800R79101
5177
                      POTENTIAL PRODUCTION IMPACTS

                               FROM THE

                UNDERGROUND INJECTION CONTROL REGULATIONS
                    Environmental Protection Agency
                       Office of Drinking Water
                           Washington, D.C.
                               July 1979

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                           PREFACE








     The following analysis was performed to estimate the



potential impact of the State Underground Injection Control



Programs on operators of Class II wells.  The proposal of



the regulations (44 Federal Register 23,758, April 20, 1979)



included an estimate of 12,000 barrels of oil per day that



could potentially be affected by promulgation.  After this



figure was published, significant interest was shown in the



12,000 barrels per day figure and in the methodology employed



for its derivation.  Therefore, EPA decided to prepare In



succinct form a description of the methodology and its



application.  Development of this description led to refine-



ments in application of the models used.  These refinements



led to a reduction in the potential impact estimates from



12,000 barrels per day to 9,400 barrels per day.



     This analysis contains approaches frequently used and



recognized In engineering and economic estimating procedures.



They provided a way of managing and reviewing the complex



issues of oil production.  EPA welcomes comments  on this



analysis including those which could Improve the  models and



their applications.

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                      EXECUTIVE SUMMARY
     The potential of Underground Injection Control Regulations
to reduce current production levels of oil has been analyzed
through the application of capital budgeting and discounted
cash flow models.  The models used contain some of the tools
that an investor may apply for deciding the merits of a
specific investment alternative.   The question that these
models attempt to answer may be stated accordingly:  "Is the
return on the investment worth the cost?".  An investor may
use these techniques to analyze the future revenues that may
be expected from a given investment opportunity.  The expected
revenue stream may then be compared with the expected cost
stream to estimate the Return on Investment (R.O.I.).  When
the revenue stream exceeds the cost stream (including taxes)
by a margin equal to or greater than that of other investment
alternatives then the investor's decision will probably be
to undertake the investment alternative.

     This analysis contains several simplifying assumptions
so that the complexities of oil production activities and
processes can be managed in a more logical and rational
manner.  Most of the assumptions used are contained in the
report Cost of Compliance Proposed Underground Injection
Control Program - Oil and Gas WeTTs"June1979, prepared by
Arthur D. Little, Inc.  Several additional assumptions are
made in this phase of the analysis and they are described in
the narrative in detail.

     The analysis indicates that less than 9^00 barrels of
oil per day or about one-tenth of one percent of total
annual domestic production would potentially be affected by
implementation of requirements in the UIC regulations.  This
amounts to approximately nine-tenths of one percent of total
stripper production.  The summary table below presents
production Impacts by type and category of injection well
based on the program characteristics during the first five
years.  As explained in the text, the methodology produces
an upper limit on the actual impact.  Moreover, as the price
of petroleum products increases through the activity of
government and markets, Including the possibility of price
decontrol, the impact of the program will be further reduced.
                              11

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                        SUMMARY TABLE

           PRODUCTION IMPACTS PROM THE UNDERGROUND
                INJECTION CONTROL REGULATIONS
       (BASED UPON THE FIRST FIVE YEAR COST ESTIMATES)

                                        Production
                                       (barrels/day)

New
     Enhanced Recovery Wells               1900
     Salt Water Disposal Wells              600

Existing
     Enhanced Recovery Wells               4300
     Salt Water Disposal Wells             2600
                                           9400

The methodologies of capital budgeting and discounted cash
flow applied in this analysis make use of decision tree
analysis and profitability distributions to account for the
possibility of various types of testing and remedial action
that may be required of an operator by the proposed regulations

     The revenue, cost of production and cash flow scenarios
which support the profitability assumptions used for this
analysis were based upon work by Arthur D. Little, Inc., and
are included in their preliminary analyses of the UIC program.
The data on well populations, remedial actions and testing
regimes are included in their report of June 1979.  Their
preliminary work provides examples of historical lease
profitability and cash flow analysis during the year 1976
for various locations around the country including south
Louisiana, west Texas, east central California, Wyoming, and
Appalachia.  Arthur D. Little, Inc.'s work further provides
examples of lease profitability and cash flow analysis
forecasts for the year 198l.  Their report has provided much
insight into types of cost impacts that may be felt by the
industry.  This awareness has been reflected in the proposed
regulations and in the impact analysis.
                              111

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        PRODUCTION IMPACT ANALYSIS FOR CLASS II WELLS

A.   Introduction

     This section contains an analysis of the potential
impact of the proposed Underground Injection Control (UIC)
Regulations on production.  The regulations could conceivably
affect production in one of the following four ways:

     (l)  by increasing the capital investment and operating
     and maintenance costs for a new oil lease such that the
     decision to drill is changed.

     (2)  by increasing the operating and maintenance cost
     on existing producing and injection wells such that the
     economic life of these wells is shortened.

     (3)  by imposition of remedial costs on existing wells
     such that the economic life is shortened.

     (4)  through lost production due to additional downtime
     of producing wells to comply with UIC regulations.

