gain in 1993; Revenues Dip." Oil and Gas Journal. 12(24) : 25-30. June 13, 1994. 49. $U.S. Interstate Pipelines Ran More Efficiently in 1994.^ Oil and Gas Journal. November 27, 1995. p. 39-58. 2-52 ------- SECTION 3 REGULATORY CONTROL OPTIONS AND COSTS OF COMPLIANCE The BID details the available technologies on which this NESHAP is based. Model plants were developed to evaluate the effects of various control options on the oil and natural gas production and natural gas transmission and storage source categories. Control options were selected based on the application of presently available control equipment and technologies and varying levels of capture consistent with different levels of overall control. Section 3.1 presents a brief description of the model plants. Section 3.2 provides an overview of the control options, and Section 3.3 summarizes the compliance costs associated with the regulatory control options. 3.1 MODEL PLANTS The large number of production, processing, and storage facilities in the oil and natural gas industry necessitates using model plants to simulate the effects of applying the regulatory control options to this industry. A model plant does not represent any single actual facility; rather it represents a range of facilities with similar characteristics that may be affected by the regulation. Each model plant is characterized by facility type, size, and other parameters that influence the estimates of emissions and control costs. Model plants developed for the oil and natural gas production and natural gas transmission and storage source categories are • TEG dehydration units, • tank batteries that handle condensate (CTB), 3-1 ------- • natural gas processing plants (NGPP), and • offshore production platforms (OPP). The following subsections identify these model plants and provide the estimated capacity, throughput, and population for each unit/ 3.1.1 TEG Dehydration Units As shown in Table 3-1, the engineering analysis establishes five model TEG dehydration units based on natural gas throughput capacity.50 These model units are defined in the following manner: • TEG unit A: <5 MMcfd, • TEG unit B: >5 MMcfd and s20 MMcfd, • TEG unit C: >20 MMcfd and $50 MMcfd, • TEG unit D: >50 to 500 Mmcfd, and • TEG unit E: >500 Mmcfd. The total estimated number of TEG dehydration units is just below 30,000 units. In addition, Table 3-1 includes the number of TEG dehydration units by application (i.e., stand- alone, condensate tank battery, natural gas processing plant, offshore production platform, and natural gas transmission and storage facilities). The estimated number of TEG dehydration units by application is assumed to be one TEG dehydration unit per condensate tank battery and offshore production platform used in the separation of the well stream and two to four dehydration units (TEG, EG, or solid desiccant) per natural gas processing plant, depending on throughput capacity and type of processing configuration, to dry the gas to required specifications. In addition, model "TEG units were distributed within the natural gas transmission and storage source category consistent with their natural gas design and throughput capacities. 'No model plants are developed for natural gas transmission and storage facilities because the only HAP emission point of concern for these facilities is a process vent at an associated TEG dehydration unit. 3-2 ------- TABLE 3-1. MODEL TEG DEHYDRATION UNITS Model plant Capacity (MMcfd) A B <5 5 to 20 C 20 to 50 D >50 to 500 E Total >500 Throughput (MMcfd) 0.3 10 Estimated population Stand-alone 24,000 200 ® Condensate 12,000 500 tank battery @ Natural gas 66 processing plant @ Offshore 260 production platform ® Natural gas 200 125 transmission and underground storage TOTAL 36,200 1,151 35 25 100 110 40 35 100 20 70 54 500 10 10 24,245 12,670 230 300 370 300 154 10 37,815 Source: National Emission Standards for Hazardous Air Pollutants for Source Categories: Oil and Natural Gas Production and Natural Gas Transmission and Storage —Background Information Document. U.S. Environmental Protection Agency. Research Triangle Park, NC. April 1997. Note: MMcfd = million cubic feet per day. 3.1.2 Condensate Tank Batteries As shown in Table 3-2, the engineering analysis establishes four model condensate tank batteries based on natural gas throughput capacity. These model units are defined as follows: • CTB E: <5 MMcfd, • CTB F: >5 MMcfd and £20 MMcfd, • CTB G: >20 MMcfd and <;50 MMcfd, and • CTB H: >50 MMcfd. 3-3 ------- TABLE 3-2. MODEL CONDENSATE TANK BATTERIES Capacity (MMcfd) Throughput (MMcfd) Estimated population Model plant E F G H Total s5 5 to 20 20 to 50 >50 1 10 35 100 12,000 500 100 70 12,670 Source: National Emission Standards for Hazardous Air Pollutants for Source Categories: Oil and Natural Gas Production and Natural Gas Transmission and Storage —Background Information Document. U.S. Environmental Protection Agency. Research Triangle Park, NC. April 1997. Note: Mmcfd = million cubic feet per day. Condensate tank batteries generally have a TEG dehydration unit as a process unit within the overall system design of the tank battery. The estimated number of condensate tank batteries operating in the U.S. is close to 13,000, or 15 percent of all tank batteries.51 3.1.3 Natural Gas Processing Plants As shown in Table 3-3, the engineering analysis establishes three model natural gas processing plants based on natural gas throughput capacity. These model units are defined as follows: • NGPP A: <20 MMcfd, • NGPP B: >20 MMcfd and £100 MMcfd, NGPP C: >100 MMcfd. Although the population of TEGs and tank batteries must be estimated, the OGJ provides detailed information on U.S. natural gas processing plants. As of January 1, 1994, the U.S. had approximately 700 natural gas processing plants. The OGJ's annual survey of natural gas processing plants 3-4 ------- TABLE 3-3. MODEL NATURAL GAS PROCESSING PLANTS Capacity (MMcfd) Throughput (Mmcfd) Estimated population Model plant A B *20 20 to 100 10 70 260 300 C >100 200 140 Total 700 Source: U.S. Environmental Protection Agency. National Emission Standards for Hazardous Air Pollutants for Source Categories: Oil and Natural Gas Production and Natural Gas Transmission and Storage— Background Information Document. Office of Air Quality Planning and Standards. Research Triangle Park, NC. April 1997. Note: MMcfd = million cubic feet per day. identifies each plant by State, design capacities, and estimated 1993 throughput.52 The estimates of the number of natural gas processing plants corresponding to each size range shown in Table 3-3 are based on this annual survey. 3.1.4 Offshore Production Platforms t As shown in Table 3-4, the engineering analysis establishes two model offshore production platforms based on crude oil productive capacity of those located in state water areas. These model units are defined in the following manner: • OPP A: State water areas with 1,000 bpd capacity, and • OPP B: State water areas with 5,000 bpd capacity. As discussed in the BID, approximately 300 offshore production platforms are located in State water and therefore subject to EPA's jurisdiction for air emissions regulations. The model characterization of these platforms is based on data from the Minerals Management Service (MMS) of the U.S. Department of Interior.53 3-5 ------- TABLE 3-4. MODEL OFFSHORE PRODUCTION PLATFORMS Model plant Small Medium Total Location State waters State waters Capacity (BOPD) 1,000 5,000 Throughput (BOPD) 200 2,000 Estimated population 260 40 300 Source: National Emission Standards for Hazardous Air Pollutants for Source Categories: Oil and Natural Gas Production and Natural Gas Transmission and Storage —Background Information Document. U.S. Environmental Protection Agency. Research Triangle Park, NC. April 1997. Note: BOPD = barrels of oil per day. 3.2 CONTROL OPTIONS Sources of HAP emissions in oil and natural gas production include the glycol dehydration unit process vents, storage vessels, and equipment leaks. Table 3-5 summarizes the control options under evaluation for HAP emission points within the model units in the oil and natural gas production and natural gas transmission and storage source categories.54 The control options include the use of certain equipment (e.g., installation of a cover or fixed roof for tanks) and work standards (e.g., leak detection and repair [LDAR] programs for fugitive emission sources). Control options that are applicable to each potential HAP emission point at model plants are fully detailed in the BID. Major sources of HAP emissions are controlled based on the MACT floor, as defined by the control options in Table 3-6. The Agency has determined that a glycol dehydration unit must be collocated at a facility for the facility to be designated as a major source. Therefore, the MACT floor may apply to stand-alone TEG units, condensate tank 3-6 ------- TABLE 3-5. SUMMARY OF CONTROL OPTIONS BY MODEL PLANT AND HAP EMISSION POINT Model plant/unit HAP emission point Control option Control efficiency (%) TEG dehydration Reboiler vent unit Condenser with flash 95 tank in design Condenser without 50 flash tank Combustion 98 System optimization Variable Tank battery Natural gas processing plant Offshore production platforms Open-top storage tank Fixed roof storage tank Equipment leaks Cover and vent to 95% control device or redirect Fixed roof storage tank Equipment leaks LDARa Vent to 95% control device or redirect Vapor collection and redirect LDAR Equipment leaks LDAR 99 95 70 95 70 70 a Leak detection and repair program based on one of the following: • Control Techniques Guideline (CTG) document applicable to natural gas/gasoline processing plants, • New Source Performance Standard (NSPS) applicable to onshore natural gas processing plants constructed or modified after 1/20/84, or • Hazardous Organic NESHAP (HON) regulatory negotiation applicable to synthetic organic chemical manufacturing facilities. Source: National Emission Standards for Hazardous Air Pollutants for Source Categories: Oil and Natural Gas Production and Natural Gas Transmission and Storage —Background Information Document. U.S. Environmental Protection Agency. Research Triangle Park, NC. April 1997. batteries, natural gas processing plants, and storage facilities. Black oil tank batteries and offshore production platforms are not considered since TEG units are not typical 3-7 ------- of the operations at black oil tank batteries and are completely controlled at offshore production platforms. The engineering analysis contained in the BID document projects the number of major sources of HAP emissions by model plant. Tables 3-6, 3-7, and 3-8 provide the percentage and number of affected units by model type--TEG dehydration unit, condensate tank battery, and natural gas processing plant. TABLE 3-6. TOTAL AND AFFECTED POPULATION OF TEG'UNITS BY MODEL TYPE Model TEG Unit Item Total population Percent affected Affected units Stand-alone ® Condensate TB ® NGPP ® transmission and storage facility Total A 36,200 0.0% 0 0 0 0 0 B 1,151 22.7% 138 109 14 0 261 C 300 50.3% 25 100 26 0 151 D 154 18.2% 20 5 3 4 32 E 10 50.0% 0 0 0 3 3 Total 37,615 445 183 214 43 5 445 3.3 COSTS OF CONTROLS The BID describes in detail the cost estimates for control options that are applicable to each potential HAP emission point at model plants. Cost estimates are expressed 3-8 ------- TABLE 3-7. TOTAL AND AFFECTED POPULATION OF CONDENSATE TANK BATTERIES BY MODEL TYPE Model condensate Item Total population Percent affected Affected units E 12,000 0% 0 F 500 21.8% 109 tank battery G 100 10.0% 10 H 70 7.1% 5 Total 12,670 1.0% 124 TABLE 3-8. TOTAL AND AFFECTED POPULATION OF NATURAL GAS PROCESSING PLANTS BY MODEL TYPE Model NGPP Item Total population Percent affected Affected units A 260 2.7% 7 B 300 1.3% 4 C 140 0.7% 1 Total 700 1.7% 12 in July 1993 dollars. Table 3-9 summarizes the total and annualized capital costs; operating expenses; monitoring, inspection, recordkeeping, and reporting costs (maintenance costs) ,- and total annual cost for each control option by model plant. The annualized capital cost is calculated using a capital recovery factor of 0.1098 based on an equipment life 3-9 ------- TABLE 3-9. REGULATORY CONTROL COSTS PER UNIT FOR THE OIL AND NATURAL GAS PRODUCTION INDUSTRY BY MODEL PLANT Control option/model plant" Condenser control systemsc TEG-B TEG-B' TEG-C TEG-C' TEG-D TEG-E Storage tank controls/recycle CTB-F CTB-G CTB-H NGPP-A NGPP-B NGPP-C Number of Affected Units 157 104 67 84 28 5 50 4 2 3 2 0 Total capital cost $13,620 $11,400 $13,620 $11,400 $11,400 $11,400 $3,590 $3,590 $3,590 $3,590 $3,590 $3,590 Annualized capital cost $1,495 $1,252 $1,495 $1,252 $1,252 $1,252 $394 $394 $394 $394 $394 $394 Operating and maintenance cost" $11,626 $11,538 $11,626 $11,538 $11,538 $11,538 $2,511 $2,511 $2,511 $2,511 $2,511 $2,511 Total annual cost $13,121 $12,790 $13,121 $12,790 $12,790 $12,790 $2,905 $2,905 $2,905 $2,905 $2,905 $2,905 Product recovery credit $2,825 $2,825 $9,789 $9,789 $23,783 $3,580 $71 $93 $115 $115 $115 $115 Storage tank controls/fuel substitute CTB-F CTB-G CTB-H NGPP-A NGPP-B NGPP-C 50 4 2 3 2 1 $3,590 $3,590 $3,590 $3,590 $3,590 $3,590 $394 $394 $394 $394 $394 $394 $2,511 $2,511 $2,511 $2,511 $2,511 $2,511 $2,905 $2,905 $2,905 $2,905 $2,905 $2,905 $46 $60 $75 $75 $75 $75 (continued) ------- TABLE 3-9. REGULATORY CONTROL COSTS PER UNIT FOR THE OIL AND NATURAL GAS PRODUCTION INDUSTRY BY MODEL PLANT (CONTINUED) Number of Affected Control option/model plant" Units Storage tank controls/flare TB-F TB-G TB-H NGPP-A NGPP-B NGPP-C w Leak detection and repair ^ NGPP-A 1-1 NGPP-B NGPP-C 9 2 1 1 0 0 7 4 1 Total capital cost $37,080 $37,080 $45,260 $37,080 $37,080 $45,260 $1,378 $1,378 $1,378 Annualized capital cost $4,071 $4,071 $4,970 $4,071 $4,071 $4, 970 $6,564 $6,564 $6,564 Operating and maintenance costb $44,490 $44,490 $44,817 $44,490 $44,490 $44,817 $10,543 $19,479 $40,331 Total annual cost $48,561 $48,561 $49,787 $48,561 $48,561 $49,787 $11,921 $20,857 $41,709 Product recovery credit $0 $0 $0 $0 $0 $0 $135 $340 $815 ' Abbreviations are TEG for triethylene glycol dehydration units, CTB for condensate tank batteries, and NGPP for natural gas processing plants. The letter following the hyphen designates the model plant. b Included in this cost category are operating and maintenance costs, other annual costs (i.e., administrative, taxes, insurance, etc.), and monitoring, inspection, recordkeeping, and reporting costs. c Model condensate tank battery E is not listed since it does not incur control costs. Also the presence of a flash tank at glycol dehydration units affects the compliance costs. Thus, model TEG-B represents a glycol dehydration unit without a flash tank, white model TEG-B' has a flash tank. ------- of 15 years and a 7 percent discount rate.55 The total annual cost is calculated as the sum of the annualized capital cost; operating expenses; and the monitoring, inspection, recordkeeping, and reporting costs. In addition, product recovery is presented in Table 3-9 as an annual cost credit where applicable. Product recovery credits were calculated by multiplying the mass of product recovered by the product value. Recovered liquid, condensate, and crude oil were assig'ned a value of $18 per barrel, while recovered gas product was assigned different dollar amounts depending on its use. Recycled product for further processing and sale was valued at $2 per Mcf, recovered gas hydrocarbons for use as a fuel supplement were valued at $1.30 per Mcf, and gas hydrocarbons directed to an incinerator or flare were assigned no value.56 Tabl_ r-10 summarizes the annual control costs for major sources expressed per model plant. The annual costs for model condensate tank batteries and natural gas processing plants are appropriately weighted given the percentage of affected units subject to the various control options and include the costs of TEG dehydration units present at each model type. One TEG unit is assigned to each model CTB based on throughput capacity so that a TEG unit A is assigned to each CTB E, a TEG unit B is assigned to each CTB F, a TEG unit C is assigned to each CTB G, and a TEG unit D is assigned to each CTB H. The allocation of TEG units to model NGPPs is such that a model NGPP A is assigned two TEG B units, a model NGPP B is assigned three model TEG C units, and a model NGPP C is assigned three model TEG D units. 3-12 ------- TABLE 3-10. SUMMARY OF ANNUAL CONTROL COSTS BY MODEL PLANT Model Plant Cost per model unit TEG dehydration units TEG-A TEG-B TEG-C TEG-D TEG-E Condensate tank batteries CTB-E CTB-F CTB-G CTB-H Natural gas processing plants NGPP-A NGPP-B NGPP-C Natural gas transmission and storage TEG-A TEC D TEG-C TEG-D TEG-E $12,989 $12,937 $12,790 $12,790 $19,660 $24,973 $25,071 $46,747 $61,823 $81,083 $49,787* $49,787 Three of the four affected TEGs of this size are assumed to have control costs of $49,787, while the fourth TEG is assumed to have control costs of $4,315. 3-13 ------- References: 1. Ref. 1, Chapter 4. 2. Ref. 1, p. 2-4. 3. Ref. 39. 4. U.S. Department of the Interior/Minerals Management Service. Federal Offshore Statistics: 1993 (OCS Report MMS 94-0060). Herndon, VA. 1994. 5. Ref. 1, Table 3-1. 6. Ref. 1. 7. Ref. 1. 3-14 ------- SECTION 4 ECONOMIC IMPACT ANALYSIS Implementing the controls will directly affect the costs of production in the oil and natural gas production industry. However, these initial effects will be felt throughout the economy--downstream by consumers of refined petroleum products and natural gas and upstream by suppliers of inputs to the industry. As demonstrated in Section 3, facilities in this industry will be affected by the regulation differently, depending on the products (crude oil, condensates, natural gas) they process, the processing equipment they currently employ, and the level of throughput. Facility-level production responses to the additional regulatory costs will determine the market-level impacts of the regulation. Specifically, the cost of the air pollution controls may force the premature closing of some facilities or may cause facilities to alter current production levels. Section 3 indicates that black oil tank batteries will not incur control costs as a result of the regulation. Thus, only condensates processed at condensate tank batteries will be directly affected by the regulation, which represents less than 5 percent of total U.S. crude oil production.1 Crude oil is an international commodity, transported and consumed throughout the world. Most economic models of world crude oil markets consider the OPEC as a price-setting residual supplier, facing a net demand for crude oil that is the difference between the world demand and the non-OPEC supply of crude oil.2'3 Accordingly, the U.S. may be seen as a price taker on the world oil market with no power to influence the world price in any significant way. This analysis does not include a model to assess the regulatory effects on the world 4-1 ------- crude oil market because not only will less than 5 percent of U.S. crude oil production be affected but changes in the U.S. supply are not likely to influence world prices. Therefore, this analysis focuses on the regulatory effects on the U.S. natural gas market. As discussed in Section 2, the natural gas industry has undergone fundamental changes in recent years including a restructuring of the interstate pipeline industry and a diminishing of excess productive capacity. These changes have resulted in increased competition within the natural gas industry. Accordingly, producers of natural gas can respond to changes in demand and price levels fairly easily because their product is often sold directly to the end user. Open access to pipeline transportation created regional spot markets for natural gas through local and regional competition between pipelines for gas supplies and between producers for gas sales. Doane and Spulber find that open access, or the "unbundling" of pipeline services, has integrated regional wellhead markets into a national market for natural gas.4 The regional wellhead markets are linked by the action of buyers, who are interested in the delivered price of natural gas (i.e., the sum of the wellhead price and the transportation and transaction costs of obtaining gas). Buyers have the opportunity to evaluate costs of purchasing gas from different regions and transporting it along different pipeline systems. To the extent that natural gas producers compete across regions to supply the same customers, the regional wellhead markets combine to form a national market.5 Based on this research, the U.S. market for natural gas was modeled as a national, perfectly competitive market for a homogeneous commodity. Sections 4.1 through 4.3.2.2 assesses the market-,and industry-level impact of the regulation on the natural gas 4-2 ------- production industry. These sections provide a conceptual overview of the production relationships involving the natural gas industry, the details of an operational market model to assess the regulation, and the results of the economic analysis. Section 4.3.2.2 presents a screening analysis of impacts on the natural gas transmission and storage industry. Section 4.4 provides conclusions for the impacts on society from these regulations. 4.1 MODELING MARKET ADJUSTMENTS Standard concepts in microeconomics are employed to model the supply of natural gas and the impacts of the regulation on production costs and output decisions. The following subsections examine the impact of the regulations that affect operating costs for producing wells in the U.S. natural gas industry. Together they provide an overview of the basic economic theory of the effect that regulations have on production decisions and of the concomitant effect on natural gas prices. The three main elements are the regulatory effects on the production well or "facility," market response, and facility-market interactions. 4.1.1 Facility-Level Effects At any point in time, the costs that a firm faces can be classified as either unavoidable (sunk) or avoidable. In the former category, we include costs to which the firm is committed and that must be paid regardless of any future actions of the firm.* The second category, avoidable costs, describes any costs that would be foregone by ceasing production. Avoidable costs can also be viewed as the full opportunity costs of operating the facility. These costs can For instance, debt incurred to construct a production well or processing facility must be repaid regardless of the production plan and even if the well or facility ceases operation prior to full repayment. 4-3 ------- be further refined to distinguish between costs that vary with the level of production and those that are independent of the production level.* The determination of both the avoidability and the variability of firms' costs is essential to analyzing economic responses to the regulation. Figure 4-1 illustrates the classical U-shaped structure of production costs with respect to natural gas production. Let ATAC be the average total (avoidable) cost curve and MC the marginal cost of producing natural gas, which intersects ATAC at its minimum point. All these curves are drawn conditional on input prices and the technology in place at the production well. Thus, all firms have some flexibility via their decision to operate, at a given output rate, or to close the well. But they do not have the full flexibility to vary the size and composition of their existing capital stock at the produccj.on well or processing facility (i.e., to change technology beyond that needed to comply with the regulatory alternative). The well's supply function for natural gas is that section of the marginal cost curve bounded by the quantities Qmin and Q^. Q^ is the largest feasible production rate that can be sustained at the facility given the technology and other fixed factors in place, regardless of the output price. Qmin is t*16 minimum economically feasible production rate, which is determined by the minimum of the ATAC curve, which coincides with the price Pmin. Suppose the market price of For example, production factors such as labor, materials, and capital (except in the short run) vary with the level of output, whereas expenditures for facility security and administration may be independent of production levels but avoidable if the well or processing facility closes down. 4-4 ------- $/Q P1 mm ATAC Qmi mm Q Q/t max Figure 4-1. Facility unit cost functions. natural gas is less than Pmin. In this case, the firm's best response is to close the well and not produce natural gas because P < ATAC implies that total revenue would be less than total avoidable costs if the well operated at the associated output levels below Qmin-* Now consider the effect of the regulatory control costs. These costs are all avoidable because a firm can choose to cease operation of the facility and thus avoid incurring the costs of compliance. These costs of compliance include the variable component consisting of the operating and maintenance costs and the nonvariable component consisting of the compliance capital equipment acquired for the regulatory option. Incorporating the regulatory control costs will This characterization of the economics regarding the operating decision agrees with that described in Reference 6. 4-5 ------- involve shifting upward the ATAC and MC curves as shown in Figure 4-2 by the per-unit compliance cost (operating and 4-6 ------- $/Q p; min rmin Qmin Q'min Q/t Figure 4-2. Effect of compliance costs on facility cost functions. maintenance plus annualized capital). Therefore, the supply curve for each production well shifts upward with marginal costs, and a new (higher) minimum operating level (Q'^J is determined by a new (higher) Pmin. 4.1.2 Market-Level Effects The competitive structure of the market is an important determinant of the regulation's effect on market price and quantity. As discussed above, it was assumed that natural gas prices are determined in perfectly competitive markets. As illustrated in Figure 4-3, without the regulation, the market quantity and price of natural gas (Q0, P0) are determined by the intersection of the market demand curve (D) and the market supply curve (S). The market supply curve is determined by the horizontal summation of the individual facility supply curves. Imposing the regulation increases the costs of producing natural gas for individual suppliers and, thus, shifts the market supply function upward to S1 (see Figure 4-3). The supply shifts for natural gas cause the 4-7 ------- $/Q PI PO Q/t Figure 4-3. Natural gas market equilibria with and without compliance costs. market price to rise and market quantity to fall at the new with-regulation equilibrium. 