Environment

Milch Engineering is committed to being a good steward of all our natural resources, including protecting the air quality resulting from our operations. Ensuring that natural gas does not escape into the surrounding air is not only a requirement of the many laws and regulations at both the state and federal levels, but a sound business practice, as it maximizes the volume of gas available for sale to our customers. Our air quality programs work to ensure that our operations meet or exceed these federal and state regulations that establish emissions limits, emissions control requirements, monitoring, testing, recordkeeping, and reporting requirements, to protect and maintain air quality.

Overview of Operation

The EPA defines Milch Engineering operations as Onshore Petroleum and Natural Gas production. As a producer of natural gas, emission sources at Milch Engineering facilities primarily consist of production equipment designed to extract, separate, process, store and transfer natural gas to downstream gathering facilities or transmission pipelines. As part of normal operating processes, some of this equipment generates atmospheric emissions that may be recovered, captured, neutralized, vented, or combusted.

On an annual basis, Milch Engineering conducts benchmarking of the company’s atmospheric emission performance to identify opportunities and challenges relating to various emission sources. At the federal level, greenhouse gases (GHGs) are regulated under two programs: Title 40, Part 98, Subpart W of the Code of Federal Regulations (CFR), “Mandatory Greenhouse Gas Reporting,” which mandates annual reporting of GHGs and 40 CFR Part 60 Subpart OOOOa, “Standards of Performance for Crude Oil and Natural Gas Facilities,” which imposes emission standards, operation standards and control requirements, as well as recordkeeping and reporting requirements for operations resulting in the emissions of both GHGs and volatile organic compounds (VOCs). Whereas Subpart OOOOa enforces how Milch Engineering conducts our operations to reduce emissions and impacts on the ambient air, Subpart W mandates specific procedures for data gathering, integrity review and calculation methodology for annual reporting. In addition to these federal programs¹, Milch Engineering also implements internal processes and procedures to ensure our performance meets or exceeds regulatory requirements.

Milch Engineering’s commitment to operational excellence leads to the development of internal guidelines, processes and practices that aim to comply with or exceed regulatory requirements. Milch Engineering performs annual benchmarking of GHG emissions to identify opportunities for emission reduction. For natural gas producers such as Milch Engineering, the two key GHGs that make up the majority of our total emissions are carbon dioxide (CO₂) and methane (CH₄). The EPA and industries measure the impacts of GHGs in units of CO₂ equivalents (CO₂e), which is based on converting methane, nitrous oxides and fluorinated gases to CO₂ using global warming potential factors (GWP)². Milch Engineering’s emissions of other greenhouse gasses are negligible.

The primary contributor to methane emissions is from the estimated methane venting during the pre-separation drill-out process of completion operations and natural gas venting associated with liquid unloading. The primary contributor of carbon dioxide emissions is from combustion, such as firing of fuels in engines operated during drilling and completion operations. The annual analysis of our emission profile enables us to track carbon dioxide and methane emissions by each categorical source to identify equipment and/or emission sources with the most potential for emission reduction.

In our efforts to identify and minimize methane emissions, Milch Engineering evaluates industry proven technologies and implements best management practices. The three categorical sources of methane emissions are 1) Liquid Unloading, 2) Estimated methane venting during the pre-separation drill-out process of completion events, and 3) Fugitive emissions from components in service of natural gas such as valves, flanges, etc. In 2019, Milch Engineering implemented the following technologies and practices.

Liquid Unloading

Accumulation of liquid in the wellbores is an inherent part of upstream operations as wells mature over times and optimization of the processes to remove liquids is a necessary operation for all oil and gas producers. Milch Engineering continues to use the technologies and practices implemented below to minimize methane emissions.

