Based on these analyses, the net impact of both the direct and secondary impacts of these rules would be an improvement in ambient air quality, which would reduce exposure to various harmful pollutants, improve visibility impairment, reduce vegetation damage, and reduce potency of greenhouse gas emissions.  Table 4-5 provides a summary of the direct and secondary emissions changes for each rule.
Table 4-5	Summary of Emissions Changes for the Final Oil and Gas NSPS and NESHAP in 2015 (short tons per year)

                                   Pollutant
                                     NSPS
                               NESHAP Amendments
Change in Direct Emissions
                                      VOC
                                   -290,000
                                    -9,000

                                    Methane
                                  -1,700,000
                                    -4,800

                                     HAP
                                    -19,000
                                    -1,300
Change in Secondary Emissions (Producer-Side)
                                      CO2
                                   1,200,000
                                     5,500

                                      NOx
                                      630
                                      2.9

                                      PM
                                     19.0
                                      0.1

                                      CO
                                     3,400
                                      16

                                      THC
                                     1,300
                                      6.0
Change in Secondary Emissions (Consumer-Side)
                                     CO2-e
                                    600,000
                                      N/A
Net Change in CO2-equivalent Emissions
                                     CO2-e
                                  -34,000,000
                          (≈31,000,000 metric tons)
                                    -95,000
                            (≈90,000 metric tons)
Note: Totals may not sum due to independent rounding.

Hazardous Air Pollutant (HAP) Benefits
     Even though emissions of air toxics from all sources in the U.S. declined by approximately 42 percent since 1990, the 2005 National-Scale Air Toxics Assessment (NATA) predicts that most Americans are exposed to ambient concentrations of air toxics at levels that have the potential to cause adverse health effects (U.S. EPA, 2011d).  The levels of air toxics to which people are exposed vary depending on where they live and work and the kinds of activities in which they engage.  In order to identify and prioritize air toxics, emission source types and locations that are of greatest potential concern, U.S. EPA conducts the NATA.   The most recent NATA was conducted for calendar year 2005 and was released in March 2011.  NATA includes four steps:
      1) Compiling a national emissions inventory of air toxics emissions from outdoor sources
      2) Estimating ambient and exposure concentrations of air toxics across the United States
      3) Estimating population exposures across the United States
      4) Characterizing potential public health risk due to inhalation of air toxics including both cancer and noncancer effects
      Based on the 2005 NATA, EPA estimates that about 5 percent of census tracts nationwide have increased cancer risks greater than 100 in a million.  The average national cancer risk is about 50 in a million.  Nationwide, the key pollutants that contribute most to the overall cancer risks are formaldehyde and benzene. ,  Secondary formation (e.g., formaldehyde forming from other emitted pollutants) was the largest contributor to cancer risks, while stationary, mobile and background sources contribute almost equal portions of the remaining cancer risk.
      Noncancer health effects can result from chronic, subchronic, or acute inhalation exposures to air toxics, and include neurological, cardiovascular, liver, kidney, and respiratory effects as well as effects on the immune and reproductive systems.  According to the 2005 NATA, about three-fourths of the U.S. population was exposed to an average chronic concentration of air toxics that has the potential for adverse noncancer respiratory health effects. Results from the 2005 NATA indicate that acrolein is the primary driver for noncancer respiratory risk.
      Figure 4-2 and Figure 4-3 depict the estimated census tract-level carcinogenic risk and noncancer respiratory hazard from the assessment.  It is important to note that large reductions in HAP emissions may not necessarily translate into significant reductions in health risk because toxicity varies by pollutant, and exposures may or may not exceed levels of concern.  For example, acetaldehyde mass emissions are more than double acrolein emissions on a national basis, according to EPA's 2005 National Emissions Inventory (NEI).  However, the Integrated Risk Information System (IRIS) reference concentration (RfC) for acrolein is considerably lower than that for acetaldehyde, suggesting that acrolein could be potentially more toxic than acetaldehyde.   Thus, it is important to account for the toxicity and exposure, as well as the mass of the targeted emissions.

Figure 4-2	Estimated Chronic Census Tract Carcinogenic Risk from HAP exposure from outdoor sources (2005 NATA)

Figure 4-3	Estimated Chronic Census Tract Noncancer (Respiratory) Risk from HAP exposure from outdoor sources (2005 NATA)