4.1.3 Facility-Level Response to Control Costs and New Market Prices In evaluating the market effects for natural gas, the analysis must distinguish between the initial effect of the regulation and the net effect after the market has adjusted. Initially, the cost curves at all affected wells producing natural gas shift upward by the amount of the appropriate unit costs of the regulation. However, the combined effect across these producers causes an upward shift in the market supply curve for natural gas, which pushes up the price. Determining which shift dominates for a particular production well depends on the relative magnitude of the well-specific unit control costs of the regulation and the change in market price. Given changes in market prices and costs, operators of production wells will elect to either 4-8 ------- • continue to operate, adjusting production and input use based on new prices and costs, or • close the production well if revenues do not exceed operating costs. The standard closure evaluation is based on the comparison of revenues to the opportunity costs of production. If operators of production wells anticipate that these costs with the controls will exceed revenues, they will close the well. Production well closures directly translate into quantity reductions. However, these quantity reductions will not be the only source of output change in response to the regulation. The output of production wells that continue operating with regulation will also change as will the quantity supplied from foreign sources. Affected facilities that continue to produce may increase or decrease their output levels depending on the relative magnitude of their unit control costs and the changes in market prices. Unaffected U.S. producers will not face an increase in compliance costs, so their response to higher product prices is to increase production. Foreign producers, who do not incur higher production costs because of the regulation, will respond in the same manner as the unaffected U.S. facilities. The approach described above provides a realistic and comprehensive view of the regulation's effect on responses at the facility-level as well as the corresponding effect on market prices and quantities for natural gas. The next section describes the specifics of the operational market model.6 4.2 OPERATIONAL MARKET MODEL To estimate the economic impacts of the regulation, the competitive market paradigm outlined above was operationalized. The purpose of the model is to provide a 4-9 ------- structure for analyzing the market adjustments associated with regulations to control air pollution from the oil and natural gas production industry. The model is a multi-dimensional Lotus spreadsheet incorporating various data sources to provide an empirical characterization of the U.S. natural gas industry for a base year of 1993—the latest year for which supporting technical and economic data were available at proposal. The analysis for the final rule maintains this same base year for consistency. To implement this model, the production wells and natural gas production facilities to be included in the analysis were identified and characterized, the supply and demand sides of the U.S. natural gas market were specified, supply and demand specifications were incorporated into a market model framework, and market adjustments due to imposing regulatory compliance costs were estimated. 4.2.1 Network of NaturalGas Production Wells and Facilities Because of the large number of producing wells, operating units, and processing plants in the oil and natural gas production industry, it is not possible to simulate the effects of imposing the regulatory control costs at each and every facility in the industry. The following section describes the methods employed in linking the EPA engineering model plants (as described in Section 2} with the wellgroups developed by Gruy Engineering Corporation (as discussed in Section 2.3.1.1 and provided in Appendixes A and B) to construct the model units of analysis that constitute the "facilities" for use in the economic model of the U.S. natural gas industry. To apply the Gruy Engineering Corporation data to the economic analysis, it was necessary to make appropriate adjustments to those databases. First, to ensure consistent 4-10 ------- units of measure between Gruy and supporting data sources, all units of natural gas production were converted to thousands of cubic feet per day (Mcfd). Next, because the Gruy report reflects 1989 data, it was necessary to adjust the number of gas wells to reflect 1993 data, the base year of this analysis. The 1993 gas wells, as shown in Table 2-16, were allocated across the Gruy well cohorts in each state in the same proportion as their distribution in the Gruy database. Gas well production rates (Mcfd/well) were calculated based on the Gruy data. These rates were not altered for the analysis because no evidence suggested that production rates have changed since 1989. Natural gas production was recalculated by multiplying the production rates per well by the 1993 number of producing wells in each cohort. These adjustments are reflected in Appendix B. To facilitate the analysis, the producing field was determined to be the relevant unit of production. Thus, the individual Gruy gas wells were integrated into producing fields of homogeneous well types rather than employing units of production at the individual well level. The number of wells in each wellgroup, or cohort, was distributed as evenly as possible to each of the fields. Rather than allocate parts of a well, the number of wells was distributed as integer values so that some like fields have an additional well. The oil wells, however, were included in the analysis at the wellgroup level as a single cohort, thereby representing one or more fields. 4.2.1.1 Allocation of Production Fields to Natural Gas Processing Plants. Once the production fields for each state were established, each field needed to be assigned to one of the 720 U.S. natural gas processing plants listed in the OGJ.7 Oil and gas production fields were randomly allocated to the natural gas processing plants within a State given the plant- level natural gas processing throughput for 1993 as provided 4-11 ------- in the OGJ survey. However, in many cases, natural gas that is extracted in one State is processed in another State. Table 4-1 shows which states produce more gas than they process (excess suppliers), process more than they produce (excess demanders), or process exactly what they produce. Because of this interstate flow of natural gas, it was necessary to allocate the production fields of States with excess supply to the processing plants within that State first and then assign the unallocated fields to States with excess demand. The step-by-step allocation process was as follows: 1) Assign uniform random numbers between 0 and 1 to each production field using the @RAND function in Lotus 1-2-3. 2) Sort the production fields by their random number. 3) Allocate production fields to a processing plant until the 1993 processing level at that plant is matched (exactly or as close as possible). 4) Continue to the next processing plant within that state repeating Step 3 until the 1993 processing levels at all processing plants within the State are satisfied. Those states with excess supply were assumed to only process gas extracted from fields within that State. Production fields that were not allocated to a processing plant within their State are then assigned to the next closest State with excess demand based on the location of existing pipelines. The steps outlined above were repeated for the excess demand states until all production fields had been allocated to processing plants. After allocating the production fields to the processing plants, like field types that were assigned to the same processing plant were combined by summing the number of wells across these fields. This further aggregation is justified since baseline and with-regulation costs per unit are the same within wellgroups, natural gas processing plants, and their combination. After this adjustment was completed, just over 4-12 ------- TABLE 4-1. LIST OF STATES BY EXCHANGE STATUS OF NATURAL GAS, 1993 Export Import No exchange Alabama Arizona California Illinois Indiana Kentucky Michigan Mississippi Montana Nebraska New Mexico New York North Dakota Oklahoma Ohio Oregon Pennsylvania South Dakota Tennessee Texas--North Texas--Gulf Coast Texas--West Utah Virginia West Virginia Arkansas Colorado Florida Kansas Louisiana Wyoming Alaska Note: Exporting States produced more natural gas in 1993 than that processed within the State, importing States processed more natural gas in 1993 than that produced within the State, while States with no exchange processed and produced an equal amount of natural gas in 1993. 4-13 ------- 8,000 production field groupings supplied the 691 processing plants.* 4.2.1.2 Assignment of Model Units. Once production fields had been assigned to natural gas processing plants, it became necessary to assign natural gas processing equipment to the production fields and natural gas processing plants. Processing equipment includes TEG dehydration units and condensate tank batteries (CTB). TEG units may be stand-alone units or they may exist at condensate tank batteries or natural gas processing plants. The following sections discuss the model units defined in the engineering analysis and the methods employed in allocating these units to the production fields and natural gas processing plants for the economic analysis. Stand-alone TEG units. For this analysis, a stand-alone TEG unit was assigned to gas production fields that are deeper than 4,000 feet. This assignment was based on the assumption that wells that are less than 4,000 feet deep produce "dry gas" and do not need a stand-alone TEG unit. Data supporting this assumption are found in the U.S. Department of Energy report entitled, "Costs and Indices for Domestic Oil and Gas Field Equipment and Production Operations: 1990-1993." This report provides cost information for natural gas lease equipment by type of well, and dehydrators and their corresponding cost estimates are only listed for well types greater than 4,000 feet deep.8 For gas production fields with well depth greater than 4,000 feet, stand-alone TEG units were assigned based on the throughput of each field (i.e., a production field producing 25 MMcfd is assigned a model TEG unit C). To approximate the Total does not sum to the 720 as reported in the industry profile (section 2)because plants in OGJ processing survey that indicated no throughput for 1993 were excluded from the analysis. 4-14 ------- engineering estimates of the number of model units, it was necessary to convert some model C and D units initially assigned to production fields into multiple model A and B units. Thus, randomly selected model C and D units were converted to model A and B units according to the ratio of average throughput per unit (as expressed in MMcfd) (i.e., one model C unit is equivalent to 125 model A units, one model D is equivalent to 350 model A units, and one model D unit is equivalent to 10 model B units).9 Condensate tank batteries and associated TEG units. Model condensate tank batteries were assigned to production fields based on the throughput of each field (i.e., if a field produces 2 MMcfd of natural gas, it was assigned a model CTB E). One TEG unit was assigned to each condensate tank battery based on throughput capacity so that a TEG unit A was assigned to each CTB E, & TEG unit B was assigned to each CTB F, a TEG unit C was assigned to each CTB G, and a TEG unit D was assigned to each CTB H. To approximate the engineering estimates of the number of model units, it was necessary to convert some model CTB F, G, and H units initially assigned to production fields into multiple model E units. Thus, randomly selected model F, G, and H units were converted to model E units according to the ratio of average throughput per unit (as expressed in MMcfd) (i.e., one model F unit is equivalent to 10 model E units, one model G is equivalent to 35 model E units, and one model H unit is equivalent to 100 model E units) .10 TEG units at natural gas processing plants. TEG dehydration units are also employed at NGPPs. For this analysis, the allocation of model TEG units to model NGPPs was based on the engineering analysis so that a model NGPP A is assigned two model TEG B units, a model NGPP B was assigned three model TEG C units, and a model NGPP C was assigned three model TEG D units. 4-15 ------- After completing the assignment of model units, every "facility" began with a model production well and ended with a model natural gas processing plant (e.g., model production well 1 - TEG dehydration unit A at CTB E - Natural gas processing plant A). As a result, the level of domestic production is equal to the level of natural gas processed at natural gas processing plants during 1993 as provided by the OGJ processing survey. Table 4-2 provides a summary of the network of production wells and production facilities by State for 1993 . Because of the uncertainty related to the actual combinations of production well and processing plants, the production well-processing facility combinations developed for this analysis to reflect the base year data of 1993 will not be unique—there are likely other possible combinations of production wells and processing facilities that are consistent with the base year data. 4.2.2 Supply of Natural Gas Producers of natural gas have the ability to vary output in the face of production cost changes. Production well- specific upward sloping supply curves for natural gas are developed to allow domestic producers to vary output in the face of regulatory control costs. The following sections provide a description of the production technology characterizing production at U.S. natural gas fields and the corresponding supply functions, as well as the foreign component of U.S. natural gas supply (i.e., imports). 4.2.2.1 Domestic Supply. For this analysis, the generalized Leontief technology was assumed to characterize natural gas production at all producing fields. This formulation allows for projection of supply curves for natural gas at the field level. In general, the supply function of a 4-16 ------- TABLE 4-2. SUMMARY OF ALLOCATION OF PRODUCTION WELLS, PROCESSING PLANTS, AND MODEL UNITS FOR 1993 BY STATE Wells providing natural gas to plants within that State State Alaska Alabama Arkansas California Colorado Florida i Kansas •j Kentucky Louisiana Michigan Mississippi Montana North Dakota New Mexico Oklahoma Pennsylvania Ohio West Virginia Texas-Gulf Coast Texas-North Texas-West Oil wells 1,541 0 12,726 40,482 8,306 2,779 33,967 0 71,049 2,099 1,811 0 2,101 5,606 59,564 0 0 0 56,558 50,502 61,913 Gas wells 157 2,274 2,974 1,018 7,157 1,395 26,850 7,842 131,256 2,196 278 83 80 17,596 12,472 258 609 24,154 17,647 14,521 7,750 Total 1,698 2,274 15,700 41,500 15,463 4,174 60,817 7,842 202,305 4,295 2,089 83 2,181 23,202 72,036 258 609 24,154 74,205 65,023 69,663 Natural gas processed (Mmcfd) 6,499.2 701.9 520.3 659.4 1,129.6 621.3 3,776.5 118.0 11,865.5 859.0 209.6 7.1 83.2 2,122.2 2,863.4 8.2 8.8 337.8 7,037.9 1,679.7 3,284.0 A 286 339 206 577 781 369 2,747 0 5,973 69 92 1 9 1,205 1,834 0 0 0 5,119 882 1,778 Stand-alone TEG B 1 2 3 2 4 2 13 0 62 1 1 0 0 10 21 0 0 0 47 7 6 C 1 1 1 0 0 1 3 0 4 0 0 0 0 1 2 0 0 0 4 1 3 D 1 1 2 0 4 0 4 0 5 0 1 0 0 0 0 0 0 0 2 0 0 Total 289 343 212 579 789 372 2,767 0 6,044 70 94 1 9 1,216 1,857 0 0 0 5,172 890 1,787 ------- TABLE 4-2. SUMMARY OF ALLOCATION OF PRODUCTION WELLS, PROCESSING PLANTS, AND MODEL UNITS FOR 1993 BY STATE (CONTINUED) Condensate tank batteries State E F Alaska Alabama Arkansas California Colorado Florida Kansas Kentucky i Louisiana oo Michigan Mississippi Montana North Dakota New Mexico Oklahoma Pennsylvania Ohio West Virginia Texas-Gulf Coast Texas-North Texas-West Utah Wyoming G H Total 27 79 60 281 326 84 555 0 2,765 86 54 1 27 571 1,175 0 0 0 2,220 665 1,418 137 918 Natural gas processing plants ABC Total8 2 4 3 6 6 4 32 0 162 4 3 0 1 40 53 0 0 0 99 32 15 8 26 3 1 3 3 0 2 15 0 32 1 0 0 1 7 1 0 0 0 11 4 10 1 5 4 2 2 0 4 2 6 0 25 0 1 0 0 0 4 0 0 0 15 0 1 2 2 36 86 68 290 336 92 608 0 2,984 91 58 1 29 618 1,233 0 0 0 2,345 701 1,444 148 951 0 2 1 15 27 0 6 0 14 7 3 6 5 6 34 1 0 3 22 . 42 34 7 15 0 4 1 11 14 1 4 3 22 9 2 0 1 20 48 0 1 2 69 27 44 5 16 3 3 1 2 4 1 11 0 32 11 1 0 0 7 10 0 0 2 21 7 10 2 9 3 9 3 28 45 2 21 3 68 27 6 6 6 33 92 1 1 7 112 76 88 14 40 ------- natural gas producing field resulting from the generalized Leontief technology is: q. = v + — J J 2 1 1/2 (4.1) u r where q.j = annual production of natural gas (Mcf) for field j = 1 to n, r = national wellhead price of natural gas, 3 = negative supply parameter (i.e., 3 < 0), and YJ = productive capacity of field j. Figure 4-4 illustrates the theoretical supply function of Equation (4.1). As shown, the upward-sloping supply curve is specified over a productive range with a lower bound of zero B2 that corresponds with a shutdown price equal to -i— and an 4y/ upper bound given by the productive capacity of q^ that is approximated by the supply parameter YJ • The curvature of the supply function is determined by the 3 parameter (see Appendix C for a discussion of the derivation and interpretation of this parameter). To specify the supply function of Eq. (4-1) for this analysis, the 3 parameter is computed by substituting the market supply elasticity for natural gas (£), the wellhead price of natural gas (r), and the production-weighted average annual production level of natural gas per well (q) into the following equation: r 11-1/2 (4.2) The market-level supply elasticity for natural gas is assumed to be 0.2624, which reflects the production-weighted average 4-19 ------- S/q, 71 -q, Figure 4-4. Theoretical supply function of natural gas producing well. supply elasticity estimated across EPA regions as shown in Table 4-3.n The 1993 wellhead price of natural gas is $2.01 per Mcf and the production-weighted average annual level of natural gas production per well based on the Gruy database is 131,496 Mcf. The 3 parameter is calculated by incorporating these values into Equation (4.2) resulting in an estimate of the 3 parameter equal to -195,674. Unlike the product-specific P, the individual supplier- level elasticity of supply is not constant, but varies across each producing field with the level of production, q.j. For high production fields, the elasticity of supply will be low reflecting the low responsiveness to price changes of large wells due to high overhead expenses and low extraction costs as described in the literature. For low production fields, the elasticity of supply will be high reflecting the high responsiveness to price changes of "stripper" wells. Since stripper wells produce a small product volume and have low 4-20 ------- TABLE 4-3. SHORT-RUN SUPPLY ELASTICITY ESTIMATES FOR NATURAL GAS BY EPA REGION EPA Weighted Source : Region 1 2 3 4 5 6 average U.S. Department Estimates of short-run elasticities 0.852 0.263 0.207 0.122 0.118 0.463 0.2624 of Energy. Documentation of the Oil and Gas Supply Module. DOE/EIA-M063. Energy Information Administration, Oil and Gas Analysis Branch. Washington, DC. March 1994. overhead expenses, producers usually respond to fluctuations in price of oil or gas by ceasing production when revenues fall below operating costs, and possibly resuming production when it is profitable.12 As a result, domestic capacity utilization fluctuates mainly as stripper wells are changed from idle to production status. The intercept of the supply function, YJ/ approximates productive capacity and varies across producing fields. This parameter does not influence the field's production responsiveness to price changes as does the 3 parameter. Thus, the parameter YJ is used to calibrate the model so that each field's supply equation is exact using the Gruy data. 4.2.2.2 Foreign. The importance of including foreign imports in the economic model is highlighted by the significant level of U.S. importation of natural gas that currently reflects over 10 percent of U.S. domestic consumption. Thus, the model specifies a general formula for the foreign supply for natural gas that is: 4-21 ------- (4.3) where qx = foreign supply of natural gas (Mcf ) , A1 = positive constant, and S1 = foreign supply elasticity for natural gas. Difficulty in estimating foreign trade elasticities has long been recognized and precludes inclusion of econometric estimates (new or existing) . International trade theory suggests that foreign trade elasticities are larger than domestic elasticities. In fact, at the limit, the foreign trade elasticities are infinite, reflecting the textbook case of price-taking in world markets by small open economy producers and consumers. For this analysis, a value of 0.852 is assumed for the import supply elasticity, which is the highest domestic supply elasticity estimate from Table 4-3 . The multiplicative foreign supply parameter, A1, is determined by backsolving given estimates of the import supply elasticities, 1993 wellhead price, and the quantities of U.S. imports 1993 . 4.2.2.3 Market Supply. The market supply of natural gas (Qs) is the sum of supply from all natural gas producers, i.e. , (4.4) where q1 is foreign supply of natural gas and ]£ QJ" is the j domestic supply of natural gas, which is the sum of natural gas production across all U.S. producing fields (j). 4-22 ------- 4.2.3 Demand for Natural Gas Natural gas end users include residential and commercial customers, as well as industrial firms and electric utilities. These customer groups have very different energy requirements and thus quite different service needs. Therefore, the model specifies a general formula for the demand of natural gas by end-use sector (qf) , that is, " = Bd "' (4-5) where pi = the end-user price for sector I, r\l = the demand elasticity for end-use sector I, B^ = a positive constant The multiplicative demand parameter, B^, calibrates the demand equation so that each end-use sector replicates its observed 1993 level of consumption given data on price and the demand elasticity. Table 4-4 provides the estimates of the demand elasticity by end-use sector that are employed in the model.13 In a survey of price elasticities of demand for natural gas, Al-Sahlawi found that short-run elasticities of demand range from -0.035 to -0.686 in the residential sector and -0.161 to -0.366 in the commercial sector.14 As shown in Table 4-4, this analysis employs the mid-point of the range for each of these end-use sectors. Industrial demand for natural gas is a derived demand resulting from producers optimizing the relative use of fuels that comprise the energy input to the production function. Based on time-series data across 9 U.S. states, Beierlin, Dunn, and McConnor used a combination of error components and seemingly unrelated regression to 4-23 ------- TABLE 4-4. SHORT-RUN DEMAND ELASTICITY ESTIMATES FOR NATURAL GAS BY END-USER SECTOR Estimate of the short-run End-use sector demand elasticity Residential -0.3605 Commercial -0.2635 Industrial -0.6100 Electric utility" -1.0000 a Value is assumed due to lack of literature estimates of this parameter for electric utilities. Higher absolute value than other sectors because of greater fuel-switching capabilities. Source: Al-Sahlawi, Mohammed A. "The Demand for Natural Gas: A Survey of Price and Income Elasticities," Energy Journal Vol. 10, No. 1, January 1989. estimate a short-run elasticity of -0.61 for natural gas.15 To the best of our knowledge there exist no studies that estimate short-run demand elasticities for electric utilities. Because electric utilities have greater fuel switching capabilities than other end-users, we assume a more responsive short-run elasticity of -1 for this group in the model. The total market demand for natural gas (QD) is the sum across all consuming end-use sectors, i.e., (4.6) An additional component of natural gas consumption is that used as lease, plant, and pipeline fuel. This consumption is fairly constant over time varying only with fluctuations of natural gas production. For the purposes of this analysis, this component is treated as an additional end-use sector consuming at a constant amount without and with the regulation. 4-24 ------- 4.2.4 Incorporating Regulatory Control Costs The starting point for assessing the market impact of the regulations is to incorporate the regulatory control costs into the natural gas production decision. The regulatory control costs for each model unit are presented in Table 3-9 of Section 3. An additional aspect of the regulation is the product recovery credit received by natural gas producers as a result of adding the controls. These credits do not directly affect the production decisions as do the costs of adding the pollution controls. Rather these credits are added revenues that each producer gains after complying with the regulation. The focus of incorporating regulatory control costs into the model structure is to appropriately assign the costs to the natural gas flows directly affected by the imposition of HAP emission controls. This assignment includes the identification of affected entities and determination of their control costs and the inclusion of these costs in the production decision of each affected entity. 