• Install artificial lift equipment
• Ensure all liquid unloading events flowed directly from the wellhead to the production tanks are monitored in person
• Install tubing/capillary strings/ plunger lifts
• Employ automation of liquid soap pumps

Completion Events

Methane emissions are entrained in the circulating fluid as the liquid is recirculated to tanks from wellheads during the pre-separation drill-out process. In 2019, Milch Engineering strived to refine data accuracy by installing Lower Explosive Limit (LEL) detection monitors to track and record actual emission duration in lieu of applying a conservative engineering estimate which yielded an overestimation of methane emissions. These LEL detection monitors track and record actual emission duration of flowback liquids as the liquids recirculate to tanks from wellheads. Minimal emissions are in the entrained liquids as the flowback volume contains primarily non-volatile materials such as sand and recycled wastewater.

Leak Detection and Repair

Fugitive emissions are the unintended escape of gas through various components such as flanges, valves, connectors, and pressure relief valves. To help identify and minimize fugitive emissions, Milch Engineering employs the use of optical gas imaging (OGI) cameras for leak-detection inspections. The key members of our team, including Facility Engineers, Operators, and EHS staff members, are trained and certified Thermographers from the Infrared Training Center (IFR). The training provides our operators with not only the operating techniques and basics of thermal science, but also an understanding of the regulatory framework, safety practices and techniques and interpretive skills.

The key to the effective use of the OGI camera technology is training and preparation. Milch Engineering’s Thermographers are trained and required to conduct each leak inspection in accordance with the regional Monitoring Plan and are prepared to provide immediate corrective actions should a leak be discovered. On an ongoing basis, Milch Engineering conducts fugitive leak monitoring of our assets in the Appalachian Basin. The Monitoring Plan is developed in accordance with requirements from the New Source Performance Standards Subpart OOOOa as well as the Company’s internal policies and serves as a “not-to-deviate” guidance document for every inspection.

Our inspection teams travel with the necessary tools and parts to make repairs as leaks are detected in the field. This practice results in over 96% of leaks being restored to zero-leak status the same day of discovery. Those that are not fixed the same day, primarily due to unavailable parts, are expedited on the maintenance list.

Carbon Dioxide Emissions

To reduce CO₂ emissions, Milch Engineering focuses on the operation of engines during drilling, completion and production, (e.g. reduce diesel usage, use of alternative fuels), as well as green completion practices. Subpart OOOOa defines green completion as the total capture of gases and allows for flaring or venting only when it is not technically feasible to capture the gases or the situation presents a hazardous condition.

During a flowback event, Milch Engineering’s Completion Engineers collaborate with Operations to orchestrate the sequence of flowback processes and transition of to normal production to eliminate the need for flaring.

Milch Engineering does not allow flaring or venting of natural gas during the drilling and completion process, unless it is necessary to alleviate a safety concern. Milch Engineering makes every effort to reduce the need for flaring and venting through technical and engineering design as well as operational processes prior to conducting/ beginning completions. Milch Engineering’s completion activities follow green completions guidelines and only perform flaring as necessary to ensure safety when extenuating circumstances arise.

In 2019, Milch Engineering reduced not only GHGs but also nitrogen oxides, an EPA criteria pollutant, by operating only lean burn engines equipped with a catalytic converter. Also in 2019, to minimize direct emissions, Milch Engineering replaced pneumatic pumps that were operating on natural gas with pumps operating on electricity. We anticipate that all natural gas pumps will be converted to electric by the end of 2020.

GHG Compliance Team

We have established a GHG Compliance Team that gathers information, develops plans to monitor our emissions and manages our reporting requirements. The work of this team led to the development of an air module in our Asset and Compliance Tracking System (ACTS), which is the data-gathering and report-generating platform for GHG emissions that supports our evolving air quality program. On a daily basis, operational data is pushed from the field, from various operational databases, to ACTs, which is configured to calculate emissions in accordance with regulatory requirements. As an oil and gas producer, Milch Engineering is subject to the annual reporting of GHG emissions under 40 CFR Part 98, Subpart W, which mandates source-specific calculation methodologies and emission factors. Milch Engineering is also subject to various operating practices under 40 CFR Part 60, Subpart OOOOa. As required, Milch Engineering monitors and quantifies emissions under the mandates of these two regulations, along with other state rules. The guideposts for Milch Engineering’s emission inventory are:

