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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--A new set of air-quality rules unveiled on November 18 by Colorado Governor John Hickenlooper followed months of collaboration between Hickenlooper, who is a petroleum geologist by training, a major national environmental organization and three large oil & gas companies that operate in Colorado's Denver-Julesburg (D-J) Basin.
If adopted, the draft rules would make Colorado the first state in the country with a comprehensive program to detect and reduce methane emissions across the lifecycle of oil & gas development, from drilling to production to maintenance. The regulations resulted from an extended collaboration facilitated by the state and involving the Environmental Defense Fund (EDF) (New York, New York) and the three largest producers in the D-J Basin: Anadarko Petroleum Corporation (NYSE:APC) (The Woodlands, Texas), Encana Corporation (NYSE:ECA) (Calgary, Alberta) and Noble Energy Incorporated (NYSE:NBL) (Houston, Texas).
Anaradko Petroleum Corporation has more than a dozen drilling rigs in the Denver-Julesburg Basin. Click on the image at right for an example.
The draft rules seek to lower the oil & gas industry's emissions of volatile organic compounds (VOCs) by an estimated 34%, or 92,000 tons per year, according to Dr. Larry Wolk, executive director and chief medical officer at Colorado Department of Public Health and Environment (CDPHE) (Denver, Colorado). A 2011 inventory of VOCs from the industry showed emissions of 275,000 tons. VOCs contribute to ground-level ozone, which causes health problems for some segments of the population.
Material circulated by the governor's office included these highlights of the draft rules:
"We understand there are a lot of concerns about air quality along Colorado's Front Range, and we want to address those," Doug Hock, a spokesman for Encana, told Industrial Info. "Anytime we have stakeholders that have concerns, we want to be responsive to them. There will be some incremental cost to these rules, but it is the right thing to do."
"The draft regulations show what can be done when people sit down and work together instead of enacting moratoria and bans on drilling," Hock said.
The Encana spokesman was referring to voter initiatives in four Colorado cities this month that would either ban or delay oil & gas drilling that uses hydraulic fracturing. The state's oil & gas industry spent heavily to defeat the initiatives, but all four communities passed them.
There was no ballot initiative on hydraulic fracturing in Weld County, Colorado's largest oil & gas producing county. But there have been media reports that some Weld County residents are questioning the dramatic increase in drilling for a range of reasons, including heavy truck traffic, damage to roads, over-burdened civic infrastructure, increased noise, falling property values, threat of water pollution, and potential risks to public health.
Colorado's proposed rules are part of an effort to restore public confidence in oil & gas production. Between 2006 and 2011, the state's number of producing wells increased 50% to more than 30,000, according to data from the U.S. Energy Information Administration (EIA) cited by The New York Times. Drilling has increased even further from 2011, buoyed by high crude oil prices.
The dramatic expansion of drilling, nearly all of its using hydraulic fracturing, has led to deterioration in Colorado's air quality and increased reports of sickness being attributed to drilling. Concerns about the potential impact of those drilling practices put voter initiatives on the ballot in four Colorado communities this month.
"These draft rules are a smart effort by the state, producers and a prominent environmental organization to respond to shifting public sentiment and get ahead of any other efforts to limit oil & gas development in Colorado," said Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Production, Pipelines and Terminals industries. "Although the communities that voted to ban or delay hydraulic fracturing have no history of meaningful oil & gas production, the strategic concern is that that sentiment would spread to Weld County, which could imperil Colorado's production."
These voter initiatives, and unrest in some other communities over the potential impacts of hydraulic fracturing, have made Colorado a more challenging place to operate, Anadarko spokesperson Robin Olsen told Industrial Info. Politically speaking, "the environment today is different from what it used to be. But the voters have spoken and we are listening. But we all want clean air, and we all want to keep Colorado beautiful. I live here, and I'm raising a family here." She hopes that the "collaborative and transparent process will increase public trust and accountability" in the process the state uses to regulate oil & gas production.
Olsen said the IR cameras to be required in the new rules cost about $100,000 each. "There will be a significant cost to these rules, but reducing VOC emissions by 92,000 tons per year will be a great thing," she said in an interview.