4.2.4.1 Affected Entities. For this analysis, affected units were randomly selected given the percentages provided in Tables 3-7 through 3-9 of Section 3 and then assigned the appropriate compliance costs. Specifically, the following steps were undertaken: • Each production field was assigned a uniform random value between 0 and 1 using the @RAND function in Lotus 1-2-3. • Affected units were determined to be those with a random value below the percentage affected as given in Tables 3-7 through 3-9 for each model type. • Total annual compliance costs, as shown in Table 3-9, were assigned to affected units and aggregated across model units for each "facility," or production field- processing plant combination. 4-25 ------- The total annual compliance costs are expressed at the model unit level and must be converted to a per Mcf basis for inclusion in the model, i.e., application to affected product flows. To avoid double counting, compliance costs assigned to natural gas processing plants are further allocated to the multiple production fields providing natural gas according to their share of total natural gas processed at the plant. The total annual compliance costs per Mcf (c.,) for each affected production field j are computed as the sum of total annual compliance costs for affected TEG unit(s), condensate tank battery, and natural gas processing plant divided by the annual production level of the field. 4.2.4.2 Natural Gas Supply Decisions. The production decisions at the individual producing fields are affected by the total annual compliance costs, c.,, which reflect the shift in marginal cost and are expressed per Mcf of natural gas. If the producing field serves an affected stand-alone TEG unit, condensate tank battery, or natural gas processing plant, then its supply equation will be directly affected by the regulatory control costs, which enter as a net price change, i.e., r^ - GJ . Thus, the supply function for producing fields, assuming the generalized Leontief production technology becomes: '1/2 (4.7) n = v. + — J J 2 The discussion above assumes that producing natural gas is profitable. However, in confronting the decision to comply with the regulation, a producer's optimal choice could be to produce zero output (i.e., close the production field). As shown in Figure 4-4, if the net wellhead price (r.j -Cj) falls B2 below the shutdown price of -*— , then the producing field's production response for the supply equation given the 4-26 ------- regulatory control costs will be less than or equal to zero (i.e., q., < 0) . 4.2.5 Model Baseline Values and Data Sources Table 4-5 provides the 1993 baseline equilibrium values for wellhead and end-user prices, domestic and foreign production, and consumption by end-use sector.16 The level of domestic production is equivalent to the level of natural gas processed at natural gas processing plants during 1993 as obtained from the OGJ processing survey.17 The consumption level for lease, plant, and pipeline fuel was adjusted to ensure that national production and consumption levels were exact for the model's 1993 characterization of the U.S. natural gas market. 4.2.6 Computing Market Equilibria This section provides a summary of the model structure and a description of the equilibria computations of the model. A complete list of exogenous and endogenous variables, as well as the model equations, is given in Appendix D. Producers' responses and market adjustments can be conceptualized as an interactive feedback process. Producers 4-27 ------- TABLE 4-5. BASELINE EQUILIBRIUM VALUES FOR ECONOMIC MODEL: 1993 Item Producers Domestic Foreign Total Consumers Residential Commercial Industrial Electric utility Other Average/ total Price3 ($/Mcf) $2.01 $2.01 $2.01 $6.15 $5.16 $3.07 $2.61 N/A $4.16 Quantity (MMcf ) 17,440,586 2,350,115 19,790,701 4,956,000 2,906,000 7,936,000 2,682,000 1,310,701 19,790,701 a For producers, price reflects the national wellhead price. For consumers, price reflects the appropriate national end-user price. b For producers, quantity reflects the total production level. For consumers, quantity reflects the appropriate level of consumption. Source: Department of Energy. Natural Gas Monthly. Energy Information Administration, Washington, DC. October 1994. face increased production costs due to compliance, which causes individual production responses; the cumulative effect, which leads to a change in the wellhead price that all producers (affected and unaffected) face; and the end-user price that all consumers face, which leads to further responses by producers (affected and unaffected) as well as consumers and thus new market prices, and so on.* The new equilibria after imposition of these regulatory control costs is the result of a series of iterations between producer and consumer responses and market adjustments until a stable 'End-user prices are determined by adding the new wellhead price to the absolute markup for each end- user. 4-28 ------- market price arises where total market supply equals total market demand, i.e., Qs = QD - This process is simulated given the producer and consumer response functions and market adjustment mechanisms to arrive at the post-compliance equilibria. The process for determining equilibrium prices (and outputs) with the increased production cost is modeled as a Walrasian auctioneer. The auctioneer calls out a wellhead price for natural gas (indirectly yielding end-user prices) and evaluates the reactions by all participants (producers and consumers, both foreign and domestic) comparing quantities supplied and demanded to determine the next price that will guide the market closer to equilibrium, i.e., market supply equal to market demand. An algorithm is developed to simulate the auctioneer process and find a new equilibrium price and quantity for natural gas. Decision rules are established to ensure that the process will converge to an equilibrium, in addition to specifying the conditions for equilibrium. The result of this approach is a combination of wellhead price and end-user prices with the regulation that equilibrates supply and demand for the U.S. natural gas market. The algorithm for deriving the with-regulation equilibrium can be generalized to five recursive steps: 1) Impose the control cost on the production wells, thereby affecting their supply decisions. 2) Recalculate the market supply of natural gas. 3) Determine the new wellhead price via the price revision rule and add appropriate markups to arrive at end-user prices. 4) Recalculate the supply function of producing fields and foreign suppliers with the new wellhead price, resulting in a new market supply of natural gas. Evaluate end-use consumption levels at the, new end- 4-29 ------- user prices, resulting in a new market demand for natural gas. 5) Return to Step 3, and repeat steps until equilibrium conditions are satisfied (i.e., the ratio of market supply to market demand is equal to 1). 4.3 REGULATORY IMPACT ESTIMATES The model results can be summarized as market- and industry- and societal-level impacts due to the regulation. 4.3.1 Market-Level Results Market-level impacts include the market adjustments in price (wellhead and end-user) and quantity for natural gas, including the changes in international trade flows. Table 4-6 provides the market adjustments for each regulatory scenario. As shown, the changes in wellhead and end-use prices for each regulatory scenario are all nearly zero (less than 0.0005 percent change). The market adjustments associated with the regulation are also negligible in comparison to the observed trends in the U.S. natural gas market. For example, between 1992 and 1993, the average annual wellhead price increased by 14 percent, while domestic production of natural gas rose by 3 percent.18 The increase in foreign imports of natural gas is also inconsequential (totaling less than 0.0004 percent) for each regulatory scenario. 4.3.2 Industry-Level Results Industry-level impacts include an evaluation of the changes in revenue, costs, and profits; the post-regulatory compliance cost; production well and natural gas processing plant closures; and the change in employment attributable to 4-30 ------- TABLE 4-6. SUMMARY OF NATURAL GAS MARKET ADJUSTMENTS FOR MAJOR SOURCES I OJ Major sources Item Producers Domestic Foreign Total Consumers Residential Commercial Industrial Electric utility Other Total Price ($/Mcf) $2.01 $2.01 $6.15 $5.16 $3.07 $2.61 N/A $4.16 Percent change (%) 0.00044% 0.00044% 0.00014% 0.00017% 0.00029% 0.00034% N/A 0.00021% Quantity (MMcf) 17,440,551 2,350,123 19,790,674 4,955,997 2,905,999 7,935,986 2,681,991 1,310,701 19,790,674 Percent change (%) -0.00020% 0.00035% -0.00014% -0.00005% -0.00005% -0.00018% -0.00034% 0.00000% -0.00014% (continued) ------- the change in industry output. Workers' dislocation costs associated with industry-wide job losses are also computed. Table 4-7 summarizes these industry-level impacts by regulatory scenario. TABLE 4-7. INDUSTRY-LEVEL IMPACTS Oil and Natural Gas Production Category Change in revenues ($106) $3.1 Market adjustments $0.2 Product recovery $2.9 Change in costs ($106) $7.4 Post-regulatory control costs $7.5 Costs of production adjustment -$0.1 Change in profits ($106) -$4.3 Closures Production wells 0 Natural gas processing plants 0 Employment loss 0 Natural Gas Transmission and Storage Category Compliance Costs ($106) $0.3 4.3.2.1 Post-Reaulatory Compliance Cost. The post- regulatory compliance cost at each facility can be calculated as the product of the total annual compliance cost per unit (Cj) and the new output rate (q*'). At the industry-level, the post-regulatory compliance cost for major sources is roughly $7.5 million for production facilities and reflects the sum of the total annual compliance cost across all facilities continuing to operate in the post-compliance equilibrium. Thus, the post-compliance cost is not necessarily equal to the estimated compliance costs before accounting for market adjustments. They differ because producing wells output rates may change at affected producing wells. 4-32 ------- 4.3.2.2 Revenue. Production Cost, and Profit Impacts. The economic model generates information on the change in individual and market quantities and market price in the oil and natural gas production industry. This allows computation of the change in total revenue and total cost at the industry level. For major sources, the total increase in revenue is $3 million and includes the change in product revenue associated with market adjustments ($0.2 million), which is the difference between baseline product revenue and post- compliance product revenue, and the added revenue associated with the product recovery credits ($2.9 million). The total increase in production cost is $7.4 million and reflects the post-compliance costs of production minus the baseline costs of production, which will account for the increase in costs due to the regulation ($7.5 million) and the decrease in costs due to the lower output rate ($0.1 million). These costs amount to just C.004 percent of the total revenues in 1993 of the 300 largest publicly traded oil and natural gas producing companies in the U.S.19'20 The changes in total revenue and total cost are used to measure the profitability impact of the regulations which indicates a loss of $4.3 million at the industry level due to regulation. The economic model also uses changes in industry revenues and costs to project closures of producing wells and natural gas processing plants and to assess employment impacts in the industry. No closure or employment effects are estimated to occur. 4.3.2.3 Screening Analysis for Natural Gas Transmission and Storage The cost estimates for the 7 major sources in the natural gas transmission and storage category were not included in the market model reported above. Between proposal and promulgation of this rule, data was collected through surveys and site visits for 81 facilities, however, only one facility in EPA's 4-33 ------- database, KN Interstate Gas Transmission Company, is known to be affected by the standard. We db not have information on the other six facilities estimated to be affected by the rule. Below is a screening analysis of Impacts on the natural gas transmission and storage industry, the calculated impact for KN Interstate Gas Transmission Company, and an approach to characterize potential impacts for other affected facilities. First, to screen the potential impacts on the market for natural gas transmission and storage, we calculate the ratio of total compliance costs with industry revenues. This calculation can give some insight into potential price increases and the level of potential impacts on the transmission and storage market. Information on pipeline economics from the OGJ21 indicates total 1997 revenues of $16.1 billion for all pipeline firms listed. A total regulatory cost of $jGu,000 would represent CT..02% of market revenues. This level of impact is unlikely to be enough of a shock to production costs throughout the market to cause the supply curve to shift upward, so market price would not be expected to increase as a result of the regulation. This impact is also overstated to the extent that the table of firms from the OGJ does not list all of the firms in the industry. The table includes all "major" and "non-major* firms (as defined by the FERC), which are required to report pipeline company statistics. The overstatement of impacts will be minimal if the firms reported in the OGJ table constitute a large majority of the industry. To screen for impacts of the rule on individual firms, we calculate the ratio of firm compliance cost to firm revenues*. If the ratio is greater that one percent for a substantial number of firms this screening would indicate a need for It should be noted that while the estunated regulatory impact of $300,000 is based on seven facilities, this analysis is based on firm-level impacts. A firm may own one facffily or seven! facilities - a portion of which might be affected by the final rule. 4-34 ------- further evaluation, especially for small businesses in accordance with requirements of the Regulatory Flexibility Act and the Small Business Regulatory Enforcement and Fairness Act. Using the information provided by the OGJ, we selected data for 42 pipeline companies that transferred greater than 100 Mmscf of natural gas per year corresponding to the throughput of EPA's model TEG-D units and larger. It is assumed that companies listed in this table with less than 100 Mmscf would not be affected by the rule because they may not be a major source (as defined by the Clean Air Act), or they may be major but excluded from this regulation due to the 85 Mmscf cut-off for control requirements. From the information given in the table, we obtained the total volume of gas sold and transferred, and operating revenues to calculate the cost- to-revenues ratios for each company. The firms were then divided into two categories: (1) those with throughput of 100 but less than 500 Mmscf (i.e., model TEG-D size category), and (2) those with throughput greater than or equal to 500 Mmscf (i.e. model TEG-E facilities). Table 4-8 below displays the firm information for the two TEG size categories. We then calculate the cost-to-revenue ratios assuming one TEG transfers all of the throughput indicated for the firm (i.e. a TEG-D can transfer as little as 100 Mmscf , or as much as 499 Mmscf). The cost associated with controlling a single TEG is $49,787, which is used in the numerator of the ratio. As Table 4-8 demonstrates, this rule will have a minimal impact on affected firms. All but one of the 42 companies in the analysis had a cost-to-revenue ratio well below 1%, including KN Interstate Gas with a ratio of 0.06%. The range of ratios for the listed firms is from 0.003% to 1.32%. The average firm ratio is 0.09%, which indicates that the impacts are typically well below l/10th of one percent. It is also possible for a firm to transfer it's volume through multiple TEGs of various sizes. As is previously 4-35 ------- mentioned, TEGs with throughputs below 85 Mmscf do not have control requirements resulting from this rule. Therefore, firms that utilize multiple TEG units will have a portion of those controlled by the rule. Again, we do not have information on the number of affected TEG units operated at the listed firms. Alternatively, we calculate the number of TEGs it would take to equate to 1% of a firm's revenues. Table 4-8 shows that on average, it would require 57 TEGs to be controlled for compliance costs to reach 1% of firm revenues. In summary, the screening of compliance costs on market and firm revenues shows minimal impacts on the natural gas transmission and storage industry. Nearly all of the firms have impacts below 1%, and it would require the control of 57 TEGs on average for greater impacts to be realized. With this information, it is not likely that small businesses will be significantly impacted and the further evaluation of the industry is not warranted. 4-36 ------- TABLE 4-8. IMPACTS ON SELECTED NATURAL GAS TRANSMISSION AND STORAGE FIRMS (See Excel file: Transl) 4-37 ------- 4.4 Economic Welfare Impacts The value of a regulatory policy is traditionally measured by the change in economic welfare that it generates. Welfare impacts resulting from the regulatory controls on the oil and natural gas production industry will extend to the many consumers and producers of natural gas. Consumers of natural gas will experience welfare impacts due to the adjustments in price and output of natural gas caused by the imposition of the regulations. Producer welfare impacts result from the changes in product revenues to all producers associated with the additional costs of production and the corresponding market adjustments. The theoretical approach used in applied welfare economics to evaluate policies is presented in Appendix E and indicates our approach to estimation of the changes in economic welfare. The market adjustments in price and quantity in the oil and natural gas production industry were used to calculate the changes in aggregate economic welfare using applied welfare economics principles. Table 4-9 shows the estimated economic welfare change. These estimates represent the social cost of the regulation. For major sources, the social cost of the regulation is $4.9 million with producers of natural gas incurring over 95 percent of the total burden. An alternative measure of the social cost is the total annual compliance cost as estimated by the engineering analysis. However, that measure fails to account for market adjustments and the fact that units may close and not incur the regulatory costs. Thus, the difference between the engineering estimate of social cost and that derived through economic welfare analysis is the deadweight loss to society of the reallocation of resources. 4-39 ------- TABLE 4-9. ECONOMIC WELFARE IMPACTS ($106) Change in consumer surplus -$0.32 Change in producer surplus -$4.33 Domestic -$4.36 Foreign $0.04 Change in surplus for . -$0.30 transmission and storage Change in economic welfare -$4.94 4-40 ------- References: 1. U.S. Environmental Protection Agency. Oil and Natural Gas Production: An Industry Profile. Office of Air Quality Planning and Standards, Research Triangle Park, NC. October 1994. p. 4. 2. Farzin, Yeganeh Hossein. Competition in the Market for an Exhaustible Resource. Jai Press, 1986. 3. Crimer, Jacques. Models of the Oil Market. Harwood Academic Publishers, 1991. 4. Ref. 23, p. 477-517. 5. Ref. 23. 6. Bradley, M.E., and Wood, A.R.O. "Forecasting Oilfield Economic Performance," JPT. November 1994. p. 965-971. 7. Ref. 39, p. 63-109. 8. U.S. Department of Energy. Costs and Indices for Domestic Oil and Gas Field Equipment and Production Operations: 1990-1993. Energy Information Administration, Washington, DC. July 1994. Appendices H through M. 9. Ref. 1, Table 4-1. 10. Ref. 1, Table 4-1. 11. U.S. Department of Energy. Documentation of the Oil and Gas Supply Module (OGSM) DOE/EIA-M063. Energy Information Administration, Oil and Gas Analysis Branch, Washington, DC. March 1994. 12. Science Application International Corporation. The Oil and Gas Exploration and Production Industry: Trends 1985-2000. Draft report prepared for the U.S. Environmental Protection Agency, Office of Solid Waste. April 1993. 13. Al-Sahlawi, Mohammed A. "The Demand for Natural Gas: A Survey of Price and Income Elasticities," Energy Journal 10(1) January 1989. 14. Ref. 69. 15. Ref. 69. 4-41 ------- 16. U.S. Department of Energy. Natural Gas Monthly. Energy Information Administration, Washington, DC. Tables 18, 19, 20, and 21. October 1994. 17. Ref. 39, p. 63. 18. Ref. 72, Table 4. 19. Ref. 46. 20. Dun's Analytical Services. Industry Norms and Key Business Ratios. Dun and Bradstreet, Inc. 1994. 21. "Weather, Construction Inflation Could Sqeeze North American Pipelines." Oil and Gas Journal Special. August 31, 1998. 4-42 ------- SECTION 5 FIRM-LEVEL ANALYSIS A regulatory action to reduce air emissions from the oil and natural gas production industry will potentially affect owners of the regulated entities. Firms or individuals that own the production wells and processing facilities are legal business entities that have the capacity to conduct business transactions and make business decisions that affect the facility. The legal and financial responsibility for compliance with a regulatory action ultimately rests with these owners who must bear the financial consequences of their decisions. Thus, an analysis of the firm-level impacts of the EPA regulation involves identifying and characterizing affected entities, assessing their response options by modeling or characterizing the decision-making process, projecting how different parties will respond to a regulation, and analyzing the consequences of those decisions. Analyzing firm-level impacts is important for two reasons: • Even though a production well or processing facility is projected to be profitable with the regulation in place, financial constraints affecting the firm owning the facility may mean that the plant changes ownership. • The Regulatory Flexibility Act (RFA) requires that the impact of regulations on all small entities, including small companies, be assessed. Environmental regulations such as the NESHAP for the oil and natural gas production industry affect all businesses, large and small, but small businesses may have special problems in complying with such regulations. The RFA of 1980 requires that special consideration be given to small entities affected by Federal regulation. Under the 1992 revised EPA 5-1 ------- guidelines for implementing the RFA, an initial regulatory flexibility analysis (IRFA) and a final regulatory flexibility analysis (FRFA) will be performed for every rule subject to the Act that will have any economic impact, however small, on any small entities that are subject to the rule, however few, even though EPA may not be legally required to do so. In 1996, the Small Business Regulatory Enforcement Fairness Act (SBREFA) was passed, which further amended the RFA by expanding judicial review of agencies' compliance with the RFA and by expanding small business review of EPA rulemaking. Although small business impacts are expected to be minimal due to the size cutoffs for TEG dehydration units,1 this firm-level analysis addresses the RFA requirements by measuring the impacts on small entities in the oil and natural gas production source category. In addition, the screening analysis presented in section 4.3.2.3 provides an indication that small transmission and storage firms are also not likely to experience significant impacts. Small entities include small businesses, small organizations, and small governmental jurisdictions and may be defined using the criteria prescribed in the RFA or other criteria identified by EPA. Small businesses are typically defined using Small Business Association (SBA) general size standard definitions for Standard Industrial Classification (SIC) codes. Firms involved in the oil and natural gas production industry include producers (majors and independents), transporters (pipeline companies), and distributors (local distribution companies) that are covered by various SIC codes. The relevant industries include SICs 1311 (Crude Petroleum and Natural Gas), 1381 (Drilling Oil and Gas Wells), 1382 (Oil and Gas Exploration Services), 2911 'TEG dehydration units that process less than 3 MMcfd are not expected to be affected by the regulation. It follows that the smaller owners would likely own only units of this type. 5-2 ------- (Petroleum Refining), 4922 (Natural Gas Transmission), 4923 (Gas Transmission and Distribution) and 4924 (Natural Gas Distribution). The SBA size standards for these industries are shown in Table 5-1. TABLE 5-1. SBA SIZE STANDARDS BY SIC CODE FOR THE OIL AND NATURAL GAS PRODUCTION INDUSTRY SBA size standard in number of SIC code Description employees/annual sales 1311 1381 1382 2911 4922 4923 4924 Crude Petroleum and Natural Gas Drilling Oil and Gas Wells Oil and Gas Exploration Services Petroleum Refining Natural Gas Transmission Natural Gas Transmission and Distribution Natural Gas Distribution 500 500 $5 million 1,500 $5 million $5 million 500 The general steps involved in analyzing company-level impacts include identifying and analyzing the possible options facing owners of affected facilities and analyzing the impacts of the regulation including impacts on small companies and comparing them to impacts on other companies. 