Peter Blake

Oil and gas rules will need more lubrication

When the corporate biggies of the oil and gas industry show up with the governor and the environmental establishment to announce agreement on proposed air pollution rules, you tend to be a tad suspicious.

Why aren’t the little guys up there? Are they afraid the rules would put more of an economic squeeze on them than on the Big Boys? Regulations often tend to limit competition by being too expensive for small operators.

Peter Blake
Peter Blake

Last week Gov. John Hickenlooper, joined by Encana, Anadarko, Noble Energy and the Environmental Defense Fund (EDF), announced proposed rules governing volatile organic compounds and methane emissions, the latest hot target for those who believe humans are largely responsible for climate change, nee global warming.

Two of the industry’s trade associations, the Colorado Oil and Gas Association (COGA) and the Colorado Petroleum Association, attended the press conference but weren’t up front. Both said they have not yet taken a position on the proposed rules. But be assured they want changes.

Negotiations among the various stakeholders — who include most everybody involved with the oil and gas business except the ultimate consumer — took place from January through September, according to Stan Dempsey, head of the petroleum association.

Then things seemed to stop, at least for most of those involved. But negotiations hadn’t stopped; they just went underground. During the last two months they were conducted by Noble, Encana and Anadarko, along with EDF. The facilitator was said to be the versatile Jim Martin, who’s been a regional director for the Environmental Protection Agency, an EDF attorney, director of the state health department and the state natural resources department, and a professor at the CU law school. The proposed rules they came up with were new to the trade groups.

Apparently you have to limit the size of the group if you want to get something done. To be sure, the more radical enviros, the ones who want to get rid of oil and gas, not just control it, were also nonparticipants.

These are groups like Americans Against Fracking, which employs B-list celebs to make smarmy, vaguely obscene internet ads in which they spout “what the frack?” and urge President Obama and governors like Hickenlooper to “ban fracking now.”

icon_op_edEven Obama’s EPA hasn’t started regulating methane directly yet. EDF says Colorado would become the first state to mandate reduced methane emissions from oil and gas production; to require leak detection and repair on all wells; to mandate monthly inspections of the largest emitters; to require the retrofit of all valves used on well sites to control operations; and to require that all existing storage tanks, not just new ones, comply with pollution limits.

The proposed rules will be made final after public hearings in February. Until then the various interests involved will be introducing their own modifications in a quasi-legal process.

Because of the expense of installing new controls and inspections — estimates range from $30 million (the state) to $80 million (industry) — you can expect the companies and trade associations to seek relief. They want it especially for gas drilling operations on the Western Slope, gas prices being extraordinarily low and profit margins slim.

Oil drillers on the eastern plains are probably better able to handle extra costs, since oil has been hovering around $95 a barrel, according to Dempsey.

One issue is whether the rules can be adjusted to account for different conditions in different drilling basins, or in areas not in danger of violating federal air pollution standards.

Doug Flanders of COGA said his group will be working on various amendments. “Even if we propose major changes it doesn’t mean we’re for a rule,” he said. “We just want to make it better.”

The rules would be adopted by the Colorado Air Quality Control Commission, a division of the health department, and thus ultimately would have to apply to all businesses producing methane, not just oil and gas. Ranchers, are you ready to retrofit your cattle, who emit methane from both ends?

In the middle of the ongoing rule negotiations is Gov. John Hickenlooper, who has to walk a fine line as he seeks re-election next year.

He’s on record as supporting hydraulic fracturing for the recovery of gas and oil, which puts him in line with conservatives and the business community. But he’s a Democrat, which means he really needs the environmentalists’ votes. They’re disgruntled by his support for fracking, but he may regain their trust if he backs rules strong enough to hurt the oil and gas industry financially.

Longtime Rocky Mountain News political columnist Peter Blake now writes Thursdays for CompleteColorado.com. Contact him at pblake0705@comcast.net You may re-publish his work at no charge and without further permission; please give full credit to Peter Blake and www.CompleteColorado.com

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