The Polis administration is banking on an untested, first-in-the-nation type of regulation to sharply cut oil and gas sector emissions to meet state greenhouse gas targets — drawing praise from the industry, but roiling environmental groups and some local officials.
The draft “greenhouse gas intensity target” rule, to be submitted to the Air Quality Control Commission on Friday, aims to cut overall emissions from oil and gas production by requiring operators to reduce emissions per barrel of oil equivalent (defined as oil plus natural gas) they produce.
It is, however, a complex regulatory approach that has never been used industry wide, and it is based on incomplete data, and it gives companies a free hand in deciding how to cut those emissions — from places such as wells, tanks, motors and valves.
“We are concerned about the use of intensity targets as the main way of reducing greenhouse gas emissions because they are novel and somewhat untested,” said Kate Merlin, an attorney for WildEarth Guardians, an environmental group. “We are concerned that if they prove ineffective, we will have wasted years.”
Still, as the pressure to cut greenhouse gas emissions grows in Colorado, the nation and the world, agencies and regulators are seeking new and inventive ways to curb the climate-altering gases.
“Colorado is so advanced in the oil and gas regulations we have on the books already that it is very hard to find things that will work at every site,” Robyn Wille, chief strategy officer for the state Air Pollution Control Division, said Tuesday in an interview.
“We believe intensity is the right approach,” she said. “It does a couple of things. It helps us look at the big picture of all the reductions we need to achieve. … It is flexible.”
Getting big cuts in the oil and gas sector is key to meeting the statutory goal of trimming Colorado’s greenhouse gas emissions 26% over 2005 levels in 2025; 50% by 2030; and 90% by 2050 under the administration’s Greenhouse Gas Pollution Reduction Roadmap.
The oil and gas rules already enacted by the Air Quality Control Commission focus on limiting emissions for an activity, such hydrofracturing a well, or for equipment, including tanks and engines.
By contrast, the intensity target leaves it up to each company to decide how to meet their required emission cuts.
“It gives us the flexibility to do things where it makes sense,” said Mike Paules, associate director of API-Colorado, an industry trade group. “I think it is going to result in more reductions sooner than command-and-control regulations.”
Calculating the targets, however, relies on data, some of which even the Air Pollution Control Division, the author of the intensity rule, concedes it does not have now and may not have until 2023.
The first company plans to meet the targets are also due in 2023. Those plans, however, will not be enforceable. And the proposed rule includes no penalties for a company that fails to meet its intensity target.
“It is not a proven approach and we have absolutely no time to waste,” Avon Mayor Sarah Hymes said in an interview. “The ski season is already shorter, there is less snowpack and less water reaching the river.”
“As a winter and sports-based economy, we need snow on the slopes and water in the river,” Hymes said. “We don’t have time; it is already Armageddon.”
While the intensity targets are the centerpiece of the oil and gas greenhouse gas controls, they are just one initiative the air pollution division is proposing. Others include enhanced leak detection and repair, controlling emissions during well maintenance and new controls on site equipment.
“Where we could find meaningful direct regulations, we have proposed them,” Wille said. The flexibility the intensity targets offer, she said, will be “ that last little bit to get us to the finish line.”
Intensity targets have been used in other ways
Colorado air regulators aren’t the only ones looking at intensity targets — usually measured in increments of carbon dioxide equivalent, which is a measure of all greenhouse gases emitted.
New York City, for example, has adopted a rule to cut carbon emissions 40% from 2005 levels in buildings heated by natural gas using a ratio of kilograms of CO2 emitted per square-foot for buildings of more than 25,000 square feet.
The International Maritime Organization is planning to use an intensity measure to help cut emissions from international shipping by 40% in 2030 over 2008 levels. One measurement proposed is grams of CO2 emitted in moving one ton of cargo one mile.
There have also been voluntary intensity programs in the oil and gas industry in the U.S., such as the One Future Coalition, which has 45 participating natural gas companies, including Colorado operators Crestone Peak Resources and Caerus Oil and Gas.
The proposed Colorado rule, however, would be the first in the nation to comprehensively seek intensity reductions across oil and gas production and transport.
The challenge is that setting the intensity targets to meet the state goals is a complex and compound calculation – one that critics say may be difficult to set, measure and enforce.
According to the Roadmap’s baseline, the state needs to cut emissions by a total of 36.4 million tons of carbon dioxide equivalent by 2025; another 33.6 million tons by 2030; and yet another 56 million tons by 2050.