5.1 ANALYZE OWNERS' RESPONSE OPTIONS In reality, owners' response options to the impending regulation potentially include the following: • installing and operating pollution control equipment, • closing or selling the facility, and • complying with the regulation via process and/or input substitution (versus control equipment installation). This analysis assumes that the owners of an affected facility will pursue a course of action that maximizes the value of the 5-3 ------- company, subject to uncertainties about actual costs of compliance and the behavior of other companies. The market model presented in Section 4 models the facility- and market-level impacts for natural gas producing wells and processing facilities under the owners' first two options listed above. Evaluating facility and market impacts under the third option listed above requires detailed data on production costs and input prices; costs and revenues associated with alternative services/products; and other owner motivations, such as legal and financial liability concerns, and is beyond the scope of this analysis. Consequently, this analysis is based on the assumption that owners of oil and natural gas production facilities respond to the regulation by installing and operating pollution control equipment or discontinuing operations at production wells or process facilities that they own. The facility- and market-level impacts, presented in Section 4, were used to assess the financial impacts to the ultimate corporate owners of oil and natural gas production facilities. As a result of the regulations, companies will potentially experience changes in the costs of oil and natural gas production as well as changes in the revenues generated by providing these products. Both cost and revenue impacts may be either positive or negative. The cost and revenue changes projected to result from regulating each source category occur at the facility level as a result of market adjustments. Net changes in company profitability are derived by summing facility cost and revenue changes across all facilities owned by each affected company. The net impact on a company's profitability may be negative (cost increases exceed revenue increases) or positive (revenue increases exceed cost increases). 5-4 ------- Figure 5-1 characterizes owners' potential responses to regulatory actions. The shaded areas represent decisions made at the facility level that are used as inputs to the company- level analysis. For this analysis, companies are projected to implement the cost-minimizing compliance option and continue to operate their facilities. As long as the company continues to meet its debt obligations, operations will continue. Realistically, if the company cannot meet its interest payments or is in violation of its debt covenants, the company's creditors may take control of the exit decision and forced exit may occur. If the market value of debt (DM) under continued operations is greater than the liquidation value of debt (DL), creditors would probably allow the facility to continue to operate. Under these conditions, creditors may renegotiate the terms of debt. If, however, the DM under continued operations is less than DL, involuntary exit will result and the facility will discontinue operations. Exit will likely take the form of liquidation of assets or distressed sale of the facility. These decisions are modeled in terms of their financial impact to parent companies. The decision to continue to operate may be accompanied by a change in the financial viability of the company. 5.2 FINANCIAL IMPACTS OF THE REGULATION This analysis evaluates the change in financial status by computing the with-regulation financial ratios of potentially affected firms and comparing them to the corresponding baseline ratios. These financial ratios may include indicators of liquidity, asset management, debt management, and profitability. Although a variety of possible financial ratios provide individual indicators of a firm's health, they may not all give the same signals. Therefore, this analysis focuses on changes in key measures of profitability (return on sales, the return on assets, and the return on equity). 5-5 ------- Identify Cost-Minimizing Compliance Option r AVC DM DL With-Reg Wellhead Price Average Variable Cost Market Value of Debt Liquidation Value of Debt Indicates that decision was modeled in the market analysis Nat. Gas Well Closure Implement Cost-Minimizing Compliance Option Implement Cost- Minimizing Compliance Option and Continue Operations Can firm cover its debt obligations? Figure 5-1. Characterization of owner responses to regulatory action. 5-6 ------- To assess the financial impacts on the oil and natural gas production source category, this analysis characterizes the financial status of a sample of 80 public firms potentially affected by the regulation. Based on SBA size standards from Table 5-1, a total of 39 firms in this sample are defined as small, or 48.8 percent. Baseline financial statements are developed based on financial information reported in the OGJ and industry-level financial ratios from Dun and Bradstreet (D&B). To compute the with-regulation financial ratios, pro-forma income statements and balance sheets reflecting the with-regulation condition of potentially affected firms were developed based on projected with- regulation costs (including compliance costs) and revenues (including product recovery credits and the with-regulation price and quantity changes projected using a market model). The financial impacts on the natural gas transmission source category are not assessed because no small entities are expected to be affected. Only operations with throughput of 500 MMcfd or more will be affected by the rule.2 Information reported in OGJ for the 110 largest gas pipeline companies indicates that none of the companies with volumes in the 500 MMcfd range would have qualified as small businesses (less than $5 million in revenues) in 1994.l For the 34 companies that did transmit volumes in that range in 1994, even if all 5 of the TEG units expected to be affected by the rule were operated by the firm with the smallest revenues, the annual compliance costs would only represent 0.34 percent of its revenues. 5.2.1 Baseline Financial Statements Pro-forma income statements and balance sheets reflecting the 1993 baseline condition of 80 potentially affected firms 2Based on model TEG units in Class E. 5-7 ------- were developed based on financial information reported in the OGJ and industry-level financial ratios from D&B.2'3 This analysis includes 49 firms that listed 1311 as their primary SIC code, 8 firms under SIC 1382, 14 firms under SIC 2911, 8 firms under SIC 4922, and 1 firm under SIC 4924. Each of these firms is publicly traded and listed in the OGJ300, which includes estimates of total revenue, net income, total assets, and shareholder equity. The remaining financial variables needed to complete each firm's income statement and balance sheet were computed using financial ratios computed from the OGJ data and from the D&B benchmark financial ratios shown in Table 5-2. Appendix F provides more detailed firm-by-firm financial data for the 80 sample firms. This analysis employed probability distributions of the D&B benchmark ratios rather than point estimates to compute the remaining financial variables. The probability distributions for each financial ratio listed in Table 5-2 were generated using ©RISK, a risk analysis software add-on for Lotus 1-2-3 . In projecting the baseline financial statements, the D&B benchmark ratios were modeled as a triangular distribution with the median value reflecting the most likely value of the distribution and the lower and upper quartile values reflecting the 25th and 75th percentile values of the distribution. ©RISK randomly selected a value from the probability distribution of each financial ratio and combined these values with the OGJ data to project the baseline income statement and balance sheet for each firm. 5.2.2 With-Recrulation Financial Statements Before adjusting the baseline financial statements, the regulatory control costs must be mapped from processing facilities to the firms that own them. Mapping the regulatory costs to firms requires knowledge of the number of processing facilities owned by each firm and the extent that they are 5-8 ------- TABLE 5-2. DUN AND BRADSTREET'S BENCHMARK FINANCIAL RATIOS BY SIC CODE FOR THE OIL AND NATURAL GAS PRODUCTION INDUSTRY SIC code /financial ratio 1311-Crude Petroleum and Natural Gas Quick ratio (times) Current ratio (times) Current liab. to net worth (%) Fixed assets to net worth (%) 1381-Drilling Oil and Gas Wells Quick ratio (times) Current ratio (times) Current liab. to net worth (%) Fixed assets to net worth (%) 1382-Oil a^rl nas Exploration Services Quick ratio (times) Current ratio (times) Current liab. to net worth (%) Fixed assets to net worth (%) 2911-Petroleum Refining Quick ratio (times) Current ratio (times) Current liab. to net worth (%) Fixed assets to net worth (%) 4922-Natural Gas Transmission Quick ratio (times) Current ratio (times) Current liab. to net worth (%) Fixed assets to net worth (%) Lower quartile 0 0 84 133 0 1 92 123 0 0 77 129 0 1 97 220 0 0 105 264 .6 .8 .0 .5 .8 .0 .8 .5 .5 .8 .3 .9 .5 .1 .9 .1 .3 .8 .9 .7 Median 1 1 30 64 1 1 37 74 1 1 33 70 0 1 68 169 0 1 50 175 .1 .5 .9 .0 .3 .7 .1 .6 .0 .3 .4 .0 .7 .3 .3 .9 .7 .0 .7 .7 Upper guartile 2. 3. 9. 22. 2. 4. 11. 27. 1. 3. 10. 22. 0. 1. 37. 103. 1. 1. 29. 111. 3 5 7 2 7 2 2 5 9 4 0 3 9 9 7 8 0 5 4 4 (continued) TABLE 5-2. DUN AND BRADSTREET'S BENCHMARK FINANCIAL RATIOS BY SIC CODE FOR THE OIL AND NATURAL GAS PRODUCTION INDUSTRY (CONTINUED) 5-9 ------- SIC code/ financial ratio 4923-Gas Transmission and Distribution Quick ratio (times) Current ratio (times) Current liab. to net worth (%) Fixed assets to net worth (%) 4924-Natural Gas Distribution Quick ratio (times) Current ratio (times) Current liab. to net worth (%) Fixed assets to net worth (%) Lower quartile 0 0 127 229 0 0 99 225 .3 .7 .6 .3 .4 .8 .2 .0 Median 0 1 65 144 0 1 57 176 .7 .0 .6 .3 .7 .0 .9 .9 Upper cjuartile 1 1 30 104 1 1 35 86 .1 .4 .4 .8 .1 .4 .4 .8 Source: Dun's Analytical Services. Industry Norms and Key Business Ratios. Dun and Bradstreet, Inc. 1994. affected by the regulation. The market model did not explicitly link firms to their respective processing facilities. Thus, this analysis relies on firm responses to EPA's Air Emissions Survey Questionnaires to determine ownership of TEG dehydration units and condensate tank batteries and the OGJ's Special Report, "Worldwide Gas Processing," to determine ownership of natural gas processing plants operating in the U.S. as of January 1994.4 Table 5-3 provides the ratio of model TEG units to total assets as computed from the EPA survey data. These ratios reflect the average of firms within the natural gas production groups as defined in the table. To estimate the number of model TEG units for each firm, the total assets of the firm were multiplied by the appropriate ratios. The number of model CTBs for each firm was estimated according to the ratio of CTBs to TEG units by model type. In addition, the number 5-10 ------- TABLE 5-3. DISTRIBUTION OF MODEL TEG UNITS BY FIRM'S LEVEL OF NATURAL GAS PRODUCTION Model TEG units per Natural gas production >500 175 100 Bcf to 500 Bcf to 175 Bcf 10 to 100 Bcf <10 Bcf 0 0 0 0 1 A .30259 .40071 .36200 .41223 .15830 ($106 B 0 0 0 0 0 .05663 .07447 .09000 .02660 .00000 0. 0. 0. 0. 0. ) of assets C 00890 00355 00600 00000 00000 0 0 0 0 0 D .00405 .00532 .01800 .00665 .00000 of model natural gas processing plants owned by each firm was estimated given the company name and 1993 throughput of natural gas as provided in the OGJ. In the absence of information on the number of affected units owned by each firm, this analysis assumed that each TEG unit, CTB, and processing plant owned by each firm is expected to be affected by the regulation—the worst-case scenario for each firm. Affected firms typically incur three types of costs because of regulation: capital, operating, and administrative. The capital cost is an initial lump sum associated with purchasing and installing pollution control equipment. Operating costs are the annually recurring costs associated with operation and maintenance of control equipment, while administrative costs are annually recurring costs associated with emission monitoring, reporting, and recordkeeping. Figure 5-2 provides an indication of the burden of the regulatory costs on sample firms in the oil and natural gas production source category by size. This figure shows the distribution of total annual compliance cost (annual!zed capital plus the annual operating and administrative cost) as a percentage of baseline sales across sample firms by size. As shown, the mean level of regulatory burden for small firms in the sample if 0.09 percent of sales 5-11 ------- E >» u c 3 er £ u. / U 70 - 60% - 50% - 40% - 30% - 20% - 10% - 0% - ll r~ ' '^aji. -Weig hted Avg. = 0.090% i"l"' 1''" J.I | ^f ••••••«• •""•€ V^Sv^i - ? i ^ , .,., ., . .. .0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8% 0.9% 1.0% 1.1% 1.2% Cost-Sales Ratio (%) (a) Small Companies / V 70 - 60% - 2 50% - « 40% - § 30% - £ 20% - 10% - n% . \ I Maximum = 0.187% / 0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8% 0.9% 1.0% 1.1% 1.2% Cost-Sales Ratio (%) (b) Large Companies / U 70 - 60% - g, 50% - o 40% - c a 30% - £ 20% - 10% - 0% - ,r- "^-Weighted Avg. = 0.013% \ *''' ' \ , ;;j"i^^-/ ^ 0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8% 0.9% 1.0% 1.1% 1.2% Cost-Sales Ratio (%) (c) Total, All Companies Figure 5-2. Distribution of total annual compliance cost to sales ratio for sample companies. 5-12 ------- with a maximum level of 1.1 percent of sales. Alternatively, the mean level of regulatory burden for large firms in the sample is 0.01 percent of sales with a maximum level of 0.19 percent. Several adjustments were made to the baseline financial statements of each firm to account for the regulation-induced changes at all facilities owned by the firm. Table 5-4 shows the adjustments made to the baseline financial statements to develop the with-regulation financial statements that form the basis of this analysis. In the annual income statement, the baseline annual revenues are increased by the projected product recovery credits earned by each firm and by the expected change in operating revenues of less than 0.01 percent based on the regulation induced market adjustments. Furthermore, the baseline operating expenses are increased by the estimated change in operating and maintenance costs across TEG units and NGPPs owned by the firm, while the firms' other expenses also increase due to the interest charges and depreciation associated with the acquired pollution control equipment. In the balance sheet, changes occur to only those firms that incur capital control costs and are determined by the manner in which firms acquire the pollution control equipment. These firms face three choices in funding the acquisition of capital equipment required to comply with the regulation. These choices are • debt financing, • equity financing, or • a mixture of debt and equity financing. Debt financing involves obtaining additional funds from lenders who are not owners of the firm: they include buyers of bonds, banks, or other lending institutions. Compliance 5-13 ------- TABLE 5-4. CALCULATIONS'REQUIRED TO SET UP WITH-REGULATION FINANCIAL STATEMENTS Financial statement category Calculations Income statement Annual revenues Cost of sales Gross profit Expenses due to regulation Other expenses and taxes Net income Balance sheet Current assets Fixed assets Other noncurrent assets Total assets Current liabilities Noncurrent liabilities Total liabilities Net worth Baseline annual revenues + product recovery credits + projected revenue change due to market adjustments. Baseline cost of sales + operating and maintenance cost of regulation. Annual revenues - cost of sales. Interest: Projected share of capital costs financed through debt times the debt interest rate (7%). Depreciation: 7.5% times the annualized capital costs. (Gross profit - estimated expense due to regulation) times the baseline ratio of other expenses and taxes to gross profit. Gross profit - estimated expense due to regulation - other expenses and taxes. Baseline current assets - [(1 - debt ratio) times total capital cost]. Baseline fixed assets + total capital cost. No change from baseline. Current assets + fixed assets + other noncurrent assets. Baseline current liabilities + amortized compliance cost financed through debt - estimated interest expense. Baseline noncurrent liabilities + (debt ratio times total capital cost) - current portion of debt. Current liabilities + noncurrent liabilities. Total assets - total liabilities. Note: Depreciation expense is based on the first year's allowable deduction for industrial equipment under the modified accelerated cost recovery system. costs not financed through debt are financed using internal or external equity. Internal equity includes the current portion of the company's retained earnings that are not distributed in 5-14 ------- the form of dividends to the owners (shareholders) of the company, while external equity refers to newly issued equity shares. Each source differs in its exposure to risk, its taxation, and its costs. In general, debt financing is more risky for the firm than equity financing because of the legal obligation of repayment, while borrowing debt can allow a firm to reduce its weighted average cost of capital because of the deductibility of interest on debt for State and Federal income tax purposes. The outcome is that a tradeoff associated with debt financing for each firm exists and it depends on the firm's tax rates, its asset structures, and their inherent riskiness. Leverage indicates the degree to which a firm's assets have been supplied by, and hence are owned by, creditors versus owners. Leverage should be in an acceptable range, indicating that the firm is using enough debt financing to take advantage of the low cost of debt, but not so much that current or potential creditors are uneasy about the ability of the firm to repay its debt. The debt ratio (d) is a common measure of leverage that divides all debt, long and short term, by total assets. Empirical evidence shows that capital structure can vary widely from the theoretical optimum and yet have little impact on the value of the firm.5 Consequently, it was assumed that the current capital structure, as measured by the debt ratio, reflects the optimal capital structure for each firm. Thus, for this analysis, each firm's debt ratio for 1993 determines the amount of capital expenditures on pollution control technology that will be debt financed. That portion not debt financed is assumed to be financed using internal equity. Thus, on the assets side of the balance sheet of affected firms, current assets decline by (1-d) times the total capital cost (EK) , while the value of property, plant, and equipment (fixed assets) increases by the total capital cost (i.e., the 5-15 ------- value of the pollution control equipment). Thus, the overall increase in a firm's total assets is equal to that fraction of the total capital cost that is not paid out of current assets (i.e. , d*EK) . The liabilities side of the balance sheet is affected because firms enter new legal obligations to repay that fraction of the total capital cost that is assumed to be debt financed (i.e., d*EK) . Long-term debt, and thus total liabilities, of the firm is increased by this dollar amount less the interest expense paid during the year. Owner's equity, or net worth at these firms, is increased by only the amount of interest expense paid during the year due to the offsetting increases in both total assets and total liabilities regarding the acquisition of the pollution control equipment. Moreover, working capital at each affected firm, defined as current assets minus current liabilities, unambiguously falls because of the decline in current assets and the increase in current liabilities. Comparison of the baseline and with-regulation financial statements of firms in the U.S. oil and natural gas production industry provides indicators of the potential disparity of economic impacts across small and large firms. These indicators include the key measures of profitability (return on sales, return on assets, and return on equity) and changes in the likelihood of financial failure or bankruptcy (as measured by Altman's Z-score). 5.2.3 Profitability Analysis Financial ratios may be categorized as one of five fundamental types: 5-16 ------- • liquidity or solvency • asset management • debt management • profitability • market value Profitability is the most comprehensive measure of the firm's performance because it measures the combined effects of liquidity, asset management, and debt management. Analyzing profitability is useful because it helps evaluate both the incentive and ability of firms in the oil and natural gas production industry to incur the capital and operating costs required for compliance. More profitable firms have more incentive than less profitable firms to comply because the annual returns to doing business are greater. In the extreme, a single-facility firm earning zero profit has no incentive to comply with a regulation imposing positive costs unless the entire burden of the regulation can be passed along to consumers. This same firm may also be less able to comply because its poor financial position makes it difficult to obtain funds through either debt or equity financing. As shown in Table 5-5, three ratios are commonly used to measure profitability: return on sales, return on assets, and return on equity. For all these measures, higher values are unambiguously preferred over lower values. Negative values result if the firm experiences a loss. TABLE 5-5. KEY MEASURES OF PROFITABILITY 5-17 ------- Measure of profitability Formula for calculation Return on sales Return on assets Return on equity Net income Sales Net income Total assets Net income Owner's equity Table 5-6 provides the summary statistics for each of the measures of profitability. The summary statistics include the mean, minimum, and maximum values for each measure in the baseline and with-regulation conditions across small, large, and all firms included in this analysis. A comparison of the values in baseline and after imposition of the regulation provides much detail on the distributional changes in these profitability measures across firms. TABLE 5-6. SUMMARY STATISTICS FOR KEY MEASURES OF PROFITABILITY IN BASELINE AND WITH-REGULATION BY FIRM SIZE CATEGORY Measure of prof itabili ty/ summary statistics Return on sales Mean Minimum Maximum Return on assets Mean Minimum Maximum Return on equity Mean Minimum Maximum Baseline Small firms 8.05 -43.99 70.15 5.83 -10.34 62.22 9.00 -91.37 90.35 Large All firms firms 3.71 5.82 -17.29 29.47 2.72 4.24 -7.16 16.59 6.16 7.54 -33.40 26.43 With Small firms 7.87 -44.30 69.82 5.76 -10.42 62.22 8.80 -91.78 89.85 regulation Large firms 3.66 -17.33 29.30 2.70 -7.18 16.49 6.10 -33.64 26.26 All firms 5.71 4.19 7.41 As Table 5-6 illustrates, the mean return on sales slightly declines for all firms after imposition of the regulation from 5.82 percent to 5.71 percent. This slight 5-18 ------- decline is shared across small and large firms. Further, the mean return on assets declines to some extent for all firms with regulation from 4.24 percent to 4.19 percent. This inconsiderable decline in the mean return on assets is found for small and large firms alike. As measured across all firms, the with-regulation mean return on equity declines slightly from 7.54 percent to 7.41 percent. As a group, the financial impacts associated with the regulation are negligible and show no overall disproportionate impact across small and large firms. The screening analysis of the transmission and storage firms in section 4.3.2.2 shows that the cost-to-revenues ratios of the selected firms is 0.09% on average, which indicates that impacts are typically well below I/10th of one percent for these firms. Therefore, this information presented in this section of the EIA along with the screening analysis of the transmission and storage firms in section 4.3.2.2 clearly indicates that there will not be a significant impact on a substantial number of small entities in the natural gas production, and transmission and storage industries. 5-19 ------- References: 1. Ref. 49. 2. Ref. 46. 3. Ref. 76. 4. Ref. 39. 5. Brigham, Eugene F., and Louis C. Gapenski. Financial Management: Theory and Practice. 6th Ed. Orlando, FL, The Dryden Press. 1991. 6. Ref. 82. 5-20 ------- APPENDIX A GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE Depth State/ range wellgroup (Mft) Alaska AKOIL 1 AKOIL 2 AKOIL 3 AKOIL 4 AKOIL 5 AKOIL 6 AKOIL 7 AKOIL 8 AKOIL 9 AKOIL 10 AKOIL 11 AKOIL 12 AKOIL 13 AKOIL 14 AKOIL 15 AKOIL 16 AKOIL 17 AKOIL 18 AKOIL 19 AKOIL 20 AKOIL 21 AKOIL 22 AKOIL 23 AKOIL 24 AKOIL 25 AKOIL 26 AKOIL 27 AKOIL 28 AKOIL 29 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 2-6 2-6 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 10 + 10 + 10 + 10 + 10 + 10 + 10+ 10 + BOE range (BOE/mo) 0- 60 61- 100 201- 300 401- 500 601-1,000 1, 0001-2,000 2,001-5,000 5, 001-over 1,001-2,000 5,001- Over 0- 60 61- 100 101- 200 201- 300 301- 400 401- 500 501- 600 601-1,000 1, 001-2, 000 2,001-5,000 5,001- Over 61- 100 101- 200 301- 400 501- 600 601-1,000 1,001-2,000 2,001-5,000 5,001- Over Number of wells 4 2 2 1 1 6 23 67 1 2 1 5 2 3 1 1 2 5 14 27 613 2 2 1 1 6 11 31 704 Number of fields 3 2 2 1 1 4 7 10 1 1 1 1 2 1 1 1 3 3 5 6 7 2 2 1 1 6 6 9 10 Gas rate per well (Mcfd) 12.43 31.33 91.17 42.80 54.17 610.07 2,233.33 176,855.57 100.50 32,719.13 2.20 1.93 3.33 16.30 14.10 34.97 60.73 160.77 546.37 2,778.30 1,732,915.13 26.10 50.03 22.93 2.03 161.20 472.47 5,214.00 2,990,463.67 Oil rate per well (Bd) 1.33 0.17 0.70 14.27 17.53 187.30 2,142.23 37,691.77 50.27 6,184.60 0.27 3.57 4.97 15.40 8.90 10.97 29.93 94.03 463.40 2,250.57 808,289.93 0.33 0.67 10.13 18.10 57.43 348.40 2,726.60 1,039,351.67 (continued) A-l ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) Alabama ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL ALOIL 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 C-2 0-2 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 6-10 6-10 6-10 6-10 6-10 6-10 6-10 10 + 10 + 10 + 10 + 10 + BOE range (BOE/mo) 0- 61- 101- 201- 301- 501- 601- 1, 001- 2,001- 5,001- 0- Gl- 101- 201- 301- 401- 501- 601- 1, 001- 2,001- 0- 201- 401- 601- 1,001- 2,001- 5,001- 0- 101- 201- 301- 401- 60 100 200 300 400 600 1, 000 2,000 5,000 Over 60 100 200 300 400 500 600 1, 000 2, 000 5, 000 60 300 500 1,000 2,000 5,000 Over 60 200 300 400 500 Number of wells 2 4 11 443 50 54 36 8 20 7 18 15 49 38 23 13 11 8 4 1 2 1 1 4 6 11 1 7 1 2 7 2 Number of fields 3 3 6 4 4 3 5 3 6 4 6 7 11 10 7 4 7 4 4 1 3 1 1 3 4 4 1 1 1 3 4 3 Gas rate per well (Mcfd) 0 5 6 324 0 188 138 107 2,093 1,808 3 61 148 103 124 4 214 19 156 162 0 0 0 1 5 37 13 0 0 0 31 6 .00 .13 .13 .13 .00 .63 .47 .40 .50 .80 .07 .97 .47 .07 .03 .90 .97 .50 .30 .50 .00 .00 .40 .07 .53 .53 .03 .10 .00 .17 .53 .30 Oil rate per well (Bd) 1. 