A round of hurrahs in Colorado

Agreement around verification of oil-and-gas emissions hailed as a model for other stations — and other countries, too. But it’s not over yet.

by Allen Best

As the Colorado Air Quality Control Commission considered new methane-testing requirements for oil and gas operators on July 20, an observation was shared frequently during testimony and then among the commissioners as they prepared to affirm the proposal.

“We’re teaching the country and the world a little bit about finding consensus,” said Jon Slutsky, a now-retired dairy farmer from Wellington, in northern Colorado, and one of the nine commissioners.

If Colorado is to achieve reductions in greenhouse gas emissions that were identified in a 2019 law and expanded in a 2023 law, the state must curb methane emissions. Methane has a global warming potential 80 times greater than carbon dioxide over a 20-year period.

Methane and other emissions produced during extraction of fossil fuels are also important contributors to degraded air quality, particularly a problem along the northern Front Range (Castle Rock north), where more than half of Colorado’s 5.9 million residents live.

In 2021, the Air Quality Control Commission adopted nation-leading regulations. But what good are those regulations if the reductions in emissions cannot be verified?

That was the point of this rule-making, to figure out the best approach for ensuring the intent of the law is honored but in the most practical way. Trust but verify, Ronald Reagan famously said of nuclear disarmament by the Soviet Union.

The rule requires that the quantity of methane emissions at production sites be directly measured. The measurement data must be publicly reported. It also empowers the Colorado Air Quality Control Division to ensure compliance.

In short, the rule allows verification.

The process began more than a year ago. Several oil-and-gas industry groups and private companies, the Environmental Defense Fund, and other environmental groups, plus several local government groups and the staff of the state agency spent some months working through the issues. The key question was how could the methane emissions caused by the extraction, processing, and transport of the gas to consumers be verified? How do we know that the reductions are indeed happening?

The negotiations and discussions were described by one participant as a “little bit rocky.” Over the months, agreement emerged that centered around a proposal to the Air Quality Control Commission—the eight person board responsible for setting policy that the division staff executes—that satisfied the insistence of the environmental community for the level of verification needed, but left oil and gas operators with the flexibility they wanted.

The hearing was scheduled to bleed over into the second day. In fact, it was a wrap by mid-afternoon of the first day, a testament to the consensus that had been achieved.

“It’s great that Colorado is a leader. It’s really important,” said Elise Jones, a commission member, in suggesting that Colorado’s innovation can help other jurisdictions in figuring out how to meet their greenhouse gas reduction targets.

Patrick Cummins, who had driven five hours that morning from his home near Durango, reported being struck at the rapid development of technology that may allow for reduction of emissions from oil and gas operations in the Denver-Julesburg, Piceance, and other basins in Colorado.

“It really excites me,” he said.

Martha Rudolph, chair of the commission and former director of environmental programs for the Colorado Department of Public Health and Environment, the parent agency for the AQCC, was more cautious.

“We are congratulating each other, but my gosh, there is a lot of work to be done and a lot of discussions, probably a lot of argument and disagreements and throwing up your hands and wondering what we can agree to,” said Rudolph. “I think we all recognize that this is just the beginning step for a lot of work and hopefully a lot of progress.”

Colorado began reforming its governance of oil and gas operations in 2007. In that year, the first year of the administration of Gov. Bill Ritter, the state held a hearing at the Paramount Theater in downtown Denver. A Denver newspaper reported dark muttering and other evidence of indignation expressed by many oil and gas operators. It had long been the Wild West.

State regulation was just getting started as the arrival of hydrofracturing and other advanced technologies made oil deposits, in particular, from the Denver-Julesburg Basin of northeastern Colorado more commercially accessible. State regulation continued to tighten to tame the unhappiness when drilling rigs arrived at the suburban and exurban edges of the northern Front Range.

Concurrent with this were questions about the role of oil and gas operations in the unhealthy air most demonstrably manifested in surging ozone levels on hot summer days along the northern Front Range. By some measurements, oil and gas contributes to roughly half the air quality problems. Emissions from cars and trucks, of course, also contribute significantly.

A long journey

Colorado actually began regulating methane specifically in 2014.

