1. Michael Hopkins Assistant Chief, Permitting Ohio EPA 614-644-3611 Air Permitting for Oil & Gas Well Sites

2. Discussion Topics Basics of an oil & gas well site Three phases of development Equipment installed Exemptions Permitted sources Status of GP Common Q&A 2

3. Ohios Shale Plays 3

4. Why Now? New method to get oil and gas from rock 7,000 to 10,000 feet below ground (Freshwater typically 10-1,500 feet) Could satisfy 14 years of US NG demand Also contains significant oil reserves 4

5. Extracting Gas from Shale Three Phases – Drilling – Fracturing – Production 5

6. Drilling Phase Drill initial bore Insert well casings Multi layer concrete and steel Drill rest of well (15-25 days) Turn drill and drill horizontally into shale Source: ConocoPhillips Company 6

7. Drilling Phase Equipment Portable drilling rigs w/ diesel engines (3-5,000 HP TTL) Diesel compressor engines (~3,000 HP) Construction roads Portable storage tanks Temporary flare to handle gas safely Lots of trucks 7

8. Fracturing Process Isolate part of horizontal well Perforate through well casing Pump high pressure fracturing fluids into well to fracture rock and insert sand 8

9. Fracturing Process Pump out fluid Move to next part of well Flow back of fracturing fluids to storage tanks 9

10. Fracturing Phase Equipment Large diesel engines for pumping fracturing fluids (15 engines at 1,125 HP each = 17,000 HP) Temporary storage tanks Lots and lots of support equipment Lots of trucks 2-3 days per well 10

11. Fracturing Phase Photo Source: Chesapeake Energy Corporation, 2008 Hydraulic Fracturing of a Marcellus Shale Well, West Virginia11

12. Production Phase Install gas conditioning equipment, liquid storage tanks, control equipment Designed to control pressure, flow; remove water, remove organic liquids Equipment generally stays static As gas flow changes with time, equipment may be swapped out 12

13. Sample Oil & Gas Site 13

14. Production Phase Equipment Dehydration/conditioning system Natural gas-fired engines for compressors (up to 1800 HP total in GP) Diesel-fired engines for power generation (up to 250 HP total in GP) NG micro-turbines for power generation (2-200 kW allowed) 14

15. Production Phase Equipment Water and petroleum liquid storage tanks (up to fifteen 39,000 gallon tanks) Combustor/Flare (no more than 10 MMBtu/hr?) Ancillary equipment (compressors, pumps, piping, etc.) (equipment leaks) Unpaved roadways (up to 3 miles) Lots of trucks removing liquids 15

16. Pollutants Expected Criteria (NOx, PM, CO, VOC, SO2(little)) Some HAPS (<10/25) – Acetaldehyde – Formaldehyde – Benzene – Ethyl benzene – N-Hexane – Naphthalene – Toluene – Xylene – H2S (not expected in Ohio) 16

17. General Permit Approach Drilling and fracturing phases are exempt Production phase is not GP designed to cover most, but not all, well sites Covers well site (six wells typical) Intended as a non-synthetic minor 17

18. GP Unique Features Allows installation of various size engines if combined HP limit met Allows swapping of engines w/o new permit Allows installation of various size tanks Restricts total flow to tanks Requires very basic leak detection/repair program 18

19. GP Status Official draft for comment sent out Comment period ended Nov. 28 Hope to have final done in 3 weeks 19

20. What will happen after GP is issued? Expect companies to apply Expect to find issues with GP (will revise/expand as needed) Expect some companies will not qualify for GP (use as template) 20

21. Why no permits for drilling and fracturing? Drilling and fracturing are thought of as construction activities Largest emitting equipment: portable engines Engines are exempt from air permits because they are non road engines per 31-03/31-01 Roadways are exempt because construction roads (still cant cause nuisance) Drilling engines and fracturing engines required to meet NSPS Feds proposed NSPS 21

22. Why didnt we require well sites to get permits before? Well sites were smaller Minimum emissions expected New sites are much larger with much larger equipment Rigorous review found rules apply. 22

23. What should existing sites do? Two options: – Wait for GP – Submit case-by-case permit Sent sample letter to companies 23

24. What Rules May Apply? BAT MACT Subpart HH, Oil & Gas Chapter 17 NSPS Subpart JJJJ, IIII (SI, CI ICE) MACT Subpart ZZZZ (SI ICE) NSPS Kb, tanks Oil and Natural Gas Sector: New Source Performance Standards and National Emission Standards for Hazardous Air Pollutants proposed rule issued August 23, 2011 24

25. What about ponds? Most not expected to use ponds – portable tanks instead Water/fracturing fluids expected to be reused or disposed Ponds are not covered by GP Must get case-by-case permit if need one 25

26. What other sources are expected? Intermediate stations: gas cleaning and compression stations Expansion of existing compressor stations Chemical company facilities: to take gas and/or VOC liquids and process them into other materials NG powered power stations 26

27. Wrap up Lots of work ahead Ohio EPA web site: http://www.epa.ohio.gov/shale.aspx http://www.epa.ohio.gov/shale.aspx ODNR web site: http://www.ohiodnr.com/oil/shale/tabid/23174/D efault.aspx http://www.ohiodnr.com/oil/shale/tabid/23174/D efault.aspx Questions? 27