In 2019, the oil and gas industry accounted for 17% of the state’s greenhouse gas emissions, 22 million metric tons overall. The Roadmap is looking for a 60% reduction in oil and gas emissions over 2005 levels by 2030.
To get to the intensity targets, the Air Pollution Control Division started with 2005 baseline emissions and divided them over the oil and gas production for the year.
This calculation found that in 2005, the industry generated 80 tons of CO2 equivalent for every barrel of oil equivalent it produced, according to the division.
The division then calculated how many fewer tons per barrel operators will have to emit to meet the Roadmap targets – also assuming how much oil and gas Colorado will produce annually to 2030.
Targets are vastly more ambitious for large operators
There are two intensity targets, one for major companies that are responsible for up to 90% of the state’s production, and one for minor producers who make up the rest.
Major producers have to cut their intensity to 11 metric tons of CO2 per barrel in 2025; 8.5 tons in 2027; and 6.8 tons in 2030.
Small operators have targets of 34 metric tons of CO2 per barrel in 2025; 26.6 tons in 2027; and 21.4 tons in 2030.
There is also a stringent target for all new wells, in the hopes of encouraging companies to build in more emission controls in planning their operations, Stefanie Rucker, an Air Pollution Control Division staffer, said during an Aug. 31 online stakeholder meeting.
If a company misses its target one year the regulation would require it to make it up in the following year. An operator failing to meet its goals could face administrative orders and fines under estimating statues, Wille said.
More limited targets are also proposed for the engines, pumps and other industrial equipment on site.
“It is a straight math calculation,” Wille said during the stakeholder meeting.
Critics, however, say it isn’t that straightforward. First it depends on an accurate baseline number for 2005 (and 2015 for the industrial equipment).
“To make a tool like this appropriate, you have to have a fundamental understanding of the baseline,” said Jon Goldstein, senior director of legislative and regulatory affairs at the Environmental Defense Fund. “It might be a good approach someday, but right now we are not there.”
Then it requires an accurate record of the annual emissions for each company. In 2020, the Air Quality Control Commission issued rules for comprehensive oil company greenhouse gas inventories — an annual accounting of all the greenhouse gases a company emits . The first of those inventories was filed in June.
The inventory for Occidental Petroleum’s Colorado operations, the biggest in the state, includes estimates for emissions from more than 12,000 discrete pieces of equipment ranging from tanks to combustion controllers to stationary engines to valve controllers.
Adding up all the emissions for all the equipment from all the companies gives the total sector emissions.
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However, scientific studies using ambient air measurements – from towers and aircraft – calculated that the ground-based modeling consistently under-reported emissions. One study by the National Oceanic and Atmospheric Administration estimated the ground-based modeling was off by a factor of four.
This summer, the Air Pollution Control Division began measuring ambient concentrations of methane – the prime greenhouse gas emitted by the oil and gas industry – using aircraft and a mobile monitoring van.
Still, it will take time to get a better handle on the emissions and on the detailed inventories being submitted by companies.
“The division does not believe it has enough information about these annual emission reports to specify exactly how compliance will be demonstrated at this time,” the division said in a memo to the Air Quality Control Commission.
Wille said that the division is hiring staff, building a database and working to better understand how emissions are calculated with the aim of going back to the commission in 2023 with a verification plan.
Still, Rucker maintained during the stakeholder meeting, “We feel that we have the data that demonstrates that this program is going to accomplish the reduction that we are required to make.”
The sheer complexity of the calculations is one of the elements that concerns Westminster Mayor Anita Seitz.
“This is going to be a difficult thing to measure and monitor,” Seitz said. “It will require a more extensive inventory and it could be manipulated … This whole approach would require a lot more safeguards.”
And since intensity is calculated by dividing emissions by production, in some cases raising production could reduce intensity, WildEarth Guardians’ Merlin said. “In no universe is increasing production of oil and gas reducing greenhouse gas emissions.”
Merlin said that a greenhouse gas target that doesn’t account for the fact that most of that oil and gas is going to be burned, creating more greenhouse gases, is shortsighted.
“They want us to focus on this few percent of leaking equipment,” Merlin said. “Meanwhile they are shoveling carbon out of the ground and have no intention of slowing that down.”
Emissions inventories were submitted to the Air Pollution Control Division by 187 companies in June, and some of those were from utilities and transmission companies. The Colorado Oil and Gas Commission lists several hundred active oil and gas operators in the state.
Wille said that the division is working to identify the companies for which they do not have reports, but that it does have reports from the 35 to 40 companies that account for almost 95% of Colorado oil production.
The Air Pollution Control Division did not respond to an email question about the difference in numbers between the two agencies.