Then came the 2019 state law, HB 19-1261, Climate Action Plan to Reduce Pollution, which set specific greenhouse reduction goals for 2025, 2030, and 2050.

The state’s pollution reduction roadmap in January 2021 said achieving those goals depended not just on shifting electrical generation to renewables but also upon “deep reduction in methane pollution from the oil and gas industry, which makes up the largest source of non-combustion emissions in the state.”

Based on conclusions reached by the Air Pollution Control Division, state legislators in HB21-1266, Environmental Justice Disproportionately Impacted Communities, ordered that greenhouse gas emissions from oil and gas exploration, production, processing, transmission, and storage operations be reduced by at least 36% by 2025 and 60% by 2030, relative to 2005 levels.

In December 2021, the air quality commission adopted that greenhouse gas intensity verification program. The primary purpose was to require owners or operators of oil-and-gas infrastructure to demonstrate to the state how they intended to meet the 2025, 2027, and 2030 targets.

Colorado “has kind of led the global conversation on methane emission reductions from the oil and gas industry over the last several years,” said Will Toor, director of the Colorado Energy Office, in a webinar session July 18.

Tanks between Kersey and Keensberg, Colo.

Colorado’s Wattenberg Field is rich with extraction and storage equipment, including these tanks between Kersey and Keensburg. Top, a processing plant east of Fort Lupton. Photos/Allen Best

But work remained—including the verification piece. The Environmental Defense Fund has been the pre-eminent environmental player in this space. In a March 2023 post the group declared that methane emissions from the oil and gas industry topped the global climate agenda.

“Investors are increasingly concerned with financial, regulatory, and reputational risks associated with this potent source of climate warming. But one stubborn challenge has persisted for operators, regulators, and investors alike: quantifying how much methane is emitted from where.”

People commonly understand that carbon dioxide is a problem. The organization has been focused on getting people to understand that methane has immediate and great impact—and hence the solutions for curbing them matter so much.

EDF also made the case that Colorado needed to accelerate its actions if it hoped to achieve its greenhouse gas reduction goals.

In a September 2022 filing with the Air Quality Control Commission, the organization reported finding a “persistent gap between projected emissions and the state’s near-term targets for 2025 and 2030.” Might the recently passed Inflation Reduction Act provide the necessary traction? Perhaps. Rhodium Group, a research group, at the time had predicted a national impact of 32% to 42% emissions reduction by 2030 as compared to 2005 levels because of the law.

But the precise impact on Colorado was unclear, said EDF’s Katie Schneer and Alex DeGolia. They insisted that Colorado was on a trajectory to fall short of its 2025 goals by 18% and its 2030 goal by 35%.

In other words, Colorado could not afford to lag in efforts to curb methane emissions. If the Air Quality Control Commission had created “nation-leading direct regulations to cut methane emissions from the oil and gas sector,” it still lacked a “robust verification program that includes the direct measurement of emissions.”

The EDF continued to argue its case in a 2023 filing: “Absent requirements to measure and verify real-world methane emissions data from oil and gas operations, the Division and public will have no way to know whether operators are making the required reductions to meet the intensity targets and whether the state is on track to meet or exceed its GHG reduction targets from the oil and gas sector.”

By then, a consensus had emerged around a proposal rule, the one now adopted. It gave operators two options for compliance, one a state-developed default. But companies could also develop their own operator-specific plan subject to approval by the Air Pollution Control Division. The expectation is that these methods will need to be updated over time.

This will be good for cutting emissions. It can also be good for the bottom line.

That was one takeaway of a June analysis by the air quality division staff. The new verification standards would allow certification of “responsibility-sourced gas” that could be of greater value in the marketplace. That, combined with the value of the gas saved by stanching the leaks in methane infrastructure, can offset costs. The report nodded to something called The Colorado Molecule, a fact sheet assembled by Colorado Oil and Gas Association to promote the idea that oil and gas molecules processed in Colorado “are among the cleanest in the world.”

The staff report also laid out the math for long-term benefits to the globe. By 2030, the report said, the net value of benefits minus cost would be $337 million.

Evolving technology

Technology lies at the heart of the proceeding. Satellites can now detect methane. This is how the methane plume in the San Juan Basin of Colorado and New Mexico was discovered about a decade ago. And the Environmental Defense Fund plans to launch its own satellite during the next year to provide information about methane emissions from oil and gas operations across the world.

