A Joint Association Education Message

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A Joint Association Education Message FROM THE TEX A S OIL AND NATUR AL GA S INDUSTRY

A Joint Association Message FROM THE TEXAS OIL & NATURAL GAS INDUSTRY

Advances in proven technology and unmatched investments in innovation are delivering new opportunities in oil and natural gas production, transportation and refining across Texas. Oil and natural gas activity is the reason the Texas economy is so strong. While much of Texas is familiar ground to oil and natural gas development, many Texans are now experiencing oil and natural gas operations in their communities for the first time. As oil and natural gas operations extend into previously untapped regions of the state, area residents and local elected officials are likely to have questions and want to learn more.

As part of ongoing statewide educational efforts, several non-profit and trade associations have come together to provide factual information about oil and natural gas operations to the public, local leaders and elected officials. The oil and natural gas industry continues to work closely with communities and state and local officials to raise awareness about operations, to share information about the extensive precautions taken to maintain the safety of workers and local communities, and to address concerns about the climate.

This book aims to answer your questions and provide useful resources. Participating organizations include the Texas Oil and Gas Association, the Texas Independent Producers and Royalty Owners Association, the Texas Alliance of Energy Producers, the Permian Basin Petroleum Association, the Panhandle Producers and Royalty Owners Association, the Texas Pipeline Association, the Texas Royalty Council and the South Texas Energy & Economic Roundtable.

A Joint Association Education Message F R OM T H E T E X A S OI L A N D NAT U R A L G A S I N DU ST RY

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Who Regulates Oil and Natural Gas Operations?.....................p. 1 Hydraulic Fracturing (Fracking)..........................................................p. 3 Water.................................................................................................................p. 11 Air.......................................................................................................................p. 17 Flaring...............................................................................................................p. 25 Waste Management..................................................................................p. 27 Pipeline Safety..............................................................................................p. 31 Refining ..........................................................................................................p. 33 Oil and Natural Gas by the Numbers.............................................p. 35

W HO R E G U L AT E S . . . ? W HO R E G U L AT E S . . . ? W HO R E G U L AT

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Who Regulates Oil and Natural Gas Operations?

W HO R E G U L AT E S . . . ? W HO R E G U L AT E S . . . ? W HO R E G U L AT E

A Texas Joint Association Education Message

W HO R E G U L AT E S . . . ? W HO R E G U L AT E S . . . ? W HO R E G U L AT

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There are comprehensive regulations governing Texas oil and natural gas exploration, production, transportation, processing and refining.

State agencies have been delegated authority to enforce federal programs and Texas laws establish additional requirements to protect the environment and public health.

State law provides cities with authority to reasonably regulate aboveground activity related to oil and natural gas operations like setbacks from other structures, traffic, emergency response and noise.

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Fast Facts:

F Wells are required by law to be constructed with multiple layers of industrial-grade steel casing (pipe) and cement to protect water supplies.

F The oil and natural gas industry is committed to safe and responsible operations to ensure communities are protected.

“The Railroad Commission of Texas (RRC) and the Texas Commission on Environmental Quality (TCEQ) are the two state agencies that establish standards and enforce regulations for oil and natural gas exploration and production.”

The Railroad Commission of Texas (RRC) and the Texas Commission on Environmental Quality (TCEQ) are the two state agencies that establish standards and enforce regulations for oil and natural gas exploration and production. The RRC oversees all aspects of the drilling activity such as well spacing, well design including depth of casing and cement, groundwater protection during drilling and completion, water protection, wastewater handling and disposal, and operational and public safety. TCEQ’s primary role relates to control of air emissions, control of water quality, and consistency in regulations related to public health and safety.

The Railroad Commission of Texas, the Texas Commission on Environmental Quality, the General Land Office, the Texas Department of Transportation and multiple federal agencies regulate oil and natural gas pipelines.

Regulation of intrastate pipeline safety is the responsibility of the Railroad Commission of Texas. For interstate pipelines, the Pipeline and Hazardous Materials Administration (PHMSA), a division of the United States Department of Transportation, oversees pipeline safety regulation. TCEQ regulates air emissions associated with pipeline operations.

H Y D R AU L IC F R AC T U R I N G H Y D R AU L IC F R AC T U R I N G

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Hydraulic Fracturing (Fracking)

H Y D R AU L IC F R AC T U R I N G H Y D R AU L IC F R AC T U R I N G

A Texas Joint Association Education Message

H Y D R AU L IC F R AC T U R I N G H Y D R AU L IC F R AC T U R I N G

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What is hydraulic fracturing?

Hydraulic fracturing or “fracking” is proven, safe and well understood.

Also known as “fracking,” hydraulic fracturing is a proven well stimulation technique that has been used for more than 60 years to safely enhance the production potential of oil and natural gas from more than one million wells in the United States.

How does well construction protect freshwater supplies?

For decades, state regulators have imposed strict, comprehensive requirements for how oil and natural gas wells must be constructed. Each well must be encased in multiple layers of protective industrial-grade steel casing (pipe), which is surrounded by cement to create redundant safety systems for underground freshwater supplies. The casing and cementing process may be repeated as the well deepens. Highly regulated well construction - and thousands of feet of rock - keeps oil and natural gas out of the freshwater and freshwater out of the oil and natural gas.

For years, oil and natural gas deposits in certain rock formations, like Texas shale formations, were thought to be uneconomic.

Advances in horizontal drilling and fracking technology changed that perception and allow operators to develop these natural resources.

Advances in technology allow operators to drill thousands of feet below freshwater supplies and then turn horizontally into rock formations where fracking releases vast oil and natural gas deposits that were once considered unreachable. While the fracking technique has been used for decades, the process has been continuously refined to be even more effective.

