1. Natural Gas Emissions: Drivers of Policy and R&D Bob Morris Gas Technology Institute (GTI) June 2015

2. 22 Company Overview ESTABLISHED 1941 >Independent, not-for-profit established by the natural gas industry >Providing natural gas research, development and technology deployment services to industry and government clients >Performing contract research, program management, consulting, and training >Wellhead to the burner tip including energy conversion technologies Our Staff

3. 33 Thank You to Our Members

4. 44 Addressing Key Issues Across the Energy Value Chain Expanding the supply of clean, abundant, and affordable natural gas Transforming natural resources into clean fuels, power, and chemicals Ensuring a safe and reliable energy delivery infrastructure Promoting the clean and efficient use of energy resources REDUCING CARBON EMISSIONS TO THE ENVIRONMENT SUPPORTING SUSTAINABLE ECONOMIC GROWTH

5. 5 Natural Gas Industry Emerging Technology Drivers Distinct gas industry needs and opportunities, driven by key societal needs to reduce energy intensity, strive for sustainability, achieve renewable energy integration, lower carbon/methane emissions, ensure public safety, and boost economic welfare Production Advancements to boost productivity and minimize environmental impacts Delivery Advancements to reduce risks, replace aging infrastructure, automate operations, and minimize environmental impacts End Use Advancements to address core markets (electric competition) and capitalize on shale gas resources to expand industrial, power, and vehicle use and realize economic and environmental gains

6. 66 “New Technology” Fundamentally Transformed U.S. Gas Market in 2008

7. 77

8. 8 Emissions Have Declined Even as Pipeline Miles Have Grown Source: AGA Analysis based on Department of Transportation data and EPA Inventory of U.S. Greenhouse Gas Emissions and Sinks 1990-2012

9. 9 U.S. Methane Emissions by Source

10. 10 Natural Gas Systems Represent a Small Share of Annual GHGs Source: Inventory of U.S. Greenhouse Gas Emissions and Sinks 1990-2012, Environmental Protection Agency American Gas Association (AGA)

11. 11 Emissions Leakage Rates Production 130 Bcf 0.41% Processing 122 Bcf 0.38% Transmission & Storage 84 Bcf 0.27% Distribution 66 Bcf 0.24% Only 0.24 % of produced natural gas is emitted from systems operated by natural gas utilities Approximately 1.3% of gross natural gas production (31 Tcf) is estimated to be emitted throughout the supply chain Source: U.S. Department of Energy and U.S. Environmental Protection Agency

12. 12 Technological Advances, Industry Best Practices, and Infrastructure Add up to a declining emissions trend EPA Estimates of Natural Gas System Methane Emissions Show a Continued Decline Source: Inventory of U.S. Greenhouse Gas Emissions and Sinks 1990-2012, Environmental Protection Agency

13. 13 Are EPA’s Numbers Too High? Yes. >We think EPA’s Inventory numbers are still too high ─based on 20-year old emission factors >“Bottom-up” studies ─Measure emissions directly from specific sources ─Multiply average measured emissions times number of widgets or miles of pipe to estimate overall emissions >Environmental Defense Fund (EDF) Methane Studies: ─Production: Texas University (TU)—EDF Production study published (Sept 2013) showed emissions from well completions much lower than EPA estimated >Partly offset by higher emissions from pneumatic valves >Net result somewhat lower than EPA Inventory estimate 13

14. 14 EPA OIG Report: Current Data Results in More Precise Emission Factors Improvements made but additional data will improve accuracy

15. 15 Need to Increase Efforts to Address Fuel and Methane Emissions >Administration releases Climate Action Plan which includes reducing emissions from the gas industry >EPA Office of Inspector General: conducted an evaluation of what EPA has done to reduce methane emissions from distribution pipelines. Recommendations include: ─EPA and PHMSA to work together to address methane leaks from a combined environmental and safety standpoint ─Establish performance goals and track emissions from distribution sector ─Assess whether data from current studies should be used to update emission factors. Work with research community to update the distribution sector emission factors

16. 16 Major Industry Initiatives: Guidelines >AGA Natural Gas Emission Reduction Guidelines ─Approved by AGA Board – May 17, 2014 ─Outlines voluntary practices for continuing the downward trend in emissions, focusing on safety and system integrity 16

17. 17 Major Industry Initiatives: Guidelines >List of 8 practices (not all are applicable everywhere) 1.Modernize Distribution Systems – replace cast iron, bare steel, or other pipe based on fitness for service, at a pace approved by state utility commission 2.Replace High Bleed Pneumatic Devices 3.Damage Prevention Programs 4.Reduce Venting during Blow Downs 5.Annual System Inspection and maintenance 6.Composite wrap to repair non-leaking pipe defects, to avoid venting the line 7.Encapsulate or replace joints 8.Modernize systems by lining existing pipe as appropriate 17

18. 18 Benefits of GTI Methane Emissions and Detection Program >Goal ─Facilitate the reduction of methane emissions by developing methods, processes and new technologies to detect, quantify and reduce emissions >Safety ─Enhance safety for employees, customers and general public through better detection of leaks and reduced emissions >Environmental ─Reduce GHG emissions and overall carbon footprint ─Maintains social license to operate >Economic ─Prioritize leaks and repair ─Reduces lost gas