     The Proposed Regulations

     The focus of this analysis will include Items 1, 2, and
3 because all potential production impacts will become
evident in one or several of these ways.  Item 4 is unlikely
to occur because compliance with the regulations will take
place during normal downtime.  Therefore, this analysis will
approach new injection wells and existing injection well
issues separately.  The narrative will include a step-by-
step review of the analysis for new enhanced recovery wells.
Appendix A will contain the analytical decision trees and
corresponding tables for new salt water disposal wells
without the narrative since the approach is basically the
same for both types of wells.  Appendices E and C will
contain analyses for existing secondary recovery and salt
water disposal wells respectively.

     There are some differences between the approaches used
for new Injection wells and those for existing injection
wells.  The reason for these differences is that the "area
of review'1 concept in the regulations is applicable only to
new wells.  This concept takes Into consideration abandoned
and producing wells within the area of review of a new
injection.  This requirement seeks to assure the mechanical
integrity of wells within the area of review to prevent the
possibility of the migration of injected fluids into potable
water aquifers.  The decision tree analysis for new injection
wells reflects relevant probabilities, explained in detail
below, for abandoned and producing wells within the area of
review of new injection wells.

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     The proposed regulations contain distinctions between
two specific types of injection wells:  salt water disposal
and enhanced recovery.  A further differentiation is made
between new and existing injection wells.   Within the new
enhanced recovery category, there are newly drilled wells
and converted producing wells.  These distinctions are
clearly needed to recognize the differences in construction
characteristics between types of wells and the evolving
technological methods for construction.  Construction
characteristics and operational practices  are the variables
which determine the degree of safety assured for drinking
water aquifers through which these wells penetrate.  The
area of review is only applicable to new injection wells;
recovery wells and salt water disposal wells will be treated
separately.

     An additional note is added on a procedural difference
between existing salt water disposal wells and existing
enhanced recovery injection wells.  Existing enhanced recovery
wells are administered by rule and existing salt water disposal
wells are administered by permit.  Permitting is considered
a fixed cost  for purposes of analysis.  Therefore a fixed
cost is attributed to the existing salt water disposal wells
but there are no fixed costs shown for existing secondary
recovery wells.

     The analysis as described above is developed in two
parts.  The new enhanced recovery wells are analyzed in
detail with accompanying narrative to demonstrate the method-
ology and its application. Corresponding tables and results
without the narrative are contained in Appendicies A, B, and
C for new salt water disposal wells, existing enhanced
recovery wells, and existing salt water disposal wells since
the methodologies applied are essentially the same.

B.   Methodology

      (1)  Overview

          The decision to close  a production well or to
discontinue production is usually a financial decision.  It
can be viewed as a capital budgeting problem. Simply stated,
is the return on investment worth the  costs? Several different
technical approaches  are typically used to make this decision
such  as payback period, return on book value or discounted
cash  flow.  The discounted cash  flow model, however, is
recognized  as the most comprehensive and technically correct
approach and  is used  as the basis for  the analysis in this
section.  A production well is predicted to close when the
present value of the  stream of future  profits from operations
is less than  the present value of the  cost of compliance
with  the UIC  regulations.  In other words, the operator will
discontinue production when profitability is less  than
alternative investment opportunities.

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     Key variables in the analysis include the costs of
compliance, oil production associated with an injection
well, and profitability per barrel of oil produced.   The
Arthur D. Little study Cost of Compliance - Proposed
Underground Injection ControT~Program - Oil and Gas~Wells,
June 1979, was the source of much of the data for this
analysis.  The following tables in the report were used:

     0    total cost of complianceTable XIV-1
     0    average production levels--Table II-3
     0    average number of producing wells per injection
          wellTables VIII-8, VIII-9, and VIII-10

These tables provide data on the unit cost of compliance per
well and total cost to the oil industry over the first
five years of the program.  The analysis of production
impacts includes a probabilistic approach to identify the
set and associated frequency of wells faced with a combination
of factors which potentially affect production.  Separate
probability distributions are included for the cost of
compliance for injection wells, producing wells and abandoned
wells.
     (2)  Fixed Cost Per Injection Well

          Table XIV-1 of the ADL report lists the total cost
to the oil and gas industry for licensing new injection
wells.  Costs can be divided into a fixed and probabilistic
component.  Fixed costs are borne by all new injection wells
as well as existing salt water disposal wells and include
the following items:

                           Table 1
                FIXED COST PER INJECTION WELL
Permit application

Review completion records on
producing wells

Review records on completion
of abandoned wells

                    Total
                                   New       New Salt  Existing
                                   Secondary  Water    Salt Water
                                   Recovery  Disposal  Disposal
$367
  17
  50
$620
  17
	50_

$687
$240
                    $240
The review of records on the completion of producing and
abandoned wells is to ascertain from existing documentation
whether these wells are constructed in such a way that they

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protect nearby potable water aquifers from contamination.
This documentation includes the amount of cement used,  depth
of surface casing and data on other construction techniques.