Fast Facts:

The word “fracking” is often mistakenly used to describe everything associated with oil and natural gas development. Fracking is a well stimulation technique that typically lasts about 3 to 5 days. Fracking is one of many steps in the process of producing oil and natural gas.

F The combination of horizontal drilling and fracking has revolutionized oil and natural gas production in the U.S. F Fracking has helped to revive the Texas manufacturing industry. Shale energy production will support an estimated one million manufacturing jobs nationwide by 2025.

F Fracking has helped America to be less dependent on other countries for our energy needs. In 2019, the U.S. became a net energy exporter for the first time since 1952.

F Fracking provides Texans with access to local energy and lower energy prices.

Wells are required by law to be constructed with multiple layers of industrial-grade steel casing (pipe) and cement to protect water supplies.

The casing must remain in place even after a well becomes inactive to ensure permanent fresh groundwater protection.

Conductor Casing

Surface Casing Drilling Mud

30 - 60

feet deep

Intermediate Casing Drilling Mud

500 - 1,500

This layer runs from the surface to at least 20 - 200 feet below usable quality ground water.

feet deep

Production Casing

5,000 - 10,000 feet deep

An example of well construction

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How does fracking work?

Fracking occurs at great depths – generally a mile or more underground, thousands of feet below freshwater supplies. With safety systems of steel casing (pipe) and cement in place, operators drill vertically thousands of feet down then drill horizontally into the targeted rock formation. Then a mixture of pressurized water, sand and a specifically-formulated fracturing compound is pumped thousands of feet down into the formation to create tiny, millimeterthick fissures in carefully-targeted sections of the host rock. The tiny fractures free the trapped oil or natural gas. Oil and natural gas operators in Texas typically use a fracturing compound (or fracking fluid) that is 99.5 percent water and sand and 0.5 percent approved additives. The sand helps to prop open the fractures to facilitate the flow of oil or natural gas.

Advances in technology significantly reduce the environmental impacts of drilling for oil and natural gas. Operators can produce more oil or natural gas from

Is fracking safe?

Yes. Fracking is a precise, engineered process with a 60-year

track record of safe operations. The Environmental Protection Agency’s comprehensive, five-year study of fracking’s effects on drinking water concluded that fracking has not led to widespread systemic water contamination. The Groundwater Protection Council (composed of state water pollution control officials) and the Interstate Oil and Gas Compact Commission have also studied hydraulic fracturing and found that existing regulations addressed and mitigated potential risks.

each site using less surface area and with fewer air emissions.

In addition, fracking has helped America to be less dependent

“Fracking has been done safely for decades.”

on other countries for our energy needs.

– Sally Jewell, U.S. Interior Secretary, 2013

“I’m not aware of any proven case where the fracking process itself has affected water.”

– Lisa Jackson, former U.S. EPA Administrator, 2011

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Texas Law Requires Hydraulic Fracturing Disclosure To promote transparency and to inform the public, Texas was the first state in the nation to pass a law to require that oil and natural gas operators publicly disclose chemicals used in hydraulic fracturing fluid, on a well-by-well basis. Texas oil and natural gas operators must report the chemicals used in fracking fluids and the amount of water used in fracking to the

Environmental Benefits of Horizontal Drilling and Fracking

Railroad Commission of Texas (RRC). The RRC must post the information on a free, publicly-accessible website and currently uses the www.FracFocus.org for this purpose, a joint project of the Ground Water Protection Council and the Interstate Oil and Gas Compact Commission. FracFocus provides a searchable database by operator, well or location.

Chemicals used in fracking are highly diluted and are used to ensure that the process is safe, effective and efficient.

Material Safety Data Sheets on all chemicals must be available at each drilling site for inspectors, first responders and medical personnel.

Why are chemicals used in fracking?

Chemicals are used in fracking to ensure that the process is safe, effective and efficient. Each chemical serves a specific, engineered purpose such as limiting growth of bacteria and preventing well casing corrosion. Friction reducing additives, for example, significantly decrease emissions by reducing the horsepower required for fracking. Corrosion inhibitors protect pipe and help to maintain well integrity. Many fracking chemicals are similar to common household products like soap, anti-bacterial hand sanitizer and vegetable oil. The number and type of chemicals used in each hydraulic fracturing job depends on geology and the specific well to be fractured.

Less surface area.

The average well site today is 30 percent of the size it was in 1970 and an average well can now access up to 60 times more below-ground area than previously possible.

Fewer wells.

Today, operators can drill as few as six to eight wells on a single site to access the same amount of natural gas that once required 16 or more wells drilled from separate locations. Some modern rigs have the capability to drill more than 20 wells from a single drilling site.

Reduced air emissions.

Greater equipment and engine efficiency and improved technologies mean less energy consumption - thus lower air emissions - per unit of energy produced.

What happens to water after it’s used for fracking?

An increasing amount of water used for fracking is being recycled and reused for future operations. Other water from the fracking process is collected and disposed of according to stringent state regulations via approved underground injection wells deep beneath the surface, far below freshwater sources.

These disposal wells use steel casing (pipe) and cement during drilling and completion to protect freshwater supplies.

Disposal well construction must comply with programs delegated to the Railroad Commission of Texas. (See Waste Management Chapter for more information.)

How much water are oil and gas operators using?

A study by the University of Texas, Bureau of Economic Geology shows that even as energy demand and production have increased, the oil and natural gas industry uses less than one percent of Texas’ water in the exploration and production of oil and natural gas. The study indicates that the industry has been decreasing fresh water consumption through reuse, recycling and use of brackish water. Oil and natural gas operators continue to work closely with state regulators and water management experts to develop innovative ways to reduce the amount of water used in oil and natural gas operations.

Is Texas doing a good job regulating fracking?