19. 19 Defining the Problem: More Accurate Emissions Information >GTI is… ─Developing a methodology for calculating methane emissions that will provide an increased level of accuracy ─Providing technical validation of methodologies and emission data ─Coordinating work with AGA, EPA, and other appropriate stakeholders >Method is based on leak measurements made at the surface using current technology, Hi-Flow Sampler >Emission estimates will be based on leak rates and company specific leak records

20. 20 Distribution Pipeline Emission Factors >Value: Current estimates for methane emissions are based on outdated data and practices ─Improving emission factors will provide a more accurate representation of a utilities emissions profile and satisfy regulatory requirements of EPA requirements in 40 CFR Part 98 Subpart W >Objective: Collect field data from distribution pipeline leak rates to revise the emission factors for plastic pipe, cast iron and unprotected steel >Revised Emission Factors for Plastic Pipe >Cast iron and unprotected steel: Collecting field data to revise emission factors Revised Plastic Pipe EF3.72 scf/leak-hr GRI/EPA 1996 Plastic Pipe EF12.45 scf/leak-hr

21. 21 Emerging Technology for Low-Cost Methane Sensing >Better data collection and measurement of methane emissions will enable quicker emission reductions by: ─Providing an accurate count of emissions ─Ranking high priority sources >Low-cost methane sensing technologies can enable wide spread deployment for all infrastructure assets >In collaboration with RedWave Energy, 3M and Desert Research Institute, GTI is developing a measurement system based on Terahertz (THz) technology to detect methane in conjunction with signal processing and advanced computational fluid dynamics (CFD) to estimate the location and intensity of methane leaks

22. 22 Prioritizing Leaks Based on Safety and Environment >Concentration of methane does not tell the entire story >Traditional leak survey equipment can be used to initially locate suspected leaks >Prioritize leaks based on safety and emission/leak rates >Allows for the optimization of methane emission reductions through leak repair and main/service replacement programs OTD is developing an inexpensive and repeatable device that can provide a coarse measurement of the gas leakage rate in the field while investigating leaks on distribution piping

23. 23 Industry Needs and Next Steps for GTI and OTD >Continuous improvement in the quantification of distribution sector emissions to enable accurate utility level tracking of emission profiles ─Build robust data set of leak emission characteristics to better quantify methane emissions ─Implement utility specific methodology to establish baseline emission profiles and quantify subsequent reductions >Leak survey technology that will enable prioritization based on safety and environment >Continuous monitoring of leaks (e.g., high consequence areas) >Mapping of leak detection and repair >Real-time imaging of low ppm gas distribution leaks during leak surveys

24. 24 EPA Proposed 111(d) CO 2 Rule for Existing Power Plants >AGA not commenting on how to set the state emission reduction goals >AGA is advocating for flexible compliance options: ─Natural gas not just for power plants ─Reduce cost by looking outside the fence for compliance: >Demand side management >Renewable Energy, and yes… >Natural Gas for homes and businesses >Natural gas used for direct thermal load ─heating water and space ─Cuts net CO 2 emissions by 50% on average

25. 25 End-use technologies for the next-generation. Highly efficient and low emission factor.

26. 26 Direct Use of Natural Gas… the Clean, Efficient Energy Choice >The direct use of natural gas in America’s homes and businesses maintains about 92% of its usable energy, and a household with natural gas versus all-electric appliances produces 37% lower greenhouse gas emissions >Converting natural gas or any other fossil fuel into electricity to power comparable electric end-use products and appliances only maintains 32% of usable energy Consumers can save on their monthly utility bills through converting their households to natural gas

27. 27 End-Use Technology >Water Heating >Space Conditioning >Commercial Food Service >Industrial Processes >Power Generation/CHP >Transportation UTD Working Groups >Energy Efficiency >Renewable Energy and Alternative Fuels >Environmental >Smart Energy Future Crosscutting

28. 28 U.S. DOE Mandate The New DOE Standards for Manufacturers (Effective April 16, 2015) Product ClassRated Storage VolumeEnergy Factor Tank Gas Water Heaters 20-55 gallons0.675 56-100 gallons0.8012 Electric Tank Water Heaters 20-55 gallons0.96 56-120 gallons2.057 Tankless Gas Water Heaters Less than 2 gallons0.82 Tankless ElectricLess than 2 gallons0.93 Tank Oil Water Heaters50 gallons or less0.68 Table Top Water Heater20-100 gallons0.93

29. 29 The Answer: The Gas Heat Pump Water Heater

30. 30 The U.S. DOE Mandate >Submitted February 2015 >996 page document >APGA, AGA to file documents to stop implementation documentation supported by GTI technical analysis. >Scheduled to become efficiency standard early 2016 with 5 year trigger to 2021implementation >92% condensing furnace nationwide 92% Efficient Home Furnace

31. 31 Tackling Important Energy Challenges and Creating Value for Customers in the Global Marketplace Bob Morris Manager, Business Development, GTI robert.morris@gastechnology.org 469-223-5951 www.gastechnology.org @gastechnology