Due to methodology and data limitations, we were unable to estimate the benefits associated with the hazardous air pollutants that would be reduced as a result of these rules. In a few previous analyses of the benefits of reductions in HAP, EPA has quantified the benefits of potential reductions in the incidences of cancer and noncancer risk (e.g., U.S. EPA, 1995). In those analyses, EPA relied on unit risk factors (URF) developed through risk assessment procedures. These URFs are designed to be conservative, and as such, are more likely to represent the high end of the distribution of risk rather than a best or most likely estimate of risk. As the purpose of a benefit analysis is to describe the benefits most likely to occur from a reduction in pollution, use of high-end, conservative risk estimates would overestimate the benefits of the regulation. While we used high-end risk estimates in past analyses, advice from the EPA's Science Advisory Board (SAB) recommended that we avoid using high-end estimates in benefit analyses (U.S. EPA-SAB, 2002). Since this time, EPA has continued to develop better methods for analyzing the benefits of reductions in HAP.
As part of the second prospective analysis of the benefits and costs of the Clean Air Act (U.S. EPA, 2011a), EPA conducted a case study analysis of the health effects associated with reducing exposure to benzene in Houston from implementation of the Clean Air Act (IEc, 2009). While reviewing the draft report, EPA's Advisory Council on Clean Air Compliance Analysis concluded that "the challenges for assessing progress in health improvement as a result of reductions in emissions of hazardous air pollutants (HAP) are daunting...due to a lack of exposure-response functions, uncertainties in emissions inventories and background levels, the difficulty of extrapolating risk estimates to low doses and the challenges of tracking health progress for diseases, such as cancer, that have long latency periods" (U.S. EPA-SAB, 2008).
In 2009, EPA convened a workshop to address the inherent complexities, limitations, and uncertainties in current methods to quantify the benefits of reducing HAP. Recommendations from this workshop included identifying research priorities, focusing on susceptible and vulnerable populations, and improving dose-response relationships (Gwinn et al., 2011).
In summary, monetization of the benefits of reductions in cancer incidences requires several important inputs, including central estimates of cancer risks, estimates of exposure to carcinogenic HAP, and estimates of the value of an avoided case of cancer (fatal and non-fatal). Due to methodology and data limitations, we did not attempt to monetize the health benefits of reductions in HAP in this analysis. Instead, we provide a qualitative analysis of the health effects associated with the HAP anticipated to be reduced by these rules and we summarize the results of the residual risk assessment for the Risk and Technology Review (RTR).  EPA remains committed to improving methods for estimating HAP benefits by continuing to explore additional concepts of benefits, including changes in the distribution of risk.
Available emissions data show that several different HAP are emitted from oil and natural gas operations, either from equipment leaks, processing, compressing, transmission and distribution, or storage tanks.  Emissions of eight HAP make up a large percentage the total HAP emissions by mass from the oil and gas sector: toluene, hexane, benzene, xylenes (mixed), ethylene glycol, methanol, ethyl benzene, and 2,2,4-trimethylpentane (U.S. EPA, 2011a).  In the subsequent sections, we describe the health effects associated with the main HAP of concern from the oil and natural gas sector: benzene, toluene, carbonyl sulfide, ethyl benzene, mixed xylenes, and n-hexane.  These rules combined are anticipated to avoid or reduce 20,000 tons of HAP per year.  With the data available, it was not possible to estimate the tons of each individual HAP that would be reduced.
EPA conducted a residual risk assessment for the NESHAP rule (U.S. EPA, 2012).  The results for oil and gas production indicate that maximum lifetime individual cancer risks could be 10 in-a-million for existing sources with a cancer incidence of 0.02 before and after controls.  Approximately 120,000 people are estimated to have cancer risks at or above 1-in-1 million for oil and gas production.  For existing natural gas transmission and storage, the maximum individual cancer risk decreases from 20-in-a-million with a cancer incidence of 0.001.  Approximately 2,200 people are estimated to have cancer risks at or above 1-in-1 million for oil and gas transmission and storage. Benzene is the primary cancer risk driver.  The results also indicate that significant noncancer impacts from existing sources are unlikely, especially after controls.  It is important to note that the magnitude of the HAP emissions avoided by new sources with the NSPS are much higher than the HAP emissions reduced from existing sources with the NESHAP.
Benzene
      The EPA's IRIS database lists benzene as a known human carcinogen (causing leukemia) by all routes of exposure, and concludes that exposure is associated with additional health effects, including genetic changes in both humans and animals and increased proliferation of bone marrow cells in mice.,,  EPA states in its IRIS database that data indicate a causal relationship between benzene exposure and acute lymphocytic leukemia and suggest a relationship between benzene exposure and chronic non-lymphocytic leukemia and chronic lymphocytic leukemia.  The International Agency for Research on Carcinogens (IARC) has determined that benzene is a human carcinogen and the U.S. Department of Health and Human Services (DHHS) has characterized benzene as a known human carcinogen.,  A number of adverse noncancer health effects including blood disorders, such as preleukemia and aplastic anemia, have also been associated with long-term exposure to benzene.,   The most sensitive noncancer effect observed in humans, based on current data, is the depression of the absolute lymphocyte count in blood.[,]   In addition, recent work, including studies sponsored by the Health Effects Institute (HEI), provides evidence that biochemical responses are occurring at lower levels of benzene exposure than previously known.,,,   EPA's IRIS program has not yet evaluated these new data.
Toluene
Under the 2005 Guidelines for Carcinogen Risk Assessment, there is inadequate information to assess the carcinogenic potential of toluene because studies of humans chronically exposed to toluene are inconclusive, toluene was not carcinogenic in adequate inhalation cancer bioassays of rats and mice exposed for life, and increased incidences of mammary cancer and leukemia were reported in a lifetime rat oral bioassay.
The central nervous system (CNS) is the primary target for toluene toxicity in both humans and animals for acute and chronic exposures.  CNS dysfunction (which is often reversible) and narcosis have been frequently observed in humans acutely exposed to low or moderate levels of toluene by inhalation: symptoms include fatigue, sleepiness, headaches, and nausea.  Central nervous system depression has been reported to occur in chronic abusers exposed to high levels of toluene.  Symptoms include ataxia, tremors, cerebral atrophy, nystagmus (involuntary eye movements), and impaired speech, hearing, and vision.  Chronic inhalation exposure of humans to toluene also causes irritation of the upper respiratory tract, eye irritation, dizziness, headaches, and difficulty with sleep.
Human studies have also reported developmental effects, such as CNS dysfunction, attention deficits, and minor craniofacial and limb anomalies, in the children of women who abused toluene during pregnancy.  A substantial database examining the effects of toluene in subchronic and chronic occupationally exposed humans exists.  The weight of evidence from these studies indicates neurological effects (i.e., impaired color vision, impaired hearing, decreased performance in neurobehavioral analysis, changes in motor and sensory nerve conduction velocity, headache, and dizziness) as the most sensitive endpoint.
Carbonyl sulfide
      Limited information is available on the health effects of carbonyl sulfide.  Acute (short-term) inhalation of high concentrations of carbonyl sulfide may cause narcotic effects and irritate the eyes and skin in humans. No information is available on the chronic (long-term), reproductive, developmental, or carcinogenic effects of carbonyl sulfide in humans.  Carbonyl sulfide has not undergone a complete evaluation and determination under U.S. EPA's IRIS program for evidence of human carcinogenic potential.
Ethylbenzene
      Ethylbenzene is a major industrial chemical produced by alkylation of benzene. The pure chemical is used almost exclusively for styrene production.  It is also a constituent of crude petroleum and is found in gasoline and diesel fuels.  Acute (short-term) exposure to ethylbenzene in humans results in respiratory effects such as throat irritation and chest constriction, and irritation of the eyes, and neurological effects such as dizziness.  Chronic (long-term) exposure of humans to ethylbenzene may cause eye and lung irritation, with possible adverse effects on the blood.  Animal studies have reported effects on the blood, liver, and kidneys and endocrine system from chronic inhalation exposure to ethylbenzene.  No information is available on the developmental or reproductive effects of ethylbenzene in humans, but animal studies have reported developmental effects, including birth defects in animals exposed via inhalation.  Studies in rodents reported increases in the percentage of animals with tumors of the nasal and oral cavities in male and female rats exposed to ethylbenzene via the oral route.[,] The reports of these studies lacked detailed information on the incidence of specific tumors, statistical analysis, survival data, and information on historical controls, thus the results of these studies were considered inconclusive by the International Agency for Research on Cancer (IARC, 2000) and the National Toxicology Program (NTP).[,]  The NTP (1999) carried out a chronic inhalation bioassay in mice and rats and found clear evidence of carcinogenic activity in male rats and some evidence in female rats, based on increased incidences of renal tubule adenoma or carcinoma in male rats and renal tubule adenoma in females. NTP (1999) also noted increases in the incidence of testicular adenoma in male rats. Increased incidences of lung alveolar/bronchiolar adenoma or carcinoma were observed in male mice and liver hepatocellular adenoma or carcinoma in female mice, which provided some evidence of carcinogenic activity in male and female mice (NTP, 1999). IARC (2000) classified ethylbenzene as Group 2B, possibly carcinogenic to humans, based on the NTP studies.
Mixed xylenes
      Short-term inhalation of mixed xylenes (a mixture of three closely-related compounds) in humans may cause irritation of the nose and throat, nausea, vomiting, gastric irritation, mild transient eye irritation, and neurological effects.  Other reported effects include labored breathing, heart palpitation, impaired function of the lungs, and possible effects in the liver and kidneys.  Long-term inhalation exposure to xylenes in humans has been associated with a number of effects in the nervous system including headaches, dizziness, fatigue, tremors, and impaired motor coordination. EPA has classified mixed xylenes in Category D, not classifiable with respect to human carcinogenicity.
n-Hexane
      The studies available in both humans and animals indicate that the nervous system is the primary target of toxicity upon exposure of n-hexane via inhalation. There are no data in humans and very limited information in animals about the potential effects of n-hexane via the oral route.  Acute (short-term) inhalation exposure of humans to high levels of hexane causes mild central nervous system effects, including dizziness, giddiness, slight nausea, and headache.  Chronic (long-term) exposure to hexane in air causes numbness in the extremities, muscular weakness, blurred vision, headache, and fatigue.  Inhalation studies in rodents have reported behavioral effects, neurophysiological changes and neuropathological effects upon inhalation exposure to n-hexane.  Under the Guidelines for Carcinogen Risk Assessment (U.S. EPA, 2005), the database for n-hexane is considered inadequate to assess human carcinogenic potential, therefore the EPA has classified hexane in Group D, not classifiable as to human carcinogenicity.
Other Air Toxics
In addition to the compounds described above, other toxic compounds might be affected by these rules, including hydrogen sulfide (H2S).  Information regarding the health effects of those compounds can be found in EPA's IRIS database.
VOC
VOC as a PM2.5 precursor
      This rulemaking would reduce emissions of VOC, which are a precursor to PM2.5.  Most VOC emitted are oxidized to carbon dioxide (CO2) rather than to PM, but a portion of VOC emission contributes to ambient PM2.5 levels as organic carbon aerosols (U.S. EPA, 2009a).  Therefore, reducing these emissions would reduce PM2.5 formation, human exposure to PM2.5, and the incidence of PM2.5-related health effects.  However, we have not quantified the PM2.5-related benefits in this analysis.  Analysis of organic carbon measurements suggest only a fraction of secondarily formed organic carbon aerosols are of anthropogenic origin.  The current state of the science of secondary organic carbon aerosol formation indicates that anthropogenic VOC contribution to secondary organic carbon aerosol is often lower than the biogenic (natural) contribution.  Given that a fraction of secondarily formed organic carbon aerosols is from anthropogenic VOC emissions and the extremely small amount of VOC emissions from this sector relative to the entire VOC inventory it is unlikely this sector has a large contribution to ambient secondary organic carbon aerosols.  Photochemical models typically estimate secondary organic carbon from anthropogenic VOC emissions to be less than 0.1 ug/m[3].
      Due to time limitations under the court-ordered schedule and data limitations regarding locations of new well completions, we were unable to perform air quality modeling for this rule.  Due to the high degree of variability in the responsiveness of PM2.5 formation to VOC emission reductions, we are unable to estimate the effect that reducing VOC will have on ambient PM2.5 levels without air quality modeling.
PM2.5 health effects and valuation
      Reducing VOC emissions would reduce PM2.5 formation, human exposure, and the incidence of PM2.5-related health effects.  Reducing exposure to PM2.5 is associated with significant human health benefits, including avoiding mortality and respiratory morbidity.  Researchers have associated PM2.5- exposure with adverse health effects in numerous toxicological, clinical and epidemiological studies (U.S. EPA, 2009a).  When adequate data and resources are available, EPA generally quantifies several health effects associated with exposure to PM2.5 (e.g., U.S. EPA (2011g)).  These health effects include premature mortality for adults and infants, cardiovascular morbidity such as heart attacks, hospital admissions, and respiratory morbidity such as asthma attacks, acute and chronic bronchitis, hospital and ER visits, work loss days, restricted activity days, and respiratory symptoms.  Although EPA has not quantified these effects in previous benefits analyses, the scientific literature suggests that exposure to PM2.5 is also associated with adverse effects on birth weight, pre-term births, pulmonary function, other cardiovascular effects, and other respiratory effects (U.S. EPA, 2009a).
      EPA assumes that all fine particles, regardless of their chemical composition, are equally potent in causing premature mortality because the scientific evidence is not yet sufficient to allow differentiation of effect estimates by particle type (U.S. EPA, 2009a).  Based on our review of the current body of scientific literature, EPA estimates PM-related mortality without applying an assumed concentration threshold.  This decision is supported by the data, which are quite consistent in showing effects down to the lowest measured levels of PM2.5 in the underlying epidemiology studies.
      Previous studies have estimated the monetized benefits-per-ton of reducing VOC emissions associated with effect that those emissions have on ambient PM2.5 levels and the health effects associated with PM2.5 exposure (Fann, Fulcher, and Hubbell, 2009).  Using the estimates in Fann, Fulcher, and Hubbell (2009), the monetized benefit-per-ton of reducing VOC emissions in nine urban areas of the U.S. ranges from $560 in Seattle, WA to $5,700 in San Joaquin, CA, with a national average of $2,400.  These estimates assume a 50 percent reduction in VOC, the Laden et al. (2006) mortality function (based on the Harvard Six City Study, a large cohort epidemiology study in the Eastern U.S.), an analysis year of 2015, and a 3 percent discount rate.
      Based on the methodology from Fann, Fulcher, and Hubbell (2009), we converted their estimates to 2008$ and applied EPA's current VSL estimate.  After these adjustments, the range of values increases to $680 to $7,000 per ton of VOC reduced for Laden et al. (2006).  Using alternate assumptions regarding the relationship between PM2.5 exposure and premature mortality from empirical studies and supplied by experts (Pope et al., 2002; Laden et al., 2006; Roman et al., 2008), additional benefit-per-ton estimates are available from this dataset, as shown in Table 4-6.  EPA generally presents a range of benefits estimates derived from Pope et al. (2002) to Laden et al. (2006) because they are both well-designed and peer reviewed studies, and EPA provides the benefit estimates derived from expert opinions in Roman et al. (2008) as a characterization of uncertainty.  In addition to the range of benefits based on epidemiology studies, this study also provided a range of benefits associated with reducing emissions in eight specific urban areas.  The range of VOC benefits that reflects the adjustments as well as the range of epidemiology studies and the range of the urban areas is $280 to $7,000 per ton of VOC reduced.
      While these ranges of benefit-per-ton estimates provide useful context for the break-even analysis, the geographic distribution of VOC emissions from the oil and gas sector are not consistent with emissions modeled in Fann, Fulcher, and Hubbell (2009).  In addition, the benefit-per-ton estimates for VOC emission reductions in that study are derived from total VOC emissions across all sectors.  Coupled with the larger uncertainties about the relationship between VOC emissions and PM2.5, these factors lead us to conclude that the available VOC benefit per ton estimates are not appropriate to calculate monetized benefits of these rules, even as a bounding exercise.

Table 4-6	Monetized Benefits-per-Ton Estimates for VOC (2008$)
                                     Area
                                  Pope et al.
                                 Laden et al.
                                   Expert A
                                   Expert B
                                   Expert C
                                   Expert D
                                   Expert E
                                   Expert F
                                   Expert G
                                   Expert H
                                   Expert I
                                   Expert J
                                   Expert K
                                   Expert L
                                    Atlanta
                                     $620
                                    $1,500
                                    $1,600
                                    $1,200
                                    $1,200
                                     $860
                                    $2,000
                                    $1,100
                                     $730
                                     $920
                                    $1,200
                                     $980
                                     $250
                                     $940
                                    Chicago
                                    $1,500
                                    $3,800
                                    $4,000
                                    $3,100
                                    $3,000
                                    $2,200
                                    $4,900
                                    $2,800
                                    $1,800
                                    $2,300
                                    $3,000
                                    $2,500
                                     $600
                                    $2,400
                                    Dallas
                                     $300
                                     $740
                                     $780
                                     $610
                                     $590
                                     $420
                                     $960
                                     $540
                                     $360
                                     $450
                                     $590
                                     $480
                                     $120
                                     $460
                                    Denver
                                     $720
                                    $1,800
                                    $1,800
                                    $1,400
                                    $1,400
                                    $1,000
                                    $2,300
                                    $1,300
                                     $850
                                    $1,100
                                    $1,400
                                    $1,100
                                     $280
                                     $850
                               NYC/ Philadelphia
                                    $2,100
                                    $5,200
                                    $5,500
                                    $4,300
                                    $4,200
                                    $3,000
                                    $6,900
                                    $3,900
                                    $2,500
                                    $3,200
                                    $4,200
                                    $3,400
                                     $830
                                    $3,100
                                    Phoenix
                                    $1,000
                                    $2,500
                                    $2,600
                                    $2,000
                                    $2,000
                                    $1,400
                                    $3,300
                                    $1,800
                                    $1,200
                                    $1,500
                                    $2,000
                                    $1,600
                                     $400
                                    $1,500
                                   Salt Lake
                                    $1,300
                                    $3,100
                                    $3,300
                                    $2,600
                                    $2,500
                                    $1,800
                                    $4,100
                                    $2,300
                                    $1,500
                                    $1,900
                                    $2,500
                                    $2,100
                                     $530
                                    $2,000
                                  San Joaquin
                                    $2,900
                                    $7,000
                                    $7,400
                                    $5,800
                                    $5,600
                                    $4,000
                                    $9,100
                                    $5,200
                                    $3,400
                                    $4,300
                                    $5,600
                                    $4,600
                                    $1,300
                                    $4,400
                                    Seattle
                                     $280
                                     $680
                                     $720
                                     $530
                                     $550
                                     $390
                                     $890
                                     $500
                                     $330
                                     $420
                                     $550
                                     $450
                                     $110
                                     $330
                               National average
                                    $1,200
                                    $3,000
                                    $3,200
                                    $2,400
                                    $2,400
                                    $1,700
                                    $3,900
                                    $2,200
                                    $1,400
                                    $1,800
                                    $2,400
                                    $1,900
                                     $490
                                    $1,800