Yes. Steve Heare, former director of the EPA’s Drinking Water Protection Division, has said publicly that state regulators are doing a good job of overseeing fracking.

The Railroad Commission of Texas has effectively regulated fracking for decades.

Fast Facts:

F The oil and natural gas industry uses less than one percent of Texas’ water in the exploration and production of oil and natural gas.

F The oil and natural gas industry is decreasing fresh water consumption through reuse, recycling and use of brackish water.

Source: University of Texas, Bureau of Economic Geology

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Understanding Drilling What happens before companies drill a well?

Before a company drills a well, geologists and engineers study the rock formations to scientifically determine how and where drilling should take place. The Railroad Commission of Texas provides operators with information about the depth of freshwater so that operations protect the entire freshwater zone. Operators must file for all necessary state and local permits. Many operators reach out to local neighborhoods to share information about their plans and timelines.

How long does it take to drill a well?

It takes several weeks to prepare a well site to produce oil or natural gas. This time frame includes pad site construction, moving equipment on and off site, well preparation, and actual drilling, casing, cementing and completion.

Fracking is one of many steps in the process of producing oil and natural gas. Fracking is a well stimulation technique that typically lasts about 3 to 5 days. The drilling rig and the

What happens if there’s an incident like water spilled on the drill pad?

Accidents are rare. Oil and natural gas companies place a high priority on safety and constantly monitor operations. In the event of an incident, each site is required by the Railroad Commission to have an emergency response plan in place. This plan details the proper steps needed to “contain and clean” the area, minimize any impact on the environment and notify the proper authorities.

equipment are temporary and are removed when the well is complete and production begins.

After construction, a well can produce for 20 to 40 years, providing long-term local jobs and tax revenues.

Questions about fracking or drilling? Visit www.rrc.state.tx.us

W A T E R W A T E R W A T E R WA T E R WA T E R WA T E R W A T E R

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Water

W A T E R W A T E R W A T E R WA T E R WA T E R WA T E R W A T E R

A Texas Joint Association Education Message

W A T E R W A T E R W A T E R WA T E R WA T E R WA T E R W A T E R

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Who oversees the rules oil and natural gas operators must follow to protect the water in Texas?

The Railroad Commission of Texas has wide-ranging regulations designed to protect the surface, subsurface, and coastal waters of Texas during oil and natural gas drilling, completion and production operations.

Any operator with plans to drill or produce oil and natural gas in Texas must apply for a permit and file an annual organization report with the Railroad Commission.

water

“By law, each well must be encased in multiple layers of protective industrial-grade steel casing (pipe), which is surrounded by cement to create redundant safeguards for underground freshwater supplies. ”

How does well construction protect freshwater supplies?

For decades, state regulators have imposed strict, comprehensive requirements for how oil and natural gas wells must be constructed. Each well must be encased in multiple layers of protective industrial-grade steel casing (pipe), which is surrounded by cement to create redundant safeguards for underground freshwater supplies. The casing must remain in place even after a well becomes inactive to ensure permanent freshwater protection.

(See page 5 for detailed diagram.)

How do operators monitor well integrity?

In addition to redundant safety systems in each well’s construction, operators are required to monitor wells with pressure gauges to detect pressure changes that could indicate a problem. Monitoring allows operators to quickly identify or prevent potential problems. Operators are also required to monitor pressure of the fluids used in the fracking process.

Operators regularly monitor wells remotely and physically inspect wells on a routine basis.

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The Railroad Commission’s Statewide Rule 8 expressly prohibits pollution of surface and subsurface waters from oil and natural gas drilling, completion and production activities.

Does Texas have specific rules that prohibit water pollution?

Yes. The Railroad Commission’s Statewide Rule 8 expressly prohibits pollution of surface and subsurface waters from oil and natural gas drilling, completion and production activities. This rule applies to water sources including rivers, streams, creeks, surface drainage and coastal waters.

What happens to inactive or “orphaned” wells?

When a well is no longer economically viable and is no longer actively used, operators must follow the Railroad Commission of Texas’ specific procedures and requirements to properly plug the well to protect surface and groundwater. Operators that do not properly plug such wells may face stiff fines and sanctions, including having their licenses to operate revoked.

Operator Cleanup Programs Although operators maintain performancebased procedures to prevent incidents like surface spills, the Railroad Commission of Texas oversees an Operator Cleanup Program to provide direction and oversight in the unlikely event that a complex environmental cleanup project is necessary. Under the program, the Commission’s Site Remediation Section would work with the responsible oil and natural gas operator to determine the scope, methods and cleanup targets for the site.

In 1991, the oil and natural gas industry, in conjunction with the Texas Legislature and Railroad Commission, initiated and implemented a program called the Oilfield Cleanup Program that is funded by the Oil and Gas Regulation and Cleanup Fund, which pays for the protection of surface and groundwater by properly plugging wells and cleaning up oil and natural gas sites that have been orphaned. The Oil and Gas Regulation and Cleanup Fund is funded by oil and natural gas companies through fees and fines paid to the Railroad Commission.

From 1984 through fiscal year 2020, the oil and natural gas industry has paid hundreds of millions of dollars to have more than 41,000 orphaned wells properly plugged as part of the Railroad Commission’s program.

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Anyone with questions about oil and natural gas

Who can the public contact with questions about oil and natural gas operations in their area?

operations can contact the nearest regional office of the Railroad Commission of Texas. Contact information is available on the Railroad Commission of Texas website at www.rrc.state.tx.us.

AIR AIR AIR AIR AIR AIR AIR AIR AIR AIR AIR AIR

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Air

A Texas Joint Association Education Message

AIR AIR AIR AIR AIR AIR AIR AIR AIR AIR AIR AIR

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Who regulates air quality associated with oil and natural gas operations?

