Seep Tents Seep Tents Masters ProjectMasters Project

Presentation to Presentation to StakeholdersStakeholders

April 12April 12thth, 2002 , 2002

Donald Bren School of Environmental Science & Management

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AgendaAgenda IntroductionsIntroductions BackgroundBackground Research approachResearch approach Water quality & marine ecologyWater quality & marine ecology Air qualityAir quality Regulatory obstacles & requirementsRegulatory obstacles & requirements Economic costs & benefits of seep Economic costs & benefits of seep

tentstents Results & RecommendationsResults & Recommendations

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Group Project MembersGroup Project Members

Ali GerAli Ger Water quality, marine ecology, cost-benefit Water quality, marine ecology, cost-benefit

analysisanalysis Misty GonzalesMisty Gonzales

Air quality, ozone production modelingAir quality, ozone production modeling Erin MayberryErin Mayberry

Health valuation, cost-benefit analysisHealth valuation, cost-benefit analysis Farah ShamszadehFarah Shamszadeh

Gas price forecasting, cost-benefit analysis, Gas price forecasting, cost-benefit analysis, regulatory frameworkregulatory framework

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BackgroundBackground

Project proposed by SBCAPCDProject proposed by SBCAPCD Research motivationResearch motivation

Recent CA energy crisis has renewed Recent CA energy crisis has renewed interest in capturing this seepage as a interest in capturing this seepage as a potential “green” source of natural potential “green” source of natural gasgas

The SBCAPCD suggested that The SBCAPCD suggested that capturing natural hydrocarbons might capturing natural hydrocarbons might reduce local air pollutionreduce local air pollution

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Research ApproachResearch Approach

We take an interdisciplinary approach to We take an interdisciplinary approach to evaluating a proposed project by estimating:evaluating a proposed project by estimating: Impacts on water quality and marine ecology Impacts on water quality and marine ecology Effects on air qualityEffects on air quality Regulatory obstacles and requirementsRegulatory obstacles and requirements Economic costs and benefits of installing Economic costs and benefits of installing

additional seepadditional seep gas capture tents gas capture tents Majority of the data for this group project Majority of the data for this group project

came from the UCSB Hydrocarbon Seeps came from the UCSB Hydrocarbon Seeps Project and SBCAPCDProject and SBCAPCD

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Tent design?Tent design?

Source: http://seeps.geol.ucsb.edu/

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Temporal Seep FluxTemporal Seep Flux

Temporal decline statistically deduced Temporal decline statistically deduced from ARCO capture datafrom ARCO capture data

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Spatial Seep FluxSpatial Seep Flux

Spatial flux is variableSpatial flux is variable High flux areas are High flux areas are

optimal tent locationsoptimal tent locations Grided Libe Washburn’s Grided Libe Washburn’s

flux buoy data over flux buoy data over 100’ x 100’ plots100’ x 100’ plots

Statistically deduced Statistically deduced function for decrease in function for decrease in capture for each capture for each additional tentadditional tent

0 5 10 15 200

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5x 10

4

Number of Tents

Flu

x C

aptu

re (M

CF p

er y

ear)

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Environmental Impact Environmental Impact marine environmentmarine environment

Important to understand how Important to understand how additional seep tents may impact:additional seep tents may impact: Seep gas total flux ratesSeep gas total flux rates Fate and transport of hydrocarbon Fate and transport of hydrocarbon

gasesgases Marine ecologyMarine ecology

Interactions with seep ecosystem Interactions with seep ecosystem structurestructure

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Seep EnvironmentSeep Environment biogeochemistry & biogeochemistry &

ecology ecology

Seeps release between 80,000 to 200,000 Seeps release between 80,000 to 200,000 mm33 of gas per day of gas per day Mostly methane with trace amounts of toxicsMostly methane with trace amounts of toxics Most toxics and hydrocarbons disperse and/or Most toxics and hydrocarbons disperse and/or

biodegrade readilybiodegrade readily Toxicity reduces away from the seepsToxicity reduces away from the seeps Impacts on water quality not known (negligible)Impacts on water quality not known (negligible)

Hydrocarbons provide organic enrichmentHydrocarbons provide organic enrichment Result in localized rings of increased sediment Result in localized rings of increased sediment

biomass around the seep vents biomass around the seep vents

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Environmental Impact Environmental Impact marine impactsmarine impacts

