Valerie Volcovici, Nichola Garoom

WASHINGTON (Reuters), – The U.S. environment regulators plan to use the Colorado-based nation-leading policies for new methane regulations from oil-and-gas operations as the basis for their rules. This state has been tamping the deadly greenhouse gas since seven years.

Sources familiar with the early versions of proposed regulations say that the U.S. Environmental Protection Agency (USEPA) will soon unveil the rules. These could have serious repercussions to oil and natural gas drillers.

The proposal, which will be rolled out just days before the start of the United Nations conference on global warming https://www.reuters.com/business/environment/cop26-glasgow-who-is-going-who-is-not-2021-10-15 in Glasgow, is a key pillar of the Biden administration’s broader crackdown on climate change.

Drilling companies from the major states producing methane such as Texas and North Dakota will be facing a host of new regulations, but Colorado businesses can continue to operate under existing government laws.

Both strong environmental and large-scale oil and natural gas industries are two of the state’s priorities. In 2014, the state put in place first methane regulations at the state level. It has since gradually increased those requirements to reduce methane emissions in order to decrease methane from drilling by over half of 2005 levels.

“Colorado regulations are the toughest on the planet,” Dan Haley, president of the Colorado Oil and Gas Association, said, adding that the rules were crafted with industry input.

Methane https://www.reuters.com/business/environment/save-planet-focus-cutting-methane-un-climate-report-2021-08-09, a gas that leaks from oil and gas infrastructure, livestock farming and landfills, is the second-biggest cause of climate change after carbon dioxide. It has a higher heat-trapping potential than CO2 but it breaks down in the atmosphere faster, so rapid reductions of methane emissions https://www.reuters.com/business/environment/save-planet-focus-cutting-methane-un-climate-report-2021-08-09 can quickly have a large impact on slashing greenhouse gases.

The U.S. and European Union last month kicked off an effort https://www.reuters.com/business/environment/us-eu-line-up-over-20-more-countries-global-methane-pact-2021-10-11 by two dozen nations to slash methane emissions 30% over the next decade.

The federal regulations that limit methane from new sources are in place. However, existing activities cannot be regulated in those states which do not have their standards.

Colorado regulations require that oil and gas companies find methane leaks, fix them and use technologies to reduce or eliminate emissions. It has been required to conduct semi-annual leak detections, control tank levels and establish transmission standards. Rules that also apply to marginal wells or low production also prohibit routine flaring and mandate the installation of emission-reducing valves.

SOARING PRODUCTION

The rise in horizontal drilling methods, which underpinned America’s shale gas boom in the United States before plummeting in 2020 due to the coronavirus pandemic in the U.S. Energy Information Administration data showed that oil production rose 57% in Colorado between 2015 and 2019.

The state reported that methane emission growth was slower than the increase in production. It rose 9% from 2015 to 2019. Federal data from the EPA shows that the Permian Basin is the nation’s most prolific and largest oil field, covering portions of Texas, New Mexico and Texas. Methane emissions from oil production rose by 25% in that period at large facilities reporting to it.

Andrew Bare, spokesperson for Colorado Department of Public Health and Environment said that Colorado’s emissions had remained relatively stable in spite of an increase in oil and other production. The 2019 numbers do not include expected emission reductions due to additional state policies since then, he said.

“Since 2014 it feels like we’ve been engaged in almost continuous rulemaking,” said Garry Kaufman, director of the CDPHE’s air pollution control division.

In an effort to improve the measurement of methane, the state deployed overflights to measure ground-based emissions.

The EPA examined a number of state programs and spoke with state regulators, including Colorado’s, as it evaluated new methane rules, according to EPA spokesperson Nick Conger.

CLEANER GAS ADVANTAGE

    Some Colorado drillers have embraced the opportunity to market what they bill as lower-emitting natural gas to customers eager to tout their environmental credentials.

“Being a Colorado operator has really given us a tremendous advantage relative to the rest of the United States in terms of the environmental quality of our operations,” Brian Cain, vice president of government affairs for Denver-based Extraction Oil and Gas Inc, said in an interview.

The company produced an average 88.907 barrels oil equivalent per day in 2013 and is now merging with two more to create Civitas Resource Inc. This will allow for lower-emission drilling within Colorado’s Denver–Julesburg Basin.

Jon Goldstein, of the green organization Environmental Defense Fund states that the state’s increased production since 2014 shows the “fallacy in the oil industry myth about strong and comprehensive methane regulations putting industry out business.”

Other producers feel the new regulations have rendered doing business in Colorado difficult, especially smaller and less-capitalized ones. Trisha Fanning of the Colorado Small Operator Society represents 60 oil and natural gas companies.

“Some operators are no longer able to economically operate within the state,” she said. This does not bode well for small operators nationwide, Fanning added, since “we expect the federal methane rule to possibly take several aspects from Colorado.”

Industry players voiced concern that the EPA may follow Colorado’s lead and apply methane rules to small production or “marginal” wells, which environmental groups say are a significant source of methane emissions, according to sources who saw earlier versions of the proposal.

EDF (PA 🙂 has found that there are 565,000 U.S. marginal well sites producing oil and gas. These locations account for 5.8% combined oil/gas production, yet produce a significant amount of methane emissions. According to EDF, 11% federal methane is produced by gas wells in the Appalachian Basin that contribute 0.2% to 0.4% to production.

Kathleen Sgamma of the Western Energy Alliance stated that federal marginal well regulations will affect 20% of oil and gas production. She stated that “a lot of these wells would need to be closed in.”