The Texas Commission on Environmental Quality (TCEQ) has authority and jurisdiction to ensure that oil and natural gas operations comply with federal and state air quality rules and regulations.

TCEQ administers rules and programs that stem from Texas laws that predate the Federal Clean Air Act, but are designed to implement federal requirements.

How can the public check on their air quality?

Texas has one of the most robust air monitoring systems in the nation. The Texas Commission on Environmental Quality (TCEQ) uses state-of-the-art technology to monitor oil and natural gas activity. Continuous air monitors are located in several regions across Texas, which provide near real-time readings online, 24 hours a day. The state continues to assess expansion of the continuous air monitoring network.

Infrared cameras and other hand held emission detection devices are examples of tools used to inspect oil and natural gas equipment.

Near real-time monitoring results, maps of wells and monitor locations, and air quality information are available online: https://www.tceq.texas.gov/assistance/industry/oil-and-gas/oilgas.html

What are oil and natural gas operators doing to protect the air?

All oil and natural gas operators must strictly comply with TCEQ regulations established to control air emissions.

Oil and natural gas operators may be subject to specific permitting requirements based on an operation’s potential to emit. Companies also must comply with regulations that cover emissions from engines and generators at well sites.

(See Air Regulations on the Books on page 21.)

The pressure in pipelines and other production equipment can be monitored remotely using computerized systems. Infrared cameras and other hand held emission detection devices are examples of tools used to inspect oil and natural gas equipment.

Operators have a proven track record for quickly identifying and repairing faulty equipment. Operators may install additional air quality equipment to reduce the risk of leaks.

Fast Facts:

F Oil and natural gas companies have invested more in low emissions technology than the rest of the private sector and the government combined.

F Methane emissions from oil and natural gas systems are down 23% during a time when production has almost doubled.

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“The results show me that our air is no different than (other) urban/suburban areas, regardless of gas drilling. This is the seventh study we’ve received this year, and we have yet to hear anything that exceeds TCEQ or EPA standards. To me, this is good news.”

Mike Wallace - Flower Mound council member* *Source: Dallas Community Newspapers

How does the State keep track of air emissions?

Texas requires an annual air emissions inventory for all oil and natural gas facilities exceeding minimum emission thresholds. The inventory allows the State to review air quality conditions and trends and provides a basis for focusing regulations and manpower on high-priority areas. State regulators also use continuous air monitors, hand held air monitoring equipment, mobile laboratory equipment, air-sampling canisters, infrared cameras, helicopter fly-overs and windshield surveys to assess air emissions at oil and natural gas operations across the state.

Is the air near oil and natural gas facilities safe?

Yes. Numerous state agencies and some local governments have

conducted independent air and biological sampling. The Texas Department of State Health Services collected and analyzed blood and urine samples from residents near natural gas facilities in the North Texas town of DISH. The residents’ sample results are no different from the rest of the U.S. population.

Comprehensive research by Eastern Research Group, Inc. evaluated air emissions associated with natural gas development near Fort Worth and concluded gas exploration and production sites “did not reveal any significant health threats.”

Air

REGULATIONS ON THE BOOKS

Oil and natural gas operators are required to ensure each site or facility complies with all state and federal regulations, including those federal regulations delegated to state oversight.

In some cases, Texas’ state requirements are more stringent than federal requirements.

All oil and natural gas operators must obtain appropriate air authorizations from the Texas Commission on Environmental Quality.

Major Source Programs

Minor Source Programs De Minimis – De Minimis refers to activities that emit very minor amounts of air emissions and would cause no adverse health effects off-site. If an oil and natural gas operator determines that an operation or activity meets the requirements of the De Minimis Rule, then no other state air authorization is required.

Permits by Rule (PBR) – Some oil and natural gas facilities that meet TCEQ’s extensive recordkeeping requirements and whose emissions are defined as insignificant and fall below pre-set limits may operate with an authorization known as a Permit by Rule.

Standard Permit – Certain oil and natural gas sites with higher level (yet still insignificant) emissions than established for the previous types of authorizations may be required to apply for a Standard Permit (a permit for a specific, well-characterized type of facility).

Title V Operating Permit and New Source Review Permit – Large oil and natural gas production facilities and natural gas processing plants typically have the “potential to emit” significant air emissions and a major source air permit is required for their construction and operation. The State of Texas has two air permit programs administered by the Texas Commission on Environmental Quality: a preconstruction permit authorization program, commonly known as a New Source Review (NSR) permit program, and the Federal Operating Permit program, commonly known as a Title V permit.

Anyone who plans to construct a new facility or to modify an existing facility which produces certain air emissions is required to obtain a permit prior to construction. Major source facilities undergo a stringent “New Source Review” process to ensure that local and regional ambient air quality is not impaired.

Major source facilities must comply with strict pollution control requirements that are validated through regular emissions monitoring and reporting to TCEQ. Major sources also must obtain a Title V permit, which is a federal Clean Air Act program delegated to the Texas Commission for Environmental Quality to administer. Major source facilities are under the regular and careful scrutiny of TCEQ and report compliance status to TCEQ semi-annually. TCEQ also conducts annual inspections.

Questions about air issues?

Visit www.tceq.state.tx.us

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Parts per billion The air is made up of many different elements and compounds. The concentration of any given compound in the air is measured as “parts per billion” or ppb.

One part per billion is an extremely low concentration. The following examples put “parts per billion” in context:

1 part per billion is like 1 second in 32 years.

1 part per billion is like 1/2 teaspoon in an olympic-size swimming pool (660,000 gallons).

AutoGC Automated Gas Chromatograph is the official term for the TCEQ continuous air monitoring stations. AutoGC monitors are strategically placed throughout the state’s population centers.

It is not appropriate nor scientifically sound to compare one-hour data to the long-term AMCV. One-hour data should only be compared to the short-term AMCV.