Impacts on soft bottom sedimentsImpacts on soft bottom sediments Biomass is relatively lowBiomass is relatively low Recovery from disturbance is quickRecovery from disturbance is quick

Tent installationTent installation Short-term: One-time impacts to seafloor Short-term: One-time impacts to seafloor

communitiescommunities Long-term: Undetectable impactsLong-term: Undetectable impacts

PipelinePipeline Short/Long-term: Possible ecosystem level Short/Long-term: Possible ecosystem level

impacts if piping is not placed sufficiently far impacts if piping is not placed sufficiently far from critical habitats (kelp beds)from critical habitats (kelp beds)

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Environmental Impact Environmental Impact air quality - methaneair quality - methane

Primary component is methanePrimary component is methane Contributes to global warmingContributes to global warming

Seepage accounts for between Seepage accounts for between 0.001-0.004% of total methane 0.001-0.004% of total methane flux to atmosphere (2-5 x 10flux to atmosphere (2-5 x 101010 g/yr) g/yr)

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Seep gas contains reactive organic Seep gas contains reactive organic gases (ROGs)gases (ROGs)

Ozone is a serious health concernOzone is a serious health concern Magnitude of seep contribution to Magnitude of seep contribution to

ozone formation varies depending on: ozone formation varies depending on: ClimateClimate Levels of ROGs and NOLevels of ROGs and NOxx

Environmental Impact Environmental Impact air quality - ozoneair quality - ozone

ROG + NOX hv O3

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Environmental Impact Environmental Impact air quality - air quality -

speciationspeciation

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Environmental Impact Environmental Impact ozone production ozone production

modelmodel

Relates seep gas emissions to Relates seep gas emissions to ozone formation (reactivity)ozone formation (reactivity)

Estimates the change in ozone Estimates the change in ozone associated with seep gas captureassociated with seep gas capture

Results input to health benefit Results input to health benefit modelmodel Monetizes benefits of improved air Monetizes benefits of improved air

quality from seep tents installationquality from seep tents installation

Ozone Production Ozone Production ModelModel

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

Reac

tivity

(mol

O3/

mol

C)

0102030405060708090100

Reactivity Volume

Vo

lum

e (%)

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Environmental Impact Environmental Impact ozone model outputozone model output% SB ROGs% SB ROGs relative relative

reactivity reactivity (molO(molO33/molC)/molC)

% of total % of total SB ozoneSB ozone

Seep gas totalSeep gas total 33.833.8 0.020.02 5.15.1Biogenics totalBiogenics total 48.548.5 0.130.13 51.351.3Wildfire totalWildfire total 0.60.6 0.510.51 2.82.8Urban mix* Urban mix*

(SB total-(SB total-natural)natural)

17.117.1 0.280.28 40.840.8

TOTAL SB TOTAL SB (natural+anthro)(natural+anthro)

100100 0.130.13 100.0100.0

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Environmental Impact Environmental Impact ozone model outputozone model output

% SB % SB ROGsROGs

relative relative reactivity reactivity

(molO(molO33/molC)/molC)

% of total % of total SB ozoneSB ozone

Seep gas Seep gas totaltotal

26.426.4 0.020.02 5.15.1

Seeps gas Seeps gas

(-1 tent)(-1 tent)21.721.7 0.020.02 4.34.3

0.84% O3 reduced first year

0.4% annually over 20 years

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Regulatory Requirements Regulatory Requirements processing facilityprocessing facility

Current regulatory obstacles limit development Current regulatory obstacles limit development or use of onshore gas processing facilityor use of onshore gas processing facility

Measure A96 requires voter approval on Measure A96 requires voter approval on onshore infrastructure for offshore projectsonshore infrastructure for offshore projects Project would be dependent on the county voters’ Project would be dependent on the county voters’

approval of processing facilityapproval of processing facility Coastal Act s.30263 implies new facilities will Coastal Act s.30263 implies new facilities will

not be developed unless existing facilities not be developed unless existing facilities used at maximum capacityused at maximum capacity

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Regulatory Requirements Regulatory Requirements processing facilityprocessing facility

Most likely existing facility: Ellwood Oil and Most likely existing facility: Ellwood Oil and Gas Processing FacilityGas Processing Facility Existing tent gas processed thereExisting tent gas processed there Closest onshore support facility to the seep fieldClosest onshore support facility to the seep field

