In February 2014, the Colorado Air Quality Control Commission adopted rules to directly regulate methane and volatile organic compounds (VOC) emissions from oil and gas sources.

Leading up the adoption of regulations, the Colorado Department of Public Health and Environment worked with several stakeholder groups. While having support of some industry, environmental, and local government stakeholders, many stakeholder groups were opposed to the adopted regulations. Colorado’s regulations, as discussed below, entail requirements for monitoring and inspections of storage tanks, compressors, and production facilities; storage tank emission management plans; leak detection and repair; and other provisions linked to methane emission reductions.

EPA’s Intent to regulate methane

Giving accolades to Colorado for its methane regulations, the Environmental Protection Agency (EPA) issued a Clean Air Act Excellence Award to Colorado and described the methane regulations as an “innovative program” to minimize impacts from oil and gas operations.1 According to the EPA, the Colorado program “can serve as a model for responsible oil and gas development across the country.”

At the federal regulatory level, on January 14, 2015, the Obama administration announced a new goal with respect to methane emissions. The goal is to reduce methane emissions from the oil and gas industry by 40 to 45 percent by 2025, using 2012 as the baseline.2 In an attempt to reach the goal, the administration has indicated it is planning to take several actions, including issuing direct methane control regulations.3

These potential federal regulations are significant because they would be the first federal rules to directly regulate methane emissions from oil and gas operations. Currently, methane emissions from oil and gas operations are not directly regulated by the federal government. However, according to the EPA, certain existing EPA regulations or programs already address methane emissions from oil and gas facilities in indirect ways.For example, in 2012, the EPA promulgated VOC regulations, which, according to the EPA, have the additional benefit of reducing methane emissions.5 In addition, the EPA has recognized voluntary programs that some oil and gas source operators have been voluntarily implementing, such as the Natural Gas STAR program.6The administration claims that its new plans to reach its goal would merely “build onto” existing regulations and voluntary programs.7

Given the EPA’s goals and its praise of Colorado’s program, one should not be surprised if the EPA draws heavily from Colorado’s regulations in developing federal rules. Below is a review of some of the Colorado provisions as a preview of the types of provisions we may see nationwide in the near future.

Colorado’s Regulations

Overall, Colorado’s regulations require the use of control devices and certain management practices to target aspects of operations that cause VOC and methane emissions, such as leaks and venting. For new sources, the provisions mostly require compliance upon installation or commencement of operation. For existing sources, the regulations generally take a phased approach, making certain requirements applicable at staggered dates over the couple years following adoption of the regulations. The regulations also take a tiered approach, providing varying degrees of stringency for certain requirements, such as inspection frequency, based on the level of emissions from the facility.

Within the oil and gas industry, the Colorado regulations apply to oil and gas exploration and production operations, well production facilities, natural gas compressor stations, and natural gas processing plants.The regulations mostly target upstream and midstream sources. In fact, when adopting the regulations, the Colorado Air Quality Control Commission clarified that the regulations do not directly apply to compressor stations at downstream well production and gas processing facilities.9

The following are samples of the types of methane and VOC emission-related requirements adopted by the Colorado Air Quality Control Commission last year.

Auto-Igniters

An auto-igniter is a device that will automatically attempt to relight the pilot flame in the combustion chamber of a control device in order to combust VOC emissions.10

  • New combustion devices are required to use auto-igniters upon installation.
  • Existing combustion devices must use auto-igniters beginning May 1, 2016 (more than two years after the regulations were adopted in 2014), or after the next planned combustion device shutdown, whichever comes first.

Storage Tanks

The following storage tank air emission provisions require emission reduction from storage tanks at exploration and production operations, well production facilities, compressor stations, and processing plants.11