AMCV Air Monitoring Comparison Values (AMCV) are compound-specific concentration levels that are used to evaluate the potential for effects to occur as a result of exposure. The TCEQ has developed two types of AMCVs, short-term AMCVs and long-term AMCVs, specifically designed for comparison with short-term and long-term monitoring data, respectively.

Short-term AMCVs are intended to protect against the adverse effects of short-term exposures – defined as exposures occurring over a period of hours to a few days.

These values are defined as concentrations at or below which no adverse effects are anticipated for short-term exposure.

Readings above these levels do not indicate health effects, but instead serve as a screening tool for state and health officials to investigate further.

Long-term AMCVs are intended to protect against the adverse effects of long-term exposures – defined as continuous or repeated exposure over a long period of time (70 years). These values are defined as concentrations of compounds at or below which no adverse health effects are anticipated.

It is not appropriate nor scientifically sound to compare one-hour data to the long-term AMCV. One-hour data should only be compared to the short-term AMCV.

Since substantial margins of safety are incorporated into both types of AMCVs – accounting for the elderly, children and pregnant women – exceeding either type of AMCV does not automatically indicate an adverse health impact.

Rather, it would trigger a more in-depth review.

FL

FLARING, FLARING, FLARING, FLARING, FLARING, FLARING

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Flaring

LARING, FLARING, FLARING, FLARING, FLARING, FLARING

A Texas Joint Association Education Message

FLARING, FLARING, FLARING, FLARING, FLARING, FLARING

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What is Flaring?

Flaring is the practice of safely burning excess natural gas at production facilities used for operational or safety reasons. Flaring typically occurs when there is a lack of gas gathering or processing capacity during facility or gathering maintenance or during unplanned events for safety measures such as alleviating pressure. Rather than venting methane gas into the air, flaring burns the gas, which releases fewer greenhouse gases than venting.

(The Environmental Partnership 2020 Annual Report)

Flaring is Decreasing in Texas According to the Railroad Commission of Texas, the percentage of natural gas flared out of all the natural gas produced in Texas decreased 72% between June 2019 and May 2021. During the same period, the volume of gas flared decreased by approximately 73%.

In Texas, natural gas that is flared represents less than 1% of all natural gas produced, and innovation and new technologies continue to drive this number down.

Routine Flaring Based on an extensive review of regulatory requirements and operational best practices that include maintaining the accessibility of flaring for safety and environmental protection, the Coalition considers routine flaring to be flaring of natural gas from new and existing wells/ facilities during normal production operations when gas gathering, processing, or infrastructure are insufficient or unavailable. The Texas Methane & Flaring Coalition supports industry’s continued progress to end routine flaring and shares a goal of ending this practice by 2030. Many companies are working to achieve an end to routine flaring even sooner.

Industry-led Solutions are Driving Progress Industry is stepping up and taking action by participating in voluntary collaborations where the brightest minds are coming together to implement best practices, emerging technologies, and operational enhancements to reduce flaring. The Coalition believes that industry-led solutions and best practices are how flaring will be reduced.

Texas Methane and Flaring Coalition The Texas Methane and Flaring Coalition is an alliance of Texas oil and natural gas trade associations, along with nearly 40 Texas energy companies that focuses on environmental progress and industry-led solutions to minimize flaring and methane emissions. The Coalition collectively identifies and promotes operational and environmental recommended practices. (www.texasmethaneflaringcoalition.org)

W A S T E W A S T E WA S T E WA S T E WA S T E WA S T E WA S T E W A S

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Waste Management

W A S T E W A S T E WA S T E WA S T E WA S T E WA S T E WA S T E W A

A Texas Joint Association Education Message

W A S T E W A S T E WA S T E WA S T E WA S T E WA S T E WA S T E W A S

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Who oversees waste from oil and natural gas operations?

The Railroad Commission of Texas oversees the management of solid waste at oil and natural gas sites such as drilling mud, produced water, salt water or drill cuttings (the soil and rock that come out of the ground when a well is drilled).

Operators must obtain a permit from the Railroad Commission of Texas to dispose of waste and must demonstrate that both surface and groundwater are protected during permitted disposal.

The Railroad Commission maintains rules and requires permits that specify stringent disposal well construction standards that require several layers of steel casing (pipe) surrounded by cement to protect freshwater supplies.

How is on-site waste regulated?

Operators must obtain a permit from the Railroad Commission of Texas to dispose of waste and must demonstrate that both surface and groundwater are protected during permitted disposal. Landowners and other parties that could be affected must be notified and they have the right to a hearing before the Railroad Commission on a disposal permit application.

How is off-site waste regulated?

The Railroad Commission and the Texas Commission on Environmental Quality work together to ensure that waste from oil and natural gas activity is stored, treated and disposed of at permitted off-site facilities. Those who transport oil and natural gas waste must maintain detailed records of the waste’s origin, type, volume, delivery and disposal location. Commercial recycling and surface disposal facilities must also be permitted to receive oil and natural gas waste.

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What about ongoing testing of injection wells?

Companies are required by the Railroad Commission of Texas to regularly conduct tests and submit detailed logs to state regulators.

This data provides graphic evidence that the steel and cement well casings are sound. Required regular testing allows the industry to precisely pinpoint any potential problem areas and quickly work to address them.

Questions about waste management?

Visit www.rrc.state.tx.us

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What is an injection well?

When oil and natural gas is produced and brought to the surface at a well site, naturally-occurring salt water is also brought to the surface and must be separated and disposed of in compliance with stringent Railroad Commission of Texas regulations. The most common method of disposal is to safely inject the produced water via permitted disposal injection wells thousands of feet below freshwater supplies. Most often, waste water is returned to naturally-occurring, deep salt water formations.