     The probabilistic items are those requirements with
which the injection well operator may be out of compliance.
A well that is leaking injection fluid into surrounding
aquifers may require a cement squeeze to prevent further
leakage.  An abandoned well that is the source of fluid
migration may require remedial action such as plugging.
These probabilistic items with their probabilities and  unit
costs are shown in Table 2.

                           Table 2
                     PROBABALISTIC COSTS
                       (over 5 years)
                                   Cost Per
                                Injection Well

                                   $ 1,500
 Fraction of
Affected Wells

    0.250
Well Testing Costs /I

Remedial Action on
Injection Wells                     30,000           0.001

Plug Abandoned Wells                20,000           0.009

Squeeze Cement Plug in
Producing Wells                     30,000           0.003

/TIncludes test of mechanical integrity, fluid movement
     along exterior of an injection well or producing well in
     the zone of endangerment.   A maximum of one test per
     injection well is assumed.

C.   Enhanced Recovery Wells

     (1)  Decision Tree Analysis

          An enhanced recovery operation may incur costs
from more than one requirement placed upon it by the UIC
program.  Thus, all combinations of requirements and associated
probabilities were computed.  Figure 1 shows the decision
tree from the Arthur D. Little report used to calculate the
probabilities.  Each branch of Figure 1 is extended by the
decision tree in Figure 2 to account for abandoned and
producing wells.

     The probability of occurrence of a specific set of
event combinations is determined by following the appropriate
limbs of the decision tree.  For example, starting with
Figure  1, the probability that a new enhanced recovery well
is newly drilled is  .37 based on 20,000 new enhanced recovery
wells over five years.  Further, the probability that a

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newly drilled enhanced recovery well will be required to
only report its mechanical integrity is 1.00. This probability
reflects the assumption that newly drilled wells are less
likely to have problems than converted producing wells.  This
specific set of "branches" or "events" have been coded
number 2 shown to the right on Figure 1.

     The next step is to account for the probabilities of
event combinations affecting producing and abandoned wells
within the area of review, recognizing that this concept is
only applicable to new injection wells.  This is accomplished
by extending branch number 2 by all branches in Figure 2.
The branches on Figure 2 are coded "a" through "f" shown to
the right.  For example, branch number 2 on Figure 1 is
extended by branch number a on Figure 2.  This extension
indicates that the probability that an abandoned well is
located within the area of review and does not require
remedial action is .9^-  The estimated cost of no remedial
action is $0.  The next extension is the probability that
producing wells located within the area of review require no
testing is .93.  Therefore the probability of the event
combination coded 2a is calculated by multiplying together
the individual probabilities.  That is:
                                             .37
     Newly drilled ER wells

     Report mechanical integrity only       1.00

     An abandoned well in the area of
      review requires no remedial action     .9^

     A producing well in the area of
      review requires no test                .93

     EVENT COMBINATION PROBABILITY           ,32

     The event combination codes for Figures 1  and 2 and
their respective probabilities calculated by the methods
shown above are presented in Table 3.  Scientific notation
is used to obtain two significant digits for extremely small
probabilities.

     (2)  Total Cost of Compliance for Event Combination

     Each event combination shown In Figures 1  and 2 and
probabilistically shown in Table 3 has a cost associated
with it.  The first cost is the fixed cost reflected in
Table 1.  The second type of cost is the probabilistic cost
shown in Table 2.  The third cost is the additional operating
and maintenance, or in this analysis, monitoring costs
associated the implementation of the proposed regulations.

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                           Table 3

        PATH PROBABILITIES FOR EACH EVENT COMBINATION
               FOR NEW ENHANCED RECOVERY WELLS
     Event Combination             Path Probability*
               2a                          .32
               2b                       .19 x 10-1
               2c                       .51 x 10~^
               2d                       .21 x 1C-1
               2e                       .12 x lO-2
               2f                       .32 x 10~3

               3a                       .50 x 10-2
               3b                       .29 x 10-3
               3c                       .78 x 10-;
               3d                       .32 x 10-3
               3e                       .19 x 10-4
               3f                       .50 x 10-5

               4a                       .45 x 10-1
               4b                       .27 x lO-2
               4c                       .71 x 10-3
               4d                       .28 x 10"^
               4e                       .17 x 10-3
               4f                       .45 x 10-4

               5a                          .50
               5b                       .30 x 10~L
               5c                       .79 x lO-2
               5d                       .32 x 10-1
               5e                       .19 x 10-2
               5f                       .51 x 10-3
*May not total to 1.00 due to rounding

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     These costs are reflected in Figures 1 and 2 as unit
co.sts or costs per well.  Using event combination 2a above
the costs include

     Fixed Costs (F) (from Table 1)               $434

     Variable Costs (V) (Probabilitstic
      Costs from Figure l)                      	25

                         Total (V&F)              $459
                Tax Adjustment (48$)            -  220
                  Tax Adjusted Total              $239

     Tax Adjusted Operation & Maintenance         $ 55
     [Annually - $28
          Present value 10%, 5 yrs =
          $28 x 3.7907 - $106.14
          T.A. = $106.14 - ($106.14 x .48) = $55]
               TOTAL PRESENT VALUT OF             $294
               INCREMENTAL COST FOR EVENT
               COMBINATION 2a.

