A discussion regarding the impacts numerous (recent & proposed) air quality regulations targeting oil and gas operations will have on the industry. Discussion includes Bakken shale history, methane rules, Climate Action Plan, Montana air registration program, etc.

1. Bret Gallo, Project Engineer/Business Development
Presented to REAL Montana, June 2016
Air Quality Regulations
Impacts on the Oil and Gas
Industry

2. Introduction
Bison Engineering, Inc.
 Employee-owned, environmental consulting and technical services firm
specializing in air quality.
 Founded in Montana in 1980 by the previous Chief of the Montana Air
Quality Bureau (MT DEQ)
 Experience carried forward as Bison was joined by two subsequent DEQ Air
Bureau Chiefs
 Hal Robbins (previous President) and Jeff Chaffee (current President)
 Company’s foundation is based on EXTENSIVE air quality regulatory
and policy knowledge.
 Recently acquired EEMC/EMRC (37 years of air quality services)
 Emissions Testing and Gas Flow Monitoring
 Success of our companies have been based on assisting natural resources
industries in Montana and the western US.

3. OUR MISSION
Through innovative engineering and scientific
excellence, we offer our clients a “Clear
Advantage” in achieving the delicate balance
between a healthy environment and a thriving
industrial economy…..

4. Bakken Shale Revolution
2000-2005: Hundreds of new wells in Elm Coulee Field
 FUN FACT: First economical Bakken well was drilled, completed, and
produced in Richland County (arguably the birth well of the shale
revolution)
Emissions from Shale Plays were relatively unknown
 Conventional plays had heavy crude, little gas or visa versa
(few emissions)
 Unconventional shale plays have high gas volumes AND
light crude (higher emissions potential)

5. MT DEQ Oil and Gas Regulations
“Pre-Construction” air permitting process
 Emissions estimates based on proposed facility design, equipment, and
maximum capacity.
 Application Review, completeness, public comment, etc.
2006: Oil and Gas Well “Post Construction/Operation”
Registrations/Permits
 Max production not known until well produces
 Allow well to be drilled and produced, estimate emissions after
 (included control requirements in the mean time)

6. MT O&G Regs Continued….
Hundreds of wells/production facilities operating w/o
state required air permits, controls, etc.
MT DEQ Next Steps:
 Work with all stakeholders to determine what the potential emissions
 Establish a common sense permitting mechanism for existing sites and
new sites
 Extensive outreach and educational sessions by DEQ
 Subsequent enforcement actions
 Facilities not getting registrations/permits
 Control devices not installed or operating
OVERALL, VERY SUCCESSFUL!

7. Change in White House
Administration (2008)
Two Major Primary Focuses of the new Administration….
1. Reduce our dependency on fossil fuels
 Coal and O&G, primarily….
2. Combat Climate Change through reduction of GHGs
 All industrial sectors, including vehicles, agriculture, etc.

8. EPA Regulations for Oil and Gas
2012: Finalized NSPS, “Quad O”
 Newly constructed, reconstructed, or modified
 Nation-wide standards for VOCs & SO2
 Requirements included:
 Storage tank controls
 Venting flaring of produced gas
 Leak detection
 Equipment specific requirements
 “Green” completions of gas wells
 Extensive Recordkeeping, Monitoring, Reporting

9. White House Climate Action Plan
Strategy to Reduce Methane Emissions
 Landfills
 Coal Mines
 Agriculture
 Oil and Gas
 Aggressive methane reduction of 40-45% from 2012 levels by 2025
 Agencies: EPA & BLM

10. EPA “Methane Rule” & BLM
Venting/Flaring Rule
September 2015: EPA amends original “Quad O” and establishes
first of it’s kind methane specific standards through “Quad Oa” for
new or modified sources (FINALIZED: May 12, 2016)
 Extensive Leak Detection and Repair (LDAR)
 No exemption for low/marginal producing wells (<15 boepd)
 Informational Collection Request (to regulate existing sites)
January 2016: BLM proposes to update regulations to reduce waste
of natural gas from flaring, venting, and leaks
 Extensive LDAR at all existing sources
 No exemption for low/marginal wells (<15 boepd)

11. Future State Regulations
MT DEQ and other states will update/adopt federal
regulations within existing programs.
 Allows the state to ensure compliance
 Enforcement actions, negotiations at state level
Preferable!
State agencies understand the importance of local
business/industries
 State tax revenue, job creation, infrastructure, wages, etc.
 Knowledgeable about operations of the industries

12. Regulatory Affect on Jobs
If O&G industry is hurting, all commodities are
hurting….. 1 oil company job = ~3 auxiliary jobs
Industry directly employs ~2.6 million jobs, supporting a total of ~9.8 million jobs
(~5.6% of total US employment) Referenced American Petroleum Institute
Supporting industries include, but are not limited to:
 Lumber
 Metals
 Steel
 Chemical
 Utilities (increased need for power, transmission, etc.)
 Services: environmental, fabrication, mechanical, transportation, legal, financial,
gov’t oversight, etc.…

13. Affect on Jobs….
Commodity crash with increased operating costs due to costly
regulations…… “The Perfect Storm” …for job loss
Regulatory Changes that directly affect overhead, arguably w/o significant
economical benefit include:
 Rigorous monitoring, recordkeeping, and reporting (MRR)
 Duplicative within single agencies and between different agencies
 Duplicative requirements of state agencies
 LDAR…….
 1st of it’s kind, nation-wide requirements, no exemption for low producing wells
 Optical Gas Imagining technology required (FLIR camera)
 EXPENSIVE!! ($85,000 - $100,000…..each, not including training)
 ~1.7 million active wells in the US (63,000 in BLM jurisdiction)

14. Large Operator vs. Small Operator
Large Operator:
 100s to 1,000s of revenue generating wells
 Large capital for service expenditures
 Higher producing wells
 Diversified business/investment portfolios
 In-house professional services positions (overhead):
 HSE, Gov’t Affairs, Engineers, Attorneys, Accountants, etc.
Small Operator:
 Fewer wells and smaller production…….
 Smaller revenue generation = smaller capital = required smaller overhead
 Positions perform multiple tasks for efficiency
 Extra costly requirements for O&M and MRR decrease profits exponentially

15. MT Small Operators Impacted
There are approximately 45
oil and gas fields in
Montana.
 43 of which are not the
prolific producing fields
in Richland, Roosevelt,
and Fallon Counties.
 Note: There are numerous
old, low producing fields
located in those counties.
Other Producing Counties:
Toole, Rosebud, Liberty,
Powder River, Musselshell,
Blaine, Carbon, Sheridan,
Dawson, Petroleum,
Yellowstone, Park, Glacier,
Big Horn, Wibaux, Hill
(Most are low producing wells that are
located on federal land and are operated
by ranchers/farmers or small local
companies.)

16. Closing Thoughts….
1. Regulations don’t discriminate against high or low commodities
 Cost of business is only going to increase, profits will decrease
2. Have a strong relationship with your state agencies
 They understand your importance to the state and what you provide
and will work with you, if you work with them….
3. Promote the products you provide and how they assist with enhancing
human health and the environment!
 You create products/goods we need to survive…
4. Market/Promote all of the time you were in compliance, not be reactive
when a violation occurs!
 You are an environmental steward of the land/water/air…or your
company wouldn’t exist…..accidents happen sometimes….

17. Questions??
Bret Gallo, Project Engineer/Business Development