Permit applicants must provide comprehensive plans to protect groundwater including details about adequate separation and impervious rock formations between the proposed injection zone and shallow freshwater formations as well as the volume and injection pressures to be used during the disposal process.

An “area of review” is required to identify all plugged, unplugged or improperly orphaned wells penetrating the injection zone within a ¼ mile radius of the proposed disposal well. Appropriate landowners are notified and can request a hearing before the Railroad Commission on a disposal well permit application.

How does injection well construction and monitoring protect freshwater supplies?

The Railroad Commission maintains rules and requires permits that specify stringent disposal well construction standards that require several layers of steel casing (pipe) surrounded by cement. Disposal well operators are required to constantly monitor multiple pressure gauges, to closely monitor and record injection pressure and rate, and to perform periodic mechanical integrity tests on the disposal well. Operators must maintain and report this monitoring and testing information to the Railroad Commission.

SAFETY SAFETY SAFETY SAFETY SAFETY SAFETY

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Pipeline Safety

SAFETY SAFETY SAFETY SAFETY SAFETY SAFETY

A Texas Joint Association Education Message

SAFETY SAFETY SAFETY SAFETY SAFETY SAFETY

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Fast Fact: F A moderate 20” pipeline running 50 miles through a county can replace over 1,650 tanker truck trips per day through that county.

Are pipelines safe?

Yes.

Pipelines are an essential component of modern infrastructure. They are the safest, most reliable and efficient means of transporting water, natural gas, crude oil and refined petroleum products. Without pipelines, producers would be forced to rely on traditional transportation methods, such as trucks and railcars, which are more prone to accidents and produce more emissions.

Source: Texas Pipeline Association

What are pipeline operators doing to promote safety?

The pipeline industry uses leading-edge technology and techniques to safeguard the environment, minimize impact and protect the communities where pipelines operate.

This includes building pipelines to the highest construction standards, taking measures to prevent corrosion, monitoring pipeline rights-of-way and conducting public awareness programs.

Texas was the first state in the nation to mandate a pipeline integrity assessment and management program, which requires pipelines to be inspected – both physically and visually – for safety and reliability. This program covers more miles of pipeline on each system than mandated by the federal integrity program.

Fast Fact: F Texas was the first state in the nation to mandate a pipeline integrity assessment and management program.

The pipeline industry regularly meets with first responders and appropriate public officials to educate, test and refine emergency strategies.

What is the “One Call” system?

Texas pipeline companies, in partnership with state and federal governments, work to aggressively enhance pipeline safety awareness through programs such as 811: Call Before You Dig. This is part of the national “One Call” system established as a clearinghouse for digging or excavation activities near pipelines or other underground facilities.

The “One Call” system requires homeowners, commercial contractors, fence builders and road maintenance crews who are planning an excavation project, large or small, to take specific safety measures. A call to 811 at least two days prior to beginning an excavation project will ensure that pipeline and underground facility locations are flagged, staked or painted to help prevent accidental breach.

What can you do to promote pipeline safety?

4 Call 811 before you dig.

4 Wait the time required (48 hours in Texas) to receive the locations of any

Fast Fact: F In Texas, dial 811 before you dig to reach the local “one call” center.

underground pipelines and other facilities.

4 Respect the marks.

4 Dig with care.

Questions about pipelines?

Visit www.rrc.state.tx.us and www.phmsa.dot.gov

REFINING REFINING REFINING REFINING REFINING REFINI

S E C T I O N

V I I I

Refining

REFINING REFINING REFINING REFINING REFINING REFINI

A Texas Joint Association Education Message

REFINING REFINING REFINING REFINING REFINING REFINI

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8

What is a Refinery?

A refinery is a highly sophisticated industrial facility where raw crude oil is processed into usable forms like gasoline, diesel and jet fuel. In addition to making transportation fuels, one barrel of crude oil can also produce the valuable building block chemicals for thousands of other products like plastics, paint, tires, asphalt, diapers, cosmetics, computers, electronics, prescription medicines, plastic products and medical devices. (See page 39 for more products made from oil and natural gas.)

Texas refineries have spent billions of dollars on equipment to control air emissions, which has resulted in dramatic air quality improvements over the past decade.

What happens at a refinery?

What are refineries doing to protect the environment?

When crude oil arrives at a refinery, the oil is heated and separated into different components. The resulting components are further processed and may be blended with additives to make familiar products like gasoline, diesel and jet fuel. Complex refinery operations can break down crude oil even further to produce foundational components of many more everyday products.

Like all aspects of the oil and natural gas industry, refineries must comply with stringent and complex environmental laws and regulations to protect the air and water. (See Air Chapter for more information on permitting requirements for facilities like refineries.)

Refinery operations can be finetuned to produce the desired mix of products. Crude oil can be processed to produce more heating oil in winter or more gasoline during the summer months. Within the refining system, waste is limited as byproducts from one process often are central to another.

Texas refineries have spent billions of dollars on equipment to control air emissions, which has resulted in dramatic air quality improvements over the past decade. Also, many Texas refineries are more energy-efficient than ever and some facilities generate their own electricity. Many refineries have also implemented water conservation programs.

Are refineries prepared for emergencies?

Yes.

Texas refineries maintain robust emergency procedures and train their employees to be prepared for and respond to any emergency to protect workers, the community and the environment. Refineries regularly perform drills to practice their readiness. Many refineries have on-site emergency personnel and work closely with local emergency response organizations to ensure plans are continuously updated and improved.

Questions about refining? Visit www.tceq.state.tx.us

J O B S , TA X E S & R O YA LT I E S J O B S , TA X E S & R O YA LT I E S

S E C T I O N

I X

Oil & Natural Gas by the Numbers: Jobs, Taxes, Royalties J O B S , TA X E S & R O YA LT I E S J O B S , TA X E S & R O YA LT I E S

A Texas Joint Association Education Message

J O B S , TA X E S & R O YA LT I E S J O B S , TA X E S & R O YA LT I E S

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S E C T I O N

Fracking is helping America to be less dependent on other countries for our energy needs.