     Table 4 presents these costs for each event combination
code reflected in the decision trees on Figures 1 and 2.
The corresponding tables as noted above are presented in
Appendices A, B, and C for new salt water disposal wells,
existing enhanced recovery wells and existing salt water
disposal wells.

     (3)  Break-even Analysis for New Enhanced Recovery Wells

          The next step in the analysis is to find the minimum
daily production necessary for an operator to break-even when
faced with additional cost to comply with the proposed
regulations.   The break-even point is a function of several
variables including profitability per barrel of oil produced,
the present value of the event combination that occurs, the
number of days per year that the project will operate and the
rate of return to the operator.   Current production levels
are maintained at optimum levels by the operator given existing
production constraints.

     The break-even production level necessary to cover the
cost of compliance shown in Table 4 for a given event combina-
tion and reflected in Figures 1  and 2 is calculated by the
following formula:

     Break-even Production =  PV .  r
                               T .  P
     where:
          PV = present value of the incremental cost of
               compliance (Table 4)
           P = profit per barrel
           T = time period over which the additional
               production would occur
           r = rate of return to the operator.

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The rate of return used in this application of the formula
was based on the report 1976 Profitability of Selected Major
Oil Company Operations by the Committee on PTnance, UnI ted
States Senate 95th Congress.  Preliminary work by Arthur D.
Little, Inc., indicates that profitability levels for oil
vary from $0.93 per barrel for non-stripper production to
$4.97 per barrel for stripper production.  This analysis
includes the use of $2 and $4 per barrel based on an arbitrary
selection that is representative of the range of profitability
historically.

     An assumption was made that each production year averaged
360 days.  For event combination 2a, for example, the break-even
production required would be 0.02 barrels per day.  The results
of these calculations are listed in Table 5.

     An additional step was used to establish the relationship
between the incremental production levels required to break-
even and the probability that an operator would be faced
with event combinations that require such additional production.
Table 6 presents the data that shows this relationship.   The
break-even production levels are arrayed in ascending order
for $4 and $2 per barrel profitability levels.  The "total
probabilities of event occurrences" column is taken from
Table 5.  For example, event combination 2a used before
requires break-even production of 0.02 and 0.04 barrels per
day at $4 and $2 per barrel profit level respectively.   Event
combination 5a also requires break-even production of 0.02
and 0.04 barrels per day.   Therefore the probabilities  of 2a
and 5a are added (.32 + .50 = .82) to obtain the total
probability (.82) that an operator would incur cost of
compliance requiring additional production of 0.02 and  0.04
barrels per day.  The probability is extremely low C..50 x
10-5) that an operator would incure incremental cost that
would require additional production of 3.05 barrels per day
at $4 per barrel profit level.

     (4)  Expected Value of Production Impacts

          Since an exhaustive array of possible event combina-
tions are depicted in Figures 1 and 2 for new enhanced  recovery
well operations, their probabilities represent ''expectations'1
that these events will in fact  occur.  The break-even produc-
tion computed by the above formula represents production levels
necessary to cover the cost of  occurrences of each event
combination.   The next step in  the analysis then is to  deter-
mine the number of operations that may be impacted and  to
weight  these Break-even production levels by the probability
of occurence.   The results of these calculations are shown in
Table 7.  For example, the probability that an operator  will
be faced with additional production of 0.04 barrels  per  day at
$4 per  barrel is .82.   Event combinations 2a and 5a would be
responsible for such an increase.   The "expected value1'  of
                              11

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Event
Combination
(Figuresl&2)
     1

     2(a)
     2(b)
     2(c)
     2(d)
     2(e)
     2(f)

     3Cal
     3(b)
     3(c)
     3(d)
     3(e)
     3(f)

     4(a)
     Mb)
     MO
     4(d)
     4(e)
     4(f)

     5(a)
     5(b)
     5(c)
     5(d)
     5(e)
     5(f)
                           Table 5

              BREAK-EVEN PRODUCTION LEVELS FOR
                   ENHANCED RECOVERY WELLS
Probability
     of
Occurrence
   .32
.19 x 10-1
.51 x 10-2
.21 x 10-1
.12 x 1C-2
,32 x 10-3