* These estimates assume a 50 percent reduction in VOC emissions, an analysis year of 2015, and a 3 percent discount rate.  All estimates are rounded to two significant digits.  These estimates have been updated from Fann, Fulcher, and Hubbell (2009) to reflect a more recent currency year and EPA's current VSL estimate.  Using a discount rate of 7 percent, the benefit-per-ton estimates would be approximately 9 percent lower.  Assuming a 75 percent reduction in VOC emissions would increase the benefit-per-ton estimates by approximately 4 percent to 52 percent.  Assuming a 25 percent reduction in VOC emissions would decrease the benefit-per-ton estimates by 5 percent to 52 percent.  EPA generally presents a range of benefits estimates derived from Pope et al. (2002) to Laden et al. (2006) and provides the benefits estimates derived from the expert functions from Roman et al. (2008) as a characterization of uncertainty.

Organic PM welfare effects
      According to the residual risk assessment for this sector (U.S. EPA, 2011a), persistent and bioaccumulative HAP reported as emissions from oil and gas operations include polycyclic organic matter (POM).  POM defines a broad class of compounds that includes the polycyclic aromatic hydrocarbon compounds (PAHs).  Several significant ecological effects are associated with deposition of organic particles, including persistent organic pollutants, and PAHs (U.S. EPA, 2009a).
      PAHs can accumulate in sediments and bioaccumulate in freshwater, flora, and fauna.  The uptake of organics depends on the plant species, site of deposition, physical and chemical properties of the organic compound and prevailing environmental conditions (U.S. EPA, 2009a). PAHs can accumulate to high enough concentrations in some coastal environments to pose an environmental health threat that includes cancer in fish populations, toxicity to organisms living in the sediment and risks to those (e.g., migratory birds) that consume these organisms. Atmospheric deposition of particles is thought to be the major source of PAHs to the sediments of coastal areas of the U.S.  Deposition of PM to surfaces in urban settings increases the metal and organic component of storm water runoff.  This atmospherically-associated pollutant burden can then be toxic to aquatic biota.  The contribution of atmospherically deposited PAHs to aquatic food webs was demonstrated in high elevation mountain lakes with no other anthropogenic contaminant sources.
      The recently completed Western Airborne Contaminants Assessment Project (WACAP) is the most comprehensive database on contaminant transport and PM depositional effects on sensitive ecosystems in the Western U.S. (Landers et al., 2008).  In this project, the transport, fate, and ecological impacts of anthropogenic contaminants from atmospheric sources were assessed from 2002 to 2007 in seven ecosystem components (air, snow, water, sediment, lichen, conifer needles, and fish) in eight core national parks.  The study concluded that bioaccumulation of semi-volatile organic compounds occurred throughout park ecosystems, an elevational gradient in PM deposition exists with greater accumulation in higher altitude areas, and contaminants accumulate in proximity to individual agriculture and industry sources, which is counter to the original working hypothesis that most of the contaminants would originate from Eastern Europe and Asia.
Visibility Effects
      Reducing secondary formation of PM2.5 would improve visibility throughout the U.S. Fine particles with significant light-extinction efficiencies include sulfates, nitrates, organic carbon, elemental carbon, and soil (Sisler, 1996). Suspended particles and gases degrade visibility by scattering and absorbing light. Higher visibility impairment levels in the East are due to generally higher concentrations of fine particles, particularly sulfates, and higher average relative humidity levels.  Visibility has direct significance to people's enjoyment of daily activities and their overall sense of wellbeing.  Good visibility increases the quality of life where individuals live and work, and where they engage in recreational activities. Previous analyses (U.S. EPA, 2006b; U.S. EPA, 2011g; U.S. EPA, 2011a) show that visibility benefits are a significant welfare benefit category.  Without air quality modeling, we are unable to estimate visibility related benefits, nor are we able to determine whether VOC emission reductions would be likely to have a significant impact on visibility in urban areas or Class I areas.
VOC as an Ozone Precursor
      This rulemaking would reduce emissions of VOC, which are also precursors to secondary formation of ozone.  Ozone is not emitted directly into the air, but is created when its two primary components, volatile organic compounds (VOC) and oxides of nitrogen (NOx), combine in the presence of sunlight.  In urban areas, compounds representing all classes of VOC and CO are important compounds for ozone formation, but biogenic VOC emitted from vegetation tend to be more important compounds in non-urban vegetated areas (U.S. EPA, 2006a).  Therefore, reducing these emissions would reduce ozone formation, human exposure to ozone, and the incidence of ozone-related health effects.  However, we have not quantified the ozone-related benefits in this analysis for several reasons.  First, previous rules have shown that the monetized benefits associated with reducing ozone exposure are generally smaller than PM-related benefits, even when ozone is the pollutant targeted for control (U.S. EPA, 2010a).  Second, the complex non-linear chemistry of ozone formation introduces uncertainty to the development and application of a benefit-per-ton estimate.  Third, the impact of reducing VOC emissions is spatially heterogeneous depending on local air chemistry.  Urban areas with a high population concentration are often VOC-limited, which means that ozone is most effectively reduced by lowering VOC.  Rural areas and downwind suburban areas are often NOx-limited, which means that ozone concentrations are most effectively reduced by lowering NOx emissions, rather than lowering emissions of VOC.  Between these areas, ozone is relatively insensitive to marginal changes in both NOx and VOC.
      Due to time limitations under the court-ordered schedule and data limitations, we were unable to perform air quality modeling for this rule.  Due to the high degree of variability in the responsiveness of ozone formation to VOC emission reductions and data limitations regarding the location of new well completions, we are unable to estimate the effect that reducing VOC will have on ambient ozone concentrations without air quality modeling.
Ozone health effects and valuation
      Reducing ambient ozone concentrations is associated with significant human health benefits, including mortality and respiratory morbidity (U.S. EPA, 2010a).  Epidemiological researchers have associated ozone exposure with adverse health effects in numerous toxicological, clinical and epidemiological studies (U.S. EPA, 2006c).  When adequate data and resources are available, EPA generally quantifies several health effects associated with exposure to ozone (e.g., U.S. EPA, 2010a; U.S. EPA, 2011a).  These health effects include respiratory morbidity such as asthma attacks, hospital and emergency department visits, school loss days, as well as premature mortality. Although EPA has not quantified these effects in benefits analyses previously, the scientific literature is suggestive that exposure to ozone is also associated with chronic respiratory damage and premature aging of the lungs.
      In a recent EPA analysis, EPA estimated that reducing 15,000 tons of VOC from industrial boilers resulted in $3.6 to $15 million of monetized benefits from reduced ozone exposure (U.S. EPA, 2011b).  This implies a benefit-per-ton for ozone reductions of $240 to $1,000 per ton of VOC reduced.  While these ranges of benefit-per-ton estimates provide useful context, the geographic distribution of VOC emissions from the oil and gas sector are not consistent with emissions modeled in the boiler analysis.  Therefore, we do not believe that those estimates to provide useful estimates of the monetized benefits of these rules, even as a bounding exercise.
Ozone vegetation effects
Exposure to ozone has been associated with a wide array of vegetation and ecosystem effects in the published literature (U.S. EPA, 2006a).  Sensitivity to ozone is highly variable across species, with over 65 plan species identified as "ozone-sensitive", many of which occur in state and national parks and forests.  These effects include those that damage or impair the intended use of the plant or ecosystem.  Such effects are considered adverse to the public welfare and can include reduced growth and/or biomass production in sensitive plant species, including forest trees, reduced crop yields, visible foliar injury, reduced plant vigor (e.g., increased susceptibility to harsh weather, disease, insect pest infestation, and competition), species composition shift, and changes in ecosystems and associated ecosystem services.
Ozone climate effects
      Ozone is a well-known short-lived climate forcing (SLCF) greenhouse gas (GHG) (U.S. EPA, 2006a).  Stratospheric ozone (the upper ozone layer) is beneficial because it protects life on Earth from the sun's harmful ultraviolet (UV) radiation.  In contrast, tropospheric ozone (ozone in the lower atmosphere) is a harmful air pollutant that adversely affects human health and the environment and contributes significantly to regional and global climate change.  Due to its short atmospheric lifetime, tropospheric ozone concentrations exhibit large spatial and temporal variability (U.S. EPA, 2009b). A recent United Nations Environment Programme (UNEP) study reports that the threefold increase in ground level ozone during the past 100 years makes it the third most important contributor to human contributed climate change behind CO2 and methane.  This discernable influence of ground level ozone on climate leads to increases in global surface temperature and changes in hydrological cycles.
Methane (CH4)
Methane climate effects and valuation
      Methane is the principal component of natural gas.  Methane is also a potent greenhouse gas (GHG) that once emitted into the atmosphere absorbs terrestrial infrared radiation which contributes to increased global warming and continuing climate change.  Methane reacts in the atmosphere to form ozone and ozone also impacts global temperatures.  Methane, in addition to other GHG emissions, contributes to warming of the atmosphere which over time leads to increased air and ocean temperatures, changes in precipitation patterns, melting and thawing of global glaciers and ice, increasingly severe weather events, such as hurricanes of greater intensity, and sea level rise, among other impacts.
      According to the Intergovernmental Panel on Climate Change (IPCC) Fourth Assessment Report (2007), changes in methane concentrations since 1750 contributed 0.48 W/m[2] of forcing, which is about 18% of all global forcing due to increases in anthropogenic GHG concentrations, and which makes methane the second leading long-lived climate forcer after CO2. However, after accounting for changes in other greenhouse substances such as ozone and stratospheric water vapor due to chemical reactions of methane in the atmosphere, historical methane emissions were estimated to have contributed to 0.86 W/m[2] of forcing today, which is about 30% of the forcing due to historical greenhouse gas emissions.
      Processes in the oil and gas category emit significant amounts of methane. The Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2009 (published April 2011) estimates 2009 methane emissions from Petroleum and Natural Gas Systems (not including petroleum refineries and petroleum transportation) to be 251.55 (MMtCO2-e).  In 2009, total methane emissions from the oil and gas industry represented nearly 40 percent of the total methane emissions from all sources and account for about 5 percent of all CO2-equivalent (CO2-e) emissions in the U.S., with natural gas systems being the single largest contributor to U.S. anthropogenic methane  emissions (U.S. EPA, 2011b, Table ES-2).  It is important to note that the 2009 emissions estimates from well completions and recompletions exclude a significant number of wells completed in tight sand plays and the Marcellus Shale, due to availability of data when the 2009 Inventory was developed.  The estimate in this final rule includes an adjustment for tight sand plays and the Marcellus Shale, and such an adjustment is also being considered as a planned improvement in next year's Inventory. This adjustment would increase the 2009 Inventory estimate by about 80 MMtCO2-e. The total methane emissions from Petroleum and Natural Gas Systems based on the 2009 Inventory, adjusted for tight sand plays and the Marcellus Shale, is approximately 330 MMtCO2-e.
      This rulemaking finalizes emission control technologies and regulatory alternatives that will significantly decrease methane emissions from the oil and natural gas sector in the United States.  The NSPS is expected to reduce methane emissions annually by about 1.7 million short tons or approximately 33 million metric tons CO2-e.  These reductions represent about 13 percent of the GHG emissions for this sector reported in the 1990-2009 U.S. GHG Inventory (251.55 MMTCO2-e).  This annual CO2-e reduction becomes about 31 million metric tons when the secondary impacts associated with increased combustion and supplemental energy use on the producer side and CO2-e emissions from changes in consumption patterns previously discussed are considered.  However, it is important to note the emissions reductions are based upon predicted activities in 2015; EPA did not forecast sector-level emissions to 2015 for this rulemaking.  The climate co-benefit from these reductions are equivalent of taking approximately 6 million typical passenger cars off the road or eliminating electricity use from about 4 million typical homes each year.
      EPA estimates the social benefits of regulatory actions that have a small or "marginal" impact on cumulative global CO2 emissions using the "social cost of carbon" (SCC).  The SCC is an estimate of the net present value of the flow of monetized damages from a one metric ton increase in CO2 emissions in a given year (or from the alternative perspective, the benefit to society of reducing CO2 emissions by one ton). The SCC includes (but is not limited to) climate damages due to changes in net agricultural productivity, human health, property damages from flood risk, and ecosystem services due to climate change. The SCC estimates currently used by the Agency were developed through an interagency process that included EPA and other executive branch entities, and concluded in February 2010. The Technical Support Document: Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 for the final joint EPA/Department of Transportation Rulemaking to establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards provides a complete discussion of the methods used to develop the SCC estimates (Interagency Working Group on Social Cost of Carbon, 2010).
	To estimate global social benefits of reduced CO2 emissions, the interagency group selected four SCC values for use in regulatory analyses: $6, $25, $40, and $76 per metric ton of CO2 emissions in 2015, in 2008 dollars.  The first three values are based on the average SCC estimated using three integrated assessment models (IAMs), at discount rates of 5.0, 3.0, and 2.5 percent, respectively.  When valuing the impacts of climate change, IAMs couple economic and climate systems into a single model to capture important interactions between the components. SCCs estimated using different discount rates are included because the literature shows that the SCC is quite sensitive to assumptions about the discount rate, and because no consensus exists on the appropriate rate to use in an intergenerational context. The fourth value is the 95th percentile of the distribution of SCC estimates from all three models at a 3.0 percent discount rate. It is included to represent higher-than-expected damages from temperature change further out in the tails of the SCC distribution.
      The interagency group noted a number of limitations to the SCC analysis, including the incomplete way in which the integrated assessment models capture catastrophic and non-catastrophic impacts, their incomplete treatment of adaptation and technological change, uncertainty in the extrapolation of damages to high temperatures, and assumptions regarding risk aversion. The limited amount of research linking climate impacts to economic damages makes estimating damages from climate change even more difficult.  The interagency group hopes that over time researchers and modelers will work to fill these gaps and that the SCC estimates used for regulatory analysis by the Federal government will continue to evolve with improvements in modeling. Additional details on these limitations are discussed in the SCC TSD.
      A significant limitation of the aforementioned interagency process particularly relevant to this rulemaking is that the social costs of non-CO2 GHG emissions were not estimated.  Specifically, the interagency group did not directly estimate the social cost of non-CO2 GHGs using the three models.  Moreover, the group determined that it would not transform the CO2 estimates into estimates for non-CO2 GHGs using global warming potentials (GWPs), which measure the ability of different gases to trap heat in the atmosphere (i.e., radiative forcing per unit of mass) over a particular timeframe relative to CO2.  One potential method for approximating the value of marginal non-CO2 GHG emission reductions is to convert the reductions to CO2-equivalents which may then be valued using the SCC.  Conversion to CO2-e is typically done using the GWPs for the non-CO2 gas.  The GWP is an aggregate measure that approximates the additional energy trapped in the atmosphere over a given timeframe from a perturbation of a non-CO2 gas relative to CO2.  The time horizon most commonly used is 100 years.  One potential problem with utilizing temporally aggregated statistics, such as the GWPs, is that the additional radiative forcing from the GHG perturbation is not constant over time and any differences in temporal dynamics between gases will be lost.  This is a potentially confounding issue given that the social cost of GHGs is based on a discounted stream of damages that are non-linear in temperature. For example, methane has an expected adjusted atmospheric lifetime of about 12 years and associated GWP of 21 (IPCC Second Assessment Report (SAR) 100-year GWP estimate).  Gases with a relatively shorter lifetime, such as methane, have impacts that occur primarily in the near term and thus are not discounted as heavily as those caused by longer-lived gases such as CO2, while the GWP treats additional forcing the same independent of when it occurs in time.  Furthermore, the baseline temperature change is lower in the near term and therefore the additional warming from relatively short lived gases will have a lower marginal impact relative to longer lived gases that have an impact further out in the future when baseline warming is higher.  The GWP also relies on an arbitrary time horizon and constant concentration scenario.  Both of which are inconsistent with the assumptions used by the SCC interagency workgroup. Finally, impacts other than temperature change also vary across gases in ways that are not captured by GWP.  For instance, CO2 emissions, unlike methane will result in CO2 passive fertilization to plants.
	The EPA recognizes that the methane reductions finalized in this rule will provide significant economic climate co-benefits to society.  However, the 2009-2010 Interagency Social Cost of Carbon Work Group did not produce directly modeled estimates of the social cost of methane.  In the absence of direct model estimates from the interagency analysis, EPA has used aA "global warming potential (GWP) approach" to estimate the dollar value of this rule's methane co-benefits.  Specifically, EPA of converted methane to CO2 equivalents using the GWP of methane, then multiplied these CO2-equivalent emission reductions by the social cost of carbon developed by the Interagency Social Cost of Carbon Work Group.
      EPA requested comments from interested parties and the public about this interim approach specifically and more broadly about appropriate methods to monetize the climate co-benefits of methane reductions.  EPA's response to these comments, as well as a summary of the public comments sent in response to this request, is provided in the response to comments document.
      Applying the GWP approach, these co-benefits equate to a range of approximately $130 to $1,600 per metric ton of methane reduced depending upon the discount rate assumed, with an estimate of $840 per ton using the mean SCC at the 3 percent discount rate.   When including expected methane emission reductions from the NESHAP Amendments and NSPS and considering secondary impacts of the oil and gas rule, the 2015 co-benefits vary by discount rate and range from about $190 million to over $2.4 billion; the mean SCC at the 3 percent discount rate ($25 per metric ton) results in an estimate of $780 million in 2015 (Table 4-7).