7. 43. 3,587. 505. 762. 665. 362. 1,755. 2,062. 6. 22. 185. 254. 191. 148. 129. 138. 57. 57. 1. 9. 16. 49. 231. 680. 202. 2. 5. 10. 66. 30. 90 73 53 97 47 30 37 10 03 70 20 30 97 83 57 47 83 43 00 20 43 00 27 10 03 23 33 03 53 17 90 17 A-2 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) ALOIL 33 10 + BOE range (BOE/mo) 501- 600 Number of wells 2 Number of fields 3 Gas rate per well (Mcfd) 8 .33 Oil rate per well (Bd) 28 .90 (continued) ALOIL ALOIL ALOIL ALOIL Arkansas AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL 34 35 36 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 10+ 10 + 10 + 10 + 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 6-10 6-10 6-10 6-10 6-10 601- 1,001- 2,001- 5,001- 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 5, 001- 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 0- 61- 101- 201- 301- 1,000 2,000 5,000 Over 60 100 200 300 400 500 600 1,000 2,000 5,000 Over 60 100 200 300 400 500 600 1,000 2,000 5,000 60 100 200 300 400 7 12 25 33 1484 704 560 156 231 31 47 41 109 4 5 694 320 399 148 69 31 16 45 26 7 18 14 88 64 43 7 10 18 17 48 47 56 33 21 15 8 13 12 4 6 51 60 98 55 41 24 14 27 19 6 11 10 40 25 21 113 382 1,557 4,389 28 7 26 138 32 38 227 3,222 0 178 912 1 9 46 119 11 70 3 410 106 159 55 61 213 284 581 .43 .23 .57 .67 .77 .93 .17 .67 .70 .27 .73 .50 .00 .27 .30 .97 .87 .00 .83 .33 .40 .70 .07 .53 .07 .43 .17 .93 .63 .80 130 381 2,214 6,605 1,176 1,722 2,474 1,186 2,793 421 790 871 4,341 339 1,529 672 798 1,883 1,150 782 435 272 1,049 1,022 577 16 17 295 460 403 .43 .27 .33 .90 .03 .60 .17 .97 .13 .93 .53 .00 .50 .43 .90 .57 .87 .33 .90 .20 .47 .23 .20 .90 .90 .10 .60 .27 .67 .17 A-3 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) AROIL AROIL AROIL 27 28 29 6-10 6-10 6-10 BOE range (BOE/mo) 401- 501- 601-1 500 600 ,000 Number of wells 20 12 50 Number of fields 12 7 20 Gas rate per well (Mcfd) 179 343 1,652 .23 .30 .83 Oil rate per well (Bd) 264 167 1,033 .17 .93 .10 (continued) AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL AROIL Arizona AZOIL AZOIL AZOIL AZOIL AZOIL AZOIL AZOIL AZOIL AZOIL AZOIL AZOIL AZOIL AZOIL 30 31 32 33 34 35 36 37 38 39 40 41 1 2 3 4 5 6 7 8 9 10 11 12 13 California -Coastal CACNOIL 1 CACNOIL 2 6-10 6-10 6-10 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10+ 10 + 0-2 0-2 0-2 0-2 0-2 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 and 0-2 0-2 1,001-2 2,001-5 5,001- 0- 61- 201- 401- 501- 601-1 1,001-2 2,001-5 5,001- 101- 301- 401- 601-1 2,001-5 0- 101- 201- 301- 401- 501- 601-1 2,001-5 Northern 0- 61- , 000 ,000 Over 60 100 300 500 600 ,000 ,000 ,000 Over 200 400 500 ,000 , 000 60 200 300 400 500 600 ,000 ,000 60 100 26 10 1 1 1 2 1 1 4 7 2 2 1 1 1 3 4 1 1 5 2 1 1 2 2 322 169 10 8 1 1 1 3 1 1 5 6 3 2 1 1 1 1 1 1 1 1 1 1 1 1 1 59 44 2,247 3,947 1,600 3 8 7 94 5 245 1,394 1,465 2,320 4 7 44 56 4 0 5 94 34 0 69 55 0 131 395 .10 .77 .67 .37 .30 .50 .53 .63 .33 .40 .73 .40 .17 .83 .47 .30 .40 .00 .77 .73 .83 .00 .10 .03 .00 .83 .40 904 561 70 i, 0 1 12 7 16 85 178 54 135 4 9 9 42 121 0 4 31 18 16 12 40 71 229 324 .40 .43 .67 .33 .57 .27 .17 .57 .77 .70 .17 .63 .20 .47 .97 .47 .90 .83 .27 .37 .50 .20 .60 .63 .33 .57 .37 A-4 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) State/ we 11 group CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL Depth range (Mft) 3 4 5 6 7 0-2 0-2 0-2 0-2 0-2 BOE range (BOE/mo) 101- 201- 301- 401- 501- 200 300 400 500 600 Number of wells 292 160 119 68 47 Number of fields 58 36 39 29 23 Gas rate per well (Mcfd) 1,228 1,031 1,348 567 522 Oil rate per well (Bd) .53 .03 .27 .50 .53 1, 1, 1, 066 022 085 836 744 .93 .10 .70 .27 .30 (continued) CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL 8 9 10 11 12 13 -v a 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 0-2 0-2 0-2 0-2 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 10+ 601- 1,001- 2,001- 5,001- 0- 61- 1C1- 201- 301- 401- 501- 601- 1, 001- 2,001- 5,001- 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 5,001- 0- 1, 000 2, 000 5,000 Over 60 100 200 300 400 500 600 1,000 2, 000 5,000 Over 60 100 200 300 400 500 600 1,000 2,000 5,000 Over 60 113 94 31 8 279 221 569 357 234 204 115 301 141 59 3 49 33 118 86 71 61 51 106 117 67 13 6 27 19 6 5 50 38 52 47 36 36 34 41 33 16 4 21 15 24 29 21 21 21 24 23 17 7 5 2,038 3,100 1,615 2,942 443 900 4,091 3,096 3,086 2,938 2,217 5,214 3,367 2,295 280 36 124 814 880 874 883 961 3,073 4,871 7,494 2,657 2 .60 .00 .53 .90 .53 .30 .27 .80 .40 .60 .93 .47 .53 .00 .53 .93 .63 .27 .03 .43 .33 .67 .13 .77 .27 .97 .50 2, 3, 2, 2, 2, 2, 2, 1, 6, 5, 5, 2, 4, 5, 1, 436 650 699 792 156 418 135 382 245 612 808 883 908 474 594 29 44 406 509 624 718 699 277 637 325 990 2 .70 .87 .20 .70 .53 .27 .80 .10 .27 .60 .53 .57 .23 .37 .67 .83 .20 .80 .93 .00 .00 .07 .73 .63 .87 .10 .50 A-5 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) State/ wellgroup CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL CACNOIL Depth range (Mft) 35 36 37 38 39 40 41 10 + 10 + 10 + 10+ 10 + 10 + 10 + BOE range (BOE/mo) 61- 101- 201- 301- 401- 501- 601- 100 200 300 400 500 600 1,000 Number of wells 8 17 23 38 31 24 60 Number of fields 4 5 8 7 8 8 11 Gas rate per well (Mcfd) 16 64 111 373 643 574 1,507 Oil rate per well (Bd) .20 .67 .93 .03 .10 .00 .80 1, 13 71 156 363 357 310 263 .77 .73 .40 .70 .33 .73 .60 (continued) CACNOIL CACNOIL CACNOIL 42 43 44 California- Los CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 10 + 10 + 10 + Angeles 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 1,001- 2,001- 5,001- Basin 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 5,001- 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 2, 000 5,000 Over 60 100 200 300 400 500 600 1,000 2,000 5,000 Over 60 100 200 300 400 500 600 1,000 2,000 5,000 63 36 3 382 291 591 396 232 177 111 273 174 48 1 189 176 493 415 282 230 176 396 239 59 10 7 1 29 24 37 40 32 30 24 37 30 20 1 30 30 39 38 37 34 29 44 32 19 1,683 3,053 350 191 505 1,261 1,408 1, 037 1,001 673 2,385 2,376 1,258 15 124 195 1,136 1,342 1,398 1,290 954 3,133 3,014 2,009 .30 .70 .20 .60 .17 .77 .10 .03 .27 .20 .63 .10 .47 .00 .23 .30 .43 .37 .13 .00 .37 .57 .03 .57 2, 3, 2, 2, 2, 2, 1, 6, 7, 4, 2, 3, 2, 3, 3, 9, 9, 4, 602 251 565 319 631 516 896 493 395 881 438 559 424 192 128 377 154 Oil 921 135 027. 435 753. 674, .90 .53 .37 .37 .47 .60 .70 .33 .53 .97 .13 .20 .30 .43 .73 .67 .20 .63 .70 .20 .90 .87 .57 .80 A-6 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) State/ wellgroup CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL Depth range (Mft) 22 23 24 25 26 27 28 29 30 2-6 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 BOB range (BOE/mo) 5,001- 0- 61- 101- 201- 301- 401- 501- 601- Over 60 100 200 300 400 500 600 1,000 Number of wells 1 60 35 112 83 75 67 32 86 Number of fields 1 19 21 22 29 28 24 24 29 Gas rate per well (Mcfd) 40 19 102 470 754 1,036 1,073 564 1,894 .20 .93 .77 .30 .53 .40 .30 .90 .23 Oil rate per well (Bd) 168 36 67 451 540 706 812 490 1,951 .53 .80 .87 .67 .47 .13 .03 .37 .50 (continued) CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL CALAOIL 31 32 33 34 35 36 37 38 39 40 41 42 43 44 California -San CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL 1 2 3 4 5 6 7 8 6-10 6-10 6-ir 10+ 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10+ 10 + Jose Basin 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 1,001- 2,001- 5,001- 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 5, C01- 0- 61- 101- 201- 301- 401- 501- 601- 2, 000 5,000 Over 60 100 200 300 400 500 600 1,000 2, 000 5,000 Over 60 100 200 300 400 500 600 1,000 75 46 10 3 1 6 4 9 5 5 7 7 8 1 3812 2369 4493 3091 2474 2050 1541 3920 21 11 5 1 1 6 4 6 5 4 5 6 4 1 77 56 54 45 32 34 24 31 2,006 2,038 449 11 2 4 9 138 111 59 202 226 417 255 S20 743 1,963 1,703 1,770 1,639 1,715 4,760 .37 .97 .97 .50 .40 .67 .43 .80 .77 .23 .73 .40 .00 .63 .23 .10 .40 .93 .13 .00 .33 .87 3,183 4,551 1,982 1 2 30 22 74 62 67 138 339 749 225 2,968 5,237 19,634 23,541 26,934 28,980 26,846 96,300 .70 .50 .90 .00 .40 .67 .40 .40 .10 .57 .60 .47 .67 .73 .03 .23 .90 .70 .10 .40 .50 .23 A-7 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) State/ wellgroup CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL Depth range (Mft) 9 10 11 12 13 14 15 16 17 18 19 0-2 0-2 0-2 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 BOE range (BOE/mo) 1,001-2,000 2,001- 5,001- 0- 61- 101- 201- 301- 401- 501- 601- 5,000 Over 60 100 200 300 400 500 600 1,000 Number of wells 2971 1137 266 1280 865 1400 830 447 303 254 660 Number of fields 24 20 9 57 52 55 53 40 31 26 27 Gas rate per well (Mcfd) 9,799 21,738 110,704 985 1,736 7,310 8,410 6,593 6,641 6,752 29,171 .00 .57 .47 .90 .33 .10 .87 .17 .60 .80 .67 Oil rate per well (Bd) 127,933 102,768 61,404 999 1,862 5,482 5,453 4,038 3,468 3,595 12,579 .63 .57 .97 .33 .63 .23 .63 .97 .57 .77 .37 (continued) CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL CASJOIL :: 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 2-6 2-6 2-6 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 10 + 10 + 10+ 10+ 10 + 10+ 10 + 1, C01- 2,001- 5,001- 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 5,001- 0- 61- 101- 201- 301- 401- 501- 2,000 5,000 Over 60 100 200 300 400 500 600 1, 000 2,000 5,000 Over 60 100 200 300 400 500 600 520 295 38 74 49 144 97 69 53 40 112 132 143 147 21 10 16 29 16 10 17 24 14 7 37 20 39 39 27 26 21 18 20 17 6 15 10 9 15 11 9 11 35,959 28,730 18,777 29 183 796 1,487 1,363 1,669 1,499 9,722 24,153 71,093 195,646 8 21 88 317 111 367 398 .97 .93 .40 .10 .33 .57 .23 .60 .13 .47 .03 .97 .53 .73 .97 .43 .87 .80 .03 .57 .53 16,932 18,800 6,337 47 82 476 529 548 557 469 1,802 3,472 8,207 46,313 5 16 58 160 124 84 261 .00 .80 .57 .93 .57 .60 .43 .13 .60 .27 .73 .83 .40 .93 .90 .10 .83 .43 .33 .97 .17 A-8 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) CASJOIL 41 CASJOIL 42 CASJOIL 43 CASJOIL 44 Colorado COOIL 1 COOIL 2 COOIL 3 COOIL 4 COOIL 5 COOIL 6 COOIL 7 COOIL 8 COOIL 9 COOIL 10 COOIL 11 COOIL 12 COOIL 13 COOIL 14 COOIL 15 COOIL 16 COOIL 17 COOIL 18 COOIL 19 COOIL 20 COOIL 21 COOIL 22 COOIL 23 COOIL 24 COOIL 25 COOIL 26 COOIL 27 10 + 10 + 10 + 10 + 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 6-10 6-10 6-10 6-10 6-10 6-10 BOB range (BOE/mo) 601-1,000 1,001-2,000 2,001-5,000 5,001- Over 0- 60 61- 100 101- 200 201- 300 301- 400 401- 500 501- 600 601-1,000 1,001-2,000 2,001-5,000 0- 60 61- 100 101- 200 201- 300 301- 400 401- 500 501- 600 601-1,000 1,001-2,000 2,001-5,000 5,001- Over 0- 60 61- 100 101- 200 201- 300 301- 400 401- 500 Number of wells 38 34 44 36 129 22 81 27 28 16 7 7 4 3 429 840 857 230 148 88 56 121 129 127 39 270 407 975 418 146 101 Number of fields 18 15 12 5 16 13 23 14 4 7 1 4 3 3 73 88 162 92 67 47 35 52 30 17 6 93 89 129 85 51 39 Gas rate per well (Mcfd) 968.70 2,484.67 3,552.93 7,009.67 27.93 42.17 53.87 68.73 17.73 103.70 0.07 22.87 36.73 262.47 1,499.50 6,572.43 9,468.53 2,074.53 2,344.77 391.80 756.70 3,415.87 1,656.30 5,416.67 8,031.40 919.70 3,349.77 18,818.13 14,182.10 6,468.87 5,963.23 Oil rate per well (Bd) 786.50 1,253.27 4,144.37 17,150.97 84.53 49.13 356.40 190.63 333.57 206.53 114.30 148.73 (continued) 184.17 203.23 371.27 1,406.80 2,660.30 1,502.47 1,347.50 1, 141.10 831.57 2,443.47 2,591.00 10,206.50 6,169.97 170.40 649.10 2,432.77 1,634.30 852.53 761.77 A-9 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) COOIL COOIL COOIL COOIL COOIL Florida FLOIL FLOIL FLOIL FLOIL FLOIL FLOIL FLOIL FLOIL FLOIL 28 29 30 31 32 1 2 3 4 5 6 7 8 9 6-10 6-10 6-10 6-10 6-10 0-2 0-2 0-2 0-2 10 + 10 + 10 + 10 + 10 + BOE range (BOE/mo) 501- 601-1 1,001-2 2,001-5 5,001- 601-1 1,001-2 2,001-5 5,001- 61- 101- 201- 301- 501- 600 ,000 ,000 ,000 Over ,000 ,000 ,000 Over 100 200 300 400 600 Number of wells 44 98 76 430 10 1 1 1 1 1 1 3 4 2 Number of fields 25 45 23 13 5 1 2 1 1 1 1 1 4 3 Gas rate per well (Mcfd) 2,357 6,765 7,984 16,352 1,247 3 65 9 834 32 42 22 65 34 .63 .77 .73 .83 .17 .07 .40 .80 .57 .17 .17 .20 .47 .43 Oil rate per well (Bd) 388 1,559 2,289 33,830 2,107 25 58 103 704 3 6 22 16 32 .53 .50 .20 .30 .37 .43 .17 .03 .90 .33 .67 .20 .67 .80 (continued) FLOIL FLOIL FLOIL FLOIL Illinois ILOIL ILOIL ILOIL ILOIL ILOIL ILOIL ILOIL ILOIL ILOIL ILOIL ILOIL Indiana 10 11 12 13 1 2 3 4 5 6 1 8 9 10 11 10 + 10 + 10 + 10 + 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 601-1 1,001-2 2, 001-5 5,001- 0- 61- 101- 201- 301- 401- 501- 601-1 1,001-2 2,001-5 5,001- ,000 ,000 ,000 Over 60 100 200 300 400 500 600 ,000 ,000 ,000 Over 7 19 39 44 5424 5421 14865 3006 1146 630 426 708 462 210 51 4 10 13 8 132 250 433 217 127 88 59 91 57 25 12 107 550 1,984 20,896 0 0 0 0 0 0 0 0 0 0 0 .20 .03 .73 .33 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 89 693 3,422 15,087 937 2,275 12,122 6,760 3,960 2,966 2,504 5,807 6,916 6,499 5,835 .23 .73 .67 .57 .07 .20 .03 .17 .70 .17 .30 .33 .80 .63 .70 A-10 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) INOIL INOIL INOIL INOIL INOIL INOIL INOIL INOIL INOIL INOIL INOIL Kansas KSOIL KSOIL KSOIL KSOIL KSOIL 1 2 3 4 5 6 7 8 9 10 11 1 2 3 4 5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 BOE range (BOE/mo) 0- 61- 101- 201- 301- 401- 501- 601- 1, 001- 2,001- 5,001- 0- 61- 101- 201- 301- 60 100 200 300 400 500 600 1, 000 2,000 5,000 Over 60 100 200 300 400 Number of wells 1205 1894 3062 677 274 155 73 119 66 17 7 11041 2824 2204 833 219 Number Gas rate of per well fields (Mcfd) 70 135 188 88 45 31 16 26 14 6 3 385 385 691 249 103 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 Oil rate per well (Bd) 2 1 6 5 8 5 1 202.17 683.73 ,394.47 ,402.87 851.43 658.17 387.33 901.87 874.80 486.60 350.93 ,667.47 ,559.90 ,269.37 ,269.77 ,873.87 (continued) KSOIL KSOIL KSOIL KSOIL KSOIL KSOIL KSOIL KSOIL KSOIL KSOIL KSOIL KSOIL KSOIL KSOIL KSOIL 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 -2 -2 -2 -2 -2 -2 -6 -6 -6 -6 -6 -6 -6 -6 -6 401- 501- 601- 1, 001- 2,001- 5, 001- 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 500 600 1,000 2, 000 5,000 Over 60 100 200 300 400 500 600 1,000 2,000 125 74 93 69 11 4 7001 6754 8015 2524 955 508 292 556 320 67 40 56 44 10 3 565 989 B93 373 206 147 234 153 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 1 1 1 2 1 7 13 29 15 8 5 4 10 10 ,430.70 ,025.37 ,761.77 ,517.87 637.70 ,053.67 ,051.93 ,896.93 ,623.00 ,720.63 ,413.90 ,930.70 ,034.57 ,691.93 ,400.10 A-ll ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) KSOIL KSOIL KSOIL KSOIL KSOIL KSOIL KSOIL KSOIL KSOIL KSOIL KSOIL KSOIL KSOIL Kentucky KYOIL KYOIL KYOIL KYOIL KYOIL 21 22 23 24 25 26 27 28 29 30 31 32 33 1 2 3 4 5 2-6 2-6 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 10 + 0-2 0-2 0-2 0-2 0-2 BOE range (BOE/mo) 2,001- 5,001- 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 61- 0- 61- 101- 201- 301- 5,000 Over 60 100 200 300 400 500 600 1, 000 2,000 5,000 100 60 100 200 300 400 Number of wells 107 21 15 10 137 66 25 15 6 21 16 10 5 4495 8494 5828 1181 502 Number of fields 69 12 10 8 45 30 18 11 5 10 7 6 1 95 243 227 83 38 Gas rate per well (Mcfd) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 Oil rate per well (Bd) 7,183.67 4,623.77 2.43 4 . 97 285.50 327. 197. 175. 74. 397. 545. 704. 10. 328. 1,605. 3,071. 1,592. 1,047. 23 07 30 93 93 40 97 87 67 87 80 67 70 (continued) KYOIL KYOIL KYOIL KYOIL KYOIL KYOIL 6 7 8 9 10 11 0-2 0-2 0-2 0-2 0-2 0-2 401- 501- 601- 1,001- 2,001- 5,001- 500 600 1, 000 2,000 5,000 Over 185 119 264 231 86 33 20 17 26 23 7 3 0 0 0 0 0 0 .00 .00 .00 .00 .00 .00 512. 402. 1,183. 1,876. 1,772. 1,646. 77 67 43 80 30 60 Louisiana -North LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL 1 2 3 4 5 6 0-2 0-2 0-2 0-2 0-2 0-2 0- 61- 101- 201- 301- 401- 60 100 200 300 400 f 500 9725 531 455 101 40 14 37 23 32 15 14 8 516 115 118 13 31 0 .63 .93 .50 .77 .33 .87 5,964. 1,310. 1,838. 646. 396. 159. 77 47 93 73 87 30 A-12 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) State/ wellgroup LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL LANOIL Depth range (Mft) 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 0-2 0-2 0-2 0-2 0-2 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 10 + 10 + 10 + 10 + 10 + BOE range (BOE/mo) 501- 601-1 1,001-2 2,001-5 600 ,000 ,000 ,000 5,001- Over 0- 61- 101- 201- 301- 401- 501- 601-1 1,001-2 2,001-5 5,001- 0- 61- 101- 201- 301- 401- 501- 601-1 1,001-2 2,001-5 5,001- 0- 61- 101- 201- 301- 60 100 200 300 400 500 600 , 000 ,000 , 000 Over 60 100 200 300 400 500 600 ,000 ,000 ,000 Over 60 100 200 300 400 Number of wells 16 27 17 6 3 2117 452 588 341 231 153 116 267 234 81 2 66 41 117 76 60 57 30 55 69 31 19 8 4 15 11 17 Number of fields 8 12 15 6 4 90 74 111 86 66 60 41 59 54 25 1 40 26 50 44 43 37 21 33 40 14 1 7 5 12 6 11 Gas rate per well (Mcfd) 23. 30. 70. 64. 888. 537. '656. 2,103. 1,784. 1,837. 2,503. 1,327 4,715 5,698 4,699 88 45 87 634 772 580 1,113 1,476 1,860 4,107 7,121 55,878 15 24 57 341 230 33 10 90 30 80 87 .03 .80 .33 .90 .53 .70 .50 .23 .90 .30 .07 .20 .50 .63 .60 .20 .00 .83 .27 .90 .43 .20 .37 .97 .80 .17 Oil rate per well (Bd) 215.53 481.80 442.43 265.43 699.23 1,542.00 1,121.57 2,486.03 2,321.10 2,469.70 1,954.60 1,885.20 5,932.00 9,625.67 6,000.83 346.13 38.07 85.70 446.53 521.50 584.83 (continued) 656.93 376.60 1,192.63 2,346.67 2,093.67 514.30 3.*7 7.33 51.20 58.20 143.23 A-13 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) State/ wellgroup LANOIL Depth range (Mft) 39 10-f BOE range (BOE/mo) 401- 500 Number of wells 13 Number of fields 9 Gas rate per well (Mcfd) 505 .57 Oil rate per well (Bd) 132 .07 Louisiana -South LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL 1 2 3 4 5 6 7 8 9 10 - 12 13 14 15 16 17 18 19 20 21 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 -2 -2 -2 -2 -2 -2 •2 -2 -2 -2 -2 -6 -6 -6 -6 -6 -6 -6 -6 -6 -6 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 5, C01- 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2, 001- 60 100 200 300 400 500 600 1,000 2,000 5,000 Over 60 100 200 300 400 500 600 1,000 2,000 5,000 169 90 110 44 36 37 25 42 68 21 12 187 121 223 164 149 107 94 220 191 115 20 20 27 18 14 14 11 17 23 13 11 36 35 50 47 50 42 38 67 60 41 23 1 61 100 129 114 130 433 1,268 970 1,562 10 74 206 412 750 714 715 2,529 3,652 3,577 .47 .47 .70 .60 .80 .00 .93 .73 .17 .87 .90 .47 .13 .97 .33 .87 .43 .17 .87 .63 .70 223 197 416 270 303 393 322 729 2,184 1,504 1,753 147 240 850 1,029 1,294 1,339 1,466 4,642 7, 010 8,723 .20 .10 .33 .30 .57 .67 .70 .10 .70 .47 .50 .77 .20 .83 .73 .03 .40 .40 .33 .57 .50 (continued) LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL 22 23 24 25 26 27 28 29 30 2 -6 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 5,001- 0- 61- 101- 201- 301- 401- 501- 601- Over 60 100 200 300 400 500 600 1,000 26 100 60 158 186 179 176 177 526 16 57 42 96 106 93 92 96 157 1,775 49 76 562 1,023 1,738 2,176 2,670 12,262 .90 .03 .13 .07 .73 .53 .73 .77 .53 3,741 69 96 546 1,140 1,585 2,056 2,628 10,709 .90 .30 .33 .40 .93 .57 .20 .87 .57 A-14 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) State/ wellgroup LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL LASOIL Michigan MIOIL MIOIL MIOIL MIOIL MIOIL MIOIL MIOIL MIOIL MIOIL MIOIL Depth range (Mft) 31 32 33 34 35 36 37 38 39 40 41 42 43 44 1 2 3 4 5 6 7 8 9 10 6-10 6-10 6-10 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 2-6 2-6 BOE range (BOE/mo) 1,001- 2,001- 5,001- 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 5,001- 0- 101- 301- 401- 501- 601- 1,001- 2,001- 0- 61- 2,000 5,000 Over 60 100 200 300 400 500 600 1,000 2,000 5, 000 Over 60 200 400 500 600 1,000 2,000 5,000 60 100 Number of wells 574 376 122 52 21 98 84 85 66 72 198 294 284 137 5 5 6 3 3 17 6 3 1763 302 Number of fields 154 123 55 37 18 60 51 57 47 48 94 121 132 58 1 1 2 1 1 7 3 2 21 22 Gas rate per well (Mcfd) 25,215 35/752 26,934 22 65 503 892 1,173 1,135 1,707 5,890 18,507 44,269 63,689 33 51 50 51 129 462 603 200 9,849 4,107 .57 .47 .57 .57 .30 .93 .90 .73 .70 .90 .77 .50 .97 .80 .33 .30 .00 .20 .37 .50 .33 .00 .33 .30 Oil rate per well (Bd) 22,136 29,837 23,851 21 32 335 546 711 673 1,101 4,294 11,376 22,691 39,835 22 52 28 13 8 106 30 123 337 520 .90 .23 .47' .20 .27 .57 .63 .20 .80 .23 .00 .27 .10 .23 .77 .07 .93 .13 .70 .93 .63 .43 .93 .93 (continued) MIOIL MIOIL MIOIL MIOIL MIOIL MIOIL MIOIL 11 12 13 14 15 16 17 2-6 2-6 2-6 2-6 2-6 2-6 2-6 101- 201- 301- 401- 501- 601- 1,001- 200 300 400 500 600 1,000 2,000 411 400 203 84 122 238 377 35 33 32 20 19 38 38 8,838 8,329 2,121 1,004 2,047 7,649 26,107 .43 .53 .93 .13 .67 .03 .70 2,433 5,354 747 385 632 1.712 4.454 .10 .17 .43 .77 .13 .43 .93 A-15 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) MIOIL MIOIL MIOIL MIOIL MIOIL MIOIL MIOIL MIOIL MIOIL MIOIL MIOIL MIOIL MIOIL MIOIL MIOIL Missouri MOOIL 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 1 2 2 6- 6- 6- 6- 6- 6- 6- 6- 6- 6- 6- -6 -6 •10 •10 •10 •10 •10 •10 •10 •10 •10 •10 •10 10 + 10 + 0 -2 BOE range (BOE/mo) 2,001- 5,001- 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 5,001- 2,001- 5, 001- 0- 5,000 Over 60 100 200 300 400 500 600 1,000 2,000 5,000 Over 5,000 Over 60 Number of wells 418 99 31 31 99 99 81 41 26 128 305 229 41 3 6 807 Number of fields 34 19 4 e 15 12 18 12 10 24 24 21 13 2 2 0 Gas rate per well (Mcfd) 47,635 8,042 115 217 1,838 2,286 1,229 953 524 5,591 23,546 34,071 8,594 666 871 11 .77 .33 .80 .70 .03 .97 .37 .27 .90 .67 .63 .67 .57 .67 .00 .10 Oil rate per well (Bd) 13,091 8,148 13 83 563 1,339 235 141 138 745 3,598 6,265 2,886 173 356 377 .47 .80 .83 .37 .63 .97 .00 .57 .07 .27 .10 .53 .23 .77 .00 .77 Mississippi MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL 1 2 3 4 5 6 1 8 9 0 0 0 0 0 0 0 0 0 -2 -2 -2 -2 -2 -2 -2 -2 -2 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 60 100 200 300 400 500 600 1,000 2,000 18 14 18 46 18 37 27 50 73 8 9 10 18 11 13 12 18 22 0 24 2 18 4 145 57 505 1,933 .67 .80 .47 .30 .73 .27 .40 .67 .57 2 8 47 217 121 279 237 705 1,847 .37 .87 .00 .37 .07 .60 .07 .60 .80 (continued) MSOIL MSOIL MSOIL MSOIL MSOIL 10 11 12 13 14 0 0 2 2 2 -2 -2 -6 -6 -6 2,001- 5,001- 0- 61- 101- 5,000 Over 60 100 200 38 5 66 55 146 12 3 19 22 47 1,888 0 9 32 77 .70 .00 .67 .37 .83 2,209 549 19 57 359 .67 .00 .13 .27 .63 A-16 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL MSOIL 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 2-6 2-6 2-6 2-6 2-6 2-6 2-6 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 10 + 10+ 10 + 10 + 10 + 10+ 10 + 10+ 10 + 10 + 10 + BOE range (BOE/mo) 201- 301- 401- 501- 601- 1,001- 2,001- 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 5,001- 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 5,001- 300 400 500 600 1,000 2,000 5,000 60 100 200 300 400 500 600 1,000 2,000 5,000 Over 60 100 200 300 400 500 600 1,000 2, 000 5,000 Over Number of wells 142 111 98 62 157 131 50 47 35 128 117 120 93 72 250 181 133 6 58 18 43 49 67 76 61 175 198 194 105 Number of fields 40 32 24 22 44 34 9 30 18 58 53 46 31 28 53 42 25 3 27 13 24 26 34 42 33 65 60 56 34 Gas rate per well (Mcfd) 118 185 333 36 947 873 731 1 18 40 107 222 323 306 1,555 1,844 3,086 232 5 12 46 73 146 377 139 1,139 2,805 11,177 12,424 .77 .40 .20 .03 .90 .07 .87 .70 .80 .33 .23 .80 .60 .10 .03 .03 .10 .97 .87 .13 .93 .70 .30 .77 .87 .97 .10 .97 .30 Oil rate per well (Bd) 663. 792. 845. 701. 2,389. 3,681. 3,069. 11. 32. 308. 531. 780. 811. 780. 3,823. 4,905. 7,858. 523. 15. 16. 100. 187. 373. 608. 651. 2,591. 5,534. 11,524. 14,861. 40 13 27 63 70 27 73 60 17 53 87 57 40 20 10 97 73 00 23 53 63 67 13 43 90 03 23 77 27 (continued) Montana MTOIL MTOIL 1 2 0-2 0-2 0- 61- 60 100 1070 227 17 14 89 72 .67 .40 740. 462. 