• 40 CFR Part 98, Subpart W “Mandatory Reporting Rule”
• American Petroleum Institute
• Pennsylvania Department of Environmental Protection – Technical Guidance

The GHG Compliance Team develops training materials around new or revised regulations and other environmental compliance topics and presents the information to employees in formal training sessions. The training is rolled out to superintendents, operators, foremen and other key personnel to communicate new information and expectations so policy and procedure changes are implemented consistently across operations and in full compliance with the reporting requirements of the law.

Emission Reduction Programs and Achievements

Milch Engineering is committed to the responsible reduction of GHG emissions. We implemented our initial GHG data gathering program in 2011 and we have been engaged in extensive efforts to reduce our GHG emissions from all sources, including heaters, pneumatic devices, drilling rigs, venting and flaring in completion operations, engines in completion operations and fugitive methane.

Part of Milch Engineering’s emission reduction program is to install and replace manual pneumatic controllers with low-bleed or intermittent controllers. In 2017, Milch Engineering completed the conversion of existing high-bleed sources to low-continuous, resulting in a reduction of GHG emissions equivalent to removing 3,356 passenger vehicles from the road for one year^3,4. Milch Engineering is committed to installing only low or intermittent bleed pneumatic controllers in our operations while continuing to evaluate the feasibility studies of various technologies and practices to further reduce controller emissions.

As part of Milch Engineering’s commitment to support practical and sustainable environmental programs, we are an original member and supporter of API’s “The Environmental Partnership” program launched in December 2017. We will participate with a group of our industry’s largest companies to reduce methane and volatile organic compounds (VOCs) in our operations through the sharing of best practices and implementing innovative strategies as they are developed. Milch Engineering is excited to be an original member of The Environmental Partnership and we look forward to the continued growth in its membership and the resulting benefits for Milch Engineering and all our stakeholders.

Milch Engineering also participates in the EPA Natural Gas STAR program. The Natural Gas STAR program is a voluntary program that encourages oil and natural gas companies to adopt proven, cost-effective technologies and practices that improve operational efficiencies and reduce methane emissions to the atmosphere.

¹ Milch Engineering is also subject to state regulations that impose even more stringent requirements on certain emission sources.

² The Global Warming Potential (GWP) was developed to allow comparisons of the global warming impacts of different gases. The current GWPs over 100 years are 1 for CO₂, 25 for CH₄, and 298 for N₂O. The GWPs allow for the conversion of different gases to a common unit, namely CO₂e.

³ Data as reported to EPA Natural Gas STAR on June 28, 2017

⁴ GHG equivalencies calculator from https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator

We devote substantial time and resources to minimizing the impact of our operations on the land. By using cutting-edge technology, such as three-dimensional seismic mapping and horizontal drilling, we are able to drill for natural gas with an accurate depiction of the targeted geological formations below. This allows exploration teams to identify natural gas prospects and space wells more efficiently and effectively. This increased efficiency also reduces the number of dry holes drilled, drilling costs and exploration time. In addition to the strategic use of seismic data, we carefully evaluate geographical and topographical aspects of each site to determine the best place to locate a well.

In addition, where possible and allowed by regulation, Milch Engineering endeavors to minimize the off-site disposal of soils generated during the course of wellsite construction and operation. This includes the use of soils and uncontaminated drill cuttings generated during well cellar and conductor installation for on-site containment berms. Further, under and in accordance with the Pennsylvania Department of Environmental Protection’s Clean Fill Policy, excess site soils generated during facility installation and/or other production operations are beneficially reused as clean fill by Milch Engineering or local landowners rather than disposed at local landfills.