  • Storage tanks with uncontrolled VOC emissions greater than 6 tons per year are required to control hydrocarbon12 emissions by 95 percent. Similarly, all tanks used during the first 90 days of production are required to control emissions by 95 percent, unless emissions during the first 90 days are below 1.5 tons per year. Temporary frac tanks (located at a well production site for less than 180 consecutive days) are exempt from this requirement.
  • If a combustion device is used, it must have a design destruction efficiency of at least 98 percent.
  • Controlled tanks must operate without venting.
  • Controlled tanks must perform audio, visual, and olfactory (AVO) and additional visual inspections at the frequency of liquid load-outs or within 7 to 31 days.
  • Storage tanks with at least 6 tons per year of VOC emissions and tanks subject to systemwide controls13  are required to employ Storage Tank Emission Management (STEM) plans to operate without venting, which includes Approved Instrument Monitoring Method (AIMM) inspections.
  • STEM plans are intended to guide the design of systems to handle pressures and prevent venting, such as by use of thief hatches or pressure relief devices.
  • The regulations set forth a phase-in schedule for implementation of AIMM inspections and a tiered approach, requiring more frequent monitoring for tanks with higher levels of emissions. For example, tanks with uncontrolled actual VOC emissions greater than 6 tons per year and up to 12 tons per year must perform AIMM inspections annually beginning January 1, 2016. By comparison, tanks with uncontrolled actual VOC emissions greater than 50 tons per year must perform AIMM inspections monthly beginning January 1, 2015.
  • The regulations do not require AVO, other visual inspections, or AIMM inspections when these would be unsafe, difficult, or inaccessible to monitor.

Leak Detection and Repair (LDAR)

The Colorado provisions require owners or operators to inspect natural gas compressor stations and well production facilities for leaks. If leaks are detected at a level that meets the leak threshold, the regulations require leak repairs.14

  • Compressor stations must be inspected, using AIMM, beginning January 1, 2015, or on the date the compressor station commences operation, if after January 1, 2015.
  • The frequency of compressor station inspection requirements is tiered based on the level of VOC emissions. For example, compressor stations with fugitive VOC emissions below 12 tons per year must be inspected on an annual basis. Compressors with fugitive VOC emissions greater than 50 tons per year must be inspected on a monthly basis.
  • New well production facilities (constructed on or after October 15, 2014) must be inspected using AIMM within 15 to 30 days after the facility commences operation and thereafter in accordance with the tiered approach (shown in  Exhibit 1). Existing well production facilities (constructed before October 15, 2014) must perform AIMM inspections and AVO in accordance withExhibit 1. The frequency of inspections is based on the uncontrolled actual VOC emissions from the highest-emitting storage tank at the facility. For production facilities without tanks, inspection frequency is based on the total controlled actual VOC emissions from all permanent equipment and facility components:

Click here to view table.

  • Similar to the storage tank inspection requirements described above, AVO, other visual inspections or AIMM inspections are not required when it would be unsafe, difficult, or inaccessible to monitor.
  • The regulations set forth different thresholds for leaks requiring repairs based on the method used to detect the leak. For example, leaks associated with normal equipment operation, such as pneumatic device actuation, are not subject to the leak thresholds. The leak threshold for leaks detected by an IR camera or AVO is any detectable leak. There are several specific leak thresholds for leaks detected with EPA Reference Method 21.
  • The first attempt to repair a leak must occur within five days of the inspection, unless parts are unavailable. Remonitoring is required within 15 days.
  • Owners and operators must submit an annual LDAR report to the state agency.

Taken together, these Colorado regulations, along with related Colorado regulations not summarized herein, represent a comprehensive set of requirements on the oil and gas industry and foreshadow possible federal regulations, such as provisions targeting compressor stations, leaks, liquids unloading, and pneumatic devices.16

Are Federal Rules Even Necessary?

If the political and regulatory will exists, states could adopt their own programs to directly regulate methane from oil and gas sources, as did Colorado. To be clear, however, under current Clean Air Act programs, states are not mandated to develop such programs. Thus it is left up to the states to decide whether or not to do so and how to do so.

Many in the industry believe that new federal rules are not needed, in part because existing federal VOC regulations, such as the 2012 revisions and additions to EPA’s NSPS Subpart OOOO, already constitute tools resulting in methane reductions.17 Moreover, oil and gas operations are typically subject to EPA and state air emission permitting requirements, as well as other types of requirements imposed by other regulatory agencies, such as, in Colorado, the Colorado Oil and Gas Conservation Commission.

Environmental groups claim that the federal rules are insufficient because they do not address VOC and methane emissions from all links in the chain of oil and gas operations and because they apply only to new or modified sources. In rebuttal, the voluntary programs, with which many oil and gas companies already comply, fill in many of the possible gaps in regulations. Potential EPA regulations may be viewed as unnecessary and reaching beyond even the voluntary program provisions.

The EPA plans to issue its proposed rules in the summer of 2015. At the time this article was written, the EPA had not yet issued any proposals to directly address methane emissions from oil and gas sources. Even once the proposal has been issued by the EPA, the Colorado rules may continue to be looked to for guidance during the federal rulemaking process and used as a reference by the public when evaluating and formulating comments to the EPA’s proposal, regardless of the direction EPA’s proposal takes.