Ellwood facility currently under-utilized, but Ellwood facility currently under-utilized, but designated as non-conforming land use designated as non-conforming land use Unlikely that facility will accept additional gas for Unlikely that facility will accept additional gas for

processingprocessing

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Regulatory Requirements Regulatory Requirements emission reduction emission reduction

creditscredits Unlikely for 3 reasons: Unlikely for 3 reasons:

1.1. Difficult to prove tents would Difficult to prove tents would permanently reduce ROGs permanently reduce ROGs

2.2. S.B. in attainment for federal ozone S.B. in attainment for federal ozone standardsstandards

3.3. Seeps are natural source of ROGsSeeps are natural source of ROGs Exception would have to be made to Exception would have to be made to

issue credits to a project that reduced issue credits to a project that reduced seep gasseep gas

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Cost-Benefit Analysis Cost-Benefit Analysis approachapproach

Purpose: guide regulators in project decisionsPurpose: guide regulators in project decisions 2 views taken: entrepreneur and policymaker2 views taken: entrepreneur and policymaker

EntrepreneuEntrepreneur needs to r needs to know project know project profitprofit

Policymaker also Policymaker also considers value of considers value of improved air qualityimproved air quality

Monetize health benefitsMonetize health benefits Other benefits likely small Other benefits likely small

and difficult to quantify and difficult to quantify (i.e. marine ecology)(i.e. marine ecology)

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Profit = Gas Sales Revenue + Credits - CostsSocial Value = Gas Sales Revenue + Health Benefits - Costs

Profit = Gas Sales Revenue + Credits - CostsSocial Value = Gas Sales Revenue + Health Benefits - Costs

Cost-Benefit Analysis Cost-Benefit Analysis integrated analytical integrated analytical

modelmodel Integrates ozone reduction and health benefit Integrates ozone reduction and health benefit

valuation models, emission reduction credits, valuation models, emission reduction credits, gas price forecast and project cost estimates gas price forecast and project cost estimates over a 20-year planning horizon for 1-20 tentsover a 20-year planning horizon for 1-20 tents

Determines viability from entrepreneurial and Determines viability from entrepreneurial and social perspectivessocial perspectives

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Cost-Benefit Analysis Cost-Benefit Analysis health benefit health benefit

valuationvaluation Monetary value of improved health from Monetary value of improved health from

ozone reductionozone reduction Determined using range of studies from Determined using range of studies from

economic literature – all cited in EPA CBA of economic literature – all cited in EPA CBA of Clean Air Act standardsClean Air Act standards Benefits-transfer approach—uses data from S.B. Benefits-transfer approach—uses data from S.B.

and other regions to estimate benefit values for and other regions to estimate benefit values for S.B.S.B.

20+ studies condensed to 3 scenarios20+ studies condensed to 3 scenarios Most likely scenario: health benefits = $2.1 Most likely scenario: health benefits = $2.1

million for 1st tent averaged over 20 yearsmillion for 1st tent averaged over 20 years

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Incident Type Predicted Number of Incidents Reduced by

Project

Value of One Incident ($)

Reduction Value ($)

Mortality 0–0.122 $1,500,000.00–$9,000,000.00

$0.00–$1,098,000.00

Chronic pulmonary disease

0.00039–0.00064 $260,000.00 $101.40–$166.40

Adult onset asthma 0.6792 $25,000.00 $16,980.00

ER visits for asthma 0.00027–0.0034 $194.00 $0.00–$0.06

Asthma 0.00036 $32.00 $0.01

Self-reported asthma attacks

0.08 $32.00 $2.56

Respiratory illness 0.0005–0.0038 $18.00 $0.01–$0.07

Respiratory illness in elderly

0.0012–0.0032 $18.00 $0.02–$0.06

Respiratory infection 0.00092 $18.00 $0.02

Acute respiratory symptoms

2.56 $18.00 $46.08

Restricted activity days

0.878 $5.30 $4.65

Totals n/ a n/ a $2.1 million

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Cost-Benefit Analysis Cost-Benefit Analysis natural gas price natural gas price

forecastforecast Natural gas prices forecasted for 20-year life of projectNatural gas prices forecasted for 20-year life of project Multiplied by gas captured in each year to achieve Multiplied by gas captured in each year to achieve

revenuesrevenues Four gas price forecasts calculated: Four gas price forecasts calculated:

