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Colorado Adopts Nation's First Oil/Gas Methane Emissions Rules

Colorado regulators over the weekend adopted new rules to curb emissions from oil and gas drilling, including the nation's first such regulations that target emissions of methane.

The trade association for the state's oil and gas producers, the Colorado Oil & Gas Association (COGA), praised the rulemaking processes and said its members would work with regulators to implement the rules. However, COGA's Doug Flanders, director of policy and external affairs, expressed disappointment at the blanket approach regulators took in applying the rules.

"...[W]e were not successful in ensuring that the rule accommodates the differences in basins and operators," Flanders said. "Nevertheless, we are committed to working with our operators, our communities and the state to successfully and effectively implement these rules."

The rules adopted were the result of a collaboration of energy companies and environmental groups. Among the energy companies providing input were Encana Oil and Gas, Anadarko Petroleum Corp., Noble Energy., Pioneer Natural Resources, XTO Energy, WPX Energy and DCP Midstream. Environmental Defense Fund also was a party to the proceeding, as were numerous local community and environmental groups.

The commission approved the rules by a vote of eight to one after rejecting revisions that would have exempted smaller wells and would have applied the new rules only in areas where violations of federal air quality standards are frequent.

The regulations require the installation of equipment to reduce leakage of methane and volatile organic compounds (VOC) and to control or capture 95% of emissions. According to hearing testimony by the company, Noble expects to have to spend $3 million per year in order to comply with the new rules. Overall, the cost to comply with the new rules is pegged by the Air Pollution Control Division at about $40 million; however, industry estimates set the cost much higher, at about $100 million.

Producers will have to inspect well sites as often as monthly, depending upon a well's level of production. Leaks that are discovered must be fixed within 15 days.

The rule proposal was presented to the Colorado Air Quality Control Commission last November (see Daily GPINov. 18, 2013). The rules were adopted over the weekend, largely as proposed, following a five-day hearing. The rulemaking process was initiated by the Colorado Department of Public Health and Environment's (DPHE) Air Pollution Control Division more than a year ago.

DPHE officials said they gathered input for the proposed rules from a diverse stakeholder group and would require, among other things:

  • Leak-detection systems for tanks, pipelines and other drilling/production processes and compressor stations;
  • Instrument-based monthly inspections of large sources of emissions;
  • Timelines to repair leaks;
  • Emissions restrictions outside nonattainment areas; and
  • More stringent limits on emissions from dehydrator units near residential areas.

DPHE officials have estimated that the rules would cut nearly 92,000 tons/year of VOC, or 34% based on a 2011 inventory. Oil and natural gas VOCs have been  measured at 275,000 tons annually.

In fall 2012, the commission partially adopted federal standards applicable to crude oil and natural gas production, transmission and distribution. At the time it directed the Air Pollution Control Division to consider their full adoption, which ultimately led to last week's rulemaking.

"...Colorado has seen significant growth of oil and gas development in recent years, and that growth is expected to continue in the foreseeable future," the commission said in documents proposing the rule adoption. "The oil and gas industry is a significant source of VOC emissions (an ozone precursor). This is particularly true of oil and gas storage tanks.

"Oil and gas operations also emit methane, a negligibly reactive ozone precursor and a potent greenhouse gas. Division air monitors and other sampling indicate elevated levels of oil and gas related compounds in oil and gas development areas. Improved technologies and business practices can reduce emissions of hydrocarbons, such as VOCs and methane, in a cost-effective manner. Many Colorado operators are already utilizing such technologies and practices to some degree..."

Commission staff have also been directed to explore further regulations that would apply to the oil and gas industry, including the potential regulation of emissions from natural gas compressor stations downstream of the wellhead.

Gov. John Hickenlooper has been an advocate of regulations to protect the state's environment. "We're committed to holding the oil companies to the highest standards to protect Coloradans and our air and water," the governor said in January (see Daily GPIJan. 15). However, Hickenlooper is in league with the governors of other energy-producing states in insisting that regulation should come from the states themselves and not the federal government (see Daily GPIFeb. 19).

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