.50 x lO-2
.29 x 10-3
,78 x 10-4
,32 x 10-3
.19 x 10-4
.50 x 10-5

.45 x 10-1
.27 x 10-2
.71 x lO-3
.28 x lO-2
,17 x 10-3
.17 x 10-4

   .50
.30 x 10-1
.79 x 10-2
.32 x lO-1
.19 x 10-2
.51 x 10-3
Present Value
of Incremental
Cost Stream
  (dollars)
   1,594
  17,194
  10,694
  11,994
  27,594
  16,
  17,
  33,
  27,
   674
   974
   574
   074
28,374
43,974
   1
   074
   374
   974
   474
12^74
28,374
   2,
  17,
  11,
   1
  17
  10
  11
   294
   594
   ,194
   ,694
   ,994
  27,594
Break-even
Production
(bbl/day)
$4/bbl*
0.02
0.11
1.19
0.24
0.83
1.92
1.16
1.25
2.33
1.88
1.97
3.05
0.07
0.16
1.25
0. 80
0.89
1.97
0.02
0. 11
1.19
0.74
0.83
1.92
$2/bbl*
0.04
0.22
2.39
1.49
1.66
3.83
2.32
2.50
4.66
3.76
3.94
6.11
0.15
0.33
2.50
1.59
1.77
3.94
0.04
0.22
2.39
1. 49
1.81
3.83
^Assumed profitability  levels based  on  studies by Arthur D.
 Little, Inc.
                                 12

-------
                           Table 6

    BREAK-EVEN PRODUCTION LEVELS AND TOTAL PROBABILITIES
    OF EVENT OCCURRENCES FOR NEW ENHANCED RECOVERY WELLS
                                        Break-even Production
Event          Total Probability of          (bbl/day)
Combination    Event Occurrences        $4/bbl         $2/bbl


2a, 5a              .82                  0.02           0.04
4a                  .45 x 10-1           o.07           0.15
2b, 5b              .49 x 10-1           0.11           0.22
4b                  .27 x ID-2           0.16           0.33
2d, 5d              .53 x 10-1           0.74           1.49
4d                  .28 x lO-2           0.80           1.59
2e, 5e              .31 x 10~2           0.83           1.66
4e                  .17 x 10-3           0.89           1.77
3a                  .50 x lO-2           1.16           2.32
2c, 5c              .13 x 10-1           1.19           2.39
3b, 4c              .10 x lO-2           1.25           2.50
3d                  .32 x 10-3           1.88           3.76
2f, 5f              .83 x 10-3           1.92           3.83
3e3 4f              ,64 x 10~4           1.97           3-94
3c                  .78 x 10-4           2.33           4.66
3f                  .50 x 10-5           3.05           6.11
                              13

-------
                          Table 7

          EXPECTED VALUE OF BREAK-EVEN PRODUCTION
         NECESSARY TO COVER THE INCREMENTAL COST OF
           COMPLIANCE FOR A NEW ENHANCED RECOVERY
                       WELL OPERATION
Event Combination     Expected Value of Production  (bbl/day)

                            $4/bbl               $2/bbl

    2a,5a                 0.16 X 10"1      0.33 X 1Q-1
    4a                    0.34 X ID"2      0.68 X 10~2
    2b,5b                 0.60 X 10~2      0.11 X lO'1
    4b                    0.45 X 10~3      0.89 X 10~3
    2d,5d                 0.40 X lO"1      0.79 X lO"1
    4d                    0.43 X 10~2      0.45 X 10~2
    2e,5e                 0.28 X 10~2      0.56 X 10~2
    4e                    0.15 X 10~3      0.30 X 10~3
    3a                    0.60 X 10~2      0.12 X 1Q-1
    2c,5c                 0.15 X 1Q-!      0.31 X lO'1
    3b,4c                 0.12 X 10~2      0.25 X 10~2
    3d                    0.60 X 10~3      0.12 X 10~2
    2f,5f                 0.16 X 10~2      0.32 X 10~2
    3e,4f                 0.12 X 10~3      0.25 X 10~3
    3c                    0.18 X 10~3      0.36 X 10~3
    3f                    0.15 X 1Q~4      0.31 X 10~4
                Total     0.95 X 10"1      0.19
@ $4/bbl

    20,000 wells X 0.95 X lO"1 bbls/day =  1900  bbls/day

@ $2/bbl

    20,000 wells X0.19 bbls/day = 3800 bbls/day

-------
the break-even production for these two event combinations
at a profitability level of $4 per barrel is .33 x 10-1 (.82
x 0.04). Another perspective is that 320 operations (0.16 x
10-1 x 20,000) will each require break-even production of
0.02 barrels per day.

     Weighting calculations are performed for each event
combination at both $2 and $4 per barrel profitability levels.
The     expected values of additional production requirements
for each event combination are added to obtain the expected
value of additional production for each new enhanced recovery
well operation.  At $2 per barrel, the expected value is 0.19
barrels of oil per day.  This expected value includes not only
the costs for the new enhanced recovery injection wells
constructed within the first five years of the program provides
3800 barrels of oil per day.  This approach is followed in
Appendix A for new salt water disposal wells, Appendix B for
existing enhanced recovery wells, and Appendix C for existing
salt water disposal wells.

