1. Scoping Meeting GHG Accounting Issues Oil & Gas Exploration & Production Natural Gas Gathering & Processing October 25, 2007 Santa Fe, New Mexico

2. 2 Agenda Introductions Background on GHG Protocols Overview of Existing Protocols Discussion: Cross-cutting issues Break-out discussions: –Exploration & Production –Gathering & Processing Wrap Up – report of break-out groups

3. 3 Purpose of Today’s Meeting Identify GHG accounting issues for annual entity inventory of emissions from upstream O&G activities –Not likely resolve accounting issues today Goals: –ID issues that are relevant & answered elsewhere –ID issues not answered elsewhere –Create a parking lot of issues beyond the scope of today’s discussion Assess -- is a protocol needed for these activities?

4. 4 Protocol Elements Framework document that informs consistent, comparable, transparent, accurate GHG inventory –Definitions –Scope & boundary requirements –Calculations (emission factors, methodologies)

5. 5 Protocol Development Process 1.Conduct literature review 2.White paper 3.Multi-stakeholder workgroup develops draft protocol 4.Expert review 5.Public comment 6.Adoption/implementation

6. 6 Voluntary vs. Mandatory Reporting? Voluntary –Can allow for flexibility –Understand footprint –Often used for corporate disclosures –3 rd -party verification required? Mandatory –Typically facility- or unit-based –Consistent approach across all sources –May support regulatory goals –Agency oversight?

7. 7 Ongoing GHG Protocol Efforts for O&G Sector WRI/CA Registry protocol for NG T&D CARB mandatory reporting from petroleum refineries (draft regulation) NMED mandatory reporting from petroleum refineries (draft regulation)

8. 8 In Development: Natural Gas T&D Scope: –Combustion, process vents, non-routine activities, LAUG, equipment leaks, indirect emissions Discussion Paper –www.climateregistry.org Workgroup formed by CA Registry/WRI Expert review period Public Comment period Expected adoption (early 2008)

9. 9 In Development: Oil Refineries Literature review: –API Compendium –IPIECA Guidelines State of CA technical review of API Compendium White paper draft commissioned from CA Registry for use by ARB –www.climateregistry.org Public workshops & public comment Draft regulations for mandatory reporting Regulations adopted by CARB (expected December 2007) Protocol developed by CA Registry –Workgroup to meet December-January –Public comment February 2008 Protocol adopted by The Climate Registry?

10. 10 Source: American Petroleum Institute: Toward a Consistent Methodology for Estimating Greenhouse Gas Emissions from Oil and Natural Gas Industry Operations. Page 4. Remaining Activities

11. 11 Guidance from Current Resources (1) GHG Protocol –Framework: Direct emissions (Scope 1) Indirect emissions (Scope 2,3) Organizational boundaries Operational boundaries

12. 12 Guidance from Current Resources (2) CA Registry GRP TCR GRP –Geographic boundaries –Materiality threshold –Calculations/emission factors: Stationary combustion Mobile combustion Indirect emissions

13. 13 Guidance from Current Resources (3) API Compendium –Identify sources –Identify emission factors –Sample calculation methodologies

14. 14 Guidance from Current Resources (4) IPIECA Guidelines –Builds on GHG Protocol guidance specific to petroleum industry –Inform boundaries Examples of equity share/operational control –Identify & classify sources Table 6.1 – Upstream Petroleum Operations –Emissions Calcs Outlines tiered approach

15. 15 Guidance from Current Resources (5) CEC Evaluation –Gap analysis of API Compendium & IPIECA Compares w/CCAR GRP –IDs potential users –Some outdated emission factors –IPIECA provides framework, but not program-specific applicability –Conclusion: most work needed for CH 4 emissions

16. 16 Break

17. 17 Cross-Cutting Issues What are sources? –Indirects –Mobile –Stationary –Process –Fugitive What terms should be defined? Geographic boundaries? Organizational boundaries? Operational boundaries? What guidance is currently available?

18. 18 Organizational Boundaries Options:StrengthsWeaknesses Operational controlDemonstrates regulatory risk Indication of operational performance Operator is likely to implement changes  reductions Operator has access to emissions information Preferred by most companies Excludes emissions for companies with interest but no operation Financial controlDiscloses financial risk Assigns emissions to party that receives the majority of benefit Provides most complete basis for assessing risks/opportunities Limited use? Equity ShareReflects economic interest Demonstrates financial risk Represents multiple owners accurately Consistent with financial accounting Generally used in power sector Not indicator of control/ability to affect emissions May have limited access to data

19. 19 Operational Boundaries What sources are required/optional? What is a facility? –Geographic? –Defined by reporter? –Defined by state? What degree of aggregation is required? –Entity? –Facility?

20. 20 Break-out Groups 1.Exploration & Production 2.NG Gathering & Processing Discussions will continue in the Roundhouse after lunch. Please meet back here at 2:45.

21. 21 Next Steps Is a protocol warranted? –If so, goal: Present for adoption/incorporation NM mandatory reporting CA Registry protocol CARB mandatory reporting TCR protocol Please convey interest to Tom Moore