In a statement released by Hickenlooper's office, EDF President Fred Krupp said of the draft regulations: "Tackling smog and climate pollution from the oil & gas sector is a critical part of making sure communities are protected and that the lower carbon advantage of natural gas doesn't simply leak away. If this package is adopted, Coloradans will breathe easier, knowing they have the best rules in the country for controlling air pollution from oil and gas activities."
EDF is one of the few major environmental organizations that supports continued production of oil & gas using hydraulic fracturing. Earlier this year, EDF released the first study in a comprehensive assessment of methane emissions. That initial study, led by the University of Texas and partially funded by Encana, was the first to directly measure methane emissions from shale gas wells where hydraulic fracturing had been used, Hock said. Previous studies relied on models that depended on various assumptions about methane leakage.
Methane, the primary component of natural gas, is a very potent greenhouse gas, with a heat-trapping impact 72 times more potent than carbon dioxide over a 20-year period.
Encana's Hock said his company has been working to better understand the life cycle of methane emissions from drilling. "We think it's important to base regulations on good science, and good science starts with good measurement. That study (with EDF and the University of Texas) showed that, when using green well completion technologies, methane emissions from hydraulic fracturing were much lower than previously thought," Hock said in an interview.
The draft Colorado regulations proposed by Gov. Hickenlooper will be considered by the state's Air Quality Control Commission. Public comment will be taken over the next few months, and a public hearing on the draft rule is scheduled for early 2014.
Estimates for the cost of the new regulations vary from $30 million per year to $80 million per year. While EDF's Krupp praised the proposed rules as a model for other states to follow, oil & gas company representatives were more limited: They praised the collaborative process facilitated by the state of Colorado, but they were unwilling to say it should be adopted by other states to defuse concerns and conflicts over hydraulic fracturing.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
If adopted, the draft rules would make Colorado the first state in the country with a comprehensive program to detect and reduce methane emissions across the lifecycle of oil & gas development, from drilling to production to maintenance. The regulations resulted from an extended collaboration facilitated by the state and involving the Environmental Defense Fund (EDF) (New York, New York) and the three largest producers in the D-J Basin: Anadarko Petroleum Corporation (NYSE:APC) (The Woodlands, Texas), Encana Corporation (NYSE:ECA) (Calgary, Alberta) and Noble Energy Incorporated (NYSE:NBL) (Houston, Texas).
Anaradko Petroleum Corporation has more than a dozen drilling rigs in the Denver-Julesburg Basin. Click on the image at right for an example.The draft rules seek to lower the oil & gas industry's emissions of volatile organic compounds (VOCs) by an estimated 34%, or 92,000 tons per year, according to Dr. Larry Wolk, executive director and chief medical officer at Colorado Department of Public Health and Environment (CDPHE) (Denver, Colorado). A 2011 inventory of VOCs from the industry showed emissions of 275,000 tons. VOCs contribute to ground-level ozone, which causes health problems for some segments of the population.
Material circulated by the governor's office included these highlights of the draft rules:
- A first-in-the-nation requirement for leak detection from tanks, pipelines, and other drilling and production processes, using instruments such as infrared (IR) cameras that can detect leaks that otherwise may not be discovered using other, more conventional means
- Instrument-based monthly inspections on large sources of emissions
- An aggressive timeline for repair of leaks found using either these instrument-based methods, or leaks found through sight, smell or sound
- Leak detection and repair of storage tanks at well-site production facilities and compressor stations
- Requirements for detection and repair of leaks of a wide variety of hydrocarbons, including VOCs and methane, another first in the country
- Expanding provisions statewide for reducing emissions of pollutants that today apply only in nonattainment areas, so anyone living near a well site would benefit
- New, more stringent limits on emissions from dehydrator units located near areas where people live and play
"We understand there are a lot of concerns about air quality along Colorado's Front Range, and we want to address those," Doug Hock, a spokesman for Encana, told Industrial Info. "Anytime we have stakeholders that have concerns, we want to be responsive to them. There will be some incremental cost to these rules, but it is the right thing to do."