     Another way of looking at this calculation is the following,
The probability, from Table 6, of event combinations 3b and 4c,
for example, is 0.001 and the break-even production at $4/bbl
is 1.25 bbl/day.  We would expect that event combination to
impact 0.001 x 20,000 = 20 new enhanced recovery wells.  Some
of those wells would have an associated production of less
than 1.25 bbl/day and would close down.  The remainder would
have an associated production greater than 1.25 bbl/day and
would therefore be able to cover the additional costs (including
return on investment) and would remain in operation.   Thus, for
each of the 20 impacted wells, the production loss would be
either zero (if production is greater than 1.25 bbl/day) or some
amount less than 1.25 bbl/day.  The estimate of 20 x 1.25 = 24
bbl/day production loss is thus an over-estimate of the actual
production loss.

     The calculations performed above have also been made for
new salt water disposal wells, existing enhanced recovery wells,
and existing salt water disposal wells.  The results  of the
calculations are presented in Appendices A,  B?  and C.   The
total impact computed through this methodology  is presented in
the Executive Summary.
                            15

-------
         APPENDIX A




NEW SALT WATER DISPOSAL WELLS
             16

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-------
                          Table A-3

        Path Probabilities for Each Event Combination
              for New Salt Water Disposal Wells
     Event Combination             Path Probability

               1

               2a                            .34
               2b                       .20 x 10-1
               2c                       .54 x 10-2
               2d                       .22 x 10-1
               2e                       .13 x 10-2
               2f                       .34 x 10-3

               3a                       .43 x lO-2
               3b                       .25 x 10-3
               3c                       .6? x 10-4
               3d                       .27 x 10-3
               3e                       .16 x 10-4
               3f                       .16 x 10-5

               4a                       .38 x 10-1
               4b                       .23 x lO-2
               4c                       .61 x 10-3
               4d                       .25 x lO-2
               4e                       .15 x 10-3
               4f                       .39 x 10-4

               5a                            .49
               5b                       .29 x 10-1
               5c                       .78 x lO-2
               5d                       .31 x lO-1
               5e                       .19 x lO-2
               5f                       .49 x 10-3

Note:  Totals may not add to 1.00 due to rounding.
                             19

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                                   20

-------
                          Table A-5
Event
Combination
(Fisure3&4)
              BREAK-EVEN PRODUCTION LEVELS FOR
                  SALT WATER DISPOSAL WELLS
Probability
     of
Occurrence*
Present Value
of Incremental
Cost Stream
   Break-even
   Production
   (bbl/day)
$Vbbl
     2(a)
     2(b)
     2(c)
     2(d)
     2(e)
     2(f)

     3(a)
     3(b)
     3(c)
     3(d)
     3(e)
     4(a)
     Mb)
     Me)
     4(d)
     Me)
     Mf)

     5(a)
     5(b)
     5(c)
     5(d)
     5(e)
     5(f)
   .34
.20 x 10-1
.54 x 10-2
.22 x 10-1
.13 x 10-2
.34 x 10-3

.42 x 10-2
.25 x 10-3
.67 x 10-4
.27 x 10-3
.16 x lO-4
.43 x 10-5

.38 x 10-1
,23 x 10-2
.61 x 10-3
.25 x ID-2
.15 x 10-3
.39 x 10-4

   .49
.29 x 10-1
,78 x 10-2
.31 x 10-1
.19 x ID-2
.49 x 10-3
     565
   1,865
  17,465
  10,965
  12,265
  27,865

  16,945
  18,245
  33,845
  27,345
  28,645
  44,245

   1,345
   2,645
  18,245
  11,745
  13,045
  28,645

     565
   1,865
  17,465
  10,965
  12,265
  27,865
0.04
0.13
1.22
0.76
0.86
1.94
1.18
1.27
2.35
1.94
1.98
3.08
0.10
0.19
1.27
0.82
0.91
1.99
0.04
0.13
1.22
0.76
0.86
1.94
0.08
0.26
2.43
1.52
1.71
3.87
2.36
2.54
4.70
3.87
3.95
6.15
0.19
0.37
2.54
1.63
1.81
3.98
0.08
0.26
2.43
1.52
1.71
3.87
*Total may not add to 1.00 due to rounding.
                            21

-------
                          Table A-6

    BREAK-EVEN PRODUCTION LEVELS AND TOTAL PROBABILITIES
   OP EVENT OCCURRENCES FOR NEW SALT WATER DISPOSAL WELLS
Event          Total Probabilities of   Break-even Production
Combination      Event Occurrences*     	(bbl/day)
$4/bbl
2a, 5a
4a
2b, 5b
4b
2d, 5d
4d
2e , 5e
4e
3a
2c, 5c
3b, 4c
2f, 3d, 5f
3e
4f
3c
3f

.38
.49
.23
.53
.25
.32
.15
.43
.13
.86
.11
.16
.39
.67
.43

X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
83
10-
10-

1
1
10-2
10-
10-
1
2
10-2
10-
10-
10-
10-
10-
10-
10-
10-
3
2
1
3
2
U
4
14
10-5
0
0
0
0
0
0
0
0
1
1
1
1
1
1
2
3
.04
. 10
.13
.19
.76
.82
.86
.91
.18
.22
.27
.94
.98
.99
.35
.08
$2/bbl
0
0
0
0
1
1
1
1
2
2
2
3
3
3
4
6
.08
.19
.26
.37
.52
.63
.71
.81
.36
.43
.54
.87
.95
.98
.70
.15