17 83 A-17 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 0-2 0-2 0-2 0-2 0-2 0-2 0-2 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 10+ 10 + BOE range (BOE/mo) 101- 201- 301- 501- 601-1 1,001-2 2,001-5 0- 61- 101- 201- 301- 401- 501- 601-1 1,001-2 2,001-5 5,001- 0- 61- 101- 201- 301- 401- 501- 601-1 1,001-2 2,001-5 5,001- 0- 61- 200 300 400 600 ,000 ,000 , 000 60 100 200 300 400 500 600 ,000 ,000 ,000 Over 60 100 200 300 400 500 600 ,000 ,000 ,000 Over 60 100 Number of wells 142 28 8 1 5 2 1 550 281 364 174 87 72 39 89 58 25 1 19 19 70 85 104 71 70 209 222 88 7 9 3 Number of fields 16 9 5 1 4 3 1 53 36 61 46 28 26 20 29 21 12 1 15 16 35 44 41 39 40 54 38 23 6 10 3 Gas rate per well (Mcfd) 235 87 116 0 82 207 76 41 34 355 404 155 292 74 531 395 616 68 1 11 86 212 534 294 426 2,031 3,230 2,631 293 1 6 .43 .10 .83 .00 .73 .57 .73 .13 .93 .47 .77 .80 .87 .37 .53 .07 .93 .77 .60 .27 .47 .27 .00 .97 .33 .60 .10 .17 .17 .13 .87 Oil rate per well (Bd) 496 131 78 17 105 56 108 488 639 1,496 1,262 922 1,015 686 2,236 2,538 2,341 164 6 32 260 609 1,106 1,003 1,203 5,159 9,870 7,623 1,284 4 4 .00 .97 .70 .93 .17 .33 .00 .37 .40 .57 .20 .97 .67 .73 .70 .87 .37 .90 .23 .67 .13 .87 .80 .30 .27 .87 .70 .70 .30 .63 .37 (continued) MTOIL 34 10+ 101- 200 12 12 21 .73 46 .00 A-18 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL MTOIL 35 36 37 38 39 40 41 42 10 + 10 + 10 + 10 + 10+ 10 + 10 + 10 + BOE range (BOE/mo) 201- 301- 401- 501- 601-1 1,001-2 2,001-5 5,001- 300 400 500 600 ,000 ,000 , 000 Over Number of wells 14 18 30 24 76 106 50 14 Number of fields 15 18 27 22 46 66 32 10 Gas rate per well (Mcfd) 40 98 293 331 1,745 3,837 3,428 3,231 .23 .13 .27 .50 .60 .77 .10 .80 Oil rate per well (Bd) 95 173 376 399 1,815 4,466 4,451 2,217 .47 .70 .60 .70 .37 .73 .70 .27 North Dakota NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL NDOIL 1 2 3 4 5 6 7 B 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 6-10 6-10 6-10 0- 101- 201- 301- 401- 501- 601-1 1,001-2 2,001-5 5,001- 0- 61- 101- 201- 301- 401- 501- 601-1 1,001-2 2,001-5 5,001- 0- 61- 101- 60 200 300 400 500 600 ,000 ,000 ,000 Over 60 100 200 300 400 500 600 ,000 ,000 ,000 Over 60 100 200 2 4 9 2 2 2 3 5 6 6 84 103 289 207 95 54 53 72 46 19 6 73 51 133 2 4 5 1 2 2 2 6 6 6 46 43 65 55 32 24 23 24 15 9 5 37 25 51 0 2 117 3 38 22 11 20 196 640 44 74 436 705 354 113 310 255 109 314 184 39 202 1,221 .00 .10 .07 .60 .57 .97 .43 .30 .10 .97 .27 .23 .33 .17 .37 .10 .57 .67 .10 .10 .33 .97 .33 .03 0 10 62 22 18 16 60 66 520 995 78 241 1,299 1,566 1,056 759 916 1,692 1,992 1,657 1,108 23 59 409 .37 .93 .27 .93 .83 .60 .67 .33 .43 .60 .13 .23 .13 .60 .33 .73 .17 .87 .97 .00 .50 .00 .63 .23 A-19 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) NDOIL 25 NDOIL 26 NDOIL 27 NDOIL 28 NDOIL 29 NDOIL 30 NDOIL 31 NDOIL 32 NDOIL 33 NDOIL 34 NDOIL 35 NDOIL 3: NDOIL 37 NDOIL 38 NDOIL 39 NDOIL 40 NDOIL 41 NDOIL 42 NDOIL 43 Nebraska NEOIL 1 NEOIL 2 NEOIL 3 NEOIL 4 NEOIL 5 NEOIL 6 NEOIL 7 NEOIL 8 NEOIL 9 NEOIL 10 NEOIL 11 NEOIL 12 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 2-6 2-6 2-6 2-6 BOE range (BOE/mo) 201- 300 301- 400 401- 500 501- 600 601-1,000 1,001-2,000 2,001-5,000 5,001- Over 0- 60 61- 100 101- 200 ?01- 300 301- 400 401- 500 501- 600 601-1, 000 1,001-2,000 2,001-5,000 5,001- Over 0- 60 61- 100 101- 200 201- 300 301- 400 501- 600 601-1,000 2,001-5,000 0- 60 61- 100 101- 200 201- 300 Number of wells 194 177 136 115 322 321 163 46 30 12 34 33 38 42 36 115 193 156 69 25 49 84 13 10 3 57 1 104 180 380 286 Number of fields 73 75 70 65 98 81 50 18 24 13 28 26 32 36 32 67 83 58 29 12 14 28 7 4 4 1 2 67 77 135 74 Gas rate per well (Mcfd) 2,323.43 2,444.53 2,133.83 2,069.53 8,519.37 14,738.37 15,897.07 20,293.10 30.53 27.70 163.93 234.57 518.90 695.93 923.30 4,398.97 13,360.37 21,523.03 46,475.90 0.50 6.30 165.90 13.93 0.00 0.00 0.00 39.67 24.77 76.43 381.53 193.17 Oil rate per well (Bd) (continued) 1,253.23 1,643.23 1,743.80 1,839.37 7,351.93 13,123.53 14,098.87 9,926.43 7.00 17.20 113.83 193.37 349.50 500.90 499.33 2,523.60 7,596.97 12,330.33 11, 876.00 32.13 134.93 364.97 104.47 116.57 39.63 1,843.13 145.13 131.30 486.47 1,903.60 2,310.43 A-20 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) NEOIL NEOIL 13 14 2 2 -6 -6 BOE range (BOE/mo) 301- 401- 400 500 Number of wells 121 25 Number of fields 36 16 Gas rate per well (Mcfd) 361 84 .10 .60 Oil rate per well (Bd) 1,281 357 .07 .93 (continued) NEOIL NEOIL NEOIL NEOIL NEOIL NEOIL NEOIL NEOIL NEOIL NEOIL NEOIL NEOIL NEOIL NEOIL NEOIL 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 2 2 2 2 6- 6- 6- 6- 6- 6- 6- 6- 6- 6- 6- -6 -6 -6 -6 •10 •10 •10 •10 •10 •10 •10 •10 •10 •10 •10 501- 601-1 1,001-2 2,001-5 0- 61- 101- 201- 301- 401- 501- 601-1 1,001-2 2,001-5 5,001- 600 ,000 ,000 ,000 60 100 200 300 400 500 600 ,000 , 000 , 000 Over 54 23 77 5 35 45 97 38 15 9 9 10 7 8 1 12 16 12 4 26 29 67 31 14 9 9 11 7 4 1 68 48 65 0 10 23 45 88 60 6 5 49 51 189 72 .87 .60 .23 .00 .77 .10 .17 .50 .00 .87 .27 .77 .20 .77 .80 1,020 572 3,384 318 50 117 454 303 162 118 159 243 273 736 221 .33 .77 .70 .83 .43 .37 .63 .37 .27 .20 .90 .00 .40 .47 .67 New Mexico NMOIL NMOIL NMOIL NMOIL NMOIL NMOIL NMOIL NMOIL NMOIL NMOIL NMOIL NMOIL NMOIL NMOIL 1 2 3 4 5 6 7 8 9 10 11 12 13 14 0 0 0 0 0 0 0 0 0 0 0 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 2-6 2 2 -6 -6 0- 61- 101- 201- 301- 401- 501- 601-1 1,001-2 2,001-5 5,001- 0- 61- 101- 60 100 200 300 400 500 600 ,000 ,000 ,000 Over 60 100 200 881 240 276 102 52 35 14 24 13 11 2 2424 1550 2409 93 52 52 34 24 24 13 22 13 12 2 186 173 179 778 605 1,065 305 274 739 565 965 702 693 1,138 4,115 8,030 27,423 .37 .93 .80 .63 .10 .93 .67 .97 .10 .97 .83 .77 .80 .43 594 513 1,144 734 518 395 146 301 209 655 192 1,877 3,055 8,415 .57 .63 .77 .53 .43 .40 .40 .53 .93 .70 .80 .23 .83 .50 A-21 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) NMOIL 15 NMOIL 16 NMOIL 17 NMOIL 18 NMOIL 19 NMOIL 20 NMOIL 21 NMOIL 22 NMOIL 23 NMOIL 24 NMOIL 25 NMOIL 26 NMOIL 27 NMOIL 28 NMOIL 29 NMOIL 30 NMOIL 31 NMOIL 32 NMOIL 33 NMOIL 34 NMOIL 35 NMOIL 36 NMOIL 37 NMOIL 38 NMOIL 39 NMOIL 40 NMOIL 41 NMOIL 42 NMOIL 43 NMOIL 44 Nevada NVOIL 1 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 2-6 BOE range (BOE/mo) 201- 300 301- 400 401- 500 501- 600 601-1,000 1,001-2,000 2,001-5,000 5,001- Over 0- 60 61- 100 101- 200 201- 300 301- 400 401- 500 501- 600 601-1,000 1,001-2,000 2, 001-5, 000 5,001- Over 0- 60 61- 100 101- 200 201- 300 301- 400 401- 500 501- 600 601-1,000 1,001-2,000 2,001-5,000 5,001- Over 101- 200 Number of wells 1256 729 456 302 655 417 213 51 479 321 845 631 487 342 222 510 382 231 73 76 46 109 117 89 53 59 138 118 60 30 2 Number of fields 145 117 101 68 98 67 34 3 113 87 120 111 98 88 72 95 83 59 17 49 31 61 51 49 30 41 64 50 33 11 3 Gas rate per well (Mcfd) 26,772.07 22,602.07 18,856.53 15,637.30 42,880.60 39,434.20 20,413.93 5,310.07 1,945.70 3,058.47 14,319.67 21,075.57 21,493.30 18,712.67 13,888.27 47,243.90 46,788.27 38,694.57 20, 120.20 151.23 264.43 1,048.77 2,157.83 2,121.67 1,079.30 1,895.20 6,001.57 6,715.53 8,737.60 8,444.53 0.00 Oil rate per well (Bd) 7,168.60 5,874.97 4,615.13 3,662.23 (continued) 11,097.90 14,102.07 17,644 .83 11,350.73 221.73 479.63 2,556.23 2,863.57 3,276.43 2,998.77 2,526.53 7,780.37 12,054.23 16,448.33 13,884.27 39.47 79.50 364.03 666.10 756.00 626.93 798.20 2,738.20 4,376.93 4,465.53 6,760.47 4.57 A-22 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) NVOIL NVOIL NVOIL NVOIL NVOIL NVOIL 2 3 4 5 6 7 2 2 2 2 2 -6 -6 -6 -6 -6 2-6 BOE range (BOE/mo) 201- 301- 401- 501- 601-1 1,001-2 300 400 500 600 ,000 ,000 Number of wells 4 6 3 1 6 5 Number of fields 3 4 1 1 3 4 Gas rate per well (Mcfd) 0 0 0 0 0 0 .00 .00 .00 .00 .00 .00 Oil rate per well (Bd) 33 60 26 19 155 235 .87 .63 .07 .43 .27 .40 (continued) NVOIL NVOIL New York NYOIL NYOIL NYOIL NYOIL NYOIL Ohio OHOIL OHOIL OHOIL OHOIL OHOIL OHOIL Oklahoma OKOIL OKOIL OKOIL OKOIL OKOIL OKOIL OKOIL OKOIL OKOIL OKOIL 8 9 1 2 3 4 5 1 2 3 4 5 6 1 2 3 4 5 6 7 8 9 10 2 2 0 0 0 0 0 0 2 2 2 2 2 0 0 0 0 0 0 0 -6 -6 -2 -2 -2 -2 -2 -2 -6 -6 -6 -6 -6 -2 -2 -2 -2 -2 -2 -2 0-2 0 -2 0-2 2,001-5 5,001- 0- 61- 101- 201- 601-1 0- 61- 101- 201- 501- 1,001-2 0- 61- 101- 201- 301- 401- 501- 601-1 1,001-2 2,001-5 ,000 Over 60 100 200 300 ,000 60 100 200 300 600 ,000 60 100 200 300 400 500 600 ,000 ,000 ,000 11 9 3805 70 49 20 6 27356 1424 841 374 154 45 28981 5990 6742 2612 928 356 215 401 171 65 4 5 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 514 453 694 271 157 104 63 80 43 17 0 0 0 0 0 0 0 0 0 0 0 0 0 6,130 7,604 15,807 27,232 10,788 6,913 5,101 14,083 8,669 8,480 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .10 .33 .97 .40 .30 .07 .77 .57 .53 .77 1,135 7,267 863 146 179 162 145 11,722 3,511 3,929 3,395 3,076 2,751 14,132 8,905 18,709 10,845 5,708 2,696 1,984 5,176 3,734 3,967 .23 .77 .97 .13 .00 .17 .03 .67 .13 .10 .77 .20 .20 .57 .77 .37 .10 .53 .67 .67 .33 .70 .63 A-23 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) OKOIL 11 OKOIL 12 OKOIL 13 OKOIL 14 OKOIL 15 OKOIL 16 OKOIL 17 OKOIL 18 OKOIL 19 OKOIL 20 OKOIL 21 OKOIL 22 OKOIL 23 OKOIL 24 OKOIL 25 OKOIL 26 OKOIL 27 OKOIL 28 OKOIL 29 OKOIL 30 OKOIL 31 OKOIL 32 OKOIL 33 OKOIL 34 OKOIL 35 OKOIL 36 OKOIL 37 OKOIL 38 OKOIL 39 OKOIL 40 OKOIL 41 OKOIL 42 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 10+ 10 + 10 + 10 + 10 + 10 + 10+ 10 + 10 + 10+ BOE range (BOE/mo) 0- 60 61- 100 101- 200 201- 300 301- 400 401- 500 501- 600 601-1, 000 1,001-2,000 2,001-5,000 5,001- Over 0- 60 61- 100 101- 200 201- 300 301- 400 401- 500 501- 600 601-1, 000 1,001-2,000 2, 001-5, 000 5,001- Over 0- 60 61- 100 101- 200 201- 300 301- 400 401- 500 501- 600 601-1,000 1,001-2,000 2,001-5,000 Number of wells 7618 5631 7341 2763 2058 2179 401 1135 411 151 34 1744 1978 5442 3076 1756 1045 704 1330 934 294 50 47 87 355 247 196 145 113 282 271 79 Number of fields 480 529 884 461 265 173 109 151 110 45 13 147 153 352 267 181 138 109 149 91 57 16 25 31 90 75 54 39 34 56 44 24 Gas rate per well (Mcfd) 7,213.00 10,941.07 27,160.73 21,579.57 13,968.10 9,767.73 6,176.83 25,833.57 13,864.33 19,590.67 4,423.87 7,406.00 18,072.63 84,083.67 83,240.47 61,732.17 45,540.30 39,961.50 90,218.90 84,621.93 58,906.73 21,552.97 215.63 616.90 3,088.33 4,626.53 5,262.33 5,375.67 6,301.57 18,881.97 21,834.70 19,129.67 Oil rate per well (Bd) 4,620.70 8,228.37 19,611.37 12,102.60 13,669.33 20,633.57 3,962.33 15,867.40 (continued) 10,290.30 7,389.10 3,720.73 551.53 1,541.33 8,815.57 7,986.80 6,832.63 5,628.17 4,238.90 12,456.63 17,596.13 9,896.50 5,527.10 9.87 62.17 524.63 759.97 932.07 823.00 697.07 2,791.87 5,614.13 2,313.10 A-24 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) State/ wellgroup OKOIL Depth range (Mft) 43 10 + BOE range (BOE/mo) 5,001- Over Number Of wells 44 Number of fields 12 Gas rate per well (Mcfd) 35,422. ,70 Oil rate per well (Bd) 4,368. 17 Pennsylvania PAOIL PAOIL PAOIL PAOIL 1 2 3 4 0 0 0 0 -2 -2 -2 -2 0- 61- 101- 501- 60 100 200 600 26702 337 139 40 N/A N/A N/A N/A 0. 0. 0. 0. ,00 ,00 .00 .00 5,066. 897. 813. 727. 90 87 37 43 South Dakota SDOIL SDOIL SDOIL 1 2 3 0 0 0 -2 -2 -2 101- 201- 1, 001- 200 300 2,000 2 2 2 1 1 2 0. 0. 0. .00 .00 .00 8. 14. 44. 73 90 50 (continued) SDOIL SDOIL SDOIL SDOIL SDOIL SDOIL SDOIL SDOIL SDOIL SDOIL SDOIL SDOIL SDOIL SDOIL SDOIL SDOIL SDOIL SDOIL SDOIL Tennessee TNOIL TNOIL 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 1 2 0 2 2 2 -2 -f -6 -6 2-6 2 2 2 2 6- 6- 6- 6- 6- 6- 6- 6- 6- -6 -6 -6 -6 •10 -10 •10 •10 -10 •10 •10 -10 •10 6-10 0 0 -2 -2 2,001- 101- 201- 401- 501- 601- 1,001- 2,001- 5, 001- 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 0- 61- 5,000 200 300 500 600 1,000 2,000 5,000 Over 60 100 200 300 400 500 600 1,000 2,000 5,000 60 100 1 3 2 2 6 3 1 4 1 1 1 2 16 14 4 12 37 42 3 489 57 1 4 3 3 6 4 1 3 1 1 1 3 7 8 3 4 8 5 1 N/A N/A 0 16 3 22 24 20 17 871 226 0 0 0 10 20 0 12, 50, 1. 0, 0, 0, .00 .27 .40 .20 .80 .70 .83 .77 .63 .27 .00 .50 .03 .43 .00 .67 .43 .60 .00 .00 .00 116. 14. 16. 28. 104. 89. 35. 322. 175. 0. 2. 7. 124. 158. 59. 217. 989. 1,893. 167. 431. 178. 57 30 03 93 87 80 10 33 07 23 50 87 50 63 30 23 17 77 00 90 37 A-25 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) State/ we 11 group TNOIL 3 TNOIL 4 TNOIL 5 TNOIL 6 TNOIL 7 TNOIL 8 Texas-Gulf TXGCOIL TXGCOIL TXGCOIL TXGCOIL TXGCOIL Depth range (Mft) Coast 1 2 3 4 5 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 BOE range (BOE/mo) 101- 201- 301- 501- 1,001-2 2,001-5 0- 61- 101- 201- 301- 200 300 400 600 ,000 ,000 60 100 200 300 400 Number of wells 22 18 13 9 4 1 14856 839 1328 474 165 Number of fields N/A N/A N/A N/A N/A N/A 227 101 83 53 27 Gas rate per well (Mcfd) 0. 0. 0. 0. 0. 0. 810. 657. 2,008. 789. 644. Oil rate per well (Bd) 00 00 00 00 00 00 87 50 73 90 27 6, 2, 6, 3, 1, 107 135 144 176 160 143 062 147 604 690 910 .13 .87 .30 .77 .13 .23 .03 .73 .17 .67 .50 (continued) TXGCOIL TXGCOIL TXGCOIL TXGCOIL TXGCOIL TXGCOIL TXGCOIL TXGCOIL TXGCOIL TXGCOIL TXGCOIL TXGCOIL TXGCOIL TXGCOIL TXGCOIL TXGCOIL TXGCOIL TXGCOIL TXGCOIL TXGCOIL 6 1 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0-2 0-2 0-2 0-2 0-2 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 2-6 6-10 6-10 6-10 6-10 401- 501- 601-1 1,001-2 2,001-5 0- 61- 101- 201- 301- 401- 501- 601-1 1,001-2 2,001-5 5,001- 0- 61- 101- 201- 500 600 ,000 ,000 ,000 60 100 200 300 400 500 600 ,000 , 000 ,000 Over 60 100 200 300 163 837 609 17 1 9344 2451 4857 2319 1487 1326 1330 2470 1991 379 11 920 612 1535 1162 7 11 18 11 1 571 358 569 416 300 205 142 261 182 64 7 336 235 434 341 1,233. 4,776. 4,698. 404. 373. 6,719. 6,473. 15,404. 16,282. 14,038. 16,091. 15,457. 40,689. 233,150. 134,278. 742. 1,149. 2,712. 14,052. 20,082. 37 50 57 37 03 93 43 20 30 17 33 40 43 53 20 10 20 43 73 63 2, 15, 13, 7, 6, 22, 18, 16, 18, 23, 57, 78, 27, 2, 1, 6, 7, 285 001 453 635 77 805 073 642 119 581 698 455 393 840 913 130 711 307 124 667 .90 .83 .53 .57 .30 .00 .80 .10 .00 .17 .47 .53 .60 .43 .43 .30 .90 .17 .43 .80 A-26 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) TXGCOIL 26 TXGCOIL 27 TXGCOIL 28 TXGCOIL 29 TXGCOIL 30 TXGCOIL 31 TXGCOIL 32 TXGCOIL 33 TXGCOIL 34 TXGCOIL 35 TXGCOIL 36 TXGCOIL 37 TXGCOIL 38 TXGCOIL 39 TXGCOIL 40 TXGCOIL 41 TXGCOIL 42 TXGCOIL 43 Texas -North TXNOIL 1 TXNOIL 2 TXNOIL 3 TXNOIL 4 TXNOIL 5 TXNOIL 6 TXNOIL 7 TXNOIL 8 TXNOIL 9 TXNOIL 10 TXNOIL 11 TXNOIL 12 TXNOIL 13 6-10 6-10 6-10 6-10 6-10 6-10 6-}0 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 2-6 2-6 2-6 2-6 BOE range (BOE/mo) 301- 400 401- 500 501- 600 601-1, 000 1, 001-2,000 2,001-5,000 5,001- Over 0- 60 61- 100 101- 200 201- 300 301- 400 401- 500 501- 600 601-1, 000 1,001-2,000 2,001-5,000 5,001- Over 0- 60 61- 100 101- 200 201- 300 301- 400 401- 500 501- 600 601-1,000 1,001-2,000 0- 60 61- 100 101- 200 201- 300 Number of wells 946 843 617 1249 1080 492 115 137 84 149 95 86 43 35 115 99 44 5 24154 2170 1406 474 93 39 IS 10 2 11809 5331 5523 2233 Number of fields 308 249 191 322 264 145 28 35 29 51 34 34 23 14 34 35 18 5 324 129 119 57 31 IS 8 7 3 913 559 Gas rate per well (Mcfd) 22,867.23 28,478.20 26,189.63 78,855.30 116,647.70 139,729.73 39,580.93 378.97 686.53 2,438.03 2,703.63 3,562.97 2,244.47 2, 716.13 11,308.83 17,638.00 14,699.93 4,752.83 8,155.87 3,361.73 3,867.60 3,124 .40 125.13 330.57 134.07 117.27 3.87 29,635.17 35,910.47 71,697.70 41,825.13 Oil rate per well (Bd) 9,031.33 10,079.70 9,045.90 25,064.70 37,938.33 34,415.50 30,841.67 76.37 148.03 463.57 482.67 620.87 413.23 349.27 (continued) 1,889.13 2,495.93 2,330.40 333.73 14,697.57 5,213.67 6,088.77 3,125.57 996.13 516.03 252.17 233.10 72.27 9,019.07 10,659.43 19,463.37 14,511.50 A-27 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) State/ wellgroup TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL Depth range (Mft) 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 2-6 2-6 2-6 2-6 2-6 2-6 2-6 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 BOE range (BOE/mo) 301- 401- 501- 601-1 1,001-2 2,001-5 5,001- 0- 61- 101- 201- 301- 401- 501- 601-1 1,001-2 400 500 600 ,000 , 000 ,000 Over 60 100 200 300 400 500 600 ,000 , 000 Number of wells 901 593 436 1057 313 125 6 661 520 955 583 280 250 152 248 168 Number of fields 313 207 149 266 147 24 5 211 195 265 187 114 78 56 87 60 Gas rate per well (Mcfd) 28,284 17,502 15,842 19,382 15,852 10,560 856 1,349 3,892 16,088 14,460 9,370 8,494 7,490 16,191 8,557 Oil rate per well (Bd) .77 .63 .00 .53 .10 .43 .03 .63 .13 .27 .37 .90 .97 .80 .23 .73 7, 7, 6, 24, 11, 9, 1, 2, 3, 2, 2, 2, 4, 6, 728 173 238 238 729 402 463 527 981 969 401 259 868 010 645 135 .80 .20 .23 .00 .73 .20 .87 .43 .37 .90 .93 .77 .47 .53 .23 .67 (continued) TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL TXNOIL Texas-West TXWOIL TXWOIL 30 31 32 33 34 35 36 37 38 39 40 41 42 1 2 6-10 6-10 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10+ 10 + 0-2 0-2 2, 001-5 5,001- 0- 61- 101- 201- 301- 401- 501- 601-1 1,001-2 2,001-5 5,001- 0- 61- ,000 Over 60 100 200 300 400 500 600 ,000 ,000 ,000 Over 60 100 72 12 10 8 23 13 11 10 4 26 9 11 5 3101 760 34 9 8 8 14 11 11 5 4 9 8 6 3 158 71 8,883 2,064 13 60 468 439 604 903 530 3,824 2,029 5,321 3,799 1,419 343 .70 .57 .27 .07 .20 .27 .30 .00 .90 .97 .30 .30 .30 .17 .87 6, 2, 2, 1, 281 584 4 15 55 63 64 60 22 261 142 308 436 687 820 .37 .10 .53 .40 .37 .30 .73 .23 .07 .87 .53 .77 .40 .60 .10 A-28 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) TXWOIL 3 TXWOIL 4 TXWOIL 5 TXWOIL 6 TXWOIL 7 TXWOIL 8 TXWOIL 9 TXWOIL 10 TXWOIL 11 TXWOIL 12 TXWOIL 13 TXWOIL 14 TXWOIL 15 TXWOIL 16 TXWOIL 17 TXWOIL 18 TXWOIL 19 TXWOIL 20 TXWOIL 21 TXWOIL 22 TXWOIL 23 TXWOIL 24 TXWOIL 25 TXWOIL 26 TXWOIL 27 TXWOIL 28 TXWOIL 29 TXWOIL 30 TXWOIL 31 TXWOIL 32 TXWOIL 33 TXWOIL 34 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 2-6 2-6 2-6 2-6 2-f 2-6 2-6 2-6 2-6 2-6 2-6 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 10+ 10+ BOE range (BOE /mo) 101- 201- 301- 401- 501- 601- 1,001- 2,001- 0- 61- 101- 201- 301- 401- 501- 601- 1, 001- 2,001- 5, 001- 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 5,001- 0- 61- 200 300 400 500 600 1,000 2, 000 5, 000 60 100 200 300 400 500 600 1,000 2,000 5,000 Over 60 100 200 300 400 500 600 1,000 2,000 5,000 Over 60 100 Number of wells 862 172 114 48 16 40 5 1270 9224 5740 9670 5497 4518 4577 2114 4219 3829 676 37 2295 2327 5183 2971 1704 1281 1150 3356 2540 254 240 222 147 Number of fields 57 28 8 7 5 8 2 0 709 462 575 363 251 180 130 180 120 39 10 391 262 413 325 237 176 153 239 173 80 19 121 53 Gas rate per well (Mcfd) 131.33 121.50 30.10 23.57 177.63 159.97 88.43 155,889.60 24,699.93 32,416.13 73,291.37 43,473.13 34,413.57 33,966.47 35,221.13 58,625.27 304,490.43 125,260.03 950.93 44, 810.03 69, 747.03 144,652.73 73,143.27 55,556.17 44,735.23 33,130.67 103,708.00 457,137.57 23,383.30 33,489.57 5,372.10 7,753 .40 Oil rate per well (Bd) 3,461.20 1,354.40 1,270.93 632.70 277.27 869.87 198.63 75,763.03 8,859.80 14,223.07 44,562.07 41,345.07 49,462.13 62,441.07 35,724.10 104,599.53 163,734.80 64,493.47 (continued) 7,396.70 2,599.13 5,760.10 23,487.93 22,330.23 18,207.17 17,521.67 19,941.33 86,184.10 106,421.63 20,483.23 39,435.57 169.10 346.50 A-29 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) State/ we 11 group TXWOIL TXWOIL TXWOIL TXWOIL TXWOIL TXWOIL TXWOIL TXWOIL TXWOIL Utah UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL Depth range (Mft) 35 36 37 38 39 40 41 42 43 1 2 3 4 5 6 7 8 9 10 10 + 10 10 10 + + + 10 + 10 10 + + 10 + 1C 0- 0- 0- 0- 0- 0- 0- 0- 0- 0- + 2 2 2 2 2 2 2 2 2 2 BOE range (BOE/mo) 101- 201- 301- 401- 501- 601- 1, 001- 2,001- 5,001- 0- 61- 131- 201- 301- 401- 501- 601- 1, 001- 2,001- 200 300 400 500 600 1,000 2, 000 5, 000 Over 60 100 200 300 400 500 600 1, 000 2, 000 5, 000 Number of wells 324 320 180 156 131 362 342 144 32 76 6 8 3 2 1 1 4 3 2 Number of fields 120 ill 81 71 64 112 104 68 14 6 1 4 3 1 2 1 5 3 3 Gas rate per well (Mcfd) 20,292 18,342 13,626 10,720 4,706 20,884 52,246 8,611 760 8 4 7 21 0 36 51 152 31 856 .60 .00 .33 .30 .33 .23 .17 .00 .50 .57 .47 .93 .63 .00 .63 .53 .93 .83 .60 Oil rate per well (Bd) 1,449 2,464 1,996 2,099 2,127 8,595 14,177 12,583 7,439 33 13 25 25 23 12 13 83 139 122 .77 .13 .57 .13 .53 .03 .37 .97 .07 .53 .80 .27 .90 .73 .67 .33 .00 .90 .70 (continued) UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL 11 12 13 14 15 16 17 18 19 20 21 22 2- 2- 2- 2- 2- 2- 2- 2- 2- 2- 2- 6 6 6 6 6 6 6 6 6 6 6 6-10 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 5,001- 0- 60 100 200 300 400 500 600 1,000 2,000 5,000 Over 60 45 49 130 140 127 88 94 228 213 76 15 7 23 22 27 34 26 22 20 31 ' 22 12 8 7 38 200 860 1,836 1,956 1,629 2,320 6,241 7,149 4,250 3,792 0 .93 .50 .10 .57 .00 .30 .70 .50 .07 .83 .40 .83 18 88 483 884 1,217 1,086 1,369 5,098 8,791 6,305 2,614 3 .90 .87 .90 .27 .83 .27 .40 .07 .70 .30 .57 .47 A-30 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL UTOIL 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + BOE range (BOE/mo) 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 5,001- 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 5,001- 100 200 300 400 500 600 1,000 2,000 5, 000 Over 60 100 200 300 400 500 600 1,000 2,000 5,000 Over Number of wells 5 20 33 21 20 13 45 38 22 16 31 14 21 25 17 22 18 73 153 95 17 Number of fields 6 13 19 12 11 10 17 18 12 7 4 3 4 6 6 5 5 6 7 6 6 Gas rate per well (Mcfd) 19 130 594 466 477 387 1,936 3,565 4,507 50,086 24 29 112 176 183 384 284 2,551 12,665 16,031 18,867 .47 .77 .30 .60 .30 .30 .40 .70 .50 .47 .50 .23 .43 .07 .67 .73 .90 .87 .57 .90 .27 Oil rate per well (Bd) 7 80 199 151 211 193 934 1,251 1,680 2,283 11 21 63 155 146 226 254 1,522 5,726 6,857 3,842 .30 .20 .27 .20 .10 .13 .83 .67 .30 .70 .40 .93 .33 .47 .27 .67 .27 .87 .77 .97 .27 (continued) A-31 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) State/ wellgroup Virginia VAOIL Depth range (Mft) 1 0-2 BOE range (BOE /mo) 0- 60 Number of wells 50 Number of fields N/A Gas rate per well (Mcfd) 0 .00 Oil rate per well (Bd) 58 .33 West Virginia WVOIL WVOIL WVOIL WVOIL WVOIL Wyoming WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL 1 2 3 4 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 -3 -3 -3 -3 -3 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2 -6 -6 -6 -6 -6 -6 -6 -6 -6 -6 -6 6-10 6-10 0- 61- 101- 201- 601- 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 5,001- 0- 61- 101- 201- 301- 401- 501- 601- 1,001- 2,001- 5,001- 0- 61- 60 100 200 300 1, 000 60 100 200 300 400 500 600 1,000 2,000 5,000 Over 60 100 200 300 400 500 600 1,000 2,000 5,000 Over 60 100 15356 284 197 81 24 1340 393 556 326 230 140 90 185 92 27 5 475 466 905 537 350 266 230 591 621 330 46 192 201 N/A N/A N/A N/A N/A 79 46 62 45 38 34 27 33 31 20 5 94 92 126 121 86 75 79 81 71 37 15 93 90 0 0 0 0 0 22 53 559 414 376 290 651 1,302 2,266 2,092 4,559 183 546 2,781 2,149 1,518 1,132 1,623 4,498 7,025 9,170 4,628 296 822 .00 .00 .00 .00 .00 .63 .20 .63 .17 .90 .60 .97 .50 .40 .27 .67 .53 .40 .33 .97 .33 .67 .37 .17 .33 .40 .70 .03 .40 3,597 608 745 675 603 973 951 2,515 2,501 2,512 1,993 1,488 4,203 3,379 2,075 1,201 385 1,025 3,772 3,880 3,697 3,576 3,746 14,127 26,723 29,795 9,108 120 398 .67 .47 .33 .20 .87 .87 .70 .70 .33 .87 .60 .63 .27 .23 .90 .67 .07 .17 .33 .47 .97 .10 .03 .73 .37 .47 .30 .90 .10 A-32 ------- APPENDIX A: GRUY ENGINEERING CORPORATION'S OIL WELLGROUPS BY STATE (Continued) Depth State/ range wellgroup (Mft) WYOIL 25 6-10 BOE range (BOE/mo) 101- 200 Number of wells 622 Number of fields 158 Gas rate per well (Mcfd) 6, 137 .53 Oil rate per well (Bd) 2,263. 97 (continued) WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL WYOIL 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 6-10 6-10 6-10 6-10 6-10 6-10 6-10 6-10 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 201- 301- 401- 501- 601- 1,001- 2,001- 5,001- 0- 61- 101- 201- 301- 401- 501- 601- 1, 001- 2,001- 5,001- 300 400 500 600 1, 000 2,000 5,000 Over 60 100 200 300 400 500 600 1,000 2,000 5,000 Over 587 457 247 175 416 348 300 174 20 27 55 73 59 38 44 117 121 95 103 158 133 118 93 166 147 125 54 19 22 35 32 36 20 32 53 58 49 26 9, 9, 6, 4, 10, 10, 23, 146, 1, 1, 5, 13, 21, 223, 181 092 283 791 529 470 030 148 25 136 532 997 009 462 500 375 329 076 460 .17 .83 .80 .50 .70 .40 .37 .00 .57 .23 .17 .00 .13 .60 .23 .20 .90 .03 .00 3,611. 4,035. 2,891. 2,550. 9,063. 14,483 . 27,171. 38,210. 11. 35 179 475 536 486 611 2,355 4,241 6,666 34,896 30 30 83 .97 ,23 .13 .90 .57 .00 .03 .33 .10 .90 .70 .80 .20 .20 .07 .93 A-33 ------- APPENDIX B GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE Gruy State/wellgroup Alaska AKGAS1 AKGAS2 AKGAS3 AKGAS4 AKGAS5 AKGAS6 AKGAS7 AKGAS8 AKGAS9 AKGAS10 AKGAS11 AKGAS12 AKGAS13 AKGAS14 AKGAS15 Alabama ALGAS 1 ALGAS 2 ALGAS 3 ALGAS 4 Depth Range (Mft) 0-4 0-4 0-4 0-4 0-4 0-4 0-4 4-10 4-10 4-10 4-10 4-10 10+ 10+ 10+ 0-4 0-4 0-4 0-4 Range (Mcfd) 34 100 167 200 334 667 1,667 134 200 334 667 1,667 334 667 1,667 0.0 20 34 67 67 133 200 333 667 1,667 167 333 667 1,667 0 667 1,667 20 33 67 100 Gas rate per well (Mcfd) 40 121 182 224 335 902 4,719 68 299 229 1,031 5,981 494 1,568 6,108 5 18 34 74 .07 .90 .55 .61 .07 .83 .79 .23 .97 .31 .92 .88 .77 .63 .00 .16 .12 .87 .30 dumber of wells 1 2 2 5 3 1 4 2 1 3 7 72 2 1 13 203 148 275 191 Number of fields 1 3 3 4 1 1 3 3 1 3 4 8 3 1 5 31 30 37 40 Revised 1993 Number of wells 1 3 3 7 4 1 5 3 1 4 9 95 3 1 17 452 329 611 425 Number of fields 1 5 5 6 1 1 4 5 1 4 5 11 5 1 7 69 67 82 89 1993 Total gas production (Mcdf) 40 365 547 1,572 1,340 902 23,598 204 299 917 9,287 568,278 1,484 1,468 103,836 2,333 5,962 21,304 31,578 .07 .70 .65 .29 .27 .83 .96 .70 .97 .24 .27 .30 .30 .63 .04 .70 .46 .13 .46 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/wellgroup ALGAS ALGAS ALGAS ALGAS ALGAS ALGAS ALGAS ALGAS ALGAS ALGAS ALGAS ALGAS ALGAS ALGAS ALGAS ALGAS ALGAS ALGAS ALGAS ALGAS ALGAS 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Depth Range (Mft) 0-4 0-4 0-4 0-4 0-4 0-4 0-4 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 10+ 10+ 10+ Range (Mcfd) 100 134 167 200 334 667 1,667 0.0 20 34 67 100 134 167 200 334 667 1,667 34 134 200 133 167 200 333 667 1,667 0.00 20 33 67 100 133 167 200 333 667 1,667 0.00 67 167 333 Gas rate per well (Mcfd) 94 141 174 256 444 740 2,231 0 13 42 71 99 136 170 233 456 847 1,799 45 17 74 .52 .98 .39 .60 .45 .36 .05 .93 .23 .09 .10 .15 .09 .26 .31 .88 .83 .49 .43 .90 .53 Number of wells 95 95 42 115 79 20 60 4 5 9 14 12 11 6 25 27 19 5 1 1 4 Number of fields 37 31 23 32 27 15 9 5 6 7 9 11 9 5 13 13 12 5 1 2 5 Revised 1993 Number of wells 211 211 93 259 174 37 126 26 11 20 31 27 24 13 56 60 42 11 2 2 9 Number of fields 82 69 51 71 60 33 20 11 13 16 20 25 20 11 29 29 27 11 2 4 11 1993 Total gas production (Mcdf) 19,943.42 29,957.19 16,218.68 66,458.72 77,333.60 27,393.26 281,112.23 24.27 145.57 841.70 2,204.10 2,677.13 3,266.11 2,213.39 13,065.10 27,412.52 35,608.71 19,794.35 90.87 35.80 670.73 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/ wellgroup W I oo ALGAS ALGAS ALGAS Arkansas ARGAS ARGAS ARGAS ARGAS ARGAS ARGAS ARGAS ARGAS ARGAS ARGAS ARGAS ARGAS ARGAS ARGAS ARGAS ARGAS ARGAS 26 27 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Depth Range (Mft) 10+ 10+ 10 + 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 4-10 4-10 4-10 4-10 4-10 4-10 Range (Mcfd) 334 667 1,667 0.0 20 34 67 100 134 167 200 334 667 1,667 0.0 20 34 67 100 134 667 1,667 0.00 20 33 67 100 133 167 200 333 667 1,667 0.00 20 33 67 100 133 167 Gas rate per well (Mcfd) 176.07 644.75 3,677.65 6.95 22.19 42.24 69.96 94.19 131.45 143.00 226.13 390.89 745.22 1,359.01 7.95 21.71 41.86 73.96 105.05 132.60 Number of wells 1 15 44 276 100 209 146 76 57 30 87 79 36 3 157 111 251 164 150 91 Number of fields 1 8 10 61 48 56 47 33 30 18 35 29 17 4 35 35 43 38 39 31 Revised 1993 Number of wells 2 33 98 311 113 237 165 86 65 34 98 89 41 3 178 126 284 186 170 103 Number of fields 2 18 22 69 54 64 53 37 34 20 39 33 19 4 40 40 49 43 44 35 1993 Total gas production (Mcdf) ' 352.13 21,276.64 360,410.00 2,161.64 2,507.66 10,011.72 11,542.80 8,100.71 8,544.08 4,862.00 22,160.54 34,788.97 30,554.07 4,077.03 1,415.57 2,734.92 11,887.19 13,756.40 17,858.58 13,657.50 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/wellgroup ARGAS 18 ARGAS 19 ARGAS 20 ARGAS 21 ARGAS 22 ARGAS 23 Arizona w AZGAS 1 JL AZGAS 2 AZGAS 3 AZGAS 4 AZGAS 5 California-Northern CACNGAS 1 CACNGAS 2 CACNGAS 3 CACNGAS 4 CACNGAS 5 CACNGAS 6 CACNGAS 7 CACNGAS 8 Depth Range (Mft) 4-10 4-10 4-10 4-10 4-10 10+ 0-4 4-10 4-10 4-10 4-10 & Coastal 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 Range (Mcfd) 167 200 334 667 1,667 200 34 0.0 67 667 1,667 0.0 20 34 67 100 134 167 200 200 333 667 1,667 0.00 333 67 20 100 1,667 0.00 20 33 67 100 133 167 200 333 Gas rate per well (Mcfd) 156 231 422 756 2,018 293 30 20 30 1,025 2,641 5 21 43 75 90 144 160 230 .60 .68 .80 .84 .26 .80 .83 .00 .00 .23 .68 .41 .77 .91 .29 .36 .56 .62 .68 Number of wells 83 189 167 95 17 1 1 1 1 1 2 28 18 41 26 27 14 6 17 Number of fields 31 36 32 26 12 1 1 1 1 2 1 15 13 21 13 15 11 6 10 Revised 1993 Number of wells 94 214 189 108 19 1 1 2 1 1 2 16 14 31 20 20 11 5 13 Number of fields 35 41 36 30 13 1 1 1 1 2 1 11 10 16 10 11 9 5 8 1993 Total gas production (Mcdf ) 14,720. 