Table 4-7	Climate Methane Benefits Using `GWP' Approach
    SCC Value for 2015 emission reductions ($/ton CO2 in 2008 dollars) [1]
      Total Benefits based on 100 year GWP adjustment[2] (millions 2008$)

                                  Final NSPS
                            Final NESHAP Amendments
$6 (mean 5% discount rate)
                                      190
                                      0.5
$25 (mean 3% discount rate)
                                      780
                                      2.3
$40 (mean 2.5% discount rate)
                                     1,200
                                      3.6
$76 (95 percentile at 3% discount rate)
                                     2,400
                                      6.8
Methane Emission Reductions [3] (MMT CO2-e)
                                      31
                                     0.09
[1] SCC values for 2015 from the SCC TSD in the light duty vehicle rule adjusted to reflect 2008$ using the CPI-U from the Bureau of Labor Statistics.
[2] Estimates are given for illustrative purposes and  represent the CO2-e estimate of methane reductions multiplied by the SCC estimates ("GWP approach").CO2-e calculated using the GWP of 21 (SAR).  These co-benefit estimates are not the same as would be derived using a social cost of methane directly computed from integrated assessment models. See Marten and Newbold (2011) for discussion of the limitations of the GWP approach.
3 Estimates include methane reductions from the NSPS and NESHAP Amendments  respectively and consider secondary impacts from Table 4-4.