-------
                          Table A-7

           EXPECTED VALUE OF BREAK-EVEN PRODUCTION
           NECESSARY TO COVER THE INCREMENTAL COST
 OF COMPLIANCE FOR A NEW SALT WATER DISPOSAL WELL OPERATION
Event Combination
Expected Value of Production (bbl/day)
$4/bbl
2a, 5a
4a
2b, 5b
4b
2d, 5d
4d
2e, 5e
4e
3a
2c, 5c
3b, 4c
2f, 3d, 5f
3e
4f
3c
3f
Total
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
.33
.36
.70
.43
.41
.21
.28
.14
.50
.16
.11
.22
.32
.80
.16
.13
.12
x
x
X
X
X
X
X
X
X
X
X
X
X
X
X
X

10
-1
10-2
10
_2
10-3
10
10
10
-1
-2
-2
10-3
10
10
10
10
10
10
10
10

-2
-1
-2
_2
-4
-4
-3
-4

$2/bbl
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
.66
.72
.13
.85
.81
.41
.55
.27
.10
.32
.22
.43
.63
.16
.31
.26
.23
x
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X

10-1
10-2
10-1
10-3
10-1
10-2
10-2
10-3
10-1
10-1
10-2
10-2
10-4
10-3
10-3
10-4

at $ Vbbl

     5000 wells x 0.12 bbl/day = 600 bbls/day

at $2/bbl

     5000 wells x 0.23 bbl/day = 1150 bbls/day

-------
           APPENDIX B




EXISTING ENHANCED RECOVERY WELLS

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-------
                          Table B-4

          COSTS OF COMPLIANCE FOR EXISTING ENHANCED
        RECOVERY WELLS FOR SPECIFIC EVENT COMBINATION
                          (dollars)
Event               Tax*                   Tax         Total
Comb.     Variable  Adjusted  Operation &  Adjusted    Present
Code      Costs(V)  Varl Csts Maintenance  0 & M       Value
la
Ib
Ic
Id
le

2a
2b
2c
2d
2e
     40
     40
  1,540
 31,540
151,540

  1,520
  1,520
  3,020
 33,020
153,020
    21
    21
   801
16,401
78,801

   790
   790
 1,570
17,170
79,570
28
28
28
28
28

28
28
28
28
28
55
55
55
55
55
55
55
55
55
55
    76
    76
   856
16,456
78,856

   845
   845
 1,625
17,225
79,625
*No fixed costs accrue to existing enhanced recovery wells under
 the reproposed regulations.

-------
                          Table B-5

          BREAK-EVEN PRODUCTION LEVELS FOR EXISTING
                   ENHANCED RECOVERY WELLS
Event
Combination
Fig. B-1&B-2
Probability
    of
Occurrence*
Present Value  Break-even Production
of Incremental      (bbI/day)
Cost Stream    $4/bbl         $2/bbl
     la
     Ib
     Ic
     Id
     le

     2a
     2b
     2c
     2d
     2e
.58
86 x 10-1
78 x 10-1
78 x lO-2
86 x 10-3
.19
29 x 10 x
26 x lO-1
26 x lO-2
29 x 10-3
76
76
856
16,456
78,856
845
845
1,625
17,225
79,625
                              0.53 x 10~2
                              0.53 x 10~2
                                0.06
                                1.14
                                5.48

                                0.06
                                0.06
                                0.11
                                1.20
                                5.53
                              0.11 x 10-1
                              0.11 x 10-1
                                0.12
                                2.28
                               10.95

                                 .12
                                 .12
                                 .23
                                2.39
                               11.06
*May not add to l.OQ due to rounding.

-------
                               Table B-6

                BREAK-EVEN PRODUCTION LEVELS AND TOTAL
                PROBABILITIES OP EVENT OCCURRENCES FOR
                   EXISTING ENHANCED RECOVERY WELLS
                               (DOLLARS)
   Event
Combination
Total Probabilities of
  Event Occurrences*
Break-Even Production
      (bbl/day)
  $Vbbl     $2/bbl
la,lb
Ic32a,2b
2c
Id
2d
le
2e


.26
.78
.26
.86
.29
.67
.30
x
x
X
X
X


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10-
10-


1
2
2
10-3
10-
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20
48
53
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0
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2
10
11
11 x
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.22
.28
.39
.95
.06
     * May not add to 1.00 due to rounding.