49,580. 79,909. 81,738. 38,347. 293. 30. 40. 30. 1,025. 5,283. 86. 304. 1,361. 1,505. 1,807. 1,590. 803. 2,998. 29 37 61 57 03 80 83 00 00 23 37 59 79 28 72 14 13 08 87 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/wellgroup CACNGAS CACNGAS CACNGAS CACNGAS CACNGAS CACNGAS CACNGAS CACNGAS CACNGAS CACNGAS CACNGAS CACNGAS CACNGAS CACNGAS CACNGAS CACNGAS CACNGAS CACNGAS CACNGAS CACNGAS CACNGAS 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Depth Range (Mft) 0-4 0-4 0-4 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 10+ 10+ 10+ 10+ 10+ 10+ 10+ Range (Mcfd) 334 667 1,667 0.0 20 34 67 100 134 167 200 334 667 1,667 0.0 20 34 67 100 134 167 667 1,667 0.00 20 33 67 100 133 167 200 333 667 1,667 0.00 20 33 67 100 133 167 200 Gas rate per well (Mcfd) 339 617 2,313 5 21 43 72 101 138 168 240 436 870 2,380 10 16 25 93 89 106 152 .98 .42 .29 .52 .40 .83 .94 .83 .36 .00 .27 .98 .10 .39 .10 .11 .08 .67 .73 .83 .22 Number of wells 23 5 3 107 53 115 108 89 72 61 166 172 61 20 1 3 3 1 6 2 2 Number of fields 13 6 4 33 26 36 36 28 27 24 43 37 27 14 1 3 4 1 5 1 1 Revised 1993 Number of wells 17 6 2 73 38 87 82 70 55 46 126 130 46 17 1 2 2 ' 1 5 2 2 Number of fields 10 5 3 25 20 27 27 21 21 18 33 28 20 11 1 2 3 1 4 1 1 1993 Total gas production (Mcdf ) 5,779.61 3,704.52 4,626.58 402.61 813.32 3,813.30 5,981.04 7,128.10 7,609.99 7,728.13 30,274.51 56,808.01 40,024.73 40,466.69 10.10 32.22 50.16 93.67 448.67 213.67 304.43 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy Depth Range State/wellgroup (Mft) CACNGAS 30 CACNGAS 31 CACNGAS 32 CACNGAS 33 10+ 10+ 10+ 10+ 1 Range (Mcfd) 200 334 667 ,667 333 667 1,667 0.00 Gas rate per well (Mcfd) 249.37 457.30 965.03 3,921.66 N imber of -.veils 8 5 8 6 Number of fields 3 1 1 3 Revised 1993 Number of wells 6 4 6 5 Number of fields 2 1 1 3 1993 Total gas production (Mcdf ) 1,496.23 1,829.20 5,790.20 19,608.28 California- Los Angeles Basin CALAGAS 1 CALAGAS 2 CALAGAS 3 California-San CASJGAS 1 CASJGAS 2 CASJGAS 3 CASJGAS 4 CASJGAS 5 CASJGAS 6 CASJGAS 7 CASJGAS 8 CASJGAS 9 CASJGAS 10 CASJGAS 11 CASJGAS 12 0-4 0-4 0-4 Jose Basin 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 1 4-10 4-10 0.0 34 67 0.0 20 34 67 134 167 200 334 667 ,667 0.0 20 20 67 100 20 33 67 100 167 200 333 667 1,667 0.00 20 33 10.23 47.57 92.40 6.99 22.57 49.74 85.02 137.03 181.07 250.08 457.42 842.90 2,751.10 4.46 25.58 1 1 1 33 12 14 6 1 1 4 7 11 1 8 2 1 1 1 9 6 5 5 1 1 1 1 1 1 6 1 1 1 1 25 9 11 5 1 1 3 5 • 8 1 6 2 1 1 1 7 5 4 4 1 1 1 1 1 1 5 1 10.23 47.57 92.40 174.72 203.15 547.15 425.08 137.03 181.07 750.25 2,287.12 6,743.18 2,751.10 26.75 51.17 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/wellgroup CASJGAS CASJGAS CASJGAS CASJGAS CASJGAS CASJGAS CASJGAS CASJGAS CASJGAS CASJGAS CASJGAS CASJGAS CASJGAS CASJGAS CASJGAS CASJGAS Colorado COGAS 1 COGAS 2 COGAS 3 COGAS 4 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Depth Range (Mft) 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 10+ 10+ 10+ 10+ 10+ 10+ 10+ 0-4 0-4 0-4 0-4 Range (Mcfd) 34 67 100 134 167 200 334 667 1,667 0.0 20 34 67 100 134 167 0.0 20 34 67 67 100 133 167 200 333 667 1,667 0.00 20 33 67 100 133 167 200 20 33 67 100 Gas rate per well (Mcfd) 42 86 119 135 172 170 425 1,037 1,008 19 10 13 23 27 73 39 8 25 46 78 .17 .92 .60 .67 .10 .60 .40 .45 .98 .13 .80 .19 .05 .58 .40 .83 .52 .49 .25 .33 "lumber of 1 2 2 1 1 3 1 5 2 1 1 6 2 2 1 4 345 210 410 257 Number of fields 1 3 3 1 2 4 2 5 2 1 1 1 1 1 1 1 64 56 65 45 Revised 1993 Number of wells 1 2 2 1 1 2 1 4 2 1 1 5 2 2 1 3 384 217 424 266 Number of fields 1 3 3 1 2 3 2 4 2 1 1 1 1 1 1 1 66 58 67 47 1993 Total gas production (Mcdf ) 42.17 173.83 239.20 135.67 172.10 341.20 425.40 4,149.81 2,017.97 19.13 10.80 65.94 46.10 55.17 73.40 119.50 3,270.46 5,530.95 19,609.83 20,836.32 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/wel COGAS COGAS COGAS COGAS COGAS COGAS COGAS COGAS COGAS COGAS COGAS COGAS COGAS COGAS COGAS COGAS COGAS COGAS COGAS COGAS COGAS .Igroup 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Depth Range (Mft) 0-4 0-4 0-4 0-4 0-4 0-4 4-10 4-10 4-10 4-10 4-10 4-10 4-10 '4-10 4-10 4-10 4-10 10+ 10+ 10+ 10+ 100 134 167 200 334 667 0. 20 34 67 100 134 167 200 334 667 1,667 0 20 34 100 Range (Mcfd) 133 167 200 333 667 1,667 .0 20 33 6.7 100 133 167 200 333 667 1,667 0.00 .0 20 33 67 133 Gas rate per well (Mcfd) 104.46 143.59 148.79 230.25 351.41 514.47 8.88 22.01 37.65 63.93 92.17 110.05 125.16 179.37 360.27 622.57 1,489.77 8.18 17.40 38.07 130.97 Number of wells 118 186 34 161 70 11 444 411 1,271 771 437 243 198 349 161 54 4 4 2 2 1 Number of fields 34 24 15 21 18 6 89 76 109 69 43 32 36 49 41 17 5 4 3 * 3 1 Revised 1993 Number of wells 122 192 30 166 72 14 459 425 1292 797 452 251 205 361 166 56 4 • 4 2 2 1 Number of fields 35 25 15 22 19 6 92 79 113 71 44 33 37 51 42 18 5 4 3 3 1 1993 Total gas production (Mcdf ) 12,744 27,568 4,463 38,221 25,301 7,202 4,074 9,354 48,638 50,953 41,662 27,621 25,656 64,753 59,804 34,863 5,959 32 34 76 130 .42 .69 .62 .04 .86 .62 .28 .24 .40 .35 .78 .95 .79 .57 .44 .73 .07 .70 .80 .13 .97 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State /wellgroup COGAS COGAS COGAS COGAS COGAS COGAS Illinois ILGAS ILGAS ILGAS ILGAS ILGAS ILGAS Indiana INGAS INGAS INGAS Kansas KSGAS KSGAS KSGAS 26 27 28 29 30 31 1 2 3 4 5 6 1 2 3 1 2 3 Depth Range (Mft) 10+ 10+ 10+ 10+ 10+ 10+ 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-4 0-4 0-4 Range (Mcfd) 134 167 200 334 667 1,667 0.0 20 0 100 200 667 0.0 20 34 0.0 20 34 167 200 333 667 1,667 0.00 20 33 67 133 333 1,667 20 33 80 20 33 67 Gas rate per well (Mcfd) 164 187 92 448 684 2,910 5 27 53 110 208 374 0 22 48 7 23 42 .23 .07 .77 .20 .12 .87 .39 .76 .29 .86 .35 .13 .89 .20 .03 .72 .03 .86 Number of wells 1 1 1 1 2 2 263 16 10 4 2 1 1,291 3 1 1,424 718 1,480 Number of fields 1 1 1 1 3 1 N/A N/A N/A N/A N/A N/A N/A N/A N/A 290 180 189 Revised 1993 Number of wells 1 1 1 1 2 2 341 21 13 5 3 1 1323 3 1 1549 784 1617 1993 Number Total gas of production fields (Mcdf) 1 164. 1 187. 1 92. 1 448. 3 1,368. 1 5,821. 1,836. 582. 692. 554. 625. 374. 1,172. 66. 48. 317 11,956. 197 18,056. 206 69,311. 23 07 77 20 23 73 60 88 77 29 05 13 05 60 03 02 97 32 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/wellqroup KSGAS KSGAS KSGAS KSGAS KSGAS KSGAS KSGAS W KSGAS 1 £ KSGAS KSGAS KSGAS KSGAS KSGAS KSGAS KSGAS KSGAS KSGAS KSGAS KSGAS 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Depth Range (Mft) 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 Range (Mcfd) 67 100 134 167 200 334 667 1,667 0.0 20 34 67 100 134 167 200 334 667 1,667 100 133 167 200 333 667 1,667 0.00 20 33 67 100 133 167 200 333 667 1,667 0.00 Gas rate per well (Mcfd) 71 97 119 148 214 392 786 2,016 9 24 43 73 105 134 169 217 394 807 1,808 .56 .09 .36 .06 .87 .16 .22 .29 .27 .32 .85 .45 .39 .83 .37 .99 .59 .93 .96 Number of wells 1,071 901 790 663 1,595 1,082 165 4 791 493 707 323 223 109 71 180 124 70 15 Number of fields 110 66 48 39 50 30 14 5 241 184 240 137 112 67 56 92 67 35 12 Revised 1993 Number of wells 1170 984 863 724 1749 1182 180 4 864 539 772 353 245 119 78 197 135 76 16 Number of fields 120 72 52 43 55 33 15 5 263 201 262 150 123 73 62 101 73 38 13 1993 Total gas production (Mcdf) 83, 95, 103, 107, 375, 463, 141, 8, 8, 13, 33, 25, 25, 16, 13, 42, 53, 61, 28, 725.06 534.71 004.26 196.88 806.08 528.76 519.31 065.17 007.42 109.33 853.89 926.12 821.17 044.95 210.60 943.63 270.20 402.72 943.32 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/wellgroup Kentucky KYGAS 1 KYGAS 2 KYGAS 3 KYGAS 4 KYGAS 5 KYGAS 6 tfl KYGAS 7 1 ^ Louisiana-North LANGAS 1 LANGAS 2 LANGAS 3 LANGAS 4 LANGAS 5 LANGAS 6 LANGAS 7 LANGAS 8 LANGAS 9 LANGAS 10 LANGAS 11 LANGAS 12 Depth Range (Mft) 0-2 0-2 0-2 0-2 0-2 0-2 0-2 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 4-10 Range (Mcfd) 0.0 34 67 100 200 334 667 0.0 20 34 67 100 134 167 200 334 667 1,667 0.0 20 67 100 133 333 667 1,667 20 33 67 100 133 167 200 333 667 1,667 0.00 20 Gas rate per well (Mcfd) 7 41 80 119 217 551 1,356 5 23 36 55 84 101 118 208 346 528 1,222 7 .09 .82 .61 .20 .15 .40 .05 .88 .26 .80 .91 .01 .67 .77 .80 .10 .84 .75 .48 Number of wells 9,884 884 159 139 121 45 17 8,290 408 257 114 65 36 36 56 24 21 2 222 Number of fields N/A N/A N/A N/A N/A N/A N/A 50 34 56 44 32 24 23 27 15 16 3 66 Revised 1993 Number of wells 11294 1024 150 159 139 51 19 7576 373 235 104 59 33 33 51 22 19 2 203 Number of fields 46 31 51 40 29 22 21 25 14 14 3 60 1993 Total gas production (Mcdf ) 80,089 42,820 12,091 18,952 30,184 28,121 25,764 44,537 8,675 8,649 5,814 4,956 3,354 3,919 10,648 7,614 10,047 2,445 1,518 .36 .42 .23 .46 .52 .25 .97 .38 .78 .13 .69 .51 .97 .27 .56 .29 .98 .50 .69 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State /wellgroup tx) I M to LANGAS LANGAS LANGAS LANGAS LANGAS LANGAS LANGAS LANGAS LANGAS LANGAS LANGAS LANGAS LANGAS LANGAS LANGAS LANGAS LANGAS LANGAS LANGAS LANGAS LANGAS 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Depth Range (Mft) 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 10 + 10 + 10+ 10+ 10+ 10+ 10+ 10+ 10+ 10+ 10+ Range (Mcfd) 20 34 67 100 134 167 200 334 667 1,667 0.0 20 34 67 100 134 167 200 334 667 1,667 33 67 100 133 167 200 333 667 1,667 0.00 20 33 67 100 133 167 200 333 667 1,667 0.00 Gas rate per well (Mcfd) 20.86 38.99 68.10 98.36 124.53 153.83 212.52 403.91 779.52 2,860.46 6.45 14.52 28.44 49.59 92.79 107.70 114.10 184.16 330.93 846.97 2,135.84 Number of wells 127 250 207 136 116 100 274 275 188 89 29 10 26 26 13 24 11 63 51 59 40 Number of fields 53 70 60 56 49 46 67 64 52 24 17 9 18 19 11 16 10 24 27 21 15 Revised 1993 Number of wells 116 228 189 124 106 91 250 251 172 81 27 9 24 24 12 22 10 58 47 54 37 Number of fields 48 64 55 51 45 42 61 58 48 22 16 8 17 18 10 15 9 22 25 19 14 1993 Total gas production (Mcdf) 2,419.22 8,888.78 12,871.23 12,196.62 13,200.62 13,998.17 53,129.01 101,380.79 134,077.29 231,697.47 174.17 130.65 682.68 1,190.12 1,113.54 2,369.49 1,141.00 10,681.39 15,553.77 45,736.44 79,026.11 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/wellgroup Depth Range (Mft) Range (Mcfd) Gas rate per well (Mcfd) 'lumber of wells Number of fields Revised 1993 Number of wells Number of fields 1993 Total gas production (Mcdf) Louisiana-South LASGAS LASGAS LASGAS LASGAS LASGAS LASGAS W LASGAS 1 H1 LASGAS CO LASGAS LASGAS LASGAS LASGAS LASGAS LASGAS LASGAS LASGAS LASGAS LASGAS LASGAS LASGAS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 0.0 20 34 67 100 134 167 200 334 667 1,667 0.0 20 34 67 100 134 167 200 334 20 33 67 100 133 167 200 333 667 1,667 0.00 20 33 67 100 133 167 200 333 667 4 16 33 66 81 96 120 185 344 743 1,246 2 14 30 40 62 90 112 169 303 .94 .82 .49 .55 .85 .09 .69 .65 .10 .76 .82 .96 .59 .62 .61 .59 .21 .42 .85 .26 11 7 13 9 11 5 10 14 24 30 13 40 23 42 62 39 36 28 100 157 12 7 8 9 10 6 10 13 19 16 13 34 23 35 47 34 32 24 76 114 10 6 12 8 10 5 9 13 22 27 12 37 21 38 57 36 33 26 91 143 11 6 7 8 9 6 9 12 17 14 12 31 21 32 43 31 29 22 69 104 49.39 100.91 401.94 532.39 818.55 480.47 1,086.21 2,413.45 7,570.26 20,081.40 14,961.88 109.40 306.33 1,163.73 2,314.66 2,253.08 2,977.06 2,922.93 15,456.35 43,365.71 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/wellgroup LASGAS 21 LASGAS 22 LASGAS 23 LASGAS 24 LASGAS 25 LASGAS 26 LASGAS 27 0) LASGAS 28 1 H» LASGAS 29 LASGAS 30 LASGAS 31 LASGAS 32 LASGAS 33 Michigan MIGAS 1 MIGAS 2 MIGAS 3 MIGAS 4 MIGAS 5 MIGAS 6 MIGAS 7 Depth Range (Mft) 4-10 4-10 10+ 10+ 10+ 10+ 10 + 10 + 10+ 10+ 10+ 10 + 10+ 0-4 0-4 0-4 0-4 0-4 0-4 0-4 Range (Mcfd) 667 1,667 0.0 20 34 67 100 134 167 200 334 667 1,667 0.0 20 34 67 100 134 167 1,667 0.00 20 33 67 100 133 167 200 333 667 1,667 0.00 20 33 67 100 133 167 200 Gas rate per well (Mcfd) 692. 1,918. 2. 12. 21. 50. 71. 96. 112. 164. 342. 781. 3,612. 4. 11. 24. 47. 67. 85. 102. 16 26 55 22 88 37 77 13 88 12 46 98 62 77 73 47 46 71 20 70 Number of wells 167 67 75 21 71 58 52 59 44 177 325 486 538 89 69 89 77 62 42 47 Number of fields 112 48 60 20 63 54 47 54 40 123 186 205 195 21 21 24 18 20 15 13 Revised 1993 Number of wells 153 61 69 19 65 53 48 54 40 162 297 444 508 287 222 287 248 200 135 151 Number of fields 103 44 55 18 58 49 43 49 36 113 170 187 178 68 68 77 58 65 48 42 1993 Total gas production (Mcdf) 105, 117, 1, 2, 3, 5, 4, 26, 101, 347, 1,835, 1, 2, 7, 11, 13, 11, 15. 899.88 014.15 175.78 232.25 422.13 669.52 444.83 191.20 515.18 586.70 709.58 197.71 212.51 367.71 605.12 024.08 769.37 541.83 501.79 507.06 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/wellgroup MIGAS MIGAS MIGAS MIGAS MIGAS MIGAS MIGAS U MIGAS 1 H-1 MIGAS Ul MIGAS MIGAS MIGAS MIGAS MIGAS MIGAS MIGAS MIGAS 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Depth Range (Mft) 0-4 0-4 0-4 0-4 4-10 4-10 4-10 4-10 4-10 4-10 4-10 10+ 10+ 10+ 10+ 10+ 10+ Range (Mcfd) 200 334 667 1,667 0.0 34 67 200 334 667 1,667 34 67 167 334 667 1,667 333 667 1,667 0.00 20 67 100 333 667 1,667 0.00 67 100 200 667 1,667 0.00 Gas rate per well (Mcfd) 144 279 586 1,773 21 69 68 10 250 244 1,196 53 77 116 77 618 2,190 .50 .71 .05 .05 .49 .85 .88 .89 .68 .70 .94 .73 .92 .78 .92 .42 .33 Number of wells 109 91 146 94 5 2 2 7 12 10 12 2 2 2 2 5 7 Number of fields 25 29 36 24 3 2 2 4 4 5 4 2 2 2 2 3 4 Revised 1993 Number of wells 351 293 470 306 16 6 6 23 39 32 39 6 6 6 6 16 23 Number of fields 81 93 116 77 10 6 6 13 13 16 13 6 6 6 6 10 13 1993 Total gas production (Mcdf) 50,720.79 81,955.86 275,441.35 542,554.82 343.89 419.10 413.30 250.48 9,776.33 7,830.29 46,680.73 322.40 467.50 700.70 467.50 9,894.72 50,377.67 Mississippi MSGAS MSGAS MSGAS 1 2 3 0-4 0-4 0-4 0.0 20 34 20 33 67 5 19 35 .64 .13 .05 19 15 10 10 12 8 16 11 7 7 9 6 90.22 210.44 245.37 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy MSGAS MSGAS MSGAS MSGAS MSGAS MSGAS MSGAS tx) MSGAS 1 H-1 MSGAS MSGAS MSGAS MSGAS MSGAS MSGAS MSGAS MSGAS MSGAS MSGAS MSGAS MSGAS MSGAS 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Depth Range (Mft) 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 10+ 10+ Range (Mcfd) 67 100 134 167 200 334 667 1,667 0.0 20 34 67 100 134 167 200 334 667 1,667 0.0 20 100 133 167 200 333 667 1,667 0.00 20 33 67 100 133 167 200 333 667 1,667 0.00 20 33 Gas rate per well (Mcfd) 68 88 108 151 187 317 629 2,446 6 18 40 58 85 100 136 189 337 631 977 3 6 .19 .60 .64 .49 .72 .41 .15 .34 .11 .59 .37 .71 .98 .36 .24 .30 .94 .51 .54 .18 .76 Number of wells 22 23 16 6 32 30 23 6 25 11 32 23 22 18 10 18 23 11 7 21 9 Number of fields 11 13 13 6 15 15 12 4 11 6 14 10 9 12 8 8 8 9 2 11 9 Revised 1993 Number of wells 16 17 12 4 24 22 17 4 19 8 24 17 16 13 7 13 17 8 5 16 10 Number of fields 8 10 10 4 11 11 9 3 8 4 11 7 7 9 6 6 6 7 1 8 7 1993 Total gas production (Mcdf) 1,091.10 1,506.22 1,303.68 605.96 4,505.23 6,983.07 10,695.49 9,785.38 116.18 148.73 968.98 998.12 1,375.61 1,304.74 953.68 2,460.95 5,745.06 5,052.05 4,887.69 50.90 67.63 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/wellgroup MSGAS MSGAS MSGAS MSGAS MSGAS MSGAS MSGAS Cd MSGAS 1 |-i MSGAS -J Montana MTGAS MTGAS MTGAS MTGAS MTGAS MTGAS MTGAS MTGAS MTGAS MTGAS MTGAS 25 26 27 28 29 30 31 32 33 1 2 3 4 5 6 7 8 9 10 11 Depth Range (Mft) 10+ 10+ 10+ 10+ 10+ 10+ 10+ 10+ 10+ 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 Range (Mcfd) 34 67 100 134 167 200 334 667 1,667 0.0 20 34 67 100 134 167 200 334 667 1,667 67 100 133 167 200 333 667 1,667 0.00 20 33 67 100 133 167 200 333 667 1,667 0.00 Gas rate per well (Mcfd) 21 40 81 97 127 180 341 788 3,862 9 22 40 73 107 133 164 214 400 727 874 .81 .88 .20 .27 .61 .58 .98 .39 .31 .11 .90 .04 .20 .99 .07 .55 .61 .44 .03 .56 Number of wells 10 9 11 13 9 39 51 77 89 1,184 585 520 169 82 49 40 48 36 13 4 Number of fields 10 7 7 11 7 22 30 32 36 95 72 77 43 29 23 16 17 14 4 3 Revised 1993 Number of wells 7 7 8 10 7 29 38 57 66 1243 614 546 177 86 51 42 50 38 14 4 Number of fields 7 5 5 8 5 16 22 24 27 100 76 81 45 30 24 17 18 15 4 3 1993 Total gas production (Mcdf ) 152.69 286.14 649.58 972.74 893.28 5,236.78 12,995.06 44,938.45 254,912.17 11,328.52 14,059.17 21,864.19 12,956.05 9,286.95 6,786.43 6,911.14 10,730.59 15,216.75 10,178.43 3,498.23 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/ wellgroup W I M CO MTGAS MTGAS MTGAS MTGAS MTGAS MTGAS MTGAS MTGAS MTGAS MTGAS MTGAS 12 13 14 15 16 17 18 19 20 21 22 Depth Range (Mft) 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 10 + 10 + Range (Mcfd) 0.0 20 34 67 100 134 167 200 334 0.0 34 20 33 67 100 133 167 200 333 667 20 67 Gas rate per well (Mcfd} 4.53 23.98 45.78 68.29 106.33 135.10 163.45 143.48 579.03 10.83 37.93 dumber of wells 4 2 9 3 5 3 2 2 1 1 1 Number of fields 4 3 3 3 3 3 1 3 1 1 1 Revised 1993 Number of wells 4 2 9 3 7 3 2 2 1 1 1 Number of fields 4 3 3 3 3 3 1 3 1 1 1 1993 Total gas production (Mcdf) 18.13 47.97 412.00 204.87 744.33 405.30 326.90 286.97 579.03 10.83 37.93 North Dakota NDGAS NDGAS NDGAS NDGAS NDGAS NDGAS NDGAS NDGAS NDGAS 1 2 3 4 5 6 7 8 9 0-4 0-4 0-4 0-4 10+ 10+ 10+ 10+ 10+ 0.0 20 34 67 0.0 200 334 667 1,667 20 33 67 100 20 333 667 1,667 0.00 7.95 25.59 42.90 69.43 3.16 48.33 146.81 478.33 2,250.43 54 5 2 1 3 1 3 1 3 3 1 1 1 4 1 4 2 4 77 7 3 1 4 3 4 1 4 4 1 2 1 5 1 5 2 5 611.77 179.11 128.70 69.43 12.62 145.00 587.24 478.33 9,001.73 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/ wellgroup Nebraska NEGAS NEGAS NEGAS 1 2 3 Depth Range (Mft) 4-10 4-10 4-10 Range (Mcfd) 20 34 67 33 67 100 Gas rate per well (Mcfd) 13 40 37 .99 .93 .93 lumber of wells 6 4 2 Number of fields 4 3 3 Revised 1993 Number of wells 30 20 10 Number of fields 20 15 15 1993 Total gas production (Mcdf ) 419.83 818.67 379.33 New Mexico NMGAS NMGAS UJ NMGAS 1 J-J NMGAS NMGAS NMGAS NMGAS NMGAS NMGAS NMGAS NMGAS NMGAS NMGAS NMGAS NMGAS NMGAS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 4-10 4-10 4-10 4-10 4-10 0.0 20 34 67 100 134 167 200 334 667 1,667 0.0 20 34 67 100 20 33 67 100 133 167 200 333 667 1,667 0.00 20 33 67 100 133 7 22 38 65 95 121 150 214 358 740 2,844 6 20 39 65 89 .82 .10 .97 .54 .90 .20 .13 .76 .24 .49 .17 .76 .21 .24 .70 .94 2,306 1,126 1,486 635 355 241 138 289 155 59 38 1,151 796 1,908 1,531 1,206 64 43 43 38 37 29 25 30 22 14 4 93 60 82 61 55 3694 1804 2380 1017 569 386 221 463 248 95 61 1844 1275 3056 2449 1932 103 69 69 61 59 46 40 48 35 23 6 149 96 131 98 88 28,885.87 39,867.17 92,744.99 66,656.42 54,566.51 46,781.54 33,178.35 99,435.26 88,842.61 70,346.91 173,494.49 12,471.91 25,766.53 119,918.32 160,888.64 173,764.07 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/wellgroup NMGAS NMGAS NMGAS NMGAS NMGAS NMGAS NMGAS tO NMGAS 1 *J NMGAS O NMGAS NMGAS NMGAS NMGAS NMGAS NMGAS NMGAS NMGAS New York NYGAS NYGAS NYGAS 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 1 2 3 Depth Range (Mft) 4-10 4-10 4-10 4-10 4-10 4-10 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 0-3 0-3 0-3 Range (Mcfd) 134 167 200 334 667 1,667 0.0 20 34 67 100 134 167 200 334 667 1,667 0.0 20 34 167 200 333 667 1, 667 0.00 20 33 67 100 133 167 200 333 667 1,667 0.00 20 33 67 Gas rate per well (Mcfd) 113 135 182 318 750 2,735 5 20 41 68 96 116 152 220 395 863 2,245 6 30 46 .46 .86 .92 .43 .05 .30 .21 .37 .01 .94 .16 .06 .41 .45 .22 .73 .17 .00 .40 .60 Number of wells 842 561 953 395 99 52 122 56 109 98 67 60 51 129 172 132 58 4,850 168 139 Number of fields 37 41 59 43 33 11 71 42 54 60 46 44 35 67 81 63 30 N/A N/A N/A Revised 1993 Number of wells 1349 899 1526 633 159 83 195 90 175 157 107 96 82 207 276 211 93 5391 187 155 Number of fields 59 66 94 69 53 18 113 68 87 96 73 70 56 108 130 101 48 1993 Total gas production (Mcdf ) 153,051 122,134 279, 137 201,565 119,257 227,030 1,015 1,833 7,176 10,823 10,289 11,141 12,497 45,633 109,080 182,246 208,800 32,334 5,684 7,222 .05 .41 .16 .31 .76 .01 .17 .70 .07 .60 .03 .49 .44 .12 .60 .19 .45 .25 .73 .41 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/ wellgroup W 1 to i — i NYGAS NYGAS NYGAS NYGAS Ohio OHGAS OHGAS OHGAS OHGAS OHGAS OHGAS OHGAS Oklahoma OKGAS OKGAS OKGAS OKGAS OKGAS OKGAS OKGAS OKGAS 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 8 Depth Range (Mft) 0-3 0-3 0-3 0-3 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 Range (Mcfd) 67 100 200 667 0.0 20 34 67 100 200 667 0.0 20 34 67 100 134 167 200 100 133 333 1,667 20 33 67 100 133 333 1,667 20 33 67 100 133 167 200 333 Gas rate per well (Mcfd) 72 127 282 853 4 23 48 74 130 288 880 5 16 30 52 78 100 126 172 .41 .67 .72 .38 .78 .62 .01 .27 .67 .46 .18 .39 .35 .36 .65 .12 .10 .05 .67 Number of wells 95 66 27 8 28,300 3,789 887 609 424 174 51 2,959 1,169 1,537 895 523 371 249 520 Number of fields N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 466 301 329 220 129 87 56 106 Revised 1993 Number Number of of wells fields 106 73 30 9 28587 3827 896 615 428 176 52 3114 492 1236 318 1624 348 946 233 553 136 392 92 263 59 550 112 1993 Total gas production (Mcdf ) 7,675.29 9,320.18 8,481.67 7,680.41 136,735.83 90,383.96 43,018.74 45,675.18 55,928.56 50,768.82 45,769.41 16,772.70 20,207.56 49,305.89 49,806.14 43,200.93 39,239.24 33,151.38 94,968.89 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State /wellgroup OKGAS OKGAS OKGAS OKGAS OKGAS OKGAS OKGAS tfl OKGAS 1 W OKGAS NJ OKGAS OKGAS OKGAS OKGAS OKGAS OKGAS OKGAS OKGAS OKGAS OKGAS OKGAS OKGAS 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Depth Range (Mft) 0-4 0-4 0-4 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 10 + 10 + 10 + 10 + 10 + 10 + 10+ Range (Mcfd) 334 667 1,667 0.0 20 34 67 100 134 167 200 334 667 1,667 0.0 20 34 67 100 134 167 667 1,667 0.00 20 33 67 100 133 167 200 333 667 1,667 0.00 20 33 67 100 133 167 200 Gas rate per well (Mcfd) 306. 597. 1,373 . 6. 16. 30. 52. 73. 96, 120, 165, 297 610 1,832 4 13 27 47 68 91 112 66 25 57 33 ,17 ,46 .75 .20 .28 .39 .91 .53 .86 .28 .75 .87 .03 .30 .39 .81 17 Number of wells 356 100 11 1,394 1,113 2,363 1,818 1,293 870 698 1,629 1,295 829 210 245 247 536 428 323 279 247 Number of fields 78 23 7 285 250 337 284 233 180 162 240 211 141 47 88 84 135 117 90 91 83 Revised 1993 Number of wells 376 106 12 1473 1176 2497 1921 1367 920 738 1725 1369 876 222 259 261 566 452 341 295 261 Number of fields 82 24 8 301 264 356 300 246 190 171 254 223 149 50 93 89 143 124 95 96 88 1993 Total gas production (Mcdf ) 115,305.26 63,308.57 16,482.87 9,320.09 19,011.26 76,051.91 101,333.91 100,064.44 88,578.20 88,850.30 286,193.81 407,322.50 535,113.28 406,767.22 1,231.15 3,619.45 15,300.55 21,378.93 23,321.44 27,084.81 29,275.96 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State /wellgroup OKGAS OKGAS OKGAS OKGAS Oregon ORGAS ORGAS ro 1 ORGAS NJ ^ ORGAS ORGAS ORGAS ORGAS ORGAS 30 31 32 33 1 2 3 4 5 6 7 8 Depth Range (Mft) 10 + 10 + 10 + 10 + 0-4 0-4 0-4 0-4 0-4 0-4 0-4 4-10 Range (Mcfd) 200 334 667 1,667 20 34 100 134 200 334 667 67 333 667 1,667 0.00 33 67 133 167 333 667 1,667 100 Gas rate per well (Mcfd) 162 300 678 2,394 28 65 116 162 213 392 996 95 .21 .85 .81 .68 .20 .90 .82 .73 .22 .94 .68 .07 ' 'umber of veils 649 833 810 547 1 1 2 1 5 4 4 1 Number of fields 124 131 107 86 1 1 1 1 1 1 1 1 Revised 1993 Number of wells 686 880 866 579 1 2 2 1 6 4 4 1 1993 Number Total gas of production fields (Mcdf) 131 111 138 264 113 587 ,278.89 ,747.52 ,852.20 91 1,386,517.3 6 1 1 1 1 1 1 1 1 1 3 1 28.20 131.80 233.63 162.73 ,279.32 ,571.77 ,986.73 95.07 Pennsylvania PAGAS PAGAS PAGAS PAGAS PAGAS PAGAS 1 2 3 4 5 6 0-4 0-4 0-4 0-4 0-4 0-4 0.0 20 34 67 134 200 20 33 67 100 167 333 5 24 46 89 157 345 .75 .76 .76 .33 .29 .63 23,975 2,301 1,660 516 359 148 N/A N/A N/A N/A N/A N/A 25709 2467 1780 553 386 159 147 61 83 49 60 54 ,934.68 ,087.79 ,238.16 ,401.62 ,714.43 ,955.66 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/wellgroup PAGAS 7 South Dakota SDGAS 1 SDGAS 2 SDGAS 3 SDGAS 4 SDGAS 5 SDGAS 6 Tennessee TNGAS 1 TNGAS 2 TNGAS 3 TNGAS 4 TNGAS 5 TNGAS 6 Texas -Gulf Coast TXGCGAS 1 TXGCGAS 2 TXGCGAS 3 TXGCGAS 4 TXGCGAS 5 Depth Range (Mft) 0-4 0-4 0-4 0-4 0-4 0-4 4-10 0-2 0-2 0-2 0-2 0-2 0-2 0-4 0-4 0-4 0-4 0-4 Range (Mcfd) 667 0.0 20 34 67 100 20 0.0 20 34 67 134 334 0.0 20 34 67 100 1,667 20 33 67 100 133 33 20 33 67 100 167 667 20 33 67 100 133 Gas rate per well (Mcfd) 1,063. 10. 27. 52. 72. 120. 25, 3, 27 40 77 164 440 6 21 40 66 93 94 77 .64 .23 .63 .33 .10 .94 .86 .35 .66 .16 .47 .61 .47 .17 .48 .24 Number of wells 43 14 5 28 3 1 1 560 15 11 7 3 1 722 348 566 384 242 Number of fields N/A 3 3 3 1 1 1 N/A N/A N/A N/A N/A N/A 328 211 293 227 150 Revised 1993 Number Number of of wells fields 46 10 2 4 2 20 2 2 1 1 1 1 1 582 16 11 7 3 1 661 300 319 193 518 268 351 207 220 138 1993 Total gas production (Mcdf ) 48, 941 107 110 1,044 145 120 25 2,292 445 443 543 492 440 4,369 6,848 20,807 23,334 20,513 .25 .69 .56 .60 .27 .33 .10 .87 .72 .80 .63 .47 .47 .22 .57 .10 .55 .79 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) w Gruy State/ wellgroup TXGCGAS TXGCGAS TXGCGAS TXGCGAS TXGCGAS TXGCGAS TXGCGAS TXGCGAS TXGCGAS TXGCGAS TXGCGAS TXGCGAS TXGCGAS TXGCGAS TXGCGAS TXGCGAS TXGCGAS TXGCGAS TXGCGAS TXGCGAS TXGCGAS 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Depth Range (Mft) 0-4 0-4 0-4 0-4 0-4 0-4 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 10 + 10 + 10+ 10+ Range (Mcfd) 134 167 200 334 667 1,667 0.0 20 34 67 100 134 167 200 334 667 1,667 0.0 20 34 67 167 200 333 667 1,667 0.00 20 33 67 100 133 167 200 333 667 1,667 0.00 20 33 67 100 Gas rate per well (Mcfd) 117. 148. 210. 391. 704. 7,122. 7. 20. 40. 69. 95. 124. 155. 217. 387. 804. 2,232. 6. 19. 40. 71. 