"The draft regulations show what can be done when people sit down and work together instead of enacting moratoria and bans on drilling," Hock said.
The Encana spokesman was referring to voter initiatives in four Colorado cities this month that would either ban or delay oil & gas drilling that uses hydraulic fracturing. The state's oil & gas industry spent heavily to defeat the initiatives, but all four communities passed them.
There was no ballot initiative on hydraulic fracturing in Weld County, Colorado's largest oil & gas producing county. But there have been media reports that some Weld County residents are questioning the dramatic increase in drilling for a range of reasons, including heavy truck traffic, damage to roads, over-burdened civic infrastructure, increased noise, falling property values, threat of water pollution, and potential risks to public health.
Colorado's proposed rules are part of an effort to restore public confidence in oil & gas production. Between 2006 and 2011, the state's number of producing wells increased 50% to more than 30,000, according to data from the U.S. Energy Information Administration (EIA) cited by The New York Times. Drilling has increased even further from 2011, buoyed by high crude oil prices.
The dramatic expansion of drilling, nearly all of its using hydraulic fracturing, has led to deterioration in Colorado's air quality and increased reports of sickness being attributed to drilling. Concerns about the potential impact of those drilling practices put voter initiatives on the ballot in four Colorado communities this month.
"These draft rules are a smart effort by the state, producers and a prominent environmental organization to respond to shifting public sentiment and get ahead of any other efforts to limit oil & gas development in Colorado," said Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Production, Pipelines and Terminals industries. "Although the communities that voted to ban or delay hydraulic fracturing have no history of meaningful oil & gas production, the strategic concern is that that sentiment would spread to Weld County, which could imperil Colorado's production."
These voter initiatives, and unrest in some other communities over the potential impacts of hydraulic fracturing, have made Colorado a more challenging place to operate, Anadarko spokesperson Robin Olsen told Industrial Info. Politically speaking, "the environment today is different from what it used to be. But the voters have spoken and we are listening. But we all want clean air, and we all want to keep Colorado beautiful. I live here, and I'm raising a family here." She hopes that the "collaborative and transparent process will increase public trust and accountability" in the process the state uses to regulate oil & gas production.
Olsen said the IR cameras to be required in the new rules cost about $100,000 each. "There will be a significant cost to these rules, but reducing VOC emissions by 92,000 tons per year will be a great thing," she said in an interview.
In a statement released by Hickenlooper's office, EDF President Fred Krupp said of the draft regulations: "Tackling smog and climate pollution from the oil & gas sector is a critical part of making sure communities are protected and that the lower carbon advantage of natural gas doesn't simply leak away. If this package is adopted, Coloradans will breathe easier, knowing they have the best rules in the country for controlling air pollution from oil and gas activities."
EDF is one of the few major environmental organizations that supports continued production of oil & gas using hydraulic fracturing. Earlier this year, EDF released the first study in a comprehensive assessment of methane emissions. That initial study, led by the University of Texas and partially funded by Encana, was the first to directly measure methane emissions from shale gas wells where hydraulic fracturing had been used, Hock said. Previous studies relied on models that depended on various assumptions about methane leakage.
Methane, the primary component of natural gas, is a very potent greenhouse gas, with a heat-trapping impact 72 times more potent than carbon dioxide over a 20-year period.
Encana's Hock said his company has been working to better understand the life cycle of methane emissions from drilling. "We think it's important to base regulations on good science, and good science starts with good measurement. That study (with EDF and the University of Texas) showed that, when using green well completion technologies, methane emissions from hydraulic fracturing were much lower than previously thought," Hock said in an interview.
The draft Colorado regulations proposed by Gov. Hickenlooper will be considered by the state's Air Quality Control Commission. Public comment will be taken over the next few months, and a public hearing on the draft rule is scheduled for early 2014.
Estimates for the cost of the new regulations vary from $30 million per year to $80 million per year. While EDF's Krupp praised the proposed rules as a model for other states to follow, oil & gas company representatives were more limited: They praised the collaborative process facilitated by the state of Colorado, but they were unwilling to say it should be adopted by other states to defuse concerns and conflicts over hydraulic fracturing.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