Thanks in part to fracking in Texas, the United States is the largest oil and natural gas producing nation in the world.

In FY 2019, oil and natural gas companies paid

BILLION

- the most in Texas history - in state and local taxes and state royalties that directly fund public education, roads, essential services and more.

9

The Texas oil and natural gas industry contributes 22.3% of the state’s gross domestic product. More than 2.5 million Texans have a job that is a result of the oil and natural gas industry.*

Taxes The oil and natural gas industry paid $13.9 billion in Texas state and local taxes and royalties in fiscal year 2020. In fiscal year 2019, the oil and natural gas industry paid $16.3 billion in state and local taxes and state royalties - the highest total in Texas history. The taxes directly fund Texas schools, textbooks, Medicaid and children’s health insurance programs, child protective services, roads and first responders such as police and firefighters.

Oil and natural gas companies pay $34,691 per employee in state and local taxes and royalties. By comparison, other private sector companies averaged only $5,467 per employee. This 6-fold difference highlights the critical role oil and natural gas plays to keep the Texas economy - and Texas state budget - viable and resilient.

Sectors of Texas Oil & Natural Gas Industry

Crude Petroleum Extraction Natural Gas Extraction Industrial Sand Mining Drilling Oil and Gas Wells Support Activities Oil and Gas Operations Natural Gas Distribution Oil and Gas Pipeline and Related Structures Construction Petroleum Refineries Petroleum Lubricating Oil and Grease Manufacturing Petrochemical Manufacturing Oil and Gas Field Machinery and Equipment Petroleum Merchant Wholesalers Fuel Dealers Pipeline Transportation *Source: American Petroleum Institute, for 2019

OIL PRODUCTION IN TEXAS 2010-2020 MILLION BARRELS PER DAY

4.4 3.2

1.2

1.5

2.0

3.5

5.1 4.9

Direct Oil and Natural Gas Jobs in Texas*

3.5

3.2

Oil & Natural Gas by the Numbers:

620,000+

2.5

*Source: American Petroleum Institute, for 2019

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

TOTAL TAXES & ROYALTIES PAID 2010-2020

TO $136.5 2010 2020

BILLION

TOTAL PAID

18 12

12.1

13.6 BILLION

15.7 BILLION

BILLION

6 0

7.4

14.0 BILLION

13.8 BILLION 9.4 BILLION

9.3 BILLION

16.3 BILLION

Average Oil and Natural Gas Wage

$128,860

(more than double the rest of the workforce)

13.9 BILLION

11.0 BILLION

Texas Royalty Owners

866,000+

BILLION

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Fiscal Year 2019 was a record-breaking year for taxes and royalties paid by the Texas oil and natural gas industry.

TAXES AND ROYALTIES PAID BY TEXAS OIL AND NATURAL GAS INDUSTRY (FY2019)

Property taxes* ............................................... $3.957 billion

Sales, state and local taxes* ........................... $3.748 billion

Crude oil production tax** ............................. $3.887 billion

Natural gas production tax** ........................ $1.686 million

Franchise, oil well servicing, and other taxes* .............................................. $828 million

Royalties to State Funds** .............................. $2.173 billion

AMOUNT

Total Paid............................................. $16.278 billion

*Estimated, Tax & Fiscal Consulting, Austin, TX

**Source: Texas Comptroller’s Office

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S E C T I O N

9

Oil and natural gas companies pay more than 6 TIMES MORE state and local taxes and royalties on a per employee basis than the average private sector company.

State and Local Taxes and State Royalties Paid Per Employee in Texas - Fiscal Year 2020 $40k

$30k

$20k

$10k

$

Combined all other Industries ($5,467 per employee)

Oil and Natural Gas Industry ($34,691 per employee)

Taxes & Royalties Paid Per Employee* (Fiscal Year 2020)

Oil & Natural Gas

All Other Industries

Property**

$12,461

$3,034

Sales, state and local**

$5,767

$1,442

State franchise and other taxes**

$1,472

$978

Production of oil***

$8,054

$0

Production of natural gas***

$2,308

$0

Oil & natural gas well servicing***

$297

$0

Total Taxes**

$30,359

$5,454

Royalties to State Funds***

$4,333

$13

Total Paid:

$34,691

Per Employee

$5,467

Per Employee

*Employment data provided by Texas Workforce Commission **Estimated Tax & Fiscal Consulting, Austin ***Source: Texas Comptroller’s Office

Better Jobs, Better Wages

Jobs Creating Jobs

Oil and natural gas employers

operations, such activities tend to generate many

provide more than 620,000

Given the large capital outlays and other expenditures that accompany oil and natural gas other jobs in Texas, creating a “ripple effect.”

According to one economic model, the highest

high-quality, high-paying jobs

job multiplier in Texas is in petroleum refining, at

in Texas.* The average oil

nearly 26 additional jobs created for every new

and natural gas worker earns $128,860 a year; the rest of the private sector workforce earns an average of $59,000 a year.

petroleum refining job. This ripple effect stems from the purchases that oil and natural gas companies make such as machinery, pipe, fuel, raw materials, concrete, steel, engineering services, legal services, well services, electricity, maintenance, construction and land, as well as pay to their employees.

*Source: American Petroleum Institute, for 2019

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S E C T I O N

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Texas Rainy Day Fund Texas maintains an Economic Stabilization Fund (ESF) or “Rainy Day Fund” that is funded almost exclusively by oil and natural gas taxes. The Rainy Day Fund has been used to help close budget shortfalls, to provide property tax relief, and to fund public schools, teachers’ compensation and health insurance programs, Medicaid, child protective services, foster child care and adoption services, criminal justice programs and disaster recovery programs.