98 55 55 74 65 61 23 99 10 98 90 85 43 77 37 99 76 73 69 21 14 lumber of wells 190 139 282 119 39 15 1,493 884 1,810 1,330 963 853 721 1,837 1,998 1,558 539 206 145 381 336 Number of fields 1?8 94 150 74 25 12 582 386 648 542 480 436 351 692 656 492 191 149 98 225 187 Revised 1993 Number of wells 174 127 258 109 34 14 1367 809 1657 1217 881 783 660 1681 1829 1426 493 189 133 351 308 Number of fields 117 86 137 68 23 11 533 353 593 496 439 399 321 633 601 450 175 137 90 206 171 1993 Total gas production (Mcdf ) 20,528.61 18,866.35 54, 323.12 42,699.76 23,958.00 99,716.49 9,885.28 16,982.14 66,439.96 85,165.84 84,486.31 97,754.72 102,586.06 366,067.63 708,494.06 1,147,911.69 1,100,751.34 1,271.77 2,619.00 14,114.56 21,912.31 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State /wellgroup TXGCGAS 27 TXGCGAS 28 TXGCGAS 29 TXGCGAS 30 TXGCGAS 31 TXGCGAS 32 TXGCGAS 33 tfl Texas -North 1 10 TXNGAS 1 TXNGAS 2 TXNGAS 3 TXNGAS 4 TXNGAS 5 TXNGAS 6 TXNGAS 7 TXNGAS 8 TXNGAS 9 TXNGAS 10 TXNGAS 11 TXNGAS 12 Depth Range (Mft) 10 + 10 + 10 + 10 + 10 + 10 + 10 + 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 4-10 4-10 Range (Mcfd) 100 134 167 200 334 667 1,667 0.0 20 34 67 100 134 167 200 334 667 0.0 20 133 167 200 333 667 1,667 0.00 20 33 67 100 133 167 200 333 667 1,667 20 33 Gas rate per well (Mcfd) 99 131 159 228 411 868 3,066 8 24 44 78 110 143 175 245 423 835 9 24 .40 .87 .80 .37 .79 .09 .41 .21 .27 .49 .28 .26 .11 .42 .36 .04 .42 .06 .08 Number of wells 325 292 243 696 884 828 514 4,337 1,512 1,776 951 500 373 273 613 358 78 1,779 1,083 Number of fields 159 160 130 282 291 280 170 596 342 351 179 84 59 39 51 28 10 439 307 Revised 1993 Number of wells 297 267 222 637 809 758 470 4133 1441 1692 906 476 355 260 584 341 74 1695 1032 Number of fields 145 146 119 258 266 256 155 568 326 334 171 80 56 37 49 27 9 418 293 1993 Total gas production (Mcdf ) 29 35 35 145 333 658 1,441 33 34 75 70 52 50 45 143 144 61 15 24 , 522.10 ,208.28 ,476.27 ,470.97 ,137.29 ,014.31 ,213.61 ,929.83 ,969.22 ,284.47 ,917.48 ,484.52 ,804.43 ,609.81 ,290.86 ,255.16 ,820.90 ,364.73 ,850.20 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) w Gruy State/ wellgroup TXNGAS TXNGAS TXNGAS TXNGAS TXNGAS TXNGAS TXNGAS TXNGAS TXNGAS TXNGAS TXNGAS TXNGAS TXNGAS TXNGAS TXNGAS TXNGAS TXNGAS TXNGAS TXNGAS TXNGAS 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 Depth Range (Mft) 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10+ 10+ 10 + Range (Mcfd) 34 67 100 134 167 200 334 667 1,667 0.0 20 34 67 100 134 167 200 334 667 1,667 67 100 133 167 200 333 667 1,667 0.00 20 33 67 100 133 167 200 333 667 1,667 0.00 Gas rate per well (Mcfd) 44. 77. 106. 136. 169. 225. 389. 771. 1,765. 8. 22. 40. 68. 94. 127. 162. 221. 410. 883. 2,623. 32 05 43 38 82 90 43 45 23 67 45 45 77 23 38 23 84 15 81 55 Number of wells 1,689 937 509 348 270 516 334 95 13 78 55 119 122 74 70 53 168 173 148 64 Number of fields 433 271 159 140 91 143 102 58 11 43 31 43 48 34 29 24 57 52 43 25 Revised 1993 Number of wells 1609 893 485 332 257 492 318 91 12 74 52 113 116 71 67 51 160 165 141 63 Number of fields 412 258 152 134 87 136 97 56 10 41 29 41 46 33 28 23 54 50 41 25 1993 Total gas production (Mcdf ) 71,318.36 68,803.79 51,618.71 45,279.17 43,643.84 111, 143.53 123,839.80 70,201.87 21,182.71 641.40 1,167.45 4,571.40 7,976.77 6,690.47 8,534.20 8,273.48 35,494.03 67,675.47 124,617.32 165,283.49 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/ wellgroup Depth Range (Mft) Range (Mcfd) Gas rate per well (Mcfd) Number of wells Number of fields Revised 1993 Number of wells Number of fields 1993 Total gas production (Mcdf ) Texas-West ro i 10 00 TXWGAS TXWGAS TXWGAS TXWGAS TXWGAS TXWGAS TXWGAS TXWGAS TXWGAS TXWGAS TXWGAS TXWGAS TXWGAS TXWGAS TXWGAS TXWGAS TXWGAS TXWGAS TXWGAS TXWGAS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 0.0 20 34 67 100 134 167 200 334 667 1,667 0.0 20 34 67 100 134 167 200 334 20 33 67 100 133 167 200 333 667 1,667 0.00 20 33 67 100 133 167 200 333 667 6. 23. 43. 73. 101. 130. 171. 223. 411. 788. 171,517. 9. 24. 45. 78. 108. 139. 170. 225. 383. 75 44 86 62 61 59 70 51 73 33 88 16 16 12 01 90 86 31 65 79 603 185 300 143 101 60 49 86 75 7 2 1,239 635 1,231 724 455 324 198 442 266 157 71 97 49 36 24 18 28 21 7 3 184 141 181 129 99 80 60 106 83 619 190 308 147 104 62 50 88 77 7 2 1268 651 1263 743 467 332 203 453 273 161 73 100 50 37 25 18 29 22 7 3 189 145 186 132 102 82 62 109 85 4, 4, 13, 10, 10, 8, 8, 19, 31, 5, 343, 11, 15, 56, 57, 50, 46, 34, 102, 104, 180 453 507 822 567 096 585 668 703 518 035 616 728 983 964 855 434 572 218 773 .32 .09 .96 .73 .40 .34 .00 .72 .06 .30 .77 .24 .74 .77 .74 .48 .88 .30 .12 .60 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/ wellgroup TXWGAS 21 TXWGAS 22 TXWGAS 23 TXWGAS 24 TXWGAS 25 TXWGAS 26 TXWGAS 27 W 1 TXWGAS 28 to ^° TXWGAS 29 TXWGAS 30 TXWGAS 31 TXWGAS 32 TXWGAS 33 Utah UTGAS 1 UTGAS 2 UTGAS 3 UTGAS 4 UTGAS 5 UTGAS 6 Depth Range (Mft) 4-10 4-10 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10 + 0-4 0-4 0-4 0-4 0-4 0-4 Range (Mcfd) 667 1,667 0.0 20 34 67 100 134 167 200 334 667 1,667 0.0 20 34 67 100 134 1,667 0.00 20 33 67 100 133 167 200 333 667 1,667 0.00 20 33 67 100 133 167 Gas rate per well (Mcfd) 767 2,366 7 23 42 69 102 131 161 225 424 984 3,705 5 18 38 64 95 130 .62 .38 .65 .40 .23 .86 .26 .07 .94 .42 .77 .36 .64 .74 .60 .23 .59 .18 .15 " umber of Jells 103 27 76 33 73 52 35 41 41 115 178 254 294 42 21 26 20 16 11 Number of fields 44 12 51 25 55 35 27 32 32 61 62 62 51 10 8 10 7 9 6 Revised 1993 Number of wells 106 28 78 34 75 53 36 42 42 118 183 261 302 57 29 35 27 22 15 Numbe r of field s 45 12 52 26 57 36 28 33 33 63 64 64 52 14 11 13 9 12 8 1993 Total gas production (Mcdf ) 81, 66, 3, 3, 3, 5, 6, 26, 77, 256, 1,119, 1, 1, 2, 1, 367.42 258.51 596.49 795.74 167.50 702 .80 681.19 504.90 801.58 599.90 732.54 917.51 103.18 327.39 539.26 338.03 744.02 093.94 952.23 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/wellgroup W 1 GO O UTGAS UTGAS UTGAS UTGAS UTGAS UTGAS UTGAS UTGAS UTGAS UTGAS UTGAS UTGAS UTGAS UTGAS UTGAS UTGAS UTGAS UTGAS UTGAS UTGAS UTGAS 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Depth Range (Mft) 0-4 0-4 0-4 0-4 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 10 + 10 + 10 + 10 + 10+ 10 + Range (Mcfd) 167 200 334 667 0.0 20 34 67 100 134 167 200 334 667 1,667 20 34 100 200 334 667 200 333 667 1,667 20 33 67 100 133 167 200 333 667 1,667 0.00 33 67 133 333 667 1,667 Gas rate per well (Mcfd) 141 167 427 749 8 17 37 58 90 114 138 196 341 644 10,117 18 66 127 113 148 699 .58 .92 .94 .47 .67 .72 .79 .23 .71 .97 .45 .51 .48 .98 .78 .20 .67 .30 .83 .52 .65 Number of wells 5 9 3 2 38 29 110 92 79 73 42 86 79 25 9 2 1 1 2 4 2 Number of fields 6 5 4 3 12 13 18 15 13 15 12 17 17 10 7 3 1 1 1 4 3 Revised 1993 Number of wells 7 12 4 3 55 39 149 125 107 99 57 117 107 34 12 3 1 1 3 5 3 Number of fields 8 7 5 5 16 17 24 20 18 20 16 23 23 14 9 5 1 1 2 5 5 1993 Total gas production (Mcdf ) 991 2,015 1,711 2,248 476 691 5,630 7,278 9,705 11,382 7,891 22,992 36,537 21,929 121,413 54 66 127 341 742 2,098 .06 .07 .78 .40 .86 .20 .76 .85 .62 .06 .92 .13 .88 .37 .38 .60 .67 .30 .50 .58 .95 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/ wellqrouo UTGAS Virginia VAGAS VAGAS VAGAS VAGAS VAGAS |# VAGAS 1 W VAGAS VAGAS VAGAS 28 1 2 3 4 5 6 7 8 9 Depth Range (Mft) 10 + 0-5 0-5 0-5 0-5 0-5 0-5 0-5 0-5 0-5 Range (Mcfd) 1,667 0.0 34 67 134 167 200 334 667 1,667 0.00 20 67 100 167 200 333 667 1,667 0.00 Gas rate per well (Mcfd) 15,430 11 37 100 154 209 286 508 1,331 4,761 .77 .28 .38 .52 .88 .58 .09 .35 .08 .80 " umber of jells 28 325 286 59 23 12 7 21 4 1 Number of fields 1 N/A N/A, N/A N/A N/A N/A N/A N/A N/A Revised Number of wells 36 590 519 107 42 22 13 38 7 2 1993 1993 Number Total gas of production fields (Mcdf) 1 555, 6, 19, 10, 6, 4, 3, 19, 9, 9, 507.73 657.50 402.37 755.19 504.83 610.71 719.11 317.15 317.53 523.60 West Virginia WVGAS WVGAS WVGAS WVGAS WVGAS WVGAS WVGAS 1 2 3 4 5 6 7 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0.0 20 34 67 134 200 667 20 33 67 100 167 333 1,667 5 23 43 83 146 322 988 .37 .12 .66 .36 .69 .51 .16 29,959 2,875 2,074 645 449 185 54 N/A N/A N/A N/A N/A N/A N/A 31645 3037 2191 681 474 195 57 169, 70, 95, 56, 69, 62, 56, 963.19 200.86 648.45 765.80 528.80 888.84 324.90 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/wellgroup Wyoming WYGAS WYGAS WYGAS WYGAS WYGAS WYGAS W WYGAS 1 ^ WYGAS WYGAS WYGAS WYGAS WYGAS WYGAS WYGAS WYGAS WYGAS WYGAS WYGAS WYGAS WYGAS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Depth Range (Mft) 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 0-4 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 4-10 Range (Mcfd) 0.0 20 34 67 100 134 167 200 334 667 1,667 0.0 20 34 67 100 134 167 200 334 20 33 67 100 133 167 200 333 667 1,667 0.00 20 33 67 100 133 167 200 333 667 Gas rate per well (Mcfd) 6 21 42 66 85 132 150 218 330 581 5,628 6 21 41 66 95 120 160 219 388 .63 .66 .31 .79 .06 .51 .99 .29 .86 .26 .49 .83 .31 .52 .49 .48 .08 .95 .44 .14 Number of wells 77 30 83 36 26 18 19 44 34 28 10 74 59 178 122 128 96 100 241 268 Number of fields 43 18 39 23 22 16 14 30 24 15 10 47 38 75 59 58 47 43 65 64 Revised 1993 Number of wells 80 31 86 37 26 19 20 46 35 30 10 77 61 185 125 133 100 104 250 278 Number of fields 45 19 40 24 23 17 15 31 25 16 10 49 39 78 61 60 49 45 67 66 1993 Total gas production (Mcdf) 3 2 2 2 3 10 11 17 56 1 7 8 12 12 16 54 107 530.42 671.46 ,638.66 ,471.26 ,211.60 ,517.68 ,019.75 ,041.21 ,580.13 ,437.75 ,284.90 525.79 ,299.95 ,680.51 ,310.83 ,699.39 ,008.44 ,738.38 ,858.96 ,902.03 (continued) ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy State/ wellgroup WYGAS WYGAS WYGAS WYGAS WYGAS WYGAS WYGAS ft) WYGAS 1 £J WYGAS WYGAS WYGAS WYGAS WYGAS 21 22 23 24 25 26 27 28 29 30 31 32 33 Depth Range (Mft) 4-10 4-10 10 + 10 + 10 + 10 + 10 + 10 + 10 + 10+ 10 + 10 + 10+ Range (Mcfd) 667 1,667 0.0 20 34 67 100 134 167 200 334 667 1,667 1,667 0.00 20 33 67 100 133 167 200 333 667 1,667 0.00 Gas rate per well (Mcfd) 765 2,124 4 13 30 55 75 100 128 185 370 721 9,085 .06 .09 .60 .95 .37 .20 .65 .22 .87 .36 .15 .65 .16 Number of wells 209 60 51 30 88 80 57 37 40 97 145 90 120 Number of fields 53 22 37 25 56 51 36 22 31 36 48 41 33 Revised 1993 Number of wells 217 62 53 31 91 83 59 38 42 101 150 96 124 Number of fields 55 23 38 26 58 53 37 23 33 37 50 42 34 1993 Total gas production (Mcdf) 166,017.94 131,693.82 243.83 432.59 2,763.99 4,581.46 4,463.06 3,808.18 5,412.40 18,721.03 55,521.76 69,278.04 1,126,560.0 5 ------- APPENDIX B: GRUY ENGINEERING CORPORATION'S GAS WELLGROUPS BY STATE (CONTINUED) Gruy Revised 1993 State/wellgroup Depth Range (Mft) Range (Mcf«) Gas rate per well (Mcfd) Number of wells Number of fields Number of wells Number of fields 1993 Total gas production (Mcdf ) ro i OJ (continued) ------- APPENDIX C DERIVATION AND INTERPRETATION OF SUPPLY FUNCTION PARAMETER (3 ------- APPENDIX C DERIVATION AND INTERPRETATION OF SUPPLY FUNCTION PARAMETER 3 The generalized Leontief functional form that is used to project supply relations for each producing field is set out in Equation (4-1), repeated below for clarity: q,- = YJ + - 1 D 2 1/2 1 (4-1) A closer look at the supply specification in Eq. (4-1) requires an interpretation of the (3 parameter. Although this parameter does not have an intuitively appealing interpretation, it is related to the producing field's supply elasticity for natural gas--a well-known model parameter. An individual field's supply elasticity for natural gas, £.., can be expressed as: 3q /q dq /dr Sj = -7—— = ;— (C-la) dr/r q-j/r or ^j ~ -7— ' — (C-lb) dr q. where dq^/dr is the derivative of quantity supplied by the field with respect to wellhead price (r). To establish the relationship between ^ and (3 we start by taking the derivative of the facility supply function C-l ------- (Equation [4.1]) with respect to price, and multiply the expression by r/q.j resulting in the following expression for the supply elasticity: 8r r *J 4q. 1/2 (C-2) Since economic theory dictates that the supply elasticity is positive (i.e., ^ > 0) and qd and r are positive, Equation (C-2) above indicates that the parameter 3 is negative, i.e., 3 < 0. Finally, the solution for (3 from Equation (C-2) reveals the following expression: -1/2 (C-3) where E, = market supply elasticity, and q = production-weighted average annual level of natural gas production per well. This approach derives a single (3 value based on market-level data. C-2 ------- APPENDIX D NATURAL GAS MARKET MODEL SUMMARY ------- APPENDIX D NATURAL GAS MARKET MODEL SUMMARY This appendix provides a complete list of the exogenous and endogenous variables, as well as the model equations. D.I EXOGENOUS VARIABLES nf Demand elasticity for natural gas by end-user (i) . ^ Import supply elasticity of foreign natural gas. 3,y. Supply function parameters for natural gas by U.S. producing field (j). A1 Import supply function parameter for natural gas (Multiplicative constant). Bf Demand function parameters for natural gas by end-user (i) (Multiplicative constants). c. Regulatory control costs (per Mcf of output) for producing field (j). D.2 ENDOGENOUS VARIABLES r Wellhead price of natural gas ($/Mcf). pi End-user price of natural gas where i represents residential, commercial, industrial, and utility consumers. <3jS ' q1 • Qs Domestic (field-level) and foreign supply of natural gas (q^ • q1) and market supply of natural gas (Q s\ D-l ------- q^ • QD Domestic end-user demand (q^) and market demand for natural gas (QD) . D.3 MODEL EQUATIONS Market Supply of Natural Gas: Qs - q1 +E q/ , where q = and or 1/2 without regulation y^ s r - c. 1/2 with regulation Market Demand of Natural Gas: where D-2 ------- APPENDIX E APPROACH TO ESTIMATING ECONOMIC WELFARE IMPACTS ------- APPENDIX E APPROACH TO ESTIMATING ECONOMIC WELFARE IMPACTS The economic welfare implications of the market price and output changes of natural gas with the regulations can be examined using two slightly different tactics, each giving a somewhat different insight but the same implications: (1) changes in the net benefits of consumers and producers based on the price changes, and (2) changes in the total benefits and costs of natural gas based on the quantity changes. For this analysis, we focus on the first measure— the changes in the net benefits of consumers and producers. Figure E-l depicts the change in economic welfare by first measuring the change in consumer surplus and then the change in producer surplus. In essence the demand and supply curves previously used as predictive devices are now being used as a valuation tool. This method of estimating the change in economic welfare with the regulations decomposes society into consumers and producers. In a market environment, consumers and producers of the good or service derive welfare from a market transaction. The difference between the maximum price consumers are willing to pay for a good and the price they actually pay is referred to as consumer surplus. Consumer surplus is measured as the area under the demand curve and above the price of the product. Similarly, the difference between the minimum price producers are willing to accept for a good and the price they actually receive is referred to as producer surplus. Producer surplus is measured as the area above the supply curve to the price of the product. These areas may be thought of as consumers' net benefits of E-l ------- Q Q/t (a) Change in Consumer Surplus with Regulation $/Q Q2 Q, Q/t (b) Change in Producer Surplus with Regulation ,S' Q, Q/t (c) Net Change in Economic Welfare with Regulation Figure E-l. Economic welfare changes with regulation: consumer and producer surplus. E-2 ------- consumption and producers' net benefits of production respectively. In Figure E-l, baseline equilibrium occurs at the intersection of the natural gas demand curve, D, and supply curve, S. Price is Pl with quantity Qj. The increase cost of production with the regulations will cause the market supply curve to shift upward to S'. The new equilibrium price of paper is Px. With a higher price for natural gas there is less consumer welfare, all else being unchanged. In Figure E-l(a), area A represents the dollar value of the annual net loss in consumers' benefits with the increased price of natural gas. The rectangular portion represents the loss in consumer surplus on the quantity still consumed, Q2, while the triangular area represents the foregone surplus resulting from the reduced amount of natural gas consumed, Qi-Q2- In addition to the changes in consumer welfare, there are also changes in producers welfare with the regulations. With the increase in natural gas price producers receive higher revenues on the quantity still purchased, Q2. In Figure E-l(b), area B represents the increase in revenues due to this increase in price. The difference in the area under the supply curve up to the original market price, area C, measures the loss in producers' surplus, which includes the loss associated with the quantity no longer produced. The net change in producers' welfare is represented by area B-C. The change in economic welfare attributable to the compliance costs of the regulations is the sum of consumer and producer surplus changes, that is, - (A) + (B-C). Figure E-l(c) shows the net (negative) change in economic welfare associated with the regulations as area D. However, this analysis does not include the benefits that occur outside the natural gas market--the value of the reduced levels of air E-3 ------- pollution with the regulations. Inclusion of this benefit may reduce the net cost of the regulations or even make them positive, that is, total benefits, private market benefits as estimated above plus the benefits in the quality of the environment, may exceed total costs. E-4 ------- APPENDIX F DATA SUMMARY OF COMPANIES INCLUDED IN FIRM-LEVEL ANALYSIS: 1993 ------- TABLE F-l. DATA SUMMARY OF COMPANIES INCLUDED IN FIRM-LEVEL ANALYSIS: 1993 Comp. ID 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Company Name Adams Resources & Energy Inc . Alamco, Inc. Alexander Energy Corp. Alfa Resources Corp. Allegheny & Western Energy Corp. Alta Energy Corp. Amber Resources Co. Amerada Hess Corp. American Exploration Co. American Natural Energy Corp. Amoco Corp. Apache Corp . ARCO Ashland Oil Inc. Barrett Resources Corp. Basic Earth Science Systems Inc . Basin Expl. Inc. SIC Code 1311 1311 1311 1311 4924 1311 1311 2911 1311 1311 2911 1311 2911 2911 1311 1382 1311 Employment (#) 291 87 46 11 565 31 2 10,100 297 121 46,994 884 26,800 31,800 60 13 123 Sales ($000/yr) 695, 11, 14, 1, 185, 16, 5,872, 59, 8, 28,617, 466, 19,183, 10,283, 42, 1, 37, 445 900 207 354 534 926 469 741 088 425 000 638 000 325 686 653 968 Assets ($000) 50, 43, 54, 1, 195, 58, 3, 8,641, 185, 21, 28,486, 1,592, 23,894, 5,551, 90, 2, 131, 295 261 158 261 680 467 604 546 598 169 000 407 000 817 740 745 520 Total Liquid Net Income Production ($000/yr) (Bcf) 1,452 1,552 1,245 5 3,746 (3,750) (10) (268,203) (19,186) 704 1,820,000 37,334 269,000 142,234 5,756 (23) 5,150 0.54 0.37 2.02 0.6 0.05 4.92 0.02 260 11.89 0.81 1000 121 2210 4 0.75 0.77 8.44 Total Natural Gas Production (Bcf) 0. 3. 3. 0. 1. 1. 0. 183. 11. 2. 867. 109. 332. 36. 7. 0. 13. 885 197 692 Oil 518 665 232 000 790 640 000 300 000 200 214 126 330 (continued) ------- TABLE F-l. DATA SUMMARY OF COMPANIES INCLUDED IN FIRM-LEVEL ANALYSIS: 1993 (CONTINUED) Comp . ID 18 19 20 21 22 23 24 I 25 to 26 27 28 29 30 31 32 33 34 Company Name Belden & Blake Corp. Bellwether Exploration Co. Berry Petroleum Co. Black Dome Energy Corp. Black Hills Corp. Box Energy Corp . Western Gas Resources Louis Dreyfus Natural Gas Corp. Gallon Consolidated Partners LP Castle Energy Corp. Chevron Corp. Cliffs Drilling Co. Coastal Corp. Columbia Gas System Columbus Energy Corp. Corns tock Resources Inc . Conoco Inc . SIC Code 1311 1311 1311 1311 1311 1311 4923 1311 1311 1311 2911 1381 1311 1311 1382 1311 2911 Employment (#) 292 6 125 3 449 57 825 556 126 402 49,245 352 16,570 10,172 36 27 25,782 Sales ($000/yr) 77, 3, 67, 139, 37, 932, 95, 8, 601, 37,082, 66, 10,136, 3,398, 12, 22, 15,771, 718 655 761 678 373 102 338 181 805 000 000 396 100 500 913 453 000 Assets ($000) 135, 12, 135, 1, 352, 128, 1,114, 481, 19, 392, 34,736, 133, 10,277, 6,957, 22, 74, 11,938, 174 480 159 040 853 882 748 488 349 738 000 523 100 900 938 095 000 Total Liquid Net Income Production ($000/yr) (Bcf) 3 22 2 38 2 67 1,265 3 115 152 3 2 812 ,220 41 32 62 ,946 ,161 ,102 ,260 165 ,837 ,000 ,626 ,800 ,200 ,806 ,324 ,000 4.53 0.49 36.17 0.03 3.27 8.04 1.07 21.06 2.64 0.45 1440 0.44 49.4 36.03 2.93 2.78 400 Total Natural Gas Production (Bcf) 7.373 0.483 0.771 0.286 0.777 3.912 15.850 30.540 6.847 3.472 751.000 1.651 122.000 71.500 1.693 7.274 305.000 (continued) ------- TABLE F-l. DATA SUMMARY OF COMPANIES INCLUDED IN FIRM-LEVEL ANALYSIS: 1993 (CONTINUED) Comp. ID 35 36 37 38 39 40 7 41 w 42 43 44 45 46 47 48 49 50 51 Company Name Consolidated Natural Gas Co. Crystal Oil Company Delta Natural Gas Co . Inc . Eagle Exploration Co. Edisto Resources Corp. Energy Development Corp. Enron Corp . Ensearch Corp. Equitable Resources Inc. Espero Energy Corp. Exxon Corp . Forest Oil Corp. Great Northern Gas Co. Hallwood Energy Prtnr LP KN Energy Inc . Lomak Petroleum Inc . Louisiana Land & Exploration SIC Code 4923 1311 4923 1311 4923 1311 1382 1311 4923 1311 2911 1311 1311 1311 4923 1311 1382 Employment (#) 7,615 92 177 2 192 235 7,780 10,400 2,454 8 95,000 183 4 200 1,600 150 709 Sales ($000/yr) 3,194, 35, 31, 175, 281, 8,003, 1,902, 1,094, 6, 111,211, 105, 49, 493, 19, 815, 616 940 221 355 069 066 939 299 794 050 000 148 667 613 349 075 400 Assets ($000) 5,409, 117, 55, 1, 168, 679, 11,504, 2,760, 1,946, 9, 84,145, 426, 1, 171, 731, 76, 1,838, 586 334 130 336 243 437 315 261 907 383 000 755 469 624 269 333 700 Total Liquid Net Income Production ($000/yr) (Bcf) 205 1 2 5 46 332 59 73 5,280 (21, 13 24 1 9 ,916 ,040 ,621 120 ,600 ,341 ,522 ,237 ,455 116 ,000 213) 177 ,064 ,275 ,391 ,600 39.07 11.06 0 0.03 3.53 26.1 25.2 24.81 21.12 1.26 2020 14.93 0 8.81 1.51 3.18 88 Total Natural Gas Production (Bcf) 124.000 7.551 0.270 0.009 11.160 95.000 240.000 70.030 53.550 1.891 697.000 41.110 0.384 14.070 5.100 2.590 65.600 (continued) ------- TABLE F-l. DATA SUMMARY OF COMPANIES INCLUDED IN FIRM-LEVEL ANALYSIS: 1993 (CONTINUED) Comp. ID 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 Company Name Maxus Energy Corp. Meridian Oil Inc. Mesa Inc. Mitchell Energy & Development Corp. Mobil Corp. Noble Affiliates Inc. Nuevo Energy Co . Occidental Petroleum Corp. ONEOK Inc. Oryx Energy Co . Pennzoil Co. Phillips Petroleum Co. Plains Petroleum Co. Pogo Producing Co. Presidio Oil CLA Questar Corp. Sage Energy Co. Samson Energy Co. LP Sante Fe Energy Resources Shell Oil Co. Snyder Oil Corp. SIC Code 1311 1311 1311 1311 2911 1311 1382 1311 4923 1382 2911 1311 1311 1311 1382 1311 1311 1311 1311 2911 1311 Employment (#) 2,190 1,700 382 2,900 63,700 503 630 23,600 2,208 1,600 9,901 21,400 106 100 137 2,659 105 176 839 28,893 289 Sales ($000/yr) 807, 1,246, 232, 952, 63,975, 286, 107, 8,544, 789, 1,054, 2,782, 12,545, 64, 139, 48, 664, 43, 22, 446, 21,092, 229, 000 502 908 809 000 583 832 000 111 000 397 000 280 568 267 062 399 374 000 000 685 Assets ($000) 1, 4, 1, 2, 40, 1, 17, 1, 3, 4, 10, 1, 1, 26, 987,400 375,165 533,382 415,476 585,000 067,996 287,591 123,000 104,468 624,000 886,203 868,000 126,792 239,774 280,420 417,687 49,632 41,805 076,900 851,000 479,536 Total Liquid Net Income Production ($000/yr) (Bcf) (49, 303 (102, 19 2,084 12 8 283 38 (100, 141 243 1 25 (7, 81 6 4 (77, 781 25 400) ,138 448) ,687 ,000 ,625 ,933 ,000 ,424 000) ,856 ,000 ,727 ,061 233) ,692 ,735 ,329 100) ,000 ,664 46 153.1 57.88 203 1110 60.64 19.33 210 4.43 240 240 470 12.2 42.2 14.36 20.56 15.18 2.51 219 1470 34.51 Total Natural Gas Production (Bcf) 76.000 336.000 79.820 74.400 558.000 71.310 16.770 219.000 8.401 191.000 220.000 345.000 23.760 32.320 15.340 67.810 6.305 7.641 60.300 539.000 35.080 (continued) ------- TABLE F-l. DATA SUMMARY OF COMPANIES INCLUDED IN FIRM-LEVEL ANALYSIS: 1993 (CONTINUED) Comp. ID 73 74 75 76 77 78 79 80 Company Name Sonat Inc. Sooner Energy Corp. Texaco Inc . Tide West Oil Co. Unocal Corp. USX-Marathon Group Wainoco Oil Corp. Wolverine Exploration Co. SIC Code 4923 1311 2911 1311 2911 2911 2911 1311 Employment (#) 5,300 2 38,000 34 14,687 44, 872 434 4 Sales ($000/yr) 1,966,664 392 34,071,000 96,302 8,344,000 11,962,000 366,556 7,061 Assets ($000) 3,213,997 352 26,626,000 106,606 9,254,000 10,806,000 296,811 10,763 Total Liquid Net Income Production ($000/yr) 261,240 219 1,068,000 4, 030 213,000 (29,000) 2,504 4,953 (Bcf) 37.44 0.02 1550 0.58 480 410 7.47 1.12 Total Natural Gas Production (Bcf) 146.100 0.077 652.000 2.317 365.000 193.000 2.504 1.467 ------- TECHNICAL REPORT DATA (Please read Instructions on reverse before completing) 1 REPORT NO 2 EPA-452/R-99-003 4 TITLE AND SUBTITLE Economic Impact Analysis of the Oil and Natural Gas Production NESHAP and the Natural Gas Tranmission and Storage NESHAP 7 AUTHOR(S) Lisa Conner, Innovative Strategies and Economics Group 9. PERFORMING ORGANIZATION NAME AND ADDRESS U.S. Environmental Protection Agency Office of Air Quality Planning and Standards Air Quality Strategies and Standards Division (MD-15) Research Triangle Park, NC 27711 12. SPONSORING AGENCY NAME AND ADDRESS John Sietz, Director Office of Air Quality Planning and Standards Office of Air and Radiation U.S. Environmental Protection Agency Research Triangle Park, NC 27711 3. RECIPIENT'S ACCESSION NO 5. REPORT DATE May 1999 6. PERFORMING ORGANIZATION CODE 8. PERFORMING ORGANIZATION REPORT NO. 10. PROGRAM ELEMENT NO. 11 CONTRACT/GRANT NO 13. TYPE OF REPORT AND PERIOD COVERED 14 SPONSORING AGENCY CODE EPA/200/04 15 SUPPLEMENTARY NOTES 16 ABSTRACT This report evaluates the impacts of the final rule for controls of hazardous air pollutants (HAPs) in the Oil and Natural Gas Production industry and the Natural Gas Transmission and Storage industry. Total social costs are estimated by evaluating costs of compliance with the rule and associated market impacts, including: price changes in the natural gas market, adjustments in quantity produced, small entity impacts, and employment impacts . H KEY WORDS AND DOCUMENT ANALYSIS a DESCRIPTORS economic impacts small entity impacts social cost 18 DISTRIBUTION STATEMENT Release Unlimited b. IDENTIFIERS/OPEN ENDED TERMS c COSATI Field/Group Air Pollution control Economic Impact Analysis Regulatory Flexibility Analysis 19 SECURITY CLASS (Repon) 21. NO. OF PAGES Unclassified 20 SECURITY CLASS (Page) 22. PRICE Unclassified EPA Form 2220-1 (Rev. 4-77) PREVIOUS EDITION IS OBSOLETE ------- |