“MethaneSAT (the satellite) will fill these capability and data gaps. It will have a wide field of view, high level of precision, and fine spatial resolution that will be able to quantify methane emissions from the vast majority of global oil and gas production regions – determining from where and at what rate methane is escaping. Together, these measurements can help companies and governments prioritize where emission reduction efforts should be focused,” explained EDF in a March 2023 posting. In a July 12 post, EDF cited a report from Datu Research that concluded that the ”methane measurement industry is ready to scale up to meet the demand for accurate, real-world data.”

Commissioners were told that at least 20 non-regulatory initiatives have been created to promote emissions reductions in the industry, one of them developed in part by Colorado-based Rocky Mountain Institute. It’s called MiQ,

The oil and gas industry’s main driver was to ensure flexibility.

“These technologies are rapidly evolving,” said the Colorado Oil & Gas Association, the American Petroleum Institute, and the West Slope Colorado Oil and Gas Association in a June filing. “As a result, operators should be able to select from a range of technology options and choose technologies appropriate for their facilities.”

EDF emphasized the need for direct measurement, meaning that that the role of modeling would be less.

“One of the things that we’re hoping for from this rulemaking about verification is to be able to analyze the data quicker and without as much extrapolation, to have more direct measurement,” Nini Gu, EDF’s regulatory and legislative manager for the Western U.S., told me in an interview the day before the commission’s hearing.

“So we know exactly how much methane is being emitted, and so we can understand exactly the cuts that need to be made,” she further explained. “Because as it is, there’s a lot of very, very educated analysis, but we don’t have as much direct measurement where we’re actually counting the gas.”

Gu said operators are already seeing the value in getting an accurate sense of how much methane they’re emitting. “The goal of the rules will be to create a standard framework that can also be applied to smaller operators. Our argument is that it will all run more smoothly once we get like a standard railroad gauge.”

The Environmental Defense Fund hopes to see Colorado as the beginning domino in a sequence with global repercussions. Important is the fact—apparently common knowledge—that the Environmental Protection Agency has closely followed Colorado’s work. If Colorado can demonstrate the viability of its approach, the EPA can then use it to convince some problem areas (think Permian of Texas). And then, perhaps, the European Union will follow the U.S. example to tame its methane emissions.

“Our hope is to build a lot of momentum with this,” explained Jack Alber, a communications specialist for the EDF.

“Now, Mike Tyson had that quote about plans and getting punched in the mouth. (‘Everybody has a plan until they get punched in the mouth.’). So we’re obviously not expecting everything to go perfectly swimmingly, but we believe that this is a viable step-by-step path to dramatically cut global methane emissions.”

What remains

Much work remains, as Rudolph, the chair of the commission noted. That’s the same viewpoint of EDF.

“I think we should all celebrate this victory of getting a consensus rule, but let’s not take our eyes off the prize, because we still have to work on the protocol,” said EDF’s Gu. “Tomorrow’s a big day, but it’s not a mission accomplished.”

The verification protocol will outline key guardrails to rule implementation. This includes Division pre-approved monitoring programs and minimum criteria for selecting and deploying measurement technologies for operators. EDF describes the air commission hearing as the “what.” The protocol will be the “how.”

That evening, the air commissioners took testimony. There were people from Wheat Ridge, Denver, Erie, Fort Collins, and a dozen other places.

Among them was John Clark, a computer specialist who relocated from Boulder to Ridgway, where he is now the mayor. In his two minutes, he said he liked the idea of the proposed verification.

He later explained that he gets solicited frequently to testify by various groups, and he’s happy to do so, even if he does not have time to probe into the intricacies of all that is involved.

“I have a real job,” he said, mentioning that the mayoral position is without pay. “I wear a number of hats. I don’t have a whole ton of time,” he explained. But for things like this, I do obviously care about the climate catastrophe, so I try to do as much as I can.”

“I just think we are fortunate in Colorado to have the political makeup of the state that we have, that we are actually able to make a difference, unlike some other, much more red states. I think it’s worth taking the time to try to get these things accomplished.”