Conservative and High ARIMA time series model, Conservative Conservative and High ARIMA time series model, Conservative constant pricing (Structural), and Hotelling (scarcity-driven)constant pricing (Structural), and Hotelling (scarcity-driven)

Average Annual Natural Gas Price Forecast

0

2

4

6

8

10

12

1989 1994 1999 2004 2009 2014 2019 2024

Years

Cit

y G

ate

Gas

Pri

ce (

$/M

CF

)

Historical City Gate Gas PriceHigh ARIMA ForecastConservative ARIMA ForecastStructural ForecastHotelling Forecast

Most likely is Most likely is conservative conservative annual average annual average generated by generated by ARIMA ARIMA $2.45 per 1000 $2.45 per 1000

cubic feet cubic feet (MCF)(MCF)

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Cost-Benefit Analysis Cost-Benefit Analysis emission reduction emission reduction

creditscredits Credits worth $5,000/ton ROGs Credits worth $5,000/ton ROGs

reducedreduced 80% transfer ratio: 1.2 tons ROGs 80% transfer ratio: 1.2 tons ROGs

captured for each 1 ton of creditscaptured for each 1 ton of credits Multiplied by amount of ROGs Multiplied by amount of ROGs

reduced by project scenario, then reduced by project scenario, then by transfer percentageby transfer percentage

Not included in most likely scenarioNot included in most likely scenario

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Cost-Benefit Analysis Cost-Benefit Analysis project costsproject costs

InstallmentInstallment 1-10 tents $3-$1.5 M 1-10 tents $3-$1.5 M

marginal cost scalemarginal cost scale 11-20 tents constant 11-20 tents constant

$1.5 M marginal cost$1.5 M marginal cost Piping: $1 M/mi to Piping: $1 M/mi to

EllwoodEllwood Plus 100 ft for each Plus 100 ft for each

add’l tentadd’l tent Maintenance: Maintenance:

$100,000/ tent/year for $100,000/ tent/year for 20 yrs20 yrs

Average Capital and Design Cost per Tent

1.5

2.0

2.5

3.0

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20Number of Tents

Co

st p

er T

ent

in M

illi

on

s o

f D

oll

ars

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C-B Analysis Model C-B Analysis Model most likely scenariomost likely scenario

Most likely project scenario based on Most likely project scenario based on best available databest available data

Input Parameter Value Source

Starting Tent Flux Capture 220,000 MCF/tent/year ARCO starting tent Capture

Decrease in Flux Over Time 7.4%/year Historic ARCO Capture

Discount Rate 5% Intermediate Estimate

Gas Sales Scenario Conservative ARIMA Time Series Model

Health Benefit Scenario Intermediate Benefits-Transfer Approach

Air Regime (NOx or ROG limited) Co-limited (NOx-ROG) Ozone Production Model

Emission Reduction Credits No SBAPCD Judgment

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C-B Analysis Model C-B Analysis Model

Most Likely Project Scenario

$40

$35

$30

$25

$20

$15

$10

$5

$0

$5

$10

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20Number of Tents

Mill

ions

of D

olla

rs

Total Project ValueProject ProfitHealth Benefits

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C-B Analysis Model C-B Analysis Model alternate scenariosalternate scenarios

Bold text – optimized for social valuePlain text – optimized for profit

Scenario Description Optimal Tents

Project Profit

Health Benefit

Social Value

Most-likely Most-likely (1) (-$5.2) (+$2.1) (-$3.1)

1 ROG-limitation 0 0 0 0

2 ROG-limitation/High Gas Pricing 1 $0.1 $4.2 $4.3

1 $0.1 $35.8 $35.9 3

ROG-limitation/ High Gas Pricing/ Health Benefits 5 -$6.9 $48.2 $41.3

3 $30 $2.6 -$7.2 4 ERC

0 0 0 0

0 0 0 0 5 Hotelling Gas Pricing

1 -$1.9 $2.1 $0.2

6 No Piping Costs / ERC (5%) 1 $0.3 $2.1 $0.4

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C-B Analysis Model C-B Analysis Model resultsresults

Under likely project conditions, Under likely project conditions, installing new seep tents NOT practical installing new seep tents NOT practical from social or entrepreneurial viewpointfrom social or entrepreneurial viewpoint