Counties that receive Oil & Natural Gas Property Taxes (Fiscal Year 2020) Dallam

Sherman

Hansford

Ochiltree

Lipscomb

Hartley

Moore

Hutchinson

Roberts

Hemphill

Gray

Wheeler

Donley

Collingsworth

Randall

Deaf Smith

Parmer

Carson

Potter

Oldham

Castro

Armstrong

Swisher

Briscoe

Hall

Counties that receive $20,000 or more in property taxes from oil and natural gas.

Counties where oil and natural gas property taxes constitute less than ½ of 1% of the county’s tax base.

Childress Hardeman

Bailey

Lamb

Hale

Cochran

Hockley

Lubbock

Motley

Floyd

Cottle

Foard

Wilbarger

Wichita

Baylor

Archer

Clay Crosby

Dickens

King

Knox

Montague

Cooke

Grayson

Lamar

Fannin

Red River Bowie

Lynn

Terry

Gaines

Dawson

Garza

Borden

Kent

Scurry

Stonewall

Fisher

Haskell

Throckmorton

Shackleford

Jones

Jack

Young

Stephens

Wise

Tarrant

Parker

Palo Pinto

Martin

Howard

Mitchell

Nolan

Taylor

Callahan

Eastland

Loving Hudspeth

Winkler

Ector

Midland Glasscock Sterling

Coke

Runnels

Coleman

Johnson

Crane

Upton

Reagan

Irion

Tom Green Concho

Reeves Schleicher

Pecos

Jeff Davis

Mcculloch

Sutton

Gillespie

Coryell

Brazos

Uvalde

Washington

Zavala

Frio

*Fiscal year 2020 covers those taxes imposed during 2019; property taxes are legally due by January 31 of the following year. Source of data is “self-report” information from counties provided to Texas Comptroller’s Office.

La Salle

Webb

Mcmullen

De Witt

Duval

Live Oak

Jim Wells

Jackson Victoria

Bee

Jim Hogg

Brooks Kenedy

Starr

Willacy Hidalgo Cameron

Calhoun

Refugio

San Patricio Nueces

Kleberg

Zapata

Harris

Chambers

Orange Jefferson

Fort Bend Wharton

Karnes

Atascosa

Hardin Liberty

Lavaca

Goliad Dimmit

San Jacinto

Colorado Gonzales

Bexar

Medina

Austin

Fayette

Caldwell

Wilson Maverick

Grimes

Tyler

Montgomery

Bastrop

Guadalupe Kinney

Jasper Polk

Walker

Lee

Travis

Comal

Bandera

Newton

Madison

r

Real

San Augustine Sabine

Trinity

Robertson Milam

Williamson

Hays

Shelby

Angelina

Bell

Kendall

Panola

Houston

Leon

Falls

Blanco

Harrison

Nacogdoches

Burleson

Kimble

Gregg

Rusk

Freestone

Llano

Kerr Edwards

Smith

Walle

Brewster

Val Verde

Van Zandt

Cass Marion

Upshur

Limestone

Mclennan

Burnet

Terrell Presidio

Camp Wood

Anderson Cherokee

Lampasas

San Saba

Mason

Rains

Titus

Navarro

Brown

Menard

Crockett

Rockwall

Ellis

Hill

Bosque

Mills

Hopkins

Hunt

Henderson

Hamilton Ward

Culberson

Dallas

vell Somer

Erath

Comanche El Paso

Collin

Kaufman Hood

Andrews

Denton

Morris

Yoakum

Franklin

Delta

Aransas

Matagorda

Galveston Brazoria

Oil and Natural Gas: Essential for Texans’ Way of Life

ALL OF THESE PRODUCTS AND THOUSANDS MORE EVERYDAY ESSENTIALS ARE MADE FROM OIL AND NATURAL GAS. MOSQUITO SPRAY

HELMET

WATER BOTTLE

FISHING POLES

EARPHONES

VINYL CASES

JERSEY/SHORTS GLOVES

FISHING BOBBERS

SHOES FISHING LURES

BRAKES

MONOFILAMENT FISHING WATERPROOF CLOTHING

CLIMBING HOLD

BIKE TIRE/TUBE ROPE

CHAIN LUBRICANT

MONITORING EQUIPMENT BED

BABY CARRIER STETHOSCOPE

ARTIFICIAL GRASS

SAFETY HARNESS

CLIMBING SHOES

PETROLEUM JELLY

39

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N A T U R A L

G A S

I N

T E X A S

A Joint Association Education Message F R OM T H E T E X A S O I L A N D NAT U R A L G A S I N DU S T RY

Helpful Resources American Petroleum Institute www.api.org

Texas Commission on Environmental Quality

Independent Petroleum Association of America www.ipaa.org

Texas Independent Producers and Royalty Owners

Interstate Oil & Gas Compact Commission iogcc.publishpath.com

Texas Methane and Flaring Coalition

Panhandle Producers and Royalty Owners Association www.pproa.org

Texas Oil and Gas Association

Permian Basin Petroleum Association www.pbpa.info

Texas Pipeline Association

Railroad Commission of Texas www.rrc.state.tx.us

Texas Royalty Council

South Texas Energy & Economic Roundtable www.steer.com

Texas Water Development Board

www.tceq.state.tx.us www.tipro.org www.texasmethaneflaringcoalition.org www.txoga.org www.texaspipelines.com www.texasroyaltycouncil.org www.twdb.texas.gov

Texas Alliance of Energy Producers www.texasalliance.org

This publication is available online at www.oilandnaturalgasintexas.com

© Copyright 2021, Texas Oil & Gas Association