	As previously stated, these co-benefit estimates are not the same as would be derived using a directly computed social cost of methane (using the integrated assessment models employed to develop the SCC estimates) for a variety of reasons including the shorter atmospheric lifetime of methane relative to CO2 (about 12 years compared to CO2 whose concentrations in the atmosphere decay on timescales of decades to millennia).  The climate impacts also differ between the pollutants for reasons other than the radiative forcing profiles and atmospheric lifetimes of these gases.  Methane is a precursor to ozone and ozone is a short-lived climate forcer (details below). This use of the SAR GWP to approximate benefits may underestimate the direct radiative forcing benefits of reduced ozone levels, and does not capture any secondary climate co-benefits involved with ozone-ecosystem interactions.  In addition, a recent NCEE working paper suggests that this quick `GWP approach' to benefits estimation will likely understate the climate benefits of methane reductions in most cases (Marten and Newbold, 2011).  This conclusion is reached using the 100 year GWP for methane of 25 as put forth in the IPCC Fourth Assessment Report as opposed to the lower value of 21 used in this analysis. Using the higher GWP estimate of 25 would increase these reported methane climate co-benefit estimates by about 19 percent.  Although the IPCC Fourth Assessment Report suggested a GWP of 25, EPA has used GWP of 21 consistent with the IPCC SAR to estimate the methane climate co-benefits for this oil and gas rule.  The use of the SAR GWP values allows comparability of data collected in this final rule to the national GHG inventory that EPA compiles annually to meet U.S. commitments to the United Nations Framework Convention on Climate Change (UNFCCC). To comply with international reporting standards under the UNFCCC, official emission estimates are to be reported by the U.S. and other countries using SAR GWP values. The UNFCCC reporting guidelines for national inventories were updated in 2002 but continue to require the use of GWPs from the SAR. The parties to the UNFCCC have also agreed to use GWPs based upon a 100-year time horizon although other time horizon values are available.  The SAR GWP value for methane is also currently used to establish GHG reporting requirements as mandated by the GHG Reporting Rule (2010e) and is used by the EPA to determine Title V and Prevention of Significant Deterioration GHG permitting requirements as modified by the GHG Tailoring Rule (2010f).
	EPA also undertook a literature search for estimates of the marginal social cost of methane.  A range of marginal social cost of methane benefit estimates are available in published literature (Fankhauser (1994), Kandlikar (1995), Hammitt et al. (1996), Tol et al. (2003), Tol, et al. (2006), Hope (2005) and Hope and Newberry (2006).  Most of these estimates are based upon modeling assumptions that are dated and inconsistent with the current SCC estimates.  Some of these studies focused on marginal methane reductions in the 1990s and early 2000s and report estimates for only the single year of interest specific to the study.  The assumptions underlying the social cost of methane estimates available in the literature differ from those agreed upon by the SCC interagency group and in many cases use older versions of the IAMs.  Without additional analysis, the methane climate benefit estimates available in the current literature are not acceptable to use to value the methane reductions finalized in this rulemaking.
	Given the uncertainties with both the `GWP approach' estimates presented and estimates available in the literature, EPA chooses not to compare these co-benefit estimates to the costs of the rule for this final rule.  Rather, the EPA presents the `GWP approach' climate co-benefit estimates as an interim method to produce lower-bound estimates until the interagency group develops values for non-CO2 GHGs.
Methane as an ozone precursor
      This rulemaking would reduce emissions of methane, a GHG and also a precursor to ozone.  In remote areas, methane is a dominant precursor to tropospheric ozone formation (U.S. EPA, 2006a).  Approximately 40% of the global annual mean ozone increase since preindustrial times is believed to be due to anthropogenic methane (HTAP, 2010).  Projections of future emissions also indicate that methane is likely to be a key contributor to ozone concentrations in the future (HTAP, 2010). Unlike NOx and VOC, which affect ozone concentrations regionally and at hourly time scales, methane emissions affect ozone concentrations globally and on decadal time scales given methane's relatively long atmospheric lifetime (HTAP, 2010).  Reducing methane emissions, therefore, can reduce global background ozone concentrations, human exposure to ozone, and the incidence of ozone-related health effects (West et al., 2006, Anenberg  et al., 2009).  These benefits are global and occur in both urban and rural areas.  Reductions in background ozone concentrations can also have benefits for agriculture and ecosystems (UNEP/WMO, 2011). Studies show that controlling methane emissions can reduce global ozone concentrations and climate change simultaneously, but controlling other shorter-lived ozone precursors such as NOx, carbon monoxide, or non-methane VOC may have larger local health benefits from greater reductions in ozone concentrations (West and Fiore, 2005; West et al., 2006, 2007; Fiore et al. 2008; Dentener et al., 2005; Shindell et al., 2005, 2012; UNEP/WMO, 2011).VOC The health, welfare, and climate effects associated with ozone are described in the preceding sections.  Without air quality modeling, we are unable to estimate the effect that reducing methane will have on ozone concentrations at particular locations.
Combined methane and ozone effects
      A recent United Nations Environment Programme (UNEP) assessment provides the most comprehensive analysis to date of the health, climate, and agricultural benefits of measures to reduce methane, as well as black carbon, a component of fine particulate matter that absorbs radiation (UNEP/WMO, 2011; Shindell et al., 2012). The UNEP assessment found that while reducing longer-lived GHGs such as CO2 is necessary to protect against long-term climate change, reducing global methane and black carbon emissions would have global health benefits by reducing exposure to ozone and PM2.5 as well as potentially slowing the rate of climate change within the first half of this century. Relative to a business as usual reference scenario, implementing methane mitigation measures that achieve approximately 40% reductions in global methane emissions were estimated to avoid approximately 0.3° C globally averaged warming in 2050 (including the impacts of both methane itself and subsequently formed ozone) and 47,000 ozone-related premature deaths and 27 million metric tons of ozone-related crop yield losses globally in 2030 (Shindell et al., 2012). These benefits, including global climate impacts of methane and resulting ozone changes, and global ozone-related health and agricultural impacts, were valued at $700 to $,5000 per metric ton. The methane measures examined include extended methane recovery/utilization and reduced fugitive emissions from oil and gas production, which contributed the greatest climate benefit of all methane mitigation measures in North America and Europe (UNEP, 2011).
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U.S. Environmental Protection Agency (U.S. EPA). 2011b. Regulatory Impact Analysis: National Emission Standards for Hazardous Air Pollutants for Industrial, Commercial, and Institutional Boilers and Process Heaters. Office of Air Quality Planning and Standards, Research Triangle Park, NC.  February.  <http://www.epa.gov/ttn/ecas/regdata/RIAs/boilersriafinal110221_psg.pdf>. Accessed March 30, 2011.
U.S. Environmental Protection Agency (U.S. EPA). 2011d. 2005 National-Scale Air Toxics Assessment. Office of Air Quality Planning and Standards, Research Triangle Park, NC.  March. < http://www.epa.gov/ttn/atw/nata2005/> Accessed March 30, 2011.
U.S. Environmental Protection Agency (U.S. EPA). 2011e. Draft Inventory of the U.S. Greenhouse Gas Emissions and Sinks 1990. Report No. 430-R-11-005. February. <http://www.epa.gov/climatechange/emissions/downloads11/US-GHG-Inventory-2011-Complete_Report.pdf>. Accessed March 30, 2011.
U.S. Environmental Protection Agency (U.S. EPA). 2011f.   Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2009. EPA 430-R-11-005. Office of Atmospheric Programs, Washington, DC.  <http://epa.gov/climatechange/emissions/usinventory.html >. Accessed July 21, 2011.
U.S. Environmental Protection Agency (U.S. EPA). 2011g.  Regulatory Impact Analysis for the Federal Implementation Plans to Reduce Interstate Transport of Fine Particulate Matter and Ozone in 27 States; Correction of SIP Approvals for 22 States. Office of Air Quality Planning and Standards, Research Triangle Park, NC. July. <http://www.epa.gov/airtransport/pdfs/FinalRIA.pdf>.  Accessed February 10, 2012.
U.S. Environmental Protection Agency (U.S. EPA). 2012. Residual Risk Assessment for the Oil and Gas Production and Natural Gas Transmission and Storage Source Categories. Office of Air Quality Planning and Standards, Research Triangle Park, NC.
U.S. Environmental Protection Agency -- Science Advisory Board (U.S. EPA-SAB). 2002. Workshop on the Benefits of Reductions in Exposure to Hazardous Air Pollutants: Developing Best Estimates of Dose-Response Functions An SAB Workshop Report of an EPA/SAB Workshop (Final Report). EPA-SAB-EC-WKSHP-02-001. January. <http://yosemite.epa.gov/sab%5CSABPRODUCT.NSF/34355712EC011A358525719A005BF6F6/$File/ecwkshp02001%2Bappa-g.pdf>. Accessed March 30, 2011.
U.S. Environmental Protection Agency -- Science Advisory Board (U.S. EPA-SAB). 2008. Benefits of Reducing Benzene Emissions in Houston, 1990 - 2020. EPA-COUNCIL-08-001. July. <http://yosemite.epa.gov/sab/sabproduct.nsf/D4D7EC9DAEDA8A548525748600728A83/$File/EPA-COUNCIL-08-001-unsigned.pdf>. Accessed March 30, 2011.
West et al. 2006. "Global health benefits of mitigating ozone pollution with methane emission controls."  PNAS 103:11:3988-3993.
West, J.J., A.M. Fiore. 2005. "Management of tropospheric ozone by reducing methane emissions." Environ Sci Technol, 39:4685-4691.
Wild, O., et al. 2011. "Modelling future changes in surface ozone: a parameterized approach," Atmos. Chem. Phys. Discuss., 11, 27547 - 27590.

Statutory and Executive Order Reviews
Executive Order 12866, Regulatory Planning and Review and Executive Order 13563, Improving Regulation and Regulatory Review
      Under section 3(f)(1) Executive Order 12866 (58 FR 51735, October 4, 1993), this action is an "economically significant regulatory action" because it is likely to have an annual effect on the economy of $100 million or more. Accordingly, the EPA submitted this action to the Office of Management and Budget (OMB) for review under Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011) and any changes made in response to OMB recommendations have been documented in the docket for this action.
      In addition, the EPA prepared an analysis of the potential costs and benefits associated with this action. The RIA available in the docket describes in detail the empirical basis for the EPA's assumptions and characterizes the various sources of uncertainties affecting the estimates below. Table 5-1 shows the results of the cost and benefits analysis for these final rules.

Table 5-1	Summary of the Monetized Benefits, Costs, and Net Benefits for the Final Oil and Natural Gas NSPS and NESHAP Amendments in 2015 (millions of 2008$)[1]

                                     NSPS
                               NESHAP Amendments
                      NSPS and NESHAP Amendments Combined
Total Monetized Benefits[2]
                                      N/A
                                      N/A
                                      N/A
Total Costs[3]
                                -$18 million[4]
                                  $18 million
                                   -$61,000
Net Benefits
                                      N/A
                                      N/A
                                      N/A
Non-monetized Benefits
                              19,000 tons of HAP
                               1,300 tons of HAP
                              20,000 tons of HAP

                              290,000 tons of VOC
                               9,000 tons of VOC
                              300,000 tons of VOC

                          1.7 million tons of methane
                             4,800 tons of methane
                          1.7 million tons of methane

                       Health effects of HAP exposure[5]
                        Health effects of HAP exposure
                        Health effects of HAP exposure

                  Health effects of PM2.5 and ozone exposure
                  Health effects of PM2.5 and ozone exposure
                  Health effects of PM2.5 and ozone exposure

                             Visibility impairment
                             Visibility impairment
                             Visibility impairment

                              Vegetation effects
                              Vegetation effects
                              Vegetation effects

                              Climate effects[5]
                              Climate effects[5]
                              Climate effects[5]

1 All estimates are for the implementation year (2015) and include estimated revenue from additional natural gas recovery as a result of the NSPS.

2 While we expect that these avoided emissions will result in improvements in air quality and reductions in health effects associated with HAP, ozone, and particulate matter (PM) as well as climate effects associated with methane, we have determined that quantification of those benefits and co-benefits cannot be accomplished for this rule in a defensible way.  This is not to imply that there are no benefits or co-benefits of the rules; rather, it is a reflection of the difficulties in modeling the direct and indirect impacts of the reductions in emissions for this industrial sector with the data currently available.  The specific control technologies for the final NSPS are anticipated to have minor secondary disbenefits, including an increase of 1.2 million tons of carbon dioxide (CO2), 630 tons of nitrogen oxides NOx, 19 tons of PM, 3,400 tons of CO, and 1,300 tons of total hydrocarbons (THC) as well as emission reductions associated with the energy system impacts.  The specific control technologies for the NESHAP is anticipated to have minor secondary disbenefits, including an increase of 5,500 tons of CO2, 2.9 tons of NOx, 16 tons of CO, and 6.0 tons of total hydrocarbons (THC) as well as emission reductions associated with the energy system impacts.  The net CO2-equivalent emission reductions are 31 million metric tons.