Minimizing Surface Impacts

The use of horizontal drilling and multi-well pads significantly reduces our overall surface footprint. By designing the majority of our pads to accommodate up to a dozen (or more) wells, we are able to centralize operations as well as reduce the number of pads required for optimal land use. In addition, technological advancements have enabled us to increase substantially lateral lengths, further minimizing the number of pads constructed. This is further leveraged with the increased usage of in-field drilling to return to existing well pads to drill additional wells and/or target different zones within the Marcellus formation, minimizing the need for construction of new well pads. Another benefit to multi-well pad sites is the reduction in road traffic due to less frequent mobilization of drilling rigs and fewer individual sites requiring maintenance.

In addition to reducing our surface footprint, we also take many additional steps to minimize erosion and sediment issues, utilizing industry best management practices (BMPs) prepared under the direction of Professional Engineers and tailored to each site. Some of the measures we implement include:

• Utilizing current state of the art BMP Erosion controls to prevent storm water pollution;
• Measures to minimize and control storm water flowing onto and through the project;
• Sediment controls to work in conjunction with and provide a second line of defense to properly designed and installed erosion controls;
• Temporary seeding to aid in controlling erosion;
• Proper design, alignment and building of lease roads to avoid sensitive areas; and
• Performing regular inspections to ensure that the controls are functioning as designed.

Reclamation

As soon as is practical following drilling and completions activities, we work to return the area to its original condition, contour and drainage, utilizing only the minimum footprint necessary for ongoing production operations. During the interim reclamation process, when transitioning from drilling operations to production operations, we use the original stockpiled topsoil, we fertilize, and we plant the graded areas with noninvasive seeding, as recommended by the various federal and state agencies with reclamation oversight.

Incidental Release Management

Unplanned releases of any kind – fuel/oil, gas, water, chemicals, muds, etc. – are inefficiencies we strive to eliminate. At Milch Engineering, we seek to manage our operations effectively such that spills and incidental releases do not occur. In the event that we do have an incident, we are prepared with secondary containment systems, auto-shutoff instrumentation and controls, response plans, incident investigation and corrective action. In addition, we utilize spill response companies for spill management and professional removal, remediation and disposal of waste to ensure all releases are handled with the safety and wellbeing of our employees, the community and the environment as our top priorities.

Mitigation and Containment Systems

Milch Engineering is very protective when it comes to containment systems used to intercept incidental releases and prevent pollution from reaching soil or water. Across our operations, we utilize impervious berms/containment structures and/or double-walled tanks as secondary containment for stored fluids, depending on operating conditions. During the drilling and completion process, Cabot utilizes closed loop circulating systems, which eliminate the need for lined impoundments. All secondary containments are inspected routinely to ensure that integrity is maintained.

We also continuously monitor our wellheads and production equipment for erosional flow conditions to minimize the potential for piping and equipment failures that could result in an accidental release of produced fluids.

By maintaining a remote, automated system with 24/7 monitoring and control, our personnel can immediately respond to minimize lost production and the potential for environmental damage and costly cleanups.

Investigation and Corrective Action

No matter the size, all releases are reported internally. We analyze all releases to determine cleanup and restoration needs as well as to identify preventative measures to avoid reoccurrence. Cabot retains third-party remediation contractor professionals to assist in documentation, sample and data collection and analysis, and remediation oversight.

Waste Management

Reducing operational waste is an important objective for Cabot. Our absolute focus is on intentionally designing our processes to maximize efficiency and minimize waste generation. One of the higher-volume waste streams in our operations is wastewater in the form of produced and flowback water. As described in the water section, Cabot utilizes water recycling efforts to beneficially reuse generated wastewater to the extent possible. Solid wastes generated during exploration and production are generally landfilled and options to use the solid waste for beneficial reuse are periodically evaluated. Uncontaminated drill cuttings and soils are beneficially reused, to the extent possible (as discussed under Land Stewardship) in lieu of disposal at local landfills.