Business’ point of view: project is not Business’ point of view: project is not attractive, unless unlikely conditions:attractive, unless unlikely conditions: Emission reduction credits are issuedEmission reduction credits are issued High market gas pricing conditions are High market gas pricing conditions are

sustainedsustained Society’s point of view: costs to private Society’s point of view: costs to private

firm outweigh society’s benefit firm outweigh society’s benefit

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C-B Analysis Model C-B Analysis Model results: creditsresults: credits

If health value is greater or project costs are If health value is greater or project costs are lower, ERCs could be issued to compensate an lower, ERCs could be issued to compensate an entrepreneur for their losses on the projectentrepreneur for their losses on the project

Example: Scenario 6 Example: Scenario 6 project loses $1.7 million without creditsproject loses $1.7 million without credits For a credit of 5% of this project’s ROG reduction For a credit of 5% of this project’s ROG reduction

the owners of the tents compensated $2 million the owners of the tents compensated $2 million (industry standard 10% rate of return)(industry standard 10% rate of return)

policymaker could create incentive to produce $2.1 policymaker could create incentive to produce $2.1 million air quality improvement for $2 million in million air quality improvement for $2 million in ERCsERCs

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C-B Analysis Model C-B Analysis Model cost-effectiveness cost-effectiveness

analysisanalysis

Prudent to compare cost-effectiveness seep Prudent to compare cost-effectiveness seep tents to other abatement technologytents to other abatement technology

Seep tents are cost effective technology for Seep tents are cost effective technology for ROG abatementROG abatement $1,800/ton with seep tents vs. $5,000/ton using $1,800/ton with seep tents vs. $5,000/ton using

other abatement technologiesother abatement technologies Seep tents are not a cost effective Seep tents are not a cost effective

technology for methane emission technology for methane emission abatement abatement $550/ton with seep tents vs. ~$3.80 /ton in $550/ton with seep tents vs. ~$3.80 /ton in

Canada’s pilot program (GERT)Canada’s pilot program (GERT)

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Recommendations Recommendations further researchfurther research

More precise and complete research into More precise and complete research into Chemistry of the Santa Barbara airshedChemistry of the Santa Barbara airshed Marine ecology of the seep field (no Marine ecology of the seep field (no

ecosystem-level studies)ecosystem-level studies) Use of Santa Barbara County hospital Use of Santa Barbara County hospital

data to derive the exact relationship data to derive the exact relationship between illness and ozone in place of between illness and ozone in place of using a benefits transfer methodusing a benefits transfer method

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Recommendations Recommendations seep tents projectsseep tents projects

If a seep tents project is proposed in If a seep tents project is proposed in the future, we recommend that an the future, we recommend that an entrepreneur consider: entrepreneur consider:

1.1. Permitting associated with onshore Permitting associated with onshore gas processinggas processing

2.2. Acquisition of ERCsAcquisition of ERCs

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Recommendations Recommendations policypolicy

1.1. Verify precise amount of ozone reduced by Verify precise amount of ozone reduced by seep tents to accurately determine value of seep tents to accurately determine value of health benefits and amount of emission health benefits and amount of emission reduction creditreduction credit

2.2. Revise permit and credit conditions to account Revise permit and credit conditions to account for the seeps’ spatial and temporal variabilityfor the seeps’ spatial and temporal variability

3.3. Institute a socially responsible value for Institute a socially responsible value for credits that reflects the health and other credits that reflects the health and other possible external benefits possible external benefits

4.4. Compare cost effectiveness of seep tents to Compare cost effectiveness of seep tents to other methods of abating tropospheric ozoneother methods of abating tropospheric ozone

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AcknowledgementsAcknowledgements Bruce Luyendyk, Jordan Bruce Luyendyk, Jordan

Clark, Libe Washburn, Clark, Libe Washburn, James Boles James Boles (UCSB (UCSB Hydrocarbon Seeps Research Hydrocarbon Seeps Research Group)Group)

Tom Murphy, Doug Allard Tom Murphy, Doug Allard Patricia Holden, Mike Patricia Holden, Mike Edwards, Steve Sterner, Edwards, Steve Sterner, Michelle Pasini, and Jim Michelle Pasini, and Jim Fredrickson, Sally Fredrickson, Sally HolbrookHolbrook

Our advisors: Our advisors: Chris Costello Chris Costello and Natalie and Natalie MahowaldMahowald

Spring quarter Spring quarter advisor Mel advisor Mel WillisWillis

Peter Cantle Peter Cantle (SBCAPCD)(SBCAPCD)

Questions?Questions?