3 The engineering compliance costs are annualized using a 7 percent discount rate.

4 The negative cost for the NSPS reflects the inclusion of revenues from additional natural gas and hydrocarbon condensate recovery that are estimated as a result of the final NSPS.  Possible explanations for why there appear to be negative cost control technologies are discussed in the engineering costs analysis section in the RIA.

[5] For the NSPS, reduced exposure to HAP and climate effects are co-benefits. For the NESHAP, reduced VOC emissions, PM2.5 and ozone exposure, visibility and vegetation effects and climate effects are co-benefits.

Paperwork Reduction Act
      The information collection requirements in this rule have been submitted for approval to OMB under the PRA, 44 U.S.C. 3501, et seq. The ICR document prepared by EPA has been assigned EPA ICR number 1716.07.
[Note: The summary of the results of the ICR and supporting statement will be provided.]
      An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for EPA's regulations in 40 CFR are listed in 40 CFR part 9. When these ICRs are approved by OMB, the agency will publish a technical amendment to 40 CFR part 9 in the Federal Register to display the OMB control numbers for the approved information collection requirements contained in the final rule.
Regulatory Flexibility Act
	The Regulatory Flexibility Act generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities (SISNOSE). Small entities include small businesses, small organizations, and small governmental jurisdictions. For purposes of assessing the impact of this rule on small entities, a small entity is defined as: (1) A small business whose parent company has no more than 500 employees (or revenues of less than $7 million for firms that transport natural gas via pipeline); (2) a small governmental jurisdiction that is a government of a city, county, town, school district, or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.
	For the final NSPS, the EPA performed an analysis for impacts on a sample of expected affected small entities by comparing compliance costs to entity revenues. Based upon the analysis in the RIA, which is in the Docket, when revenue from additional natural gas product recovered is not included, we estimate that 120 of the 127 small firms analyzed (94 percent) are likely to have impacts less than 1 percent in terms of the ratio of annualized compliance costs to revenues. Meanwhile, seven firms (6 percent) are likely to have impacts greater than 1 percent. Three of these seven firms are likely to have impacts greater than 3 percent. However, when revenue from additional natural gas product recovery is included, we estimate that none of the analyzed firms will have an impact greater than 1 percent.
	For the final NESHAP Amendments, we estimate that 54 of the 108 firms (50 percent) that own potentially affected facilities are small entities. The EPA performed an analysis for impacts on all expected affected small entities by comparing compliance costs to entity revenues. Among the small firms, 45 of the 54 (83 percent) are likely to have impacts of less than 1 percent in terms of the ratio of annualized compliance costs to revenues. Meanwhile, nine firms (17 percent) are likely to have impacts greater than 1 percent. Three of these nine firms are likely to have impacts greater than 3 percent. While these nine firms might receive significant impacts from the final NESHAP amendments, they represent a very small slice of the oil and gas industry in its entirety, less than 0.2 percent of the estimated 6,427 small firms in NAICS 211.
	After considering the economic impact of the combined NSPS and NESHAP amendments on small entities, I certify this action will not have a SISNOSE. While both the NSPS and NESHAP amendment would individually result in a no SISNOSE finding, the EPA performed an additional analysis in order to certify the rule in its entirety. This analysis compared compliance costs to entity revenues for the total of all the entities affected by the NESHAP amendments and the sample of entities analyzed for the NSPS. When revenues from additional natural gas product sales are not included, 153 of the 169 small firms (91 percent) in the sample are likely to have impacts of less than 1 percent in terms of the ratio of annualized compliance costs to revenues. Meanwhile, 16 firms (9 percent) are likely to have impacts greater than 1 percent. Six of these 16 firms are likely to have impacts greater than 3 percent. When revenues from additional natural gas product sales are included, 160 small firms (95 percent) in the sample are likely to have impacts of less than 1 percent. Nine firms (5 percent) are likely to have impacts greater than 1 percent, while only three of these nine are likely to have impacts greater than 3 percent.
	Our determination is informed by the fact that many affected firms are expected to receive revenues from the additional natural gas and condensate recovery engendered by the implementation of the controls evaluated in this RIA. As much of the additional natural gas recovery is estimated to arise from completion-related activities, we expect the impact on well-related compliance costs to be significantly mitigated. This conclusion is enhanced because the returns to REC activities occur without a significant time lag between implementing the control and obtaining the recovered product, unlike many control options where the emissions reductions accumulate over long periods of time; the reduced emission completions and recompletions occur over a short span of time, during which the additional product recovery is also accomplished.
	Although this final rule will not impact a substantial number of small entities, the EPA, nonetheless, has tried to reduce the impact of this rule on small entities by setting the final emissions limits at the MACT floor, the least stringent level allowed by law.
Unfunded Mandates Reform Act
      This final action does not contain a federal mandate under the provisions of Title III of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1531-1538 for state, local, and tribal governments, in the aggregate, or to the private sector. The action would not result in expenditures of $100 million or more for state, local, and tribal governments, in the aggregate, or to the private sector in any 1 year. Thus, this final rule is not subject to the requirements of sections 202 or 205 of UMRA.
      This final rule is also not subject to the requirements of section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments because it contains no requirements that apply to such governments nor does it impose obligations upon them.
Executive Order 13132:  Federalism
      This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. These final rules primarily affect private industry, and do not impose significant economic costs on state or local governments. Thus, Executive Order 13132 does not apply to this action.
Executive Order 13175:  Consultation and Coordination with Indian Tribal Governments
	This action does have tribal implications, as specified in Executive Order 13175 (65 FR 67249, November 9, 2000) because the growth of the oil and gas production industry in Indian country.  As a result, EPA conducted early outreach to the tribes, prior to proposal in 2010.  We met with the Inter Tribal Environmental Council, which include many of the Region VI tribes, The Tribal leadership summit in Region X, and Tribal Energy Conference hosted by Ft. Belknap, and the National Tribal Forum.
	After the Proposal was published letters were sent to all tribal leaders offering to consult on the rule. An outreach and consultation call was held on October 12, 2011.  Tribes that participated on this call were:  Fond du Lac Band of Lake Superior Chippewa, Fort Belknap Indian Community, Forest County Potawatomi Community, Southern Ute Indian Tribe, and Pueblo of Santa Clara.  All these tribes counted this as information only, not consultation. There were no issues raised during this call.  The tribes were listening to the presentation and the call was ended without comment.
	In this meeting the tribes were presented the information in the proposal then asked general clarifying questions but did not provide specific comments. Comments on the proposal were received from an affiliate of the Southern Ute Indian Tribe.  The commenter expressed concern about the impacts of the rule on natural gas and oil production operations on the Southern Ute Indian reservation and requested additional time to evaluate the impacts.  In response to this and other requests, the comment period was extended. More specific comments can be found in the docket.
Executive Order 13045:  Protection of Children from Environmental Health Risks and Safety Risks
      This action is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997) because it is not economically significant as defined in Executive Order 12866, and because the EPA does not believe the environmental health or safety risks addressed by this action present a disproportionate risk to children. This action would not relax the control measures on existing regulated sources. The EPA's risk assessments (included in the docket for this rule) demonstrate that the existing regulations are associated with an acceptable level of risk and provide an ample margin of safety to protect public health.
Executive Order 13211:  Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use
	This action is not a "significant energy action" as defined in Executive Order 13211 (66 FR 28,355, May 22, 2001), because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. These final rules will result in the addition of control equipment and monitoring systems for existing and new sources within the oil and natural gas industry. The final NESHAP Amendments are unlikely to have a significant adverse effect on the supply, distribution, or use of energy. As such, the final NESHAP Amendments are not "significant energy actions" as defined in Executive Order 13211, (66 FR 28355, May 22, 2001).
	The final NSPS is also unlikely to have a significant adverse effect on the supply, distribution, or use of energy. As such, the final NSPS is not a "significant energy action" as defined in Executive Order 13211 (66 FR 28355, May 22, 2001). The basis for the determination is as follows.
	We use the NEMS to estimate the impacts of the final NSPS on the United States energy system. The NEMS is a publically available model of the United States energy economy developed and maintained by the Energy Information Administration of the U.S. DOE and is used to produce the Annual Energy Outlook, a reference publication that provides detailed forecasts of the United States energy economy.
	Emission controls for the NSPS capture VOC emissions that otherwise would be vented to the atmosphere. Since methane is co-emitted with VOC, a large proportion of the averted methane emissions can be directed into natural gas production streams and sold. One pollution control requirement of the final NSPS also captures saleable condensates.  The revenues from additional natural gas and condensate recovery are expected to offset the costs of implementing the final NSPS.
	The analysis of energy impacts for the final NSPS that includes the additional product recovery shows that domestic natural gas production is estimated to increase (about 60 billion cubic feet or 0.3 percent) and natural gas prices to decrease ($0.05/Mcf or 1.1 percent at the wellhead for producers in the lower 48 states) in 2015, the year of analysis. Domestic crude oil production is not estimated to change, while crude oil prices are estimated to decrease slightly ($0.01/barrel or less than about 0.01 percent at the wellhead for producers in the lower 48 states) in 2015, the year of analysis. All prices are in 2008 dollars.
	Additionally, the NSPS establishes several performance standards that give regulated entities flexibility in determining how to best comply with the regulation. In an industry that is geographically and economically heterogeneous, this flexibility is an important factor in reducing regulatory burden.
National Technology Transfer and Advancement Act
	Section 12(d) of the NTTAA of 1995, Public Law 104 - 113, 12(d) (15 U.S.C. 272 note) directs the EPA to use VCS in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by VCS bodies. The NTTAA directs EPA to provide Congress, through OMB, explanations when the EPA decides not to use available and
applicable VCS.
	This final action does not involve technical standards. Therefore, the EPA is not considering the use of any VCS.
Executive Order 12898:  Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations
	Executive Order 12898 (59 FR 7629, February 16, 1994) establishes Federal executive policy on EJ. Its main provision directs Federal agencies, to the greatest extent practicable and permitted by law, to make EJ part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies and activities on minority populations and low income populations in the United States.
	The EPA has determined that this final rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it increases the level of environmental protection for all affected populations without having any disproportionately high and adverse human health or environmental effects on any population, including any minority, low-income, or indigenous populations.
	To examine the potential for any environmental justice issues that might be associated with each source category, we evaluated the percentages of various social, demographic, and economic groups within the at-risk population living near the facilities where these source categories are located and compared them to national averages. The development of demographic analyses to inform the consideration of environmental justice issues in EPA rulemakings is an evolving science.
	The EPA conducted a demographic analysis, focusing on populations within 50 km of any facility in each of the source categories that are estimated to have HAP exposures which result in cancer risks of 1-in-1 million or greater or non-cancer hazard indices of 1 or greater based on estimates of current HAP emissions.  The results of this analysis are documented in the technical report: Risk and Technology Review  -  Analysis of Socio-economic Factors for Populations Living Near Oil & Natural Gas Production Facilities located in the docket for this rulemaking.
	As described in the preamble, our risk assessments demonstrate that the regulations for the oil and natural gas production and natural gas transmission and storage source categories, are associated with an acceptable level of risk and that the additional requirements will provide an ample margin of safety to protect public health. Our analyses also show that, for these source categories, there is no potential for an adverse environmental effect or human health multi-pathway effects, and that acute and chronic noncancer health impacts are unlikely. The EPA has determined that, although there may be an existing disparity in HAP risks from these sources between some demographic groups, no demographic group is exposed to an unacceptable level of risk.
	EPA defines "Environmental Justice" to include meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and polices. To promote meaningful involvement, EPA conducted three public hearings on the proposal. The hearings were held in Pittsburgh, PA on September 27, 2011, Denver, CO on September 28, 2011 and Arlington, TX on September 29, 2011. A total of 261 people spoke at the three hearings and 735 people attended the hearings. The attendees at the hearings included private citizens, community-based and environmental organizations, industry representatives, associations representing industry and local and state government officials.
Congressional Review Act

      U.S.C. 801, et seq., as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that, before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. The EPA will submit a report containing this final rule and other required information to the United States Senate, the United States House of Representatives, and the Comptroller General of the United States prior to publication of the final rule in the Federal Register. A major rule cannot take effect until 60 days after it is published in the Federal Register. This action is not a "major rule" as defined by 5 U.S.C. 804(2).