-------
                          Table B-7

           EXPECTED VALUE OF BREAK-EVEN PRODUCTION
         NECESSARY TO COVER THE INCREMENTAL COST OP
      COMPLIANCE FOR AN EXISTING ENHANCED RECOVERY WELL
Event Combination   Expected Value of Production (bbI/day)
                         $4/bbl$2/bbl

la, Ib              0.36 x lO-2              0.74 x 10-2

Ic, 2a, 2b          0.18 x ID"1 -             0.36 x 1Q-1

2c                  0.29 x ID"2              o.60 x lO-2

Id                  0.90 x lO-2              0.18 x 10-1

2d                  0.31 x lO-2              o_62 x 10-2

le                  0.47 x lO-2              0-9i| x 10-2

2e                  0.16 x IP"2              0.32 x 1Q-2

     Total          0.43 x 10-1              0.93 x 10-1
at $4/bbl

     100,315 wells x 0.43 x 10-1 bbl/day = 4314 bbls/day

at $2/bbl

     100,315 wells x 0.93 x 10-1 bbl/day = 9329 bbls/day

-------
            APPENDIX C




EXISTING SALT WATER DISPOSAL WELLS

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-------
                          Table C-5

              BREAK-EVEN PRODUCTION LEVELS FOR
             EXISTING SALT WATER DISPOSAL WELLS
                          (dollars)
Event
Combination
Figures
C-l & C-2
     la
     Ib
     Ic
     Id
     le

     2a
     2b
     2c
     2d
     2e

     3a
     3b
     3c
     3d
     3e
Probability
    of
Occurrence
Present
Value of
Incremental
Cost Stream
Break-even Production
     (bbl/day)
.44
45 x
4l x
4i x
45 x
.24
25 x
22 x
22 x
25 x
.15
15 x
14 x
14 x
15 x

10-1
10-1
10-2
10-3

10-1
10-1
10-2
10-3

10-1
10-1
10-2
10-3
346
346
1,126
16,726
79,126
1,126
1,126
1,890
17,490
79,890
1,126
1,126
1,890
17,490
79,890
$4/bbl
$2/bbl
0.
0.
0.
0.
5.
0.
0.
0.
1.
5.
0.
0.
0.
1.
5.
24 x
24 x
78 x
16
49
78 x
78 x
13
22
54
78 x
78 x
13
21
35
10-1
10-1
10-1


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0.
0.
2.
10.
0.
0.
0.
2.
11.
0.
0.
0.
2.
11.
48 x
48 x
16
32
79
16
16
26
43
10
16
16
26
42
10
10-1
10-1














-------
                          Table C-6

   BREAK-EVEN PRODUCTION LEVELS AND TOTAL PROBABILITIES OF
  EVENT OCCURRENCES FOR EXISTING SALT WATER DISPOSAL WELLS
                          (dollars)
Event
Combination
la, Ib

lc, 2a, 2b,
 3a, 3b

2c, 3c

Id

2d, 3d

le

2e, 3e
Total Probabilities of
Event Occurrences*
          .49


          .47

     .36 x 10-1

     .41 x lO-2

     .36 x lO-2

     .45 x 10-3

     .40 x 10-3
Break-even Production
     (bbl/day)
$4/bbl         $2/bbl


0.24 x 10-1    0.48 x 10-1
0.78 x 10-1    0.16

0.13           0.26

1.16           2.32

1.22           2.43

5.49          10.99

5.54          11.10
*May not equal 1.00 due to rounding.

-------
                          Table C-7

           EXPECTED VALUE OF BREAK-EVEN PRODUCTION
    NECESSARY TO COVER THE INCREMENTAL COST OF COMPLIANCE
          FOR AN EXISTING SALT WATER DISPOSAL WELL
Event Combination        Expected Value of Production (bbl/day)
                                                  $2/bbl
la, Ib                   0.12 x 10-1              0.25 x lO'1

Ic, 2a, 2b               0.37 x 10-1              0.75 x 10-1
3a, 3b

2c, 3c                   0.4? x lO-2              0.94 x lO-2

Id                       0.48 x 10-2              0.95 x lO-2

2d, 3d                   0.44 x lO-2              0.87 x 10~2

le                       0.25 x lO-2              0-49 x 10-2

2e, 3e                   0.22 x 1Q-2              0. 44 x 1Q-2

     Total               0.67 x 10-1              0.14
at $4/bbl

     39,355 wells x 0.67 x 10-1 bbls/day = 2637 bbls/day

at $2/bbl

     39,355 wells x 0.14 bbls/day = 5510 bbls/day

-------
                  UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
  DATE:    September  19,  1979

SUBJECT:     Potential Production Impacts from  the
          Underground Injection Control Regulations

  FROM:    Alan Levin, Director   / '""'/'"^ f,/    C-^->r
          State Programs Division   '"*'

    TO.-    Regions  I  - X  Libraries
          Attached is  a  copy  of  the  subject document.  As indicated in the
          September 11,  1979,  Federal Register  the comment period on this
          document which provides  supporting data for the reproposed
          Underground  Injection  Program Regulations, extends to October 12, 1979.
          Please make  this  document  available for public inspection and copying
          in the same  manner  as  the  reproposed  regulations and the other
          supporting documents.
          Attachment
EPA FORM 1320-6 (REV, 3-76)

-------