Comparison of Benefits and Costs
      Because we are unable to estimate the monetary value of the emissions reductions from the rule, we have chosen to rely upon a break-even analysis to estimate what the monetary value benefits would need to attain in order to equal the costs estimated to be imposed by the rule.  A break-even analysis answers the question, "What would the benefits need to be for the benefits to exceed the costs."  While a break-even approach is not equivalent to a benefits analysis or even a net benefits analysis, we feel the results are illustrative, particularly in the context of previously modeled benefits.
      The total engineering cost of the final NSPS in the analysis year of 2015 when the additional natural gas and condensate recovery is included in the analysis is estimated at -$18 million.  EPA anticipates that this rule would prevent 290,000 tons of VOC, 1.7 million tons of methane, and 19,000 tons of HAP in 2015 from new sources.  In 2015, EPA estimates the costs for the NESHAP Amendments to be 18 million.  EPA anticipates that this rule would reduce 9,000 tons of VOC, 4,800 tons of methane, and 1,300 tons of HAP in 2015 from existing sources.  For the NESHAP Amendments, a break-even analysis suggests that HAP emissions would need to be valued at $14,000 per ton for the benefits to exceed the costs if the health benefits, and ecosystem and climate co-benefits from the reductions in VOC and methane emissions are assumed to be zero.  If we assume the health benefits from HAP emission reductions are zero, the VOC emissions would need to be valued at $1,900 per ton or the methane emissions would need to be valued at $3,700 per ton for the benefits to exceed the costs.  All estimates are in 2008 dollars.
For the final NSPS, the revenue from additional natural gas recovery already exceeds the costs, which renders a break-even analysis unnecessary.  However, as discussed in Section 3.2.2., estimates of the annualized engineering costs that include revenues from natural gas product recovery depend heavily upon assumptions about the price of natural gas and hydrocarbon condensates in analysis year 2015. Therefore, we have also conducted a break-even analysis for the price of natural gas.  For the NSPS, a break-even analysis suggests that the price of natural gas would need to be at least $3.79 per Mcf in 2015 for the revenue from product recovery to exceed the annualized costs.  EIA forecasts that the price of natural gas would be $4.22 per Mcf in 2015.  In addition to the revenue from product recovery, the NSPS would avert emissions of VOC, HAP, and methane, which all have value that could be incorporated into the break-even analysis.  Figure 6-1 illustrates one method of analyzing the break-even point with alternate natural gas prices and VOC benefits.  If, as an illustrative example, the price of natural gas was only $3.00 per Mcf, VOC would need to be valued at $220 per ton for the benefits to exceed the costs. All estimates are in 2008 dollars.

Figure 6-1	Illustrative Break-Even Diagram for Alternate Natural Gas Prices for the NSPS
      With the data available, we are not able to provide a credible benefit-per-ton estimate for any of the pollutant reductions for these rules to compare to the break-even estimates.  Based on the methodology from Fann, Fulcher, and Hubbell (2009), average PM2.5 health-related benefits of VOC emissions are valued at $280 to $7,000 per ton across a range of eight urban areas.  In addition, ozone benefits have been previously valued at $240 to $1,000 per ton of VOC reduced.  Using the GWP approach, the climate co-benefits range from approximately $110 to $1,400 per short ton of methane reduced depending upon the discount rate assumed with a per ton estimate of $760 at the 3 percent discount rate.
      These break-even benefit-per-ton estimates assume that all other pollutants have zero value.  Of course, it is inappropriate to assume that the value of reducing any of these pollutants is zero.  Thus, the real break-even estimate is actually lower than the estimates provided above because the other pollutants each have non-zero benefits that should be considered.  Furthermore, a single pollutant can have multiple effects (e.g., VOC contribute to both ozone and PM2.5 formation that each have health and welfare effects) that would need to be summed in order to develop a comprehensive estimate of the monetized benefits associated with reducing that pollutant.
      As previously described, the revenue from additional natural gas recovery already exceeds the costs of the NSPS, but even if the price of natural gas was only $3.00 per Mcf, it is likely that the VOC benefits would exceed the costs,  As a result, even if VOC emissions from oil and natural gas operations result in monetized benefits that are substantially below the average modeled benefits, there is a reasonable chance that the benefits of these rules would exceed the costs, especially if we were able to monetize all of the benefits associated with ozone formation, visibility, HAP, and methane.
      Table 6-1 and Table 6-2 present the summary of the benefits, costs, and net benefits for the NSPS and NESHAP Amendments, respectively.  Table 6-3 provides a summary of the direct and secondary emissions changes for each rule.

Table 6-1	Summary of the Monetized Benefits, Costs, and Net Benefits for the Final Oil and Natural Gas NSPS in 2015 (millions of 2008$)[1]

                                   Final[4]
Total Monetized Benefits[2]
                                      N/A
Total Costs[3]
                                 -$18 million
Net Benefits
                                      N/A
Non-monetized Benefits
                             19,000 tons of HAP[5]

                              290,000 tons of VOC

                          1.7 million tons of methane

                       Health effects of HAP exposure[5]

                  Health effects of PM2.5 and ozone exposure

                             Visibility impairment

                              Vegetation effects

                              Climate effects[5]

1 All estimates are for the implementation year (2015) and include estimated revenue from additional natural gas recovery as a result of the NSPS.

2 While we expect that these avoided emissions will result in improvements in air quality and reductions in health effects associated with HAP, ozone, and particulate matter (PM) as well as climate effects associated with methane, we have determined that quantification of those benefits and co-benefits cannot be accomplished for this rule in a defensible way.  This is not to imply that there are no benefits or co-benefits of the rules; rather, it is a reflection of the difficulties in modeling the direct and indirect impacts of the reductions in emissions for this industrial sector with the data currently available.  The specific control technologies for the final NSPS are anticipated to have minor secondary disbenefits, including an increase of 1.2 million tons of carbon dioxide (CO2), 630 tons of nitrogen oxides NOx, 19 tons of PM, 3,400 tons of CO, and 1,300 tons of total hydrocarbons (THC) as well as emission reductions associated with the energy system impacts.  The net CO2-equivalent (CO2-e) emission reductions are 31 million metric tons.

3 The engineering compliance costs are annualized using a 7 percent discount rate.

4 The negative cost for the NSPS reflects the inclusion of revenues from additional natural gas and hydrocarbon condensate recovery that are estimated as a result of the final NSPS.  Possible explanations for why there appear to be negative cost control technologies are discussed in the engineering costs analysis section in the RIA.

[5] Reduced exposure to HAP and climate effects are co-benefits.

Table 6-2	Summary of the Monetized Benefits, Costs, and Net Benefits for the Final Oil and Natural Gas NESHAP Amendments in 2015 (millions of 2008$)[1]

                                     Final
Total Monetized Benefits[2]
                                      N/A
Total Costs[3]
                                  $18 million
Net Benefits
                                      N/A
Non-monetized Benefits
                               1,300 tons of HAP

                             9,000  tons of VOC[4]

                           4,800  tons of methane[4]

                        Health effects of HAP exposure

                 Health effects of PM2.5 and ozone exposure[4]

                           Visibility impairment[4]

                             Vegetation effects[4]

                              Climate effects[4]

1 All estimates are for the implementation year (2015).

2 While we expect that these avoided emissions will result in improvements in air quality and reductions in health effects associated with HAP, ozone, and PM as well as climate effects associated with methane, we have determined that quantification of those benefits and co-benefits cannot be accomplished for this rule in a defensible way.  This is not to imply that there are no benefits or co-benefits of the rules; rather, it is a reflection of the difficulties in modeling the direct and indirect impacts of the reductions in emissions for this industrial sector with the data currently available.  The specific control technologies for the NESHAP is anticipated to have minor secondary disbenefits, including an increase of 5,500 tons of CO2, 2.9 tons of NOx, 16 tons of CO, and 6.0 tons of total hydrocarbons (THC) as well as emission reductions associated with the energy system impacts.  The net CO2-equivalent emission reductions are 90,000 metric tons.

3 The cost estimates are assumed to be equivalent to the engineering cost estimates.  The engineering compliance costs are annualized using a 7 percent discount rate.

4 Reduced exposure to VOC emissions, PM2.5 and ozone exposure, visibility and vegetation effects, and climate effects are co-benefits.

Table 6-3	Summary of Emissions Changes for the Final Oil and Gas NSPS and NESHAP in 2015 (short tons per year)

                                   Pollutant
                                     NSPS
                                    NESHAP
Change in Direct Emissions
                                      VOC
                                   -290,000
                                    -9,000

                                    Methane
                                  -1,700,000
                                    -4,800

                                     HAP
                                    -19,000
                                    -1,300
Change in Secondary Emissions (Producer-Side) [1]
                                      CO2
                                   1,200,000
                                     5,500

                                      NOx
                                      630
                                      2.9

                                      PM
                                     19.0
                                      0.1

                                      CO
                                     3,400
                                      16

                                      THC
                                     1,300
                                      6.0
Change in Secondary Emissions (Consumer-Side)
                                     CO2-e
                                    600,000
                                      N/A
Net Change in CO2-equivalent Emissions
                                     CO2-e
                                  -34,000,000
                          (≈31,000,000 metric tons)
                                    -95,000
                            (≈90,000 metric tons)

Economic Impact Analysis and Distributional Assessments

Introduction
This section includes three sets of analyses for both the NSPS and NESHAP Amendments:
   * Energy System Impacts
   * Employment Impacts
   * Small Business Impacts Analysis
Energy System Impacts Analysis of Final NSPS
We use the National Energy Modeling System (NEMS) to estimate the impacts of the final NSPS on the U.S. energy system.  The impacts we estimate include changes in drilling activity, price and quantity changes in the production and consumption of crude oil and natural gas, and changes in international trade of crude oil and natural gas.  We evaluate whether and to what extent the increased production costs imposed by the NSPS might alter the mix of fuels consumed at a national level.  With this information we estimate how the changed fuel mix affects national level CO2-equivalent greenhouse gas emissions from energy sources.  We additionally combine these estimates of changes in CO2-equivalent greenhouse gas emissions from energy sources and emissions co-reductions of methane from the engineering analysis with NEMS analysis to estimate the net change in CO2-equivalent greenhouse gas emissions from energy-related sources, but this analysis is reserved for the secondary environmental impacts analysis within Section 4.
A brief conceptual discussion about our energy system impacts modeling approach is necessary before going into detail on NEMS, how we implemented the regulatory impacts, and results.  Economically, it is possible to view the recovered natural gas as an explicit output or as contributing to an efficiency gain at the producer level.  For example, the analysis for the final NSPS shows that about 93 percent of the natural gas captured by emissions controls suggested by the rule is captured by performing RECs on new and existing wells that are completed after being hydraulically fractured.  The assumed $4/Mcf price for natural gas is the price paid to producers at the wellhead.  In the natural gas industry, production is metered at or very near to the wellhead, and producers are paid based upon this metered production.  Depending on the situation, the gas captured by RECs is sent through a temporary or permanent meter.  Payments for the gas are typically made within 30 days.
      To preview the energy systems modeling using NEMS, results show that after economic adjustments to the new regulations are made by producers, the captured natural gas represents both increased output (a slight increment in aggregate production) and increased efficiency (producing slightly more for less).  However, because of differing objectives for the regulatory analysis we treat the associated savings differently in the engineering cost analysis (as an explicit output) and in NEMS (as an efficiency gain).
      In the engineering cost analysis, it is necessary to estimate the expected costs and revenues from implementing emissions controls at the unit level.  Because of this, we estimate the net costs as expected costs minus expected revenues for representative units.  On the other hand, NEMS models the profit maximizing behavior of representative project developers at a drilling project level. The net costs of the regulation alter the expected discounted cash flow of drilling and implementing oil and gas projects, and the behavior of the representative drillers adjusts accordingly.  While in the regulatory case natural gas drilling has become more efficient because of the gas recovery, project developers still interact with markets for which supply and demand are simultaneously adjusting.  Consequently, project development adjusts to a new equilibrium.  While we believe the cost savings as measured by revenues from selling recovered gas (engineering costs) and measured by cost savings from averted production through efficiency gains (energy economic modeling)  are approximately the same, it is important to note that the engineering cost analysis and the national-level cost estimates do not incorporate economic feedbacks such as supply and demand adjustments.
Description of the Department of Energy National Energy Modeling System
NEMS is a model of U.S. energy economy developed and maintained by the Energy Information Administration of the U.S. Department of Energy.  NEMS is used to produce the Annual Energy Outlook, a reference publication that provides detailed forecasts of the energy economy from the current year to 2035.  DOE first developed NEMS in the 1980s, and the model has been undergone frequent updates and expansion since.  DOE uses the modeling system extensively to produce issue reports, legislative analyses, and respond to Congressional inquiries.
EIA is legally required to make the NEMS system source code available and fully documented for the public.  The source code and accompanying documentation is released annually when a new Annual Energy Outlook is produced.  Because of the availability of the NEMS model, numerous agencies, national laboratories, research institutes, and academic and private-sector researchers have used NEMS to analyze a variety of issues.
NEMS models the dynamics of energy markets and their interactions with the broader U.S. economy.  The system projects the production of energy resources such as oil, natural gas, coal, and renewable fuels, the conversion of resources through processes such as refining and electricity generation, and the quantity and prices for final consumption across sectors and regions.  The dynamics of the energy system are governed by assumptions about energy and environmental policies, technological developments, resource supplies, demography, and macroeconomic conditions.  An overview of the model and complete documentation of NEMS can be found at <http://www.eia.doe.gov/oiaf/aeo/overview/index.html>.

Figure 7-1	Organization of NEMS Modules (source: U.S. Energy Information Administration)
NEMS is a large-scale, deterministic mathematical programming model.  NEMS iteratively solves multiple models, linear and non-linear, using nonlinear Gauss-Seidel methods (Gabriel et al. 2001).  What this means is that NEMS solves a single module, holding all else constant at provisional solutions, then moves to the next model after establishing an updated provisional solution.
NEMS provides what EIA refers to as "mid-term" projections to the year 2035.  However, as this RIA is concerned with estimating regulatory impacts in the first year of full implementation, our analysis focuses upon estimated impacts in the year 2015, with regulatory costs first imposed in 2011.  For this RIA, we draw upon the same assumptions and model used in the Annual Energy Outlook 2011.   The RIA baseline is consistent with that of the Annual Energy Outlook 2011 which is used extensively in Section 2 in the Industry Profile.
Inputs to National Energy Modeling System
To model potential impacts associated with the NSPS, we modified oil and gas production costs within the Oil and Gas Supply Module (OGSM) of NEMS and domestic and Canadian natural gas production within the Natural Gas Transmission and Distribution Module (NGTDM).  The OGSM projects domestic oil and gas production from onshore, offshore, Alaskan wells, as well as having a smaller-scale treatment of Canadian oil and gas production (U.S. EIA, 2010).  The treatment of oil and gas resources is detailed in that oil, shale oil, conventional gas, shale gas, tight sands gas, and coalbed methane (CBM) are explicitly modeled.  New exploration and development is pursued in the OGSM if the expected net present value of extracted resources exceeds expected costs, including costs associated with capital, exploration, development, production, and taxes.  Detailed technology and reservoir-level production economics govern finding and success rates and costs.
The structure of the OGSM is amenable to analyzing potential impacts of the Oil and Natural Gas NSPS.  We are able to target additional expenditures for environmental controls required by the NSPS on new exploratory and developmental oil and gas production activities, as well as add additional costs to existing projects.  We model the impacts of additional environmental costs, as well as the impacts of additional product recovery.  We explicitly model the additional natural gas recovered when implementing the NSPS.  However, we are unable to explicitly model the additional production of condensates expected to be recovered by reduced emissions completions, although we incorporate expected revenues from the condensate recovery in the economic evaluation of new drilling projects.
While the oil production simulated by the OGSM is sent to the refining module (the Petroleum Market Module), simulated natural gas production is sent to a transmission and distribution network captured in the NGTDM.  The NGTDM balances gas supplies and prices and "negotiates" supply and consumption to determine a regional equilibrium between supply, demand and prices, including imports and exports via pipeline or LNG.  Natural gas transmitted through a simplified arc-node representation of pipeline infrastructure based upon pipeline economics.
Compliance Costs for Oil and Gas Exploration and Production
	As the NSPS affects new emissions sources, we chose to estimate impacts on new exploration and development projects by adding costs of environmental regulation to the algorithm that evaluates the profitability of new projects.  Additional NSPS costs associated with reduced emission completions and future recompletions for new wells are added to drilling, completion, and stimulation costs, as these are, in effect, associated with activities that occur within a single time period, although they may be repeated periodically, as in the case of recompletions.  Costs required for reduced emissions recompletions on existing wells are added to stimulation expenses for existing wells exclusively.  Other costs are operations and maintenance-type costs and are added to fixed operation and maintenance (O&M) expenses associated with new projects.  The one-shot and continuing O&M expenses are estimated and entered on a per well basis, depending on whether the costs would apply to oil wells, natural gas wells, both oil and natural gas wells, or a subset of either.  We base the per well cost estimates on the engineering costs including revenues from additional product recovery.  This approach is appropriate given the structure of the NEMS algorithm that estimates the net present value of drilling projects.
One concern in basing the regulatory costs inputs into NEMS on the net cost of the compliance activity (estimated annualized cost of compliance minus estimated revenue from product recovery) is that potential barriers to obtaining capital may not be adequately incorporated in the model.  However, in general, potential barriers to obtaining additional capital should be reflected in the annualized cost via these barriers increasing the cost of capital.  With this in mind, assuming the estimates of capital costs and product recovery are valid, the NEMS results will reflect barriers to obtaining the retired capital.  A caveat to this is that the estimated unit-level capital costs of controls which are newly required at a national-level as a result of the regulation -- RECs, for example -- may not incorporate potential additional transitional costs as the supply of control equipment adjusts to new demand.
	Table 7-1 shows the incremental O&M expenses that accrue to new drilling projects as a result of producers having to comply with the NSPS.  We estimate those costs as a function of new wells expected to be drilled in a representative year.  To arrive at estimates of the per well costs, we first identify which emissions reductions will apply primarily to crude oil wells, to natural gas wells, or to both crude oil and natural gas wells.  Based on the baseline projections of successful completions in 2015, we used 19,097 new natural gas wells and 12,193 new oil wells as the basis of these calculations.  We then divide the estimated compliance costs for the given emissions point (from Table 3-3) by the appropriate number of expected new wells in the year of analysis.  The result yields an approximation of a per well compliance costs.  We assume this approximation is representative of the incremental cost faced by a producer when evaluating a prospective drilling project.
Like the engineering analysis, we assume that hydraulically fractured well completions and recompletions will be required of wells drilled into tight sand, shale gas, and coalbed methane formations.  While costs for well recompletions reflect the cost of a single recompletion, the engineering cost analysis assumed that one in one hundred new wells drilled after the implementation of the promulgation and implementation of the NSPS are completed using hydraulic fracturing will receive a recompletion in any given year using hydraulic fracturing.  Meanwhile, within NEMS, wells are assumed to be stimulated every five years.  We assume these more frequent stimulations are less intensive than stimulation using hydraulic fracturing but add costs such that the recompletions costs reflect the same assumptions as the engineering analysis.  In entering compliance costs into NEMS, we also account for reduced emissions completions, completion combustion, and recompletions performed in absence of the regulation, using the same assumptions as the engineering costs analysis (Table 7-2).

Table 7-1	Summary of Additional Annualized O&M Costs (on a Per New Well Basis) for Environmental Controls Entered into NEMS

                           Emissions Sources/Points
                               Emissions Control
                            Per Well Costs (2008$)
                           Wells Applied To in NEMS
Equipment Leaks

Well Pads
                                  Subpart VV
                                 Not in Final
                                  Oil and Gas

Gathering and Boosting Stations
                                  Subpart VV
                                 Not in Final
                                      Gas

Processing Plants
                                  Subpart VVa
                                      $14
                                     None

Transmission Compressor Stations
                                  Subpart VV
                                 Not in Final
                                      Gas
Reciprocating Compressors

Well Pads
                        Annual Monitoring/ Maintenance
                                 Not in Final
                                     None

Gathering/Boosting Stations
                                      AMM
                                      $10
                                      Gas

Processing Plants
                                      AMM
                                     -$26
                                      Gas

Transmission Compressor Stations
                                      AMM
                                 Not in Final
                                      Gas

Underground Storage Facilities
                                      AMM
                                 Not in Final
                                      Gas
Centrifugal Compressors

Processing Plants